Wickham Hill Investment Pty Ltd v Ding

[2019] NSWSC 631

Supreme Court

New South Wales

Medium Neutral Citation:

Wickham Hill Investment Pty Ltd v Ding [2019] NSWSC 631

Hearing dates:

27 and 28 August 2018; further written submissions ending 5 October 2018

Date of orders:

31 May 2019

Decision date:

31 May 2019

Jurisdiction:

Equity

Before:

Parker J

Decision:

1) Order that the second defendant register a financing change statement removing registration number 2017 02030061920 from the Personal Property Securities Register.
2) Order that the first defendant pay the plaintiff’s costs of the proceedings.

Catchwords:

MORTGAGES AND SECURITIES – personal property security interests – Personal Property Securities Act 2009 (Cth) (“PPSA”) – amendment demands – judicial process for considering amendment demand under PPSA s 182 – nature of the Court’s enquiry – whether the Court can finally determine the parties’ rights in an application under s 182 – onus of proof – consideration of jurisdiction to restrain threatened registration of further financing statements under s 182(4)(c).

 

EQUITY – equitable remedies – injunctions – injunctions in the Court’s inherent jurisdiction – injunctive relief in aid of the determination of title to property – where injunction sought to restrain further registration of a financing statement of the Personal Property Securities Register – injunction refused in circumstances where no declaratory relief sought to clarify existence of security interest.

 

CONTRACTS – construction – five agreements entered into between individual shareholders / directors of a company and a third party lender – where agreements written in Mandarin and translated into English – whether the company was a party to the agreements – whether the five agreements create “security interests” arising under the Personal Property Securities Act 2009 (Cth).

  CORPORATIONS – capacity to contract by corporation – whether corporation became party to agreement by stamping its corporate seal to a pre-existing agreement – corporate state of mind – stamping of corporate seal not intended to signify accession to agreement but merely to comply with Chinese custom.

Legislation Cited:

Corporations Act 2001 (Cth), ss 127, 131, 132, 133
Land Transfer Act 1952 (NZ), s 145A
Personal Property Securities Act 1999 (NZ), s 167
Personal Property Securities Act 2009 (Cth), ss 12, 19, 21, 150, 151, 157, 178, 179, 181, 182, 206, 245, 275, 296
Real Property Act 1900 (NSW) ss 74K, 74MA

Cases Cited:

Bennett v Strauss [2016] NSWCA 324
Blanch v British American Tobacco Australia Services Ltd [2005] NSWSC 241; 62 NSWLR 653
Capital Finance Australia Ltd v Clough [2015] NSWSC 1327
Daniel Smith Industries Ltd v Cranes International NZ Ltd [2009] NZHC 2589
Fencott v Muller [1983] HCA 12; 152 CLR 570
Gangemi v Gangemi [2009] WASC 268
Gibbons v Wright [1954] HCA 17; 91 CLR 423
Halaga Developments Pty Ltd v Grime (1986) 5 NSWLR 740
Macquarie Leasing Pty Ltd v DEQMO Pty Ltd [2014] NSWSC 1466
Milne Feeds Pty Ltd v Bride (unreported, Supreme Court of WA, Murray J, 7 May 1996)
National Australia Bank Ltd v Garrett [2016] FCA 714
Nichibo Trading Company New Zealand Ltd v Lucich [2011] NZHC 722
Northside Developments Pty Ltd v Registrar-General [1990] HCA 32; 170 CLR 146
Nurisvan Investment Ltd v Anyoption Holdings Ltd [2017] VSCA 141
Re Maiden Civil (P&E) Pty Ltd; Albarran v Queensland Excavation Services Pty Ltd [2013] NSWSC 852; 277 FLR 337
Sandhurst Golf Estates Pty Ltd v Coppersmith Pty Ltd [2014] VSC 217; 285 FLR 267
Sanpine v Koompahtoo Aboriginal Land Council [2005] NSWSC 365
Sheahan v Londish [2010] NSWCA 270; 244 FLR 64
Stapley v Towing Masters Pty Ltd (t/as Dynamic Towing) [2009] NSWCA 382
Stocks & Holdings (Imperial Arcade) Ltd v Fink [1965] NSWR 504
Toyota Finance NZ Ltd v Christie [2009] NZHC 827
Universal Trucks and Equipment Ltd v Reynolds [2012] NZHC 483
Vegar-Fitzgerald v Mawdsley [2012] NZHC 1311
Working Capital Solutions Holdings Ltd v Pezaro [2014] NZHC 1020; 3 NZLR 379

Texts Cited:

Bruce Whittaker, ‘Review of the Personal Property Securities Act 2009 – Final Report’

Category:

Principal judgment

Parties:

Wickham Hill Investment Pty Ltd (Plaintiff)
Xiaoxin Ding (First Defendant)
Registrar of Personal Property Securities (Second Defendant)

Representation:

Counsel:
N Mirzai (Plaintiff)
L Bishop (First Defendant)

 

Solicitors:
Cappello Rowe Lawyers (Plaintiff)
Bartier Perry Lawyers (First Defendant)

  Submitting appearance:
Registrar of Personal Property Securities (Second Defendant)

File Number(s):

2017/364588

Publication restriction:

Nil

Judgment

1. Wickham Hill Investment Pty Ltd (“WHI”) is the owner of a winery at Griffith, New South Wales, known as Wickham Hill Winery (“the Winery”). WHI holds the Winery assets (which include valuable plant and equipment as well as the vineyard land) as trustee of a unit trust called the Wickham Hill Unit Trust. These proceedings concern a disputed claim to a security interest in those assets.

2. WHI was incorporated, and the Trust was established, for the purpose of acquiring the Winery from its previous owner, Pernod Ricard. The acquisition took place at the end of June 2012. The acquisition cost was about $6.5 million. In the 2013 financial year, approximately a further $8 million was invested in the Winery.

3. The leading part in the acquisition of the Winery appears to have been played by Ruiyong (also known as “John”) Chen. Mr Chen is a Chinese-Australian businessman. Mr Chen sought to raise funds for the purchase from a number of Chinese or Chinese-Australian business people. Among those business people was Xiaoxin Ding. He apparently lives in China. Mr Chen approached Mr Ding through his niece, Yisi Ding.

4. Initially, Mr Chen was the sole director of WHI. In October 2014 there was a change of control which resulted in his removal. Haiyang Xu became the general manager. Mr Xu is one of the investors who participated in the acquisition of the Winery; he is a substantial unit-holder in the Trust.

5. Mr Ding claims that in June 2012 he, or others acting on his behalf, advanced 20 million Chinese yuan (CNY, ¥; also known as renminbi (RMB)) towards the acquisition of the Winery. He claims that he provided a further advance of ¥6 million in February 2013. These advances are the subject of five written agreements concerning the provision of finance to the Winery which were signed by Mr Chen and others between April 2012 and the end of 2014.

6. Mr Ding further claims that he holds security over the Winery assets for these advances. He relies on the terms of the five finance agreements in this regard. For its part, WHI contends that it has never had any direct financial dealings with Mr Ding and has never granted any security interest to him.

7. In February 2017, Mr Ding registered a financing statement under the Personal Property Securities Act 2009 (Cth) (“PPSA”) claiming a security interest over the assets of WHI (apart from its real property, which falls outside the PPSA). WHI applied to the Registrar of Personal Property Securities to register a financing change statement on the Personal Property Securities Register (“the Register”). The effect of doing so would be to remove Mr Ding’s earlier financing statement. But the Registrar declined (or at least failed) to do so. That has resulted in the present proceedings.

Issues for determination

8. WHI commenced the proceedings by Summons in December 2017, joining Mr Ding and the Registrar as first and second defendants respectively. The Registrar filed a submitting appearance and played no role in the proceedings.

9. Apparently these are not the only legal proceedings which concern the Winery. On the first day of the hearing, counsel for Mr Ding foreshadowed an application to use material from other proceedings to which Mr Xu and WHI are party to cross-examine Mr Xu in these proceedings. In the end, the application was not pursued and there was no evidence before me about the claims and issues in the other proceedings.

10. By its Summons, WHI seeks orders that the Registrar register WHI’s amendment demand under s 182(4)(a) of the PPSA. The relevant parts of s 182(4) provide:

(4)   On an application under this section, a court may make the following orders:

(a)   if the court considers the amendment demanded to be authorised under section 178 -- an order requiring the Registrar to register a financing change statement amending the registration (including an amendment to remove the registration);

…

(c)   any other order that the court thinks fit.

11. In addition to the order under s 182(4)(a), WHI also seeks an injunction which would prevent Mr Ding from lodging any further financing statement with respect to any alleged security interest in the Winery assets.

12. Section 182(4)(a) refers to s 178. That section relevantly provides:

(1)   A person with an interest (including a security interest) in collateral described in a registration with respect to a security interest may give a demand (an amendment demand), in writing, to the secured party for a financing change statement to be registered to amend the registration as authorised by the following table:

Authorised amendments
Item	When amendment is authorised	What amendment is authorised
1	No collateral described in the registration secures any obligation (including a payment) owed by a debtor to the secured party.	Amendment to end effective registration (including an amendment to remove the registration).
2	The particular collateral in which the person has an interest does not secure any obligation (including a payment) owed by a debtor to the secured party.	Amendment to omit the collateral.

Note:   If the secured party does not comply with the amendment demand, the demand may be enforced under Subdivision A (administrative process) or Subdivision B (judicial process) of Division 2.

13. In the present case, it is item 1 which is relevant. The debate on whether WHI’s amendment demand was authorised is centred on two questions: whether WHI had granted any security interest over the Winery assets at all; and, if so, whether there was any money owing to Mr Ding which was secured by the security interest. But a preliminary issue arose as to the nature of proceedings under PPSA s 182.

14. In Toyota Finance NZ Ltd v Christie [2009] NZHC 827, Asher J of the New Zealand High Court drew attention to the similarities between the personal property securities registration removal procedure (Personal Property Securities Act 1999 (NZ), s 167; PPSA, s 182) and the caveat removal procedure under Torrens Title legislation (Land Transfer Act 1952 (NZ), s 145A (since re-enacted); Real Property Act 1900 (NSW) s 74MA). His Honour said at [17]-[19]:

[17]   An application [under s 167] is normally brought by way of originating application. Inevitably, given the time constraints, a hearing of a s 167 application will be the type of hearing that is best determined on the affidavits only. There may be third parties with an interest who have not been served. There may be disputed questions of fact and credibility issues. Such a hearing is not suited to a final determination of rights.

[18]   I conclude that the tests that apply in respect of maintaining caveats under s 145A should where possible be applied where a party seeks to maintain registration, and the existence of a security interest is at issue. This means that:

a)   The person seeking to maintain their registration has the onus of establishing a sufficient interest. This is the approach taken in caveat cases: Castle Hill Run Limited v NZI Finance Limited [1985] 2 NZLR 104 at 106.

b)   The test is whether the person seeking to maintain the registration can establish a seriously arguable case that a security agreement exists between the relevant parties. The test of "reasonably arguable" is used in relation to caveat cases: Sims v Lowe [1988] 1 NZLR 656 at 660.

c)   Such a summary procedure is unsuitable for the determination of disputed questions of fact. This is also the approach in relation to caveats: Sims v Lowe [1988] 1 NZLR 656 at 659-660.

…

[19]   I consider, therefore, that the Court should make a decision on whether there is a seriously arguable case. If there is, the interest will be maintained and the parties may litigate the substantive question between them.

15. Consistently with this approach, the proceedings before me were conducted without pleadings. In opening the case, counsel for WHI stated that the Court was not concerned with finally resolving factual disputes between the parties, but rather with determining whether there was sufficient basis to maintain Mr Ding’s registration. Counsel for Mr Ding apparently took the same view.

16. But as the case went on, the ground shifted. There was extensive documentary and oral evidence surrounding the acquisition of the Winery and, in particular, the provision of finance. Counsel for both parties cross-examined each other’s witnesses. And by the end of the case, an issue had clearly emerged concerning the onus of proof. Counsel for WHI, following the Toyota Finance approach, contended that the onus lay on Mr Ding to establish a sufficient factual basis for registration of his claimed interest. Counsel for Mr Ding submitted, to the contrary, that the onus lay on WHI to establish that the claimed interest did not exist.

17. The question of onus is thus the first question for determination in the proceedings. In the light of my conclusion on that issue, I must then consider whether a security interest, securing a debt owing to Mr Ding, subsists under the five finance agreements upon which Mr Ding relies. Finally, if I conclude that Mr Ding’s registration should be removed, I must consider whether an injunction should be granted against the lodgement of any further financing statement, as sought by WHI.

Summary and analysis of evidence

18. The five finance agreements fall into two groups. The agreements in each group are in similar terms to each other and involve the same individual borrower parties.

19. The first group, to which I will refer as the “Loan Agreements”, consists of three Agreements written in Mandarin. The form of each Agreement is similar and in some respects identical. The Agreements clearly had a common origin.

20. Each of the Agreements was expressed to be between one individual as Party A and three individual borrowers as Party B. In each case the borrowers were Jihong (known as “John”) Liu, Mr Chen and Frank Fabrizio.

21. In the earliest Agreement, Party A was Ms Ding. Counsel for Mr Ding submitted that Ms Ding entered into this Agreement as his agent, although the Agreement itself did not say this. The Agreement was not a loan agreement as such, but rather an agreement under which Ms Ding undertook to obtain loan finance for Mr Liu, Mr Chen and Mr Fabrizio as borrowers.

22. The next Agreement in this group is a loan agreement between Lihua Zhang as lender and Mr Liu, Mr Chen and Mr Fabrizio as borrowers. Ms Zhang is Mr Ding’s wife. Again, Mr Ding claims that Ms Zhang entered into the Agreement on his behalf, but this is not referred to in the Agreement itself. The third of the Agreements in this group is a loan agreement between Mr Ding himself as lender and Mr Liu, Mr Chen and Mr Fabrizio as borrowers.

23. The Agreements in the second group were both styled “Borrowing Agreement”. Each Agreement was between Mr Ding (defined as Party A) as lender and Mr Liu and Mr Chen as borrowers (Party B). These Agreements had both a Mandarin and an English text. Both Agreements provided that in a case of conflict, the Mandarin text was to prevail. The two Agreements were largely the same in their layout and wording: they appear to have been prepared from the same standard form.

24. The Court was provided with agreed translations of each of the five financing agreements (in the case of the Borrowing Agreements, these were translations of the Mandarin text).

25. The agreed translations are far from ideal. In places the language of the translations is ungrammatical and the terminology inapt. The Borrowing Agreements particularly show the difficulty. The agreed translations of those Agreements are not the same as the English language versions. I appreciate the Mandarin versions were expressed to prevail but there is nothing to suggest that where the agreed translations differ from the English language versions, the differences represent variations in meaning which are only apparent on translating the Mandarin versions. Rather, the agreed translations appear to have been taken from the Mandarin versions without regard to the English language versions. While this might be adequate in most situations, it does not inspire confidence when the Court is being asked to construe the documents in a formal way. I refer further to this below.

26. I have already referred to the Winery assets being held by WHI under the terms of the Trust. There is another company involved in the Winery as well. That company is called Wickham Hill Holdings Pty Ltd (“WHH”). WHH is said to be “the trading company for the Winery”.

27. Neither company is a subsidiary of, or holds shares in, the other. The shares in each company (and the units in the Trust) have, over the relevant period, been held by various individual investors who are (judging by their names) nearly all Chinese. The evidence before me, or at least the evidence to which I was referred, does not provide any further detail of WHH’s activities or the relationship between WHH and WHI.

28. WHI’s main witness in the proceedings was Haiyang Xu. The evidence indicates that Mr Xu was from 2012 the largest individual investor in the Trust, having been issued 17.3% of the units. He has been the general manager (although not a director) of WHI since October or November 2014. He is also the sole director and one of several shareholders of WHH. Mr Xu gave evidence by affidavit and was cross-examined.

29. WHI also called evidence from Sarah Cappello, a solicitor with Cappello Rowe Lawyers, who act for WHI. The evidence largely went to the procedures undertaken by WHI in causing the amendment demand to be issued, and subsequent activity. Ms Cappello’s affidavit was not contentious and she was not cross-examined.

30. It was Mr Xu’s evidence that his involvement in the Winery stemmed from an approach made to his father, Jingbo (also known as “Eric”) Xu, by Mr Chen. Jingbo Xu is not himself a unit holder in the Trust but he has been a director and shareholder of WHI since November 2014. He is also a shareholder in WHH. He did not give evidence.

31. Mr Ding’s witnesses were two of the borrowers under the finance agreements, Mr Liu and Mr Chen. Both gave evidence by affidavit and were cross-examined.

32. Mr Liu is an acquaintance of Ms Ding and, through her, of Mr Ding. Mr Liu has known Ms Ding for “at least 10 years” but became acquainted with Mr Ding more recently, meeting him for the first time in Beijing in around 2012. Mr Liu was a signatory to all five finance agreements the subject of these proceedings.

33. For his part, Mr Chen was the sole director and shareholder of WHI from June 2012 until October 2014. Like Mr Liu, Mr Chen was a signatory to all five of the finance agreements.

34. The role of the third borrower, Mr Fabrizio, is unclear. He was a signatory to the three Loan Agreements, but not the two Borrowing Agreements. Mr Fabrizio is not a unit holder in the Trust or a shareholder in WHI or WHH. In 2012 Judith Fabrizio (presumably Mr Fabrizio’s wife or relative) was issued 16% of the units in the Trust. Neither of the Fabrizios gave evidence.

35. Mr Ding did not himself give evidence in the proceedings in support of his case. Nor did Ms Zhang or Ms Ding. There was no evidence that any of them was unavailable. Nor was there any evidence from them in the form of business records.

36. There was no evidence about the prior business relationship, if any, between the parties to the five finance agreements (Mr Ding, Ms Zhang, Ms Ding, Mr Liu, Mr Chen and Mr Fabrizio). Mr Liu did say that he, Mr Chen and Mr Fabrizio had been involved in a number of wine trading entities with Jingbo Xu since 2008. He did not provide any further details.

Initial financing approaches and Acquisition Agreement

37. The narrative of events commences in early 2012. According to Mr Haiyang Xu, discussions about acquiring the Winery and setting up the business (including incorporating both WHI and WHH) began some time in early 2012. Mr Xu deposed to a conversation he had with his father, Jingbo Xu, to the following effect:

Jingbo Xu:   [Mr] Chen wants to borrow $2 million to buy a winery. I would like the first $1 million to come from you and for you to be the other director of the winery so that you can receive the reports and monitor the winery’s operations.

Haiyang Xu:   OK. I would be happy to accept the appointment.

Jingbo Xu:   Your appointment as director is a pre-condition of the loan you will give to Chen, Fabrizio and Liu. The loan is to be paid repaid [sic] within two to three years. Once the company is set up, can you please transfer the money for the loan from your account to the account Chen tells you to send it.

38. According to Mr Liu, he had discussions with both Ms Ding and Mr Chen concerning the proposal acquisition. Mr Liu said that one such discussion was to the following effect:

Mr Liu:   Do you know anyone who could lend money to buy Wickham Hill winery and a wine brand in Australia?

Ms Ding:   I will speak with my uncle, Xiaoxin Ding to see whether he would be willing to lend the money. How will the loan be secured?

Mr Chen:   The assets of Wickham Hill Winery are enough to cover the loan and will be granted as security.

Mr Liu:   Yes, the Wickham Hill wine business and assets can cover the loan amount.

39. There is no further evidence surrounding the events leading up to signing the first finance agreement, which was styled “Agreement on Joint Acquisition of Wickham Hill Winery and the Related Brand” (and to which I will refer as the “Acquisition Agreement”). The Agreement was signed in Beijing and provided that it was governed by the law of the People’s Republic of China. It was dated 20 April 2012.

40. The preamble stated:

Party B [Mr Liu, Mr Chen and Mr Fabrizio] has conducted business enquiries with respect to Griffith Wickham Hill Winery in the state of New South Wales of Australia (“target factory” hereinafter), and signed agreement(s) on acquiring the target factory and its brand with the original shareholder(s) of the target factory. Based on information provided by Party B on the target factory and out of its trust on Party B’s reputation, Party A [Ms Ding] agrees to assist and support Party B to acquire the target factory.

41. Article 1 relevantly provided (italics and parentheses original in agreed translation):

Party A’s Responsibility and Obligation

1.   Party A shall be responsible for raise [sic] RMB twenty million Yuan (RMB 20,000,000.00) to be used to acquire the target factory. In the agreement, the third party that provides loan to Party B shall be called lender for short.

2.   Party A shall have the obligation to look for a lender and negotiate with the lender on behalf of Party B with respect to the repayment conditions, interest and amount of such loan.

3.   (Party A shall) communicate with the lender and Party B and assist the two parties with reaching a loan agreement.

4.   Upon receiving lender’s principal or loan return paid by Party B, Party A has the obligation to allocate the principal or loan interest of the lender under the agreement.

42. Article 2 relevantly provided:

Party B’s Responsibility and Obligation

1.   Before 30 July 2012, Party B shall assist Party B [sic] with completing the relevant legal paperwork and registration with respect to ascertaining the 4% shares held in the target factory and the brand.

2.   Shares being registered can be adjusted as needed, but the shares Party A holds in the target factory and its brand shall not be less than 4%. Party A shall be the director of the target factory and its brand company and is entitled to its right as a shareholder and director and assumes responsibility accordingly. After acquiring the target factory and its brand, Party A shall participate in decision-making of the company as its director and shareholder. From the day that Party B repays the lender the full amount of principal and loan interest, Party A shall participate in allocation of profit and loss as a company shareholder and director.

…

4.   Party B shall pay Party B [sic] before 30 June 2015 the full amount of the lender’s principal (RMB twenty million Yuan) and the loan return payable.

…

43. Article 4 relevantly provided:

Settlement of Payment Breach

1.   Under this agreement party B uses its personal assets and all asset of the target factory as security for the performance of the agreement. Party B undertakes that if it fails to pay Party A the total amount as agreed in Article 2 of the agreement and has not obtained written consent from Party A, party A shall assume all the rights and interest in the target factory, and shall have the right to take over the target factory or to auction the factory via public bidding, and Party B shall not dispute this.

2.   Pursuant to Paragraph 1 of Article 4 of the agreement, if the total rights and interests that Party B has transferred to Party A is not sufficient to cover the total amount payable to Party A, Party B has the obligation to transfer its personal property to Party A until the total amount of the loan return and lender’s principal payable to Party A under Article 2 of the agreement is compensated in full.

3.   Parties A and B agree to use earnings from a genuine auction to pay Party A in the event that the total rights and interests owned by Party B in the target factory outweigh the total amount payable to Party A, and the remaining earnings shall be owned by Party B.

4.   Party B shall be fully responsible for the business operation and management of the target factory upon acquiring it, and Party [sic] has the right to participate in decisions [sic] making over significant items as a shareholder and director. The profit and loss by the target factory shall be assumed by Party B.

44. Shortly after the signing of the Acquisition Agreement, on 4 May, a meeting was held in the VIP Room of Star City Casino in Sydney. Those attending included Mr Haiyang Xu, Mr Jingbo Xu, Mr Chen and, in Mr Haiyang Xu’s words, “other borrowers”. According to Mr Haiyan Xu, Ms Ding was not present. During cross-examination, counsel for Mr Ding put to Mr Xu that he was at least aware of Ms Ding at around the time of the meeting and that he was aware that Ms Ding was providing finance. He denied both suggestions. There was no evidence to contradict him.

45. Apparently the 4 May meeting was held to discuss how the acquisition of the Winery was to be financed. According to Mr Xu, Mr Chen noted that external finance, probably in the form of a bank loan, would be needed. Mr Chen suggested that in the meantime he and his other businesses would contribute $1 million or so which was to be repaid when the bank loan was obtained. Mr Xu said that Mr Jingbo Xu agreed but added that no further finance was to be obtained without “our approval”. According to Mr Haiyan Xu, this course of action was approved by the others at the meeting.

Incorporation of WHH and WHI and establishment of Trust

46. WHH was incorporated on 24 May 2012. Its authorised share capital consisted of 1,000 ordinary one dollar shares. Mr Haiyan Xu was, and remains, the sole director of the company. The ASIC search for the company which is in evidence shows a Form 484 was lodged on 30 May notifying changes in shareholder details. The evidence does not identify what the shareholding details were on incorporation, and what changes were made on 30 May. The Form 484 lodged on 31 October (see below), however, does show that, by 30 May, Mr Xu held 430 shares in WHH.

47. WHI was incorporated on 19 June 2012. Its authorised share capital consisted of 10,000 ordinary one dollar shares. Mr Chen was the sole director and secretary of the company. This remained the position until October 2014 (see below). Initially WHI’s sole shareholder was Mr Chen, to whom one hundred shares were allocated on incorporation.

48. The Trust was established by trust deed dated 21 June 2012, two days after the incorporation of WHI. The trust deed provided in conventional form for the establishment and operation of a unit trust. The settlor was Qi (also known as “Grace”) Wang. The trust deed recorded a receipt of an initial sum of $1, divided into one $1 unit held by Ms Wang.

49. Ms Wang later became an investor in the Winery. She was issued with 16% of the units in the Trust. There was no other evidence about her involvement. Ms Wang did not give evidence.

Acquisition of Winery

50. The purchase of the Winery was completed on 29 June 2012. A settlement sheet is in evidence. The purchase price was $6.46 million. This included $1.75 million for the land value.

51. A deposit of $665,000 had previously been paid, leaving a balance payable of $5.981 million. Taking into account adjustments for rates and the like, the total amount payable on settlement was approximately $5.983 million. Of this amount, approximately $32,000 was paid to Griffith City Council at the vendor’s direction. The sum payable to the vendor was $5,951,297.89.

52. The payment to the vendor was made in two tranches. In evidence are domestic telegraphic transfer receipts issued by the Australia and New Zealand Banking Group Limited for each tranche. In each case the beneficiary was Premium Wine Brands Pty Ltd (presumably the Pernod Ricard subsidiary which held the Winery).

53. The first receipt was for $951,297.89. The applicant (that is, the source of the funds) was identified as WHI. The other receipt was for $5 million. The applicant was identified as Mr Chen/Mr Fabrizio.

54. WHI’s bank statements and general ledger for the period up to 30 June 2012 are in evidence. The general ledger records the deposit of $665,000 being paid on 22 June. This payment did not go through WHI’s bank accounts. It was recorded by journal entry, crediting WHH as unsecured creditor for that amount. This indicates that WHH paid the deposit directly to the vendor and that payment was treated as a loan to WHI.

55. The bank statements show overseas transfers totalling approximately $505,000 were received on 25 June 2012. These payments, together with money received from Parliament Hill Enterprise Pty Ltd, and Ausino Alliance Pty Ltd (see below), were used to make the payment of $951,297.89 on settlement, which came out of WHI’s bank account. The $5 million attributed to Mr Chen and Mr Fabrizio did not pass through WHI’s bank account; presumably the payment was made directly to the ANZ for transfer to the vendor.

56. The overseas transfer receipts of $505,000 and the payment of $5 million to the vendor on WHI’s behalf (attributed to Mr Chen and Mr Fabrizio) were not recorded in the books of WHI as borrowings. Rather, the approximately equivalent sum of $5.5 million was credited to a general ledger account styled “Units Premium Reserve”. In effect, $5.5 million was treated as a subscription of equity.

57. As at 30 June, WHI’s accounts showed unsecured creditors as including Parliament Hill Enterprise Pty Ltd ($250,000) and Ausino Alliance Pty Ltd (approximately $330,000). An unsecured loan was shown as owing from an entity named as “Ausino Investment Unit Trust” of $20,000. These figures represented the net outcomes of a series of receipts and payments by way of internet transfer between 26 and 29 June. Parliament Hill Enterprise Pty Limited and Ausino Alliance Pty Limited appear to have been companies associated with Mr Chen. The evidence did not identify what the connection was.

2012 finance agreements

58. Several finance agreements were entered into following the meeting at Star City on 4 May. The first was an agreement in Mandarin dated 6 May. A translation is in evidence. The agreement was styled “Agreement regarding the Joint Acquisition of Wickham Hill Winery and its Brand”. The parties to the agreement were Lai Risheng (Party A), described as “representative from China”; and Mr Liu, Mr Chen and Mr Fabrizio (Party B), described as “three representatives from Australia”.

59. The agreement contemplated the acquisition of the Winery (defined as the “target enterprise”) with $5 million raised by Mr Lai; acquiring a wine brand called “Poet’s Corner” with $3 million raised by Mr Liu, Mr Chen and Mr Fabrizio; and the provision of working capital or operating funds of $3 million, also to be raised by Mr Liu, Mr Chen and Mr Fabrizio. It went on to provide:

a.   The capital for the acquisition of the target enterprise capital (A$5 million) will be raised by Party A, with a mortgage by Party B on the target enterprise and individual assets and credit guarantee, with Party B shareholders lending a total of $A5 million as a personal loan as investment to acquire the target enterprise.

b.   The parties shall hold proportional shares in the target enterprise as follows:

Party A:   Lai Risheng (Lai Ri Sheng) to hold 7% of shares;

Party B:   Liu Jihong (John Liu) to hold 34% of shares;

Chen Ruiyong (John Chen) to hold 34% of shares;

Frank Fabrizio to hold 25% of shares.

c.   Party B shareholders will lend the following sums to Lai Risheng:

Liu Jihong (John Liu) to lend: A$2 million

Chen Ruiyong (John Chen) to lend: A$2 million

Frank Fabrizio to lend: A$1 million

For the sake of convenient operation, the registration of shares can be adjusted as necessary, but Party A’s 7% cannot be reduced.

60. Mr Lai was another investor in the Winery. He was issued 7% of the units in the Trust. There was no other evidence about his involvement in the acquisition. He does appear to have been involved in the change in control of the Winery in 2014. Mr Lai did not give evidence.

61. The reference in the translated version of this agreement to Mr Liu, Mr Chen and Mr Fabrizio lending $5 million to Mr Lai (clause (c) quoted above) is not easy to understand. In all of the other finance agreements which are in evidence Mr Liu, Mr Chen and Mr Fabrizio were borrowers. Elsewhere the agreement spoke (in clause 4) of the $5 million as “capital lent” or a “loan” by Mr Lai. Clause 5, which dealt with repayment terms, was clearly drafted on the basis that Party B was the borrower. I am inclined to think that what was truly contemplated was Mr Lai lending $5 million, and that the translation of clause (c) has gone wrong. There was no evidence from either party which would clarify the situation.

62. The next agreement was dated 25 May. Again it was in Mandarin but a translation is in evidence. The parties were Mr Haiyang Xu as lender and secured party (Party A) and Mr Liu, Mr Chen, Guorong Zhu and Mr Fabrizio as borrower and “guarantor” (Party B). At the time control of WHI changed in October/November 2014, Mr Zhu was involved in some of the meetings. Guorong Zhu as another investor in the Winery who was issued units in the Trust. There is no other evidence about his role. Mr Zhu did not give evidence.

63. Under the agreement, the borrowers were to borrow $1 million from Mr Xu for the purposes of acquiring the Winery. Clause 3 provided:

All borrowers unanimously agree to provide a reverse guarantee in respect of the above-mentioned finance, that is, they agree to provide to Party A [Mr Xu] (Secured Party) a security over all the assets and brand (including trademark of the Winery) at its current value. Without the written consent of Party A, no shareholder, authorised attorney of the Winery or representative may create any further security over the assets of the Winery or transfer any assets of the Winery to any entity of individual.

64. A borrowing receipt, originally written in Mandarin and translated into English, is in evidence. It states:

In accordance with the minutes of the first shareholder / director meeting in 2012 of Parliament Hill Enterprise Pty Ltd in Australia held on 4 May 2012 at VIP Room of Sydney Star City, the board of directors unanimously authorise Ruiyong Chen to seek external financing for Wickham Hill Holdings Pty Limited to be established before 30 June 2012 in accordance with the spirit of this meeting. Accordingly, Ruiyong Chen has borrowed from Haiyang Xu A$1 million, and the amount has been remitted into a bank account nominated by Ruiyong Chen.

65. Yet another finance agreement post-dating, or apparently post-dating, the Star City meeting is the second agreement upon which Mr Ding relies in these proceedings. It was styled “Loan Agreement between Lihua Zhang and Jihong Liu, Ruiyong Chen and Frank Fabrizio”. I will refer to this as the “Zhang Loan Agreement”.

66. The Zhang Loan Agreement was signed at Beijing and provided that it was governed by the law of the People’s Republic of China. The Agreement was dated 2012, but the day and month were not inserted. Mr Chen’s evidence was that it was signed in “mid June”. Mr Liu said it was signed on 30 June. This discrepancy was not resolved. I am unable to say when precisely it was signed. In particular, it is unclear whether the Agreement (which does not mention WHI) was signed before or after the incorporation of WHI on 19 June.

67. Both Mr Liu and Mr Chen gave evidence of being told by Ms Ding that Ms Zhang would enter into the Agreement on Mr Ding’s behalf. This evidence was not challenged in cross-examination.

68. The preamble stated:

Party B [Mr Liu, Mr Chen and Mr Fabrizio] provides Party A [Ms Zhang] with comprehensive and true information with respect to Griffith Hill Winery (“the target factory” hereinafter) in the State of New South Wales, Party A agrees to lend RMB twenty million Yuan (RMB20,000,000.00) to Party B to support its acquisition of the target factory.

69. Article 1 relevantly provided:

Loan Amount, Currency, Term and Bank Account

1.   The amount of the loan under the agreement is RMB twenty Yuan [sic] (RMB 20,000,000.00), which will be used to support Party B in acquiring the target factory (“the principal” hereinafter). Specifically, Party A lends Jihong LIU RMB five million Yuan (RMB5,000,000.00); Party A lends Ruiyong CHEN RMB ten million Yuan (RMB10,000,000.00); Party A lends Frank Fabrizio RMB five million Yuan (RMB5,000,000.00).

…

3.   The loan term under the agreement for Party A shall be from the date that Party A remits the principal to the account(s) designated by Party B until 30 June 2015.

70. Article 3 relevantly provided:

Loan Security and Settlement

1.   Party B undertakes to use the total assets of the target factory and their personal property as security to take out a loan of RMB twenty million Yuan (RMB20,000,000.00).

2.   Party B shall dispose of the assets of the target factory via auction or other means in order to repay the principal and interest due when either of the following conditions occur.

(1)   If Party B is unable to pay the principal and interest in full before 30 June 2015 and has not obtained Party A’s written consent to late payment;

(2)   Party B did not pay Party A the principal or interest on time pursuant to Article 2 of the agreement, and such payment has been overdue for more than 20 working days, and Party B has not obtained Party A’s written consent to late payment.

3.   Pursuant to Paragraph 2 of Article 3, if Party B is still unable to compensate for the principal and interest to Party A after transferring the asset of the target factory based on its shareholding ratio, Party B has the obligation to dispose of their personal property and use the funds obtained therein to pay the principal and interest to Party A.

4.   Pursuant to Paragraph 2 of Article 3, if the total asset of the target factory owned by Party B outweigh Party A’s principal and interest, both parties agree to repay Party A’s principal and interest using the funds from a genuine auction of the asset, and the remaining funds shall be owned by Party B.

5.   Before Party B pays up Party A’s principal and interest in full, the total remuneration paid by the target factory to Party B shall not exceed 50% of remuneration for equivalent positions in the same industry in Australia.

71. In evidence is a Mandarin document identified by Mr Liu as a receipt for ¥20 million signed by himself, Mr Chen and Mr Fabrizio. The receipt is dated 30 June 2012. No translation was provided, and the only other information I can glean from the receipt is that the payment was made in two tranches, one of ¥5 million on 15 June and the second of ¥15 million on 26 June.

72. It appeared from Mr Liu’s oral evidence that the monies referred to in the receipt came from China via Hong Kong. Mr Liu said, as I understood him, that money was paid into his sister’s bank account in Hong Kong and he received confirmation from her by text message that money had been received. Mr Liu indicated that the money provided by Mr Xu had been reached in the same sort of way. Mr Liu was not in a position to say from his own knowledge what the source of the money was and no transfer records were tendered. On the evidence before the Court, the receipt itself did not say.

Use of WHI’s common seal on Acquisition Agreement and Zhang Loan Agreement

73. Each of the signed versions of the Acquisition Agreement and the Zhang Loan Agreement in evidence bears imprints of WHI’s common seal. The seal did not appear on the execution page as would be conventional in Australian commercial practice. Rather, the document was fanned at the margin and the seal stamped across the fanned section so that a slither of the seal imprint appears on the margin of each page. This was done twice, in the lower quarter of the left hand margin.

74. Mr Chen’s evidence was that it was he who stamped the seal on the two agreements in this way. He was unable to specify exactly when this was done. He accepted that it could not have been before the incorporation of WHI on 19 June and suggested it had been shortly after that. Whether it was days or weeks after WHI’s incorporation cannot be determined on the evidence.

75. Mr Chen was asked about stamping the seal on the documents. He described a Chinese custom whereby a person’s seal or “chop” is stamped on a document to authenticate it. He said that he considered that it was unnecessary for this to be done on an Australian legal document, but that he would do it if asked. Presumably that means that Ms Ding or Ms Zhang or one of their associates asked Mr Chen to stamp the seal on the Agreements in question.

76. Mr Chen was asked about the purpose of the custom. He gave the following evidence:

Q.   …when you apply the chop to the fanned pages of the document, you’re doing so to make sure that the pages are not changed for other pages later, correct?

A.   Yeah.

Q.   If you want to make a party agree to the document, you stamp the last page, correct?

A.   Stamp only the last page?

Q.   Yes?

A.   Yes.

Trust unit holdings and share holdings

77. Among the exhibits to Mr Chen’s affidavit was a trial balance for the trust as at 30 June 2012 and 2013 financial statements. The financial statements were unsigned by no point was taken about this.

78. The 2012 trial balance showed 1,000 issued units with a total value of $1,000. The 2013 financial statements showed the unit holdings as being:

Haiyang Xu      173

Linru Feng      160

Qi Wang      160

Judith Fabrizio      160

Jihong Liu      160

Risheng Lai      70

Yisi Ding      40

Ruiyong Chen      77

79. An ASIC Form 484, notifying the transfer of 40 shares in WHH from Mr Haiyang Xu to Ms Ding on 31 October 2012, is in evidence. Mr Xu was asked about this in cross-examination but his evidence was vague. He seemed to suggest that although the form went out under his name, he had not been involved in giving instructions for it. Mr Chen, however, confirmed in his evidence that 40 units in the Trust and 40 shares in WHH were issued to Ms Ding; I infer that he was responsible for this.

80. There appears to have been no change to the shareholding of WHI at this time. The ASIC search for WHI shows no changes to details in shareholding being notified between the date of incorporation and the change in control in October/November 2014.

2013 financial year

81. In March 2013, WHH obtained a $3 million commercial overdraft facility from St George Bank. The facility was apparently negotiated by Mr Haiyang Xu on behalf of WHH. The security required included a first registered real property mortgage by WHI of the Winery land and a first registered general security agreements over the assets and undertaking of WHI as trustee for the Trust. Security was also to be provided over the assets and undertaking of Ausino Wine Brand Pty Ltd as trustee for the Coolabah Unit Trust. Settlement of the facility was effected in 28 March.

82. The financial statements for the Trust for the year ended 30 June 2013 show that during the year the book value of property, plant and equipment increased from $6.6 million to $14.6 million. This was reflected in an increase in equity of $8.35 million. The financial statements contained no further information about the nature of the further assets acquired. I was not referred to any other evidence on this question.

Ding Loan Agreement

83. The third agreement upon which Mr Ding relies was titled “Loan Agreement between Xiaoxin Ding and Jihong LIU, Ruiyong CHEN and Frank Fabrizio”. It was dated 30 June 2013.

84. The preamble stated:

Party B [Mr Liu, Mr Chen and Mr Fabrizio] provides Party A [Mr Ding] with comprehensive and true information with respect to Griffith Wickham Hill Winery (“the target factory” hereinafter) in the State of New South Wales of Australia and the Coolabah brand (“the target brand” hereinafter), Party A agrees to use a total of RMB thirty million six hundred thousand Yuan only (RMB30,600,000), including the loan of RMB twenty million Yuan (RMB20,000,000.00) to Party B on 30 June 2012, the loan of RMB six million Yuan (RMB6,000,000.00) to Party B on 18 February 2013 and the matured interest of RMB four million sixty hundred thousand Yuan (RMB4,600,000) to support the target factory to acquire the Coolbah brand.

85. Article 1 relevantly provided:

Loan Amount, Currency, Term and Bank Account

1.   The amount of loan under the agreement is RMB thirty million six hundred thousand Yuan only (RMB30,600,000), which will be used to support Party B in acquiring the target brand and target factory (“the principal” hereinafter).

…

86. Article 2 relevantly provided:

Interest Rate and Settlement Method

…

4.   Party B shall repay to Party A the full amount of principal and interest before 30 June 2015.

…

87. Article 3 provided:

Loan Security and Settlement

1.   Party B undertakes to use the total asset [sic] of the target factory, the Coolabah brand and the personal property as security to take out a loan of RMB thirty million six hundred thousand (RMB30,600,000).

2.   Party B shall dispose of the asset [sic] and brand of the target factory via auction or other means in order to repay the principal the principal and interest due when either of the following conditions occur.

(1)   If Party B is unable to pay the principal and interest in full before 30 June 2015 and has not obtained Party A’s written consent to late payment;

(2)   Party B did not pay Party A the principal or interest on time pursuant to Article 2 of the agreement, and such payment has been overdue for more than 20 working days, and Party B has not obtained Party A’s written consent to late payment;

3.   Pursuant to Paragraph 2 of Article 3, if Party B is still unable to compensate for the principal, interest and late payment fee to Party A after transferring the asset and brand of the target factory and target brand based on its shareholding ratio, Party B has the obligation to dispose of its personal property and use the funds obtained therein to pay the principal, interest and late payment fee to Party A.

4.   Pursuant to Paragraph 2 of Article 3, if the total asset of the target factory and brand (value) owned by Party B outweigh Party A’s principal and interest, both parties agree to repay Party A’s principal and interest using the funds from a genuine auction of the asset, and the remaining funds shall be owned by Party B.

5.   Before Party B pays up Party A’s principal and interest in full, the total remuneration paid by the target factory and brand to Party B shall not exceed 50% of remuneration for equivalent positions in the same industry in Australia.

88. Article 4 relevantly provided:

Undertaking and Representation on the Target Factory

1.   Parties A and B agree that the full loan issued by Party A shall be used to acquire the Griffith Wickham Hill Winery in the State of New South Wales of Australia and Coolabah brand. Without Party A’s consent Party B shall not alter the use of the loan; otherwise Party A has the right to demand early repayment from Party B, including the principal, interest as well as late payment fee under the agreement.

…

89. Article 7 relevantly provided:

Obligation of Providing Information

1.   Party B shall provide Party A with genuine financial statement(s) of the project factory and brand every six months.

2.   Party B shall notify Party A on a timely basis of any pledge of assets relating to the project factory and brand, major transactions and events that impact upon the sustainable development.

…

90. Article 10 relevantly provided:

Supplementary Provisions

1.   The agreement shall take effect upon being signed by both parties. The agreement shall terminate after Party B has paid up Party A the principal, interest and late payment fee in full and has completed the service of applying for migration to Australia for individuals designated by Party A.

…

3.   In the event that provisions of the agreement are at odds with resolution by the Board of Directors of the target factory or the local laws and regulations, the agreement shall prevail until Party B has repaid Party A all of the principal and interest.

…

91. The Agreement contained a space for inserting the place where it was signed, but this was left blank. Article 9 provided that the “current Australian laws, regulations and rules” applied with respect to, among other things, the interpretation of the Agreement.

Change in control of WHI, October/November 2014

92. Mr Xu gave evidence that a meeting between investors and other parties interested in the Winery took place at Mr Chen’s office in Sydney on 27 October 2014. Among those who attended were Mr Jingbo Xu, Mr Lai, Xia Zhang, Mr Liu, Mr Chen, Mr Fabrizio and Ms Wang. Ms Ding was notified but did not attend. Mr Xu said that this was the first time he had heard of her involvement with the Winery.

93. Xia Zhang is Mr Lai’s wife, and should not be confused by Lihua Zhang, Mr Ding’s wife. As will be seen, Xia Zhang has become involved as an investor in the Winery and a director of WHI. She did not give evidence.

94. Mr Xu said the purpose of meeting was to discuss the poor financial performance of the Winery. He said that it was agreed at the meeting that a steering group be formed and that the shareholding and debt rights over the Winery be clarified. It was agreed by 16 November, any person claiming to have an interest had to put in evidence supported by relevant contracts, bank receipts etc.

95. In evidence is a minute of the meeting of 27 October. The minute is generally consistent with Mr Xu’s account. It also referred to further loans being made to keep the Winery going. The minute was signed by persons described as “shareholders” and “directors”. The “shareholders” who signed were Mr Lai, Mr Jingbo Xu, Mr Haiyang Xu, Mr Chen, Ms Wang, Mr Liu, and Ms Zhang. The “directors” who signed were Mr Fabrizio, Mr Lai, Mr Jingbo Xu, Mr Chen and Mr Liu.

96. Also in evidence are three ASIC forms dated 28 and 29 October. The first of those, lodged under Mr Chen’s name, recorded Ms Zhang’s appointment as an additional director of WHI. The next, dated 29 October and lodged under Ms Zhang’s name, recorded that Mr Chen ceased to hold office as a director on the previous day, 28 October. The third, also lodged under Ms Zhang’s name on 29 October, recorded the transfer of 51 of Mr Chen’s shares in WHI to Ms Zhang.

97. Mr Chen said that he did not agree to resign as director of WHI, or to transfer his shares in WHI, as recorded in the two ASIC forms lodged under Mr Zhang’s name on 29 October. But there was no evidence that he took any steps to contest what was done. He seems, for practical purposes, to have ceased being involved in management of the Winery from this point.

98. The ASIC search for WHI shows that a further form was lodged with ASIC on 21 November notifying changes to its details. The form is not in evidence but from other parts of the search it can be deduced that the form notified:

(1)   the appointment of Jingbo Xu as an additional director from 11 November;

(2)   the issue of a further 9,900 shares, taking the shares on issue to 10,000;

(3)   the allocation of 469 shares to each of Ms Fabrizio, Ms Wang, Mr Liu, and Mr Zhu.

99. The ASIC search also refers to a further change in company details form lodged four days later, on 25 November. This form is in evidence. It recorded the transfer of forty shares to Ms Ding, twenty from Mr Haiyang Xu and twenty from Ms Zhang. Mr Xu was shown as retaining 2,168 shares and Ms Zhang as retaining 5,447 shares. Presumably these shares were allocated to them (apart, in Ms Zhang’s case, from the 51 shares she already owned from 29 October) in the share issue the subject of the 21 November notification. The date of the change was, however, shown as 13 November.

100. Mr Xu’s evidence was that he was present when his father telephoned Lei Rong, who is Ms Ding’s husband, after the meeting on 27 October. Mr Rong was told of the decision requiring any person claiming an interest in the Winery to provide evidence by 16 November. Mr Xu said that Mr Rong accepted this.

101. Mr Xu gave evidence that a further meeting took place on 16 November, at Mr Chen’s office. The meeting was also attended by Mr Lai, Ms Zhang, Mr Jingbo Xu, Mr Chen, Ms Ding, Mr Rong and others. Mr Haiyang Xu, Mr Lai and Ms Zhang submitted agreements and documents to the meeting. Ms Ding did not. Mr Xu said that there was several follow up requests to Mr Rong and Ms Ding to produce documents or paperwork, but nothing was provided.

102. The evidence of those events is difficult to understand. It does not explain why all of the directors named in the minute of the 27 October were not formally appointed as directors of WHI. Mr Xu’s account of events following the meeting, and in particular his evidence that Ms Ding was unable to sustain any interest in the Winery, seems inconsistent with the issue of shares to her on 13 November. But this was not explored in cross-examination.

103. On the information notified to ASIC, Ms Ding retained a holding of forty shares in WHI (0.4% of the total) after 21 November and she still had her 4% per cent holding in WHH (no changes to shareholder details were lodged for WHH during this period). But subsequently Ms Ding, along with Mr Chen, Mr Liu, Ms Wang, Mr Zhu and Ms Fabrizio, have been recorded in ASIC’s register as having ceased to be shareholders in WHI (and WHH, in Ms Ding’s case).

104. The ASIC search of WHI shows the shareholdings (at September 2016) to be:

Haigen Xu   2831 shares

Jingbo Xu   480 shares

Xia Zhang   5575 shares

Jiawei Liu   1114 shares

105. The ASIC search of WHH shows the shareholdings (at September 2016) as: Haiyang Xu (283); Jingbo Xu (48); Xia Zhang (62); Jiawei Liu (111) and Daihong Zhang (496).

106. These two ASIC extracts show that after November 2014, two further ASIC forms notifying a change in shareholder details were lodged in May and August 2015. Presumably Ms Ding’s shareholder status ceased by August 2015 at the latest.

107. There is no evidence of any change to the unit holdings of the Trust from those details recorded in the Trust’s 2013 financial statements. It is not clear if any of Ms Ding, Mr Liu, Mr Chen or Ms Fabrizio still remain unit holders.

Borrowing Agreements

108. The Borrowing Agreements are the other two agreements upon which Mr Ding relied. Each Agreement was undated. Neither Agreement specified where it was signed by the parties. As I have mentioned, each Agreement was written in both Mandarin and English. Because of my doubts about the Mandarin translations, in quoting from the Agreements I have used the English language versions.

109. The first of these two Agreements, to which I will refer as the “¥20 million Borrowing Agreement”, began by identifying the parties in the following terms:

Lender (hereafter referred to as Party A):

-   Xiaoxin Ding

Borrower (hereafter referred to as Party B):

-   John Liu (Wickham Hill)

-   John Chen (Wickham Hill)

110. The preamble stated:

Party A and Party B have entered into this agreement regarding Party B borrowing CNY 20,000,000 from Party A between 01 May 2012 and 30 June 2012 to purchase all assets of Coolabah & Wickham Hill. Party A is the Lender while Party B is the Borrower.

111. The Agreement relevantly provided:

1.   Amount borrowed: CNY 20,000,000;

2.   Borrowing period: till 28/02/2015;

…

4.   Party B shall repay the principal and interest of CNY 34,560,000 into the designated account of Party A before 30 June 2015;

5.   Guarantee: Party B shall take all personal and company’s properties and assets as the guarantee to repay the principal and interest to Party A on agreed time;

…

112. In the second Borrowing Agreement, to which I will refer as the “¥30.6 million Borrowing Agreement”, the parties were defined in the same way as in the ¥20 million Borrowing Agreement except that in the brackets after the name of each of Mr Liu and Mr Chen, in place of the words “Wickham Hill” there appeared the following:

Cheviot Wine Group Pty Limited, Coolabah Wine Group Pty Limited, Wickham Hill Investment Pty Limited, Wickham Hill Holdings Pty Limited, Ausino Wine Brand Pty Limited ATF Coolabah Unit Trust.

113. The preamble stated:

Party A and Party B have entered into this agreement regarding Party B borrowing CNY 26,000,000 from Party A between 01 May 2012 and 01 March 2013. Between 01 May 2012 and 30 June 2013, the total amount borrowed from Party A is CNY 30,600,000. Party A is the Lender while Party B is the Borrower.

114. The Agreement relevantly provided:

1.   Amount borrowed: CNY 30,600,000;

2.   Borrowing period: until 30/06/2015;

…

4.   Party B shall repay the principal and interest of CNY 44,064,000 into the designated account of Party A before 30 June 2015;

5.   Guarantee: Party B shall take all personal and company’s properties and assets as the guarantee to repay the principal and interest to Party A on agreed time;

115. Mr Liu stated in his affidavit that the Borrowing Agreements were signed in “late 2014”. That was as far as his evidence was taken. Mr Chen said that both agreements had been signed “in or about November 2014”. He was not asked to give any further evidence about this either in chief or in cross-examination.

Financing Statement and amendment (removal) application

116. In February 2017 Mr Ding caused to be lodged on the Register a financing statement that identified Mr Ding as the secured party and WHI as the grantor of a security interest attaching to all WHI’s present and after-acquired property.

117. In March 2017 the solicitors acting for WHI sent a letter to Mr Ding’s solicitors requesting information under PPSA s 275 concerning the security interest said to support Mr Ding’s financing statement. The letter also requested a statement from Mr Ding setting out the obligations said to be secured by the alleged security interest. Mr Ding’s solicitors wrote back, stating that Mr Ding’s security interest secured a repayment obligation in the amount of approximately ¥70.6 million. This was made up of ¥26 million in loans and more than ¥44 million in interest. The letter also enclosed the five agreements referred to above (including the original Mandarin and English translations).

118. In June 2017 an amendment demand was served on Mr Ding’s local representative. In July 2017, following Mr Ding’s non-compliance with the amendment demand, WHI caused an amendment notice to be issued by the Registrar and was subsequently served by WHI’s solicitors on Mr Ding’s local representative. That notice gave Mr Ding an opportunity to provide to the Registrar a response as to why WHI’s amendment demand should not be registered. Such a response was provided by Mr Ding’s solicitors in August 2017. The Registrar subsequently invited the parties to provide further submissions about the nature of the security interest under which Mr Ding claims.

I have arrived at the settled view that the caveat G35519 should be removed and, in my opinion, the history of this matter reveals clearly that it is necessary for the court at this stage to take the unusual step of making the further orders sought by the plaintiff to restrain the first defendant from lodging any further caveat against the land until further order. To assist the efficacy of that order it should be ordered that the second defendant be restrained from registering any such further caveat until further order of the court. Only by that means will it be possible, in my opinion, to ensure that time is not unnecessarily wasted and proceedings not unnecessarily proliferated. The effect of those orders of course will be to require the first defendant to obtain leave before the further caveat may be lodged and registered. Such an application would necessarily require cogent evidence in its support and in support of the contention of a caveatable interest.

227. His Honour’s decision was applied by Murphy J in Gangemi v Gangemi [2009] WASC 268 in a similar case where a caveat was lodged in defiance of an earlier decision of the Court.

228. The headnote in Halaga Developments states:

(1)   It is an abuse of the caveat provisions of the Real Property Act 1900 to lodge a series of identical caveats which would prevent indefinitely consideration of a primary application and each such caveat other than the first is therefore invalid.

(2)   By virtue of both the ordinary jurisdiction of the Court to protect rights of property and the Supreme Court Act 1970, s 23, the Court has jurisdiction to grant an injunction to restrain a party from acting lawfully where such restraint is necessary to protect the rights of another party.

229. The juxtaposition of these two propositions could be misleading if it were taken to imply that they are necessarily related. Waddell CJ in Eq found, in accordance with proposition (1), that the repeated caveats were an abuse of process. But he merely ordered their removal. His Honour did not consider whether to grant an injunction against further caveats as well. Proposition (2) concerned the question whether a caveator could obtain a general law injunction. This is not the question which arises in this case.

230. An injunction was granted in Stocks & Holdings where there was an express threat to lodge a caveat and a finding that the interest claimed in the threatened caveat did not exist. In Milne Feeds and Gangemi, similarly, there were repeated lodgements of caveats where the court had previously decided the question of title adversely to the caveator. In both Milne Feeds and Gangemi there was liberty to apply, so the injunctions were not final.

231. In my view, the proper explanation of the decisions in Stocks & Holdings, Milne Feeds and Gangemi, is that where the court exercises its jurisdiction to determine a question of title, it may, in a proper case, grant an injunction in aid of that determination. It hardly needs to be said that the exercise of this power would be sparingly exercised. There would need to be a real basis for thinking that the unsuccessful party will not accept the Court’s conclusion. But in a proper case I think that the Court has power to ensure that its decision quelling the dispute is not frustrated by collateral means.

232. On this analysis, the power derives from the Court’s general law jurisdiction to determine title to property. It can therefore be exercised by this Court outside the framework of the PPSA. But, having regard to my analysis of s 182, I also think that a declaration of right, and, in a proper case, an injunction in aid of that declaration, can be granted under PPSA, s 182(4)(c).

233. The question is therefore whether this is a proper case for an injunction. I do not think it is.

234. As already noted, WHI was initially invited to deal with the case on the basis that the Court would not need to decide whether Mr Ding’s claimed security interest actually existed. WHI did not seek a declaration that Mr Ding had no security interest. I do not know whether, had it been clear at the outset that WHI was seeking a final determination that no security interest existed, Mr Ding’s case would have been conducted differently. Having regard to the way the case has been conducted, I decline to grant an injunction in the terms sought.

Conclusions and orders

235. I have concluded that:

(1)   on the evidence before the Court, Mr Ding has no security interest in the Winery assets, and, accordingly, WHI’s amendment demand is authorised and Mr Ding’s registration should be removed;

(2) the Court should not, however, make an order restraining Mr Ding from lodging any further financing statement for registration under the PPSA.

236. I see no reason why costs should not follow the event. I will therefore order that Mr Ding pay WHI’s costs. Any application for variation of that order can be made in accordance with the Rules.

237. The orders of the Court are:

1.   Order that the second defendant register a financing change statement removing registration number 2017 02030061920 from the Personal Property Securities Register.

2.   Order that the first defendant pay the plaintiff’s costs of the proceedings.

**********

Decision last updated: 31 May 2019