Xu v Shi

[2009] NSWSC 955

CITATION:	XU v SHI & Anor [2009] NSWSC 955 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	24-28/08 and 7/09/2009
JUDGMENT DATE :	7 September 2009
JURISDICTION:	Equity Division
JUDGMENT OF:	Bryson AJ
EX TEMPORE JUDGMENT DATE:	7 September 2009
DECISION:	(1) I make declaration as in claim 3 in the Statement of Claim. (2) I make order 5 in the Statement of Claim. (3) I am prepared to make order 8 subject to arrangement between the parties. (4) I give judgment for the plaintiff against the first defendant for $250,000.
CATCHWORDS:	CONTRACT - formation - whether document purportedly an agreement for loan, made between related persons, typed out and signed by the defendant, was intended by the parties to be binding according to its terms: on review of evidence of facts and circumstances, found that it was so intended. Judgment for plaintiff for recovery of loan: consideration of winding up 50/50 company on just and equitable ground. Decision on own facts.
CATEGORY:	Principal judgment
CASES CITED:	Air Great Lakes Pty Limited v K S Easter (Holdings) [1985] 2 NSWLR 309 Gray v Gray [2004] NSWCA 408 Jones v Padavatton [1969] 2 All ER 616
PARTIES:	Daihong Xu - Plaintiff Ziqiang Shi - First defendant Pacific Allied Corporation Pty Limited - Second defendant
FILE NUMBER(S):	SC 5969/2007
COUNSEL:	P Bolster - Plaintiff A S Bowen - First Defendant
SOLICITORS:	Gray & Perkins Lawyers - Plaintiff Munro Lawyers - First Defendant

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BRYSON AJ

MONDAY 7 SEPTEMBER 2009

5969/2007 DAIHONG XU v ZI QIANG SHI & ANOR

JUDGMENT

1 HIS HONOUR: The parties to this litigation are related, and this is a key fact. The plaintiff Dai Hong Xu is the niece of Xian Juan Zhou, known as Mrs Julia Shi, and the defendant Zi Quiang Shi, known as John Shi, is Julia Shi's husband, that is the plaintiff's uncle by marriage. The plaintiff at the time of the significant events lived in Shanghai and her husband, Chen Zhen, lived there with her. They have conducted for some years and still conduct a successful business in office and hotel fit out and construction, and are considerably prosperous. They have a son, Yan Chen, who when the events began lived in the home of the first defendant at Rouse Hill; he travelled to Australia to live with his relatives about 2003 for his schooling. The daughter of the defendant, Xi Shi, known as Lucy Shi, is a witness in the proceedings. The plaintiff and her husband have the benefit of considerable successful business experience in China.

2 By contrast, the defendant, who received trade training as an electrician or electrical engineer in China, worked as a tradesman or artisan both in China and for about 20 years in Australia, and before the relevant events had no particular experience of owning or managing a business. The second defendant is Pacific Allied Corporation Pty Limited, and has been joined because among the claims made by the plaintiff is an order winding up the second defendant on various grounds, the relevant one being the just and equitable ground.

3 Chinese cultural attitudes have an importance in the facts of this case which I am not really equipped fully to understand. Plainly, they have had influences on attitudes and decisions and on personal interaction among related persons, not all of which are readily perceptible to me. Most of the evidence was given with interpretation from Mandarin and in one case from the Shanghai dialect. The principal parties have no significant ability to read English. John Shi has slight ability to speak English but not significant.

4 Evidence with interpretation was very time consuming and the possibility of misunderstanding and ambiguities was present at almost every sentence of the translated evidence. There was no room for nuances of expression which I might understand. The interpreter was at the witness box for many hours over four days. Of course, the languages spoken by the witnesses are completely beyond my understanding. In the circumstances, use of my observations and conclusions about the demeanour of witnesses when assessing the facts does not seem to be available. The witnesses have cultural context which I do not know and I have not found observations of demeanour of any assistance in fact finding. I made no particular adverse observations about the demeanour of any witness; but I do not rely on my own impressions, I rely principally in finding facts on my view of where the probabilities are in the instances where there are conflicts in the evidence.

5 The plaintiff and her husband visited Australia, I think for the first time in January 2004, a little before the Chinese New Year. Of course they visited the defendant and his family, naturally enough in view of the relationship and their son's living in their household. They brought money for the support of their son. As their successful business career was continuing, they were able to contemplate investment in Australia.

6 According to the plaintiff's evidence, the defendant told her at an early stage, I understand about January 2004, that he had $80,000 available to invest in a business. The defendant denies that he said this or that he contemplated at that time investing in a business. In a sense, he had about $80,000 available in that he was well in advance in mortgage payments and could have drawn down as much as that if he had wished to. Later he drew down money and used it for other purposes. In the plaintiff's case the possibility that the defendant might invest $80,000, or for that matter any sum seems to have fallen out of discussion later in 2004 without being explicitly abandoned at any stage or in a clear way. In my finding the possibility of the defendant contributing money to an investment was probably discussed, but only as a possibility and fell out of consideration before the business, to which I later refer, was bought later in 2004. The whole subject of Mr Shi putting in $80,000 is not, to my mind, of primary importance.

7 The plaintiff and her husband visited Australia again in July 2004. During that journey they investigated possibilities of operating businesses in Australia. The evidence does not speak, however, of any discussion with the defendant which is relevant to the subject. The defendant flew to China and to Shanghai in August 2004 to attend to his late father's funeral. During this visit there were meetings between the parties. In the course of the meetings, and one in particular at a hotel in Pudong, there was discussion about possible business ventures. No details were discussed and no specific business was under consideration. The defendant was asked to do some research. He did some, and in September 2004 he told the plaintiff he had seen an advertisement for the sale of an IGA grocery store at Padstow, New South Wales. There was discussion about the subject, starting at the basic level of explaining what an IGA store was; there was discussion about sales figures and about profits. The plaintiff told the defendant to negotiate about the price. He did so, and later reported on the negotiations. To make the purchase he negotiated $350,000 for the business and an estimated $150,000 for the stock. At an early stage he paid $2,000 for a holding deposit which came from his own resources. He asked the plaintiff to provide $500,000 for the purchase.

8 The plaintiff and her husband gave consideration to this and decided to invest. The plaintiff then told her aunt, Julia Shi, by telephone to the effect she would contribute $500,000 to the purchase, that she and the defendant were to be equal shareholders, and that they were to share profits 50/50. The plaintiff arranged with the defendant for the plaintiff to send money for the purpose of buying the business. The arrangements related to making a number of separate remittances to accounts in Australia named by the defendant. The money was remitted in a number of different transactions, but the defendant got control of all the money remitted and used it to buy the business.

9 Negotiations and arrangements for the purchase required considerable attention by the defendant and Julia Shi, and required of him meetings and arrangements with the vendor, Brett Li, arrangements to get control of the second defendant, a shelf company apparently provided by Brett Li, consulting and instructing a lawyer, Gracie Fung, to act on the purchase. The purchase involved making arrangements to take over the existing lease or perhaps obtain a new lease of the shop premises.

10 Contracts for purchase were exchanged on 29 November 2004, the balance of deposit $33,500 was paid on 2 December and the purchase was settled on 13 December. In all these events the defendant was the only one of the parties in attendance and the only one in a position to take any active steps. He left his job at Telstra, where he had been working for about three years assembling or repairing mobile phones. His last day of work there was 31 December. Thereafter he worked in the shop and had no other occupation for more than two years. He made arrangements at or before the time of purchase for the manager employed by the vendor, Mr Oscar Lau, to remain on; and indeed Mr Lau did remain for some time, although he then left, after which Mr Shi was the only manager for the shop business.

11 In connection with obtaining control of the second defendant company, the defendant became holder of all 100 shares issued in it which were transferred to him in two transfers by the previous holders of those shares. The business of the second defendant was launched with the first defendant in charge.

12 The plaintiff and her husband came to Australia a little before the Chinese New Year of February 2005. They met and visited the defendant and his family and their son, but soon proceeded to the Gold Coast for a holiday. Of course, when they spent time at the defendant's home the business which had been acquired was discussed. The defendant reported that he knew someone who was interested in buying the business, but neither of the parties was interested in selling. There was discussion about the money that was remitted from China in Chinese currency RMB and about how much Australian money this yielded, about $510,000, all or practically all of which had been used in the purchase.

13 The parties and others consulted an accountant, Mr Thomas Wang of Hurstville, who had not previously been involved in their affairs. On this visit documents were prepared which had the effect of making the plaintiff a shareholder in the company for half the issued shares and a director, that is a co-director with the defendant. There was some misunderstanding as Mr Wang first thought there were only two shares on issue, and the documents he actually prepared on the day he was consulted reflect this. In some way he learnt better soon after and further documents prepared by him showed that each held 50 shares. The affairs of the company have always been conducted on that basis ever since, that is, each is entitled to be owner of 50 shares in the company. As the share register is not in evidence I do not know what it says, but a return made to ASIC by Mr Wang soon afterwards shows the shareholding as 50 each and there being two directors.

14 In Mr Wang's evidence the possibility of the plaintiff's migration to Australia was mentioned in the course of the interview. He did not give, and it was my understanding he was unable to give any clear or precise quotation of what was said, but it does appear from his evidence that the context was that as the plaintiff did not reside in Australia, and there had to be at least one director of a company who was an Australian national (or perhaps the need was for an Australian resident) it was necessary that both should become or continue as directors. It does appear clearly enough from Mr Wang's evidence that nobody told him anything like an account of the facts in which transferring half the shares was a token exercise which was undertaken to give a good appearance to a visa application, or had any inappropriate connection with a project for migration to Australia.

15 Early in this visit to Australia there was discussion between Julia Shi and the plaintiff, apparently initiated by Julia Shi, about preparing an agreement recording what had happened so as to protect the parties' interests. There have been a number of references in evidence and in argument to the connection between preparing the document and protecting both parties' interests. I pause to note the essential ambiguity of the concept of protecting both parties' interests. Primarily one should understand that parties' interests are protected by correct and accurate documents which indeed record what they intend to do. However, speaking of protecting both parties’ interests is, at least in concept, susceptible of another reading in which writing is entered on only to put up a show which is different from what the parties understand. Protecting interests of both parties is a credible and strong motive for writing down arrangements which at that time depended upon telephone conversations, the meeting and discussion in August 2004 in Shanghai at a very preliminary stage, and on understanding, not necessarily spoken understanding, between family members. There was an obvious need for a written record to deal with the possibility that others might have to give effect to the arrangements if one or other of the parties was no longer available. The project of making a written record was not carried through at first and the plaintiff and her husband and her son went off to the Gold Coast for their holidays.

16 On 19 February 2005 the plaintiff with her husband, son, and Mr and Mrs Shi were at the Shi's home at Rouse Hill. They had dinner on the evening before the plaintiff and her husband were to depart for China. After dinner Julia Shi referred to the project of writing the agreement down. There was discussion about who would draft the document and the defendant agreed to do so. After some discussion he went upstairs and then about half an hour later came down with a draft in Chinese characters which he had prepared in typewriting, presumably on a computer. The draft was discussed. Evidence was detailed and in some degree in conflict about what took place during the discussion on the draft. I do not regard the details as important and I do not think that a satisfactory resolution could emerge on an attempt to take to pieces all the evidence about the preparation of the documents including the discussion at that stage and make altogether reliable findings. Some details were settled and the draft was altered. The defendant went upstairs with the draft and produced another document which he brought downstairs, which the parties saw, approved of and signed. This has become exhibit A (the original), but I rely on the translation exhibit C, page 26, which is in the following terms:

Agreement


i) Dai Hong Xu (Chinese Representative) and Ziquiang Shi (Australian representative) agree to set up a joint venture to establish a Pty Limited company Pacific Allied Co-operation Pty Ltd.

(ii) Diahong Xu and Ziqiang Shi hold 50% share holding of the company respectively.

iii) On 13 December 2004 the company purchased IGA Riteway Padstow.

(iv) Daihong Xu agrees for Ziqiang Shi to look after the company's business.

(v) The company's financial records will be provided to the Chinese Representative by the Australian Representative every 6 months or as requested by the Chinese representative.

(vi) The total investment amount is $510,000 with Daihong Xu contributing $260,000 and Ziqiang Shi contributing $250,000.

(vii) The investment project is IGA supermarket Padstow.

(viii) Date of investment commencing from 13 December 2004.

(ix) Ziqiang Shi is authorised to look after the running of the business, with assistance from Ms Zianjuan Zhou and Xi Shi.

(x) Wages for the time being – Ziqiang Shi $22/hour; Xianjuan Zhou $15/hour; Xi Shi $15/hour.

(xi) Additions: Daihong Xu agrees to lend $250,000 to Ziqiang Shi. The interest rate is calculated as 50% of the bank interest rate. The Interest rate to be paid each half yearly.

(xii) Signed by Chinese Representative Daihong Xu and Australian Representative Ziqiang Shi and witnessed by Xianjuan Zhou and Zhen Chen and dated Saturday 19 February 2005.

17 The defendants' counsel made a number of observations which placed some reliance on the absence from the document of any reference to return on the investment. In my reading, the document quite clearly provides for this subject by referring in paragraph 1 to the venture as a joint venture and by going on in paragraph 2 to provide for each of the two parties to hold 50 percent of the shareholding. With the adoption of the company mechanism this provides sufficiently clearly for what is to happen with respect to profits of the company.

18 Counsel also made observations against the effect which the plaintiff attributes to the document and relied on the absence of any provision about repayment. That is, all clause (xi) says is: "Daihong Xu agrees to lend $250,000 to Ziqiang Shi”. In my opinion this is not a defect. The ordinary approach in the construction of a document about a loan in such terms (and terms like this are very commonly encountered) is that it is implied that the money is to be repaid on reasonable notice. If the document has contractual effect that implication is, in my opinion, altogether clear.

19 I go on to say that while it is not to be supposed that the parties had any grasp of the complexities which may arise from making reference to a shareholding without going on to specify whether the ownership is beneficial, there is no difficulty in understanding this document according to its own terms because the earlier reference to a joint venture made it clear enough in my view that the shareholding of 50 percent which, according to its terms the defendant was to have was to be held by him beneficially.

20 The terms of the document go considerably further than what evidence would show had earlier been arranged. It deals with subjects, most particularly the concept of the $250,000 as a loan, of which so far as evidence shows there had been no discussion between the parties and no explicit arrangements at any earlier stage than the appearance of this material in the draft document. When read in the factual context it is to be understood and indeed at a number of points the terms of the document show that it is stating the effect of arrangements which have already taken place; it is not an agreement to launch as at 19 February on a new joint venture. Some of the events which it seems to speak of were not literally enacted; there was no event, for example, in which the plaintiff handed over to the defendant $250,000 in a cheque, or for that matter in a carpet bag or in any other form; the reference to a loan is the character given to events which had already happened.

21 The case put forward by the plaintiff requires that I take the view that the agreement gives effect to and restates what the parties had earlier agreed in an arrangement that was not expressed well and some details of which had not earlier been specified at all.

22 The evidence about what took place in the discussion on 19 February seems to make it clear that there were aspects of the arrangements which the parties had not explicitly confronted earlier; interest on the loan being very prominent among these. I should interpose that although in the Statement of Claim the plaintiff claims interest, the claim cannot in my opinion be based on the provisions of clause xi about interest because the reference to "the bank interest rate" is indeterminate; nothing in the document and nothing in other evidence establishes what is the bank interest rate referred to. There could, of course, be many. The indeterminacy of that provision does not affect the contractual effect of the whole document.

23 The case for the defendant is that, whatever its terms, the document was not intended by the parties to be effective or to be a contractual arrangement at all. The defendant dealt in his affidavit at some length with the discussion of 19 February. See particularly paragraphs 125 and 126. I should note also a passage in his oral evidence as interpreted at transcript 185, line 36. There is a slight shift of context in the question, but the question is as follows:

Q. …the question was about whether in your understanding there was a loan?
INTERPRETER: Because at that time when we were dealing the whole business were based on trust so I think it was not very important on what was said in the document. And also at that point when I was sign the agreement and the loan was not happening, the 250,000 loan, that wasn't happening with Shi Ziqiang.

24 The defendant does not give evidence that an arrangement was made to produce a false document, indeed nobody does. In his evidence, however, all conversations before 19 February took place on the basis that the plaintiff was investing and buying a business and the defendant was helping the plaintiff to do so and was to manage the business. In any event, his evidence of those earlier conversations is all consistent with that reading.

25 Xi Shi shown as Lucy Shi, the defendant's daughter, a highly educated person who has perfect English, gave an account of the conversation of 19 February. It was disputed by the plaintiff that she was even present on the occasion. I do not see any clear resolution of this issue of fact, but as the account of the conversation which she gives does not differ in any way which I regard as important from the accounts of other persons who were undoubtedly there, I do not see a purpose in pursuing this issue, potentially adverse to credit or even to character of some of those involved, as it could not affect the outcome. Her account of the conversation does not show or in any way tend to show that the document produced was fictitious or intended to be a sham or otherwise that there was an arrangement to make a document which did not have its purported effect. Indeed, the same is true of the evidence of Julia Shi.

26 In the defendant's case migration and creating conditions for a successful application by the plaintiff for a visa based on ownership of a business in Australia are the central subject and the real subject of the arrangements. The arrangements began to be made in China during the August 2004 visit. There was earlier discussion of possible migration and references to the subject from January 2004 onwards. The defendant and Julia Shi had strong family motivation to assist in a project of this kind.

27 The defendant’s case, therefore, is that the document does not represent real arrangements that were made, but was produced to make it seem there was a co-owned business, on some view that this would assist an application for an immigration visa. I am asked to find that it was not intended that the defendant would really own shares, or would really part own the business, or would need to pay for these shares, or would borrow money to do so. The document exhibit A was produced to give what was thought to be an appearance favourable to a visa application, not to record any actual agreements.

28 There is a lengthy outline in Defence paragraph 2 of what are alleged to be the true arrangements. According to this outline, the loan was fictitious, the defendant handled money on the plaintiff’s behalf and he did not receive any of it himself. In my understanding nothing in the evidence articulates at any point the concept that the agreement was a construction, a fabrication or was not truly intended to be effective, or that it was a sham or was in any other way not a record of the parties' arrangements.

29 As appears clearly from the exposition of McHugh JA in Air Great Lakes Pty Limited v K S Easter (Holdings) [1985] 2 NSWLR 309 at 336 and 337, before one approaches legal rules which limit the interpretation of a written agreement to its contents and the qualifications on those rules, it is necessary that there should be a finding that the document was intended by the parties to be contractually binding on them. McHugh JA's judgment in the passage referred to shows, in what I would respectfully say is an illuminating way, a number of lines of reasoning or shapes which facts might assume which show that that was not the case. His Honour tellingly quoted a passage from Corbin on Contracts (at 337D). “… we need not begin excluding parol evidence until we know a contract has been made". There is further illuminating discussion in the judgment of Mahoney JA at 330 - 332.

30 A related subject on which defendant's counsel relied and from time to time has been followed is a line of reasoning to show that arrangements which could have been understood in their terms as contractually binding do not have that effect. This reasoning appears from a passage of the judgment of Salmon LJ in the Court of Appeal of England and Wales in Jones v Padavatton [1969] 2 All ER 616, at 621 CD. It should be seen that the subject under consideration was quite limited and related to an allowance or subvention paid to a daughter to assist her to follow a particular career path, and to leave her earlier career path. It is hardly surprising that where allowances are paid by parents to children, even adult children, tribunals charged with finding the facts quite frequently determine there was no intention to create a legal relationship. There is, as Salmon LJ’s dictum shows, no legal rule involved, but rather a consideration, sometimes according to facts quite a powerful consideration, for assessment by the tribunal of fact which has the task of finding what the parties intended. I note some consideration of this subject in Gray v Gray [2004] NSWCA 408 in the judgment of Young CJ in Eq, with which Sheller JA and I agreed, at paragraphs [55 – 57] where the limits of the dictum in Jones v Padavatton are expounded. I particularly note the passage quoted from Fleming v Veebers in the Court of Appeal New Zealand (Tipping J): “Each case will turn on its own facts and there is no substitute for a careful examination of those facts."

31 The plaintiff's claim as presented at trial is far simpler than the Statement of Claim seems to show. It is a claim to recover the debt of $250,000 purportedly recorded in exhibit A. Of course the claim depends on establishing the issue to which I have referred, that is, that the document exhibit A was intended by the parties to create legal obligations in accordance with its terms; the onus of showing which is on the plaintiff.

32 There are other matters in the pleaded Defence to which I should refer. There is a reference in the Defence paragraph 9 to the absence of clean hands and (as its terms seem to show) to illegality or some process of deception on public authorities. Having regard to the facts in evidence, these references are not really in point. There is no element on the facts of illegal or deceptive dealing with migration authorities. The plaintiff's claim is a common law claim and absence of the clean hands is not a defence in any event. There was nothing in the evidence which in my understanding could be regarded as an absence of clean hands, and in particular there is nothing in the dealings of the plaintiff with the defendant which could reasonably be so regarded.

33 As I earlier said, to my mind the central issue is to be disposed of by making a finding having regard to what appear to be the probabilities of the situation. The most significant element which I regard as bearing on the probabilities is the form of the document and the fact that the defendant Mr Shi himself typed it out and also the fact that he signed it. According to its terms it is an agreement. It says so in the heading. Its language, although it is only accessible to me through interpretation, deals fairly concisely and fairly clearly with a number of matters appropriate to a legally binding agreement between these parties. Mr Shi knew what it said, indeed he had more or less composed it and he signed it. It is extremely improbable in my view that he would have done this if he did not regard it as correctly stating the effect of the arrangements which he had made. The improbability is heightened by discussion which undoubtedly took place that evening in his presence; and also earlier than that, about the purpose of the document being to protect the positions of the parties.

34 There are other matters of probability which support this view. Notwithstanding the family relationship, it is improbable that the defendant gave him, or in effect gave him shares which had just cost about $250,000. At this point I refer to the observations in Gray v Gray. The application of the principle there considered is a matter of scale. Even among closely related persons, the point probably arises well before $250,000 where the arrangement simply being a personal arrangement relying on trust ceases to be a feasible explanation.

35 There are some other matters. The defendant put $2,000 of his own money down as a deposit before obtaining the plaintiff's approval. He gave a lot of attention and effort and used his own judgment and life experience for the decision to acquire the business. He left a job which had he had held for three years and worked in the business. His hourly rate was the same Telstra had paid him. To my mind, this as a matter of probability supports the view that he had further involvement and there were further prospective advantages for him than had been held out at his job at Telstra.

36 The defendant dealt at length with Oscar Lau, the previous manager. He investigated the value of the business and went to considerable effort to do so. He negotiated at length with Mr Brett Li; and dealt in detail with Grace Fung, the solicitor whom he chose and instructed. He made all arrangements to take over the company. He went to a great deal of trouble, which it is difficult to accept he did only to assist a relative and a family member. All of the events make the whole project much more consistent with his being motivated by his own economic participation. He guaranteed the lease. He brought money in when the business was declining. In 2006 he brought in some of his own money, not indeed a great deal, to support it. All of this is very unlikely if he did not have a high sense of involvement as a proprietor and not just as a nominee for a relative.

37 Nothing which the evidence suggests was said in the events leading up to signing exhibit A shows or even suggests that preparing and signing Exhibit A was a joke or was less than seriously intended. I see nothing in the event which could be a joke. Handing over a quarter of a million dollars and signing a document to pay it back are both of them well beyond a joke and well beyond an informal family arrangement.

38 There are many references in evidence to the plaintiff's migration application. In her evidence the subject was introduced when the defendant reported to her in September or October 2004 on his negotiation with Brett Li the vendor, who said he could assist with a migration and visa application. According to the plaintiff's evidence, she formed the intention of seeking a visa and migrating to Australia only after the Padstow business had been purchased. In the defendant's evidence the subject arose in Pudong Shanghai in August 2004, and as depicted in advocacy for his case was central to all the business in hand.

39 There was an application to an agency of the State of New South Wales for State sponsorship about April 2005. This was refused about 6 July, relodged on 22 August and again refused on 29 August 2005. On 20 October 2005, an application for sponsorship was lodged with an agency of the Victorian Government based on a business proposal for a different business venture. This led to the grant of a State sponsored business visa on 22 September 2006. Several projected businesses were put forward for consideration in connection with visa applications and the business at Padstow did not have any prominent place. Indeed one projected business was a newsagency in a shopping centre at Narre Warren in Victoria. I note that the business visa eventually obtained did not confer permanent residency and was valid until 22 April 2011.

40 There is nothing wrong and nothing which should be concealed about buying or owning a business with the hope of assisting a visa application. Many people do this. Investing in a business in Australia is obviously likely to assist a visa application. There are different kinds of visas with different requirements. The plaintiff made a visa application in 2005 which did not succeed. At a later stage she made one which did. Nothing has been shown to me which in a comprehensible way shows that making exhibit A and putting incorrect provisions in it helped or could be expected to help a migration application. In my finding migration was a possible course for the plaintiff to take in the future, considered in the period from August 2004 up to and including February 2005. This was known and discussed in the family, but it is not the explanation for what is written down in exhibit A. In my finding exhibit A is about what it says it is about and it records what the parties intended to do.

41 Later events can be compressed. The business was not a success. The problems all fell on the defendant to manage. The plaintiff was in China. The plaintiff did not respond or would not agree to what the defendant wanted to do, sell the business. But she made no other useful intervention and took no initiative at significant times. The thought or fear that selling the business might prejudice her then pending migration application was in her mind. Eventually the defendant acted without her, and notwithstanding protests by her he appointed a selling agent, agreed that the company should sell the business to Y N S Trading Pty Limited, took a deposit, obtained and sent to the plaintiff an accountant's report on the state of affairs and repeatedly urged her to join in and authorise what was happening. In doing this, he behaved with economic rationality whatever his position was, whether mere agent or participating co-venturer. The plaintiff refused to participate, challenged the effectiveness of the sale and generally withheld co-operation. She was able to come to Sydney at an appropriate time, although not immediately as the defendant at one point demanded.

42 On 2 February the defendant, with what might be thought to be high-handed behaviour, but behaviour which had in a way an economic justification, held a purported directors meeting and was a party to documents which transferred or appeared to transfer the plaintiff's shares to himself and to dismiss her as a director. These were altogether irregular acts, not authorised by the company's constitution or by the plaintiff. They had no effect. Each party still owned half the shares and the plaintiff still was a director. The true position is that each is still entitled to 50 percent of the shareholding.

43 However, on 5 February 2006 the defendant executed a second or substituted agreement for sale in much the same terms as the earlier one providing for sale at $130,000 together with up to $100,000 for stock. The sale was settled on 12 February 2006. In effect he wound up the company’s affairs informally. He collected the balance of moneys and left them in the company's bank accounts of which (I interpose) he was the only signatory. A complete deadlock and breakdown has taken place. Co-operation cannot be hoped for. The company's business has ended and its enterprise and purpose are no longer there. The only two principals are at law against each other. There has been a loss of $220,000 or so of goodwill and perhaps there have been other losses.

44 In the circumstances the company must be wound up . It is just and equitable to do so. When the consent of a liquidator is produced I will make an order to that effect. I see, however, the possibility that the parties may make some other arrangement. I leave it to their judgment whether they should do so. Of course, they must make a judgment about the adverse impact on the interests of creditors or of others, and I have no involvement in that. I have not heard of there being any outside creditors.

45 A great deal of the time taken in adducing evidence and indeed a great deal of the submissions of counsel at the end of the evidence related to what were put forward as questions of credit. I do not regard the case as turning on questions of credit. Many things which were put forward as anomalies appear to me to be probably the kind of misunderstanding and difficulty of expression to be expected in a case where evidence is given by interpretation, particularly a case about conversations which took place four or five years ago. Submissions went to considerably close details about the times and terms in which there were references to or discussions of the subject of the plaintiff's possible migration. As other observations show, I do not attribute high importance to this subject. Essentially there is no evidence which shows or tends to show that the document was put together to give a good colour to a migration application without any real intention that the document should be effective.

46 I do mention a passage at transcript 176, line 22 where, after a passage in cross-examination of the defendant about the preparation and terms of exhibit A the following appears:

“Q. And you signed that document on the basis that it was an agreement between you and the plaintiff, didn't you?
A. INTERPRETER: Yes. “

47 Read off the page and when first given it could be thought that this was a significant concession against the defendant's case. However, on reflection I have come to see that the statement is essentially ambiguous and that allowing duly for the difficulty of interpretation, and more particularly having regard to the whole of the defendant's evidence including later evidence, it was not a concession adverse to his case to the effect that Exhibit A was truly effective. I have not treated it in that way.

48 There were several passages in the cross-examination of the plaintiff upon which defendant’s counsel in submissions put great store, which I have considered and come to the view have no particular significance for or against a credit finding. Most striking of these is the reference at transcript 78 and 79 where with interpretation there are a number of references to sharing profit introduced by the question at 78:

And you said in that conversation that you will contribute the whole amount? But uncle and I will be equal shareholders, and if we make a profit we will share it 50/50. You never discussed it with John, did you?

49 The following passage has interventions by myself and counsel which are difficult to follow, but it is clear to me that the witness' objection and departure from her evidence related to the introduction of the word “profit”, not to a reference to sharing 50/50. This to my mind appears clearly from the passage at transcript 79, line 7 and 8. There were a number of other claims for significant adverse impact on the plaintiff's credibility, but they have had still less force with me.

50 Overall, the agreement as recorded in Exhibit A is not the kind of agreement which would be reached at arm's length in commerce. A person employed at $22 per hour repairing mobile phones would not be appointed manager of a business costing half a million dollars and would not be lent $250,000 without security with which to buy half the shares. Except in the context of family relationships, the arrangement would not have happened. I am satisfied that it did happen, that it was intended to have effect according to its terms and that I should enforce it.

51 I defer dealing with the claims relating to winding up except for the claims for declarations establishing interests in the company. I make declaration as claim 3 in the Statement of Claim. I make order 5 in the Statement of Claim. I am prepared to make order 8 subject to arrangement between the parties. I give judgment for the plaintiff against the first defendant for $250,000. I have still not considered interest and costs. I am prepared to award the plaintiff interest on $250,000 at one half of the rate allowed by the Court on judgments from expiry of the letter of demand on 29 September 2007 to today's date. Costs are reserved. Exhibits are to be retained with the Court file until expiry of 28 days or further direction.

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15/09/2009 - Amendments to Catchwords. - Paragraph(s) catchwords