Ye v Zeng (No 7) [2018] FCA 1478

File numbers: 

  • NSD 1123 of 2015
  • NSD 258 of 2018

Judge: Lee J

Date of judgment: 28 September 2018

Catchwords:

ARBITRATION – orders for the appointment of a receiver because obligations of payment were not fulfilled by award debtor subsequently set aside by agreement between parties – application to restore orders

CONSUMER LAW – whether respondents engaged in misleading or deceptive conduct contrary to s 18 of the Australian Consumer Law – whether oral representations were made as alleged – whether the making of a representation as to financial capacity was conduct in trade and commerce – whether contravening conduct caused entry into agreements – contravening conduct established and agreements set aside

Legislation: 

  • International Arbitration Act 1974 (Cth) ss 8, 9
  • Australian Consumer Law ss 18, 237, 243
  • Evidence Act 1995 (Cth) ss 91, 140, Pt 3.5
  • Trade Practices Act 1974 (Cth) s 52
  • Contracts Review Act 1980 (NSW)
  • Civil Procedure Law, Art 242
  • Urban Real Estate Administration Order of the People’s Republic of China, Art 38

Cases cited: 

  • Australian Securities and Investments Commission v Hellicar [2012] HCA 17; (2012) 247 CLR 345
  • Argy v Blunts & Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112
  • Bevanere Pty Ltd v Lubidineuse [1985] FCA 134; (1985) 59 ALR 334
  • Blatch v Archer (1774) 1 Cowper 63; (1774) 98 ER 969
  • Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 218 CLR 592
  • Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304
  • Chowder Bay Pty Ltd v Paganin [2018] FCAFC 25
  • Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594
  • Gerard Cassegrain & Co Pty Limited v Cassegrain [2013] NSWCA 453; (2013) 87 NSWLR 284
  • Gould v Vaggelas (1985) 157 CLR 215
  • I & L Securities Pty Limited v HTW Valuers (Brisbane) Pty Limited [2002] HCA 41; (2002) 210 CLR 109
  • Julstar Pty Ltd v Hart Trading Pty Ltd [2014] FCAFC 151
  • Murphy v State of Victoria [2014] VSCA 238; (2014) 45 VR 119
  • Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191
  • Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177
  • Watson v Foxman (1995) 49 NSWLR 315
  • Williams v Pisano [2015] NSWCA 177; (2015) 90 NSWLR 342
  • Ye v Zeng [2015] FCA 1192
  • Ye v Zeng (No 2) [2015] FCA 1243
  • Ye v Zeng (No 3) [2015] FCA 1279
  • Ye v Zeng (No 4) [2016] FCA 386
  • Ye v Zeng (No 5) [2016] FCA 850
  • Ye v Zeng (No 6) [2016] FCA 923
  • Young v Hughes Trueman Pty Ltd (No 4) [2017] FCA 456

Date of hearing: 3, 4, 5 April 2018, 17, 18 May 2018, 1 June 2018

Date of last submissions: 12 June 2018

Registry: New South Wales

Division: General Division

National Practice Area: Commercial and Corporations

Sub-area: International Commercial Arbitration

 

ORDERS

NSD 1123 of 2015

BETWEEN:  JOHNSON YE (Applicant)

AND: RONGHUO ZENG ALSO KNOWN AS ANDREW TSANG (First Respondent)

CHUNXIANG ZENG (Second Respondent)

Qinglong Zen (and others named in the Schedule) (Third Respondent)

Judge: Lee J

Date of Order: 28 September 2018

THE COURT ORDERS THAT:

  1. The parties provide to the Associate to Justice Lee by 4pm on 5 October 2018 an agreed minute giving effect to these reasons or, failing agreement, each party’s proposed minute of order.
  2. The proceedings be listed to hear any argument as to any competing orders and to receive any submissions on the topic referred to at [105] of the reasons for judgment at 9:30am on 8 October 2018.

ORDERS

NSD 258 of 2018

THE COURT ORDERS THAT:

  1. The proceedings be dismissed.

REASONS FOR JUDGMENT

LEE J:

A        INTRODUCTION AND BACKGROUND

  1. The relevant background to this matter and its procedural history is revealed in a number of judgments delivered by the Chief Justice of this Court: Ye v Zeng [2015] FCA 1192; Ye v Zeng (No 2) [2015] FCA 1243; Ye v Zeng (No 3) [2015] FCA 1279; Ye v Zeng (No 4) [2016] FCA 386; Ye v Zeng (No 5) [2016] FCA 850 and Ye v Zeng (No 6) [2016] FCA 923.
  2. For reasons that will become obvious, it is unnecessary to recount, yet again, every aspect of the litigious saga that arose after the applicant, Mr Johnson Ye, pursuant to ss 8and 9 of the International Arbitration Act 1974 (Cth), enforcement of an award made in the People’s Republic of China by the Xiamen Arbitration Commission in August 2015.
  3. Judgment was sought in this Court in the sum of RMB 50,055,950.26 (or approximately $11 million at prevailing exchange rates). At the time the application was made, freezing orders were sought restraining the respondents from dealing with certain assets pending resolution of the proceeding.  As the Chief Justice explained in Ye v Zeng (No 5) at [6]-[10], the award made by the Xiamen Arbitration Commission arose in the following circumstances:

From 2011, Ronghuo Zeng (the first respondent) borrowed money from the applicant.  On 7 December 2013, all six respondents (the second respondent being the wife of the first, the third and fourth respondents being the son and brother, respectively, of the first, and the fifth and sixth respondents being companies apparently controlled by the first respondent or in which he had an interest) entered into a loan agreement.  In that loan agreement, the parties to it confirmed that the first respondent had received loan funds of RMB 37,000,000 (being principal), carrying interest of 2.5% per month from 8 December 2013; that he would pay the principal in full by 7 December 2014; that the second to sixth respondents would guarantee said payment; and that the parties agreed to submit any dispute to arbitration at the Xiamen Arbitration Commission.

The moneys were not repaid.  The applicant claimed RMB 37,000,000 principal and RMB 11,100,000 in interest (RMB 48,100,000 in total).

In the arbitration, the respondents claimed that only RMB 15,00,000 was principal and the balance interest; that repayments had been made; and that security pledges had been given, including valuable watches and jewellery.

After examining all relevant material and setting out the parties’ arguments, the Commission ordered that the first respondent repay RMB 37,000,000 principal and RMB 12,214,460.26 in interest (up to 31 July 2015); that the second to sixth respondents assume joint liability for these payments; and that the six respondents pay costs and arbitration fees.

An appeal against the award was lodged in the Xiamen Intermediate People’s Court. In my reasons of 2 November 2015 (Ye v Zeng [2015] FCA 1192 at [6]) I described the grounds of appeal as follows:

Mr Ye, as the applicant, now comes to this court for enforcement of the award under s8(3) of the International Arbitration Act 1974 (Cth). Meanwhile an appeal has been lodged in the relevant intermediate appeal court in the PRC (the Xiamen Intermediate People’s Court) identifying 3 grounds of appeal. The first ground is a procedural fairness complaint, which, if made out, would be a breach of public policy and a ground not to enforce the award. The second and third grounds seem to be factual matters and an apparent re-litigation of what appears to have already been fought out before the Commission, when one looks at the Commission’s lengthy reasons: Xia Zhong Cai Zi [2015] no.523.

  1. None of the matters referred to by his Honour in the above extract were in contest before me.
  2. Given the procedural fairness ground identified, the Chief Justice was not prepared to enforce the award before the outcome of the Chinese appeal could be known (and orders were made extending the freezing orders previously made). In March 2016, the Xiamen Intermediate People’s Court dismissed the appeal and thereafter, in April 2016, the Chief Justice made orders enforcing the award as no basis was advanced by the respondents for resisting such an order.  Indeed, as the reasons for judgment of the Chief Justice made clear, the applicant was put to significant cost in the preparation of the evidence and in dealing with the material filed by the respondents: see Ye v Zeng (No 4)Ye v Zeng (No 5).  Moreover, the Chief Justice had previously been critical of the respondents’ conduct, noting that their approach to the proceedings had generally been less than desirable: see Ye v Zengat [12].
  3. In particular, his Honour observed that there had never been any real attempt to agitate a legitimate ground to resist enforcement and concluded that no such ground ever existed.  The respondents subjected the applicant to entirely unreasonable costs in resisting enforcement.  It was for these reasons, among others, that in July 2016 the respondents were required to pay costs incurred by the applicant on an indemnity basis: see Ye v Zeng (No 5).  Against this background of unjustly delaying the applicant enforcing a just commercial claim, in July 2016, orders were made appointing a receiver to all the property of the respondents in Australia.  The detailed reasons for making such an order are set out in Ye v Zeng (No 6).
  4. In taking this step, the Chief Justice found the respondents had extensive assets in Australia and China and (on the basis of the evidence then before his Honour) there was no basis to conclude that any of the respondents were insolvent (hence there was no apparent basis to conclude that the appointment of the receiver and the conduct of liquidating assets might interfere with the conduct of any insolvency by a trustee in bankruptcy or liquidator).  In the course of his reasons, his Honour recorded the submission made by the respondents that “the applicant should first have recourse to the assets in China owned by some of the respondents, and no receiver should be appointed until such steps have been taken”: at [6].  Further, it was suggested that the respondents should have time to arrange their affairs to arrange for an orderly sale of their Australian properties especially the family homes of the first, second and third respondents.
  5. His Honour rejected such submissions noting that the existence of assets in China and the fact that the applicant had sought freezing orders in China were irrelevant to the enforcement of the licitly obtained judgment in this Court.  In this regard, the Chief Justice noted there “was evidence that was the subject of comment in earlier judgments that the respondents had been less than co-operative in fulfilling their commercial obligations of payment”: at [7].  His Honour went on to note that the appointment of the receiver over the family homes of the first, second and third respondents was unfortunate, but the remedy to prevent such personal disruption has always been present, that is, to pay the legitimate debt owed to the applicant.
  6. The orders expressly accepted that it was just and convenient to appoint a receiver to provide the applicant with an effective mode of enforcing the award and judgment and that, given the history, the clearest and most effective remedy was warranted.
  7. One would be forgiven for thinking that this was the end of the matter, but the background I have recounted forms only the prologue to the events with which this judgment is concerned.
  8. The receiver appointed by the Chief Justice commenced the process of seeking to realise the respondents’ available Australian assets including, in September 2016, scheduling an auction of a property located at 39A Stanhope Road, Killara (Killara Property).
  9. I will recount the dealings between the parties in more detail below, but it suffices for present purposes to note that the first respondent, Mr Ronghuo Zeng, contacted the applicant, Mr Johnson Ye, concerning the sale.  Various discussions took place which involved the applicant’s son, Mr Jacky Ye instructing his father’s solicitor, Mr Terry Zhang, to prepare a proposed deed of release, in accordance with terms that were communicated to him by Jacky Ye.  Additionally, communications then took place between Mr Zhang and the solicitor for the respondents, Ms Margaret Koh, by email during the day of 12 October 2016.
  10. On 12 October 2016 at about 7.00 pm, a meeting took place over dinner at the Fook Yuen Seafood Restaurant located at Level 1, 7 Help Street, Chatswood (being a restaurant owned by Ronghuo Zeng) (Restaurant).  It was common ground that a number of people were present at the Restaurant: Johnson Ye, his son, Jacky Ye, and the applicant’s solicitor, Terry Zhang; Ronghuo Zeng was present, accompanied by his brother, Rongxing Zeng; Bihiu Lin and Guozhong Yu, who were friends of Ronghuo Zeng were also present (Bihiu Lin was also known to Johnson Ye); the final participant was Margaret Koh, who, as noted above, was the respondents’ solicitor.
  11. At that Restaurant meeting a document in the English language was discussed which sought to re-state the then existing legal relationship between the applicant and the respondents (English Agreement).  Later that night, a further meeting took place at Rongxing Zeng’s home located at 39B Stanhope Road, Killara.  At this meeting, a final version of the English Agreement was signed. Another agreement, written in Chinese, was thereafter discussed and signed (Chinese Agreement).
  12. Relevantly, as can be seen by reference to [17] below, the upshot of the October 2016 meetings was that the parties put in place an agreed regime which was much more favourable to the respondents than the regime rejected by the Chief Justice at the time the receiver was appointed (see [7] and [8] above).
  13. Who was present at the later meeting at Rongxing Zeng’s home, and precisely what occurred at this meeting was the subject of detailed and ultimately irrelevant evidence in the present hearing.  Neither party suggests that anything said in the earlier communications between Ronghuo Zeng and Johnson Ye (when the applicant was contacted concerning the sale) was different in substance to what was later said at the critical Restaurant meeting.  Nor is it suggested by either party that anything conveyed at Rongxing Zeng’s home, was substantively different to, or qualified by, what had been communicated earlier that evening at the Restaurant.  Accordingly, for the purpose of determining the substance of what was conveyed on behalf of the respondents to the applicant, it is convenient to focus primarily on what was conveyed at the Restaurant.
  14. Returning to the English Agreement, its principal terms were that:

(a)          Johnson Ye agreed to settle all ‘Claims’ in Australia including the orders made in the ‘Federal Court of Australia Proceedings’ (see Recital D), including the orders made on 15 April 2016, which recognised the Award and the orders made on 18 May 2016 appointing a receiver;

(b)          the respondents agreed to pay to Johnson Ye $3.7 million on or before 20 October 2016 (see clause 3.1) with the sum initially to be held on trust by an intermediary, but then remitted to Johnson Ye when consent orders were made (see clause 3.2);

(c)          the sum of $3.7 million received would be applied to reduce the ‘Debt’ owing to Johnson Ye (see clause 3.5);

(d)          Johnson Ye then agreed to “permit” the respondents to pay the balance of the remaining amount in China (see clause 3.6).

  1. To give effect to the paction (as constituted by both the English Agreement and also the Chinese Agreement), the Court was approached and orders were made vacating the appointment of the receiver.  Again, however, there was a twist.  Despite the terms of the agreements, the balance of the judgment sum has not been paid out of assets located in China.  Johnson Ye remains out of his money and now contends that the English Agreement and the Chinese Agreement are unjust contracts, were procured by unconscionable conduct or misleading, deceptive or fraudulent conduct and should otherwise be set aside in equity or at law.

B        THE HEARING AND THE DIFFICULTIES WITH THE ORAL EVIDENCE

  1. The hopes of Johnson Ye as to the payment of the debt being, yet again, dashed, he approached the Court for the restoration of the status quo ante.  This would allow him to move to enforce the judgment against the Australian assets (some of which have now been sold).  The matter was referred to me for the purpose of conducting a hearing as to whether Johnson Ye is entitled to such relief.  In order to give some precision to the matters to be determined, I ordered service of Points of Claim and Points of Defence and, when these documents did not prove sufficiently pellucid to indicate the nature of the case advanced, I ordered a further document to be provided specifying the nature of the alleged contravening conduct of the respondents.  Evidence in chief was ordered to be adduced orally.
  2. The hearing took place over the course of six days with written submissions being provided afterwards. It is an exercise in understatement to remark that the conduct of the hearing presented real challenges.  Almost all of the witnesses called did not have fluency in English.  Apart from Ms Koh, Mr Zhang, Jacky Ye and an expert, each witness of significance gave evidence through an interpreter.  No criticism is, of course, intended by remarking upon the use of interpreters to place the evidence of the witnesses before the Court.  The challenge was that with the exception of the solicitors and the expert to which I have just made reference, a general and somewhat troubling tendency was exhibited by each witness (to various degrees) to act as advocates for the side of the record that had called them. Perhaps the lack of easy communication between the cross examiner and the witness heightened this problem, but the case was striking for this feature of the evidence.  Additionally, the transcript, at times, is difficult to follow and was not the subject of suggested correction by the parties. This includes the evidence given by the witnesses who gave their testimony in heavily accented English.  Despite these challenges, as I will explain, the critical parts of the evidence were able to be followed and emerged quite clearly.  By the conclusion of the case, it seemed to me that identifying what had actually occurred leading up to and at the critical events in October 2016 was a relatively straightforward task which accorded with the thrust of the evidence given by Mr Zhang, Johnson Ye and Jacky Ye and also the inherent probabilities.
  3. Before leaving the difficulties with the hearing, I should make one further point.  The conduct of the case was regrettably bedevilled by a lack of focus on the real issues between the parties and unnecessary disputation.  A bewildering array of causes of action (including allegations of fraud) were advanced and maintained, when pursuit of almost all of these causes of action was unnecessary. Additionally, the evidence became interminably mired in ultimately irrelevant disputation about the means by which the English Agreement and the Chinese Agreement were drafted and the Chinese Agreement was executed.
  4. As will be seen, the facts necessary to resolve this controversy are relatively narrow:  whether certain representations which fall within the case pleaded were made and whether, if made, those representations amounted to misleading or deceptive conduct contrary to s 18 of the Australian Consumer Law(ACL).  In the event that contravening conduct was established, the further issue was whether the decision of Johnson Ye to surrender his overwhelmingly powerful legal position was causally connected to the contravening conduct and, if so, the appropriate remedial response.
  5. It is to this case that I now turn. Counsel for the applicants accepted that it was unnecessary for me to deal with the balance of the case if conduct in contravention of s 18was proved and this led to the setting aside of the English Agreement and the Chinese Agreement (T524.32). For reasons explained below, I have reached the conclusion that the English Agreement and the Chinese Agreement were entered into by reason of conduct which was in contravention of s 18 of the ACL. In the circumstances, I consider the appropriate remedial response is for the English Agreement and the Chinese Agreement to be set aside and for me to make orders which will have the effect of vacating (pursuant to FCR05) the interlocutory orders made by the Court removing the receiver (in other words, I have concluded that the status quo anteshould be restored).
  6. It follows from this conclusion that I do not need to resolve a number of what I consider to be irrelevant or peripheral matters of factual disputation and the other ways the applicants put their case, including the allegations of dishonesty.

C        THE MISLEADING AND DECEPTIVE CONDUCT CASE

C.1     The Impugned Conduct

  1. Shorn of unnecessary distractions, the applicant’s core case was that numerous representations had been made as at 12 October 2016.  The representations were overlapping and repetitive but for reasons that will become evident, it is only necessary to have regard to three of them, which related to the capacity of the respondents to pay the judgment debt and the timing within which it would be paid.  These can be identified as follows:

(a)          First, a representation (which was alleged to be partly a future representation) made by Ronghou Zeng, that the respondents had the intention of repaying the moneys owing to Johnson Ye (being the whole of the judgment) and would do so within six months if Johnson Ye granted the release and forbearance of the Court’s orders for sale of the Killara Property (Amended Points of Claim (APOC) [8(a)], [14(a)]).

(b)          Secondly, a representation made by Rongxing Zeng, that the respondents would guarantee to pay, and had the financial and economic capacity to pay, the full amount of the judgment if their Australian and Chinese properties were not sold within six months (APOC [9(ii)], [15(ii)]).

(c)          Thirdly, a representation made by Ronghou Zeng, admitted to have been conveyed, that the respondents were able to and had the financial capacity to pay to the judgment (APOC [9(iv)], [14(b)]).

  1. At the hearing, the representations at (a) and (b) above, together with one other in identical form, were known as the “First Representation”, and the representation at (c) above, was known as the “Second Representation”.  Plainly, however, they overlap and taken together, have two distinct components being:

(a)          a representation made by Ronghou Zeng and Rongxing Zeng on behalf of the respondents of an intention of the respondents to pay the judgment within six months (see [25(a),(b)]), which I will refer to as the Repayment Representation; and

(b)          a representation made by Ronghou Zeng and Rongxing Zeng on behalf of the respondents that the respondents were able to and had the financial capacity to pay to the judgment (see [25(b),(c)]), which I will refer to as the Capacity Representation.

  1. For completeness I note that when dealing with both representations collectively, I will refer to them as the Representations.

C.2     Were the Representations Conveyed

C.2.1   Relevant Principles 

  1. The Representations were alleged to have been conveyed orally and at the Restaurant meeting and, as noted above, were not alleged to have been qualified by other communications. As I have already explained at [16], while it is necessary to have regard to all the relevant context, it is sufficient to focus on the Restaurant meeting in determining whether the Representations were conveyed.
  2. In a case relying on oral representations, it is necessary, in assessing the evidence, to have close regard to the following principles identified by Dowsett, Rares and Logan JJ in Julstar Pty Ltd v Hart Trading Pty Ltd[2014] FCAFC 151 at [73]-[74]:

The assessment of the evidence of witnesses in such a case, ordinarily, will be approached in the manner discussed by McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 318-319 as follows:

“Where, in civil proceedings, a party alleges that the conduct of another was misleading or deceptive, or likely to mislead or deceive (which I will compendiously described as “misleading”) [sic] within the meaning of s 52 of the Trade Practices Act 1974 (Cth) (or s 42 of the Fair Trading Act), it is ordinarily necessary for that party to prove to the reasonable satisfaction of the court: (1) what the alleged conduct was; and (2) circumstances which rendered the conduct misleading. Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.

Each element of the cause of action must be proved to the reasonable satisfaction of the court, which means that the court “must feel an actual persuasion of its occurrence or existence”. Such satisfaction is “not … attained or established independently of the nature and consequence of the fact or facts to be proved” including the “seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding”: Helton v Allen[1940] HCA 20; (1940) 63 CLR 691 at 712.

Considerations of the above kinds can pose serious difficulties of proof for a party relying upon spoken words as the foundation of a causes of action based on s 52 of the Trade Practices Act 1974 (Cth) … in the absence of some reliable contemporaneous record or other satisfactory corroboration.”

That caution is also reflected in s 140 of the Evidence Act 1995 (Cth) and in what Dixon J said in Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 at 361-363 about the standard of proof. Dixon J emphasised that, when the law requires proof of any fact, the Court must feel an actual persuasion of its occurrence or existence before it can be found. He said that a mere mechanical comparison of probabilities, independent of any belief in its reality, cannot justify a finding of fact: see too Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission [2007] FCAFC 132; (2007) 162 FCR 466 at 479-482 [29]- [38] per Weinberg, Bennett and Rares JJ. As Dixon J said (60 CLR at 362): “In such matters ‘reasonable satisfaction’ should not be produced by inexact proofs, indefinite testimony, or indirect inferences”. But, the nature of the fact to be proved necessarily affects the sufficiency of the evidence by which it can be established.

  1. These principles have, if anything, greater resonance when the evidence of the oral representations was given through an interpreter of discussions held entirely in a foreign tongue.  The danger of grammatical differences obscuring meaning, the failure to appreciate the presence or absence of some unfamiliar or not readily translatable qualifying phrase, or some other subtlety being lost in translation, becomes real.  With this caution and these principles in mind, I turn to the question as to whether the Representations were made.

C.2.2   The Alleged Representations Generally 

  1. I have no doubt that something likethe Repayment Representation was conveyed by both Ronghou Zeng and Rongxing Zeng to Johnson Ye.  That is, representations were made that the respondents had the intention of repaying the judgment and proposed to do so within six months if Johnson Ye granted the forbearance sought. This was connected to the Capacity Representation, that is, that the respondents were able to and had the financial capacity to pay the judgment.
  2. It is important to recall, however, that the Repayment Representation has component parts.  As to the statement of intentionto pay the judgment debt, this does not seem to really be in dispute.  Counsel for the respondents, Mr Ratnam, accepted that words to the following effect were said to Johnson Ye on behalf of the respondents: “[p]lease give me a chance. I’m going to pay [the judgment]. I want to pay it. And you can trust me. I’m not a cheat” (T214.30).  The concession was hardly surprising, as it was not only consistent with the evidence of Ronghou Zeng that he had such an intention (T351.34-36) but also the evidence given by Johnson Ye, which I accept, that Rongxing Zeng had said to him “(d)efinitely.  Yes.  I will keep my word and repay the money to you.” (T38.8-9). It is also consistent with the inherent probabilities: if one is entreating a person to forbear exercising their rights against you, it does not make sense to suggest that you will not perform your side of the bargain.
  3. The real issues of controversy are whether that stated intention was accompanied by another component of the Repayment Representation, that is, the unequivocal promise that this intention would be realised within six months (which is said to amount to a future representation) and the proper characterisation of the admitted Capacity Representation.  It is convenient to now turn to the evidentiary dispute about what was said.

C.2.3   The Evidentiary Contest as to the Representations 

34. Whether a six month “guarantee” of repayment was discussed and the effect of what was said about financial capacity was starkly in dispute. The submission of the respondents that the           evidence they adduced as to the absence of any reference to repayment in six months should be accepted included two arguments of substance.

  1. First, and most importantly, if it was part of the bargain that the judgment would be paid within six months and this was subjectively important, then the fact that this promise is not reflected in an express term in either the English Agreement or the Chinese Agreement is inexplicable, a fortioriwhere Johnson Ye was legally represented.
  2. Secondly, Johnson Ye gave evidence that he instructed his solicitor, Mr Zhang, to include in the draft of the English Agreement a six-month period (T83.44-84.9) but, despite this, the “first generation” of the English Agreement was issued by Mr Zhang on 12 October 2016 at 11:24am and such a term is absent.
  3. These arguments have an obvious attraction, as it does, prima facie, seem strange that such a “guarantee” would be omitted by an apparently competent solicitor from the agreement when reduced to writing.  In order to appreciate why I have reached the conclusion that some comfort was given to the applicant that the respondents had the intention to pay within six months, but no temporal guarantee was provided as alleged, it is necessary to set out relevant aspects of the evidence of Mr Zhang, regrettably at some length and despite the fact that Mr Zhang’s first language is not English and the transcript, at times, is difficult to follow.  This lengthy extract also sets out the evidence of Mr Zhang as to the making of the Capacity Representation.  After setting out Mr Zhang’s evidence and summarising the key points emerging from that evidence, I will then turn to the separate issues being: (a) whether the Repayment Representation was made; and (b) identifying the context in which the admitted Capacity Representation was made and its content.
  4. During the course of examination in chief Mr Zhang said:

HIS HONOUR:  … your evidence before the luncheon adjournment was the fact that what the first and fourth respondents had said to you was that they were going to sell three properties in China to pay down the judgment debt, and that was going to happen within six months; correct?

THEWITNESS:  Yes.  That’s correct.

HIS HONOUR:  And that you understood from what had been said to you that they were not the subject of freezing orders in China, those properties?

THE WITNESS:  Yes.

HIS HONOUR:  Right.

THE WITNESS:  That’s correct.

HIS HONOUR:  Now, when you got back to Killara, was that still the discussion about selling properties?  Because I thought you were talking about something else just a moment ago.  I was just trying to clarify what you were saying.

THE WITNESS:  Yes, the same things, actually.  Discussing twice.

HIS HONOUR:  I see.

THE WITNESS:  Yes, because one would require something to put this – whether we put into this deed of release or not, and they retract it, so we worried maybe they do not …

HIS HONOUR:  All right.  Now, I will just ask this further question of clarification and Mr King …

THE WITNESS:  Okay.

HIS HONOUR:  … can ask whatever he wants about it.  You said also before lunch that you proposed putting in a term of six months.

THE WITNESS:  Yes.

HIS HONOUR:  The six-month term in the deed of release, and that was …

THE WITNESS:  Yes.

HIS HONOUR:  And they rejected that.

THE WITNESS:  No.  They put this six month.  They make the offer for six months to transfer the property or – or pay the money.

HIS HONOUR:  Yes, and …

THE WITNESS:  This is their offer, not our offer.

HIS HONOUR:  No, but I thought you had said before lunch that you had tried to get a term in the deed which said that.

THE WITNESS:  That’s right.  Yes.

HIS HONOUR:  And they rejected that.

THE WITNESS:  Yes.

HIS HONOUR:  Can you explain that, please.

THE WITNESS:  They don’t want to put into the term into the deed of release.

HIS HONOUR:  Was there any reason given?

THE WITNESS:  The reasons is they’re not 100 per cent sure this – this property – maybe another – maybe the property change.

HIS HONOUR:  I see.

THE WITNESS:  Maybe this property we sold somewhere.  Maybe they put another , property.  Not 100 per cent sure this is the property they want to transfer to the … but if not, they give another property to sell.  So …

HIS HONOUR:  But why would the identity of the property matter for the six-month period?

THE WITNESS:  Yes.

HIS HONOUR:  I said but why would the identity of the property matter for the six-month period?

THE WITNESS:  This six period because they said they guarantee they can – they can do it in six month, because they have a lot of other properties they have.

HIS HONOUR:  Well, if that’s the case, why wasn’t the six-month period put in the deed?

THE WITNESS:  No.

HIS HONOUR:  What did they say about that?

THE WITNESS:  They said not necessary.

39. In cross-examination Mr Zhang said:

MR RATNAM:  Now, your evidence is that certain representations were made about – I withdraw that.  You say that my clients had suggested to sell three properties.

THE WITNESS:  Yes.

MR RATNAM:  But you were – “concerned”, I think your word was.  You were concerned because there was no valuation and there was no title search.

THE WITNESS:  That’s right.

MR RATNAM:  And you told that to your client.

THE WITNESS:  Yes.

MR RATNAM:  You told that to Mr Ye.

THE WITNESS:  Yes.

MR RATNAM:  Yet – and you suggested – what did you suggest him to do?

THE WITNESS:  I suggest that we don’t need to – we shouldn’t sign until we make sure what this property is existing.  Also it belong to the respondent, and also we have to do the search to find whether they have caveat or not, and the valuation – all the things that we make sure, and then we make a decision whether we – we sign or not.  That’s what I suggested at that time.

MR RATNAM:  But despite that, your client was still prepared to sign an agreement?

THE WITNESS:  That’s right.  Yes.

MR RATNAM:  And even though he was prepared to sign it, you still said it was not a good idea?

THE WITNESS:  No.  Not a good idea to sign, no.

MR RATNAM:  And I think you suggested that there was a term discussed about the repayment at six months?

THE WITNESS:  That’s correct.

MR RATNAM:  And …

THE WITNESS:  We didn’t discussing it for six months.  The six months offer to pay the respondent and our client accepted.

MR RATNAM:  And …

***

MR RATNAM:  …And you thought that having a six-month term would be a good idea?

THE WITNESS:  Yes.

MR RATNAM:  And you told your client, the applicant, that there should be a six-month term?

THE WITNESS:  Yes.

MR RATNAM:  Yet that six-month term is not in the agreement, is it?

THE WITNESS:  No.

MR RATNAM:  And that’s because my client has made no such representation that any payment could be made within six months.

THE WITNESS:  You – the respondent did, but they don’t want to write it down in the terms of the agreement.  This is why it take a long time to discussing in the – in the house.

***

MR RATNAM:  My client Ronghuo Zeng and Rongxing Zeng did say that there was assets in China to be sold.  Do you recall hearing that at the meeting?

THE WITNESS:  Yes.

MR RATNAM:  And it is, in fact true – sorry.  I withdraw that.  It is in fact the case that no specific properties were discussed at the meeting.

THE WITNESS:  Not right.

MR RATNAM:  Because the applicant – withdraw that – the respondents could not offer assets with immediate sale because of the freezing orders.

THE WITNESS:  You are not right.

MR RATNAM:  And when it was discussed to sell assets in China, they could not give a period of time because of the freezing orders that were in place.

***

MR RATNAM:  l will put it a different way.  My clients said – I withdraw that.  Rongxing Zhu and Rongxing Zeng did not say that they could pay within six months.

THE WITNESS:  Is this question or is it a statement?

MR RATNAM:  Yes.  I’m putting a proposition to you.  They did not say that, did they?

THE WITNESS:  Okay.  I say – yes.  Did say that.  Yes.

***

MR RATNAM:  I will put it another way.  Rongxing Zeng and Rongxing – Ronghuo Zeng and Rongxing Zeng asked your client in the meeting to lift the freezing orders so that they could sell assets in China.

THE WITNESS:  No.  They never request to lift the freezing order in China during the discussion, and because our client will not accept it.  They have experience for the freeze order issues in China.  Our client, plaintiff, already got a judgment in China, want to enforce judgment because – and then they can’t sell.

HIS HONOUR:  And what, sorry?

THE WITNESS:  They can’t enforce the judgment in China.

HIS HONOUR:  They can’t enforce the judgment in China?

THE WITNESS:  That’s right.  This is the … to freeze … the sale … respondent.

HIS HONOUR:  And what was your understanding of why they couldn’t enforce the judgment in China by selling the property?

THE WITNESS:  The reason is all the properties of the respondent in China has been freezing by many …

HIS HONOUR:  I see.

THE WITNESS:  Includes bank, to borrow a lot of money.

HIS HONOUR:  I see.

THE WITNESS:  And … 100 … they borrow money either on the way … freeze … China, so … the funds – couldn’t enforcement.

HIS HONOUR:  Is that why, when these additional properties were identified, that is, properties which were said not to be subject to the freezing order …

THE WITNESS:  That’s right.

HIS HONOUR:  … you thought it would be possible to sell those properties and pay the sums?

THE WITNESS:  That’s right.

HIS HONOUR:  I see.

THE WITNESS:  This is why we said this – this other party is not on the freezing order so they can sell.  In this we can all agree.

HIS HONOUR:  I understand.

THE WITNESS:  Yes.

HIS HONOUR:  So you didn’t think that – so when they were saying to you that they could pay, they had the capacity to pay …

THE WITNESS:  Yes.

HIS HONOUR:  … your understanding was that was in relation to these non-freezing order properties, the three that were being talked about, not all their other properties …

THE WITNESS:  No.

HIS HONOUR: … because you thought they were all tied up with other creditors?

THE WITNESS:  That’s correct.

HIS HONOUR:  I see.

THE WITNESS:  Yes.

***

MR RATNAM:  I want to suggest to you that there was no properties that were available to be sold that were not the subject of freezing orders.

THE WITNESS:  Well, your client told our client there’s no freezing order over the property and that property will be free to sell to our client.

  1. Finally, at the conclusion of re-examination, in order to obtain some clarity as to the evidence of the witness, the following exchange occurred:

HIS HONOUR:  …Now, I also understood from your evidence that you say that the three properties that you thought were going to be sold in order to pay the judgment debt were not the subject of freezing orders in China?

THE WITNESS:  Yes, correct.

HIS HONOUR:  In doing the best you can in your own words, can you tell me precisely what it was the respondents said to you, if anything, as to why they didn’t want to include a term in the deed which required them to pay the balance of the judgment debt within six months?

HIS HONOUR:  They are friends many years.

HIS HONOUR:  So your client said that or [did] they said that?

THE WITNESS:  Yes.  Our clients say that.

HIS HONOUR:  Your client said that.

THE WITNESS:  Yes.  The one way … client shouldn’t sign this deal agreement.

HIS HONOUR:  Sorry.  You said they shouldn’t sign it.

THE WITNESS:  They shouldn’t.

HIS HONOUR:  Yes.

THE WITNESS:  Before I … away they say they have other issues on this … and our client said a few of the reasons they’re trying to convince me they should sign.

HIS HONOUR:  So they tried to – your clients tried to convince you that they should sign.

THE WITNESS:  They should sign because I rejected, and, yes …What … can I say that is, firstly, there was friends many years.  So certainly what the … properties how can I already know, so they know the property there.  They know the values, but I worry about whether they exist or not.

HIS HONOUR:  Yes.

THE WITNESS:  What about this … they know the values.  They just … that price, and also they said they don’t want to make their … too hard, you know.  They try and, you know … know where to … that each mother live in that properties.

HIS HONOUR:  Yes.

THE WITNESS:  And they say that it’s very hard to do that … for him from their heart … another sales.  Certainly they said they had plenty of the properties, especially these three property, plus other properties.  They believe what the respondent has said to them.

HIS HONOUR:  But what about the properties the subject of the freezing order?  You said a little earlier that you didn’t think those properties could be sold to pay the debts because that they were – there were amounts owed on those properties to lots of people.

THE WITNESS:  Yes.  Yes.  We – we know, but we have no chance at that time to check whether the properties is on freezing or not.

HIS HONOUR:  I see.

THE WITNESS:  Because the first time they told me on that – that day, I tell them we have to wait …

HIS HONOUR:  Yes.

THE WITNESS:  … by the – you know, the – our client trying to say, you know, they have money to give upfront – soon they give – money will be soon and also a lot of reasons, as I mentioned, and they … once again, but if – you know, if they … or, you know, they want to pay and our client will not believe any more.  So …

HIS HONOUR:  All right.

THE WITNESS:  … that kind of thing, you know, and our client said in this situation they will – that they would like to sign.

HIS HONOUR:  Okay.  Thank you very much.  Anything arising from that by …

MR KING:  No, your Honour.

MR RATNAM:  No.

  1. As noted above, the evidence in chief of Mr Zhang was adduced orally and dealt, at labourious length, with a range matters that are irrelevant to the determination of the real issues between the parties. Perhaps understandably in these circumstances, the cross examination and re-examination were only in part focussed on the key issue as to whether the Representations were made.  My interventions were directed at trying to understand the evidence of the witness as it related to what I consider to be the principal issues: what was said as to payment of the judgment and capacity to pay, and why the agreements were drafted as they were (if the applicant’s contention as to what was said is correct).
  2. Having had the opportunity to observe Mr Zhang give evidence, I have little doubt he was doing his best to provide a truthful account of his recollection and I accept his evidence. Despite the disjointed nature of the questioning and, without intended disrespect, his limited capacity to express himself with great fluency in English, five key matters emerged with clarity from his evidence:

(a)          First, it was said on behalf of the respondents that they had the intention of repaying the moneys owing to Johnson Ye (being the whole of the judgment) within six months if Johnson Ye signed the proposed agreements.

(b)          Secondly, it was said on behalf of the respondents, that the respondents had access to three properties in China which were not subject to current freezing orders which would allow the respondents to pay the judgment.

(c)          Thirdly, it was said on behalf of the respondents that because the respondents had access to three properties in China, the respondents were able to and had the financial capacity to pay the judgment.

(d)          Fourthly, Mr Zhang did not consider it was a good idea to proceed, particularly in circumstances where there were insufficient details as to the identity of the three properties proposed to be used to source the means of payments.

(e)          Fifthly, despite Mr Zhang’s advice not to proceed, Johnson Ye trusted the respondents and because of his friendship with them, he proceeded to enter into the forbearance arrangement reflected in the English Agreement and the Chinese Agreement.

43. In the context of examining the evidence as to precisely what was said about how the respondents were to pay, I will detail below the evidence of Johnson Ye and Jacky Ye, consistent with         the evidence of Mr Zhang, as to the respondents having access to three properties in China (which was said to illustrate why the respondents had the financial capacity to pay to the judgment).

Whether the Repayment Representation was Conveyed?

  1. Notwithstanding I consider that I should accept the key aspects of the evidence of Mr Zhang (as summarised in [42] above), consistent with the caution expressed by McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 318,I am not reasonably satisfied that it has been proven, with a sufficient degree of precision, that Ronghou Zeng said that the respondents “will” repay the judgment “within six months”, or that Rongxing Zeng said that the respondents “guarantee to pay” the full amount of the judgment if their Australian and Chinese properties are not sold within six months as was pleaded (cf APOC [9(ii)], [15(ii)]).
  2. Although I am satisfied (despite their denials) that somethingwas said by Ronghou Zeng and Rongxing Zeng about the intention of the respondents to repay the moneys owing to Johnson Ye within six months, I am not satisfied that this amounted to a guarantee or promise that this “will” occur within six months, still less that this would occur if the respondents’ Australian and Chinese properties were not sold. If this is correct, the absence of an express term in both the English Agreement and the Chinese Agreement as to the six month period is explicable; as is its absence from the “first generation” of the deed prepared by Mr Zhang.  Although the respondents were willing to convey an intention, they did not want the six month period to amount to an enforceable obligation or “guarantee”.  It follows that the Repayment Representation as pleaded was not conveyed.

The Context and Content of the Capacity Representation 

  1. Although the making of the Capacity Representation is admitted, it is worth pausing to reflect on the context of the discussions, and why the conclusion that a representation as to capacity to pay was conveyed makes intuitive sense. It is also necessary to set out the context and content of what was said about the capacity to pay.

The Relevant Context

  1. As to context, by reason of the orders made by the Chief Justice, after giving the respondents every opportunity to pay the judgment debt, the position of Johnson Ye was unassailable.  In order to convince him to give up this strong commercial position, it is understandable that efforts would be made to allay his concerns about the capacity of the respondents to pay the judgment debt.
  2. In Ye v Zengat [10], the Chief Justice observed:

The respondents say that there has been a freezing order put on all of the respondents’ properties in the PRC, by the Xiamen Intermediate People’s Court (Xia Min Bao Zi [2015] no.2), and that the applicant is thus protected. There are two difficulties with that proposition. First, there is evidence that the respondents’ properties in PRC are highly leveraged to Chinese lenders.

  1. No evidence was adduced to the contrary at this hearing and the respondents accepted, in submissions, that there was no available property in China which was not subject to the freezing orders.
  2. As noted above, the recalcitrance of the respondents in paying the debts was longstanding.  Johnson Ye had already sought to enforce his judgment against all the respondents’ properties in China and had obtained freezing orders.  This is why the representation made as to the existence of three properties which were not the subject of freezing orders was no doubt attractive.  As Mr Ratnam accepted, if there were three unencumbered properties in China, there would be nothing stopping the respondents selling those properties and remitting the proceeds to Johnson Ye within six months (T134.36).  This is essentially what Johnson Ye, Jacky Ye and Mr Zhang said was conveyed to them as to the intentions of the respondents.  In the context of entreating Johnson Ye and appealing to his feelings of goodwill, the making of the Capacity Representation makes sense, accompanied as it was by the notion that there was an ability for the respondents to realise assets not the subject of the freezing orders.
  3. I am fortified in this view because the counterfactual (that no discussion took place as to properties that were not subject to the freezing order), makes little sense.  Somewhat curiously, the position of the respondents was that they expected Johnson Ye to take the necessary steps in China to have the properties sold, so that Johnson Ye could be repaid.  According to Ronghuo Zeng, the only available assets were the subject of freezing orders and hence, without Johnson Ye taking steps to lift the freezing orders, then “nothing can be auctioned.  No way to pay” (T349.22).  I consider this evidence is curious as it made little commercial sense for Johnson Ye to have entered an agreement by which the only avenue for payment was for him to facilitate the sale of properties, apparently leveraged to a range of creditors, to pay himself.  Apart from anything else, as I explain below, in order to sell the properties, it would be necessary for Johnson Ye to obtain the cooperation of other creditors.
  4. In summary, it seems to me to be fairly clear that what was happening was that the respondents were seeking to delay payment of the judgment debt as long as possible in the hope, Micawber-like, that something might turn up in order to allow them to continue to string along Johnson Ye, but now with the benefit of the English Agreement and the Chinese Agreement. The likelihood of the Capacity Representation being made in the context alleged, together with the evidence of Mr Zhang in particular, persuades me that the Capacity Representation was conveyed and that something was also said about an intention to pay within six months, but that reference to a time period fell short of guarantee.

The Content of what was said about Capacity to Pay

  1. Having already noted I accept Mr Zhang’s evidence, it is now convenient to turn to the content of what was said about the respondents’ capacity to pay in more detail.
  2. A good deal of evidence was adduced as to the effect of the Chinese freezing orders and confusing evidence as to three properties which were the subject of Mr Zhang’s evidence, being the three properties in China to which the respondents supposedly had access which were not subject to current freezing orders and which would allow the respondents to pay the judgment.  I will deal with each topic separately.

Freezing Orders

  1. In considering what was conveyed I am, of course, conscious that the applicant agreed to do all things necessary to facilitate the sale of any property owned by the respondents in China to discharge the debt owing (see clause 3.6).  This supports the notion that there was to be some possible dealings with the properties the subject of the freezing orders.  Despite this, it was common ground that there was no discussion of the specifics of the steps to be taken to remove the freezing orders during the Restaurant meeting on 12 October 2016 (T146). As Mr Zhang explained (see [38] and [40] above), there was at least some ambiguity as to whether it was guaranteed that the three properties that were not “frozen” would necessarily be the ones (or the only ones) eventually sold to pay all the debts, or would be “substituted” or augmented by other properties.  The primary relevance of the three properties was that their existence and availability was relied upon to demonstrate a capacity to pay.
  2. An expert was called, Mr Qing Zhu. With respect to Mr Zhu, a Chinese lawyer, his oral evidence was somewhat difficult to understand.  He had given evidence about the operation of Article 38 of the Urban Real Estate Administration Order of the People’s Republic of Chinaand Article 242 of the Civil Procedure Law, pursuant to which the owner of an asset subject to freezing orders cannot dispose, including sell, assign or mortgage the relevant asset. He adhered to this evidence in cross examination and also gave evidence that if there is more than one creditor, then, it appears, all creditors need to approach the Court to facilitate the sale of the property the subject of the freezing orders (T183-184).  As I have already explained, the existence of these freezing orders made the prospect of any non-encumbered properties attractive from the perspective of Johnson Ye.

The Three Properties

  1. On one level, the precise identity of the three properties does not really matter.  As is evident from the evidence of Mr Zhang (see [39]-[40] above), the absence of concrete details such as title searches, valuations and confirmation that the three properties were not the subject of freezing orders, were matters that caused him sufficient concern to mean he gave advice that Johnson Ye should not enter into the proposed agreement.
  2. The following evidence (at T430.23-44) was adduced in the cross examination of Rongxing Zeng:

MR KING: And you – were you present at the restaurant when your brother said to Johnson Ye that, as an example of his capacity to pay the judgment debt of the court, he had three properties in China which were unaffected by any freezing order?

THE INTERPRETER: All frozen.

MR [KING]: He mentioned two houses in Zhangzhou City in China, didn’t he?

THE INTERPRETER: No. So many.

MR [KING]: Each house was valued, he said, at 10 million RMB.

THE INTERPRETER: I don’t understand the question.

MR [KING]: He also said that he had a car park with 100 car capacity.

THE INTERPRETER: No.

MR [KING]: And that if he were – if he sold those three assets their value would be 40 million RMB, enough to repay the debt.

THE INTERPRETER: As long as the frozen order lifted, I am able to repay.

59. These questions were put consistently with the evidence adduced by the applicant.  Apart from Mr Zhang, to whose evidence reference has already been made, Johnson Ye gave evidence that Ronghuo Zeng (T43.9-11):

… said that these properties [that is, the car park in Guangzhou city and the two properties in Zhangzhou city] are not subjected to any frozen order – freezing order, just the matter of the money and he can sell these properties any time to get cash.

He had earlier given evidence (at T42.39-44) that:

He [Ronghuo Zeng] gave me example. He said he has two properties two houses in Zhangzhou city, China. Each house valued about 10 million RMB. And also he told me that he has a car park which has hundred cars capacity and which valued about 100,000 to 200,000 RMB. And for these three assets, if he sell these three assets, the value would be 40 million RMB and would be enough to repay the debt.

  1. Similarly, in cross examination (at T147.31-33) he gave evidence:

No, no. They promised to me that they would pay me for about 4 million Australian dollars. And then I cancelled the receivership and then they [were to use] the carpark and the two other properties to repay the balance.

  1. Jacky Ye (at T192-193) gave similar evidence:

THE WITNESS: Yes. Both brothers say those words that they promised my dad they can – they have asset in China they can sell, but just need time. They can sell in six months to get the rest of the payment.

MR KING: And what did your father say in response?

THE WITNESS: And he ….. discuss with Terry about ….. and then my father say….. you have to keep your promise, and because I’m going to say you’re auctioning your house ….. so at least – I mean ….. last time you ask me, and then I trust you again, but you have to keep your promise.

  1. I accept this evidence.  The respondents’ submissions as to why this evidence should be rejected evolved somewhat.  Initially, it was asserted that there was no mention of the three properties and that any mention was inherently improbable because all the properties, in any event, were the subject of a freezing order (T143.42-46).  This was refined somewhat when it came to final submissions where it was contended that I should reject the evidence of Mr Zhang, Johnson Ye and Jacky Ye because:

As to the Car park – it was not the Respondents to give. Mr Yu’s evidence must be accepted. The Car Park belonged to him. Mr Yu gave evidence that the topic of the Car Park was raised in an initial discussion (before 12 October 2016) and was not raised at the Restaurant meeting. If the representation was made, the Applicant could not have relied upon it because he knew that Mr Yu was the owner and not the Respondents. Mr Yu gave this evidence and was not challenged by calling Mr Bihui Lin who was present at the Restaurant. Mr Lin’s evidence would have been critical to challenge Mr Yu’s evidence. An inference should be drawn that by failing to call Mr Lin, his evidence would not have assisted the Applicant.

Two properties in Zhangzhou city – no precise details of these two properties were ever particularised by the Applicant in chief (nor were they pleaded) apart from him identifying that they existed in Zhangzhou city.

63. I do not accept these submissions. The point about Mr Lin can be put to one side immediately.  Mr Lin was described in the two “List of Personalities” documents provided to the Court, and not disputed between the parties, as being a friend of both Johnson Ye and Ronghuo Zeng.  He was in no-one’s camp, and could have been called by either side of the record.

  1. More significantly, Mr Ratnam for the respondents cross examined on the basis that the car park had been discussed at the Restaurant, putting the positive proposition to Johnson Ye that he had asked for the car park to be transferred to him as security for the part payment of the judgment (T147.28-29).  As to Mr Yu’s evidence, in response to the question that if Ronghuo Zeng had said to Johnson Ye on 12 October 2016 that he can sell the car park, and repay Johnson Ye, whether such a statement would be false (a question which had to be asked numerous times), Mr Yu responded (T458.39):

THE INTERPRETER: So the car park can park 100 cars, I gave this proposal –mentioned it to Mr Ye at his home in China. After I arrived at Australia, we never mentioned about this car park any more.

65. It was unexplained why “this proposal”, that is, selling the car park and reducing the amount outstanding with the proceeds, was ever raised with Johnson Ye. Mr Yu was not an impressive witness and I would not accept his evidence to the extent it conflicted with that of Johnson Ye and Jacky Ye, and, even more so, Mr Zhang.

  1. The evidence as to the properties in Zhangzhou city was difficult to follow. Johnson Ye gave evidence that one of the properties had been “registered under his name” (T148.10), by which he meant that he had previously been listed as an incoming purchaser pursuant to an uncompleted contract for sale in 2013 (T158.30).  He had then later told his solicitor that he did not want the property, and he had then been “removed as the incoming purchaser” and because of that fact, Johnson Ye said (T159.11) that he:

knew that the property was the – was not subjected to the freezing order, so can be sold to get cash, because I retuned that property.

  1. Evidence was also given of another property, in Rongxing Zeng’s name. Apparently what was to happen, was that the respondents were going to sell the property, get the money from a purchaser and give the money to Johnson Ye in partial reduction of the judgment debt (T160.10-20).
  2. As best I understand it, it is contended that I should reject the evidence of Johnson Ye because: (a) Johnson Ye knew in 2016 that one of the properties could not have been the subject of bargain on 12 October 2016, because “he remained on title (by his own evidence) until 2017”; and (b) Johnson Ye knew the respondents could not sell the three assets (because, the Car Park did not belong to the respondents, one of the properties in Zhangzhou city was under contract and the second property in Zhangzhou city was the subject of a freezing order).
  3. As to the first of these arguments, it rests on far from clear evidence as to when it became evident that the 2013 contract was not to be completed.  Read contextually and consistently with the evidence of Mr Zhang, it seems to me clear that Johnson Ye formed the view during the course of the enforcement proceedings that he did not want to complete the purchase (notwithstanding the inaccurate reference, through the interpreter, to “last year” during his cross examination (T159.9)).  By the time of the discussions on 12 October 2016, Johnson Ye thought recourse was available by the respondents to this Zhangzhou city property to assist in discharging the amount owing and that it was not subject to a freezing order.
  4. As to the second argument, the topic of the car park had been discussed and the fact that Mr Yu may have had some ownership interest is beside the point.  So is the fact that all of Rongxing Zeng’s properties should have been subject to freezing orders.  As Johnson Ye explained (at T144), he was unsure as to whether freezing orders had been obtained over all the properties to which the respondents could have recourse in China because he suspected “they just hided the assets so we couldn’t search all of them” (T144.33).  As noted above, Mr Zhang was unsure as to the identity of the relevant properties and, understandably, wanted to obtain further particulars and searches.
  5. Finally, before leaving the evidence, I should make some reference to Margaret Koh. I formed the general impression that Ms Koh was also a witness who was doing her best to assist the Court, notwithstanding I was concerned that she was prepared to make serious allegations against the witnesses called by the applicant, including fellow practitioners (see T490.5-32).  As noted above, she was also at the Restaurant.  She gave evidence in chief that initially Johnson Ye was angry, but that Rongxing Zeng and Ronghou Zeng “very much wanted to settle the… matter” (T482.10-20).  No evidence was adduced in chief as to precisely what Rongxing Zeng and Ronghou Zeng said to Johnson Ye. This was perhaps understandable because Ms Koh is Malaysian and much of the discussion, it appears, took place in a variant of the Fujian dialect.  This meant that comprehension of exactly what was being communicated was not an easy task for Ms Koh (T484.30-45; T488.10).  She gave evidence that she “wasn’t participate in the discussion” (T496.26-32) and, although she said she did not believe that Mr Zhang was within earshot of what was passing between Rongxing Zeng and Ronghou Zeng on the one hand and Johnson Ye on the other, she was not definitive and accepted that she did not overhear everything (T502.8).
  6. Notwithstanding the denials of the other witnesses called by the respondents, as I have already found, I have little doubt that reference was made to “available” properties during the course of discussions. In accordance with s 140(1)of the Evidence Act 1995(Cth), I am persuaded of the existence of the five key matters to which I have made reference in [42] above and, in particular, of the evidence of Mr Zhang, Johnson Ye and Jacky Ye that Rongxing Zeng and Ronghou Zeng represented, on behalf of the respondents, that the respondents had access to assets which were not subject to current freezing orders, which demonstrated a financial capacity to allow the respondents to pay the judgment.
  7. It follows that the Capacity Representation as pleaded was conveyed.

C.3     Was the Conduct in Trade or Commerce?

  1. The respondents put in issue whether the making of the Representations, could be considered “conduct” for the purposes of s 18, given that the section requires the impugned conduct to have been made “in trade or commerce”.
  2. The usual starting point for the interpretation of the phrase is Concrete Constructions (NSW) Pty Ltd v Nelson(1990) 169 CLR 594, which concerned a preliminary question of whether an inaccurate statement by the defendant’s foreman to another employee was conduct in trade or commerce. Mason CJ, Deane, Dawson and Gaudron JJ, at 602-3,noted that the statutory words refer to “‘the central conception’ of trade or commerce”, consisting of “conduct which is itself an aspect or element of activities or transactions which, of their nature, bear a trading or commercial character”.
  3. The approach to the understanding of the statutory concept as explained in Concrete Constructions, although in the context of s 52of the Trade Practices Act 1974(Cth), is equally applicable to s 18 of the ACL: see Murphy v State of Victoria [2014] VSCA 238; (2014) 45 VR 119 at 143-144 [77] (Nettle AP, Santamaria and Beach JJA). This includes the notion, as Toohey J explained in Concrete Constructions at 613, that the relevant conduct may relate to the trade or commerce of a party other than the representor. This was confirmed by the High Court in Houghton v Arms [2006] HCA 59; (2006) 225 CLR 553 at 565 [34] where Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ considered the meaning of “in trade or commerce” (in the context of the fair trading legislation) and observed:

Moreover, in his judgment in Concrete Constructions, Toohey J emphasised that, while in most cases, the focus would be on the nature of the business of the party making the representation, s 52 was not so limited; in particular, the section did not, in terms, refer to the trade or commerce of any particular corporation. Accordingly, statements made by a person not himself or herself engaged in trade or commerce may answer the statutory expression if, for example, they are designed to encourage others to invest, or to continue investments, in a particular trading entity.

(Citations omitted, emphasis added)

  1. In Williams v Pisano [2015] NSWCA 342; (2015) 90 NSWLR 342 at 350[41]Emmett JA (with whom Bathurst CJ and McColl JA agreed) made clear: “(i)t is the character of the act that is the subject of complaint, so far as the person doing the act is concerned, that is critical”. Accordingly, statements by a person that are designed to persuade others to provide goods or services answer the description of conduct “in trade or commerce”. Such conduct has the requisite trading or commercial character.
  2. Relevantly, the Capacity Representation was designed to persuade Johnson Ye, who, in the circumstances described in [3] above, had provided financial accommodation to Ronghuo Zeng from 2011, and to all six respondents since 2013, to defer repayment of the monies outstanding.  Additionally, it was made in the context of a commercial negotiation between Johnson Ye and the respondents, by which the respondents were seeking to have Johnson Ye enter into agreements which, among other things:

(a)          required the respondents to pay $3.7 million to a trustee’s bank account and provide for the subsequent remission of that money to the beneficiary of the trust sums;

(b)          required Johnson Ye to take steps to facilitate the sale of property by the respondents in China (cl 3.6 of the English Agreement); and

(c)          effected the transfer of a Vietnamese rosewood office table and two armchairs for stated consideration (cl 2(c) of the Chinese Agreement).

A series of mutual promises were made relating to, and facilitating, a deal by which the right of Johnson Ye to take steps to recover the amount owing to him was deferred.

  1. The contention of the respondents was undeveloped in submissions, but it seems to be that the expression “in trade or commerce” necessarily connotes a course of conduct as opposed to isolated and unusual or extraordinary conduct.  This contention cannot be correct if expressed at this level of generality and was, in any event, rejected by the Full Court in Bevanere Pty Ltd v Lubidineuse[1985] FCA 134; (1985) 59 ALR 334 at 339(per Morling, Neaves and Spender JJ) where it was explained that a single transaction should not be viewed in isolation from the totality of the commercial activity of the relevant actors. The Capacity Representation was made in the context of a longstanding commercial relationship, albeit one that had soured. This was not like a one off private sale of a dwelling: see Argy v Blunts & Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112 at 127–31 per Hill J. Here, not only did the totality of the dealings between the parties have a commercial character, but also the precise conduct in the making of the Capacity Representation as to the commercial proposal later reflected in the English Agreement and the Chinese Agreement. The impugned conduct was relevantly carried out in trade and commerce.

C.4     Was the Capacity Representation Misleading or Deceptive?

C.4.1   The Principled Approach to Characterisation

  1. There was no debate between the parties as to the applicable principles of how the Court is to approach characterisation of the conduct in making the Capacity Representation.  Despite this, it is worth emphasising how the Court is to approach the assessment of whether a contravention is established.  Recently, in Chowder Bay Pty Ltd v Paganin[2018] FCAFC 25, the Full Court (Besanko, Markovic and Lee JJ) at [15] and [27]-[32], referred to the relevant principles, from which the following summary is taken:

… consideration as to whether particular conduct is misleading or deceptive is a question of fact to be determined in the context of the evidence as to the alleged conduct and all relevant surrounding facts and circumstances: Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 199 per Deane and Fitzgerald JJ. A fundamental requirement is that, in the circumstances, the impugned conduct induces or is capable of inducing error: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198 per Gibbs CJ.

… where the misleading or deceptive conduct is directed not to a class but to a specific individual, the court must necessarily take into account the knowledge of the person to whom the conduct is directed: Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 218 CLR 592 at 604-605 per Gleeson CJ, Hayne and Heydon JJ. In this regard, as French CJ noted in Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 at 319 [26]:

Characterisation [of the conduct] may proceed by reference to the circumstances and context of the questioned conduct. The state of knowledge of the person to whom the conduct is directed may be relevant, at least in so far as it relates to the content and circumstances of the conduct.

Moreover, it is not only the situational or relative commercial position of representor and representee is relevant, but also the specific dealings which related to the impugned conduct: see Butcher at 604-605 per Gleeson CJ, Hayne and Heydon JJ.

What is also clear is that in determining whether any particular conduct is misleading or deceptive is a question of fact to be determined objectively. In Campbell at 341-342, Gummow, Hayne, Heydon and Kiefel JJ approved the following statements of McHugh J in Butcher at 625 [109]:

The question whether conduct is misleading or deceptive or is likely to mislead or deceive is a question of fact. In determining whether a contravention of s 52 has occurred, the task of the court is to examine the relevant course of conduct as a whole. It is determined by reference to the alleged conduct in the light of the relevant surrounding facts and circumstances. It is an objective question that the court must determine for itself. It invites error to look at isolated parts of the [person’s] conduct. The effect of any relevant statements or actions or any silence or inaction occurring in the context of a single course of conduct must be deduced from the whole course of conduct.

(Emphasis added, citations omitted)

This task is more straightforward when one is dealing with the representation of existing fact; but sometimes representations as to fact are more appropriately classified as representations as to opinions, which raise particular issues. The initial step is to identify precisely what representations the statement of opinion entails. French CJ remarked on the importance of properly characterising the representation in Campbell at 321 [32]-[33] where his Honour observed:

Opinions may carry with them one or more implied representations according to the circumstances of the case. There will ordinarily be an implied representation that the person offering the opinion actually holds it. Other implied representations may be that the opinion is based upon reasonable grounds, which may include the representation that it was formed on the basis of reasonable inquiries.

  1. It seems to me that the better view is that the Capacity Representation was a representation as to an existing fact (although in this case, the proper characterisation is not determinative when it comes to the later task, addressed below, of assessing whether it was misleading).
  2. Having identified the relevant principles, it is convenient to turn, in further detail, to the findings as to the true position of the capacity of the respondents to pay.

C.4.2   Findings as to the True Position

  1. The question then becomes: as at 12 October 2016, when the Capacity Representation was made, did the respondents have the financial capacity to pay to the judgment?
  2. The approach adopted by the respondents in closing submissions (T508) was to say that the applicant failed to prove a lack of capacity.  The Capacity Representation was not put, or not put squarely, as a future representation. After the close of the respondents’ case, Mr Ratnam accepted that the respondents had not adduced any evidence on the question of financial capacity and (subject to the trade and commerce point), given the admission the Capacity Representation was made, if the applicant proved a lack of such capacity, he would win but if not, he would lose.  As Mr Ratnam noted (at T553.20) “this is an onus case”.
  3. It is worth noting that it was not always the way the respondents put the case.  This is perhaps unsurprising given the recalcitrance of non-payment and evident inability to pay the judgment out of the Australian assets and the admissions previously made by the respondents (recorded in Ye v Zengat [10] and not in contest before me), that there has been a freezing order put on all of the respondents’ properties in China, by the Xiamen Intermediate People’s Court. Clearly there was some evidence that there was a want of capacity to pay at the time of the meeting on 12 October 2016. That was, after all, the whole point of seeking the forbearance to allow time to realise Chinese assets. Freezing orders over all the assets in China and the mendicant approaches to the applicant (and, to a lesser extent, the appointment of receivers in Australia to realise assets) are hardly indicative of a capacity to pay.
  4. Against this background, on day two of the hearing the following exchanges occurred (T115, T121):

HIS HONOUR: Do you still say you’ve got sufficient assets in China to discharge this debt?

MR RATNAM: I would have to get those instructions, but I don’t have – this is – your Honour raises a very good point, because we had made a submission some months ago that we wanted to get valuation evidence to – – –

HIS HONOUR: Well, your client must know what his position is with his creditors.

HIS HONOUR: …it seems to me that, once I look at the way the representation case is now being put, with some degree of precision, one of the things that they say is, that was misleading and deceptive is, you had the capacity to repay. And you want to meet that case by saying, well, you have assets which – – –

MR RATNAM: That’s right.

HIS HONOUR: – – – give to you the capacity to pay at the time. All right. Well, we will continue with the applicant’s evidence, but we might have to come back to that, because I think we’re going to be part-heard anyway, and I did indicate to you, you should be getting these – that notation in the orders. So if you do want to have valuation evidence it’s going to have to be done pretty quickly.

MR RATNAM: And can I inform your Honour that I have received a phone call from Ms Koh this morning, telling me that, one set of valuation evidence is prepared and was received not long ago, but it needs to be translated.

HIS HONOUR: Okay.

MR RATNAM: I want to assure your Honour that we have not been sitting on our hands on this.

  • On 5 April 2018 orders were made for the respondents to file any valuation evidence upon which they proposed to rely.  Evidence was filed, said to be pursuant to that order, but it was not ultimately read when the matter came back before the Court in June 2018.  No explanation was provided for no evidence being adduced by the respondents to prove a capacity to pay, other than reliance upon the contention that it was unnecessary because the applicant had not adduced sufficient evidence to allow the Court to form a conclusion that there was an issue as to the capacity to pay.
  1. This deliberate forensic choice may well be entirely understandable, but it has consequences.  There was prima facieevidence of a lack of capacity to pay.  On the respondents’ own case, the Australian assets were insufficient. In final submissions the respondents asserted that Johnson Ye knew the Australian properties owned by the respondents were leveraged and that money was owing to banks. Moreover, the respondents accepted that all the respondents’ property in China was the subject of freezing orders. They were pleading for time and forbearance over a payment of a significant debt that was long past due. They had failed to pay despite there being no reasonable basis to deny liability.  As a matter of logic, the only way they could pay was by realising any equity in the “frozen” properties or bringing other properties to the table. On the respondents’ case, the latter option was unavailable, as the respondents’ contend that there were no other “unfrozen” assets and hence any admitted representation as to a capacity to pay necessarily had, as its justification, the notion that there was sufficient equity in the “frozen” properties.  No attempt was made by the respondents to adduce evidence relevant to this fact.
  2. Although the applicant placed no direct reliance on Blatch v Archer(1774) 1 Cowper 63; (1774) 98 ER 969, where Lord Mansfield said that “all evidence is to be weighed according to the proof which it was in the power of one side to have produced”, it is apposite in the present circumstances. Also relevant is the corollary of his Lordship’s dictum, that is, where further evidence is available, a tribunal of fact is entitled to consider that factor when assessing whether a party has produced evidence sufficient to satisfy the requisite standard of proof: Australian Securities and Investments Commission v Hellicar [2012] HCA 17; (2012) 247 CLR 345 at 412 [165] and 441 [250].
  3. In Gerard Cassegrain & Co Pty Limited v Cassegrain[2013] NSWCA 453; (2013) 87 NSWLR 284 at 292 [26], Beazley P said of Blatch v Archer that it is authority for the proposition that “where material evidence is peculiarly within a party’s knowledge, it may be sufficient for the opposing party to adduce slight evidence of a matter in issue”. The other party (in the present case, the respondents):

… then faces a tactical decision as to whether to adduce evidence to explain that ‘slight evidence’ given by the other party. If a decision is made not to call evidence, there is a risk the court may draw inferences contrary to the interests of the other party who chose not to respond to the evidence adduced: De Gioia v Darling Island Stevedoring & Lighterage Company Ltd (1941) 42 SR (NSW) 1 at 4; Blatch v Archer at 970; Hampton Court Ltd v Crooks [1957] HCA 28; 97 CLR 367; Australian Securities and Investments Commission v Hellicar [2012] HCA 17; 247 CLR 345 especially at [250] ff.

  1. Leaving aside the issue of capacity in relation to assets generally, it is common ground that the three (so-called “unfrozen”) properties provided no basis for the Capacity Representation.  Indeed the position of the respondents (which I have rejected) is that nothing would have been said about these properties because the respondents did not have access to them to assist in repaying the debt. There is no evidence that there was any other way the respondents had the capacity to pay at the time of the meeting at the Restaurant.  In fact, all indications are to the contrary.  Accordingly, it follows that the applicant established that the true position is that when the Capacity Representation was made, the respondents did not have the financial capacity to pay to the judgment.
  2. Before leaving this topic I should mention a further matter for the sake of completeness.  The submissions of the applicant were replete with references to findings made by the Chief Justice in earlier interlocutory judgments or to findings made by the Xiamen Intermediate People’s Court in order to prove a lack of financial capacity.  In reaching my conclusion as to a want of financial capacity I have had regard to admissions made which were common ground before me (see [89] above), but not to findingsmade in other proceedings.  I should shortly explain why.
  3. The exclusionary provision in s 91(1)of the Evidence Act 1995(Cth) is in the following terms:

(1) Evidence of the decision, or of a finding of fact, in an Australian or overseas proceeding is not admissible to prove the existence of a fact that was in issue in that proceeding.

  1. The applicant’s submissions contained an implicit assumption that a finding of fact in the earlier interlocutory judgments of the Court or a finding made by the Xiamen Intermediate People’s Court could prove the existence of the fact that was in issue before me. This is incorrect.
  2. As I explained in Young v Hughes Trueman Pty Ltd (No 4)[2017] FCA 456 at [20]:

s 91(1) is an exclusionary and not a facultative provision and is part of a regime, found in Part 3.5 of the Evidence Act, which deals with not only civil judgments but also convictions and acquittals.  The explanatory material contained in the Australian Law Reform Commission’s Interim Report: Evidence (ALRC 26) explains the relevant recommendation (no 782) which was informed, in part, by the notion that a civil judgment (and findings in such judgments) are based on evidence chosen by the parties (with no obligation, like that of a Crown Prosecutor, to make available all known evidence).

Sections 92 and 93 set out specific exceptions and savings which limit the operation of the exclusionary rule, but none speak to the present issue in circumstances where the applicant does not develop any submission that an issue estoppel has arisen.

  1. Having said this, for reasons I have explained, the applicant established that the respondents did not have the financial capacity to pay the judgment by reference to the prima facieevidence of a lack of capacity to pay, together with the inferences able to be drawn contrary to the interests of the respondents, who chose not to respond to the evidence adduced in accordance with the principles explained in Blatch v Archer.

C.4.3   Conclusions

  1. Mr Ratnam, counsel for the respondents, accepted that if I were to find that if a representation was conveyed that there were three properties not subject to freezing orders that could be sold to discharge the judgment debt, that such a representation would necessarily be misleading and deceptive (T537.23).  However, the Capacity Representation was pleaded somewhat differently and less specifically, as I raised with Mr King during the course of final submissions (T538.43).  The submission of the applicant was that the references to the three properties in China which were not the subject of freezing orders, were part of the context in which a broader representation was made to Mr Ye, being that the respondents both intended to pay and, more relevantly, had the capacity to pay (T532.12).  This submission should be accepted.
  2. There is no doubt given the findings I have made as to the true position at the time the Capacity Representation was made, that the conduct in making the Capacity Representation was misleading or likely to mislead or deceive.  What the respondents were seeking to do was buy time.  In doing so they were seeking to give Johnson Ye comfort that within the foreseeable future there was a real prospect that the judgment would be paid.  I have referred above to the commercial context in which the representations were conveyed and the desire on behalf of the respondents to appeal to Johnson Ye’s goodwill.  In this context, the Capacity Representation was of signal importance.  In this context and having regard to all relevant surrounding facts and circumstances, the Capacity Representation induced or was capable of inducing error.

C.5     Causation

  1. The essential issue as to causation in this case can be stated as whether the contravening conduct in making the Capacity Representation played some part, even if only a minor part (Gould v Vaggelas(1985) 157 CLR 215 at 236 per Wilson J) in materially contributing (I & L Securities Pty Limited v HTW Valuers (Brisbane) Pty Limited [2002] HCA 41; (2002) 210 CLR 109 at 130 [62] per Gaudron, Gummow and Hayne JJ) to the course of action taken by the applicant in entering into the English Agreement and the Chinese Agreement?
  2. I do not consider the issue of causation in this case to be attended by any real doubt.  Any suggestion that there is a failure to prove the necessary causal link between the entry into the English Agreement and the Chinese Agreement by reason of the fact that the solicitor for Johnson Ye had advised against the entry into the agreement is misconceived.  The issue here, in a case in which no proportionate liability defence was filed and no claim is made for statutory compensation, is whether the decision of Johnson Ye to enter into the English Agreement and the Chinese Agreement was materially contributed to by the proved contravening conduct?
  3. The effect of the contravening conduct on Johnson Ye is graphically demonstrated by the evidence of Mr Zhang.  Given the promises that had been made by the respondents and the applicant’s willingness to believe in the truth of the Capacity Representation, he was prepared to ignore the prudent advice of Mr Zhang and proceed to enter into agreements which were perceived by his solicitor to be contrary to his interests. The necessary causal link is easily established.

C.6     The Remedial Response

  1. Sections 237 and 243 of the ACL provide a discretion to set aside (or declare as being void ab initio), contracts where the applicant has proven: first, that a respondent has engaged in contravening conduct; and secondly, the applicant is likely to suffer loss or damage because of the contravening conduct. Further, s 237(2)requires that the Court only exercise its discretion to make an order setting aside the contract where the Court considers that the order will: (a) compensate the injured person or persons for the loss or damage; or (b) prevent or reduce the loss or damage suffered, or likely to be suffered.
  2. Although the issue as to whether the respondents engaged in conduct which contravened of s 18 of the ACL was addressed, the distinct issue of proving actual or likely loss, and the related matter of whether I should exercise my discretion to set aside the contract, were not issues explicitly addressed in submissions. Presumably this was because each party accepted that if contravening conduct was established in procuring the forbearance arrangement and postponing the sale of Australian assets, likely loss would necessarily follow. As I have explained, the Capacity Representation was designed to persuade Johnson Ye to defer repayment of the monies outstanding. It had the effect of preventing recourse to Australian assets that otherwise would have been available to reduce the amount outstanding.  Likely loss is proved.
  3. Given my conclusion that the English Agreement and the Chinese Agreement were entered into by Johnson Ye by reason of the contravening conduct of the respondents, then those agreements must be set aside and be regarded as being void ab initio.  Further, the orders made by the Chief Justice by consent should also be set aside so that the status quoante is restored. This will serve to reduce the loss or damage suffered, or likely to be suffered (see s 237(2)). It may be necessary to make further orders in order to ensure that the receiver is in a position to deal with what remains of the Australian assets and I will direct the parties to provide short minutes of order reflecting these reasons.
  4. This leaves one point unaddressed by submissions.  I have already made reference to the fact that clause 2(c) of the Chinese Agreement effected the transfer of a Vietnamese rosewood office table and two armchairs with the alleged market value of RMB 2,550,000 as “part of the payback of financial debts owed” to Johnson Ye.  Given no party addressed this aspect of the matter in submissions, I proceed on the basis that each party is content for this conveyance of property to remain untouched notwithstanding the setting aside of the Chinese Agreement. Having said that, I will reserve liberty to either party to make submissions on this issue at the time orders are made giving effect to these reasons.

D        OTHER ISSUES, COSTS AND CONCLUSION

  1. I have already made reference to the bewildering number of claims and causes of action initially relied upon by the applicant.  Misleading and deceptive conduct claims were made under a number of legislative schemes which the parties later agreed were irrelevant.  A claim in deceit was made and relief was sought under the Contracts Review Act 1980 (NSW). Claims were made as to statutory unconscionability and as to equitable relief.
  2. Leaving aside the question of the unnecessary complication of the legal issues, a costly, distracting and time consuming enquiry was made as to the genesis of each of the agreements and the various iterations of the documents.  Properly analysed, if the evidence of Johnson Ye and Mr Zhang was accepted, this was always a distraction.  Put simply, Johnson Ye was willing to sign a document the respondents put up for him to sign notwithstanding the advice of his solicitor.  He was willing to do this because of the contravening conduct.  He trusted the respondents and accepted what they said. Irrelevant to his reasoning processes was the timing of the creation of various drafts of the documents or the authorship of the documents.
  3. I mention this because significant time was wasted in not only preparing this matter for hearing but also in the way that evidence was adduced on topics that were irrelevant to its efficient and cost effective disposition.
  4. A further unnecessary complication was the filing of a separate proceeding in the Supreme Court of New South Wales which sought relief in substantially the same form as was ultimately sought in the Points of Claim.  As a result, the hearing of this matter consisted of two separate proceedings, being NSD1123 of 2015 and NSD 258 of 2018 (the latter being the proceeding commenced in the Supreme Court, which was subsequently cross vested to this Court). The 2018 proceeding was apparently commenced as a result of a misconceived understanding as to the jurisdiction of this Court.  It was sufficient, and indeed entirely appropriate, for the applicant to obtain relief in the existing proceeding. Indeed, it was necessary for them to do so to obtain a setting aside of the order made by consent giving effect to the English Agreement and the Chinese Agreement.  The 2018 proceeding should be dismissed.
  5. I will hear from the parties on the question of costs. My preliminary view is that the applicant should be entitled to their costs to the extent that those costs relate to the bringing of the claim for misleading and deceptive conduct and do not include costs incurred in relation to either the balance of the claims made or, more particularly, those costs incurred in relation to the issue of the various stages of production of the English Agreement and the Chinese Agreement (which will include the costs associated with the referee process).  In relation to these excluded costs my view, subject to hearing from the parties, is that the parties should bear their own costs.  I also consider, again subject to hearing from the parties, that any costs order should be on a lump sum basis.
  6. I will direct that the parties provide to my Associate agreed orders giving effect to these reasons or their competing proposed orders.  I will then relist the matter for hearing any argument and for final orders to be made.