Li v GWM Resources NL ACN 139 304 911

District Court of NSW|2021-03-17

A. BACKGROUND

These proceedings concern a claim by the plaintiff to recover amounts totalling $334,692.90 paid by him to the first defendant in September 2017. The amounts were paid by the plaintiff to purchase shares in the second defendant which was said to be active in the mining of chrysoprase, known as Australian Jade, in Western Australia.
The plaintiff claims that the payments were made by him to the first defendant based upon representations made to him by the third defendant, on his own behalf and on behalf of the first and second defendants. The plaintiff says that those representations were false and amounted to misleading and deceptive conduct within the meaning of s 18 the Australian Consumer Law ("ACL"). Alternatively, the plaintiff claims that the amount is repayable to him by way of a separate and subsequent agreement made between him and the third defendant in his personal capacity that those moneys would be repaid by the third defendant.
For the reasons which follow the plaintiff succeeds in his claim against the second and third defendants under the ACL but has not made out his claim in contract as against the third defendant.

Procedural Note

It should be observed that prior to the commencement of the trial an application was made by the defendants to vacate the hearing date. That application was heard by his Honour Judge Wilson SC on 15 March 2021. His Honour refused the application and, for the purposes of the hearing, made orders limiting the defendants to the matters raised in their defence filed 1 May 2020 and, in terms of evidence, to the matters in the affidavit of the third defendant filed and served on 22 September 2020 absent further leave of the court.

c. FACTUAL FINDINGS

As has been noted above, each of the plaintiff and the third defendant gave evidence and was cross-examined. In making the findings below I generally accept the evidence of the plaintiff. He was a witness who appeared to be doing his best to give his recollection of events and to give truthful answers.
On the other hand, I formed the view that the third defendant was evasive in answering questions and more than once appeared to give an answer that was more spontaneous, rather than based on his genuine recollection. To the extent that there is a conflict between the plaintiff's evidence and that of the third defendant, unless the third defendant's evidence is corroborated by other material I would accept the evidence of the plaintiff.
The following factual findings are made.
On 25 March 2017 the plaintiff was introduced to the third defendant by the plaintiff's father at a dinner in Haymarket Sydney. The plaintiff's father was visiting from China at the time. At the dinner the plaintiff's father said to the third defendant and others words to the effect: "My son is currently studying at university here and is interested in getting permanent residency in Australia".
The plaintiff's father and the third defendant had previously met each other in China. The third defendant knew that the plaintiff's father was involved in the mining industry.
At the dinner, the plaintiff and the third defendant exchanged numbers and WeChat (a social media platform) details.
Sometime in July 2017, the plaintiff received a telephone call from the third defendant during which the third defendant said to the plaintiff that he had a jade mine project for investment. He said that if the plaintiff invested in that project, it would help the plaintiff obtain permanent residency in Australia very quickly. He also said that the future of the jade project was very good and that the plaintiff should consider the investment opportunity.
A few weeks later, the third defendant again telephoned the plaintiff asking if he was interested in the project. The plaintiff said that he was and they made a time for the plaintiff to attend the defendants' business premises in Thornleigh, New South Wales, to discuss the details of the project.
On 21 August 2017 the plaintiff travelled to the third defendant's offices in Thornleigh to discuss the prospect of him investing in the mining project being promoted by the third defendant. They met at offices which were styled "GWM Resources" at Thornleigh.
I am satisfied that the plaintiff's version of what occurred at this meeting, as set out in paragraph 23 of his affidavit affirmed 26 June 2020 should be accepted. This evidence was not challenged substantially, or to any effect, in cross-examination. I set it out in full below. "Yu greeted me and took me into his office, where we had a conversation in words to the effect of: Yu: My company owns the largest jade mine in Australia and started jade exploration in 2014. Now I am seeking to do IPO and have the company publicly listed. That's why I now need investment funds. Me: So your company owns the jade mine? Yu: For sure. I guarantee that. The mine is in Western Australia. After being listed, I expect the production of the jade can be doubled. The mine has a life of 50 years. Me: That's impressive. Yu: The plan is, you purchase the shares in my company to fund the company to do the IPO. The investment in my company will help you to obtain permanent residency. After that, you can get your investment fund back with profit. Me: It sounds like a good plan. How much we are talking about? Yu: My company is very successful. The value of the company is AUD$15,000,000. You need to purchase 10% of the shares, which will cost $1,500,000. But given your family might be able to help us to develop the company in the future, I can talk with the other shareholders of the company to see whether we can give you a special price, say, $1,200,000. Me: Ok. But is my investment safe? Will I lose money? Yu: Once the company is listed, its prospects are brilliant. The return of your investment is guaranteed. You will have a good return. Me: And how long will it take to get permanent residency? Will you help me? Yu: About 6 months. Don't worry. I will help you. It is a good plan and rare opportunity to you - You can get permanent residency very quickly, and meanwhile make money. Me: Ok. I will discuss with my parents first."
At the meeting the third defendant provided to the plaintiff a "GWM Resources NL Company Brochure" (see pages 63-80 of Exhibit B). Whilst the third defendant denied this, and said that the brochure was given to the plaintiff by Tony Zhu for reasons in 62 below, I do not need to decide who gave the plaintiff the brochure.
After the meeting the plaintiff said, and I accept, that he read the GWM brochure closely and was interested in investing in the jade project. After the meeting, he discussed the opportunity with his parents in China over the phone who supported his decision to invest in the project.
On or around 2 September 2017. The plaintiff received a further telephone call from the third defendant. The third defendant enquired whether the plaintiff had read the brochure and was interested in the project. After the plaintiff indicated that he was, an arrangement was made for the plaintiff to again attend the defendants' offices to have further discussions. The third defendant said that he could provide further information to the plaintiff about the jade project.
On 4 September 2017 the plaintiff attended the defendants' offices at Thornleigh. The evidence indicates that at a time on that day the plaintiff also met a Mr Zhu and another officer or employee of the first or second defendant. I am satisfied, however, that any detailed discussions with respect to any prospective investment in the jade project were only between the plaintiff and the third defendant.
During that meeting the third defendant provided to the plaintiff another coloured brochure headed "Australian Jade Mining Limited - GWM Resources 8/2017". (see Pages 19-70 of Exhibit B) (the AJM Brochure).
I am satisfied that the plaintiff's version of events as set out in paragraph 30 of his affidavit affirmed 26 June 2020 is to be preferred to that of the defendant. I set out the plaintiff's version below. "During this meeting, Yu went through the AJM Brochure with me and also said to me the words to the effect of: Yu: This is my company you are going to buy shares from, Australian Jade Mining Limited. This company owns the jade mine and will go for IPO. As you can see from the brochure, GWM is the holding company of AJM. GWM will put money into AJM as well to help the IPO. Yu: Also I have discussed with the shareholders. They have agreed to give you a special price to buy 10% of the AJM shares at the price of $1.2 million. I am preparing the investment agreement. But in order to secure this special price and to show your good faith in investing in this rare opportunity, I need you to pay a deposit to GWM today, say, 10% of your original investment fund, which is $150,000. Can you do that? Me: Yes I can arrange that."
It is not disputed that immediately following that meeting, the plaintiff attended a Westpac branch and made a telegraphic transfer in the amount of $150,000 to GWM's bank account. The plaintiff said that he had access to his mother's Westpac account which held the moneys that he transferred to GWM. The plaintiff confirmed that he discussed the transfer of these moneys to GWM with his mother. The plaintiff said, in cross-examination, that the payment of such a substantial amount of money was, he thought, the easiest way to get permanent residency in Australia and also that by reason of the matters told to him by the third defendant, the investment in the jade project represented a safe and good investment.
On 12 September 2017 the plaintiff attended the third defendant's office to sign a document which had been prepared by the third defendant or on his behalf headed "Investment Deed of Agreement" (Investment Agreement). The plaintiff said that the first version of the Investment Agreement provided to and signed by him included an investment amount of AU$1.5 million. That is consistent with the discussions held at the meeting on 4 September 2017. That, however, was not the final agreed amount of the investment which was AU$1.2 million. The plaintiff says, and I accept, that after he left the third defendant's offices he reviewed the investment agreement that he had signed and realised the mistake. He then returned to the third defendant's offices and signed a second version of the Investment Agreement which had the correct amount of the investment of $1.2 million. The Investment Agreement is at pages 72-77 of Exhibit B.
After the plaintiff had signed the Investment Agreement, he spoke to his mother to arrange a further payment of $184,662.90 to the first defendant's bank account. Whilst the reason for payment of this particular amount is not clear, I am satisfied that it was part payment by the plaintiff of the amount he had agreed to pay to the first defendant pursuant to the Investment Agreement. There was no other identified reason for the plaintiff to make any payment to the first defendant.
The defendants admit receipt of the payments of the two amounts totalling $334,692.90.
By the terms of the Investment Agreement, the plaintiff was required to transfer to the first defendant the balance of the moneys for the purchase of the shares in the second defendant by 30 November 2017 (See clause B.2. of the Investment Agreement on page 137 of Exhibit B).
ln October 2017 the plaintiff discussed the Investment Agreement with one of his father's friends in Australia. That friend asked the plaintiff whether he had done any due diligence on the defendant companies to see whether or not they actually owned the jade mine in Western Australia. The plaintiff indicated that he hadn't done such due diligence.
Shortly after that, in October 2017, the plaintiff spoke to another friend of his father who advised him to do some searches of the company and the jade mine to see if, in fact, the defendant companies did own a jade mine in Western Australia.
The plaintiff says, and I accept, that in November 2017 he then undertook some searches on the internet and found an article entitled "Ardea Resources signs $5M gemstone mining deal'. This article referred to a deal between Ardea Resources and the second defendant. (See pages 79-80 of Exhibit B). The plaintiff says that when he read this article it caused him to have doubts about whether the second defendant in fact owned any jade mines in Australia at the time of the entry into the Investment Agreement.
On 29 November 2017 the plaintiff emailed the third defendant requesting certain information about his investment, including information with respect to the ownership of any jade mine by the second defendant (see pages 143-147 of Exhibit B). He received a response from "Tony" at GWM Resources. This is Tony Zhu who worked for one of the defendant companies. That response referred to "the new company Australian Jade Mining Limited", (the second defendant) having "obtained eight rights for mining through our years of efforts and development". The response provided other information purportedly in answer to the plaintiff's questions.
The plaintiff says that after seeing this material and the email from Tony, he did not believe what the third defendant had told him about the ownership of the Jade mines and he decided to stop making any further payments to GWM pursuant to the Investment Agreement. He also decided to require a refund of the moneys that he had paid to GWM.
In December 2017 the plaintiff attended the third defendant's offices in Thornleigh and had a conversation with the third defendant, as set out in paragraph 49 of his affidavit of 26 June 2020 as follows: "In the beginning of December 2017, I went to Yu's office in Thornleigh and had a conversation with Yu in words to the following effect: Me: I have made some researches and found your company does not actually own the jade mine in Western Australia when we signed the agreement. The information you told me before is not true. I want to cancel the agreement and have all my money back. Yu: Look, we can discuss that. My company has very good prospects. I can offer you a job in my company. So we still can help you in migration. Me: No. I don't trust you. I just want all my money back. Yu: Fine. If this is your decision, I can return the money back to you. But I don't have that much money right now. I need some time. I will let you know in next few days. Me: I am waiting for your call."
A few days later, the third defendant telephoned the plaintiff and said to him words to the following effect: "Third defendant: I can return all your money in about March or April 2018. Plaintiff: Ok"
When the plaintiff did not receive any money from the defendants in March or early April 2018 he again went to the Thornleigh offices on 16 April 2018. He then had a conversation with the third defendant when he again asked for the return of the money. The third defendant told him that all of the money was now prepared for the IPO of the second defendant and he would need another 6-8 weeks to repay the money to the plaintiff.
On or about 31 May 2018 the plaintiff again called the third defendant noting that the 6 weeks since their last conversation about repayment had passed. He again requested repayment of the money. The third defendant said he did not have enough money to repay the plaintiff but was taking to some other investors in China who were interested in his project and that if they invested and he received money from them he would fully repay the plaintiff. The third defendant said "I promise I will repay you all the money you paid when I have enough money on hand. It won't take long. Trust me".
The plaintiff continued to request that his money be repaid the remaining months of 2018. Each time, he was told that the third defendant did not have the money to repay the plaintiff and further time was requested.
By July 2019, the plaintiff had instructed solicitors who had sent a letter of demand to the first and third defendants requiring repayment of the money. No money has ever been repaid by any of the defendants to the plaintiff.
No demand or cross-claim was made by the first defendant that the plaintiff was in breach of his obligations under the Investment Agreement.

D. The nature of the plaintiff's claim.

The plaintiff advances two bases by which he says that he is entitled to payment of the sum of $334,692.90.
The first basis is against the third defendant only. That claim is pleaded in [12] of the statement of claim. It is that in or about late November or early December 2017 the plaintiff had a conversation with the third defendant during which: 1. the plaintiff told the third defendant that he believed that neither the first defendant, GWM, nor the second defendant, AJM, owned the "Kalgoorlie Jade Mine" or any mining or exploration tenements for the exploration and mining of chrysoprase in Western Australia; 2. the plaintiff told the third defendant he had been deceived by the third defendant into investing funds with the first defendant, GWM; 3. the plaintiff terminated the Investment Agreement and demanded that the defendants repay him the funds paid to the first defendant pursuant to the terms of the Investment Agreement; and 4. the third defendant promised that he would arrange the repayment to the plaintiff of the funds totalling $334,692.90 that the plaintiff had advanced to the first defendant, such repayment to be made by April 2018 ("the Repayment Agreement"). (bold emphasis added)
The plaintiff claims that in breach of the Repayment Agreement, the defendants failed to repay the plaintiff the sum of $334,692.90 on or before April 2018, or at all.
The second basis of the plaintiff's claim is against each of the second and third defendants. That claim arises from representations the plaintiff says were made to him and that are alleged to constitute misleading and deceptive conduct within the meaning of s 18 of the ACL. The representations are pleaded in paragraph 6 of the statement of claim and, it is said, were made by the third defendant on his own behalf and on behalf of the first and second defendants to induce the plaintiff to enter into the Investment Agreement which was signed by the parties on 12 September 2017.
I will deal with each of the claims in contract and for misleading and deceptive conduct in turn.

The claim in contract

The pleaded claim for the claim in contract found at paragraph 12 of the statement of claim is set out at [44] above.
The plaintiff then pleads in paragraph 13 of the statement of claim: "13. In breach of the Repayment Agreement, the defendants failed to repay the plaintiff the sum of $334,692.90 in or before April 2018, or at all". (bold emphasis added)
It is important to notice several things about this pleading. First, as highlighted in bold above, it is pleaded that the third defendant promised that he "would arrange the repayment to the plaintiff'' of the funds. It is not pleaded that the third defendant would be personally liable to repay those funds as a result of the conversation relied upon by the plaintiff in early December 2017. Second, the pleading states that "the defendants" failed to repay the sum claimed in accordance with the repayment agreement. That can only be a reference to each of the defendants and not just the third defendant personally.
In support of his submission that the third defendant contracted with him in about December 2017 that he would personally repay the plaintiff the funds that had been paid to the first defendant, the plaintiff relies on paragraphs 49 and 50 of his affidavit affirmed 26 June 2020. Those paragraphs are in the following terms: "49. In the beginning of December 2017, I went to Yu's office in Thornleigh and had a conversation with Yu in words to the following effect: Me: I have made some researches and found your company does not actually own the jade mine in Western Australia when we signed the agreement. The information you told me before is not true. I want to cancel the agreement and have all my money back. Yu: Look, we can discuss that. My company has very good prospects. I can offer you a job in my company. So we still can help you in migration. Me: No. I don't trust you. I just want all my money back. Yu: Fine. If this is your decision, I can return the money back to you. But I don't have that much money right now. I need some time. I will let you know in next few days. Me: I am waiting for your call. 50. After a few days, I received a phone call from Yu, during which we had a conversation in words to the following effect: Yu: I can return all your money in about March or April 2018. Me: OK.
As a result of this conversation, the plaintiff alleges that the terms of the contract were that third defendant agreed personally to repay the money paid by the plaintiff to the first defendant pursuant to the Investment Agreement and that all that money would be repaid by the third defendant to the plaintiff in or about March or April 2018. The plaintiff alleges that the consideration for the agreement was his forbearance from pursuing the repayment of his funds from the first defendant immediately, inconsideration for the third defendant's promise that he would arrange repayment of the plaintiff's funds at a later time, in March or April 2018 (see paragraph 38 of the plaintiff's outline of submissions dated 17 March 2021).
The plaintiff also seeks to rely upon matters subsequent to the entry into the alleged contract to support his submission that a contract existed between the plaintiff and the third defendant and that the terms of that contract were as he alleges.
Mr Robertson of counsel for the plaintiff relied on the decision in Darzi Group Pty Ltd v Nolde Pty Ltd [2019] NSWCA 210 at 159 per Emmett AJ where his Honour said: "Where, for example, there is a dispute as to whether an oral contract was made, evidence of the subsequent actions or conduct of the parties may be taken into account in order to resolve disputes as to what was said at the time when the alleged contract was made and the context in which a reasonable person would have understood the words to have meant in the manner and circumstances in which they were spoken. Similarly, where there is a dispute concerning the binding nature of an arrangement that is informal in whole or in part, involving oral or inferred terms, the actions or conduct of the parties after the time of the alleged making of the contract may be taken into account in the same way. Only in rare circumstances will there be an occasion for regard to be had to subsequent actions and conduct where a purely written contract is asserted. Where one party alleges that a contract has been formed solely by written documents, the question of whether that written document is binding will normally be a matter of objective construction. On the other hand, the subsequent actions and conduct of the parties may indicate that there were other uncompleted matters that required negotiation between the parties before it could be said that the parties intended there to be a final and binding contract."
I do not think this case provides any assistance to the plaintiff in the present circumstances. When regard is had to the subsequent conduct of the plaintiff and the third defendant in its proper context, as discussed below, I do not accept the third defendant contracted to personally repay the moneys paid to the first defendant by the plaintiff.
The two matters of subsequent conduct that the plaintiff relies upon are: 1. text messages between the plaintiff and the third defendant which can be found at pages 237-239 of the Court Book which comprise part of Exhibit C those text messages are as follows: DATE FROM SUBSTANCE 29 March 2018, 16:44 PLAINTIFF Uncle YU, you told me before that you will repay me the money in March or April. It's almost April, when will you be repaying the money? 29 March 2018, 16:55 THIRD DEFENDANT I am currently overseas, I will contact you in my return next week 29 March 2018, 18:49 PLAINTIFF Okay 13 April 2018, 14:14 PLAINTIFF Uncle YU, are you back 13 April 2018, 15:04 THIRD DEFENDANT Yes I am, you can come over whenever you are free 21 May 2018, 19:22 THIRD DEFENDANT For the moment, all we can do is waiting. I will contact you if I heard of anything PLAINTIFF It's been a while, nothing yet? PLAINTIFF If you have nothing to repay me, then does that mean you will never pay me back? THIRD DEFENDANT No 21 May 2018, 10:32 PLAINTIFF If you are not able repay the whole thing, please repay half of them or 1/3 first, that should suit you, right 21 May 2018, 11:50 THIRD DEFENDANT It's likely that I will receive an investment shortly. I have sent the investor the agreement and will show him the mine later on. I am endeavour to sign the agreement at the end of this month. Please be patient. 30 May 2018, 15:32 PLAINTIFF Uncle YU, it's now the end of May, can your repay my money now? 15 June 2018, 15:50 PLAINTIFF Uncle YU, two weeks have just passed, do you have any update? 15 June 2018, 19:12 THIRD DEFENDANT Hi Haolin, I shall receive a update next week, I will keep you posted (emoji) 15 June 2018, 20:50 PLAINTIFF when exactly 24 June 2018, 15:30 PLAINTIFF Uncle YU, it's been a week already, I still have not heard back from you. You've delayed it for 2 weeks first, then another week, you just cannot dragged it forever. 25 June 2018, 17:05 PLAINTIFF Uncle YU, any response 31 July 2018, 15:07 PLAINTIFF Uncle YU, it's the end of the month, what's your response 31 July 2018, 16:28 PLAINTIFF No update yet, I am still waiting (emoji) 31 July 2018, 16:34 PLAINTIFF You promised me before that you would repay be the end of the month, so there will be a further delay? 16 September 2018, 20:26 PLAINTIFF Uncle YU, 8, 9, weeks have passed, any update? 4 February 2019, 23:14 PLAINTIFF Uncle YU, happy new year to you and your family. Happy year of the pig (emoji) May luck always accompany you! 3 April 2019, 23:14 PLAINTIFF Uncle YU, how's the investment you mentioned last time going? When will you be available for a phone call? 4 April 2019, 08:38 THIRD DEFENDANT Hi Haolin, we talked all the way here from Canberra. He will visit our mine this month and he will make a decision. Please be patient (emoji) 15 April 2019, 13:09 PLAINTIFF Last time you told me you are going to sell a property, how's that going?

The second matter of conduct subsequent to the entry into the alleged contract relied upon by the plaintiff relates to text messages between the plaintiff's father and the third defendant (Exhibit F). The text messages where exchanged on Tuesday 3 December 2019. Mr Robertson observes that this was one day after the first defendant was placed into liquidation. The plaintiff submits that, in that context, the references about repayment of the money to the "child" (which refers to the plaintiff) could not have been references to repayment by the first defendant as it was in liquidation. Inferentially, therefore, the plaintiff submits that there must have been a reference to repayment by the third defendant himself. The text messages include the following: "Third Defendant: Hello, Dean Li (the plaintiff's father). Let me know when you are off the meeting. I'll call you to discuss something. Plaintiff's Father: What to discuss exactly? Third defendant: About the money for the child. The company will be better next year, then I can slowly return the money to the child. He has now found a lawyer to sue us. I can't take control of it once we go to court. We can't get it back and there would be more losses. We hit it off at first sight, believe me I will give him the money. The company has some difficulties. Next year, two trade contracts will be signed. I don't want to go through the legal process. I hope you could understand. Plaintiff's Father: You said that you would pay back the money many time, and it's been a long time"...And the money for the child are not too much ... Third Defendant: ... The company has some difficulties now, but once the contracts are signed, I will pay back some to the child. Plaintiff's Father: it has been so many years! ... If you do not want to be involved in legal proceedings, just pay the money back ASAP ... Third Defendant: Dean Li, I will definitely pay the money back, just not now, I have already explained to you, I will repay in the first half of next year.
The plaintiff contends that all of the references by the third defendant to repayment of the money are made in the first person supporting the argument that he had agreed to personally repay all of the funds to the plaintiff. The plaintiff submits that the third defendant had been caught out with respect to the misleading representations made by him about his companies owning the largest jade mine in Australia. Confronted about the falsity of what he had said to the plaintiff, Mr Robertson submitted that it was "plausible" that the third defendant himself undertook to repay the money even if one of his companies could not.
The defendant, on the other hand, submits that each of the references to repayment, although in the first person, should be taken as meaning that, as is pleaded in the statement of claim, Mr Yu would arrange repayment of the moneys. The defendant submits this should be taken as a reference to one of the defendant companies. The defendant points to the references in the texts to a possible investor injecting moneys which would then be used for repayment having regard to the plan to have the second defendant go public with an IPO. The defendant says that this supports the contention that the repayment would be only when one of the companies, most likely the second defendant, had received sufficient new investment funds and could then repay the money to the plaintiff.
The defendant also refers to the possible sale of a property which is mentioned in the abovementioned texts. The defendant notes that the only evidence of a property being owned was by one of the companies in control of the third defendant and not to a property owned personally by him.
In all of the circumstances, I am not satisfied that the plaintiff has discharged his onus to prove on the balance of probabilities that the third defendant agreed that he would be personally liable to repay the monies to the plaintiff. In my opinion, the matters raised by the defendant above should be accepted. It is more probable, it seems to me, that Mr Yu had agreed that he would "arrange repayment" to the plaintiff once a subsequent investor was found for the jade project or one of the defendant's properties was sold. Whilst the text messages above do refer to "I will repay" and the like, in my view there is sufficient ambiguity in the references and other material dealing with the repayment, including the subsequent materials relied upon by the plaintiff after the alleged formation of the contract, such that I cannot conclude that the third defendant agreed to personally repay any monies to the plaintiff. It is more probable that the third defendant was using the first person in the sense of him as a director of the companies, arranging repayment when sufficient funds from a new investor were received or a company property was sold.
For these reasons, the plaintiff's claim in contract under the Repayment Agreement fails.

Misleading and deceptive conduct claim

The plaintiff relies upon several representations he says were made to him by the third defendant on his own behalf and on behalf of the second defendant. He says those representations were made to induce him to enter into the Investment Agreement and pay the moneys to the first defendant. The plaintiff relies on the following matters to support this claim: 1. First, the text messages sent on 10 August 2017 by the third defendant to the plaintiff which said: "...we have the largest jade mine in Australia, which occupies 85 km2. The drilling has reached hundreds of thousands metres in depth." The plaintiff says that this representation is false because at the time, none of the defendants owned any jade mining tenements at all. The plaintiff says that the third defendant admitted in cross-examination that the first defendant did not own any mining tenements at the time and the second defendant did not and never has owned any mining tenements. The plaintiff says that the third defendant admitted that as at August 2017 any negotiations being undertaken with Ardea Resources NL such as mining and exploration tenements had not been completed. Negotiations with Ardea were only finalised in September 2017 resulting in the entry into the binding terms sheet between the first defendant and Ardea on 27 September 2017 (Exhibit 2). The plaintiff says that in cross-examination the third defendant accepted the jade mine he was referring to in this text was a reference to the Kalgoorlie jade mine which would only have been 85 km2 following a successful purchase of the mining tenements from Ardea Resources. The plaintiff says, therefore, the representation made in this text was false. 2. Second, the plaintiff refers to representations made by the third defendant to the plaintiff at the meeting between the two on 31 August 2017. Those events are set out in paragraph 23 of the plaintiff's affidavit which I have set out above. In cross-examination the defendant agreed that he had said all of the matters referred to in that paragraph, except for the conversation with respect to the value of his company being $15M. He says that what he said to the plaintiff was that once there was a restructure of the business and the IPO then the company would be worth $15M. For the reasons I have outlined above, I prefer the evidence of the plaintiff in this regard and accept his version of events as to what occurred at the meeting on that day. At that meeting, the plaintiff was provided with the GWM brochure. There is a dispute as to whether or not the brochure was provided to the plaintiff by the third defendant or by others in his office. I do not think it is necessary to resolve that dispute for two reasons. First, the third defendant accepts that he knew the brochure was given to the plaintiff on that day. Second, as things transpire, the plaintiff does not rely on any specific contents of that brochure as making representations which are misleading or deceptive. 3. The third matter relied upon by the plaintiff is the meeting of the parties on 4 September 2017. The plaintiff gives his version of what occurred at this meeting at paragraph 29 and 30 of this affidavit. I have set out paragraph 30 of his affidavit above. The defendant, in cross-examination, denied that he gave the plaintiff the colour-printed AJM brochure relating to the second defendant. He says that Tony Zhu from his office prepared this brochure and gave it to the plaintiff. The third defendant did not deny that he knew that the plaintiff had been given this brochure. Nor did he deny he knew of its contents. The third defendant also accepted in cross-examination that he said "this is my, company you are going to buy shares from, Australian Jade Mining Limited." The third defendant denies that he said that that company owned a jade mine at that time but, rather, once there was the restructure and the IPO of the second defendant it would own the mine under a new structure. The third defendant also denied that part of the conversation whereby he is alleged to have said that the shareholders had agreed to give the plaintiff a special discount on the $1.5M purchase price reducing it to $1.2M. For the reasons outlined above, I prefer the evidence of the plaintiff and accept his version of events as to what occurred at this meeting. That includes accepting the plaintiff's version that the third defendant gave him the colour brochure for the second defendant and went through that brochure with the plaintiff at the meeting. It seems to me more probable that as the third defendant was actively chasing the plaintiff to invest in his companies and had a relationship with the plaintiff's father that he, rather than Mr Zhu, would take the plaintiff through what he regarded as the relevant parts of the brochure. No attempt was made by the defendants to lead any evidence from Mr Zhu about this, or any other matter. 4. The fourth matter relied upon by the plaintiff are the contents of the AJM Brochure itself. Relevantly, the plaintiff relies upon the sentence appearing on page 89 of the Exhibit under the heading "Project Intro" Which says in the present tense that "Kalgoorlie Jade Mine is largest jade mine in Australia". Mr Yu admitted in cross-examination that the reference to the "Kalgoorlie Jade Mine" was a reference to the eight tenements the defendant companies were then seeking to purchase, but had not yet purchased, from Ardea Resources. 5. The plaintiff also relies upon statements found in the AJM brochure at page 90 of the Court Book under the heading "Tenements Info" as follows. "Company owned the largest chrysoprase mining tenements." And "There are 8 granted tenements, 6 mining tenements and 2 exploration tenements, total area is approximately 86 sq. km." 1. Finally, the plaintiff relies upon the "Technical economy sheet" found at page 112 of the Exhibit which sets out projected forecast for total production from the mine and total profits.
The plaintiff contends that each of the representations pleaded are false. He says that the evidence establishes that neither the first or second defendant at the relevant time (or in the case of the second defendant at all) owned any jade mining tenements.
Further, the plaintiff submits that any agreement with Ardea Resources was not concluded until the binding term sheet of 29 September 2017 which was after entry into the investment agreement. Even once signed, the second defendant did not immediately own any of the mining tenements the subject of the transactions as there were several conditions precedent to be completed.
The plaintiff also refers to clause D of the investment agreement which states: "1. After confirmation of AU$1.2M deposit, GWM shall transfer 10% shares of its Australian Jade Mining company and which hold Australian Jade project." (emphasis added) The plaintiff says that this representation was also false
The plaintiff also refers to the email exchange on 29 November 2017 between the plaintiff and the third defendant. These emails can be found at pages 143-145 of Exhibit B. In that exchange, the plaintiff sent an email to the third defendant as follows: "Dear Uncle Yu, Thank you for giving my family this investment opportunity. We made the investment because you said at that time that we can get PR next year. Considering that we can only get PR two years later, we still need to know the following questions before investing the rest of the money: 1. Do you have any proof that the company has invested more than 10 million in the new company (Australian Jade Mining Limited)? 2. Can you provide the investment certificates and other information on other contributors? 3. We invested 1.2 million, accounting for 10% of the company's shares; then the company assets should be at least 12 million is there any proof? 4. Why we cannot find information and date of the new company (Australian Jade Mining Limited) in ABN official website and ASIC? Thank you, Haolin Li."
The third defendant said that on receipt of that email he gave it to Tony Zhu at his office who responded, copying in the third defendant. Relevantly, the response included: "1. The new company Australian Jade Mining Limited obtained eight rights for mining through our years of efforts and development... Now the eight mining areas have a total area of 86 square kilometres and are already the largest Australian jade mines in the world... 4. We have already made a screenshot about the inquiry on ASIC official website. Please have a look. The company was registered for the eight Australian jade mining rights in 2016. You can inquire according to the correct website address. Attached: ASIC official website and query screenshot."
The plaintiff does not allege this email, or the representations in it, caused him loss. Rather he refers to it as indicating a pattern whereby the defendant was still deceiving the plaintiff about the truth of the representations that had previously been made to him and which has induced him to enter into the Investment Agreement. Particularly, the plaintiff points to the positive assertion that Australian Jade Mining had obtained "eight rights for mining" through years of efforts and development and that the company "was registered for the eight Australian Jade Mining rights in 2016". The plaintiff says, and I accept, on the evidence that there matters were false. That statement is similar to the one made in the AJM Brochure and was, I infer, made to confirm to the plaintiff that AJM did own the rights to the 8 mining tenements.
The plaintiff also submits, and I accept, that this email chain is inconsistent with the third defendant's evidence that prior to the entry into the Investment Agreement he had explained to the plaintiff and his parents the nature of the deal that he was says was being undertaken, being the contracts to be entered into with Ardea Resources which would then give rise to the IPO for the second defendant. If that had been the case, I infer that this would have been mentioned in the email response to the plaintiff.

Misleading and Deceptive Conduct: Relevant Principles and Consideration

The following applicable principles are adopted from the plaintiff's outline of submissions: "43. In order for a plaintiff to succeed on a misleading or deceptive conduct claim pursuant to ss 18 and 236 of the ACL, it is incumbent upon the plaintiff to establish (see eg Klees v M101 Holdings Pty Ltd [2021] NSWSC 182 at [60]-[63]): (a) that the conduct complained of was engaged in, and that it was misleading or deceptive or likely to mislead or deceive; (b) that the plaintiff suffered loss or damage because of the conduct; that is, that there is a sufficient connection between the conduct complained of and the damage, for the damage to be regarded as by, or because of, the conduct; and (c) the quantum of the loss or damage. 44. As for the first matter, whether particular conduct is misleading or deceptive is a question of fact to be determined having regard to the context in which the conduct takes place and the surrounding facts and circumstances. The test is objective and the Court must determine the matter for itself: Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [109]-[111]; Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 202. 45. Conduct is misleading or deceptive if it has a tendency to lead a person into error: ACCC v TPG Internet Pty Ltd (2013) 250 CLR 640 at [39] and [39]. 46. Where the conduct is directed towards an identified individual or particular individuals (as in the present case), characterisation of the conduct proceeds by reference to the circumstances and context of the impugned conduct. That requires analysis of the character of the defendant's conduct in relation to the plaintiff alone, bearing in mind what matters of fact each knew about the other as a result of the nature of their dealings and conversations between them, or which each may be taken to have known: Butcher v Lachlan Elder Realty Pty Ltd [2004] FCA 60; (2004) 218 CLR 592 at [36]-[37]; Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; 238 CLR 304 at [26]-[27]. 48. Further, since the third defendant is a director of the second defendant, AJM, the third defendant's conduct is also deemed to have been engaged in by the second defendant, and the second defendant is liable for such conduct: see s 87A(2) of the Fair Trading Act 1987 (NSW) and s 139B(2) of the Competition and Consumer Act 2010 (Cth). 51. Generally speaking, it is necessary for a party claiming to have suffered loss or damage "because of" or "by" the conduct of another to show that he or she relied on that conduct by doing, or refraining from doing, something by reason if it: see eg Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; 238 CLR 304 at [143]; Addenbrooke Pty Ltd v Duncan (No 2) [2017] FCAFC 76; (2017) 121 ACSR 406 at [499]-[502].
As has been observed above, the plaintiff seeks to press the claim with respect to the misleading and deceptive conduct, if established, against each of the second and third defendants. The plaintiff says that in so far as the third defendant made representations personally that by reason of the application of the Australian Consumer Law through the NSW Fair Trading Act, he can be personally liable: see ss 27-28 and s 32(1)(b) Fair Trading Act 1987 (NSW) and Zenas v Burkitt (No 2) [2019] NSWCA 236 at [54]-[60].
With respect to the second defendant, the Australian Consumer Law NSW or the ACL apply and each of those laws contain a provision deeming that conduct by a director of a corporation is taken to be conduct of that corporation: see sections: 131(1) Competition and Consumer Act 2010 (Cth) and s 32(1)(b) Fair Trading Act 1987 (NSW).
In respect to causation and reliance, the plaintiff submits that he relied on the representations made to him. The plaintiff submits that he was not challenged on these matters in cross-examination.
I accept that the thrust of that submission. In so far as the plaintiff was cross-examined as to his reasons for entering into the transaction, he said it was to assist him getting permanent residency and because the defendants owned a jade mine which seemed like a "good and safe" investment. The plaintiff says that the representations were made to and did induce him enter into the investment agreement and that he relied on those representations in doing so. The plaintiff gives evidence about such reliance in paragraphs 32 and 33 of his affidavit of 26 June 2020. He said that what had impressed him about the investment was that he was told that it was the largest jade mine in Australia and that he was impressed by and relied upon the table of proposed profits in the "Technical Economy Sheet" I have referred to above. He also relied upon the text message outlined above where the third defendant had told him the company owned the largest Jade mine in Australia being some 85 square kilometres in size.
It is true that part of the reason that the plaintiff entered into the Investment Agreement with the first defendant was because he thought that this would assist with him obtaining permanent residency in Australia. However, this does not prohibit him from obtaining relief when he says, and I accept, that he also relied on the representations made to him with respect to the jade mine. The question is whether the plaintiff has established that any loss was suffered "because of the conduct" of the defendants (see s 236 ACL). In my opinion, using a common sense approach, the plaintiff has plainly established this causal connection by the evidence he gave of reliance referred to in [73]-[74] above. His evidence was that he would not have entered into that agreement if the representations had not been made to him.
In respect of loss and damage suffered by reason of the misleading and deceptive conduct, the plaintiff submits that the amounts paid by him were paid pursuant to the terms of the Investment Agreement and as part payment of his obligations under that agreement only as a consequence of him relying on the representations referred to.
The defendant's answer to the plaintiff's case on this point is that the third defendant had at all times explained to the plaintiff's father and mother, and the plaintiff himself, that the whole deal was based upon the purchase of the tenement rights from Ardea Resources. Once that occurred there would be a restructure of the second defendant and an IPO. Mr Miller submits that the court should accept the evidence of the third defendant having regard to what is said to have been the close relationship between the plaintiff's parents and the third defendant and that it was really the plaintiff's parents who had directed what was to occur.
The defendants submit that if the court accepts the third defendant's evidence in this regard, then as the plaintiff knew the true nature of the transaction he cannot establish that he relied upon any of the supposed representations made. Mr Miller conceded that in order for the defendant to succeed on this argument, the court had to accept the evidence of the third defendant in preference to that of the plaintiff.
As I have stated above, I prefer the evidence of the plaintiff to that of the defendant unless the defendant's evidence is otherwise corroborated by other material. In this case, I do not think that any of the material in evidence corroborates the third defendant's version of events. None of the documentary material in evidence which relates to negotiations between the plaintiff and the third defendant, or communications between the plaintiff and the third defendant or the plaintiff's father and the third defendant, refers in any way to any proposed deal with Ardea Resources. It seems to me that if the true nature of the deal had been explained by the third defendant to the plaintiff (or his parents) then it is more likely than not that there would have been reference to this transaction in either or all of the Investment Agreement, the text messages between the plaintiff and the third defendant, the text messages between the plaintiff and plaintiff's father and the third defendant or the email exchange in November 2017 when the plaintiff was asking for an explanation as to the investment. In fact, there was no such reference in any materials. I do not accept the third defendant's version of events in this regard. I do not accept that the third defendant had explained to the plaintiff what the third defendant says was the true nature of the transaction to be entered into. There is no cogent evidence of any conversations or text messages by which I could conclude that the plaintiff's parents were the directing minds of the agreement entered into between the plaintiff and first defendant. The evidence is that the plaintiff discussed these matters with his parents, who approved of his investment. I take that as nothing more than a son seeking to discuss a possible investment with his parents who gave him advice on that matter.
I accept the plaintiff's submissions that the representations pleaded and referred to above were made in the manner submitted by the plaintiff. There is no submission by the defendants that the representations were not made in trade and commerce.
I also accept that the representations were false in the manner identified by the plaintiff. I accept that the plaintiff relied upon the representations in agreeing to enter into the Investment Agreement and pay the money to the first defendant.
For the reasons submitted by the plaintiff, I accept that the third defendant made the representations on his own behalf and on behalf of the second defendant. I find that by making the representations the third defendant and the second defendant engaged in misleading and deceptive conduct in contravention of the Australian Consumer Law (NSW) and the Australian Consumer Law respectively.
In relying upon the representation and being induced into entering into the investment agreement and pay the amounts paid by him to the first defendant, the plaintiff suffered loss and damage. I assess the loss and damage in the sum of $334,692.90, being the amounts paid by the plaintiff to the first defendant.

e. Pre-judgment interest

The plaintiff seeks an award of pre-judgment interest pursuant to s100(1) of the Civil Procedure Act 2005 (NSW). The plaintiff's counsel provided the court with a schedule of pre-judgment interest for each of the contract claims and the misleading and deceptive conduct claim. Because I have rejected the plaintiff's claim in contract, only the latter is relevant. As I understand it, the defendant disputed the time from which any interest should run but it was not said that the rate used in the calculation was incorrect.
The plaintiff has calculated pre-judgment interest for the misleading and deceptive conduct claim from 15 December 2017, being the date that the plaintiff demanded that the Investment Agreement be terminated and his money be returned as a result of discovering the falsity of the representations made by the defendants. I accept that that is an appropriate date by which to award pre-judgment interest.
The purpose of pre-judgment interest is to practically compensate the plaintiff for the loss he has suffered. I accept an award is appropriate in this case.
I assess pre-judgment interest in accordance with the plaintiff's schedule as $55,240.70.

f. ORDERS

For the reasons above, the court orders: 1. Judgment for the plaintiff in the sum of $389,933.60 including pre-judgment interest. 2. The second and third defendant pay the plaintiff's costs of the proceedings. 3. Any party seeking to vary order (2) above has liberty to apply on 3 days' notice by arrangement with my Associate. 4. The exhibits may be returned.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 29 March 2021

Australian Consumer Law Civil Procedure Act 2005(NSW)

At a glance

Court

Decision date

Catchwords

Source

Catchwords

Judgment (12 paragraphs)

Parties

Legislation Cited (5)

Cases Cited (9)

Cited By (1)