Gemi 193 Pty Ltd v Zhu (No.3)

Medium Neutral Citation: Gemi 193 Pty Ltd v Zhu (No.3) [2025] NSWSC 879

Hearing dates: 14 November and 31 March 2025

Date of orders: 1 August 2025

Decision date: 06 August 2025

Jurisdiction: Equity

Before: Slattery J

Decision: Claim for statutory damages under Australian Securities and Investment Commission Act 2001 (Cth), s 12GF permitted. Directions made in relation to the file calculation of damages. Costs order foreshadowed subject to leave to apply for a different or special costs order.

Catchwords: CIVIL PROCEDURE – damages – statutory damages under Australian Securities and Investment Commission Act 2001 (Cth), s 12GF – defendant/cross claimant successful in principal judgment in setting aside certain transaction documents with the plaintiff/cross-defendant – contest about the scope of relief claimed by the defendant/cross claimant – whether amendment of pleadings required – apportionment of liability – proceedings conducted based on an Amended Statement of Cross-Claim – in the course of a relief hearing the plaintiff/cross-defendant contends that a claim for statutory damages is not available due to certain statements made by counsel in closing submissions – discussion of the scope of the pleadings and the manner in which the proceedings were conducted – assessment of damages for lost interest and lost opportunity to invest in Australian bank shares – apportionment does not strictly arise but is considered.

Legislation Cited: Australian Securities and Investment Commission Act 2001 (Cth), ss 12BC, 12CA, 12CB, 12CC, 12GF, 12GN
Civil Procedure Act 2005, s 98(4)(c)

Cases Cited: Australian Competition and Consumer Commission (ACCC) v Quantum Housing Group Pty Ltd (2021) 285 FCR 133; [2021] FCAFC 40
Australian Securities and Investments Commission v Kobelt (2019) 267 CLR 1; [2019] HCA 18
Bartlett v Barclays Trust Co Ltd [1980] 1 Ch 515
Bingo Holdings Pty Ltd v GC Group Company Pty Ltd [2021] NSWCA 184
British Transport Commission v Gourley (1956) AC 185
Cullen v Trappell (1980) 146 CLR 1; 10 ATR 772; [1980] HCA 10
Driver v Botanical Water Technologies Pty Ltd [2024] NSWSC 1409
Gemi 193 Pty Ltd v Zhu [2024] NSWSC 1113
Gemi 193 v Zhu (No.2) [2025] NSWSC 295
Lonie v Perugini (1977) 18 SASR 201
Pennant Hills Restaurant Pty Ltd v Barrell Insurances Pty Ltd (1977) 2 NSWLR 827; (1977) 8 ATR 380; 34 FLR 222; 78 ATC 4032
Perpetual Trustee Company Ltd v Milanex Pty Ltd (in liq) [2011] NSWCA 367
Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332
Stubbings v Jams 2 Pty Ltd (2022) 276 CLR 1; [2022] HCA 6

Category: Consequential orders

Parties: GEMI 193 Pty Ltd (ACN 641 815 492) (Plaintiff/Second Cross-Defendant)
Xian Zhu (First Defendant/Cross-Claimant)
Justin Epstein (Second Cross-Defendant)
Commonwealth Bank of Australia ACN 123 123 124 (Second Defendant)

Representation: Counsel:
H Somerville; L Cooper-Hackman (Plaintiff/Cross Defendants)
A Zahra SC; J C Lee (First Defendant/Cross Claimant)
Solicitors:
Summer Lawyers (Plaintiff/First & Second Cross Defendants)
Walker Hedges & Co (First Defendant/Cross Claimant)

File Number(s): 2021/183050

Publication restriction: No

JUDGMENT

1. This is the Court’s third judgment in these proceedings. It should be read with the Court’s principal judgment, Gemi 193 Pty Ltd v Zhu [2024] NSWSC 1113 and the Court’s second judgment, Gemi 193 v Zhu (No.2) [2025] NSWSC 295, which related to costs incurred up to the time of the principal judgment. This judgment assumes familiarity with the first two judgments and deals with issues of damages, the scope of consequential relief to be granted and apportionment. Events, persons and things are referred to in this judgment in the same way as in the first two judgments.

2. In the Court’s principal judgment, Mrs Zhu, the defendant/cross claimant was found to be in a position of special disadvantage in relation to a transaction she entered with the plaintiff, G193. The Court ordered that Mrs Zhu’s secured guarantee be set aside as against G193. But the second cross-defendant, Mr Epstein, was successful in resisting a claim that he had engaged in misleading and deceptive conduct causing Mrs Zhu to enter the impugned transaction. Final relief and costs issues were reserved for further submissions.

3. The Court made the following orders on 16 October 2024 to give effect to the principal judgment:

The Court declares*:*

1 DECLARES that the following documents executed by the first defendant/cross claimant on or about 5 August 2020 are void ab initio, as against the first defendant/cross claimant:

a. The Loan Agreement between GEMI193 Pty Limited, Fucrez Pty Limited, Mr Gregory John Walker, Ms Jia Yi Zhu and the first defendant/cross claimant;

b. Guarantee and Indemnity between GEMI193 Pty Limited and the first defendant/cross claimant; and

c. Mortgage between GEMI193 Pty Limited and the first defendant with respect to the property situated at [“the Wahroonga property”].

(the Agreements).

The Court orders:

2 ORDERS that the Agreements be set aside as against the first defendant/cross-claimant.

3 DISMISSES the Amended Statement of Claim filed on 9 October 2023.

4 DISMISSES the First Amended Statement of Cross-Claim filed on 12 May 2022 as against the second cross-defendant.

6 ORDERS the plaintiff/first cross defendant within 7 days of these orders to take all required steps to withdraw the caveat [over Mrs Zhu’s Gordon property].

7 ORDERS that within 7 days of these orders the parties are to take all required steps to arrange for the monies held in the controlled monies account [Account Number not published], to be released and paid to the defendant/cross claimant or as she may direct.

8 VACATES Order 3 made by his Honour Justice Darke on 22 October 2021.

4. The orders on 16 October 2024 gave the parties leave to approach the Court for a date to argue issues of costs consequent upon those orders. That argument, together with supplementary evidence from Mrs Zhu in relation to damages, took place on 14 November 2024.

5. In the Court’s second judgment on 31 March 2025, the Court made specified gross sum costs orders under Civil Procedure Act 2005, s 98(4)(c), ordering G193 to pay Mrs Zhu the sum of $638,901.77 in respect of costs but also ordering Mrs Zhu to pay Mr Epstein, the second cross defendant, the sum of $184,616.80.

6. Appearances at the relief hearing which took place on 14 November 2024 were the same as they were at the principal hearing. Mr H Somerville leading Ms L Cooper-Hackman, instructed by Summer Lawyers, appeared for both G193 and Mr Epstein. Mr A Zahra SC leading Mr J C Lee, instructed by Walker Hedges & Co, appeared for Mrs Zhu.

7. In the second judgment the Court reserved for further consideration the remaining apportionment and damages issues. Mrs Zhu contends that she has suffered losses flowing directly from G193’s unconscionable conduct and the unjust and unfair aspects of the contract and security documents made with G193 the subject of the Court’s findings in its principal judgment. She submits it is appropriate that she be compensated for those losses. G193 contests any claim for compensation on the basis that it is not available on the pleadings and on other grounds.

8. The first section of this judgment contains a narrative of the additional factual findings relevant to Mrs Zhu’s claim for damages. This is followed by an analysis of the contest as to whether Mrs Zhu can claim damages on the existing pleadings or whether an amendment is required. The Court concludes that Mrs Zhu can claim damages on the existing pleadings. Finally, these reasons consider some issues in relation to the quantum of damages claimed and apportionment issues.

Additional Findings in Relation to Mrs Zhu’s Damages Claim

9. The following is a narrative of the relevant history relating to Mrs Zhu’s damages claim. This narrative represents the Court’s findings on the matters covered, except to the extent that the context indicates that only the parties’ allegations are being recorded in these reasons. For reasons of economy this narrative does not include reference to versions of the facts that have been rejected.

10. Mrs Zhu’s claim for damages arises from events surrounding the removal of G193’s caveat to permit the sale of her Wahroonga property in November 2021. As a condition of its removal Ms Zhu was required to quarantine $1.85 million in a controlled monies account pending the outcome of these proceedings. She now submits that as she has been successful in the proceedings and the security interest G193 claimed under the caveat has proven nugatory, she should never have been required to quarantine those funds and should now be compensated for having been deprived of their use, including in relation to her intended acquisition of a new residential apartment in the North Shore Sydney suburb of Gordon (“the Gordon property”).

11. G193’s caveat was removed from the Wahroonga property pursuant to orders that Darke J made on 22 October 2021. The orders required Mrs Zhu to pay $1.85 million of the proceeds of sale of the Wahroonga property into a controlled monies account and not to encumber the Gordon property to more than 50% of its value. The 22 October 2021 orders provided:

The Court:

1 Orders that, without admissions, the caveat with dealing number [not published] lodged by the plaintiff on [the Wahroonga Property], be withdrawn on settlement of the sale of the Property.

Notation

2 The first defendant, without admissions, undertakes to the Court that she will direct the purchaser of the Property at the settlement to direct the amount of $1.85 million (Deposit) to be paid into an interest-bearing controlled monies account, and:

a. such account shall have Paul Reese, solicitor for the plaintiff, and Amie Crichton, solicitor for the first defendant, as co-signatories of the account;

b. any interest accruing on the Deposit shall accrue to the benefit of the first defendant;

c. any interest accruing on the Deposit shall be retained within the account; and

d. the aggregate of the Deposit and the accrued interest shall be disbursed in a manner determined by an order of the Court or alternatively by the consent of the plaintiff and the first defendant.

3 The first defendant, without admissions, undertakes to the Court that she will not encumber [the Gordon Property], to an amount which exceeds 50% of the value of that property, such value to be agreed between the parties to be $1,000,000, being the purchase price to be paid by the first defendant.

12. Mrs Zhu’s case is that her inability to access the $1.85 million between the settlement and sale of the Wahroonga property in November 2021 and the release of those funds by the Court’s orders on 16 October 2024 had two significant financial consequences for her. First, she says that she was required to borrow $500,000 in connection with the purchase of the Gordon property and to pay interest on that sum, which she would not otherwise have been required to pay if she had the $1.85 million in funds available to her. Secondly, she lost the opportunity to invest $1 million worth of shares split equally among Australia’s four major banks (referred to in these reasons as “the Australian bank shares”), which she says she would have acquired had the quarantined $1.85 million been available to her. She says that as a result she has lost the opportunity of earning the capital gains and dividends associated with that proposed investment in the Australian bank shares.

13. In both cross examination and then in submissions G193 challenged Mrs Zhu’s account as to what she would have done with the quarantined funds had they been available to her.

14. As the Court explained in in the principal judgment (at [227]), these proceedings were commenced to allow Mrs Zhu to complete the sale of the Wahroonga property resulting in the compromise of 22 October 2021, which required the payment of the $1.85 million into the controlled monies account.

15. Mrs Zhu had decided prior to October 2021 to downsize from the Wahroonga property and to acquire the Gordon property as her future residence. But G193’s caveat was an obstacle to carrying out that plan. The quarantining of the $1.85 million resulting from the 22 October 2021 orders diminished the funds Mrs Zhu needed to acquire the Gordon property. The Court accepts that but for the 22 October 2021 orders Mrs Zhu would not have taken out a loan of $500,000 from Orde Financial Pty Limited (“the Orde Facility”) to complete the acquisition of the Gordon property. But for the orders of 22 October 2021, Mrs Zhu would have applied the proceeds of sale of the Wahroonga property to acquire the Gordon property without further borrowings. Instead, she established the Orde Facility to enable settlement of the Gordon property on 10 December 2021. From then until 5 November 2024 (the last interest payment date on the Orde Facility after the 22 October 2021 orders were discharged on 16 October 2024) Mrs Zhu paid total interest of $84,640.50 on account of the Orde Facility.

16. The Wahroonga property was sold for $5,010,000 and its sale settled on 9 November 2021. Following the repayment of water rates, council rates, the CBA mortgage (of approximately $1.8 million), legal fees and PEXA and NSW Land Registry Services fees, the payment of $1.85 million into the controlled monies account left Mrs Zhu with $849,212.28. This was insufficient to purchase the Gordon property outright.

17. The purchase price of the Gordon property was $1 million. Mrs Zhu had paid a deposit of $10,000 for the Gordon property leaving $990,000 for her to complete the sale. The Gordon property was completed on 10 December 2021 using the Orde Facility and the available proceeds from the Wahroonga property. Of sale funds from.

(a) 2298 shares in CBA, (b) 8654 shares in NAB, (c) 9029 shares in ANZ, and (d) 11,101 shares in WBC.

21. Mrs Zhu claims the lost dividend payments totalling $159,725.74 that she says that she would have received by holding the Australian bank shares up to the 16 October 2024. It is not in contest that the amount of $159,725.74 in dividends would have accrued upon this combination of the Australian bank shares within this time.

22. Mrs Zhu also claims the capital gain she says she should have made on those shares over the same period is the total sum of $308,546.61. The arithmetic of the capital gain is also not disputed: it being the increase in the capital value of the Australian bank shares within the same period.

23. Thus, the total claim in respect of Mrs Zhu’s alleged lost opportunity to invest in the Australian bank shares is $468,272.35 ($159,725.74 plus $308,546.61).

24. The Court accepts Mrs Zhu’s evidence that she would have invested some of the money that she would not have had to apply towards the purchase of the Gordon property into investing in the Australian bank shares. She had been a stockbroking dealer’s clerk in the past and was familiar with Australian bank shares. But the Court has assessed Mrs Zhu as generally passive by nature, cautious and self-possessed, and trusting of other family members: principal judgment, at [7], [9], [14], [228] and [229]. She had no comprehension of Fucrez’s business. She was focused on anything which would advantage her son. She had no real appreciation of property development, no experience of accounting, although with formal qualifications and tended to consult senior family members about important financial decisions: principal judgment at [29], [230] – [233]. Based on her own evidence, the Court has already assessed that “her personal attitude towards investing was conservative”: principal judgment at [29]. Her outlook in October – November 2021 was likely to be especially conservative, given her further upsetting cancer diagnosis in March 2021: principal judgment at [33]. And the Covid-19 pandemic was still well underway in October – November 2021. Her decision to sell the Wahroonga property and downsize to an apartment in Gordon itself represents her careful outlook at the time: marshalling her financial resources in the face of her health challenges and her declining earning capacity. She says and the Court accepts that as soon as she received her diagnosis that her cancer had returned in March 2021, she decided to sell the Wahroonga property and set aside money for her son’s future education.

25. In the Court’s view it is unlikely that she would have invested $1 million of the proceeds of sale of the Wahroonga property in Australian bank shares had the quarantined $1.85 million been available to her. Through her previous employment she had invested in Australian bank shares previously: principal judgment at [29]. She says she regarded bank shares as a “conservative” investment. The Court is not persuaded that she would have committed as much as $1 million to the acquisition of Australian bank shares. This amount would have been a significant proportion of her free financial resources at that time even if the 22 October 2021 orders had not been made.

Is Relief for Statutory Damages Available?

31. G193 disputes that Mrs Zhu could on the pleadings maintain a claim for damages for unconscionable conduct and because of the way that Mrs Zhu’s case was conducted.

32. Mrs Zhu’s Amended Statement of Cross-Claim (“ASCC”) was filed in August 2022 well before the hearing in October 2023 relevantly claimed damages in Prayers for relief (3) and (4) as follows:

3. *Further alternatively, order pursuant to s 243 of the Australian Consumer Law and/or s 12GM of the Australian Securities and Investments Commission Act 2001 (*Cth) declaring void or setting aside the Agreement as against the cross-claimant.

4. *Damages against the first cross-defendant and/or the second cross-defendant pursuant to s 236 of the Australian Consumer Law and/or s 12GF of the Australian Securities and Investments Commission Act 2001 (*Cth).

33. Prayer for relief (3) seeks to set aside what the principal judgment called the “Fucrez loan”. Mrs Zhu’s success resulted in the declarations made on 16 October 2024 which declared void the Loan Agreement, the Guarantee and Indemnity and the Mortgage.

34. Prayer for relief (4) also claims damages on 2 bases. Firstly, under Competition and Consumer Act 2010 (Cth), Sch 2 – Australian Consumer Law, s 236 and secondly, under the s 12GF of the Australian Securities and Investments Act 2001 (Cth) (“ASIC Act”).

35. G193 submitted that Mrs Zhu’s pleaded case on damages was limited to her claim for misleading and deceptive conduct against Mr Epstein, on which she failed and that she did not plead a case for damages for unconscionable conduct. G193 points to the ASCC not including a prayer for relief for damages for unconscionability at general law. G193 says that the failure of her misleading and deceptive conduct claim means that she cannot now claim statutory damages for unconscionable conduct. G193 submits that

36. The references in prayer for relief (4) of the ASCC to Australian Consumer Law, s 236 is a reference to Mrs Zhu’s claim for misleading and deceptive conduct pleaded in ASCC [28] – [34].

37. The ASCC (at [24] - [27]) also pleads an ASIC Act claim for unconscionable conduct as follows:

Unconscionable Conduct

24 At all material times the cross-claimant was at a special disadvantage in relation to her dealings with the first cross-defendant.

Particulars

(i) the special disadvantage arose as a consequence of the matters pleaded at [7B]**-[8] and [13]-[22F] above.

25 The special disadvantage which the cross-claimant laboured under placed her in a weak position in relation to the first cross-defendant in relation to the entry into the Agreement

26 The special disadvantage which the cross-claimant laboured under was known to the first cross-defendant.

Particulars

(i) the matters pleaded at [7B]-[8] and [13]-[22F] above.

27 In the circumstances, and by reason of the matters set out in paragraphs [7B]-[8] and [13]-[22F], above the entry into the Agreement and the first cross-defendant’s enforcement of the terms of the Agreement against the cross-claimant is unconscionable and in contravention of s 20 of the Australian Consumer Law and/or s 12CB of the ASIC Act and the cross-claimant is entitled to relief setting aside the Agreement as against her.

38. The ASCC at [27] clearly pleads that G193’s enforcement of the Loan Agreement is unconscionable and contravenes (a) the Australian Consumer Law, s 20 prohibition on “engaging in conduct that is unconscionable within the unwritten law”, and (b) the ASIC Act, s 12CB prohibition on engaging in unconscionable conduct in connection with financial services. The parties agreed that it is the ASIC Act, not the Australian Consumer Law*,* which applies in relation to G193’s supply of financial services here. It is not necessary to further consider the pleaded allegations of the Australian Consumer Law, s 20 in the ASCC in this discussion.

39. ASCC [27] identifies ASIC Act, s 12CB as entitling Mrs Zhu “to relief setting aside the Loan Agreement as against her”. G193 submits that this indicates that Mrs Zhu’s claim is limited to such a setting aside of the Loan Agreement. But ASCC [27] does not disclaim other potential forms of consequential relief that might arise from setting aside the Loan Agreement. The claim in prayer for relief (4) for damages under ASIC Act, s 12GF is consequential relief that would be available if a contravention of the ASIC Act*,* s 12CB were established. The pleaded contraventions of the ASIC Act in the ASCC are s 12DA (misleading and deceptive conduct in relation to the supply of financial services) and s 12CB (unconscionable conduct in connection with financial services). Prayer for relief (4) does not distinguish between these two contraventions. S 12GF provides consequential relief for both kinds of contravention. Without further inquiry a cross-defendant such as G193 would not be entitled to assume on these pleadings that Mrs Zhu was not claiming damages for s 12CB statutory unconscionable conduct under the ASIC Act. Such pleadings

40. Such a claim is indeed available under these provisions of the ASIC Act. Section 12BC of the ASIC Act provides:

S 12CB - Unconscionable conduct in connection with financial services

(1) A person must not, in trade or commerce*, in connection with:*

(a) the supply or possible supply of financial services to a person*; or*

(b) the acquisition or possible acquisition of financial services from a person*;*

[End] that is, in all the circumstances, unconscionable.

(2) This section does not apply to conduct that is engaged in only because the person engaging in the conduct*:*

(a) institutes legal proceedings in relation to the supply or possible supply*, or in relation to the* acquisition or possible acquisition*; or*

(b) refers to arbitration a dispute or claim in relation to the supply or possible supply*, or in relation to the* acquisition or possible acquisition*.*

(3) For the purpose of determining whether a person has contravened subsection (1):

(a) the court must not have regard to any circumstances that were not reasonably foreseeable at the time of the alleged contravention; and

(b) the court may have regard to conduct engaged in, or circumstances existing, before the commencement of this section.

(4) It is the intention of the Parliament that:

(a) this section is not limited by the unwritten law of the States and Territories relating to unconscionable conduct*; and*

(b) this section is capable of applying to a system of conduct or pattern of behaviour, whether or not a particular individual is identified as having been disadvantaged by the conduct or behaviour; and

(c) in considering whether conduct to which a contract relates is unconscionable, a court*'s consideration of the* contract may include consideration of:

(i) the terms of the contract*; and*

(ii) the manner in which and the extent to which the contract is carried out;

and is not limited to consideration of the circumstances relating to formation of the contract*.*

41. ASIC Act, s 12CC provides:

12 CC - Matters the court may have regard to for the purposes of section 12CB

(1) Without limiting the matters to which the court may have regard for the purpose of determining whether a person (the supplier ) has contravened section 12CB in connection with the supply or possible supply of financial services to a person (the service recipient ), the court may have regard to:

(a) the relative strengths of the bargaining positions of the supplier and the service recipient; and

(b) whether, as a result of conduct engaged in by the supplier, the service recipient was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; and

(c) whether the service recipient was able to understand any documents relating to the supply or possible supply of the financial services; and

(d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the service recipient or a person acting on behalf of the service recipient by the supplier or a person acting on behalf of the supplier in relation to the supply or possible supply of the financial services; and

(e) the amount for which, and the circumstances under which, the service recipient could have acquired identical or equivalent financial services from a person other than the supplier; and

(f) the extent to which the supplier's conduct towards the service recipient was consistent with the supplier's conduct in similar transactions between the supplier and other like service recipients; and

(g) if the supplier is a corporation--the requirements of any applicable industry code (see subsection (3)); and

(h) the requirements of any other industry code (see subsection (3)), if the service recipient acted on the reasonable belief that the supplier would comply with that code; and

(i) the extent to which the supplier unreasonably failed to disclose to the service recipient:

(i) any intended conduct of the supplier that might affect the interests of the service recipient; and

(ii) any risks to the service recipient arising from the supplier's intended conduct (being risks that the supplier should have foreseen would not be apparent to the service recipient); and

(j) if there is a contract between the supplier and the service recipient for the supply of the financial services*:*

(i) the extent to which the supplier was willing to negotiate the terms and conditions of the contract with the service recipient; and

(ii) the terms and conditions of the contract; and

(iii) the conduct of the supplier and the service recipient in complying with the terms and conditions of the contract; and

(iv) any conduct that the supplier or the service recipient engaged in, in connection with their commercial relationship, after they entered into the contract; and

(k) without limiting paragraph (j), whether the supplier has a contractual right to vary unilaterally a term or condition of a contract between the supplier and the service recipient for the supply of the financial services; and

(l) the extent to which the supplier and the service recipient acted in good faith.

(2) Without limiting the matters to which the court may have regard for the purpose of determining whether a person (the acquirer ) has contravened section 12CB in connection with the acquisition or possible acquisition of financial services from a person (the supplier ), the court may have regard to:

(a) the relative strengths of the bargaining positions of the acquirer and the supplier; and

(b) whether, as a result of conduct engaged in by the acquirer, the supplier was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the acquirer; and

(c) whether the supplier was able to understand any documents relating to the acquisition or possible acquisition of the financial services; and

(d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the supplier or a person acting on behalf of the supplier by the acquirer or a person acting on behalf of the acquirer in relation to the acquisition or possible acquisition of the financial services; and

(e) the amount for which, and the circumstances in which, the supplier could have supplied identical or equivalent financial services to a person other than the acquirer; and

(f) the extent to which the acquirer's conduct towards the supplier was consistent with the acquirer's conduct in similar transactions between the acquirer and other like suppliers; and

(g) the requirements of any applicable industry code (see subsection (3)); and

(h) the requirements of any other industry code (see subsection (3)), if the supplier acted on the reasonable belief that the acquirer would comply with that code; and

(i) the extent to which the acquirer unreasonably failed to disclose to the supplier:

(i) any intended conduct of the acquirer that might affect the interests of the supplier; and

(ii) any risks to the supplier arising from the acquirer's intended conduct (being risks that the acquirer should have foreseen would not be apparent to the supplier); and

(j) if there is a contract between the acquirer and the supplier for the acquisition of the financial services*:*

(i) the extent to which the acquirer was willing to negotiate the terms and conditions of the contract with the supplier; and

(ii) the terms and conditions of the contract; and

(iii) the conduct of the acquirer and the supplier in complying with the terms and conditions of the contract; and

(iv) any conduct that the acquirer or the supplier engaged in, in connection with their commercial relationship, after they entered into the contract; and

(k) without limiting paragraph (j), whether the acquirer has a contractual right to vary unilaterally a term or condition of a contract between the acquirer and the supplier for the acquisition of the financial services; and

(l) the extent to which the acquirer and the supplier acted in good faith.

(3) In this section:

"applicable industry code" , in relation to a corporation, has the same meaning as it has in subsection 51ACA(1) of the Competition and Consumer Act 2010 .

"industry code" has the same meaning as it has in subsection 51ACA(1) of the Competition and Consumer Act 2010 .

42. ASIC Act, s 12GF provides remedies for contraventions of other provisions of the ASIC Act as follows:

12GF - Actions for damages

(1) A person who suffers loss or damage by conduct of another person that contravenes a provision of Subdivision BA (sections 12BF to 12BM*), Subdivision C (sections* 12CA to 12CC*), Subdivision D (sections* 12DA to 12DN*) or Subdivision DA (sections* 12DO to 12DZA*) may recover the amount of the loss or damage by action against that other* person or against any person involved in the contravention.

(1A) Subsection (1) has effect subject to section 12GNA.

Note: Section 12GNA may limit the amount that the person may recover for a contravention of section 12DA (Misleading or deceptive conduct*) from the other* person or from another person involved in the contravention.

(1B) Despite subsection (1), if:

(a) a person (the claimant ) makes a claim under subsection (1) in relation to:

(i) economic loss; or

(ii) damage to property;

caused by conduct of another person (the defendant ) that was done in contravention of section 12DA*; and*

(b) the claimant suffered the loss or damage:

(i) as a result partly of the claimant's failure to take reasonable care; and

(ii) as a result partly of the conduct referred to in paragraph (a); and

(c) the defendant:

(i) did not intend to cause the loss or damage; and

(ii) did not fraudulently cause the loss or damage;

the damages that the claimant may recover in relation to the loss or damage are to be reduced to the extent to which the court thinks just and equitable having regard to the claimant's share in the responsibility for the loss or damage.

Note: Subdivision GA also applies proportionate liability to a claim for damages under this section for a contravention of section 12DA.

(2) An action under subsection (1) may be commenced within 6 years after the day on which the cause of action that relates to the conduct accrued.

43. ASIC Act, s 12GF traces a pathway for damages flowing from a contravention of the s 12DA misleading and deceptive conduct provisions, which is subject to statutory apportionment: s 12GF(1A) and (1B). But s 12GF’s damages remedy for contravention of s 12CB is not subject to statutory apportionment: s 12GF(1).

44. ASCC at [27] sufficiently pleads a case of unconscionability at general law alleging that G193’s conduct “is unconscionable and in contravention of…” (emphasis added). Although the ASCC prayers for relief do not specifically make claims at general law the whole pleading should be read as doing so. And the principal judgment (at [289]) makes a finding of unconscionability at general law.

45. Before examining the conduct of the hearing, the Court concludes Mrs Zhu’s pleadings indicated that she was conducting a cross claim for damages encompassing damages for contravention of ASIC Act s 12CB. Contrary to G193’s submission, no amendment to the pleadings was required to maintain that claim for statutory damages.

46. G193 next argues that Mrs Zhu conducted the proceedings in a manner that signalled she was not pursuing any claim for damages for unconscionable conduct that might be available on the pleadings. To support this contention G193 points to the final submissions of Mr Zahra SC for Mrs Zhu on 4 October 2023, in which counsel describing unconscionability claim as “defensive” and had the following exchange with the Bench:

*ZAHRA:…*Lastly, your Honour, and very briefly. There's been no challenge to Mrs Zhu's damages claim. She was not cross-examined about it. There's not a single question directed to her about that. There's no contrary evidence.

HIS HONOUR: What are the damages that she claims?

ZAHRA: It is set out in the last of her affidavits, and we've dealt with this in writing. But effectively, because of the moneys that were held in the controlled moneys account, and are still there, she's had to take on an additional loan for the new property that she bought. So, she's had to pay interest which she otherwise would not have had to pay, and she would've invested some money in some shares, and she's set out - quantified that loss.

HIS HONOUR: Just looking at the possible outcomes. You could fail on both parts of the cross-claim, but they're independent, you could succeed against GEMI, but not Mr Zhu. Could you succeed against Mr Zhu, but not GEMI?

ZAHRA: Does your Honour mean Mr Epstein?

HIS HONOUR: Mr Epstein, I'm sorry, yes. I can see how you could succeed against GEMI, but not Mr Zhu, because it depends on the representations, and what I believe. But what about the other way?

ZAHRA: I think the two go hand in hand, your Honour.

HIS HONOUR: But if I find against Mr Zhu, it's likely that I will have found against GEMI?

ZAHRA: Yes, they would both be liable. Mr Epstein and Mr--

HIS HONOUR: Although you’ve disclaimed unconscionable conduct against him.

ZAHRA: Unconscionable conduct, yes. But not misleading or deceptive.

HIS HONOUR: The question is, is it possible for him to be misleading,

deceptive, but GEMI not to be unconscionable. Could be, I suppose. I'm just thinking of the possibilities, that's all. It's a permutation.

ZAHRA: It probably goes together--

HIS HONOUR: Yes.

ZAHRA: --because all based on, really the same factual scenario. So probably all goes together, but it is a different cause of action. A damages claim only flows from misleading or deceptive conduct. But importantly, Mr Epstein was the relevant person dealing, certainly with this transaction, the Fucrez transaction. He's the only one liaising with Mr Walker with Mr Zhu. He's the only one who met Mrs Zhu. He is GEMI effectively. So, if there's misleading conduct by him, it's also by GEMI and vice versa. Your Honour, that's what I wish to say.

HIS HONOUR: I'll just I didn't have any other questions. Just a moment.

47. But this was final submissions on day seven the conclusion of the hearing leading to the principal judgement. All the witnesses had been called in cross-examined and all the documentary evidence had been tendered. Therefore, all the forensic choices about adducing evidence and cross-examining on behalf of G193 had been taken. The Court cannot accept that G193 could have relied upon Mr Zafra SC’s statement, “A damages claim only flows from misleading or deceptive conduct” in a way that now causes it prejudice. The Court did not decide damages in the principal judgment and G193 has now been afforded a full opportunity of contesting the claim for damages including by recalling Mrs Zhu to be cross-examined. Had the same point been identified on 4 October 2024 Mrs Zhu would have had to be recalled in any event. Any failure on G193’s part to cross-examine on the subject before 4 October 2024 was based upon a narrow interpretation of the pleadings which had not been clarified with Mrs Zhu’s legal representatives.

48. G193 next argues that Mrs Zhu elected not to pursue a remedy for damages for loss of use of the money arising out of the 22 October 2021 orders, because she accepted the consensual arrangement for the quarantined funds to be paid into a controlled monies account, on condition that she received interest. G193 submits that the execution of the 22 October 2021 orders amounted to an election on her part to confine her remedies to that interest.

49. This submission is not persuasive for several reasons. First, any such election would have to be express and be sufficiently clear to signal to G193 as cross-defendant that Mrs Zhu was abandoning her pleaded ASIC Act, s 12GF damages remedies beyond the interest to be earned from entering this arrangement. The 22 October 2021 orders say nothing about such an election or abandonment. Nor was the Court taken to any contemporaneous correspondence to support the inference of Mrs Zhu making an election.

50. Even if this defence case had merit, it is not available to G193 on the pleadings. G193’s Defence to the ASCC was filed on 9 June 2023, well after the 22 October 2021 orders. That Defence does not plead an election by Mrs Zhu or indicate in its answers to paragraphs [24] to [27] of the ASCC that Mrs Zhu can no longer claim damages for unconscionable conduct by reason of the 22 October 2021 orders.

51. G193 submits that when it raised the pleading issue in October 2024 no application was brought by on behalf Mrs Zhu to amend the Statement of Claim, explaining why the amendment was not sought earlier. The flaw with this submission is it wrongly assumes that an amendment is necessary.

52. G193 also says it was prejudiced in the conduct of the proceedings because the claim Mrs Zhu is pursuing for damages for unconscionable conduct under ASIC Act s 12GF avoids apportionment. But the answer to that is that the apportionment provisions of s 12GF(1A) and (1B) are only applicable to the parts of the claim which the Court dismissed against Mr Epstein – the claim for misleading deceptive conduct.

Is the claim under ASIC Act ss 12CB and 12GF otherwise available?

55. G193 submits that the Court in its principal judgment has not made findings about statutory unconscionable conduct under ASIC Act ss 12CB and 12GF. But the answer to that is that in its principal judgment, the Court considered it was unnecessary to make findings about statutory unconscionability because unconscionability was established general law on the Court’s findings: (at [289]). This part of the principal judgment did not reject Mrs Zhu’s case of statutory unconscionable conduct under ASIC Act ss 12 CB and 12GF; it merely indicated that it was open to be decided later if required.

56. Moreover, a successful claim for unconscionability at general law involves all the findings that are required for statutory unconscionability under ASIC Act s 12CB. The ASIC Act remedy is less burdensome than the remedy at general law and does not require findings that the counter party be labouring under a special disadvantage: Australian Competition and Consumer Commission (ACCC) v Quantum Housing Group Pty Ltd (2021) 285 FCR 133; [2021] FCAFC 40; Driver v Botanical W**ater Technologies Pty Ltd [2024] NSWSC 1409 at [176], see also Stubbings v Jams 2 Pty Ltd (2022) 276 CLR 1 at [56].

57. Also, this G193 contention does not answer the whole of Mrs Zhu’s damages case. In the principal judgment (at [297]-[298]) the Court upheld Mrs Zhu’s claim for relief under Contracts Review Act 1980, s 7 (“CRA”) and indicated (at [299]) that “the form of the CRA relief to be granted can be the subject of submissions”. Compensation is an available CRA remedy: CRA s 8 and Schedule 1, Item 1(b). This reserved to the relief hearing all argument in relation to CRA compensation that Mrs Zhu claimed, which was available under prayer for relief 6, “such other or further order as this Court deems necessary”. Mrs Zhu’s damages case was maintainable at the relief hearing as a CRA compensation claim.

58. G193 next submits that damages for unconscionable conduct under ASIC Act ss 12CB and 12GF are not available to Mrs Zhu because she has not established that the Court has not had regard to “any circumstances that were not reasonably foreseeable at the time of the alleged contravention” within ASIC Act s 12CB(3)(a) and Mrs Zhu did not actively present a case.

59. This contention is not persuasive several reasons. First, ASIC Act s 12CB(3)(a) is a command to the Court not to consider matters that are not reasonably foreseeable. This does not place an obligation on a plaintiff to exclude the possibility of unforeseeable circumstances but rather requires a defendant to identify whether any alleged unforeseeable circumstances are in issue. As much obligation lies on G193 to address this issue as lies on Mrs Zhu and it is not pleaded in G193’s Defence to the ASCC.

The Quantum of Mrs Zhu’s Australian Bank Shares Claim

61. Calculating the quantum of Mrs Zhu’s Australian bank shares claim raises other issues that should be noted. One of these relating to tax was not raised in the parties’ final submissions.

62. First, Mrs Zhu’s interest claim, and her Australian bank shares claim are both maintainable. Had the $1.85 million quarantined by the 22 October 2021 orders been available to Mrs Zhu she would not have taken out the Orde Facility and would have invest $250,000 in Australian bank shares for about three years.

63. Secondly, Mrs Zhu’s claimed loss of opportunity to invest in Australian bank shares satisfied the causation requirements of Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4 (Sellars). Whilst the Court doubts that the test in Sellars is applicable to claims for damages for unconscionable conduct which are more analogous to claims in equity, even if Sellars does apply it has been satisfied here. The Court has found that it is more probable than any other competing hypothesis that Mrs Zhu would have purchased $250,000 in Australian bank shares and held them for three years and that indeed it is likely that she would have done so given the Court’s reasons discussed above and that no further discount needs to be applied.

64. Thirdly, these reasons have found that Mrs Zhu is unlikely to have held the Australian bank shares for more than three years. Ordinarily she should be compensated on an after-tax basis for holding these shares, as that reflects her ultimate net loss.

65. It may not be possible to calculate Mrs Zhu’s net loss for this past closed period of three years without a better understanding of the taxation consequences of her investing in Australian bank shares in two respects, neither of which has yet been addressed by the parties in submissions. First, the beneficial tax effect of dividend imputation on the dividends she would have received may need to be considered relative to her specific financial circumstances. Moreover, the $117,068.08 (being 25% of $468,272.35) the Court has found she would have earned from investing in the Australian bank shares would also have attracted income tax and capital gains tax reducing her return. Subject to the parties putting further submissions on this issue, if it is contested, she should account for the tax on the dividend and tax on the capital gains made on the sale of the shares as at 16 October 2024 in the 2024 – 2025 financial year.

66. The issue is not free from doubt. As the Court has not heard submissions on the matter the parties should be given an opportunity to do so before quantum is determined. Some authorities based on British Transport Commission v Gourley (1956) AC 185 (adopted in Australia in Cullen v Trappell (1980) 146 CLR 1; 10 ATR 772; [1980] HCA 10) in relation to tortious and contractual wrongdoers, suggest that taxation could be factored into the calculation: see also (1977) 18 SASR 201 and [1977] 2 NSWLR 827; (1977) 8 ATR 380; 34 FLR 222; 78 ATC 4032, per Hutley JA at 858A – 859G. But in claims for equitable compensation for breach of fiduciary duty or breach of trust (which are somewhat analogous to the statutory claim for damages under s 12CB) some authorities point the other way: cf [1980] 1 Ch 515, per Brightman LJ at 543H – 545F. Directions are made to resolve this issue at the conclusion of these reasons.

Apportionment

67. Strictly the issue of apportionment does not now arise given that ASIC Act s 12GN(1A) and (1B) have no application. The statutory pathways for damages for Mrs Zhu, do not require the Court to consider or undertake an apportionment. But the Court indicated during oral submissions that against the possibility that these proceedings might become the subject of an appeal, it would indicate the apportionment that it would have undertaken a reference to the facts the Court has found.

68. Mrs Zhu submits that the loss that she claims arises solely from the $1.85 million being quarantined in the controlled monies account, a matter on which Mrs Zhu and G193 were the only relevant protagonists. She submits that Mr Walker, Mr Zhu and Mr Hedges were not involved in the quarantining of that sum between November 2021 and November 2024.

69. The Court accepts Mr Zhu’s submission that G193's analysis focuses upon a time that is earlier than the time when her claimed loss was caused. G193’s submissions seek to apportion responsibility by reference to the entry into the transaction documents in August 2020, not the quarantining of the proceeds of sale of the Wahroonga property between October 2021 and November 2024.

70. The coercive force of the Court's order on 22 October 2021 in response to Mrs Zhu’s independent decision to sell the Wahroonga property caused the loss. No undertaking as to damages appears to have been given with the associated 22 October 2021 orders, as it commonly would be when the Court intervened to resolve the caveat issue. The Court’s intervention was a new development in the proceedings and may in some circumstances have warranted such an undertaking being given. Had one been given the loss would have been recoverable pursuant to the undertaking itself. These considerations signpost that new decisions and new circumstances, triggered by the sale of the Wahroonga property, were in play when the loss now claimed was incurred.

71. But even if the analysis of proportionate responsibility is undertaken by reference to the earlier transaction in August 2020 the conclusion is little different.

72. The application of s 12GF(1B) requires the Court to determine whether Mrs Zhu’s loss was caused by conduct of another identifiable person who was legally responsible for the loss, such that there should be a reduction to Mrs Zhu’s claim to “the extent to which the court thinks just and equitable having regard to [Mrs Zhu’s] share in the responsibility for the loss or damage”: Perpetual Trustee Company Ltd v Milanex Pty Ltd (in liq*)* [2011] NSWCA 367 and Bingo Holdings Pty Ltd v GC Group Company Pty Ltd [2021] NSWCA 184.

73. A note of caution is required in considering questions of apportionment, when Mrs Zhu’s misleading and deceptive conduct case has failed. The process is somewhat artificial. But doing the best the Court can, in August 2020, in the Court’s view the responsibility for Mrs Zhu’s loss flowing from G193's conduct is far higher than the responsibility of Mr Zhu, Mr Walker or Mr Hedges. G193’s conduct was the primary of the loss that Mrs Zhu suffered.

Conclusion & Orders

75. The parties should undertake the calculations discussed above in relation to the effect of tax on the outcome of Mrs Zhu’s Australian bank shares claim. These calculations should be agreed based upon the application of current taxation law and taxation rates to Mrs Zhu’s specific income circumstances in the financial years that the $1.85 million was quarantined from her use. If the parties can agree upon a figure based upon the findings made here within 28 days and raise no other issues about tax, the Court will enter judgment in Mrs Zhu’s favour for that agreed figure. Alternatively, the parties should provide within 28 days of the making of these orders their completing calculations and submissions about whether tax should be considered in the calculations, and the Court will consider the issue and the final calculation in chambers.

76. Mrs Zhu has not been wholly successful in relation to her claims on the relief hearing. Her Australian bank shares claim has been considerably reduced. G193 has had success compared to Mrs Zhu’s contentions in relation to the issues of costs determined in the second judgment. Costs orders in relation to the relief hearing should favour Mrs Zhu more than G193 but should acknowledge G193’s partial success. That is reflected in the orders foreshadowed below that G193 pay 25% of Mrs Zhu’s costs of the relief hearing. This costs order has not yet been made. One or other of the parties may wish to apply for a different order or a special costs order. Liberty to apply will be granted for that purpose for 28 days but unless a different or a special costs order is sought the Court will enter judgment for costs as foreshadowed here.

77. For these reasons, the Court makes the following orders and directions.

78. ORDERS the plaintiff/cross-defendant, G193, to pay the defendant/cross claimant, Mrs Zhu, damages in the sum of $34,034.19 being Mrs Zhu’s net interest payments on the facility from Orde Financial Pty Limited during the operation of the 22 October 2021 interlocutory orders less interest receipts on the funds held in a controlled monies account during the operation of the 22 October 2021 interlocutory orders.

79. DISMISSES Mrs Zhu’s claim for lost opportunity to invest $1,000,000 in Australian bank shares, during the operation of the 22 October 2021 interlocutory orders but ALLOWS a claim for lost opportunity to invest $250,000 in Australian bank shares, during the operation of the 22 October 2021 interlocutory orders.

80. DIRECTS the parties within 28 days to bring in and provide to chambers an agreed calculation of Mrs Zhu’s after-tax losses in respect of her claim for lost opportunity to invest a maximum of $250,000 in Australian bank shares, during the operation of the 22 October 2021 interlocutory orders, or in the absence of an agreed calculation the parties should within the same period provide their respective calculations and written submissions on that subject, after which the Court will make orders in chambers.