China’s EXIM Bank Fails to Prove Claim Over 72 Million USD Assets of Shandong Ruyi Group in Australia

EXIM Bank tried to recover an investment in cotton assets and a huge property in Australia, from a Singaporean subsidiary of Mr Qiu Yafu’s Shandong Ruyi Group.  The claim failed for a number of reasons.  In its judgment, the Australian court emphasized the importance of complying with a company constitution, and clarified the circumstances in which multiple documents can constitute a single transaction.[1]

Background – purchase of Cubbie Station by Shandong Ruyi Group

Export-Import Bank of China (“EXIM”) is a Chinese-government-owned bank whose primary business is providing loans to assist China’s overseas trade and investment.

Shandong Ruyi Group (“Ruyi”) in 2012 was ranked in the top 5 of China’s textile and garment industry.  On 4 July 2012, Ruyi entered into a term sheet to purchase an 80% holding in Cubbie Station, a huge property in Queensland Australia which included significant cotton industry assets.  At 93,000 hectares, Cubbie Station is larger than the island of Singapore.  Ruyi expected to borrow much of the funding for this transaction from EXIM.

On 4 October 2012, Ruyi incorporated a wholly-owned subsidiary in Singapore, CSTT Co Holdings Pte Ltd (“CSTT”).  On 5 October 2012, a company called CS Agriculture Pty Ltd (CSA) was incorporated in Australia to be the vehicle of the joint venture.  At that time, CSTT held 80% of the shares in CSA, with the other 20% held by an unrelated Australian investor, Lempriere Group.

On 11 October 2012, CSA entered into a contract to purchase the land and business assets of Cubbie Station for 230 million AUD.  CSA’s obligations as purchaser were guaranteed by Ruyi.  It was intended at all material times that the bulk of Ruyi/CSTT’s contribution to the purchase price of Cubbie Station would come from an advance by EXIM.

The loan funds are advanced and passed on to CSTT

On 21 January 2013, EXIM and Ruyi entered into a loan facility agreement for the stated purpose of acquiring the Cubbie Cotton Field Project.  On that same day, EXIM advanced 74.8 million USD to Ruyi.  Ruyi then provided equity funding to CSTT using the loan funds and its own funds, and CSTT in turn advanced funds to CSA to enable it to complete the purchase.

Ruyi defaults

On 21 December 2021, Ruyi failed to pay interest due to EXIM under the loan facility agreement, and thereafter was in default.  In January 2022, EXIM began to issue letters of demand to Ruyi, and in August 2022 it began recovery proceedings against Ruyi before CIETAC[2].

EXIM sues CSTT in Australian court

EXIM then commenced proceedings against CSTT in the Supreme Court of Victoria, Australia, with a view to enforcing the outstanding loan capital and interest against CSTT’s shares in CSA, the joint venture vehicle which owned Cubbie Station property and cotton and other business assets.

The nature of EXIM’s claim

An obvious difficulty for EXIM’s case was that it had not advanced any loan funds to CSTT.  Rather, the 2013 loan agreement was between EXIM and Ruyi, and EXIM had advanced the loan funds to Ruyi.  CSTT itself was not referred to in the loan agreement.

However, EXIM sought to rely on a number of related documents and agreement, arguing that these showed CSTT had accepted responsibility for repaying the loan to EXIM and that it had pledged its interest in the assets of Cubbie Station for this purpose.

The matter came before Delany J in the Supreme Court of Victoria for hearing.  He found against EXIM bank on each point.  Some of the significant findings were:

The 2013 CSTT Letter of Undertaking signed by Mr Qiu Yafu

Mr Qiu Yafu was a significant beneficial owner of the Ruyi Group.  He signed a number of letters of undertaking on behalf of various companies in that group, including one for CSTT.  On 18 January 2013, three days before the loan agreement was signed and the loan monies advanced by EXIM to Ruyi, Mr Qiu as a director of CSTT signed a letter which stated that CSTT would pledge its assets as collateral for the loan from EXIM to Ruyi, that it would not pledge the Cubbie Station assets to anyone else, and that it would apply any incoming funds from sale of shares to repay the EXIM loan.

Delany J held that Ruyi could not rely on this document, for two reasons:

• Mr Qiu was a director of CSTT (as well as the principal executive of Ruyi) but the corporate constitution of CSTT provided that documents must be either executed with the company seal or signed by two directors. There was another director of CSTT, a Mr Lim in Singapore, and he had not signed this letter.  Therefore, Mr Qiu alone could not contractually bind CSTT by his signature.

Delany J found on the evidence that the constitution of CSTT was a public document which could be accessed by anyone via the Accounting and Corporate Regulatory Authority (ACRA) of Singapore, and it did not allow for documents to be signed by single directors.

• EXIM tried to argue that CSTT was estopped (i.e. legally prevented) from disclaiming the document, but Delany J noted that there was no evidence that EXIM had relied on the Letter of Undertaking from CSTT when it advanced the funds to Ruyi, and reliance was an essential element of such a cause of action. In fact, the available evidence indicated that EXIM had relied on other assurances or pledges provided by Mr Qiu from assets of Ruyi in China in deciding to advance the loan to purchase Cubbie Station.

The 2016 security agreement and PPSR registration

EXIM also sought to rely on a 2016 Security Agreement by which CSTT granted a ‘security interest’ and mortgage over its 80% interest in the special purpose vehicle CSA on 25 July 2016.  It was governed by Victorian law.  Relying on this document, EXIM registered a security interest on the Personal Property Securities Register (PPSR) in Australia over the shares held by CSTT in CSA.

However, Delany J held that EXIM could not rely on this agreement or the PPSR registration, for two reasons:

Firstly, because CSTT gained no benefit from this 2016 Security Agreement (legally termed a lack of consideration).  CSTT had benefited from the EXIM loan to Ruyi in 2013, since those funds were passed on to it and enabled it to acquire Cubbie Station, but that benefit was well in the past by 2016.  It was not necessary for CSTT to enter into the 2016 Security Agreement in order to secure that loan.

In response, EXIM argued that in fact there was a single transaction comprising both the 2013 loan agreement and the 2016 security agreement.  EXIM relied on precedents such as McVeigh v National Australia Bank Ltd.[3]  In that case, a suite of loan documents had been signed within a few days of each other, including a letter of loan offer to a company, personal guarantees and indemnities by the directors of the debtor company, and a registered mortgage over their home.  Even though the documents were signed at different times and involved different parties, the Federal Court of Australia had found that together they all formed one transaction.

However, Delany J declined to apply McVeigh.  In that case, the link between the various documents had been obvious on their face, and the time between executing each of them was very short.  In this case, the original loan agreement in 2013 between EXIM and Ruyi did not refer to CSTT at all, and made no reference to a later security agreement with CSTT, let alone one that would occur three years later.

A second issue with the 2016 Security Agreement was that it was signed only by Ms Fengmei Gu as “executive director” and “authorized representative” of CSTT.  But Ms Gu was not a director of CSTT nor was there any evidence that she had been authorized to act on CSTT’s behalf by that company.  She was a senior executive of Ruyi but this did not give her any right to sign a document on behalf of its subsidiary CSTT, which was a separate entity at law.  There was a document signed by Mr Qiu Yafu as director of CSTT which on its face gave her authority to sign documents for CSTT, but such an authority would have to be conferred by two directors of CSTT according to the CSTT constitution, or by a resolution of directors of CSTT, and this had not been done.

Therefore, EXIM’s attempt to rely on the 2016 Security Agreement and the registration on the PPSR also failed.

The 2020/2021 creditor agreements

Although it did not default on the EXIM loan until 2021, by 2020 Ruyi was already in financial difficulties.  A meeting of 33 banking creditors of Ruyi, including EXIM, took place in Shandong, China on 25 February 2020, and a second meeting took place on 26 March 2021.  Arising from these meetings, at least three separate agreements were entered into between Ruyi and CSTT.  However, execution was not complete: each agreement contained space for the company seal of CSTT but this was not affixed.  Instead, Mr Qiu Lafu signed, as “legal representative or authorized signatory” of CSTT.

Delany J did not accept EXIM’s argument that CSTT had held out Mr Qiu as having the authority to execute the 2020/2021 Agreements.  Rather, it was Mr Qiu who held himself out as having authority, and as a single director he did not have the power to do this according to the constitution of CSTT.  There was no evidence of any directors’ resolution of CSTT to accept or ratify these agreements, just as there had not been any for the 2016 Security Agreement.

Therefore, EXIM’s attempt to rely on these agreements to found a cause of action against CSTT also failed.

The result

Delany J pointed out that EXIM and Ruyi were sophisticated parties who had turned their minds to the question of security in 2013, and Ruyi had provided security as EXIM required from its assets in China. There was no evidence that CSTT had ever provided proper authorization according to its constitution whether by directors’ resolution, use of the company seal, or letters signed by two directors, which would enable it to be fixed with liability to repay the loan to EXIM itself.  The fact that Mr Qiu was a significant beneficial owner of the Ruyi Group and known by EXIM to be the main driving force behind the loan and the acquisition of a controlling interest in Cubbie Station by CSTT did not mean that the requirements of the constitution of CSTT  could be disregarded.

Therefore, EXIM’s claim in this particular case could not succeed.

Implications

• The judgment serves as a warning that even where a transaction is particularly complex, due attention to corporate procedure and law is required. In this case, investment funds passed through three distinct entities in three different countries, and the character of the funding changed from debt to equity in the process.
• If the lender/investor wishes to avail itself of the single transaction doctrine as per McVeigh, then it is important that the initial agreement documents reflect the whole nature of the transaction on their face.
• It is also important that the constitution of a corporation (or analogous documents such as memorandum and articles, depending on the jurisdiction) are carefully checked to ensure compliance with their requirements for authority to execute documents.

[1] The judgment is reported as The Export-Import Bank of China v CSTT Co Holdings Pte Ltd [2025] VSC 475 (6 August 2025) and may be found at The Export-Import Bank of China v CSTT Co Holdings Pte Ltd [2025] VSC 475 (6 August 2025).

[2] The China International Economic and Trade Arbitration Commission (CIETAC)

[3] McVeigh v National Australia Bank Ltd [2000] FCA 187; (2000) 278 ALR 429