Kwon & Ors v Chi & Anor

CATCHWORDS : CONTRACT - agency - whether defendant personally liable under contract entered into on behalf of unidentified team

LEGISLATION CITED : Australian Securities and Investments Commission Act 2001 (Cth)

Black v Smallwood (1965) 117 CLR 52 CASES CITED : Commercial Bank of Australia Ltd v Armadio [1983] HCA 14; 151 CLR 447 Phoenix Commercial Enterprises Pty Ltd v City of Canada Bay Council [2010] NSWCA 64 Toll (FGCT) Pty Ltd v Alphafarm Pty Ltd [2004] HCA 52; 219 CLR 165

Sally Kooi See Kwon (1st Plaintiff) Tony Eng Huat Tan (2nd Plaintiff) PARTIES : Leane Ngoc Luan (3rd Plaintiff) Stivim Chi (1st Defendant) Ronnie Kong Hong Lee (2nd Defendant)

COUNSEL : Mr M. K. Rollinson (Plaintiffs) Mr A. J. McQuillen (1st Defendant)

SOLICITORS : Tran Solicitors & Attorneys (Plaintiffs)

• 22 - IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

JUDGMENT 1 HER HONOUR: Mr Stivim Chi is a self-employed embroiderer. In September 2005, Mr Chi was persuaded by a former work colleague to make a series of investments in "sports arbitrage", which he describes as a risk-free method of profitable trading on the Internet. Mr Chi did not undertake any trading himself, but contributed to a pool of funds to be provided to Mr Ronnie Kong Hong Lee, supposedly an arbitrage trader in Melbourne. 2 After meeting Ronnie Lee (sometimes written "Rony Lee"), Mr Chi was told that he could make more money by introducing new investors to the pool. Throughout 2006, Mr Chi persuaded a number of people, including the plaintiffs in these proceedings, to deposit funds with him for contribution to Ronnie Lee's pool. Mr Chi was to receive a return from Ronnie Lee of 20% monthly on all funds he brought to the pool. He in turn was to pay a smaller return to his investors. 3 Between May 2006 and January 2007, Ms Sally Kwon (the first plaintiff) deposited a total of $250,000 with Mr Chi. She was told that the return on her investment would be 10% per month. Ms Kwon understood that Mr Chi would send the funds deposited by her to Ronnie Lee. The second and third plaintiffs, Tony Tan and Leanne Luan (a married couple) invested a similar amount. They were told that the return on their investment would be 15% per month. 4 Each time the plaintiffs deposited funds with Mr Chi, he asked them to sign a written agreement on terms proposed by him. In most instances the agreement they signed was in the form of a standard "Heads of Agreement" which Mr Chi also signed "on behalf of the Arbitrage Trading Pool Team". In some instances in relation to Ms Kwon, Mr Chi requested her to sign a different document, described as a Loan Agreement between Ms Kwon as lender and Mr Chi as borrower. 5 In early 2007, Mr Chi told his investors that Ronnie Lee had run away. The funds deposited with Mr Chi by the plaintiffs have not been returned to them. The main issue in the present proceedings is whether Mr Chi is personally liable to pay the amounts due to the plaintiffs under the various Heads of Agreement. Alternatively, the plaintiffs seek damages under the Australian Securities and Investments Commission Act 2001 (Cth) for misleading or deceptive conduct in relation to financial services. 6 Ronnie Lee is named as the second defendant to the plaintiffs' claim, and as the cross-defendant to a cross-claim brought by Mr Chi. He did not appear at the hearing.

Agreements entered into by Sally Kwon 7 There was little dispute in the evidence as to the circumstances in which the written agreements were entered into. To the extent of any difference between the evidence of Ms Kwon and the evidence of Mr Chi, I preferred the evidence of Ms Kwon, who appeared to me to be an intelligent and careful historian. Mr Chi was an unusual witness, presenting as being both dogmatic and naive at the same time. I have some doubts as to the reliability of his evidence. 8 At the time Ms Kwon was approached by Mr Chi, she was working as a real estate agent and was also selling insurance. She knew Mr Chi from a time when they had worked together fifteen years earlier. They met again by chance at Flemington Markets in May 2006. 9 Mr Chi told Ms Kwon he was investing in "financial arbitrage products". He invited her to his home to show her how they did their trading. Ms Kwon replied that she was in the insurance business and would like to see him in relation to that. 10 Ms Kwon went to Mr Chi's home several days later, where he showed her an Internet site on his computer. He said to her: "One way of investing is to get everyone to join this pool by subscribing to it, and the more people you get in, the more interest you get. But you can't make much money by joining this pool. If you want to join, you can make use of the program for trading. My friend is doing the trading, he's a professional and makes lots of money. I can talk to my friend Ronnie, to invest on your behalf." 11 The reference to "Ronnie" was a reference to Ronnie Lee. Ms Kwon did not know Ronnie Lee at that time. 12 Ms Kwon initially was not interested in Mr Chi's proposal. Several days later, however, she told Mr Chi: "I want to try your trading". They had a further meeting at Mr Chi's home during which he said: "When you are ready, give me the money and I will send it to Ronnie in Melbourne to trade for you". Ms Kwon said "I want some guarantee" and Mr Chi replied "Sure. You can have the titles to my two parcels of land". 13 After consulting a solicitor, Ms Kwon went back to Mr Chi and said: "My solicitor suggested I lodge a caveat on your home instead". Mr Chi replied: "Don't get the solicitor involved. It is all guaranteed. My solicitor has already prepared the documents". In fact, Mr Chi had obtained one of the forms of agreement used by him from Ronnie Lee and had bought the other from a conveyancer for $150. 14 In early June 2006, Ms Kwon deposited $27,000 by bank cheque into an account held by Mr Chi. She understood at that time that the funds would be sent to Ronnie Lee in Melbourne for arbitrage trading. 15 By 16 August 2006, Ms Kwon had received $5,400 deposited into her bank account as a return on that investment. Mr Chi said to her "That is two lots of 10% interest. Ronnie will pay me a 20% return and I will pay you 10%." No written agreement had been signed up to that point. 16 On 22 August 2006, Ms Kwon went again to Mr Chi's home, where they discussed a further investment of $23,000. On that occasion, Mr Chi requested Ms Kwon to sign two documents. One was a document headed "Heads of Agreement" setting out the terms on which Ms Kwon was to join the "Arbitrage Trading Pool Team". The other was described as a "Loan Agreement" between Ms Kwon as lender and Mr Chi as borrower. The agreements were each dated 8 June 2006. It is common ground that they were signed by both Ms Kwon and Mr Chi on 22 August 2006. It is also common ground that each agreement relates to the same deposit of $50,000 (being the sum of the two separate deposits that had been made by Ms Kwon up to that point). 17 One of the terms of the Loan Agreement provided: "In the even (sic) that the Borrower can not repay the "principal sum" on the repayment date, then the Borrower has agreed to allow a Caveat to be registered on the property of the Borrower…" 18 Shortly after the date on which that agreement was signed, Mr Chi told Ms Kwon that she could lodge a caveat on the title of his residential property. 19 It was Mr Chi's evidence that the Loan Agreement was to protect Ms Kwon only from the risk of Mr Chi not passing the funds on to Ronnie Lee (T94.14 to T94.21): "Q. Whose idea was it for the Loan Agreements? A. This Loan Agreement is from Rony and I just use his copy to do as a duplicate for Sally because Sally want security. Q. What did she say to you? A. She say 'what happened, I deposit the money into your account. You did not wire to Rony' and I put this as a security for her, that if I did not wire to Rony Lee for her money to invest in Rony account, then account is invalid."

20 On about 18 September 2006, Ms Kwon received a further payment of $5,000 from Mr Chi. On about 29 September 2006, Mr Chi invited Ms Kwon to invest a further $50,000. She signed a second Loan Agreement and deposited a further $50,000 into Mr Chi's account. On 17 October 2006 and again on 13 November 2006, Ms Kwon received $5,000 in cash from Mr Chi as a return on her investment. Ms Chi made three further investments of $50,000 in similar circumstances (summarised below). 21 Throughout the period of her investment, Ms Kwon regularly received payments of $5,000 or $10,000 from Mr Chi, which she understood to be by way of return on her investment. 22 On 12 December 2006 Ms Kwon and some of the other investors (including Mr Tan) attended a lunch at the invitation of Mr Chi. The purpose of the lunch was for them to meet Ronnie Lee. They had not met him before that date. The investors were encouraged before the lunch to identify any questions they would like to ask him. 23 On 5 February 2007, Mr Chi called Ms Kwon and said: "I have bad news for you. Ronnie has run away. I tried to contact his mobile but it has been cut off. I am in Melbourne and I was trying to get a solicitor to caveat Ronnie's house. I just found out that Ronnie's house was sold two weeks ago." 24 Mr Chi told Ms Kwon that he would be responsible for her money and would do the trading himself and pay her back. Shortly afterwards, however, he told her that he was not responsible for her money and that they would have to work together to find Ronnie. 25 The written agreements entered into between Ms Kwon and Mr Chi are:

(a) Heads of Agreement and Loan Agreement each dated 8 June 2006 and signed 22 August 2006. Those two agreements each relate to the sum of $50,000 representing the $27,000 deposited in June 2006 and the additional $23,000 deposited on 22 August 2006. The term of each of those agreements is 6 months;

(b) Loan Agreement dated 29 September 2006 and signed on 30 September 2006. That agreement refers to a loan in the sum of $100,000 but Ms Kwon acknowledges that she paid only $50,000 on that occasion. The term of that agreement is 6 months;

(c) Heads of Agreement dated 15 November 2006 (incorrectly dated 15 December 2006 on the signature page) and Loan Agreement dated 15 November 2006. Those two agreements each relate to the sum of $50,000 deposited on 16 November 2006. However, the term of the Heads of Agreement is 12 months while the term of the Loan Agreement is 6 months;

(d) Heads of Agreement dated 30 December 2006 relating to the sum of $50,000 deposited that day. The term of that agreement is 12 months;

(e) Heads of Agreement dated 12 January 2007 relating to the sum of $50,000 deposited that day. The term of that agreement is 12 months.

Agreements entered into by Tony Tan and Leanne Luan 26 Mr Tan knew Mr Chi from primary school in Singapore. They were friends there until Mr Tan migrated to Australia in 1989. They remained in contact after that date. 27 In about September 2006, Mr Chi visited Mr Tan at his shop. At that time, Mr Chi owed Mr Tan $17,000, which he repaid that day with a bank cheque. Mr Chi told Mr Tan that he was now in the business of sport arbitrage and was making very good money from it. 28 Mr Tan later visited Mr Chi's home where Mr Chi showed him an Internet site on his computer. Mr Tan agreed to invest $10,000. Mr Chi produced two copies of the document headed "Heads of Agreement". Mr Tan signed one copy of the agreement in his own name and also signed his wife's name on her behalf. Mr Chi kept that copy of the agreement. Mr Tan kept the other copy, which had been signed by Mr Chi. Ms Luan signed that copy later. Mr Tan transferred $10,000 that day into an account held by Mr Chi. 29 Mr Tan made further deposits in similar circumstances on eighteen separate occasions, sometimes investing $10,000 and sometimes investing $20,000. He and his wife invested a total of $240,000.

Evidence of Mr Chi 30 Mr Chi said that he first became aware of sports arbitrage trading from a former work colleague called Mr Lim. Mr Lim introduced Mr Chi to a website known as riskfreeprofit.com which enabled people to trade on the Internet using software made available to any person who joined as a member of the website. 31 Mr Chi met Ronnie Lee in that context and had arranged for Ronnie Lee to teach him sports arbitrage trading. However, Mr Chi said in evidence that, after receiving a demonstration for about half an hour, he found the trading hard. He was then told that if he did not want to do the trading himself, he could invest in a private pool with Ronnie Lee. Mr Chi said that Ronnie Lee asked him to sign Heads of Agreement in the form of the document Mr Chi later used with the plaintiffs. The first such agreement was entered into between Ronnie Lee and Mr Chi in 2005 but that document was not in evidence. Mr Chi said that it had been superseded by an agreement signed on 1 September 2006 (Ex B) recording Mr Chi's total contribution to the pool as $300,000. 32 Mr Chi said that Ronnie Lee drafted the original Heads of Agreement with the assistance of a conveyancing solicitor. The agreement they signed on 1 September 2006 was between "Kong Hong Lee…on behalf of the Arbitrage Trading Pool Team" and Mr Chi as "Client". 33 On 26 August 2006, Ronnie Lee sent Mr Chi an email attaching a copy of that agreement adapted for use by Mr Chi with his investors (Ex A). The form of agreement emailed by Ronnie Lee was made up for execution by "Stivim Chi…or nominee on behalf of the Arbitrage Trading Pool Team" with a blank space for the name of the "Client". 34 There is no suggestion that the plaintiffs were aware of those matters. As already noted, when Mr Chi requested Ms Kwon to sign the agreement, he told her that it had been drawn by his solicitor. 35 In his defence filed in the proceedings, and again in his evidence, Mr Chi identified the people he understood were in the so-called Arbitrage Trading Pool Team. They were Ronnie Kong Hong Lee ("Account Manager and Sport Arbitrage Trader"), Mei Lee Wong (Ronnie's wife), Phil Smith ("First Australian Chief Sport Arbitrage Trader and Trainer"), Michael Gorgeous ("the Presenter"), Narin Din (Sport Arbitrage Trader) and Cameron ("Narin's good friend"; Sport Arbitrage Trader). However, there is no evidence to suggest that that information was given to the plaintiffs in the context of the negotiation or execution of their agreements with Mr Chi. Ms Kwon and Mr Tan understood that the funds they deposited with Mr Chi were to be sent to Ronnie Lee as the trader, but that is as far as it went.

Is Mr Chi personally bound by the Heads of Agreement? 36 All of the Heads of Agreement signed by the plaintiffs at Mr Chi's request are in substantially the same terms. It is convenient to use the first agreement entered into by Ms Kwon by way of illustration. That agreement is set out in full below: " HEADS OF AGREEMENT THESE HEADS OF AGREEMENT are made on the 8 th day of June 2006 Between: Stivim Chi (SC) of [address provided] or nominee on behalf of the Arbitrage Trading Pool Team (ATPT) And: KWON (SURNAME) KOOI SEE (CLIENT NAME) of [address provided] RECITALS: A SC represents the management team of ATPT B Client wishes to join the ATPT C SC agrees to provide his and ATPT's professional services to the client as outlined D The pool of money to be traded on behalf of the client is declared at Schedule A E The Parties have further agreed to enter into this Heads of Agreement to record their Understandings and mutual obligations in relation to their business arrangement. NOW THERFORE THE PARTIES AGREE: Client agrees: a) To join ATPT and place money in the pool. b) That ATPT's traders will be trading the pool. c) To acknowledge and understand that the pool is a risk-free trading pool utilising SureBetPro software only. d) To be paid a 10% monthly return on the money placed in the pool. e) The monthly payment periods to commence FIFTEEN (15) days after the signing of this agreement to allow for funds clearance and transfer to trading accounts. f) To receive this payment via bank transfer to nominated bank account monthly commencing FORTY-FIVE (45) days after the signing of this agreement. g) The term of this agreement will be 6 months from the date of signing. h) At the expiration of the term DATE 24 TH OF DECEMBER 2006 , SC will return the pool portion ($50,000). i) That to facilitate the separation and identification of the pool amounts, ATPT will be operating the Neteller and bookmaker accounts and that placement of funds requires the initial payment to be made out to SC solely to facilitate transfer into said Neteller and bookmaker accounts. Mr. Chi & ATPT agrees: a) To use ATPT's traders to trade the funds deposited into the pool by ATPT. b) To solely use SureBetPro software as promoted by RiskFreeProfit group. c) To actively work to identify arbitrage opportunities on behalf of the client d) To pay the agreed 10% monthly return on the client's money in the pool. e) The monthly period commences FIFTEEN (15) days after the signing of this agreement to allow for funds clearance and transfer into the trading accounts. f) To pay the monthly fee via bank transfer to the client's nominated bank account monthly commencing FORTY-FIVE (45) days after the signing of this agreement. g) To a term of 6 months from the date of signing of this agreement. h) At the expiration of the term to repay the pool portion applicable to the client. i) That to facilitate the separation and identification of the pool amounts, ATPT will be operating the Neteller and bookmaker accounts and that placement of funds requires the initial payment to be made out to SC solely to facilitate transfer into said Neteller and bookmaker accounts."

37 As already noted, the agreements with Mr Tan and Ms Luan provided for a monthly return of 15% rather than 10% as provided for in the agreements with Ms Kwon. In each case, the signature clause under Mr Chi's signature states "Stivim Chi on behalf of ATPT". 38 Mr Rollinson, who appeared for the plaintiffs, submitted that the agreements fall into the class of transaction in which a person, although described in the language of agency, undertakes a personal obligation to fulfil the terms of the contract, either on his own or together with the principal. 39 The basis on which Mr Chi disputes that contention is not entirely clear. His initial defence filed 25 January 2008 is a rambling document evidently prepared without the assistance of a solicitor. It opens with a contrite apology to all the Sydney investors that have invested money in Ronnie Lee's team, Arbitrage Trading Pool Team in Victoria. As already noted, the pleading identifies the six people alleged to be the members of that team.

40 The defence alleges that Ronnie Lee told Mr Chi those "team names" when they were dining together in Victoria. Mr Chi further states (in paragraph 3 of the defence): "I am not an agent nor do I organise any finance service for this investment. The Head of Agreement is not set by me nor do I draft up the agreement. It is second defendant Ronnie Lee who set the Head of Agreement and I have to get approved to do so". 41 In paragraph 5 of the defence, Mr Chi asserts that he had to obtain approval from Ronnie Lee for any new investor and had to sign the Heads of Agreement with the investor. He adds "I still have to sign another Head of Agreement with second defendant Ronnie Lee". That appears to be a reference to the fact that Mr Chi's own investments with Ronnie Lee (or some of them) were governed by Heads of Agreement between Ronnie Lee on behalf of Arbitrage Trading Pool Team and Mr Chi as "Client". 42 The central contention in the defence appears to be that Mr Chi required Ronnie Lee's approval before bringing funds into the pool from any new investor. The relevance of that contention to the determination of the question whether the agreements conferred any personal liability on Mr Chi is doubtful.

43 Mr Chi filed an amended defence on 15 July 2009 in the same terms as the original defence with some additional paragraphs evidently drafted by someone other than Mr Chi. That document does not advance the issue. 44 Paragraph B of the amended defence states, in answer to the allegation that Mr Chi owed the plaintiffs obligations to pay interest and other moneys, that "any such obligation was at all times conditional upon [Ronnie Lee] paying certain interest and other moneys to [Mr Chi] for payment to the plaintiffs". It is not clear whether that is intended as an acknowledgment that a contractual obligation to pay (albeit conditional) was assumed by Mr Chi under the agreements. 45 Paragraph D of the amended defence identifies the Heads of Agreement as agreements entered into by Mr Chi "on behalf of [Ronnie Lee] and the members from time to time of ATPT". If it was meant that the members of the team changed between different agreements, there is no evidence of that. If the contention is that the counterparty to each agreement was a floating group whose members changed from time to time, it is plainly unsustainable. Assuming each agreement bound a group of people identifiable as the relevant "team" at the time the relevant agreement was executed, subsequent changes in the team could not change the identity of the parties to the agreement. 46 Subsequent paragraphs of the amended defence make the surprising allegation that it is unfair and unconscionable for the plaintiffs to rely on the Loan Agreements and the Heads of Agreement, apparently invoking the principles stated in the decision of the High Court in Commercial Bank of Australia Ltd v Armadio [1983] HCA 14; 151 CLR 447. In light of the fact that it was Mr Chi who produced the agreements and required the plaintiffs to sign them, those contentions are manifestly untenable. 47 It is well-established that the critical task is to construe the language of the agreements objectively, without reference to Mr Chi's subjective belief or understanding, to determine whether an intention to be bound personally can be imputed to him: Black v Smallwood (1965) 117 CLR 52 at 55 to 56 and 60.7. More recently, the High Court has explained that references to the common intention to be imputed to the parties are to be understood as referring to "what a reasonable person would understand by the language in which the parties have expressed their agreement": Toll (FGCT) Pty Ltd v Alphafarm Pty Ltd [2004] HCA 52; 219 CLR 165 at [40]. It is appropriate in that context to consider not only the text of the agreement but also the surrounding circumstances known to the parties and the purpose and object of the agreement: Toll also at [40]. 48 In the case of the agreements with Ms Kwon, the issue is complicated by the fact that two of her investments were governed by both a Loan Agreement and the Heads of Agreement, one investment was governed only by a Loan Agreement and two were governed only by the Heads of Agreement. The significance of those matters is considered separately below. 49 Dealing first with the Heads of Agreement, although there are some indications to the contrary, in my view the proper construction of that agreement is that Mr Chi undertook a personal obligation to fulfil the obligations attributed to "Mr Chi & ATPT" in each contract. 50 The principal indications to the contrary are the description of Mr Chi as a party "on behalf of the Arbitrage Trading Pool Team" and the signature clause "Stivim Chi on behalf of ATPT". To a lesser extent Recital A, which states that Mr Chi "represents" the management team of ATPT, also points to his acting in some capacity on behalf of another and perhaps not on his own behalf. As submitted by Mr Rollinson, however, the term "represents" is ambiguous and that is accordingly a consideration of little weight in determining this issue. 51 Other aspects of the agreement provide strong support for the conclusion that Mr Chi was assuming a series of personal obligations by entering into the agreements. The most significant indication of that intention is in the text of the agreements in the operative clause, which states "Mr Chi and ATPT agrees (sic)" to do a series of things. Additional support for that conclusion may be found in Recital C where it is stated that Mr Chi agrees to provide "his and ATPT's professional services" to the client. 52 I am reinforced in that conclusion by the fact that, by separate agreement, Ronnie Lee was to pay Mr Chi a return of 20% monthly on the funds deposited by him, whereas under the agreements with the plaintiffs, Mr Chi was to pay a smaller percentage to them. That was a circumstance known to all parties. In my view, is difficult to reconcile those different and discrete obligations with an analysis that they are both owed by Ronnie Lee. 53 It was submitted on behalf of Mr Chi that the language of the obligation ascribed to him "to repay the pool portion applicable to the client" should be understood to mean that the funds had to come out of the pool. I do not accept that submission. The obligation attributed to Mr Chi is to "repay", not to "return" (although the client's reciprocal agreement is that Mr Chi will "return" the money). The language of the operative clause, in my view, constitutes a personal promise to pay an identified amount rather than to convey a specific fund from a specific account. 54 It is difficult to accept, as implicitly suggested by Mr Chi, that he did not appreciate the import of having his own name inserted where Ronnie Lee's name appears in the agreement in which Mr Chi is identified as the client (Ex B). In any event, it does not matter. What matters is what Mr Chi's words and conduct would have conveyed to a reasonable person in the position of the plaintiffs. In my view, Mr Chi's conduct in presenting and executing agreements in the terms of the Heads of Agreement would have led a reasonable person in the position of the plaintiffs to believe that Mr Chi was assuming personal liability to fulfil the obligations identified as his in the agreement.

Is Ronnie Lee bound by the Heads of Agreement? 55 The next issue is whether Mr Chi assumed those obligations alone or together with Ronnie Lee. The plaintiffs' primary contention was that Mr Chi is solely liable for the amounts owed under the agreements. Their claim against Ronnie Lee was relied upon only as an alternative claim in the event that the Court was not so satisfied (T172.17). 56 It may be noted that Ronnie Lee is not named as a party to the agreements. He could not be bound by them unless he is (or is included within) the party identified as "ATPT". As already noted, Mr Chi identified six people (including Ronnie Lee but not including himself) alleged to be the members of that team. Interestingly, however, there is no suggestion that Mr Chi had the authority of any of those people other than Ronnie Lee to enter into the Heads of Agreement. To the extent that Mr Chi purports to have entered into the agreements on behalf of those other persons, he appears to have done so without authority. 57 In any event, the only issue required to be determined for present purposes is whether Mr Chi was the agent for Ronnie Lee to enter into the Heads of Agreement: Toll at [77] (citing what Young CJ in Eq had said in the Court of Appeal, with apparent approval). 58 The critical question in the present case is whether Mr Chi had Ronnie Lee's authority to bind him to the terms of the agreements. I am not satisfied that he did. Mr Chi relies on the fact that Ronnie Lee provided the form of agreement to Mr Chi and required him to sign an agreement with each client. The terms of Ronnie Lee's email forwarding the agreement were "This is the best format I can come up with for you. Please let me know what you think before you go ahead". That language does not suggest authority for Mr Chi to enter into the agreements as the agent to contract on behalf of Ronnie Lee. 59 Mr Chi says that he understood otherwise. In my view, however, the objective indications are that Ronnie Lee meant for Mr Chi to be the one responsible for funds invested by his investors, just as Ronnie Lee assumed that responsibility towards Mr Chi in the separate written agreement between them. That is the clear inference to be drawn from Mr Chi's use of the standard agreement he received by email from Ronnie Lee with Mr Chi's own name inserted as the party representing the trading team. 60 Accordingly, I am satisfied that Mr Chi undertook sole liability for the obligations attributed to him under the Heads of Agreement.

Loan Agreements with Sally Kwon 61 As already noted, two of Ms Kwon's investments were governed by a Loan Agreement as well as the Heads of Agreement. Mr Chi said that he "bought" the form of the Loan Agreement from a conveyancer, although as noted above, he said elsewhere that it came from Ronnie Lee. 62 Each of the Loan Agreements provides for an unsecured loan by Ms Kwon to Mr Chi for a term of 6 months at an interest rate of 6.5% per annum. In each case the "principal sum" is the sum of $50,000 being invested for arbitrage trading on that occasion by Ms Kwon (as explained above, Ms Kwon acknowledges that one of the Loan Agreements wrongly identifies the amount as $100,000). 63 As already noted, the agreements provide that, in case the principal sum is not repaid on the due date, Ms Kwon can register a caveat on the title of Mr Chi's residential property, and that has occurred. 64 No difficulty arises as to the proper construction of the Loan Agreements. Mr Chi contends, however, that the investments cannot be governed by two agreements (paragraph 11 of the amended defence). That contention is maintained notwithstanding the fact that it was Mr Chi who propounded the two agreements and requested Ms Kwon to sign them. 65 It was submitted on Mr Chi's behalf that the two agreements are contradictory and that, in the face of the terms of the Heads of Agreement, the Loan Agreements could not be construed as loans to Mr Chi. It is accordingly necessary to consider whether the two agreements create obligations or circumstances that are inconsistent or mutually exclusive. I have concluded that they do not. 66 The Heads of Agreement provide in each case for the client to deposit funds in a pool to be traded on his or her behalf for an identified term. However, I do not think the terms of those agreements create a facility in the nature of an equity investment. The funds were deposited with Mr Chi in each case subject to an express promise by him to repay the amount originally deposited. Thus, by clause (h) in the second part of the agreement, Mr Chi (and ATPT) agreed: "At the expiration of the term to repay the pool portion applicable to the client". I see no reason not to construe that as an unconditional, binding promise to pay a fixed amount. 67 Further, the "return on the client's money in the pool" was not determined by reference to the performance of the fund, but was also fixed (in the case of Ms Kwon, at 10%; in the case of Mr Tan and Ms Luan, at 15%). That also was expressed as a contractual promise (clause (d) in the second part of the agreement). As noted by Mr Rollinson, the conclusion that any investment risk was assumed by Mr Chi rather than by the plaintiffs is not surprising when one has regard to the fact that Mr Chi derived a separate percentage return on every dollar invested by the plaintiffs. 68 The Loan Agreements characterise the deposit of funds with Mr Chi as "an unsecured loan facility". There may be a measure of tension in the language of the two agreements in referring to the funds as being, at the same time, funds to be traded on behalf of the client and funds on loan by the client. There is an additional difficulty in the case of the investment made in November 2006, since the term of the Loan Agreement is 6 months whereas the term of the Heads of Agreement is 12 months. The rate of return under the Heads of Agreement and the interest rate under the Loan Agreement are also different. 69 However, on the analysis explained above, I do not think the two different forms of agreement create a circumstance that is legally impossible. The problem is, rather, one of inconsistency. Each agreement includes a promissory obligation to pay the amounts invested together with an agreed return, albeit on inconsistent terms. 70 As noted on behalf of Ms Kwon, in each instance the agreements were entered into at the same time. The task is to ascertain what a reasonable person would understand by the parties' conduct in entering into inconsistent agreements in that context. 71 It is clear from the evidence of both Ms Kwon and Mr Chi that the Loan Agreements were entered into in response to Ms Kwon's request for some form of security. The particular risk to which she appears to have referred was the risk that Mr Chi might abscond. The object of the Loan Agreements appears, accordingly, to have been to afford a measure of comfort to Ms Kwon that she would have a means of ensuring repayment of her money (the caveat). The Loan Agreements may be given a reasonable construction that is not inconsistent with the Heads of Agreement if they are understood, in that context, to create obligations that arise in support of those arising under the Heads of Agreement without derogating from those obligations. Calculation of the amounts owed in accordance with the agreements 72 It remains to consider how to calculate the amounts owed by Mr Chi to the plaintiffs in accordance with the agreements. The plaintiffs contend that they are entitled to continuing interest on the sums they invested at the rates of return provided for in the Heads of Agreement. I do not accept that contention. 73 The Heads of Agreement contemplated that the funds deposited by the plaintiffs would be traded for a fixed term and then returned. The content of the obligation "to pay the agreed 10% monthly return" must be construed in that context. The agreements are silent as to the position in the event of failure to return the funds invested at the conclusion of the fixed term. There is nothing in the terms of the agreements, or in the circumstances in which they were entered into, that points clearly to what the parties intended as to the risk of Ronnie Lee absconding with their money. 74 The high rate of return provided for (10% monthly in the case of Ms Kwon and 15% in the case of Mr Tan and Ms Luan) was the rate agreed on the premise that the funds would be used for arbitrage trading during the term of the agreement. The agreement expressly contemplated that the trading pool was "a risk-free trading pool utilising SureBetPro software only". 75 I do not think a reasonable person in the position of the parties would understand the agreement to mean that the extremely high rate of return contemplated on that specific premise would be payable by Mr Chi beyond the period of trading provided for in the event of fraudulent appropriation of the trading pool by the trader. 76 On that basis, in my view, the plaintiffs are entitled to recover amounts calculated as follows:

(a) Ms Kwon is entitled to judgment calculated as the sum of the principal amounts deposited by her ($250,000), together with the return provided for in respect of each deposit calculated for the term of the relevant Heads of Agreement, less the amount of $50,400 already received from Mr Chi. In addition, as to those investments also governed by a Loan Agreement, Ms Kwon is entitled to interest after the conclusion of the term of the Heads of Agreement at the rate of 6.5% per annum prescribed in the Loan Agreements. As to the advance governed only by a Loan Agreement, she is entitled only to interest at 6.5%;

(b) Mr Tan and Ms Luan are entitled to judgment calculated as the sum of the principal amounts deposited by them ($240,000), together with the return provided for in respect of each deposit calculated for the term of the relevant Heads of Agreement, less the sum of $39,750 already received from Mr Chi. 77 In light of the conclusions I have reached as to the written agreements between the parties, it is not necessary to consider the plaintiffs' alternative claims under the ASIC Act. Mr Chi's cross-claim 78 Mr Chi's cross-claim against Ronnie Lee, like his original defence, bears the signs of having been drafted by him and not settled by a lawyer. The amounts claimed are difficult to understand and include amounts deposited with Mr Chi by the plaintiffs and other clients of Mr Chi's. 79 The cross-claim alleges that, between about September 2005 and February 2007, Mr Chi lent money to Ronnie Lee as follows:

(a) $300,000 allegedly governed by both an oral agreement and the Heads of Agreement dated 1 September 2006 between Mr Chi and Ronnie Lee (Ex B);

(b) unspecified amounts in transactions allegedly confirmed by email. 80 The Heads of Agreement between Mr Chi and Ronnie Lee is, relevantly, in the same terms as the Heads of Agreement between the plaintiffs and Mr Chi. Accordingly, assuming that it can be established that Mr Chi has in fact invested amounts of his own money with Ronnie Lee, consistently with the conclusions I have reached in respect of the plaintiffs' claims against Mr Chi, Mr Chi is entitled to judgment against Ronnie Lee. However, it is impossible to be satisfied as to the amount in which judgment should be entered. 81 Mr Chi claimed in his evidence in chief that he personally invested $710,000 in Ronnie Lee's arbitrage trading pool. However, that contention was not proved by any reliable evidence. Mr Chi's claims were summarised in a confusing document which formed part of the cross-claim and which also became Exhibit D in the proceedings. However, Mr Rollinson's cross-examination of Mr Chi cast considerable doubt on the reliability of those figures. The amounts claimed were not proved by appropriate bank statements or other financial records in proper form. 82 In the circumstances, the only order that can appropriately be made on the cross claim is for judgment in favour of Mr Chi against Ronnie Lee for damages to be assessed. 83 The orders are:

1. Verdict and judgment for the plaintiffs against the first defendant. 2. I direct the plaintiffs to bring in a calculation within 7 days of the amounts in which judgment should be entered in accordance with paragraph 76 of this judgment.
2. Verdict for the second defendant on the plaintiffs' claim.

4. Verdict and judgment for the cross-claimant on the cross-claim for damages to be assessed.

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