Pierrot Song Pty. Limited & Ors. v. Lee & Anor. [1999] NSWCA 474

Monday 20 December 1999 PIERROT SONG PTY. LIMITED & ORS. V. LEE & ANOR. JUDGMENT

1 PRIESTLEY, JA: I agree with Hodgson, CJ in Eq. 2 GILES, JA: I agree with Hodgson, CJ in Eq. 3 HODGSON, CJ in Eq.: By their Amended Statement of Claim in these proceedings, the respondents Mr. and Mrs. Lee claimed that they had been induced to enter into a contract to purchase from the second and third appellants Mr. and Mrs. Jung a house property at West Chatswood for $650,000.00, and to enter into other contracts and incur certain expenditure, by fraudulent representations made by Mr. Jung to the effect that he had paid $650,000.00 for that property; they claimed that they had rescinded these contracts; and they sought declarations and orders including orders for the recovery of moneys paid and damages. 4 Hamilton, J. found that Mr. and Mrs. Lee's claims were made out, and he made orders in their favour, including a declaration that they had validly rescinded the contracts, and judgments for about $206,000.00 against the first appellant Pierrot Song and for about $348,000.00 against Mr. and Mrs. Jung. 5 The appellants appealed from that decision. At the hearing of the appeal, Dr. Birch SC announced his appearance for Mr. and Mrs. Jung and advised the Court that his solicitor no longer had instructions to act for Pierrot Song. There was evidence that Mr. and Mrs. Jung had sold their shares in this company after the appeal was lodged, and that the purchaser had sold them on to a further purchaser. Pierrot Song was notified of the upcoming hearing of the appeal by letter sent to its registered office, being an accountant's office, and attempts were made to notify the person now in control of the company, although the accountant's office advised that they had lost contact with that person. In those circumstances, the Court made orders allowing the appellants' solicitor to file a Notice of Ceasing to Act for Pierrot Song, with effect from the commencement of the hearing, and the hearing proceeded in the absence of Pierrot Song. 6 Also at the hearing, there was filed on behalf of Mr. and Mrs. Jung a Notice of Motion seeking orders that the Court receive evidence additional to that in the Court below, and that the Notice of Appeal be amended to add a ground of appeal that the trial judge's order should be set aside on the ground that fresh evidence showed that the representations found by the trial judge were not made. The hearing proceeded on the basis that the Court would receive the fresh evidence in support of this Notice of Motion, and would decide whether or not to receive it in the appeal in the final decision of the appeal. Accordingly, evidence was read by both sides in the Notice of Motion. 7 In argument before us, only two matters were relied on in support of the appeal:

(1) That fresh evidence should be admitted with the effect noted above. However, it was conceded that the result of success on this ground would have to be a new trial of the proceedings.

(2) That the trial judge was in error in finding that the representations alleged by Mr. and Mrs. Lee were, if made, causative of the entry into the contracts or otherwise causative of any loss.

OUTLINE OF FACTS 8 In order to understand these grounds, it is necessary to say a little about the facts. 9 Mr. and Mrs. Lee, and also Mr. and Mrs. Jung, are of Korean origin. At the relevant times, Mr. and Mrs. Jung controlled Pierrot Song, a company which conducted a business of selling clothes and granting franchises to sell clothes. 10 In December 1995, Mr. and Mrs. Lee first visited Australia. In January 1996, they caused to be lodged in Korea an application for permanent residence in Australia, and apparently they caused to be lodged with that application a substantial sum of money. 11 On about 24th June 1996, Mr. and Mrs. Lee were advised that this application had been refused. At about the same time, they first met Mr. and Mrs. Jung in Sydney. 12 There were further meetings between Mr. and Mrs. Lee and Mr. and Mrs. Jung in September and October 1996. Mr. and Mrs. Lee's case was that, at some of these meetings, Mr. Jung represented to them that he and his wife had paid $650,000.00 for the West Chatswood house. 13 On about 8th October 1996, a verbal agreement was reached that Mr. and Mrs. Lee would buy this house from Mr. and Mrs. Jung for $650,000.00. At around the same time, a verbal agreement was reached that Mr. and Mrs. Lee would purchase a business from Pierrot Song for $180,000.00. 14 From about 21st October to about 28th October 1996, Mrs. Lee was in Korea. While in Korea, she paid $430,000.00 to Mrs. Jung on account of the two purchase transactions, $250,000.00 in respect of the house and $180,000.00 in respect of the business. It would appear that this was paid from money withdrawn from money deposited in support of Mr. and Mrs. Lee's residence application, and that this had the effect of bringing that application to an end. 15 Mr. and Mrs. Lee moved into the West Chatswood house on 2nd November 1996, and they took up possession of the shop at which the business purchased from Pierrot Song was conducted on 15th November 1996. Also during November 1996, Mr. and Mrs. Lee and Mr. and Mrs. Jung attended at the office of Keith Kwon, Solicitor, at Campsie, and signed contracts for the purchase of the house and the purchase of the business. The contract for the purchase of the house stated the price to be $550,000.00, but it is common ground that the true price continued to be $650,000.00. 16 In early December 1996, Mr. and Mrs. Lee became dissatisfied with the transaction. They consulted Mr. Peter O'Neil, Solicitor, on 2nd December, and consulted a barrister in attendance with Mr. O'Neil on 3rd December. On 6th December, they closed the shop, and on 16th December 1996 they moved out of the house. It is common ground that they thereby abandoned the transactions and that they refused to complete them. Subsequently, out of $250,000.00 paid on account of the house, $195,000.00 was returned to Mr. and Mrs. Lee by Mr. and Mrs. Jung: however, Mr. and Mrs. Jung retained $55,000.00 and Pierrot Song retained the $180,000.00 paid for the business. 17 In January 1997, Mr. and Mrs. Lee consulted a new solicitor Mr. Rogers, who obtained property searches and other documents. It appears that it was then that Mr. and Mrs. Lee first found out that Mr. and Mrs. Jung had paid $509,000.00 for the Chatswood house, the purchase of which had been completed by them only on 9th August 1996. 18 The proceedings were commenced by summons filed 30th January 1997, and a Statement of Claim was filed in April 1997. Mr. and Mrs. Lee claimed the return of $180,000.00 plus interest from Pierrot Song, the return of $55,000.00 plus interest from Mr. and Mrs. Jung, and damages against Mr. and Mrs. Jung for the $180,000.00 paid to Pierrot Song and other expenses. 19 On 10th June 1998, Hamilton, J. delivered judgment, the substance of which I have already noted.

SUBMISSIONS 20 It is convenient to deal with both issues together, because Dr. Birch SC sought to rely on their cumulative effect. 21 Dr. Birch noted that in these proceedings, there was no allegation of any material misrepresentation in respect of the business, or in respect of Mr. or Mrs. Jung's ability to solve the Lees' residence problems. The Lees gave evidence of a number of conversations, in some of which the representation about the $650,000.00 purchase price was allegedly made. Each of the alleged representations was denied by Mr. Jung and where relevant by Mrs. Jung. The case was one of word against word. 22 Hamilton, J. considered the credit of the main witnesses, and found Mr. Lee to be not an entirely satisfactory witness. He considered Mrs. Lee to be the most impressive of those who gave oral evidence. He found Mr. Jung to be a most unimpressive witness, ready to tell untruths which appeared favourable to his case at the time or, at the very least, to give answers that seemed to him appropriate, not caring whether or not they were true or whether they corresponded with his earlier evidence; and he found Mrs. Jung also an unimpressive witness whose evidence was of virtually no value. 23 The fresh evidence sought to be relied on comprised depositions given by Mrs. Lee at the office of a prosector in Korea in September 1998 and January 1999. Dr. Birch submitted that these depositions contradicts the evidence given by Mrs. Lee, and also by Mr. Lee, before Hamilton, J. 24 Dr. Birch took us to the evidence before Hamilton, J. He referred us to an exchange set out in Mr. Lee's affidavit, where Mr. Lee is recorded as saying to Mr. Jung "But we don't have a business visa in Australia and we are not permanent residents yet. We are in the process of applying for permanent residency"; to which Mr. Jung is recorded as responding "There will not be any worry about a visa if you come into the business. The man who is about to open the Campsie shop does not have permanent residence. So long as you buy a home and a business you don't need to worry about residence status. There are many people who do business in Australia with temporary visas". Dr. Birch pointed out that the issue of residence was not re-visited in Mr. Lee's affidavit, and that this affidavit asserted that Mr. Lee would not have entered into the arrangements with Mr. and Mrs. Jung if he had not believed they had recently acquired the Chatswood property for $650,000.00. Mrs. Lee's affidavit merely confirmed the conversations in Mr. Lee's affidavit, and asserted Mrs. Lee's belief that Mr. and Mrs. Jung had paid $650,000.00 for the house, and asserted that if she had known that they had purchased the property for $509,000.00, she would not have agreed to proceed with the transactions. 25 Dr. Birch then took us to Mrs. Lee's oral evidence, first to two answers in which Mrs. Lee asserted that Mr. Jung had said something about residence, in the following terms: "I was told some other lady got the house and business so she could stay here. We should go through the same procedure, buy a house and business, and stay here as a business migrant"; and "I was told there is no need to invest in this country as long as I buy a house and business and stay as business migrant and also I was told that Australia - in Australia business is really good". We were referred to a further answer where Mrs. Lee said "We were told 'buy the house and shop and solve visa problems'"; and to the two answers where Mrs. Lee said that Mr. Jung said that he bought the house for $650,000.00. In respect of those answers, Dr. Birch submitted that they were drawn out by the plaintiffs' barrister returning to the matter again and again. He submitted that there was nothing in the evidence to suggest that Mr. and Mrs. Jung were to take over the procurement of visas and residency. 26 Dr. Birch then took us to a number of passages from the depositions in Korea. First, to the following passage from depositions given on 30th January 1999: Q. The defendants are claiming that the witness cancelled the sale contracts because the defendants took excessive profits not because of deception by luring the permanent residency. What do you say to that?

A. We cancelled the contract because they deceived us by saying that they would get us the permanent residency. Therefore what the defendants are saying is false.

Q. The reason why their sayings are false is known from the fact that the witness had no reason to invest a large amount of money if the defendants were not going to assist the witness with the residency matter and it is also known from the fact that the witness had withdrawn the investment migration application on the day the witness paid the full amount to the defendants, 24th October 1996. The reason for the witness to cancel the contract was because the defendants tried to take money from the witness cheating on the repair cost and also because they said that they were the permanent residents. Is this true?

A. Yes. They said they obtained their residency 18 years ago.

Q. Counselling with some other solicitor not with the one whom the defendants introduced, you found out that you were cheated by the price of the defendant's house which was reported as $550,000.00 not $650,000.00 which was less by $100,000.00 and despite you had paid the full amount it was noted that $550,000.00 was paid as a deposit. As a result, you revoked the contract, is it right?

A. Yes. 27 Next, Dr. Birch referred us to the following passage from depositions given on 12th September 1998: Q. According to the defendants, you revoked the contract not because the defendants did not get you the permanent residency but because you claimed the defendants took excessive profit in the process of sale. They assert that they have never promised you the permanent residency. Isn't it true?

A. Not. It is not true. When we decided to purchase Jung Hun Guk's house and shop investing all our assets, we did not have any intention to do business in Australia. The reason for investing almost the same amount to the required investment migration application was that we trusted Jung Hun Guk since he said he would assist us in obtaining the residency. 28 Dr. Birch then took us to the following passage from depositions given on 2nd September 1998: Q. Would you please state the reason for this action again?

A. The defendants, Song Suk Ja and Jung Hun Guk are husband and wife. Despite that they did not have any ability to grant us Australian permanent residency, they lied and deceived us that they would solve the residency problem if we purchased their house and shop which was located in Chatswood. Therefore we made the sales contract with them and wer paid $250,000.00 (bank loan $400,000.00 excluded) for sale amount and $180,000.00 for the equipment and the stock of 'Pierre Song' shop in Chatswood.

Q. The reason for this proceeding was that the defendants, Jung Suk Ja and her husband made you to purchase their house and shop using Australian Permanent Residency as a bait without the ability to grant it?

A. Yes, that's correct. We made the contract to purchase the defendants' house and shop because they said they would solve our residency problem. They said we needed the documents of purchase of house and business in order to obtain the residency. But later we found out that Mr. and Mrs. Jung had bought their house at $509,000.00 and made contract with us at $650,000.00 one month after. 29 Dr. Birch submitted that, when one has regard to this material, and to the circumstance that Mr. and Mrs. Lee abandoned the transactions before they found out what Mr. and Mrs. Jung had paid for the house, it could be inferred that Mr. and Mrs. Lee felt they had been "stung", and that after abandoning the transaction, they came up with the allegation of the $650,000.00 representation. The depositions from Korea showed that this was not in fact something that had been lied about, nor was it something which induced them to enter into the contract. 30 Dr. Birch relied on written submissions, and on the principles governing reception of fresh evidence set out in Doherty v. Liverpool Hospital (1991) 22 NSWLR 284; Vernon v. Bosley No.2 (1999) QB 18 at 29; and Mulholland v. Mitchell (1971) AC 666 at 680. He submitted that the admissions made by Mrs. Lee in the Korean depositions were so strongly inconsistent with the central parts of her evidence and the evidence of her husband given at the trial that they falsify a central assumption made by Hamilton, J. The fresh evidence contradicted the assertion that the operative misrepresentation which induced the sale was that the house property had been bought for $650,000.00; and it strongly suggested that this representation was not made. 31 In relation to the other issue on the appeal, Dr. Birch submitted that an erroneous finding of fact appeared notwithstanding the principles set out in Abalos v. Australian Postal Commission (1990) 171 CLR 167; cf State Rail Authority of NSW v. Earthline Constructions Pty. Limited (1999) 73 ALJR 306 at 307. 32 Dr. Birch submitted that Mr. and Mrs. Lee repudiated the transaction before they knew about the price Mr. and Mrs. Jung had paid for the house and through their solicitor asserted that the contract had been vitiated. The written contract showed a price of $550,000.00, and Mr. Lee admitted in cross-examination that he had been told by Mr. and Mrs. Jung that they had substantial capital gains and had to pay money to the government. The understatement of the purchase price was at the instigation of Mr. and Mrs. Jung. The overwhelming likelihood was that Mr. and Mrs. Lee were aware that the understatement of purchase price was to do with capital gains tax liability, which was inconsistent with inducement by a belief that Mr. and Mrs. Jung had paid $650,000.00 for the property. 33 Mr. Callaghan SC for Mr. and Mrs. Lee submitted that there was no real inconsistency between the evidence given before Hamilton, J. and the Korean depositions. In the proceedings before Hamilton, J., the claim was based on the $650,000.00 misrepresentation, and not upon any representation concerning the obtaining of visas or residency. However, evidence had been given that such representation was in fact made: in addition to the material in Mrs. Lee's evidence, Mr. Callaghan referred us to oral evidence given by Mr. Lee that Mr. Jung had told him "that my visa problems and permanent residence problem would be resolved"; and that "he will organise everything and manage everything, including permanent residence". Mr. Callaghan also referred us to a transcript of a decision of the Seoul District Court in Korea in civil proceedings between Mr. and Mrs. Lee and Mr. and Mrs. Jung, in which the following passages appear: a. Plaintiffs argue that: the defendants have fraudulently represented that they are able to obtain a permanent resident visa for the plaintiffs and that they had purchased the subject house at A$650,000; being so deceived, they have entered into the sale and purchase contracts for the subject house and subject store, as well as the subject repair agreement (hereinafter collectively referred to as the "subject contracts" where applicable), and paid the said purchase prices for the subject house and subject store as well as the repair costs; and they have thereby incurred damages in the said respective amounts, and therefore the defendants each are liable to compensate for the plaintiffs' damages. In response, defendants argue that they have not defrauded the plaintiffs.

b. Upon consideration, defendants are liable to the plaintiffs for the damages they have incurred, in view of the facts accepted above, i.e., the defendants had no means of obtaining permanent resident visas for the plaintiffs or solving their immigration problem, and there was no direct relationship between issuance of the permanent resident visas and the purchase of the subject house and subject store, but nevertheless made statements to the plaintiffs to the effect that plaintiffs will be able to obtain permanent resident visas if they purchase the subject house and subject store; they further lied to the plaintiffs that the purchase price of the subject house was A$650,000 even though it was A$509,000; and believing these statements of the defendants, plaintiffs entered into the subject contracts with the defendants, and paid the purchase prices and costs thereunder. Therefore, the fraudulent acts of the defendants were tortious acts towards the plaintiffs, and thus the defendants are liable to compensate the damages incurred by the plaintiffs.

That material was put into evidence by the respondents in answer to Mr. and Mrs. Jung's evidence in support of their Notice of Motion.

DECISION 34 It is convenient to deal first with the second ground relied on, considered without reference to the fresh evidence. 35 There is force in the submission that the reference to a price of $550,000.00 in the contract, the admission by Mr. Lee that he understood that Mr. and Mrs. Jung had a lot of capital gains and had to pay money to the government, and the repudiation of the transaction before Mr. and Mrs. Lee found out that the true purchase price had been $509,000.00, are strong considerations against a finding that Mr. and Mrs. Lee were induced to enter into the transactions by a fraudulent misrepresentation that the house had been purchased for $650,000.00. 36 However, a reading of the whole of Mr. Lee's evidence indicates a lack of clarity in appreciation of how the understated purchase price would save Mr. and Mrs. Jung having to pay money to the government, and also indicates that any reference to capital gain was not necessarily a reference to a capital gain in respect of that particular property. The considerations advanced by Dr. Birch were in fact fully considered by Hamilton, J., and in my opinion it was open to him to reject the contention that awareness that a sale at $650,000.00 would expose the Jungs to capital gains tax destroys their assertion that they were led to believe that the Jungs had purchased the property for this figure. As Hamilton, J. pointed out, even if Mr. Lee had understood the Australian capital gains tax system, he could well have understood that if a property were bought for $650,000.00 and sold immediately for only $550,000.00, the loss might be deducted from other capital gains. In my opinion, it was open to Hamilton, J. not to be convinced that Mr. and Mrs. Lee understood the significance of the figure of $550,000.00 in the contract. 37 Hamilton, J. found that Mr. Jung had on behalf of himself and Mrs. Jung fraudulently represented that they paid $650,000.00 for the property, with the intention of inducing Mr. and Mrs. Lee to enter into the transactions. In those circumstances, it was open to Hamilton, J. to accept the sworn evidence of Mr. and Mrs. Lee that they would not have entered into the transactions if they had known the true position: see Gould v. Vaggelas (1985) 157 CLR 214 at 236. The circumstance that they repudiated the transactions before they found out the truth does not prevent such a finding. 38 Turning to the application for the reception of fresh evidence, I accept that if a later statement or later evidence by a crucial witness unequivocally contradicts evidence given by that witness, the acceptance of which was significant in a judge's decision, and if that later statement or evidence is made in circumstances such that it raises a serious question about the evidence accepted by the trial judge, there would be a strong case for the admission of that evidence on appeal and for allowing the appeal and ordering a new trial. 39 However, in this case the later statements are not, in my opinion, unequivocally inconsistent with the evidence given by Mrs. Lee before Hamilton, J. The assertion to the effect that the discrepancy concerning the purchase price was not the reason Mr. and Mrs. Lee cancelled the contract was in fact entirely consistent with the evidence before Hamilton, J.: as noted earlier, it was clear before Hamilton, J. that Mr. and Mrs. Lee did not find out about the price Mr. and Mrs. Jung had paid for the property until after they had abandoned the transactions. An assertion that Mr. and Mrs. Lee were induced to enter into the contracts by representations concerning visas and residence is not inconsistent with an assertion that they were also induced to enter into the transactions by a misrepresentation concerning the price the Jungs had paid for the house. I do not think the evidence given by Mr. and Mrs. Lee before Hamilton, J. is inconsistent with the proposition that they were (also) induced to enter into the transactions by a representation concerning visas and residence; although there is force in the submission that the depositions given in Korea tend to suggest that representations concerning the purchase price were not a significant factor in entering into the transaction. 40 However, these depositions must be only part of the material given in Korea. It appears that they are depositions taken in respect of proposed criminal proceedings. The judgment in the civil proceedings suggests strongly that, in those proceedings, evidence was given of inducement by both the visa and residence representation and also the purchase price representation. Although Dr. Birch submitted that it was up to the respondents to put more evidence before the Court of what occurred in Korea, in my opinion there is a heavy onus upon a person seeking to introduce fresh evidence to make out the cogency of that evidence; and in this case the incompleteness of the material from Korea does count against that endeavour. 41 In the proceedings before Hamilton, J., as noted earlier, evidence was given both by Mr. Lee and Mrs. Lee of some representations concerning visas and residence problems. It was open to the representatives of Mr. and Mrs. Jung to have cross-examined on that material in order to suggest that it was this matter and not any representation concerning purchase price which induced Mr. and Mrs. Lee to enter into the transactions. 42 Taking all these matters into account, I do not think the Korean depositions throw such doubt on the Lees' evidence before Hamilton, J. or on the decision of Hamilton, J. as to justify their admission as fresh evidence, in order to support the grounds of appeal. For those reasons, I would dismiss the Notice of Motion, with one qualification to which I will come. 43 The judgment of the Korean Court in the civil proceedings, given in evidence by the respondents in the Notice of Motion, suggests that the respondents have a judgment against Mr. and Mrs. Jung in Korea covering the same losses as are dealt with in the judgment in this case. I would be minded to allow that judgment into evidence, and on the basis of that judgment note that any recovery under that Korean judgment should be set off against the judgments for money obtained in this case. Mr. Callaghan indicated that there was no objection to such a notation. 44 For those reasons, I propose that the appeal be dismissed with costs. ***********

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