Pacific Shoji Pty Ltd v Xia

Overview of the trial

1. The primary judge delivered a judgment of 274 paragraphs following an eight day trial in which there were numerous issues - many more than arise in this appeal. Her Honour made it clear that she regarded the quality of the advocacy during the trial as of "the highest standard" (at [15]), but nonetheless was confronted by a series of difficulties. These included: 1. the deficiencies in both parties' pleadings, and the taking of points which should not have been taken in litigation to which s 56 of the Civil Procedure Act 2005 (NSW) applies; 2. the fact that documentary discovery was non-existent or only belatedly provided; 3. the fact that both of the main witnesses, namely, Ms Xia and Pacific Shoji's managing director Mr Chris Spurrier, had formerly been involved in a romantic relationship and held grudges against each other, which the primary judge stated had the effect of multiplying the number of disputed factual issues; 4. the fact that Pacific Shoji's business involved the preparation of false documentation (the euphemism "dummy invoices" was deployed) in order to permit Chinese clients to avoid or minimise customs duties; 5. the fact that each of Ms Xia and Mr Spurrier acknowledged they had lied to the other.
2. The primary judge summarised some of these difficulties at [14], referring to Ms Xia, Mr Spurrier and the latter's wife Ms Sonia Klaric (who was also ill-disposed to Ms Xia): "This degree of personal connection between these three persons may explain some of the bitterness between them, but not the significant credit issues which arose in relation to both sides in relation to almost all the evidence, which has made the task of determining the factual issues so difficult. This includes acknowledgements by both Mr Spurrier and the plaintiff of having lied to each other at various stages of their professional relationship and of employing business methods which are less than satisfactory as well as, in some instances, amounting to contravention of the law."
3. Her Honour added at [62]-[63]: "Where, however, I see credit being most significantly undermined comes from the obvious hatred and hostility between these three persons, arising out of the plaintiff's former relationship with Mr Spurrier. Mr Spurrier's email to the plaintiff (annexed to Exhibit 1) warning her that Ms Klaric was now aware the plaintiff had lied about these shipments and planned to go to the police is instructive in this regard, as is the fact that Ms Klaric never once contacted the plaintiff about any of the financial transactions in the course of the business, leaving this to Mr Spurrier to do. This sort of anger and hatred can result in even an honest witness being unable to tell the truth. ..."
4. The primary judge saw each of those witnesses cross-examined at length. Her Honour's reasoning as to credit was elaborate, but need not be reproduced or summarised here. She concluded at [65]-[66] as follows: "Having noted all of the above, I am satisfied that I should regard both Mr Spurrier and Ms Klaric as persons whose evidence should not be accepted unless it is adverse to their interests, and whose evidence should not otherwise be accepted unless corroborated. The plaintiff's lies to Mr Spurrier about the identity of the person who ordered the two shipments are a significant blow to her credit. It is, however, the only blow of substance. The plaintiff's evidence is largely consistent with contemporaneous documents. For example, her claim that she had never been given annual leave was not only confirmed by the absence of documents granting her such leave, but one of the documents attached to Mr Spurrier's affidavit of 5 October 2012 (Exhibit 1) confirms his unwillingness to grant her annual leave. Her claim that she was offered commission on the Dover factory sale is not only confirmed by the Skype conversation recording, but by evidence of an earlier commission sale of Pacific Shoji's Taren Point business. While the plaintiff's evidence needs to be considered with care where it is not supported by such documentation, I am satisfied that she should not be dismissed as a witness whose evidence should not be accepted without such corroboration."
5. There was no challenge to the unfavourable assessment of the credit of Mr Spurrier and Ms Klaric, nor to the relatively favourable, albeit qualified, assessment of the credit of Ms Xia.
6. Further, one reason for the length of the trial was the multiplicity of issues. Much of her Honour's judgment is taken up by the determination of issues which are not sought to be agitated on appeal. These included the non-payment by Pacific Shoji of Ms Xia's entitlements as an employee to salary and leave (at [68]-[116]). They also include the rejection of some of Ms Xia's claims (including to a profit share from a factory in Guangzhou and reimbursement for some business expenses) at [117]-[124]; there is no cross-appeal. It is unnecessary and therefore inappropriate to summarise any of these matters.
7. The balance of these reasons take the following form. They first summarise the background, but only insofar as it is necessary to address the limited challenge made by Pacific Shoji on appeal. They then deal with the three issues, as to the findings of a loan, the claim to commission, and the rejection of Pacific Shoji's cross-claim.

Factual background

1. There was no challenge to any of the findings of primary fact made by the trial judge reproduced in the following section of the judgment.

First period of Ms Xia's employment: 2003-2005

1. Pacific Shoji is an Australian company. Its shareholders are Mr Chris Spurrier (its sole director and a witness) and his parents. It exports live and frozen seafood, principally to China.
2. Ms Xia started working part time at the Pacific Shoji's factory in Taren Point, in southern Sydney, on a casual basis, in 2003 while she was completing a post-graduate degree. She and Mr Spurrier also commenced a romantic relationship. Although initially her job involved packing seafood products, she progressed to becoming a sales manager selling seafood to Asian countries and earning a salary of around $2,000 per month.
3. In December 2004, Ms Xia accepted a full-time position as Pacific Shoji's sales manager in Yantian, China. She continued in this position until April 2005. Her romantic relationship with Mr Spurrier apparently ended during this period. She gave evidence that although she worked for Dell Computers and later a company she described as "Industrial Scientific" between 2005 and 2007, she also "worked casually for Shoji throughout this period of time between May of 2005 and the start of 2007". She maintained that she continued to have feelings for Mr Spurrier and that he continued to telephone her.
4. In October 2005, Pacific Shoji sold its plant at Taren Point. The primary judge found that Ms Xia assisted in arranging the sale as part of her then position in Pacific Shoji, and earned a commission of $10,000, although she was no longer at that time a permanent employee. The primary judge regarded this as significant, because of the similarity with the claim for commission of the Dover Factory. Her Honour noted at [40]: "These events are similar to the circumstances of the sale of the Dover factory in Tasmania. In both cases, the plaintiff was asked to sell a part of the business and promised a commission. In both cases, the plaintiff played a very significant, if not decisive, role in the sale. In both cases, the sale was completed after she had ceased being an employee of Pacific Shoji. These events are of relevance when deciding which party's evidence to accept in relation to the sale of the Dover factory in Tasmania."

2007-2011: Ms Xia resumes working for Pacific Shoji

1. In August 2007, Ms Xia accepted the full-time position as "Pacific Shoji China Manager". She was stationed in China and managed sales to Chinese customers and to other Asian markets. A contract sent to her shortly thereafter stated that her salary was AUD60,000 including a AUD10,000 accommodation allowance. It also stated that she was entitled to commission of (inter alia) AUD0.50/kg for sales of live lobster, although subject to achieving a certain threshold, and it seems that in relation to sales of live lobster, Ms Xia did not achieve that threshold (at least, Mr Spurrier's evidence was to that effect, and no submission based on commission for sales of live lobster was made in this Court).
2. Two aspects of that employment are relevant to the evidence adduced at trial and the issues raised on appeal. First, sometimes Ms Xia and Mr Spurrier communicated by email, sometimes they exchanged text messages, and sometimes they spoke with each other. However, at least some of the communications between Ms Xia in China and Mr Spurrier in Australia were via what Ms Xia termed "Skype conversations" and Mr Spurrier described as "MSN chat conversations". Whether or not two different applications were used does not matter for present purposes. But in any case, the conversations were written, and resemble an exchange of SMS messages. The messages were exchanged in real time, and are accompanied by a time stamp. The result is a document recording the exchanges and the time each message was sent (although it is unclear in some cases to which time zone reference is made). Documents recording some of those exchanges were tendered. In litigation where there was so much dispute as to the facts, it was natural that these records assumed some significance, because both parties accepted that they accurately recorded what each had written to the other at the time.
3. In some cases, the same exchanges were reproduced in quite different formats in annexures to the affidavits of Ms Xia and Mr Spurrier. In these reasons, the messages exchanged by the parties (replete with spelling and other errors) have been reproduced verbatim, but in a common format.
4. Secondly, during this time Pacific Shoji used Ms Xia's personal bank account to conduct business in China. Ms Xia would collect payments from some of the company's customers and remit those payments to Pacific Shoji from her personal account. There was a dispute at trial as to how this came about. At [49], the primary judge preferred the explanation given by Ms Xia, holding that Ms Xia was "reluctant to participate but did so because she did not have a choice", accepting the following portion of Ms Xia's evidence: "74. I recall around March of 2009, having the following conversation with Chris Spurrier about the practice of receiving payments from customers: CS: Helen, the way things work with Chinese customers is that they often delay payments, but we cannot wait for these delays because that is not how it works in Australia. The bank doesn't wait for this, the electricity company doesn't wait for this, no-one waits for this in Australia. How about this? If you are very sure that customers are going to pay, and you have enough personal funds in your personal account, you pay the invoice and then you are re-imbursed by the customer when they finally pay it to you. HX: Chris, I am not comfortable with that. It sounds very messy. CS: Helen that is the only way that the whole business will work here because Chinese payments are too slow otherwise. If you don't do this, the business will fail and you will not have a job anymore. I need you to do this for me as a favour. HX: It sounds like I don't have a choice then about this." … 94. Initially, I was reluctant to offer Shoji access to my bank account in order to receive funds. It was not something that I thought was a good idea. However, I was willing to listen to Chris Spurrier's explanation. He wanted me to help him and Shoji and made me feel that I was obligated to do this favour for him. I didn't want to lose my job."

Invoices 5146 and 5153

1. As will be seen below, a great deal in this litigation turns on two shipments of Southern Rock Lobsters made in January 2012, just before Chinese New Year (which was a time of peak demand for the product). The redirection of these shipments comprise (a) the reason given for Ms Xia's termination and (b) the quantum of Pacific Shoji's claim for damages. Further, the denouement that Ms Xia had diverted both of those shipments from one relatively favoured customer to another disfavoured customer and had concealed this from Mr Spurrier took place shortly before Ms Xia advised that she had found a buyer for the Dover factory. It is necessary to deal with these shipments in some detail.
2. The primary judge found that Pacific Shoji had "some good customers and some unreliable ones": at [182]. Mr Spurrier had given evidence that Mr Chen Chang Qing, known as Tony Chen, was a "good customer" who had a good track record of prompt payment, while Mr Hang Hai Wei Hang, known as Tim Wang, was a "bad customer". (Both men seem to have purchased through corporate entities, but it will be convenient to follow the language used by the parties and refer to Mr Chen and Mr Wang as the purchasers.) Mr Wang was regarded as a slow payer. There was evidence that it had taken many weeks and a meeting in Shanghai for him to pay for a large shipment of 1903kg made in January 2009. By January 2012 he owed Pacific Shoji approximately $58,000.
3. Invoice 5146 identified 45 boxes of live Southern Rock Lobsters weighing 802.42 kg being shipped from Melbourne to Hong Kong on QF29 on 17 January 2012, for a price of $69,588.80 to Champion Trading Co. The air waybill was to the same effect. The primary judge stated that Champion Trading Co was a "transport company" which customers would use from time to time as the consignee on an air waybill: at [184]. However, the primary judge stated at [184] that: "Sometime before this shipment being sent on 17 January 2012, the plaintiff made arrangements to sell this shipment to Hang Hai Wei Hang ("HHWH"), a company associated with Mr Wang (the bad customer) and instead of being delivered to Mr Chen's company CCQ, it was delivered to Mr Wang."
4. This seems to have been effected through a late change, instigated by Ms Xia, to the consignee identified on the invoice and air waybill. There was an exchange between Ms Xia and Mr Spurrier on 16 January between 12:59 and 1:06 as follows: "HX: pls give me an inv # CS: emailed already HX: TONY ASK TO USE CHAMPION THIS TIME CS: fucking hell CS: Hope not too late for dover docs HX: SEGA MEANS WALKING SOLDIER HX: LAST TIME I TOLD HIM NO INSPECTION IF WALKING SOLDIER CS: all ok HX: LAST TIME ENDS UP OK CS: I mean change is ok CS: not too late HX: ALL CHANGED INTO CHAMPION NOW? CS: yes HX: SORRY FOR THE LAST NOTICE HX: JUST SENT U PARTIAL OF THIS PAYMENT HX: TONY SAYS HE PAYS US AS SOON AS HE GOT ANY CASH BACK TOWARDS ANY INV HX: HE GOT PREPAY, HE WILL PRE PAY US HX: 18th, HE GOT SOME PREPAY HX: JUST PAID U CS: OK"
5. (The reference to "SEGA" is to be understood as Sega Transport, the original consignee which was replaced by Champion Trading Co.) Consistently with what was said in that exchange, there was tendered an email from Ms Xia to Mr Spurrier recording the bank account transfer details for a transfer of AUD19,200 into Pacific Shoji's Commonwealth Bank account in Middle Brighton dated 17 January 2012. The interbank transfer gave the description "INV 5146 PARTIAL PREPAY". Mr Spurrier gave evidence that "neither Tony, nor any other Pacific Shoji customer had ever made a partial pre-payment for a shipment of produce". The unpaid difference between the $69,588.80 and the $19,200 paid to Pacific Shoji is $50,388.80.
6. Turning to the second shipment, on about 19 January 2012, there was a written exchange between Ms Xia and Mr Spurrier between 6:20 and 6:29 as follows: "HX: sat hk 20 c 20 d 4-5e-price 83 for all HX: to tony HX: just normal pack HX: for c HX: no need to be very fussy HX: as price low HX: tony will pay some tonight HX: tony paid iqf partial I will email to u to apply the overpaid CS: IS THAT CONFIRMED FOR TONY TO HK? HX: YES SAT TONY 20 C 20 D 4-5 E CS: COOL."
7. There was a second invoice, invoice 5153, issued by Pacific Shoji and dated 20 January 2012, for another shipment of 45 boxes of live Southern Rock Lobster to Hong Kong on QF29. Consistently with the conversation, there were 20 boxes of live Southern Rock Lobster grade C, 20 of grade D, and 5 of grade E, all at a stated price of AUD83 per kg. This time the weight was 812.96 kg and the price was $67,477.34. The air waybill was, once again, made to Champion Trading Co. On this occasion, the invoice was made to "Chen Chang Qing" (which is to say, Tony Chen).
8. The primary judge found that, once again, Ms Xia made arrangements, without informing Mr Spurrier or Pacific Shoji, to divert that shipment so that it was delivered to Mr Wang's company. Her Honour found at [185] that "[a]gain, without informing Pacific Shoji or Mr Spurrier, the plaintiff made arrangements with Mr Wang's company and the shipment was delivered to HHWH."
9. In cross-examination, Ms Xia gave the following evidence: "Q. So Ms Xia, just to try to get some clarity in what you're saying, you're saying that on two separate occasions, on about 17 and 19 January Mr Chen had a conversation on each of those days with you, rejecting the large lobster shipments because they were the wrong size? A. WITNESS: That's correct, and I do recall Tony was quite changeable and that's why we request some pre-payment for one of the shipments, to get some security."
10. There were peculiarities in both invoices. Both misspelt "facsimile" and gave different telephone and fax numbers for Pacific Shoji. The former requested payment "upon receipt of INVOICE", the latter "upon receipt of product". The former identified a National Australia Bank account in Melbourne, the latter a Commonwealth Bank account in Middle Brighton, Victoria. The prepayment for the former invoice was paid into the Commonwealth Bank account, not the National Australia Bank account. And it seems odd that invoices of the same produce on the same Qantas flight to the same customer three days apart would have such differences.
11. The answer may lie, at least in part, in the fact that both Ms Xia and Mr Spurrier accepted that both of these shipments were "fully smuggled". That description was used by Ms Xia to describe shipments which were sent to Hong Kong or Vietnam, and from there taken into China without being declared in order to avoid the payment of customs duties.
12. "Fully-smuggled" shipments were contrasted with what was described in the evidence as "the semi-illegal aspect" of Pacific Shoji's business, whereby seafood was shipped directly to China, but with Pacific Shoji providing "dummy" (which is to say, fraudulent) invoices with a lesser price so as to reduce the payment of import duties.
13. Ms Xia gave this evidence of these two shipments in an affidavit: "All the shipments involved in invoices numbered 5146, 5079, 5152 and 5153 were on credit and were fully smuggled shipments into China. This was something I could deduce from the circumstances. Chris Spurrier was evasive and had told me at various times never to speak too much about any one shipment as he thought some of our conversations by telephone or social media were being tracked by authorities, for example, AQIS."
14. In her verified defence to cross-claim, Ms Xia admitted that she had advised Pacific Shoji to issue documents in the name of Champion, and added that: "Champion Trading was well known to be a shipping line that assisted in the smuggling of seafood from Hong Kong to China and has been, and currently is, the subject of investigations by the Chinese and Hong Kong authorities, and this is the reason why so many of the China-based customers would use it. The Cross-Defendant secondly states that the Cross-Claimant was at all times aware of the nature of Champion Trading's business and that it dealt with the smuggling of seafood in order to assist customers to avoid local duties."
15. Mr Spurrier was cross-examined about a practice of transporting produce to Vietnam or Kuala Lumpur. In the latter case, it was "re-tanked and then exported under Ausseafood's label, so that would make them of Malaysian origin and then could be imported into China under the free trade agreement between Malaysia and China". He accepted that this was "a way of achieving higher prices because of the lower duties". Indeed, he gave evidence in his own affidavit that "for a fee, Ausseafood would repackage the lobster as 'Malaysian' origin and re-export the lobster to China". In cross-examination, Mr Spurrier was unsure of the name of the company in Hanoi which performed the same function, but appeared to accept that the mechanism was the same.
16. The primary judge also reproduced the following cross-examination of Mr Spurrier (at [52]-[53]) concerning "semi-smuggled" shipments. "Q. You're assisting a company or an individual in China in paying less than they should by way of importation duties, or duties of some nature. A. No. I raised [an] invoice at a lower value because that was requested by the customers. What the customers chose to do with that invoice afterwards was up to them. Q. You know what they do with the invoices. You've just told us. A. Yes. Q. They use it to present it to Chinese customs to pay less duties. A. Yes. Yes. That's correct. Q. And you're happy to assist them in that. You're assisting them in an illegal endeavour; isn't that so? A. They request it. We gave them a dummy invoice, and, yes, I provided them with one and that's common practice, as I mentioned ... Q. You knowingly are assisting those people in carrying out an illegal practice; isn't that so? A. Well, I knowingly provided them with an invoice of a lower value. Q. And you're happy to do so? I mean, you've stated in front of a court‑‑ A. I would prefer not to. I would prefer it wasn't, but that's the way, unfortunately that the seafood business operates to China and has done for many years, and all our competitors do it as well."
17. The primary judge made a finding as to why Ms Xia was prepared to use her own bank account and to process "dummy" invoices at [64]: "Although the plaintiff said she was reluctant to use her bank account or to process dummy receipts, she certainly did so for a very long time. However, I am satisfied that her reasons for doing so were that she would do anything to please Mr Spurrier, with whom she has remained infatuated, rather than in pursuit of illegal activities of her own. Although there appeared to be some evidence of the plaintiff having her own transactions for the sale of seafood, no submissions were put to me concerning this issue by Pacific Shoji."
18. Mr Spurrier described the practice of rendering "dummy invoices" as endemic in the industry. Whether or not that is so is neither here nor there for present purposes. I shall call these invoices fraudulent invoices, because that is what they are. They are a knowingly false statement, describing a transaction different from the true transaction, issued with the intention that the recipient will pay less import duty than the recipient was required to pay. Although they may have been issued at the customer's request, they were also issued with the intent that Pacific Shoji could charge a higher price. They were supplied to Ms Xia who fully knew that they were intended to be used to defraud Chinese customs. Diluting or disguising this as a "dummy invoice" is wrong, although it might salve the consciences of the participants. Fraud should be called out for what it is.
19. However, there was no illegality defence, nor any pleading of unclean hands in response to Pacific Shoji's equitable claim. The issues arising on appeal do not require the making of any other findings of unlawful conduct, or the contravention of any criminal law, by any of the parties or witnesses.

Mr Spurrier seeks payment from Messrs Chen and Wang

1. Mr Spurrier gave evidence that in February 2012, he began to get "very concerned" about the outstanding invoices owed by Mr Chen and Mr Wang. He said that according to Pacific Shoji's accounts, Mr Wang owed three amounts totalling some $140,000 in respect of tax invoices dated 5 January 2012 ($58,833.31), 20 January 2012 ($18,456.78) and 24 January 2012 ($64,210.51), while Mr Chen owed money on six invoices, including invoices numbered 5146 and 5153, totalling approximately $388,000. Mr Spurrier flew to China to meet both men. He met Mr Wang, although he only told him that he would "try and pay as soon as I can." He failed to meet Mr Chen who, so Ms Xia informed him, had had to leave the area for business purposes and would be unable to meet Mr Spurrier. The upshot was that Mr Spurrier had not secured payment of any of the amounts either of the two men owed.
2. Ms Xia gave evidence that in April 2012 she had informed Mr Spurrier that Mr Wang had been arrested for import duty evasion. She also informed him that there was a "big customs crackdown" and that "customers have switched off phones. They are concerned about being traced." Soon after, Ms Xia told Mr Spurrier that Mr Chen had also been arrested. The effect of the arrest of Pacific Shoji's customers was that there were outstanding invoices of amounts owed to Pacific Shoji which were not being paid.
3. In mid-January 2013 Ms Xia told Mr Spurrier that Mr Wang was out of jail, but that his financial position was not good. Ms Xia said that she then told Mr Spurrier words to the following effect: "Tim isn't going to pay his customers straight away. He is going to pay me back personal money I gave him. I will pass his money on to Shoji to cover Shoji's invoices. Once Shoji is paid, I will tell Tim that I have paid his debts to Shoji and then I will chase him for the personal monies I lent him."
4. It is convenient to defer dealing with the evidence relating to the loan which Ms Xia claimed she had made to Pacific Shoji until addressing grounds 1 and 2 below.

The sale of the Dover factory

1. The primary judge found at [137] that in July 2010, Mr Spurrier asked Ms Xia whether she could find a buyer and offered to pay her "10% on the sale price up to $1 million, and then 20% for anything up to $2 million". That was not the agreement upon which the sale ultimately turned, although it serves to explain why Ms Xia thereafter advertised the factory for sale at her own cost, and, in March 2013, she mentioned the sale to a customer known to Mr Spurrier, Mr Hanxiong Cai. It does not appear to have been disputed that Ms Xia also paid for Mr Cai's flight from China to Tasmania to inspect the factory. It was accepted that in about June 2013, Ms Xia participated in that inspection trip in which Mr Cai was also shown Pacific Shoji's operations in Victoria and South Australia.
2. On 5 October 2013, Ms Xia and Mr Spurrier had a Skype exchange concerning the sale of the factory. It took place between 8:01 and 8:03 on 5 October 2013, after Ms Xia had referred to a possible purchaser of the Tasmanian factory: "HX: trust me i know what to say CS: Tell him 1.5m ... you get a 10% commission. HX: u seduce me HX: hehe CW: haha HX: if i can , i keep that in record HX: i will ask 10% then CW: Sure, but thats only for the 1.5m target... CW: anything else would have to be discussed HX: if 2 m, 20% HX: hehe CW: hahaha HX: if 3 m, 30% HX: hehe HX: wont be CW: greedy chops HX: barry taught me keep the eyes on the prize CW: thats it CW: Seriously 1.5 is not unreasonable for what he gets, its not just about land value, its whats inside, the business it can generate."
3. On 24 October 2013, Ms Xia sent a message on WeChat to Mr Spurrier that said: "Cai decided to buy the factory. He offered to rent six month as start His offering rent is 18k aud monthly If rent goes well, Will buy after six months"
4. Ms Xia said she received no response, and so sent an email on 25 October, reiterating her messages, and concluding "Please contact me. The offer won't be there forever".
5. On 25 October 2013, Ms Xia's employment was terminated. Pacific Shoji said that it did so on the basis of the lies Ms Xia had told about the sales of seafood to Mr Tim Wang, as disclosed in the "confession" Skype exchange of 20 October reproduced below. Mr Spurrier said that he did not believe that Ms Xia had found a genuine buyer for the factory. Ms Xia regarded her termination as a consequence of her telling Mr Spurrier that she had finally found a purchaser for the Dover property.

The "confession" Skype exchange

1. The steps taken to recover the indebtedness (including, so far as Mr Spurrier was concerned, from Mr Chen relating to invoices 5146 and 5153) may be passed over. The following very lengthy exchange, dated 20 October 2013, led to the termination of Ms Xia's employment. It is best to reproduce it in its entirety (as did the primary judge at [213]). Reference will be made below to the passages in bold when addressing the grounds of appeal. "HX: I have a confession to make CS: what's that? HX: Tony paid what he owes HX: Now it is all tim CS: What did you do? You lent shoji money to Tim? CS: You have lied to me all this time. HX: I am sorry CS: How could you do that to my family? HX: Tony rejected all large size shipment after shipping HX: was tony sold the shipment to tim HX: yes i lied all this time HX: and lived in guilt for all this time too CS: But we are talking more than one shipment…… CS: You have given Tim all our money HX: I have back up 3 shipment with my own money for long time in shoji-tim business HX: tim almost paid off, got one shipment to go, wiht me HX: then lent all my money HX: if i still have my own money, i will pay shoji out of my own pocket HX: i had thought tim will pay me at least, i will pay back shoji by my own money HX: now i can not make that happen HX: I will be responsible to tony 2 shipments, if tim does not pay u back, i wil pay u back CS: helen, this is all your doing…. You need to pay back everything owed with interest. CS: Our business has been crippled these last 2 years by your actions & lies. HX: that is not my intention HX: i am sorry HX: i back up shoji trading with tim with my own money for long time too, i wish you consider that too HX: i did not wish things happens in this way HX: even tim only pay me back, i will pay those 2 shipments back to u first HX: when tim paid some back personal to me, i let you take it first CS: How could you use Tonys (Shoji's) money to give to tim? HX: I wish you consider that HX: i never thought to use shoji money to give to tim on purpose HX: i take whatever blame u give CS: What do you mean…… You did it. How can you say you never meant to? HX: I never meant to CS: But you did it. CS: You were playing games with Shoji money as though it was your own… CS: That is money we should have received back from sales of our lobster CS: You have crippled Shoji for 2 years CS: The stress you have caused me and my family is immeasurable in dollar terms CS: I'm crying helen CS: I trusted you HX: that is why i used my life time money to back up shoji trading for yrs too HX: and i will pay back everything by my own if tim does not pay back CS: You can't justify it like that HX: all i try to say my intention is not to harm you or your family CS: Tim owes money that Tony had already paid to you…. Its so fucked up HX: my intention is to help CS: Tonys money was owed to Shoji HX: my personal 2 m owed by tim CS: You chose to lend Tim your money….. I didn't, I sold him lobster. That is lobster we should have been paid for. HX: if it is not for shoji, i wont be so tight with tim either CS: what do you mean? HX: first payment i made for tim is when tim stopped talking to shoji for long time, we were struggling to get sales HX: i lent tim 20k aud in 2010 HX: he has not paid back yet HX: that is how i started lending cash to tim CS: How could you ever allow us to keep selling lobster to tim if you knew he wasn't going to pay….. CS: tor thought he wasn't capable of paying HX: he was going to pay back HX: he got 2 m in 2012 march from bank HX: my second payment was 460k rmb, tim owes to shoji for too long, i paid for him CS: And the shipment you said today that tony rejected….. I don't believe you. You never mentioned anything about Tony rejecting a shipment. CS: Did you place that order for Tim knowingly? HX: no need to believe me any more chris HX: I will pay u back CS: You there? HX: yes CS: I need you to send the balance approx 20K+ funds to CKE tomorrow…… That will be the last of the funds I inject to the business over here. If it does not work soon, I will pack up the cooling equipment, withdraw remaining funds and head back to Australia. CS: Please send me an email lasting the exact balance. CS: Barry officially goes on pension next Feb. It is not enough for them to live off and Shoji business is not doing great. Mum & Dads home is $180K into the banks. I need you to try to sell the dover factory to Xiao Cai and go work for him. If you really want to undo the harm you have caused, that is the best way. CS: Awaiting your reply. [Chat inactive] CS: Please clarify the situation for the Champion Trading Invoice? CHAMPION A/CCQ/5146 $69,588-$19,200 BALANCE $50,388. This was invoiced to Tony through Champion trading. You received this payment from Tony also? CS: Call started CS: Call ended - you need to get Skype Credit to call this number. HX: tony paid back everything he took HX: tim took this shipment CS: Who paid the partial $19,200 on it? CS: ?? CS: Please respond? CS: Call started CS: Call ended - you need to get Skype Credit to call this number. HX: tony paid HX: tim sorted out with tony 19k CS: So you are saying Tony paid $19,200 for a shipment that Tim took over… That does not make any sense. How come you never told me of any shipment being taken over until today? CS: What is Tonys number? Please send it to me now. CS: Tonys number please…… CS: How many times do I have to ask for Tonys number before you will give it to me? CS: HELEN WHAT IS TONYS NUMBER? HX: I do not have tonys no CS: what is Tonys daughters contact details? You said you were speaking to her or was that all bullshit also? CS: ?? HX: if you applied 300k to tony this payment, it is paid off by my personal money chris HX: blame is not working HX: if i got all my personal back, even tim did not intend to pay u, i will pay you back HX: i deserve all the blame HX: but blame does not help HX: i blamed myself enough HX: my intention never been harming u or your family HX: u need try to understand, it is hard decision for me to make too to give my personal fund to you first HX: i am in awful situation too HX: i got a sick mother too CS: Helen what are you talking about, you have net given your personal funds to me. You received payments from Tony (Shoji money) and you gave to Tim….. Your perspective on it all is completely warped. HX: i paid 300k rmb back to u CS: Out of money you already received from Tony… Don't you bloody well get it??? HX: i got 300k from tim HX: i have paid u CS: You can test it any way you want helen…. The fact is you received payments for lobsters sold to Tony and you did not send them back to shoji like you should have….. If what you are saying is true, you lent that to Tim… How could you do that???!!!! HX: i never took any tonys money to give to tim HX: i will never do that CS: You need to pay back all the money you received from Tony with interest. HX: 300k rmb HX: i paid u back HX: 100k and 200k CS: well where the fuck is tongs payments then? HX: i am sending u email now CS: Helen that is 300,000K you sent recently… WHAT HAPPENED TO TONYS PAYMENTS??? CS: rmb HX: tony paid 19k aud HX: i never took any tony money and pocket as my own HX: i am broke HX: i can not even pay my mothers hospital bill once".
2. In cross-examination, Ms Xia gave this evidence: "I lied because Chris instruct me to make a decision and put me in the embarrassing situation, what to do. Not to make a decision is big disaster to the company. To make a decision, well, I have to sort out the payment - either the payment or the ownership, someone take the ownership, and come back to Chris."
3. On 25 October 2013 Pacific Shoji dismissed Ms Xia by letter in the following terms: "HELEN, IN LIGHT OF RECENT REVELATIONS REGARDING YOUR MISSAPPROPRIATION OF COMPANY FUNDS AND YOUR REFUSAL TO PROVIDE CUSTOMER INFORMATION (SUCH AS TONYS) WHEN REQUESTED, YOUR EMPLOYED POSITION IN THE COMPANY WILL NOT BE CONTINUED NEXT MONTH. LET THERE BE NO MISUNDERSTANDING ABOUT THE SERIOUS CRIMINALITY OF YOUR ACTIONS. UNLESS I SEE ALL MISAPPROPRIATED FUNDS RETURNED TO PACIFIC SHOJI (WITH INTERST), STARTING WITH THE APPROX $25,000 OF COMPANY FUNDS YOU ARE CURRENTLY HOLDING, YOU WILL LEAVE ME WITH NO ALTERNATIVE BUT TO TAKE THIS MATTER TO THE POLICE."
4. Ms Xia ceased working thereafter, and was not paid her salary and accrued entitlements in full.
5. On 4 May 2014, Ms Xia registered a caveat on the Dover property, and on 20 June 2014 she filed the statement of claim in the District Court commencing the present proceedings. On 28 July 2014, the agreement for the sale of the Dover factory to Mr Cai's company was concluded. More detail of the steps taken to effect that sale is given when dealing with grounds 3 and 4.

The challenge to the finding of a loan (grounds 1 and 2)

1. The entirety of the reasons of the primary judge addressing Ms Xia's claim for repayment of a loan were at [125]-[132] as follows: "Money loaned to the defendant The plaintiff sets out in her affidavit that she paid two amounts on behalf of the defendant from her personal funds (Exhibit A, paragraphs 188 - 190): A payment for rent for the defendant's Myanmar factory of RMB 200,000 which was paid into the defendant's Singapore bank account (Exhibit A, annexures pg. 35). A payment directly to the defendant's Melbourne bank account for RMB 100,000 (T pg. 142, 4 - 11). Mr Johnson (written submissions, B6 [33] - [35]) refers to a controversy over a typographical error in paragraph 184 of the plaintiff's affidavit (the word 'don't') and asserts that there is 'simply no evidence' that the plaintiff and Pacific Shoji entered into some kind of agreement, formal or informal, for the lending of money by the plaintiff to Pacific Shoji. Mr Johnson points to the absence of the usual contractual terms such as promise to repay. Mr Spurrier admitted receipt of the RMB 100,000 into Pacific Shoji's Singapore bank account: "Q. Mr Spurrier, Ms Xia has said that in respect of the debt of 300,000 RMB that was in her possession, she has made payments of those amounts in 100 and 200,000 RMB back to Pacific Shoji? A. We received a payment of 100,000 RMB. We never received a payment of 200,000 RMB." (T 274) The explanation for the whereabouts of the other RMB 200,000 was put to Mr Spurrier as follows: "Q. Yes. Then if we move forward in that same affidavit to page 35 ‑ annexure at page 35 ‑ that is a document ‑ Ms Xia said it was a bank draft that she said was used to make payment of rent in respect of Myanmar at your instruction? A. Yes, to a Singapore account, that's correct, yes. Q. And she said that constitutes the other 200,000 paid? A. I don't know whether that ‑ that may make up part of it ‑ I'm not sure. Q. Well, was that sum received into the Singapore account? A. The 24,000 RMB? Yes. Helen said she received 200,000. We never received 200,000 from Helen. There was monies which Helen had on her hands of other invoices and things that she was holding onto. Q. So this 24,000, if you look to the top left there's a USD 24 ‑ either 108 or triple zero potentially. It's quite faint but it's there? A. The USD 24,000? Q. Yes. A. Yes. Q. Was that received by Pacific Shoji to the Singapore account? A. That wasn't received by Pacific Shoji. It was received by the landlord of the factory that I was renting in Myanmar. Q. Does that account for the 300 RMB, or the two payments together? A. I don't know exactly because there was a bunch of moneys which Ms Xia had on hand, and there was a tally of moneys that had on hand and sums were deducted from various sums she had on hand, and there's a document which supports that." (T 275) The explanation for these items is difficult to follow and there is little documentation. I note the plaintiff was cross-examined about these payments as well. The burden lies on the plaintiff to prove her case. I would be troubled by the absence of more formal documentation were it not for the factual findings I have made in relation to the other claims she has made, and in particular in relation to the first three categories set out above. All of the surrounding circumstances point to the plaintiff being effectively being at the beck and call of Mr Spurrier and to her entering into a variety of transactions on his company's behalf, which included using her own bank account to process transactions (T 177 - 178). The absence of some better evidence than the very general submissions made on behalf of Pacific Shoji (in circumstances where Mr Johnson has presented his case meticulously wherever possible) does not persuade me that there is any explanation other than that given by the plaintiff, no matter how implausible it may appear. Accordingly the plaintiff is entitled to the claim of RMB 300,000, which sum should be converted to the appropriate Australian dollar rate by agreement between the parties."
2. (The reference to the "first three categories above" is a reference to Ms Xia's claims, upheld by the primary judge and unchallenged on appeal, for payment of unpaid salary, leave and superannuation entitlements.)

The parties' submissions

1. Pacific Shoji criticised the reasons of the primary judge, and maintained that there was insufficient evidence to establish that there was a loan.
2. Pacific Shoji submitted that the only documentary basis Ms Xia had to rely upon is an email she sent to Mr Spurrier in May 2014 making the assertion the funds were hers personally. Her email to Mr Spurrier copied to a solicitor said: "Hi Everyone 300K RMB was lent From Helen Rong Xia to Chris Spurrier ~pacific Shoji to cover customer Tim Wang Ting's Invoice 5146. On 17th Many 2014, Chris admitted and accepted 100 K RMB has been posted to Shoji Australia account. Re 200 K rmb, as Chris requested, I re send the info here. I have post 24 K USD (value RMB 148272) to shoji Myanmar account as Shoji Myanmar factory rent and bought cooling system for shoji factories as well. Please find the attachemnts. 300K RMB has been paid by me from Helen Xia's personal funds to pacific shoji long time agim, which Chirs and Henry admitted in their email as attached as well. Regards Helen"
3. Pacific Shoji submitted that that email should be treated with caution as it was sent seven months after Ms Xia's employment was terminated and that it was contradicted by two other pieces of evidence. 1. The first was an exchange on 3 July 2013 between Ms Xia and Mr Spurrier between 11:44 and 11:47: HX: hi there HX: i got 300k into account CS: cool... HX: tim made it clear, it is for my personal loan HX: but i will let shoji use it first HX: there maybe exchange rate difference, when tim pays shoji back compare with now HX: low battery HX: we keep chatting , may cut off CS: Thanks very much helen, but before you go ahead with that, I don't want you to lend that to shoji, we would be taking it as a direct tim payment. Tim would still owe that to you.….Are you OK with that or not?" 1. There followed a series of statements by Mr Spurrier between 11:55 and 12:38. There was no response from Ms Xia until some 7 hours later. Pacific Shoji submitted that it was clear that Mr Spurrier did not agree that the RMB300,000 received from Mr Wang was to be treated as Ms Xia's personal funds. 2. Secondly, Pacific Shoji submitted that in her affidavit of 22 October 2015, Ms Xia had effectively confirmed that she had accepted Mr Spurrier's request in the July 2013 discussion that the funds received be treated as Pacific Shoji's. Her evidence was: "I knew there was a lack of logic to me allowing Shoji to use these funds that I was repaid by Tim Wang in preference to me, but I still felt some obligation to Pacific and to assist Chris Spurrier in some overtly generous way. This was because there were still some residual attempts by Chris Spurrier to have some kind of emotional control over me".
4. In response, Ms Xia submitted that on a fair reading of the whole of the evidence, her case was made out. She submitted (correctly) that she did not respond to Mr Spurrier's statement in the 3 July exchange reproduced above, and that the affidavit fell short of an admission, because of the obligation she felt to Mr Spurrier, as well as being inconsistent with her demand in May 2014.
5. Ms Xia submitted that the appropriate manner of dealing with the evidence was to assess it as a whole, together with consideration of the negative credit findings of the primary judge in relation to the director of, and chief witness for, Pacific Shoji, Mr Spurrier. She submitted that the totality of the evidence was that the funds were paid as a loan to Pacific Shoji and that where the parties' stories differed, the primary judge's credit findings ought to be accepted.

Consideration

1. It was accepted that there had been a transfer of RMB300,000 from the respondent's personal account to Pacific Shoji. The transfer of RMB100,000 seems to have been the subject of an interbank transfer dated 18 September 2013 and on 20 October 2013 (the same day as the "confession" conversation), Ms Xia sent an email to Mr Spurrier with the subject "tim 100krmb=17492aud" and the message "pls apply to inv 5146". It is not entirely clear when the RMB200,000 was transferred; both parties seemed to accept that that amount had been transferred to pay rent directly to an offshore landlord, apparently discharging Pacific Shoji's obligations. I shall proceed on the basis, favourably to Ms Xia, that that was a transfer to the benefit of Pacific Shoji.
2. The primary judge with respect correctly observed that the burden lay on Ms Xia to prove her case: at [130]. In order to make out that case, Ms Xia needed to establish more than the fact that Pacific Shoji had received funds from her personal account. She needed to establish to the civil standard the elements of a contract.
3. Neither the pleading nor her submissions descended to any detail as to the terms of the loan, and I proceed on the basis, favourably to Ms Xia, that the loan was repayable on demand. I also proceed on the basis that it was interest free (Ms Xia did not claim any interest pursuant to an agreement).
4. The primary judge made no findings of primary fact identifying when Ms Xia and Pacific Shoji agreed that the RMB300,000 would be lent and repaid. The gravamen of the reasons appears to be that the fact that Ms Xia transferred RMB300,000 of her own money of itself is sufficient to give rise to an entitlement to its repayment. With this I cannot agree. Although the circumstances are highly unusual, this is a case where, as the primary judge found, an employee who was a selling agent in China was required to pay from her own funds for sales made by her for which funds had not been received from the buyer. There is nothing to suggest that the payments were temporary loans, such that Pacific Shoji ultimately bore the solvency risk if a purchaser failed to pay. There is nothing to suggest that Pacific Shoji regarded the payments from Ms Xia as being loan funds, rather than the proceeds of sales.
5. Although Ms Xia is correct to submit that she did not agree, in the exchange of 3 July 2013, to treat the payment as the direct payment of a customer's debt, that does not discharge the burden borne by her of establishing that there was a promise by Pacific Shoji to repay funds to Ms Xia.
6. It is true that Ms Xia gave testimonial evidence, years after the event, of conversations in which Mr Spurrier was said to accept or acknowledge that she had lent money to Pacific Shoji. For example, Ms Xia said that on 16 May 2014 she and Mr Spurrier had had a conversation in the following terms: "CS: Hi Helen. Sonia and I met with Tony today. I just want to clarify things. He is going to pay all four pending invoices directly to us rather than through you. Is that ok with you? HX: No, that's not ok, because you've already taken my 300,000 CNY as payment for invoice 5146. This personal loan needs to be paid back to me and you haven't paid it back. You need to sort this out with me. CS: Ok, I've got the records for the 100,000 CNY transaction. Can you resend the details about the 200,000 CNY transaction so that I can sort repayment of the whole amount for you? I don't want trouble."
7. This Court has not had the advantage of seeing Ms Xia give evidence. However, there is no reason to doubt the qualified assessment of her uncorroborated testimonial evidence given by the primary judge, and in any event, neither party invited this Court to do so.
8. In respect of her claim to be repaid the RMB300,000, this was not merely a case where Ms Xia's testimony was unsupported by contemporaneous documentation (which was the position for those of her claims which the primary judge rejected). The contemporaneous documents were inconsistent with an entitlement to be repaid. In particular, the "confession" exchange of 20 October 2013 refers repeatedly to Ms Xia paying 300k back to Pacific Shoji ("i got 300k from tim .... I have paid u"; "I paid you back ... 100k and 200k") without any suggestion of this being a loan. Rather it was expressed by Ms Xia to be a payment to Pacific Shoji from funds she had received from Mr Wang, to whom she had covertly redirected the lobsters originally intended to be sold to Mr Chen.
9. I would conclude that the claim that the RMB300,000 was a loan has not been made out, and that these grounds of appeal are established.

Commission for the sale of the Dover factory (grounds 3 and 4)

1. The primary judge dealt with Ms Xia's claim for commission under six headings, at [150]-[170], which may be summarised as follows (using the headings deployed by her Honour).
2. First, under the heading "Was there an agreement to pay commission?", the primary judge found that under cross-examination Mr Spurrier conceded that the agreement and its essential terms were provided by the Skype conversation referred to above. He also agreed that Mr Cai, whom Ms Xia had located, had purchased the factory.
3. The matters under the second and third headings were not re-agitated on appeal. Secondly, under the heading "What was the sale price of the factory?", Mr Spurrier maintained that the sale price was $1.3 million, because rent of $150,000 plus a management fee of $75,000 were distinct. Her Honour observed that this was contrary to the Skype exchange. The third point ("The identity of the seller") reflected Ms Xia's cross-examination on the basis that the vendor was unconnected with Pacific Shoji. However, contracts for the sale of business, and the sale of land, were executed by Pacific Shoji (and signed by Mr Spurrier). The primary judge noted that the submission anticipated by the cross-examination was withdrawn, and (with a measure of understatement) that "it was not a meritorious argument to have put": at [155].
4. The fourth point raised before, but rejected by, the primary judge was that "The sale of the factory occurred after termination of the plaintiff's employment". The primary judge rejected Pacific Shoji's submission that Ms Xia was only entitled to commission if the sale was achieved while her employment was in place. The principal submission in support of these grounds of appeal was derived from this point.
5. Fifthly, a pleading point was taken, and rejected, fairly elaborately, by the primary judge at [164]-[167]. "... [T]he plaintiff set out in her statement of claim the following information: '12. Property Sale - Under the commission agreement, the plaintiff is entitled to commission on the sale of the defendant's factory in Dover, Tasmania. The plaintiff notes that this sale has not gone through yet, but the plaintiff is entitled to a commission of 10% for the sale price up to $1,000,000.00 and 20% for amounts from $2,000,000.00 and above. The plaintiff has encouraged the potential buyer, and personally paid internationally [sic] flights for the buyer, relying on the defendant's representation to her that she would receive commission on the eventual sale of the factory. As the plaintiff has relied upon the defendant's representations to her detriment, the defendant is estopped from refusing to the commission to the plaintiff on the eventual sale of the factory. However, as soon as the buyer confirmed the deal and payment method, the defendant purported to terminate the employment agreement and the commission agreement despite not having any legitimate grounds to do so.' The plaintiff also said in her affidavit "I believe I am owed approximately $150,000 which would have been my commission if the Dover factory was sold for the sum of AUD $1.5 million" (Exhibit A, paragraph 148). Both parties to this litigation conducted these proceedings with a degree of informality which results from the lack of case management available in this court to which, in the carefully managed Commercial Division in the Supreme Court, would have ensured that these issues were attended to. The statements of Ipp J needs to be read in this context. I also note that the submissions of Pacific Shoji as to equitable defences pleaded in the defence were late (1 March 2017) and perfunctory (and thus not answered by the plaintiff), and that the defendant did not plead to some of the plaintiff's heads of damages on the basis that the pleading was "embarrassing", but then proceeded to defend these claims vigorously at the hearing. Accordingly, I have not been prepared to hold the plaintiff to her pleadings any more than I have held the defendant's failure to plead to several of the plaintiff's claims, an issue which I consider should have been dealt with in the course of case management of these proceedings. I also note that the relevant documents in relation to the sale of the factory, which I am satisfied demonstrated that the factory was in fact sold for $1.55 million, were not produced until the end of the hearing, in circumstances of some controversy. Had those documents been produced under discovery, the plaintiff would have been able to amend her pleading."
6. Although this Court was taken to the pleading, and it was said that the allegations were "at a level of generality" (transcript, 27 June 2018, p 31), I did not understand the point to be renewed on appeal. If that be wrong, I see no error in the approach taken by the primary judge.
7. The sixth and final point was addressed under the heading "The sale price is $1.3 million, not $1.5 million". This submission turned on the propositions that Ms Xia was only entitled to commission if the sale price was $1.5 million or more, and that the sale of business was to be disregarded from the contemporaneous sale of the land. The primary judge rejected the submission, concluding at [170]: "In practical terms, the reference to commission was not limited in the Skype conversation or in any conversation between the parties in this pedantic fashion. The commission was for the sale of the Dover factory as a business asset rather than as a piece of real estate."

The parties' submissions

1. Pacific Shoji relied on the finding at [150] as to the terms of the contract, expressly based upon the exchange in October 2013, to demonstrate that if there was a contract pursuant to which Ms Xia was entitled to commission, it was a contract whose terms were to be found in that exchange. In writing (but, so far as I can see, not in oral submissions) it was said that "the terms as discussed on 5 October 2013 were insufficiently certain to bring about a binding contract." The main submission, both in the written and oral submissions, was that any contract could not merely be one that paid a commission as a "spotter's fee" but rather required Ms Xia to have been personally involved in achieving a price of $1.5 million. This was the significance of the relevant conversation being that of October 2013. It was submitted that: "But the relevance of the occasion when the agreement found by her Honour was reached is that it's plain from that agreement in October 2013 that the commission agreement was for payment of commission if there was a sale of land at 1.5 million or over. It wasn't an ordinary real estate agent commission agreement in the sense that if there's a sale, you get paid a commission. The subject of the discussion was you'll get paid a commission of 10% but only if you achieve a sale of 1.5 or over. Mr Spurrier says anything else will have to be discussed."
2. It was then submitted that Ms Xia was not involved in any of the negotiations about price, all of which occurred after 25 October 2013, and that what had occurred was that Mr Cai had chosen merely to rent for six months, subsequent to which he bought the factory. In reliance on what was said in Moneywood Pty Ltd v Salamon Nominees Pty Ltd (2001) 202 CLR 351; [2001] HCA 2, it was submitted that it was necessary for Ms Xia to establish that she was an effective cause of the sale of the factory at a price of at least $1.5 million. As it was put orally: "Here, there's a whole series of lengthy negotiations which occur about the price. And it was achieving a price that was the heart of this agreement, because that's what Mr Spurrier and the respondent are talking about on 5 October. They're talking about Mr Cai's offers being too low. What Mr Spurrier said, properly understood is, okay, he's talking about low offers, which implicitly I'm not interested in. If you can get him up to the price, you'll get this generous commission. But in terms of an effective cause of the sale at that price, the respondent adduced, in my respectful submission, no real evidence that she was an effective cause of the sale at that price."
3. Ms Xia accepted that the terms of the contract were that a commission of 10% was payable only if a price for the "factory" exceeding $1.5 million was reached. That occurred, so long as the separate sale of the business for $275,000 is included in addition to the $1.3 million for the land and Crown lease. Although the point had been taken at trial, it did not appear to be agitated on appeal. If it had, I see no error in the primary judge rejecting it in the manner that occurred: what was being sold was not merely the land, but also the business conducted on the land, and it is truly so obvious that it goes without saying that the agreement as to commission was based on the price achieved by all of the assets associated with the Dover factory, not merely the real property.
4. I would also reject Pacific Shoji's written submission that the Skype exchange was insufficient to give rise to contractual obligations. The exchange has been reproduced above. I see no error on the part of the primary judge, who saw the parties give evidence, and saw and heard the way in which Ms Xia earned and was paid a commission for the sale of the Taren Point property, in concluding that the above exchange, parts of which were light-hearted, nonetheless gave rise to a binding contract. It is to be borne in mind that the exchange happened at a time when the purchaser had visited the site (apparently at Ms Xia's expense) and was plainly interested in a purchase. The latter portion of the exchange made it plain that there was a reference to "not just an empty factory - its export business capabilities", which included regulatory approvals; this confirms the appropriateness of adding the price for the sale of business.
5. The principal point raised on appeal was that this was not a "spotter's fee" or "finder's fee" contract, but instead that the respondent needed to be involved in achieving the sale, rather merely than being the effective cause of the sale. That is quite different from the submission made to the primary judge, which was that because the sale occurred after Ms Xia's employment had been terminated, she was not entitled to commission. That submission is readily rejected, especially (as the primary judge noted) in light of what had occurred with the earlier sale of the Taren Point premises.
6. The more refined submission advanced on appeal must also be rejected, as one which had not been advanced at trial and cannot fairly have been advanced on appeal, in accordance with the principles described in Coulton v Holcombe (1986) 162 CLR 1; [1986] HCA 33. It is unnecessary to express any view as to whether the termination was caused by the lies she had told Mr Spurrier about the shipments to Mr Wang, or by a desire to avoid paying commission (or both). If the question is whether Ms Xia was the effective cause, notwithstanding the termination of her employment, that gives rise to different factual considerations which were not explored at trial. This was raised during the hearing in this Court: "LLOYD: ... I submit one of the main points in the substance of that opposition to this claim was that she had not been involved in a number of senses after 25 October. SACKVILLE AJA: Why was that? LLOYD: That she hadn't been involved after 25 October? SACKVILLE AJA: She'd been sacked? LLOYD: Correct. SACKVILLE AJA: Hasn't it got something to do with how you would assess the question of effective cause if that issue had been raised? LLOYD: No. SACKVILLE AJA: It's okay for someone who's undertaken an obligation to pay a commission to someone who happens to be an employee, to sack the employee and then say that the obligation to pay the commission hasn't materialised? LLOYD: It certainly wouldn't always be the position, and one could imagine many factual scenarios where that would not be okay, but this isn't one of them. SACKVILLE AJA: These are the sorts of things that would need to be agitated for this properly to be explored."
7. These matters were not explored by the primary judge, because no submissions were made in relation to them. It would be quite unfair for Pacific Shoji to succeed on a basis different from all six of the bases advanced by it at trial, by pointing to the absence of findings of Ms Xia's involvement in the transaction which ultimately eventuated with the purchaser she had introduced, in circumstances where the absence of findings may have been attributable to the way the case was run a trial.
8. These grounds of appeal are not made out.

Pacific Shoji's cross-claim (grounds 5-8)

1. Pacific Shoji had relevantly sought an order for damages or equitable compensation in the amount of some $117,865, which the primary judge rejected. That amount comprised the sum of the unpaid $50,388 owed on invoice 5146 (allowing for the receipt of $19,200) and $67,477 on invoice 5153. These were the invoices for "fully smuggled" shipments into Hong Kong (with the intention that they would be smuggled into mainland China without paying import duty) as to which Ms Xia lied to her employer and caused to be delivered to Mr Wang rather than to Mr Cheng.

The challenge to the finding of no breach

1. Pacific Shoji pleaded as a breach of employment contract claim that there were implied terms of duty and fidelity which the plaintiff breached by representing that she had sent the two shipments in question to the good customer (Mr Chen) when in fact she had sent them to the bad customer (Mr Wang) and that she had covered up her conduct in sending these shipments to the bad customer by a series of lies.
2. The primary judge concluded that Ms Xia's conduct "does not amount to breach of contract": at [225]. Her Honour said that Ms Xia was: "under enormous pressure to make more and more sales, and given total discretion how to do so, including insalubrious methods such as using her own bank account to channel large amounts of money, processing dummy orders which she knew were intended to avoid Chinese customs inspections, purchasing materials at her own expense and working very long hours without holiday leave".
3. Her Honour also stated that Ms Xia was under pressure to make sales, and did not act for her own personal financial gain, and that the conduct was using "the name of one customer for goods ordered by another". Her Honour said at [227]: "The plaintiff was an employee who cut corners under pressure from a difficult employer whose anger she appears to have been frequently subjected to (see, for example, the 9 February 2012 conversation recorded in Tab 14 to Exhibit 1). There is no evidence that the plaintiff was motivated by anything other than a desire to make sales for her employer. An employee whose error or unwise decision costs an employer money (as opposed to some deliberate wrongdoing such as stealing from an employer) cannot be liable in breach of contract to that employer for that loss, even where the employee lies about having committed that error. I was not directed to any authority in relation to such a proposition."
4. It was accepted in this Court that Ms Xia lied to her employer about the sales. There is no reason to doubt that she did so, at least in part, because she knew that Mr Spurrier did not wish to make more sales to Mr Wang. There may have been other reasons contributing to her decision.
5. This is not to excuse the treatment which the primary judge found was received by Ms Xia from Mr Spurrier, which no employee should receive. I am also conscious that both Ms Xia and Mr Spurrier were engaged in unlawful transactions. But that does not mean that an employee is free to lie to his or her employer about a material aspect of the employee's work on behalf of his or her employer.
6. In Concut Pty Ltd v Worrell [2000] HCA 64; 75 ALJR 312 at [25]-[26], Gleeson CJ, Gaudron and Gummow JJ said: "In Pearce v Foster, Lord Esher MR stated it to be a 'rule of law' that 'where a person has entered into the position of servant, if he does anything incompatible with the due or faithful discharge of his duty to his master, the latter has a right to dismiss him'. In Blyth Chemicals Ltd v Bushnell, in the course of considering the position of the respondent, who was the manager of the appellant's business, Starke and Evatt JJ said: 'As manager for the appellant, the respondent was in a confidential position. And it is clear that he might be dismissed without notice or compensation if he acted in a manner incompatible with the due and faithful performance of his duty, or inconsistent with the confidential relation between himself and the appellant.' In the same case, Dixon and McTiernan JJ said: 'Conduct which in respect of important matters is incompatible with the fulfilment of an employee's duty, or involves an opposition, or conflict between his interest and his duty to his employer, or impedes the faithful performance of his obligations, or is destructive of the necessary confidence between employer and employee, is a ground of dismissal.' Contractual obligations and fiduciary duties have different conceptual origins, 'the former', in the words of McLelland J, 'representing express or implied common intentions manifested by the mutual assents of contracting parties, and the latter being descriptive of circumstances in which equity will regard conduct of a particular kind as unconscionable and consequently attracting equitable remedies'. Formulations of the obligations of an employee in terms such as those in Pearce and Blyth Chemicals may be understood, Professor Finn has pointed out, as the re‑expression of equitable obligations in terms of implied contracts. If so, the importation is well established and beneficial, and nothing turns upon it for present purposes." [citations omitted].
7. An attempt was made in submissions to defend the reasoning of the primary judge: "SACKVILLE AJA: Is it not an implied term of an employment contract that the employee will not deliberately mislead the employer about a matter of significance to the employment relationship or the conduct of the business? SHER: Yes. That is potentially an implied term of the contract. SACKVILLE AJA: Isn't that what is said to have happened here? SHER: My friend also dealt with what he said were the different actions of misleading. LEEMING JA: He says it's a lie. SHER: Yes. LEEMING JA: That's his language and I can see why. He says your client lied to him on 18 or 19 January in connection with what he describes as the second shipment. SHER: Correct. LEEMING JA: He says that she told him that this was going to Tony, when in fact it was going to Mr Tim Wang. SHER: Yes. LEEMING JA: He says that's a lie. He says that would be a breach. SHER: Yes. LEEMING JA: If it is a lie, at the moment I'm quite persuaded that it is a breach subject to hearing from you. SHER: The first point to be made is that that evidence, we don't concede that that is in fact what occurred. That evidence is disputed. We say that it was never said to him that this is going to Mr Chen. We say that the respondent took on her own initiative to redirect those sales. LEEMING JA: What about the contemporaneous chain? "Is that confirmed for Tony to Hong Kong? A. Yes, Saturday, Tony." This is 168, the exchange on 19 January, in the blue book concerning the so-called second shipment, which I find it a little difficult to understand. SHER: We say that at this point our client was still of the intention of sending it to Tony. It's only once this stock landed that in fact the sizes were too big. Mr Chen, on our client's version, wanted smaller stock, and only once this stock landed did it become apparent it was too small. He rejected the stock and then she took it on her own initiative to on-sell it to Mr Wang. MCCOLL JA: Yes, but when Mr Spurrier came to China in February 2012 to try and chase up these debts, invoices 5153 and 5146, which on his understanding related to boxes of sales to Mr Chen and he asked to meet Mr Chen to follow it up, she didn't disabuse him and say no, Mr Wang took those boxes. She told him Mr Chen was out of town and in due course that he was in gaol. SHER: I don't believe, and it may be that I have missed it, but I think that it was never said to respondent, "I want to speak to Mr Chen about invoices X, Y or Z, 5146." He just requested to meet with Mr Chen to speak about amounts owing. I don't believe that specifically those invoices were necessarily the subject of a discussion he wanted to have with Mr Chen at that point. MCCOLL JA: By the end of March 2012, according to Mr Lloyd, following the crackdown on seafood importers, which raised a high degree of concern about recovery of the amounts they owned the appellant, according to Mr Lloyd the amounts outstanding were those amounts Mr Wang owed and these two invoices, which on my understanding was that Mr Spurrier still understood represented a debt owed by Mr Chen. Wasn't that the context? And that was a matter that the respondent must have known through the next 15 or 16 months before she told Mr Spurrier that in fact she had been lying to him for the last period. SHER: Yes, the confession was made and that is conceded. What we submit is how the confession occurred is that not I did something wrong in redirecting the sales, but the fact that I didn't inform you earlier about the redirecting of these sales. …"
8. Contrary to the conclusions of the primary judge, and the submissions made in this Court on Ms Xia's behalf, I would regard this as a case of breach of contract. There is no reason to doubt, not least from the "confession" exchange, that Mr Spurrier lost confidence in his China-based sales agent when she "confessed" that she had lied to him about sales, and that Ms Xia appreciated that that would be his reaction.
9. The reasons of the primary judge in this respect are abbreviated. They do not contain the findings which are required in order to accept Ms Xia's submission outlined above. As was evident from the Court's questions during the hearing, the finding for which Ms Xia contended has, with respect, an air of unreality about it. Its premise is that Mr Tony Chen rejected the first shipment of lobsters (invoice 5146), leaving Ms Xia to find another purchaser. According to Ms Xia, Mr Chen rejected the shipment when he inspected it. It follows that this occurred after the exchange between Ms Xia and Mr Spurrier on 16 January concerning the late change to the paperwork when she told her employer "TONY ASK TO USE CHAMPION THIS TIME". Thus, on Ms Xia's case, this was a shipment where (a) details and price had been agreed before 16 January, (b) there was a late change instigated by Mr Chen shortly before despatch and (c) subsequently, on its arrival in Hong Kong, Mr Chen rejected the shipment, leaving it to Ms Xia to find another purchaser. Let all that be assumed. Where did the $19,200 received by Pacific Shoji on 17 January 2013 come from? Ms Xia told Mr Spurrier that that money came from Mr Chen, yet on her case he never received any product. Further, it is clear that 3 days later, on 19 January 2012, Ms Xia was unequivocally confirming that she had sold the second shipment (invoice 5153) to Mr Chen (the exchange includes "CS: IS THT CONFIRMED FOR TONY TO HK? HX: YES SAT TONY 20C 20 D 4-5E"). On her case, that was after Mr Chen had rejected the first shipment.
10. The primary judge considered that there was "real doubt" about whether Ms Xia's statements to Mr Spurrier about Mr Chen wanting shipments were true": at [211]. However, for the purposes of resolving this appeal, it is not necessary to go further. Even if the entirety of Ms Xia's account of what occurred in the third week of January 2012 be accepted, there is no escaping the fact that, as McColl JA observed during the hearing, Mr Spurrier although he travelled to China was unable to meet with Mr Chen. It is inconceivable that he did not have in mind precisely what each of Mr Chen and Mr Wang at that point owed Pacific Shoji. It is inconceivable that Ms Xia did not know as much. There can be no doubt that Ms Xia concealed from Mr Spurrier the identity of the actual recipient of both shipments for many months, until the "confession" exchange. It is plain from the "confession" exchange of 20 October 2013 that Ms Xia well appreciated that Mr Spurrier would be displeased when he discovered that the shipments had been sold to Mr Wang rather than Mr Chen.
11. True it is, as Ms Xia submitted, that it was at least arguably within the scope of her authority to reallocate or redirect shipments. However, assuming that to be so, her conduct in concealing from Mr Spurrier that most of the debt was owed by Mr Wang, rather than Mr Chen, in circumstances where Mr Spurrier was so concerned that he flew to China to attempt to see both men, was conduct destructive to the necessary trust and confidence that was required of an overseas-based sales employee, thereby breaching an implied term of her contract of employment (which had been pleaded in Pacific Shoji's cross-claim and admitted in Ms Xia's defence to cross-claim).
12. This was not a case where a company's products were sold to a different purchaser, about which an employee told a lie which had no impact upon the employer or its business. This was a case where a company's products were sold on credit to a different purchaser, being a purchaser which, to the knowledge of the employee, had a poor credit history and which in fact has failed to pay for the goods.
13. For those reasons, and contrary to the finding of the primary judge, I consider that Pacific Shoji established that there was, at the least, a breach of contract by Ms Xia in failing to disclose to Mr Spurrier that in fact she had redirected the first and second shipments to Mr Wang.
14. However, and to be fair, the likely reason for the absence of detailed findings of fact by the primary judge on this issue is that her Honour dealt more elaborately with what she described as "the real problem for the cross-claim, namely that the plaintiff's conduct has not led to any loss": at [228], because there was "no evidence that the money is unrecoverable from Mr Wang, who has signed a statement acknowledging his indebtedness".

Causation

1. For completeness, I note that an attempt was made in Pacific Shoji's written submissions to regard the way this issue was treated by the primary judge as based on novus actus interveniens and mitigation, neither of which had been pleaded. On a fair reading of her Honour's reasons (including what is said in [228], the headings preceding [229] and especially [255] "Conclusions concerning causation" and what was said at [255] and the ultimately conclusion at [261]: "I am satisfied that, if I have erred in relation to my findings as to the cross-claim in relation to breach of contract (set out above) and breach of fiduciary duty (set out below), the cross-claimant would nevertheless fail because causation has not been established", her Honour squarely rejected this element of Pacific Shoji's common law claim for breach of contract. Oral submissions in this Court proceeded accordingly.
2. There were in theory two possible ways in which causation for Pacific Shoji's claim for damages could be established. The first is that if there was a breach by Ms Xia in selling to Mr Wang, without informing Mr Spurrier that she was doing so, then the sales would not have been made and Pacific Shoji would have sold the shipments at the same price to a customer who would have paid. The second, for which is it sufficient for Pacific Shoji to establish a breach by Ms Xia in concealing from Mr Spurrier the fact that she had caused sales to be made to Mr Wang, was that Pacific Shoji, had it known earlier, could have recovered payment from Mr Wang, but by reason of the delay, was now no longer able to do so.
3. I understood the gravamen of Pacific Shoji's submissions on appeal to be directed to the second basis, being the basis which corresponds with the breach I have found to have been established. However, for the purpose of resolving these grounds of appeal, it may be assumed (favourably to Pacific Shoji) that Ms Xia lied to Mr Spurrier at the time the first and second shipments were despatched, and that that too amounted to a breach of contract, for it may readily be seen that no separate loss caused by that breach was made out.
4. This first way of formulating the case was that if it had been known that sales were to be made to Mr Wang, they would have been made to other purchasers from whom recovery was less difficult. The only evidence adduced in support of sales being made to another purchaser was some testimonial evidence from Mr Spurrier. That is insufficient, even putting to one side the difficulties associated with such inevitably self-serving counter-factual evidence on reliance, having regard to the unchallenged adverse findings as to Mr Spurrier's credit. More importantly, as will be seen below, it is inconsistent with the actual sales summarised by Mr Spurrier in his own affidavit.
5. I turn to the claim for losses caused by the breach which I am satisfied occurred. The starting point is what is established objectively. This may be summarised as follows.
6. First, in addition to a sale to Mr Wang on 5 January, Pacific Shoji made further sales to Mr Wang on 20 and 24 January 2012, in the amounts of $18,456.78 and $64,210.51 respectively. Ms Xia pointed to these as an answer to the case. In reply, Pacific Shoji acknowledged their force. The later two shipments are powerful evidence of a preparedness to sell at Chinese New Year prices to Mr Wang on credit.
7. Secondly, although Mr Chen and Mr Wang were regarded by Pacific Shoji as carrying different solvency risks, the fact of the matter was that Pacific Shoji was prepared to sell, and did in fact sell, shipments of product to them on credit, thereby accepting the solvency risk. Both Mr Chen and Mr Wang were, to the knowledge of Pacific Shoji, purchasers who were attempting to avoid Chinese customs duties. With the benefit of hindsight, it is known that both men were arrested shortly afterwards. Neither paid promptly.
8. Thirdly, Mr Spurrier's own evidence was that: "[although Tony Chen] had a significant level of debt with Pacific Shoji, I was still prepared to ship lobster to Tony because he had a good track record of paying his accounts to Pacific Shoji and Pacific Shoji had a lot of high priced lobster stock that it needed to ship. I believe that if Pacific Shoji did not sell all the stock before Chinese New Year, the market price would drop and Pacific Shoji would be caught with high priced stock that it would have to sell at a reduced price."
9. Fourthly, there is no suggestion that there was some other purchaser, who was prepared to pay cash for product which, despite its being frozen, was presumably perishable. There was evidence from Mr Spurrier that the original difficulty with Mr Wang was that he had, in 2009, sought to reduce the payment on a shipment because of a mortality claim, which Pacific Shoji rejected because the inspection took place after the time allowed by Pacific Shoji. That confirms the readily drawn inference that the product was perishable. And there seems to have been no issue that Pacific Shoji sought to sell in the period leading up to Chinese New Year in order to capture the higher prices that could then be achieved.
10. Fifthly, Pacific Shoji has the benefit of Mr Wang's undertaking to pay. Mr Spurrier gave evidence that Mr Wang undertook to pay him orally, and Mr Wang has signed an undertaking to do so, which was tendered before the primary judge. Her Honour noted at [256] that: "Mr Spurrier was unable to explain why Pacific Shoji had not commenced proceedings in China for the recovery of these sums. While a plaintiff is not under any duty to bring risky litigation to mitigate his loss and damage (see Pilkington v Wood [1953] Ch 770 at 777; Dhaildeal v Pade [2003] NSWCA 16; Bebonis v Angelos (2003) 56 NSWLR 127), a plaintiff who failed to commence proceedings against a defendant who has given a signed statement stating that he and his company owe the sums sought cannot escape an argument that there has not only been a failure to mitigate but a break in the chain of causation. There is no evidence that the court system in China is anything other than ready, willing and able to hear what would be a simple commercial debt claim."
11. In oral submissions, Ms Xia adopted a slightly more nuanced approach, reflecting the second way in which Pacific Shoji might establish causation: "SACKVILLE AJA: I have some difficulty with the submission that he's acknowledged the debt, it's only a question of invoking the Chinese legal system and all will be well. It seems to me that might be a somewhat optimistic view about Mr Wang's solvency and willingness to pay. But I can understand the submission that says in order to make out a compensable loss, what the appellant would have to do would be to demonstrate that had it known in 2012 what the true situation was, when it was misled by the respondent, and making assumptions about fact finding, it could then have taken action against Mr Wang and recovered funds that now it cannot recover because something has happened in the intervening period. Your submission presumably is there's no evidence that Mr Wang was in a better position to pay in 2012 than he was in 2014 or 2017 when the trial was. SHER: Yes, that is how we would place it before the Court."
12. That submission acknowledges the reality that Pacific Shoji was prepared to sell product, on credit, to overseas customers, who to its knowledge were involved in attempts to evade their obligations to pay import duties. Doing so led to Pacific Shoji being the unsecured creditor of those purchasers. That is precisely the situation in which it remains today, based on Mr Wang's written and oral promises to pay.
13. Against this, Pacific Shoji pointed to the fact that there was some evidence that Mr Wang had funds available to pay Ms Xia who helped him pay some other of his debts. Ms Xia gave evidence that she had personally paid some of his debts, and he had repaid her. That does not assist Pacific Shoji. Mr Wang regarded Ms Xia as having been poorly treated by Pacific Shoji, a perception borne out by this litigation. The fact that Mr Wang repaid Ms Xia, who had used her own funds on his behalf while he was in gaol, does not support the conclusion that Mr Wang would have paid Pacific Shoji, which had poorly treated his friend and benefactor Ms Xia.
14. Otherwise, there was no evidence of Pacific Shoji's inability to sue Mr Wang or his company, whether in China or in Australia, nor of his inability to meet the obligation which he accepted he owed.
15. It follows that no sufficient case has been advanced to establish that Pacific Shoji has suffered loss by being denied the chance to obtain payment from Mr Wang earlier, in 2013 or 2014. For those reasons, Pacific Shoji has failed to show error in the principal conclusion which was dispositive of its cross-claim, namely, that Ms Xia's breach of contract was not causative of the loss. As noted at the outset of these reasons, it was accepted that the claim for breach of fiduciary duty could go no higher than the claim in contract.

Orders

1. The result is limited success for Pacific Shoji, confined to grounds 1 and 2. The judgment of damages of $268,739.14 (exclusive of interest) should be reduced by $57,972.01, resulting in a judgment of $210,767.13 (exclusive of interest) in favour of Ms Xia.
2. The materials in the appeal books do not disclose how interest was calculated. However, it should be a straightforward matter for so much of the pre-judgment interest as was attributable to the $57,972.01 component of the judgment to be deducted from the $52,926.17 of interest which was ordered at first instance. The orders below will provide for this to be computed by the parties.
3. In light of the multiplicity of issues at trial, Pacific Shoji's limited success on appeal does not warrant an alteration to the exercise of the discretion of costs at first instance, for Ms Xia still emerges with a substantial judgment in her favour.
4. The costs of the appeal are another matter, although they will be very significantly smaller than the costs at trial. I am also conscious that these parties have a proven capacity to engage in disputation, which tends against an order dividing costs by issues, such that Ms Xia should pay Pacific Shoji's costs of grounds 1 and 2 of the appeal, and Pacific Shoji should pay Ms Xia's costs of grounds 3-8 of the appeal; such an order could not be quantified without regard being had to both side's costs. Taking the broadbrush approach consistently with Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219, Pacific Shoji should pay 60% of Ms Xia's costs in this Court.
5. For those reasons, I propose these orders:
6. Appeal allowed in part.
7. Set aside the judgment in favour of Ms Xia on her claim in the amount of $268,739.14 plus interest in the amount of $52,926.17 dated 31 August 2017, and in lieu thereof, enter judgment in favour of Ms Xia in the amount of $210,767.73 plus interest, with effect from 31 August 2017.
8. Direct the parties to file and serve, within 7 days, an agreed calculation of interest, or their separate calculations of interest, for the purposes of order 2 above.
9. Pacific Shoji to pay 60% of Ms Xia's costs of the appeal.
10. SACKVILLE AJA: I agree with Leeming JA.

Amendments 28 November 2018 - [94]: Quotation, first sentence, "Lord Esher Mr" changed to "Lord Esher MR" 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: 28 November 2018