Conclusion
89As to grounds 1 and 2 of the appeal grounds, I consider that the appeal from the judgment against Mr Shen and SAS for the $400,000 should be dismissed.
(ii) Claim for recovery of the sum of $145,854 withdrawn by Mr Kerr from SAS's bank account (Ground 3)
90At the hearing, this claim was put both as a claim in conversion and a claim for restitution. On appeal, there was no challenge to the finding on the conversion claim but it was maintained that Mr Kerr was liable to make restitution of this sum on the basis that Mr Kerr had no authority to withdraw the funds in question and was unjustly enriched by the receipt thereby. It was accepted by the appellants that Mr Kerr had deposited the sum of $122,050 from his personal moneys into SAS's account and that he had paid expenses of $23,808 on behalf of SAS. However, his authority to withdraw those amounts by way of repayment to himself was disputed.
91The primary judge noted that SAS had argued at the hearing that Mr Kerr was authorised under clause 3 of the Joint Venture Agreement only to draw cheques up to $10,000 and that any withdrawals had to be for the purposes of SAS and/or the joint venture. As to the former, her Honour did not accept that the contractual requirement to "inform all parties" in relation to cheques exceeding $10,000 was a requirement so to inform them before drawing such a cheque nor was it a requirement to obtain consent to such a cheque. I agree. As to the latter, her Honour found that Mr Kerr had voluntarily paid the sums comprising $145,854 (which were separate from the $1.4 million that he was contractually obliged to pay) in order to expedite the project and that the payments were loans repayable on call. Her Honour accepted that Mr Kerr was impliedly authorised only to draw cheques related to joint venture purposes but found that the repayment of loans he had made to SAS was such a purpose. The claims in conversion and unjust enrichment were not accepted ([49]).
92Emphasis was again placed by Mr Allen on the pleading, noting that Mr Kerr had not pleaded the making of loans on call but, rather, had pleaded (and had verified that pleading) that he had erroneously deposited this money into SAS's account (see [8] of the Amended Defence to Cross-Claim) (an inconsistency that he submits weighed against a conclusion that Mr Kerr's evidence should have been preferred to that of Mr Shen). Mr Allen also pointed to the evidence of the deposit slips written by Mr Kerr in relation to the payments making up the $145,854 which referred to "capital contributions" and to the obligations under the Joint Venture Agreement in clauses 4(b) and 21 as supporting the conclusion that these were moneys paid for joint venture purposes and not as loans.
93The timing of the payments comprising the $145,854 is consistent with the requirement to provide evidence of a bank balance to Nazero and the fact that construction expenses were being incurred at that time, which would support a conclusion that these were moneys provided for joint venture purposes (as seemed to be the thrust of the evidence from Mr Shen's solicitor, Mr Leamey at Black 99M). That said, it is by no means implausible that moneys provided to assist the joint venture could have been provided by way of loan (particularly if those were for the purpose of showing a positive bank balance, rather than for actual use as working capital). However, other than Mr Kerr's assertion, there is no evidence of this.
94It was submitted by Mr de Meyrick that there was nothing unlawful or improper in Mr Kerr refunding moneys to himself which he had paid from his own account into the joint venture bank account or had otherwise expended on behalf of the joint venture (a submission that somewhat begs the question as to the character of the moneys); that the obligation to provide working capital to the joint venture would not contractually oblige Mr Kerr to refrain from repayment to himself of moneys paid by him on behalf of the company (a submission that seems to me to have some force); and that the Joint Venture Agreement expressly gave him authority to make such a decision (a submission that is in my view correct).
95There was no claim for breach of directors' or fiduciary duties or breach of contract in relation to the withdrawals. As pleaded in the Amended First Cross-Claim ([9]), this claim was solely made by reference to the allegation that Mr Kerr took the money without the consent of SAS ([8]). Thus, the contention that Mr Kerr was unjustly enriched by withdrawing the money rested on the alleged lack of authority to do so (reference being made to s 198A of the Corporations Act 2001 (Cth) for the proposition that only the board of directors could give Mr Kerr such authority).
96Her Honour accepted that Mr Kerr was authorised to draw cheques on the SAS bank account. That finding is supported by reference to the terms of the agreement itself. I do not accept that clause 3 operated as no more than an administrative mechanism (akin to appointing someone as a mere signatory to a bank account) as was suggested by Mr Allen. SAS, under the Joint Venture Agreement signed on its behalf by Mr Shen, was authorising Mr Kerr to act on its behalf when signing cheques. It expressly provided for "joint venture" cheques to be signed by him. Whether or not Mr Kerr had done so in breach of an implied term of the Joint Venture Agreement (i.e. for a purpose otherwise than that of the joint venture) was not the contention.
97Therefore, whether or not her Honour was correct in concluding that these moneys had been the subject of a loan by Mr Kerr (which would not be inconsistent with money deposited merely for the purpose of artificially inflating the bank balance) or they were, as Mr Allen contends, a capital contribution to the joint venture, the withdrawal of the moneys from the account was prima facie authorised under the Joint Venture Agreement. In order to succeed in a claim of unjust enrichment SAS was required to show that the retention of the moneys was unjust. I am not persuaded that it has been shown that the withdrawal of the moneys led to an "unjust" enrichment of Mr Kerr and hence I am not persuaded that her Honour erred in dismissing this claim. This ground of appeal is not made out.
98(In passing I note that even if the July document was unenforceable for lack of consideration and did not operate to vary the Joint Venture Agreement, on the ultimate failure of the joint venture Mr Kerr might well have had a claim for the refund of the moneys deposited by him into the SAS bank account, by way of recovery of his initial contribution to the joint venture, applying the principles articulated in Muschinski v Dodds by Deane J at pp 618-620, assuming it could be said that the consensual joint relationship or endeavour had failed without attributable blame. Those principles have been recognised as being at least potentially applicable in relation to commercial joint ventures - see Liquor National Wholesale Pty Limited v The Redrock Pty Limited [2007] NSWSC 392 at [42]. No such claim was before her Honour and it is not clear how from a practical point of view the principles might have applied in relation to the particular circumstances of the SAS/Mr Kerr joint venture. Nevertheless, it provides an indication that, on a wash-up of the joint venture, there may have been no injustice in Mr Kerr being refunded these moneys.)
(iii) Failure to give adequate reasons (Ground 4)
99The complaint raised by this ground of appeal relates particularly to the credit findings made by her Honour (although there is also a complaint as to the adequacy of reasons for her Honour's dismissal of the claim by Mr Shen that Mr Kerr was estopped from asserting that the Joint Venture Agreement had been varied by the July document).
100For Mr Kerr, it is submitted that the conclusions as to the rejection of the claims with respect to the $145,854 and the alleged breach of the Joint Venture Agreement by the failure to provide the sum of $1 million clearly turned on legal principles and the construction of the Joint Venture Agreement, not credit findings. I agree. The findings as to the $400,000 payment, however, involved a rejection of Mr Shen's evidence and this was seemingly based at least in part on his credit.
101The relevant observations or findings by her Honour as to credit were as follows. At [14], her Honour expressed the view that she had no confidence in the veracity of Mr Shen's evidence and that most other witnesses were "moderately reliable". At [15] her Honour noted that she had formed the view that Mr Kerr was a "far more reliable" witness than Mr Shen. Her Honour rejected the allegation by Mr Shen that another witness (Mr Yu) was biased against him ([16]) and said that she harboured doubts about the reliability of Mr Gao (who was described as a cavalier witness). Her Honour preferred Mr Kerr's evidence to that of Mr Gao in relation to the $400,000, though accepting parts of Mr Gao's evidence.
102Her Honour stated, albeit briefly, her reasons for reaching the conclusions that she did in relation to Mr Shen's evidence (her observation of him as a witness that was less than forthcoming, in that there were many occasions when she considered that he had prevaricated and appeared to be avoiding a frank response to questions; her disbelief as to evidence given by Mr Shen on what is said by Mr Allen to have been a collateral issue; her acceptance of Mr Yu's evidence that Mr Shen had asked him to "make a false evidence to accuse" Mr Kerr; and the fact that Mr Shen had been prepared to engage in deceptive conduct in relation to the attempt to obtain financing for the project ([14]).
103In relation to Mr Kerr, her Honour expressed an opinion as to the reason he had been agitated in the witness box; did not accept the criticism made as to omissions from his affidavit; and expressed the view that in general he was a believable witness though referring to two significant shortcomings in his evidence (evasiveness as to the capacity to source the $1 million when required and the fact that he may have been involved in the plan to deceive the financier as to the pre-sales)([15]).
104The Court of Appeal, in Beale v Government Insurance Office of NSW (1997) 48 NSWLR 430 (applied recently by Bergin CJ in Eq, with whom Tobias AJA agreed, and by McColl JA in CEVA Logistics (Australia) Pty Ltd v Redbro Investments Pty Ltd [2013] NSWCA 46), considered the circumstances in which a miscarriage of justice may occur having regard to the inadequacy of reasons. There, the judicial assessment of the appellant's credibility was critical to the case. (Here, while the determination of the dispute in relation to the $400,000 payment was one which required assessment of the conflicting versions given as to the events of mid 2010, it was a finding that could have been made without much, or any, reliance on credit findings - simply on the basis that Mr Kerr's version of events as to the $400,000 was more consistent with the documentary evidence and the course of the transaction.) In Beale, the Court of Appeal ordered a re-trial on the basis that the reasoning process exposed by the trial judge left the appellant with what was referred to by Mason P as a justifiable sense of grievance. Relevantly, there, the appellant's evidence was significantly corroborated by three witnesses whose evidence was accepted and it was held that the statement of reasons did not expose any logical reasoning process behind the credit findings.
105Meagher JA there accepted that the content of an adequate statement of reasons would depend on the particular circumstances of the matter being considered by the court (referring to statements to that effect by Samuels JA in Mifsud v Campbell (1991) 21 NSWLR 725 at 728 and McHugh JA, as his Honour then was, in Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 281). In Mifsud, Samuels JA noted that:
It is plainly unnecessary for a judge to refer to all the evidence led in the proceedings or to indicate which of it is accepted or rejected. The extent of the duty to record the evidence given and the findings made depend, as the duty to give reasons does, upon the circumstances of the individual case.
106Meagher JA went on to say, at 443:
Where one set of evidence is accepted over a conflicting set of significant evidence, the trial judge should set out his findings as to how he comes to accept the one over the other. But that is not to say that a judge must make explicit findings on each disputed piece of evidence, especially if the inference as to what is found is appropriately clear: Selvanayagam v University of the West Indies [1983] 1 WLR 585; [1983] 1 All ER 824. Further, it may not be necessary to make findings on every argument or destroy every submission, particularly where the arguments advanced are numerous and of varying significance: Rajski v Bainton (Court of Appeal, 6 September 1991, unreported).
107In the present case, reasons were given for the credit findings challenged by Mr Shen. It is contended that those reasons were not sufficient to warrant the conclusion that her Honour reached. Notwithstanding the criticism made of one or more of the reasons articulated by her Honour, there were matters that objectively supported the conclusion that Mr Shen's account of the events leading up to the July document should not be accepted (in particular, his acknowledgement in September 2010 that the shares were issued without consideration for finance purposes).
108It was not necessary for her Honour to address each and every piece of evidence in setting out her reasons. To do so in each case would be an unnecessary, if not impossible, task. Her Honour's conclusion in rejecting the evidence as to the $400,000 could in my view have been reached without coming to the finding of fabrication (simply on the basis that Mr Kerr's account was the more credible).
109Mr Allen criticises the finding that Mr Kerr was a more reliable witness by reference to objective conflicts identified in Mr Kerr's evidence (said to warrant an inference of recent invention) and the conflict between Mr Kerr's evidence and Mr Gao's evidence (which her Honour took into account, though preferring Mr Kerr's evidence on the relevant issue). He also criticises the view formed by her Honour as to Mr Kerr's "agitated" demeanour.
110In relation to the first of those matters, Mr Allen handed up on appeal a schedule of evidence said to have been given for the first time in cross-examination (from which an inference of recent invention was said to be available): namely, evidence that Mr Shen had told Mr Kerr he did not have a bank account and that this was the reason why the $350,000 cheque had to be paid to Mr Shen; that the 15 August 2010 email was not approved and sent by him, despite evidence that he at times used his wife's email account; that he had post-dated the "23 July 2010" cheque; that he saw Mr Shen read the receipt; the reason he continued to deposit money into SAS's account when he knew the $350,000 had not been paid into that account; and that the conversation, when the receipt was signed, was in Chinese. It is submitted by Mr Allen that there was no evidence that would support any finding that the reason for omissions from his affidavit evidence in chief was that Mr Kerr may have overlooked or not appreciated the significance of particular evidence. Her Honour, however, had the benefit of hearing the cross-examination on those matters and was in a position to take into account the witness' response thereto.
111Her Honour was (not unreasonably in my view) critical of the affidavit evidence on both sides of the record. The fact that matters had emerged for the first time in oral evidence could well have been a function of the manner in which affidavits were prepared. There is no suggestion that her Honour treated the state of Mr Shen's affidavit evidence in this regard in any different fashion from that of Mr Kerr. At least from a reading of the transcript of the main witnesses, her Honour's criticism of the manner in which evidence was given was not in my view unwarranted.
112As to the criticism made of her Honour's observation that Mr Kerr was agitated because he perceived that he had been wronged, Mr Allen submits that this Court can be sceptical about findings based on demeanour (citing Goodrich Aerospace Pty Ltd v Arsic [2006] NSWCA 197; (2006) 66 NSWLR 186). However, such scepticism does not require this observation by her Honour to be read as a finding as to Mr Kerr's mental state, as such. Rather, it seems to me a conclusion of a kind that would be open to a trial judge to draw based on his or her observations of the manner and way in which questions were answered by a witness in the witness box. True it is, that her Honour does not refer to any particular parts of Mr Kerr's evidence to support that conclusion. However, a review of the transcript in my view provides some basis for such a conclusion. (See, for example, and without being exhaustive, Black 105S; 114D; 117C-K; 119B and her Honour's observation that Mr Kerr was upset at Black 123M.)
113Mr Allen submits that the witnesses' credit had to be determined in the context that Mr Shen gave evidence with the occasional assistance of an interpreter and that Mr Kerr was "much more proficient having received a PHD from the University of Queensland". Insofar as the assessment of the witnesses turns on matters such as that, her Honour was far better placed to assess the manner in which evidence was given and the comparative ease or difficulty of understanding exhibited by the witnesses in the witness box. Mr Leamey's evidence suggested that both Mr Shen and Mr Kerr were capable of communicating in English (Black 99V), that being the basis on which he did not consider it necessary to have the assistance of an interpreter at his meeting with them. I am not in a position to assess the extent to which, if any, Mr Shen's language difficulties might have led to her Honour's conclusions save to note that her Honour seemed to base those conclusions not solely on the manner of his evidence in the witness box.
114Complaint is made that there was no mention (presumably no mention as to their reliability as witnesses) of two witnesses called in SAS's case (Mr Younan from Nazero and SAS's solicitor, Mr Leamey). Her Honour did not, however, need to comment on the credit of each and every witness.
115I accept, as Mr Allen submits, that it does not follow that because a witness is disbelieved on particular matters he or she ought to be disbelieved on all matters (Mr Allen citing Steinberg v Federal Commissioner of Taxation [1975] HCA 63; 134 CLR 640 at 695, Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; 230 CLR 80 at 136 [100]; Australian Securities and Investment Commission v Hellicar [2012] HCA 17; 286 ALR 501 at [232]). However, as I read her Honour's general conclusions as to the witnesses, what is there being expressed is a lack of confidence in the truth and reliability of Mr Shen's evidence in general but not a conclusion that in all matters his evidence should be rejected without taking into account other evidence in relation thereto. Rather, the thrust of what is being said is that Mr Shen's evidence should be approached with some caution and that, where there was a conflict between his evidence and that of other witnesses, it was more likely that her Honour would find the latter more credible.
116The critical credit finding in relation to the July document was at [30]. Mr Allen emphasises the seriousness of a finding that evidence has been fabricated and points to evidence to which her Honour did not refer in this paragraph that he submits should have been dealt with by her Honour before making that finding (such as the evidence of what was said at the time the July document was given to Mr Shen). I do not repeat the submissions made by Mr Allen as to the evidence that are said to show that Mr Shen's case (that the cheque was given to him on 23 July 2010 and that the July document was signed on 28 July 2010 without him reading it) was arguable or that Mr Kerr's evidence should have been disbelieved. I am not satisfied that her Honour erred in these findings.
117It is submitted by Mr de Meyrick, and I agree, that findings as to the entitlement to a refund of the $400,000 are sustainable on the basis of the written wording of the Joint Venture Agreement and July document (reinforced by Mr Shen's own written communication in September 2010), without reliance on issues of credit.
118The circumstances in which findings based on credibility assessments may be found to be erroneous are well established (Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 per Gleeson CJ, Gummow and Kirby JJ at [28]; as further explained by Kirby J in CSR Ltd v Della Maddalena (2006) 224 CLR 1 at [19]-[21]). More recently, in Nominal Defendant v McLennan [2012] NSWCA 148, Beazley JA (as her Honour then was) confirmed at [141] that a finding of fact by a trial judge, based on the credibility of a witness, is not to be set aside simply because an appellate court thinks that the probabilities of the case are against (or even strongly against) that finding of fact; it being necessary for it to be shown that the trial judge "has failed to use or has palpably misused his (or her) advantage" (her Honour there citing Devries v Australian National Railways Commission [1993] HCA 78; (1993) 177 CLR 472 at 479).
119I do not accept that her Honour's findings as to the $400,000 payment (or the $145,854 withdrawal) were improbable, nor were they inconsistent with incontrovertible evidence, so as to support the proposition that there was a misuse by her Honour of (or failure to use) the advantage that her Honour had in assessing the witnesses before her. With one qualification (that being the dishonesty finding) I consider that adequate reasons were provided for the general credit findings made. This is not a case, such as Beale or CEVA, where any inadequacy in her Honour's reasons as to those findings warrants the setting aside of the decision.
120The vehemence of the complaint by Mr Shen to the credit findings made against him, as I understand the submissions by his Counsel, was (as indicated earlier) as to the findings of fabrication. The plurality in Smith v New South Wales Bar Association [1992] HCA 36; (1992) 176 CLR 256 considered that, unless it was truly necessary for the purpose of disposing of the particular case, a specific finding that deliberately false evidence had been given should not ordinarily be made. Having regard to the difference between the rejection of a person's evidence and a finding that he or she deliberately lied, the dishonesty finding in the present case was not in my view necessary. The findings made by her Honour could have been made without resort to a finding as to dishonesty. While Mr Allen submitted that, if a rehearing was required, it was arguable that Mr Shen would succeed, I am not satisfied, on the material before this Court, that any different finding would have been made in the absence of the finding of dishonesty.
121As to the particular finding on estoppel (as to which it was said to have been unclear how, if at all, it was based on the credit findings), this was a finding that necessarily followed from a rejection of Mr Shen's evidence as to the circumstances in which the July 2010 document was signed. No error has been demonstrated in that finding. As to the balance of the matters to which it was said her Honour should expressly have had regard (such as the allegation that the agreement was partly oral), her Honour's conclusions (such as those in relation to the share consideration argument) necessarily encompass a rejection of the matters for which Mr Shen contends.
122I am not satisfied that an inference can be drawn that there was a failure by her Honour to give proper consideration to the evidence before her nor am I satisfied that the credit findings against Mr Kerr have worked a substantial miscarriage of justice. Rule 51.53 of the Uniform Civil Procedure Rules 2005 (NSW) provides that a new trial must not be ordered on any ground unless it appears to the Court that some substantial wrong or miscarriage has been occasioned. I would dismiss this ground of appeal.
(iv) Claim by SAS for reliance damages (Ground 5)
123Ground 5 of the appeal grounds raises the question as to whether SAS was entitled to damages because of the failure of Mr Kerr to provide the $1 million and working capital for the joint venture (relying upon the fact that Mr Kerr had treated the joint venture as at an end from 27 August 2010 and had failed to meet the September demands for the payment of the $1 million). It is contended in submissions that the primary judge erred in not holding that Mr Kerr had wrongfully repudiated the joint venture agreement and in finding that SAS was not entitled to reliance damages.
124As set out in the submissions served on its behalf, SAS's case was that Kerr failed to provide $1 million in order to discharge the NAB mortgage "as he wrongfully repudiated" the Joint Venture Agreement (which repudiation it is said was accepted), as a consequence of which SAS claimed it was entitled to damages quantified at $254,873.55. (The submissions go on to assert a failure by Mr Kerr, by 2 November 2010, not only to provide the $1 million but also to provide working capital in compliance with clause 21 of the Joint Venture Agreement and to repay the sum withdrawn from the company bank account.)
125The damages claimed for breach of this obligation were in the sum of $254,873.55, comprising: the sum of $130,000 paid to Nazero; a further sum of $117,483.55 said to be payable to Nazero; and the sum of $7,390 paid to a quantity surveyor. Mr de Meyrick submits that those so called "losses" were not established to be "losses". The first two components were progress payments to Nazero. Mr de Meyrick points to evidence of Mr Shen and Mr Younan confirming that substantive improvements had been made to the development site in consideration for these payments, and submits that the benefit of those improvements has been retained by SAS such that no loss has been demonstrated in respect of those amounts. As to the claim for $7,390.00 for a quantity surveyor, Mr de Meyrick submits that there was no evidence led to prove that this expenditure was "wasted" such that it might attract an award of damages. At [43], her Honour found that SAS had not established whether and to what extent the expenditure on stage 1 of the project had been wasted. Mr de Meyrick submits that this finding should not be disturbed. Hence, it is submitted that even had her Honour found there to be a breach of the Joint Venture Agreement by reason that Mr Kerr had failed to provide the sum of $1 million, no loss or damage had been established as a result.
126Insofar as Mr Allen's submissions raise the issue of repudiation, Mr de Meyrick points to the fact that the primary judge expressly rejected an attempt by the appellants to amend their pleadings during submissions to include an allegation of repudiation (Black 204W to 206W) and notes that the pleaded case was that Mr Kerr had breached an obligation to provide $1 million to discharge the existing mortgage, leading to the venture failing, and a claim for loss and damage as a result.
127Her Honour dismissed the claim in relation to the failure to provide the $1 million on the basis, as appears from [41], that, as SAS did not obtain approval for development finance, Mr Kerr was never "put to the test" in relation to the obligation to provide the $1 million. In other words, her Honour found that the event on which the obligation to discharge the mortgage would have arisen had not occurred. There is nothing to suggest that this finding was incorrect.
128The Joint Venture Agreement made clear that the purpose of the $1 million payment was to enable the discharge of the NAB mortgage. (The words "or fund to start construction" must be read as meaning that the discharge of the mortgage was to enable that to occur, as the subsequent reference to the $1.4 million payment made clear.) "At necessary time" must be read in that context. There is no evidence that discharge of the NAB mortgage was necessary at any time prior to 2 November 2010 (when the Joint Venture Agreement was terminated by resolution of the directors of SAS) for the purposes of enabling construction to start or finance to be obtained. It was certainly not a condition even of the progression of the finance application for credit assessment (as opposed to something that would later become necessary as a condition of the then proposed finance facility assuming that was eventually approved).
129No error has been demonstrated in her Honour's finding that there was no breach of the obligation to pay the sum of $1 million. It is not necessary to consider the argument that Mr Kerr wrongfully repudiated the Joint Venture Agreement in the correspondence issued by his lawyers in September 2010 (since no claim in repudiation was pleaded). This ground of appeal therefore fails.