Shao v Zhang & Anor; Zhang & Anor v Shao - [2022] NSWDC 38 - NSWDC 2021 case summary — Zoe

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Shao v Zhang & Anor; Zhang & Anor v Shao

[2022] NSWDC 38

District Court of NSW|2021-11-17

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At a glance

Source facts

Court

District Court of NSW

Decision date

2021-11-17

Source

Original judgment source is linked above.

Judgment (46 paragraphs)

[1]

Solicitors: Plaintiff/cross-defendant: Brightstone Legal Defendants/cross-claimant: Concisus Legal Pty Ltd File Number(s): 2020/00135051

[2]

Table of Contents (Paragraph) Judgment The claim and cross-claim 1 The issues in the case 6 Case management issues 12 Mr Shao, Ms Zhang, Mr Yan and Oceania 16 An overview of the events leading to the three contracts 22 The first agreement ("the Licence agreement") 33 The second agreement ("the July agreement") 40 The third agreement ("the Purchase agreement") 42 The terms of the lease 49 The plaintiff leaves the Coco beauty business 50 Facts which are not in dispute 55 The "permitted representation" 56 Credit issues for the plaintiff: 81 An overview of the challenges to the plaintiff's credit 82 The $20,000 cash payment 84 Summary of findings about the $20,000 cash payment 127 Attempting to get Mr Yan to change his evidence 130 The 16 January 2020 conversation 136 Did the parties agree to terminate the purchase agreement on 16 January 2020? 137 Was the plaintiff an unsophisticated businessman? 152 Credit issues for the first defendant and Mr Yan: 166 The credit of Ms Zhang 171 The credit of Mr Yan 175 The claim for misleading or deceptive conduct 188 The defendants' "tenant" argument 202 Did the plaintiff rely upon the "permitted licence representation"? 208 Repudiation 213 The plaintiff's claim for restitution 220 Conclusions concerning liability 226 The cross-claim and the defendants' claim for damages 227 Loss of bargain damages 231 The value of the business name 242 The lease bond 246 Loss of opportunity to license credentials 249 Failure to plead contractual entitlement 255 Loss of licence fees - is there a double recovery? 256 Damages for breach of the purchase agreement 261 Agents' fees, solicitors' fees and assignment of the lease 268 Customer debt 270 Summary of items claimed in the cross-claim 271 Orders

[3]

The claim and cross-claim

These proceedings are claims by both parties arising from three agreements they entered into concerning the proposed purchase of a beauty business ("Coco"). The plaintiff's lease of the business and premises failed to be completed by him.
The plaintiff, by second further amended statement of claim filed on 2 August 2021, brings proceedings for sums calculated as totalling $157,954 and the AUD equivalent of RMB515,000 (as well as an amount equivalent to any assessment of liability on the cross-claim). In very general terms, the defendants' argument is that the plaintiff was in repudiatory breach of the contract and that his claims of misleading or deceptive conduct must fail because the representation, if made, was neither deceptive nor relied upon and had no causal connection with the plaintiff's decision to abandon the beauty business leasing contract.
The defendants, by amended statement of cross-claim filed on 29 July 2021, seek damages for expectation losses, outgoings, agents' fees and other outgoings, and calculate the losses identified in the cross-claim as totalling $329,000. The plaintiff disputes any entitlement to claim for these losses and outgoings.
As much of the fact-finding requires the acceptance or rejection of the evidence of Mr Shao and Ms Zhang, credit issues loom large. In determining those issues I have, however, been guided by Court of Appeal observations as to the correct approach when making findings of credit: Prouten v Chapman [2021] NSWCA at [4] - [17] and [32] - [51]; Pacific Shoji v Xia [2018] NSWCA 290 (in particular, as to conduct designed to minimise or evade customs duties: at 8(4), [34]ff and [93]). Tugendhat J's summary of the relevant principles in Thornton v Telegraph Media Group Ltd [2011] EWHC 1884 (QB) also provides useful guidance.
Another important factor to take into account is the role that a different cultural or ethnic background may make to demeanour and credit findings, especially where the relevant background facts may have been a factor in the parties' approach to the transaction in question: Goodrich Aerospace Pty Ltd v Arsic [2006] NSWCA 187. One example of this factor in these proceedings is the reference by both the plaintiff and the first defendant to the Chinese concept of "chengbao" (承包) in terms of the nature of the contract.

[4]

The issues in the case

The principal issue, according to the plaintiff, is whether the plaintiff relied upon an alleged misrepresentation by the defendants that the licence and subsequent lease for the premises at which the Coco beauty business traded was permitted by the terms of the lease. The plaintiff's case is that the defendants, by omission, represented to the plaintiff, in terms that were misleading or deceptive, that there were no difficulties with the licence or transfer of the lease, and that the loss suffered by the plaintiff (including a contested payment of $20,000 in cash) when the sale of the business could not proceed entitles him to restitution of the instalment payments as well as payments under the licence agreement. As the first defendant was the sole director of the second defendant and made the representation, she is directly liable, with the second defendant, for its misleading or deceptive nature.
The second major factual issue for determination is whether the defendants agreed with the plaintiff to end the purchase agreement by mutual consent in a discussion on 16 January 2020.
The plaintiff's financial claims may thus be summarised as follows: 1. The claim for return of the payments totalling $185,000 made by the plaintiff which is referred to above, on the basis of misleading or deceptive conduct, or restitution. 2. A claim for overpayment of business expenses (paragraphs 25A - 25H of the current statement of claim)("the business expenses paid claim"). The disputed item here is the cash payment of $20,000 which the plaintiff says he made on 25 June 2019. 3. Adjustment of expenses and income for the business ("the net loss claim" based on an agreed figure of $174,911.38 business income and $203,978.78 business expenses, which the defendants estimate at $29,066.90. the defendants acknowledge an overpayment of $18,133 recoverable by way of set-off (but against the second defendant only, and not Ms Zhang, as she was not a party to the licence agreement).
According to the plaintiff's submissions of 11 September 2021, the total sum claimed for the loss or damage suffered by the plaintiff (by reason of the permitted licence representation) is $157,954 and RMB 515,000. The plaintiff is also entitled to be repaid amounts paid under the licence agreement which were in excess of his liability to do so, being the total of $27,674.98 and RMB 140,000.
For the defendants/cross-claimants, Mr Harding SC and Mr Cameron, in their extensive written submissions of 24 September 2021 at paragraph 4, submit that a third essential issue is whether or not the plaintiff paid the sum of $20,000 in cash to the first defendant on 25 June 2019. The defendants' case is that there was no representation made, that any such representation was not misleading and that there was in any event no reliance. The defendants/cross-claimants argue that the purchase agreement between the plaintiff and the second defendant remained in force after 16 January 2020, that the plaintiff was in repudiatory breach of that agreement by failing to continue to make payments, and that the second defendant accepted that repudiation by its sale of the business to a third party in December 2020.
The issues in the cross-claim arise if the plaintiff's claim fails. The quantum of the cross-claim ($311,125.46) is the quantum of loss arising from, principally, loss of the bargain (the business having been sold for a reduced amount) and adjustment of outgoings and the like, less certain deductions in favour of the plaintiff for over-contributions totalling under the licence agreement. The cross-claim is predicated upon the amounts already paid by the plaintiff being retained.

[6]

Mr Shao, Ms Zhang, Mr Yan and Oceania

Mr Shao (hereafter referred to as "the plaintiff"), although born in China, is a resident of New Zealand, where he has had some business activities. As well as being the director of several companies in New Zealand, he is a qualified electrician. It was in fact in his capacity as an electrician that he came across the Coco Beauty business, after he was asked by a Mr Min Yan, a friend of Ms Zhang, to come to the Coco Beauty shop premises to mend a broken light fitting. (I note that, according to a letter dated 3 March 2020 from his solicitors attached to his first affidavit, the plaintiff first became aware of the Coco business being available for sale when he noticed an advertisement on the website of SBX Business Brokers and that the plaintiff confirmed this at T 84; nevertheless, he agreed that he did go to the shop to repair the light). The plaintiff's affidavits provide very little other background about his prior education and work history.
As there are two defendants, I have referred to these as "Ms Zhang" and "Oceania". There is more information available about the Ms Zhang's background than about the plaintiff's, although it, too, is limited. She was born in China and came to Australia to live in 2009, where she obtained qualifications as well as employment in a beauty salon. She wanted to open her own beauty business, so she borrowed from family members as well as contributing her own savings.
On 6 August 2012, the second defendant ("Oceania") was incorporated to serve as the corporate owner of her business. In about April 2014, after Ms Zhang had moved to New South Wales, the second defendant was granted a lease for the premises at which Coco has maintained its activities ever since. Ms Zhang, who had completed several courses in beauty therapy and remedial massage, worked as a cosmetologist as well as being the manager of the business.
For health reasons, Ms Zhang decided to sell the business in or about May 2019, and this led her, through an agent, to place the advertisement for sale of Coco seen by the plaintiff. The text of that advertisement is as follows: "SBX Coco Beauty Price: $450,000 Net profit: $6,130 Shop 5, Sky view shopping plaza, 537 George St Sydney NSW Business code: M 2061 Key Feature: upmarket equipment State: NSW Location: Situated in very busy shopping town in Sydney CBD Centre Description Beauty salon - licensed medical centre specialising in anti-ageing of cytokines focusing on face, body and life beauty acne and freckle removal, micro plastic, plastic surgery and cooperation with Australia medical scientist - Private medical insurance cover - New technical microelectronics practice - upmarket equipment at a cost of $500k. - 5 treatment rooms. - Regular and high income customers mostly professional females. Summary Features: top location -well known by industry - New advance practice - large number of loyal customers - low rent - very high margins - great potential - well priced Potential: Setup own website - promote social medial - A full time working and motivated owner could boost the business to a new and high level. Premises: Modern premises with an area approx. 110M2. Trading Hours: 7 days -11:30a.m.- 8:30p.m. Lease: 5 year lease+5 years option commence April 2015 4% increase - 4 months bond Employees: Under management - 3 staff and appointment cosmetic Surgeon Comments: Misc-1- Refers to accountant fee, bank fee, advertising, motor vehicle and travel fee etc. - The figures are based on FY 2017 profit & loss statement - This is a well located business with high profit in the centre of Sydney CBD- The sale price includes all expensive shop equipment - keen vendor - Full training will be provided - Please don't speak to anyone when visiting the shop.- Inspection must be through broker. Weekly Summary Weekly Taking (Inc GST) $14,000 Cost of Goods $200 Gross profit $13,800 Rent $1,846 Wages $2,112 Outgoings $88 Telephone $74 Insurance $130 Electricity $190 Misc1 $3,230 Total Expenses $7,670 Net Profit $6,130 Price $450,000"
Mr Yan, who introduced the parties and attended contractual meetings, played a role of an unusual kind. He told the court he had worked in real estate before he retired (T 375) and that his involvement came about because he knew both parties prior to the plaintiff expressing an interest in the Coco Beauty Business. He swore an affidavit stating that he had known the plaintiff since 2019 because they were both involved in "the Chinese cinema industry" (affidavit of 13 July 2021, paragraph 4) and also that he had known Ms Zhang for some time longer (since 2015), apparently as the owner of the Coco Beauty Business, although in what capacity (since he seems unlikely to have been a client in a female beauty shop) he had dealings with her is uncertain.
Mr Yan provided advice and assistance to both parties in the course of their negotiations. The reasons why both the plaintiff and Ms Zhang reposed so much trust in him were not the subject of cross-examination.

[7]

An overview of the events leading to the three contracts

Although he had no prior experience in beauty salon work or management, the plaintiff became interested in purchasing the business and met Ms Zhang on 15 June 2019 at the salon to discuss this. The reason for his interest in the shop appears to have been that he thought it was a profitable business and that a chain of beauty shops could be built up from it (as Ms Zhang notes in her account of the conversation at paragraph 43 of her affidavit of 23 February 2021). The plaintiff said that he was looking for a business to invest in, and that he was struck by the name of the business, for the following reasons, and accordingly arranged to meet Ms Zhang for dinner, with Mr Yan also being present: "That [meeting] was actually two or three days after and me and Mr Yan made appointment with Zhang, because at that time I was trying to do some online business, and I saw advertisement, which the name brought my attention. It was very particular. It was very unique. It is called Coco Beauty, because my it was also my wife's name. I was actually trying to locate some online business. HARDING Q. All I'm trying to understand is whether you had dinner with Mr Yan and Ms Zhang? A. INTERPRETER: Yes, it was in that few days two or three days after we fix up the lighting. So, yeah, we did - we went out for - we went to go out for dinner - for meal." (T 84)
At that meeting, according to the instructions the plaintiff gave his solicitors, Ms Zhang proposed that the plaintiff either purchase the business outright the $200,000 or alternatively that he obtained the right to operate the business for a limited period for a fee of $100 per day.
This is different to the evidence given by Ms Zhang, who sets out that the plaintiff said he wanted to purchase the Coco business but did not have the asking price she was seeking ($450,000) and instead asked to run the business on a contracted management or "chengbao" basis (Exhibit A, affidavit of Ms Zhang affirmed 23 February 2021, paragraphs 40 - 49). She described the plaintiff as having said: "Sister Zhang, I don't have $450,000 right now. But I hope you can consider letting me run the business on a "contracted management" basis temporarily. I am raising funds and I believe I will come up with the money for the purchase soon."
Ms Zhang asked how the arrangement would work, to which the plaintiff replied "I can continue to run all of the income through your business' current bank account so that you can monitor and ensure that I will pay all of the businesses expenses."
Ms Zhang said that she was prepared to accept this arrangement as it would give the plaintiff time to familiarise himself with the business as well as to raise money in the shop. She described this as being a business run on "contracted management" principles once again (affidavit, paragraph 43). I include these quoted excerpts from the translated affidavit because this is as close as the parties get to describing what they mean by a "chengbao" agreement, and this is the explanation offered by Ms Zhang in paragraphs 44 - 45, which follows the paragraph setting out the conversation above. The plaintiff never provided any definition to the contrary.
Absent from this discussion was an agreement as to the final price, and this is reflected in the first of the three contractual documents entered into by the parties. This would be of some significance if these arrangements were to be viewed in terms of traditional contractual principles, as price is generally regarded as one of the essential elements for there to be a contract. It is notable, however, that, whatever other issues of law raised in these proceedings, there is no submission made on either side to the effect that the parties failed to agree, or that they merely had an agreement to agree, or that the essential elements for a concluded contract were not present.
Two factors are relevant to the circumstances in which the parties entered into this "chengbao" agreement. The first is that the parties both understood what each other meant, and were drawing upon common cultural business practices, which included the role played by Mr Yan, who was acting as a kind of "go-between" on the transaction. The second is that neither of them consulted a lawyer. According to Ms Zhang, the plaintiff said that "lawyers in Australia are just a waste of money. They're too expensive and they don't do enough work for the money we pay them" (paragraph 43). The plaintiff suggested that he draw up a contracted management contract himself or, if she would prefer to do so, Ms Zhang could do this.
In his evidence, the plaintiff denied that his conversation with Ms Zhang had been in the terms set out in her affidavit (T 84 - 85). However, as Mr Harding SC pointed out, he had not challenged the relevant parts of the conversation set out by Ms Zhang in her affidavit. His response to this being pointed out to him was as follows: "Q. You said to Ms Zhang at the meeting at the Chinese restaurant the following? Can you translate that please? "Sister Zhang I was impressed when I was at your shop the other day. I am interested in buying your business. Although I have not run a beauty clinic before I am greatly experienced in different businesses and I feel confident I can make Coco Beauty a well known brand." You don't disagree, do you, Mr Shao, that's what you said to Ms Zhang? A. INTERPRETER: No, I didn't say that. That's not correct, I didn't say that. Q. Well, in your affidavit of June you did not dispute or disagree with this conversation? A. INTERPRETER: Okay, okay. As a man I have no idea I have no clue of how to operating [sic] a beauty business. How can I possibly run that kind of business? Q. Well, that's exactly why you signed a licence contract to run that kind of business, isn't it, Mr Shao? A. INTERPRETER: Well, the first time I - in our first meeting we didn't really talk about anything about a licence contract. I'm just trying to get some information. I'm trying to get some information to know about or what the beauty business is." (T 84 - 85)
It is clear from the WeChat messages which followed this meeting, the contents of Mr Yan's evidence and the behaviour of the parties that Ms Zhang's account of the conversation must be correct. This was no mere discussion of generalities.
This extract from the plaintiff's cross-examination is one of a number of examples of the plaintiff challenging or denying evidence which had not been put in dispute, followed by an implausible explanation for doing so (in this case, the fact that he was a man who knew nothing about beauty shops). In the section of this judgment on the credit and reliability of witness evidence, I have set out other examples. For the reasons set out more fully in that part of the judgment, where there is disagreement as to the factual events, I have preferred the evidence of Ms Zhang unless otherwise indicated.
The evidence points to the parties having a series of discussions including not only over dinner in Mr Yan's presence, but also in an exchange of correspondence on WeChat. The plaintiff decided to take the second option Ms Zhang proposed, namely a licence for a limited period, which was recorded in a contract, written in Chinese, dated 21 June 2019 prepared this document in triplicate so that not only the plaintiff but also Mr Yan (described as the "guarantor") could sign and retain an executed copy.

[8]

The first agreement ("the Licence agreement")

The first agreement was signed on 21 June 2019 (CB 1, 43-44), and the parties agree it remained on foot until it was terminated by the plaintiff as at 8 March 2020. The text was as follows: "Coco Medical Cosmetology Centre License Agreement Party A: Coco Medical Cosmetology Centre Address: shop 5 Skyview Shopping Plaza 537 George Street, Sydney 2000 Telephone: [redacted] Mob: [redacted] Email: [redacted] Party B: Name: SHAO WO QUAN SAM Address: [redacted] Passport number: [redacted] Telephone: [redacted] Email: [redacted] Upon amiable negotiation between party A and party B, on the basis [sic] mutual good faith, the parties agree to the following: 1. on agreement: a. Party A licenses the business known as Coco Medical Cosmetology Centre located at 537 George Street to Party B for the period of half a year, from 1 July 2019 to 1 January 2020. b. During the period of the contract, Party B will be responsible for payment all rents, outgoings and employee wages. c. Party B will pay wages In accordance with the relevant employment law, or work hour as per agreement between the parties. Party B will be responsible for all industrial dispute during the contract period. d. Upon signing of this agreement, party B wilt pay $30,000 into party A's account, for the purpose of paying the rent for the next one month, the remaining, being $20,000, is to be reserved as advance security payments (the current rent and utility bill is approximately $10,000, refer to bank statement for specific figure. On the first day of the month after the next month, payments for the following month becomes due, so on and so forth). e. During the licensing period, party B need to pay Party A $100 per day as collaboration fee, payable on the date of signing of this Agreement, totalling $18,500. f. During the licensing period, party B is entitled to all profits and is responsible for all expenses. g. During the licensing period. Party B must maintain standard of service, and the image of the business. h. Employee's wage are payable on every Thursday, Party B must calculate and send a record of each employ's wage to Party A latest by 5:00pm, Wednesday every week, to allow party A to pay the employees. NOTE: party B should also ensure that there is at least $20,000.00 reserved in the business' bank account at all times. i. All other expenses are payable by party B, Party A will only help party B with transferring rent payment, utility payment and employee wage. The j. Refer to accountant for GST and tax. k. During the licensing period, if there is any party who expresses interests to purchase, or invest in shareholdings of the business, party B is not allowed make decisions on his own, but must refer such interests to party A. l. During licensing period, party B is allowed to use alt equipment in the business, but must exercise care and carry out maintenance regularly. Party B is responsible for any damages causes. Should any equipment be lost at the end of the contracting period, Party B must repay party A In full. m. During the contracting period party A will assist party B with wage payment and marketing. n. Party B is not allow [sic] to carry out the same business within 10KM of COCO BEAUTY within 5 years. 2. Default During the term of this agreement, if either party defaults on their obligations pursuant to the agreement, the defaulting party is to pay $50,000 to the other party. Examples include if party B withdraws from the agreement without proper cause, or party A terminates the agreement without property cause, unless a new buyer agrees to enter the agreement. 3. Upon completion of the agreement, parties agree to stop the contracting relationship, party B did not violate any operation guideline, and did not cause any damage to company property, including equipment and etc. 4. Post-termination procedures: a. Party B must clear all debts incurred during the contracting period. b. Check company Inventory and stocks. c. Party A refund the remaining security payments to Party B if there are no debts or damages to any equipment. 5. Should any dispute arise during the licensing period, the parties shall, with principles of cooperation and progress in mind, negotiate and settle the dispute. 6. If there are outstanding matters, the parties could amend or add such matters to this agreement. Such amendments or additions shall have the same agree to engage in dispute resolution 7. To guarantee COCO BEAUTY'S property, reputation, safety of all equipment and the performance of the agreement, Min YAN agrees to be Party B's guarantor, and witness for both parties. 8. The parties agree to the terms set out above, and this agreement shall come into effect upon the signatures by party A, B and witness. There are three counter copies of this agreement."
According to the letter from the former plaintiff's solicitors dated 3 March 2020, the first agreement payments were made in the following ways: "(i) RMB60,000 (approximately $12,000) by way of WeChat Pay to Ms Zhang's personal WeChat Pay account from our client's WeChat Pay account on 25 June 2019, 13 July 2019, 15 August 2019 and 17 August 2019. (ii) $5,000 by way of bank transfer to the Oceania Bank Account from our client's personal bank account on 26 June 2019, (iii) $10,000 by way of bank transfer to Ms Zhang's nominated NAB bank account (BSB [redacted]; Acc No: [redacted]) from our client's personal bank account on 13 July 2019, (iv) RMB205,000 (approximately $41,000) by way of bank transfer to Ms Zhang's nominated Bank of China bank account (Acc No: 621660 0400000597346) from our client's personal bank account on 26 June 2019 and 13 July 2019, (v) $20,000 transfers to Ms Zhang's personal account from the Oceania Bank Account on 17 August 2019, and (vi) $20,000 in cash payments made by our client to Ms Zhang in person on or about 25 June 2019."
The payment identified in (vi) above is the subject of challenge; the defendants say no such cash payment was ever made.
This letter from the plaintiff's solicitors sets out that the amount payable was approximately $98,500, comprising a $20,000 deposit to be held by the defendants' pending completion of the first agreement, $18,500 for a collaboration fee and approximately $10,000 per month for six months to cover rent and other outgoings. Only $5000 was paid into the company bank account; the rest was paid to the first plaintiff personally.
Confusingly, this letter does not refer to the second agreement entered into by the parties. Instead, according to the letter from the plaintiff's solicitors of 20 March 2020, unauthorised transactions by the first defendant led him to suggest to her that he should purchase the business outright in order to obtain full control over the business, including the bank account, and this resulted in the 4 November 2019 agreement which is called the second agreement.
It is in the context of the making of the second agreement that the plaintiff's solicitors made the following statements in this letter about the plaintiff: "Our client is not a commercially sophisticated person. He has had no previous experience as a business owner in Australia. He has been in Australia for only approximately three years. In addition, he trusted Ms Zhang and assumed she would deal with him fairly and honestly. All these matters were known to Ms Zhang."
As is set out in more detail in the section of this judgment on credit and reliability, I do not regard this as being an accurate description of the plaintiff's business acumen.

[9]

The second agreement ("the July agreement")

The second agreement was signed on 14 July 2019 (CB 1, 48-49). In practical terms, it had little impact as it was overtaken by the third agreement. Its contents were as follows: "Contract for the Transfer of Coco Beauty Medical Cosmetic Centre Party A: Coco Beauty Medical Cosmetic Centre Address: Shop 5 Skyview shopping plaza 537 George St, Sydney 2000 Phone: [redacted] Mobile: [redacted] Email: [redacted] Party B: Name: SHAO WO QUAN SAM Address: [redacted] Passport number: LK771964 Phone: [redacted] Email: [redacted] Through friendly consultation between the two parties, an Agreement has been reached on the following transfer matters: I. The two parties have determined the following after consultation: 1. From 30 September 2019, Party A will transfer Coco Medical Cosmetic Centre located at No. 537 George Street, to Party B (SHAO WO QUAN SAM). The transfer fee is $200,000 Australian dollars. The first payment of $30,000 shall be paid to Party A on 13 July 2019, and the remaining balance of $170,000 shall be paid in full on 15 October 2019/30 September 20191 in a lump sum. 2. After negotiation between the two parties, Party A agrees to transfer all the equipment, devices, products and all customers, including the customers who have made the payments and those who have not paid in full, to Party B. From the date of entering the contract, Party B takes full responsibility for discretionary management, without involving Party A in any way. 3. Party B will continue to use Party A's credentials, at a cost of $20,000 annually, for a period of two years. Party B will settle the annual fee for the first year on 30 September 20192, and the second annual fee shall be settled on 30 May 2020. 4. During the period of using the credentials. Party B must respect and abide by the law, and strictly use the credentials and manage the business in accordance with Australia's laws and standards. 5. This agreement is a supplementary agreement to the Agreement of Contracted Management entered into on 21 June 2019. It has the same legal effect as the Agreement. This agreement shall take effect once the full payment is made on 1 September 2019. II. Liability for breach of contract: During the transfer period, if any party breaches the terms of the contract, the breaching party shall pay a breach fee of $50,000 Australian dollars to the other party. The specific examples for breach include Party B's failure to complete the transfer and does not return the payments made prior, or Party A's termination during the transfer period without sufficient causes or reasons. III. If Party A and Party B have no objection to the above clauses, the agreement will take effect from the date of signature by both parties and the guarantor. This agreement is made in triplicate, one for each party and one for the guarantor. Place of signing: Coco Beauty Date of signing: 14/07/2019 Signature of Party A: (signature) 1 The initial date, "1 September 2019", was crossed out by hand on the original document. 2 The initial date, "1 September 2019", was crossed out by hand on the original document."
Like the first agreement, the text of this document was in the Chinese language. It was signed by the plaintiff and by the first defendant (as representative of the second defendant) and also by Mr Yan as "guarantor". According to the plaintiff, he signed this agreement as a gesture of goodwill, but the binding nature of this agreement is not in dispute on the pleadings.

[10]

The third agreement ("the Purchase agreement")

The third agreement was signed on 4 November 2019 and remained on foot up until a variety of dates postulated by both parties (in terms of repudiation and the like) but for the purposes of this outline of facts I note that there can be no doubt that, whether terminated earlier or not, the agreement may certainly be regarded terminated by the defendants in December 2020 when they effected a sale to another purchaser. The terms of this agreement were as follows: "COCO BEAUTY TRANSFER AGREEMENT Party A: COCO BEAUTY Address: shop 5 Skyview Shopping Plaza 537 George Street, Sydney 2000 Telephone: [redacted] Mob: [redacted] Email: [redacted] Party B: Name: SHAO WO QUAN SAM Address: [redacted] Passport number; LK771964 Telephone: [redacted] Email: [redacted] Party A and Party B have agreed, through friendly negotiation, the following: 1. In order to facilitate the smooth transfer from Party A to Party B, Party A will retain the lease with the lessor, and add Party B's name at an appropriate time, after which Party A will exit the lease. 2. After Party B takes over COCO BEAUTY, all matters regarding Coco Beauty before and after are the responsibility of Party B, and Party A is no longer liable (including but not limited to; any debt employment dispute, customer dispute, marketing, product quality, product price, legal issues). 3. Party B. for the duration of using Party A's operational standard and legal responsibilities (licence), must strictly comply with Australia's industrial standards, and operate in accordance with the requirements set out by the licence. At the same time. Party B must strictly obey and execute Australia legal and regulatory system. At the same time, if Party A suffers any damage to its reputation as a result of Party B's action. Party B needs to pay $100,000 to Party A in the form of compensation. 4. COCO BEAUTY had, in the past few years, worked hard and paid off to earn a good reputation and influence, in a series of government and community activities, not only in Sydney (in events such as Voice of China, Carnival of China, International Supermodel competition, Wulin Babe etc), but also is the only organization in Australia appointed fay the Asia International Cosmetology Association (Asia International Cosmetology Association includes more than 20 nations in the world, and more than ten thousand large cosmetology and plastic surgery organizations). 5. In an effort by Party A to help Party B reduce operation costs and overheads. Party A will, upon Party B's request, transfer COCO BEAUTY'S brand name to Party B during the transfer of the business, for a brand transfer fee of $50,000. The Business transfer price is $200,000. The 2019 licence is $20,000. Lease bond is $41,888. In total $311,888. 6. Except sums already paid. Party B now owes Party A a total of $145,088, which is to be paid in 3 instalments. The $20,000 licence fee needs to be paid to Party A before 30 June 2020. Time for payments are: 31 Dec 2019 $20,000 . . 29 Feb 2020 $70,000 10 May 2020 $55,088 7. If Party B is unable to repay the last payment on 10 May 2020, Party A will allow Party B two weeks extension to arrange for payment on or before 25 May 2020, if Party B is still unable to make payment. Party A is entitled to retain all prior payment made by Party B as a result of Party B's operation of the business over the past year causing inconvenience and loss to Party A. 8. All abovementioned payment must be paid punctually by Party B. If unpaid, Party A has the right to list the Business on sale in market, and the price is determined by Party A. Once sold. Party A is entitled to collect the unpaid debt owed by Party B, and if insufficient Party B needs to pay the difference. If the payment exceeds the sale price, the Parties shares the exceeded part equally. Before the transfer Party B is responsible for all rent payable. 9. Licence fee is $20,000 per annum, and needed to be paid in full before 30 June every financial year, 10. The parties agree to the above terms, and will comply with the terms of this agreement upon execution. 11. There are three counter copies of this agreement, Party A and Party B each retain a copy, and the guarantor retains a copy. Address of execution; Coco Beauty Date of execution: 4 Nov 2019 Party A signature Party B signature Guarantor's signature"
This agreement required the outstanding sum of $145,088 to be paid by the plaintiff in three instalments as follows: 1. $20,000 by 31 December 2019; 2. $70,000 by 29 February 2020; and 3. $55,088 by 10 May 2020.
As set out in the above agreements, the license agreement was to operate from 1 July 2019 until 1 January 2020. Between 1 January 2020 and 1 March 2020, the plaintiff continued to operate the Coco business in accordance with the terms of the license agreement.
Although there was considerable cross-examination about the degree of honesty shown by Ms Zhang in terms of the true income of the business, the parties agree that the business income over the period of the plaintiff's management was approximately $174,911.88.
The parties do not agree as to the expenses of the Coco business during the period of the plaintiff's management. The plaintiff claims that these expenses were $195,436.90, consisting of rent, wages, other costs of $13,242.41 and omitted debits of $13,105.34. The defendants' position is that the total admitted debts figure should be $21,647.22 and relates to business expenses for which the plaintiff should be liable. The other sounds however are agreed to. This means that the parties agree that the business expenses are at least $195,973.78, although the defendants submit that the total amount is $203,978.78.
As is set out above, it is common ground that the plaintiff made payments totalling $53,400 and RMB 140,000. The only disputed item is the cash payment of $20,000 which the plaintiff claims he made on 25 June 2019. If this disputed payment is excluded, the parties agree that the business expenses paid by the plaintiff total $81,400. It is also common ground that the plaintiff made the nine payments listed above between 13 July and 31 December 2019 for the purpose of purchasing the Coco beauty business. This means that as at 4 November 2019, taking account of payments made after that date, out of the total sum due of $311,888, an amount of $145,088 remained to be paid. The payment on 31 December 2019 of $20,000 was the first of the three instalments required under the purchase agreement, but the remaining two payments were never made.
There was also a payment made by the first defendant is not in dispute. That is the sum of $9000 which she agreed would be a contribution towards running costs. This was achieved by transferring an additional $5000 into Oceania's account on 2 July 2019, adding to the existing balance of $4000 in that account.

[11]

The terms of the lease

The relevant terms of the lease in relation to assignment and subletting are set out in paragraph 43 of the lease, the terms of which are as follows (CB 4, 168 -170): "PART 8 - ASSIGNMENT AND SUBLETTING 43. Prohibition against assignment, subletting and mortgage over lease Prohibition of dealings (1) The Tenant shall not (a) assign, transfer, sublet, deal with, hold on trust, or grant any interest in, this Lease; (b) mortgage, charge or encumber this Lease; (c) part with possession of whole or any part of the Premises; (d) grant a licence, or share the right of occupation, in respect of whole or part of the Premises; (e) grant any franchise or concession over the Tenant's business conducted at the Premises which would entitle any other person to use, occupy or trade from whole or part of the Premises. Consent to assignment (2) The Tenant may apply to the Landlord for consent to the assignment of this Lease, which shall not be unreasonably withheld if the following conditions are satisfied: (a) the Tenant shall make a written application to the Landlord for consent and furnish complete copies of all written documents entered into between the Tenant and the proposed assignee relating to the Tenant's business and the premises, written personal and business references and financial statements relating to the assignee and any proposed new guarantors; (b) the Tenant shall establish to the reasonable satisfaction of the Landlord that (i) the proposed assignee is respectable, responsible and solvent; (ii) the proposed assignee has adequately performed its obligations as the lessee or former lessee of other business premises; (iii) in respect of the business or profession intended to be conducted by the assignee at the Premises the assignee has sufficient financial resources and business experience to be capable of adequately complying with the Tenant's obligations under this Lease and of efficiently conducting the assignee's business at the Premises; (c) the Tenant shall have paid to the Landlord all money due under this Lease up to the date of the assignment (and, in respect of any liability which can not be accurately determined, will secure it to the Landlord's reasonable satisfaction at the date of the assignment); (d) there are no unremedied breaches of the Tenant's obligations under this Lease at the date of the assignment; (e) any other consents which are required to the assignment, by head lessors, mortgagees or others, are obtained before the assignment; (f) when the assignee is a company, other than a company whose shares are listed on an Australian Stock Exchange, personal guarantees for performance of lease covenants for the duration of the lease term by the assignee be provided, in a form reasonably acceptable to the Landlord and prepared on behalf of the Landlord at the Tenant's expense, by two of the assignee's directors or principal shareholders chosen by the Landlord; (g) the execution by the Tenant and the assignee of a transfer of this Lease, which shall be duly stamped and which the assignee or the assignee's solicitor shall undertake to have registered promptly after completion of the assignment; (h) the execution of a deed in a form reasonably required by the Landlord, by the Landlord, Tenant, assignee, continuing guarantors and new guarantors, in which (i) the Tenant confirm its liability under this Lease for the balance of the current lease term; (ii) the Landlord is released from liability to the Tenant under this Lease; (iii) the assignee shall observe the Tenant's obligations under this Lease during the Tern; (iv) continuing guarantors confirm their consent and continuing liability, unless that is adequately covered in their guarantee; (v) new guarantors execute guarantees under this Lease for the assignee or the assignee provides a bank guarantee as the Landlord may require; (i) the payment by the Tenant to the Landlord of the Landlord's reasonable costs and disbursements in accordance with clause 14. Change in control of Tenant (3) (a) When the Tenant is not a company whose shares are listed on an Australian Stock Exchange, any proposed (i) transfer in the legal or beneficial interest in shares of the Tenant if a company; (ii) allotment of shares in the Tenant company; or (iii) changes in the Tenant company's articles of association, which alters or would have the consequence of altering the effective control of the Tenant company, is considered to be an assignment of this Lease and requires the Landlord's consent in accordance with clause 43(2) as if the parties which would acquire control over the company were assignees of the Lease. Consent to mortgage over Lease (4)The Tenant may apply to the Landlord for consent to the grant of a mortgage over this Lease, which shall not be unreasonably withheld if each of the following conditions precedent are satisfied; (a) the Tenant shall make a written application to the Landlord for consent, and furnish a copy of the proposed mortgage and any other documents between the Tenant and the mortgagee; (b) the mortgagee is a bank or financial institution; (c) the purpose of the loan is to enable the Tenant to acquire the business conducted at the Premises or to continue or expand the Tenant's business; (d) the Tenant is not in default under this Lease; (e) the execution of a deed of consent, in a form reasonably required by the Landlord, and to be prepared on behalf of the Landlord, by the Landlord, Tenant and mortgagee; (f) the payment by the Tenant to the Landlord of the Landlord's reasonable costs and disbursements in accordance with clause 14."

[12]

The plaintiff leaves the Coco beauty business

The plaintiff gave very little notice of his intention not to proceed with the purchase of the business. On 3 March 2020, he informed employees that he would no longer be involved and on that same day his solicitors wrote to the defendants' solicitors stating that the plaintiff gave written notification that his last day of work with the business would be Sunday, 8 March 2020, after which he would no longer be working for the business. This was a matter of days after the date for the second instalment, namely 29 February 2020.
The plaintiff's explanation for not making these payments is that there was an agreement between the plaintiff and defendants to end the purchase agreement. The evidence in relation to this asserted agreement is set out in more detail below.
After the plaintiff left the business, the defendants discovered that there were debts to customers of amounts in addition to fees paid by customers. The plaintiff has now admitted liability for such debts and the question for determination is the quantification of the amount and the consequences of his failure to comply with this obligation under the agreement to clear all debts incurred during the contracting period.
Notwithstanding the correspondence exchanged between the solicitors about the termination of the agreement, on 22 May 2020, the defendants notified the plaintiff that the date for payment of the outstanding sums due on 29 February and 10 May 2020 would be extended to 25 May 2020. However the plaintiff did not pay these outstanding amounts, either by that date, or at all. Instead, he commenced proceedings by statement of claim filed on 6 May 2020.
The defendants' cross-claim, filed on 24 June 2020, stated that it was endeavouring to mitigate its losses by reason of loss of the sale to the plaintiff. It is not in dispute that, on 10 December 2020, Oceania entered into an agreement to sell the Coco business to a third party, Zero Degree Group Pty Ltd, for $91,000.

[14]

The "permitted representation"

The plaintiff claims that the defendants represented to him that entry into the licence agreement was permitted under the lease with Meriton (which Ms Ashworth, in her submissions of 11 September 2021, defines as "the permitted licence representation"). This representation, asserted to have been implied in the course of negotiations and/or in the written agreement of 21 June 2021 and to have been relied upon by the plaintiff in relation to each of the successive contracts, was misleading or deceptive in trade or commerce in contravention of s 18 of the Australian Consumer Law ("the ACL"), principally by reason of Clause 43(1) of the lease.
What was that "representation" (or series of representations)? It appears to be acknowledged by the plaintiff that the representation was not express; the submissions of 11 September 2021 (paragraph 8) describe the representation as having been implied by "the grant of a licence of the kind contemplated" by the licence agreement, namely that the agreement being entered into was permitted by the lease. Was it the same representation for each of the three contracts, or did it differ? Was it relied upon by the plaintiff?
The "permitted license representation" is set out at paragraph 25A of the second further amended statement of claim and as follows: "On or around 21 June 2019, the second defendant represented to the plaintiff that the grant of a licence of the kind contemplated by the License Agreement was permitted under the lease ("Lease") in respect of the premises ("Permitted Licence Representation").
The plaintiff states (at paragraph 25E of the statement of claim) that this was misleading or deceptive on the basis that the representation was false, in that the licence contemplated by the license agreement was prohibited by Clause 43(1) of the lease.
As Clause 43(1) prohibited the granting of a licence, this first licence agreement was prohibited by, and in breach of, Clause 43 of the lease. That much is clear from the contents of the lease itself. What, then, did Ms Zhang say (or imply) that overrode or otherwise altered the terms of the lease in this regard?
The submissions for the plaintiff (paragraph 15 of the plaintiff's submissions of 11 September 2021) are that the court "would accept the plaintiff's evidence that he relied" upon the permitted licence representation in entering into all of the agreements and in making the instalment payments. The submissions go on to add that "reliance is also to be inferred from the fact" that the purchase of the business was to include the transfer of the lease, which was clearly essential to the conduct of the business.
The question of what representation was made, and when, is central to the findings of fact.
The first question is to determine what was said about the lease prior to the parties entering into the first agreement. Did the plaintiff see the lease before he entered into the agreements and if so, did he read and understand the restrictions on licence agreements and the requirement for approval by the Lessee if the business were to be acquired by a new owner?
The plaintiff sought to portray himself as an unsophisticated businessman and claimed variously either not to have read the lease at all prior to entering any of the agreements and to having not really been given an opportunity to inspect it. Ms Zhang's evidence was that at all relevant times the lease was in the shop and that the parties discussed its terms on the understanding that, when the full purchase price was paid, the landlord would be asked to transfer the lease conformably with the procedure set out in the lease. This position is reflected in the following two paragraphs from his fourth affidavit of 26 July 2021, which was affirmed at the commencement of these proceedings: "At no time before or during my management of the Business (1 July 2019 - early March 2020) did I know that the License Agreement was in breach or potential breach of the lease of the premises, and that the fact that I was managing the Business from the Premises would have allowed the lessor to terminate the lease. Had I known that the lease was at risk of being terminated, I would never have agreed to enter into the License Agreement, July agreement, or the November agreement, or made any payments under any of these agreements, as the termination of the lease would have meant that all monies I pay to the defendant's would need to be recovered through legal proceedings or, worse, become unrecoverable."
Mr Harding SC put it to the plaintiff that not only was this incorrect, but he would still have entered into the contract in any event even if he had known about this asserted problem issue (T 189 - 190): "Q. You said the following, "At no time before or during my management of the business (1 July 2019 to early March 2020) did I know that the licence agreement was in breach or potential breach of the lease of the premises." That evidence is not correct, is it? A. INTERPRETER: That evidence is correct. Q. Then I want to ask you about paragraph 3, and I'll read it out: "Had I known that the lease was at risk of being terminated, I would have never agreed to enter into the licence agreement July agreement or the November agreement or made any payments under any of these agreements, as the termination of the lease would have meant that all the moneys I had paid to the defendants would need to be recovered through legal proceedings or, worse, become unrecoverable." A. INTERPRETER: Yes. INTERPRETER: I need to rephrase that to Mr Shao again. I just try to read my own notes, Mr Harding, if you don't mind. Q. That evidence in your affidavit is not correct, is it? A. INTERPRETER: That evidence is correct. Q. You, on your own evidence, wanted to proceed with the purchase, even though you knew there was a risk that Meriton might terminate the lease for breach of clause 43? ASHWORTH: I object. HER HONOUR: On what basis? ASHWORTH: That wasn't the witness's evidence so the question is unfair. HARDING: I just put to the witness. I'm trying to make sure what the witness's evidence, that's why I want to put it to him. HER HONOUR: I agree. HARDING Q. It's the case, isn't it, Mr Shao, that on your evidence you wished to proceed with the purchase of the business, even though you knew there was a risk that Meriton would or might terminate the lease, because of breach of clause 43? A. INTERPRETER: If there is a risk that Meriton will do it, of course, I wouldn't sign that contract that agreement. Q. But you were perfectly happy to proceed with the agreement even knowing that fact, weren't you? A. INTERPRETER: I was not aware before that prior. Before. Q. Even if you had known of it before, you still would've entered into the licence agreement, wouldn't you, Mr Shao? A. INTERPRETER: I'm not aware of that. Of course I have no other choice, that would have to be part of my contract. Q. And even if you were aware of that, Mr Shao, you still would have entered into the purchase agreement, wouldn't you? A. INTERPRETER: I would not entered".
In the plaintiff's submissions 20 October 2021 (at paragraphs 17 - 35), the paragraphs from the plaintiff's fourth affidavit set out above are put forward as the effective answer to the question of both the making of the representation and reliance upon it. However, as the contents and the plaintiff's implausible denials in cross-examination readily demonstrate, these self-serving statements of the plaintiff's understanding are themselves redolent with doubt, as the references to "potential breach" and "risk" in his affidavit demonstrate. This evidence is, furthermore, contrary to the plaintiff's own stated position even after he received advice about Clause 43 of the lease, namely that he still wish to proceed with the purchase of the business if the lease could be transferred.
It is necessary to set out that evidence in some detail. As Ms Zhang is the person who is asserted to have made the relevant representation (either expressly or by implication), it is helpful to set out her evidence on this issue first.
Ms Zhang said in paragraphs 71 - 72 of her affidavit of 23 February 2021 (CB2, Tab 6): "On or around 1 July 2019, Sam officially assumed control of the Coco Beauty Business. On this day, I went over the books of the Company, which remained on the premises, with Sam, and said words to the effect: Sam, here are the Company's important records. The lease, client files, bank records and many more. If you are not clear about anything, please call me and we can discuss them."
If the lease was kept on the premises, it would have been easy for the plaintiff to check its contents. His claim was that it was not there, and that he had to telephone Ms Zhang to ask for it. Ms Zhang was asked about this conversation and where the lease was kept: "Q. When Mr Shao called you for a copy of the lease on 9 December 2019, why didn't you tell him where it was? A. INTERPRETER: I have told him and, in fact, I have told him when he took over the business. Q. If it was stored in the shop, you wouldn't have had to go in, would you, to show him where it was? You could have just told him where it was? INTERPRETER: Can you repeat, Ms Ashworth. Q. If the lease was stored in the shop, you wouldn't have had to go in to give it to him, would you? A. INTERPRETER: He asked me on 9 December and I told him and I went back to the shop on the 10th. Q. Why didn't you just tell him over the phone, like you had for other documents, where it was located in the shop? A. INTERPRETER: I don't know why you have to keep repeating your questions. I have told him about it before already. HER HONOUR Q. You're not being asked that question, Ms Zhang. You are not answering the question, that is why you keep being asked the questions. The thing, he asked about the lease, you said, on the 9th so you went on the 10th. Ms Ashworth's question was why not just tell him where the lease was over the phone? A. INTERPRETER: Because I have told him before already and I don't know why he had to ask that again. So I just told him I will just come into the shop. ASHWORTH Q. The lease belongs to the company; correct? A. INTERPRETER: Yes. Q. You were a personal guarantor under it; correct? A. INTERPRETER: Yes. Q. You weren't willing for such an important document to be stored in the shop, were you? A. INTERPRETER: No, I have told Sam about this document together with other documents when he took over. Q. That's not my question. My question was you weren't willing for such an important document to be stored in the shop, were you? A. INTERPRETER: No, I did keep it in the shop. HER HONOUR Q. You kept it where? Did you say in the shop or in your home? What did you just say, I didn't hear that. INTERPRETER: In the shop. ASHWORTH Q. It could get lost in the shop, couldn't it, Ms Zhang? A. INTERPRETER: Well, there's so many equipments in the shop that have not been lost. Why would this paperwork would have been lost? ASHWORTH: Sorry, could you just repeat the answer. INTERPRETER: There are so many equipments in the shop and they have not been lost. Why would this paperwork have been lost. ASHWORTH Q. Ms Zhang, the lease wasn't stored at the shop, was it? A. INTERPRETER: Incorrect." (T 299 - 300)
Ms Zhang agreed that the parties discussed the terms of the transfer of the lease, although stating that this was not to happen until the purchase price was paid in full: "Q. Ms Zhang, around this time Mr Shao was wanting to transfer the lease, didn't he? INTERPRETER: So around this time Mr Shao transferred the lease, didn't he, is that what you said? Q. No, around this time Mr Shao wanted to sort out, transfer the lease, didn't he? A. INTERPRETER: I think he asked me one time in October, ..(not transcribable).. about that ..(not transcribable).. Q. So you're agreeing with my question, correct? A. INTERPRETER: Can you repeat your question? Q. Around the time, that is the end of October, around the end of October, Mr Shao wanted to sort out the transfer of the lease, didn't he? A. INTERPRETER: No. I think he asked me, I think he may have asked me in October. But I can't remember very clearly. Q. If he asked you about the lease in October, you would agree that around that time he wanted to sort out the transfer of the lease, didn't he? A. INTERPRETER: He has to pay me out before I can transfer it to him." (T 302). Ms Zhang may be correct to say that there was no requirement for transfer of the least prior to the contract for purchase, but why was there no provision for transfer of the lease in the third contract? She answered as follows: "Q. The question is you didn't think to include a clause for the transfer of the lease in the second contract; is that right? INTERPRETER: No, I haven't thought about it. ASHWORTH Q. Did you speak to anyone about the lease around October or November 2019? A. INTERPRETER: The lease? No. Q. You at least spoke with Mr Shao, didn't you? A. INTERPRETER: The discussion about the second contract was done between us together. Q. Please don't think about why I'm asking you a question. Please just focus on the question I'm asking. The question I'm asking here is not about the second contract. It's just about the lease. You at least spoke with Mr Shao in around October or November 2019 about the lease, didn't you? A. INTERPRETER: Yes. Q. Mr Shao was eager for the lease to be transferred as soon as possible, wasn't he? A. INTERPRETER: I don't know what he was thinking. Q. What was your impression of Mr Shao in relation to his eagerness for the lease to be transferred? A. INTERPRETER: My impression at that time - my impression was he was at that time." (T 304) The context in which the lease was discussed was as follows: "Q. What questions, then, did he raise in relation to the rent adjustment transaction? A. INTERPRETER: He asked me about this, but it has been explained to him on 6 December. I gave him the details and I explained to him on WeChat as to why and how Meriton ask us to pay more to pay up the rent. Q. Ms Zhang, we might be able to go a little bit more quickly if you just focus on the question. He then raised the transfer of the lease issue, didn't he? A. INTERPRETER: The lease transfer. You've asked me about the lease transfer at the end of November already, and this is unrelated to this one here. Q. Ms Zhang, the judge has read your affidavits. We all have. Can you please just focus on answering my question. A. INTERPRETER: Okay. Q. After you had been discussing the rent adjustment, Mr Shao raised the issue of the transfer of the lease, didn't he? A. INTERPRETER: No. Q. He'd already been asking about when the transfer could be done, before you signed the November agreement. Correct? A. INTERPRETER: No, he had not been asking ..(not transcribable).. Q. And he asked you about it again on 16 January 2020, didn't he? A. INTERPRETER: No, he did not ask me." (T 309)
One of the conversations Ms Zhang had with the plaintiff is set out at paragraph 241.4 of her affidavit of 23 February 2021 as follows: "In the course of discussions for the Second Agreement between 25 October 2019 and 4 November 2019, Sam and I had a conversation in Mandarin using words to the following effect: Sam: Have you spoke to Meriton about transferring the lease to me? Me: No, is it time to ask them? Sam, we're not quite there yet, because I will need to receive the balance of the money before I transfer everything to you. Sam: I think you should ask them, to see what their initial response is, because if they do not agree after I have paid the money, then it will be troublesome. Me: Sam how about this, if we run into trouble, I will continue to hold the lease for you just like we are doing now, until Meriton accepts you as a tenant, and then we'll put it in your name. Sam: That's one way."
It was put to Ms Zhang that she knew there would be likely to be problems in the transfer of the lease, which she denied, and that this caused her to agree to "pause" the contract, which she also denied: "Q. By 16 January 2020, you knew that there was a likely problem in the transfer of the lease, didn't you? INTERPRETER: No. Were you worried that you wouldn't be able to transfer the lease? A. INTERPRETER: I was not worried. Q. You agreed in that conversation to renegotiate the purchase, didn't you? INTERPRETER: Sorry? Q. You agreed in that conversation to renegotiate the purchase of the business? INTERPRETER: Sorry, from, you agreed? Q. To renegotiate the purchase of the business during that conversation you had with him? A. INTERPRETER: Which conversation, sorry ..(not transcribable).. can you remind me which conversation ..(not transcribable).. Q. At 5.30pm on 16 January 2020? A. INTERPRETER: In conversations then about lease intentions. He asked me questions ..(not transcribable).. Q. And after that you had a discussion about the lease in which you agreed to pause the purchase, didn't you? INTERPRETER: Pause the purchase? Q. Pause the purchase, yes? A. INTERPRETER: That's not right, I disagree, we did not have such conversation." (T 310)
Ms Zhang agreed that the consent of the landlord to transfer the lease had never been sought or obtained (T 309 - 310) but repeated that no transfer would have been sought until the purchase price was paid.
The plaintiff gave the following explanation in paragraphs 9 - 15 of his affidavit of 1 December 2020: "Second business transfer agreement 9 On or about 4 November 2019, I signed another business transfer agreement with Zhang. Annexed to this affidavit and marked with the letters 'WS-3' is a copy of this agreement and its translation. 10 On the same day Zhang told me words to the effect that 'the lease will be transferred once the lessor is ready, hopefully around the time of the 2020 New Year". 11 In or around early January 2020, Zhang had not approached me with regards to the transfer of lease. On or around 16 January 2020, I had a conversation with Zhang in Mandarin Chinese in words to the following effect: I: When will the lease be transferred? I can't purchase the business if the lease is not transferred. Zhang: There will be some difficulties because Meriton, the lessor, is very strict. I think Meriton may not approve the lease transfer because of your lack of business experience. I: But you said it could be done around New Year. How can I continue with this purchase if the lease is not transferred? Why don't we call off the purchase for now, so you can speak to Meriton to sort out the lease? Once the lease issue is resolved, we can proceed with the purchase again. Zhang: OK then let's do that. I will find a way to solve the transfer of lease issue. Once that is solved, we enter into a new agreement for the purchase of the business. Meanwhile you can still operate the business in accordance with the first agreement. I: Okay. 12 Between January 2020 to March 2020, Zhang did not approach me with regards to the transfer of lease. 13 Between 4 November 2019 and March 2020,1 continued to manage and operate the Business from the Premises in accordance with the terms of the license agreement. Cessation of licensing of the Business 14 Notwithstanding the license agreement, Zhang and I continued to manage and operate the business in accordance with the license agreement up to and until March 2020. 15 In or around early March 2020, I ceased managing and operating the Business, as I was not sure if the transfer was lease was possible, and did not wish to expend furth energies into the Business if I was not going to be able to purchase it."
The plaintiff acknowledged that he did not become concerned about the asserted breach of the lease until he spoke to his lawyers, which he did shortly before notifying the defendants that he would no longer be running the business: "Q. Mr Shao, is it your understanding that the licence agreement that you entered into was in breach of the lease between the second defendant and Meriton? A. INTERPRETER: I have no idea at that time. Q. Is it now your understanding that that's the case? A. INTERPRETER: Yes, I'm aware now. Q. When do you say that you first became aware that the licence agreement was in breach or potential breach of the lease? … A. INTERPRETER: When I discussed the evidence with my lawyer and I realise that it was actually too risky. Q. The first time that you ever made this allegation was on 24 July 2021; that's right, isn't it? A. INTERPRETER: When was the date? Q. The first time you ever made the allegation that you do in paragraph 2 of your affidavit was on 24 July 2021, wasn't it? A. INTERPRETER: Yes." (T 183 - 184)
What, then, was the plaintiff's understanding of the lease clauses, and had he in fact read this document contrary to his claims? He made the following admissions at T 184: "Q. The fact is that you read the lease in December 2019, didn't you? A. INTERPRETER: I saw the lease, but I don't know what is inside it. They only just show me that, but I really don't know the detail. I'm not clear with the detail. Q. You asked Ms Zhang in December 2019 to show you where the lease was, didn't you? A. INTERPRETER: Yes, I did. Q. She did show you where the lease could be found, didn't she? A. INTERPRETER: My recollection was she did show me the lease, but there's so much content in there, I don't understand it at all. Q. You didn't understand the lease when you tried to read it? INTERPRETER: Sorry, Mr Harding ..(not transcribable).. been cut out again. Q. Did you try to read the lease? A. INTERPRETER: I tried my best to read it, but I don't I didn't understand it. There are a lot of legal I mean, very professional team, which I don't understand what they were."
The plaintiff claimed that this event in December 2019 was the first time he had ever seen the lease, and that it had not been kept in the shop, either in terms of the original, or a copy of the document in question. He referred to Ms Zhang showing him a "copy" of it, rather than the original: "Q. You said a moment ago that Ms Zhang gave you a copy of the lease in December 2019. Is that correct? A. INTERPRETER: She didn't give me a copy. She showed me. After I read it, then she took it away. Q. That's false, isn't it, Mr Shao? A. INTERPRETER: It was true. Q. A copy of the lease was always on the premises, at the shop? A. INTERPRETER: If the copy of the lease were at the premises, in the shop, why I have asked, why I had to ask the lawyer to write to, to get it?" (T 186)
Whether the plaintiff had had access to the lease all along, or had first read it in December 2019 but not been given a copy, or not read it properly or at all until his legal representatives obtained a copy (which was 21 February 2020: T 185), the fact remains that after his own lawyers advised him about the contents of Clause 43 of the lease, he still wanted to go ahead with the purchase of the business. He explained that although his solicitor had told him about Clause 43, "I didn't really pay much attention to it" (T 188) and agreed that despite this advice, and despite his earlier claims that the contract had been "paused" because of the lease problems, he still wanted to continue with the purchase: "Q. Your solicitors in this letter writing to Ms Zhang's solicitors didn't make any reference at all to the contract having been paused, did they? A. INTERPRETER: Because I still want to give her a chance to transfer the lease to me, and I've been always trying to complete the contract, that's why I didn't mention that, but at that time, I have paid $185,000. Q. This letter doesn't make any reference to obtaining a transfer of the lease, does it? INTERPRETER: Sorry, Mr Harding, I think I thought Mr Shao didn't get the question, but look like he did. HER HONOUR: He did and he answered it. INTERPRETER: Yes, he said, "Yes. Yeah, that's right." HARDING Q. In fact, in this letter, your solicitors on your instructions were threatening to commence proceedings against Ms Zhang, weren't they? A. INTERPRETER: The threatening really means that I want her to know that my consistency, my resilience of that of completing the contract. I'm just trying to get her to cooperate to transfer the lease to me. Q. That's not true, is it, Mr Shao? A. INTERPRETER: This is what I want."
He agreed that his solicitors were threatening legal proceedings if his money was not returned, but said that his real purpose was "trying to get things going ahead" and that he had been constantly wanting to settle and complete the purchase: "Q. They were threatening legal proceedings unless she paid that money? A. INTERPRETER: That's not wrong, but my purpose was to try to trade try to settle, and I know that if we do not go ahead, things were getting very serious, but my purpose was trying to get things going ahead. Q. For that purpose, you were perfectly happy for your solicitors to write out in this letter all the reasons why you would be entitled to get back 283,000; that's right, isn't it? A. INTERPRETER: I have constantly wanting to settle, complete the purchase, and the 283,000 was actually the penalty pay, "If you keep going ahead", so there won't be any of that kind of issue."
In other words, despite being told definitively by his own legal representatives on or after 21 February 2020 about Clause 43 of the lease, he continued to operate the business under the licence agreement until early March 2020 (T 188). What is more, his evidence in these proceedings up until shortly after the trial commenced was that he was still keen to do so, despite the business having been sold to another purchaser. He then changed his mind and commenced these proceedings two months later.

[17]

The $20,000 cash payment

The plaintiff sets out, in his affidavit of 4 June 2021 (which I note was one of the documents prepared and served just before the hearing commenced), the circumstances in which he paid $20,000 cash to the plaintiff. He says at paragraphs 38 - 42: "38 I have read Zhang's affidavit dated 23 February 2021, who in paragraph [64] says that '[a]t no time during this meeting on 25 June 2019 did [I] physically had over any sums of money to' Zhang. 39 This is untrue. 40 On 25 June 2019, I caused $20,000.00 to be withdrawn from my bank account for the purpose of giving it to Zhang. These withdrawal records can be found in Annexure WS-D to this affidavit. I had done so because clause 1.d. of the license agreement required me to pay Zhang $20,000.00 as security deposit, that is refundable according to clause 4, and I felt that this was the best way to isolate this refundable deposit, so that it did not become comingled with the funds I was otherwise going to transfer to the business bank account, which may be depleted over time due to the operation of the Business. 41 The rest of the monies I had to pay Zhang, being $18,500.00 in license fees, and $10,000.00 in accordance with clause 1.d. were paid to Zhang through my Chinese bank and WeChat transfer of RMB140,000.0 (or $28,000.00), and my Australian bank transfer of $5,000.00. I had paid a little in excess because I wanted some buffer for the Business. 42 I refer to paragraph [72.3] of Zhang's Affidavit. During our oral discussions prior to us signing the license agreement, Zhang made it very clear to me and told me words to the effect that 'you will only be allowed to manage the Business after you have made full payments in accordance with my requirements'."
Attached to this affidavit are the plaintiff's banking records confirming the withdrawals from the plaintiffs ANZ Access Advantage and Westpac Statements which confirm that the plaintiff withdrew two cash sums of $5,000 from the ANZ Bank on 25 June 2019 and the cash sum of $10,000 from his Westpac Choice account on the same date. No accompanying bank documents evidencing the purpose (which would be necessary for the withdrawal of sums of this size) are provided, although some form of reference would be not only required but also expected; I note, for example, the Westpac B-Pay payment of 26 June 2019, which is on the same page, contains a reference to Ms Zhang by name.
These bank records are referred to at paragraph 21 of Ms Ashworth's submissions of 11 September 2021 as being "objective evidence" that the plaintiff in fact withdrew $20,000 that day.
The evidence of Ms Zhang was that no sum of $20,000 needed to be paid at all, either in cash or into the bank. She set out, at paragraph 77 of her affidavit that she in fact had to remind the plaintiff about the $30,000 being paid into the bank for which this $20,000 in cash is a partial explanation: "77 On this day, in the Premises, Sam and I together looked at the bank statement, and we had a conversation in Mandarin words to the following effect: Me: Sam, of the RMB 140,000 that you transferred to me, I have deducted the $18,500 cooperation fee. There is a balance of around $9,000 that is to be transferred to the Company's bank account. We agreed that you would pay $30,000 into the account. Please arrange for the rest of the Money to be paid as soon as possible. Sam: Coco, rest assured I will get the money ready. I just need some help while I start running this business. Me: Alright. As for the approximately $9,000 to be transferred, there is presently around $,4000 in the Company's bank account that belongs to me. I will leave this sum of money in the account, and top it up by another $5,000. That more or less equals the $9,000 we agreed I would transfer into the account. Is that fine? Sam: Yes. 78 On 2 July 2019, I deposited $5,000 into the Company's bank account. A record of this deposit is exhibited on page 28. 79 At this time, because Sam promised that he would make the required payments, I trusted that Sam would fulfil his promises."
Ms Zhang was not cross-examined about giving this reminder. Nor was it put to her that she had asked for, or was expecting to be paid, a large sum of cash at any time during the transaction. Not even the plaintiff gave this evidence.
As noted above, the plaintiff's submissions of 11 September 2021 (at paragraph 32) identify the "security deposit of $20,000, refundable at the conclusion of the term of the licence agreement" (at paragraph 32; see also the plaintiff's further written submissions of 20 October 2021 at paragraphs 46 - 56) as the sum asserted to be the $20,000 paid in cash. The rationale for paying this $20,000 is given by Ms Ashworth in her submissions of 11 September 2021 as being that there was an "inherent implausibility" in asserting that the defendants would have let the plaintiff in to manage the business "without payment of the security deposit (being the assurance of satisfactory maintenance of the expensive equipment on the premises)", particularly in circumstances where the defendants were "otherwise fastidious in ensuring that the payments of the Licensing Agreement were adhered to", including the "topping up of the bank account" (see the cross-examination of Ms Zhang at T 227 - 9, 232 - 3 and 295 - 298).
Mr Shao sets out at paragraph 40 of his affidavit (CB1, Tab 4) that he withdrew and paid $20,000 in cash to Ms Zhang "because clause 1.d. of the license agreement required me to pay Zhang $20,000.00 as security deposit, that is refundable according to clause 4." However, as Mr Harding SC's submissions point out (at paragraphs 225 - 234), this explanation is in fact inconsistent with the actual terms of the Licence Agreement and in particular Clause 1(d) of the 21 June agreement, the full text of which is set out earlier in this judgment. I set out again this particular provision: "d. Upon signing of this agreement, party B wilt pay $30,000 into party A's account, for the purpose of paying the rent for the next one month, the remaining, being $20,000, is to be reserved as advance security payments (the current rent and utility bill is approximately $10,000, refer to bank statement for specific figure. On the first day of the month after the next month, payments for the following month becomes due, so on and so forth)."
I will not set out Clause 1(h) again, but it is essentially to the effect that the plaintiff agrees that there must be "at least $20,000.00" reserved in the Coco business' bank account at all times, so that salaries and other overheads can be paid from that bank account. I also note that Clause 4 provides for payment of all debts incurred during the period as part of post-termination.
It is clear from these terms that the License Agreement did not require the plaintiff to pay any separate $20,000 "security deposit", and certainly not as some kind of secret cash payment. To the contrary, he was required to pay $30,000 into Oceania's bank account, $20,000 of which was to be reserved to pay overheads and wages of the kind that could not be paid in cash, and which were to have been paid from that $20,000 figure. In addition, the plaintiff was required to "top up" the $20,000 sum by putting further sums into the bank, which would then be used to pay expenses.
Not only is there no reference to a "security deposit" of $20,000 (cash or otherwise) in the contract, but Clause 4(c) specifically refers to a refund of the remaining security payments. If the $20,000 was to be held as a "security deposit" the entire amount would be referenced, not the "remaining security payments". The only payment the plaintiff was to make was into Oceania's bank account, under License Agreement Clause 1(d).
Mr Harding SC submits (at paragraph 232 of his submissions of 24 September 2021), and I agree, that the language of the License Agreement also highlights the implausibility of the plaintiff's evidence that he paid $20,000 in cash because "I felt that this was the best way to isolate this refundable deposit, so that it did not become comingled with the funds I was otherwise going to transfer to the business bank account."
I note in passing Mr Harding SC's observation that, in light of the plaintiff's repeated evidence that he could not understand legal documents such as leases and affidavits, his use of an obscure term such as "comingled" (for which there are, according to Wiktionary, at least three separate spellings) seems surprising. I am prepared to assume that this is a translation issue, but the fact remains that the plaintiff's understanding and explanation of these transactions in his affidavit evidence, as well as in cross-examination, is not that of the unsophisticated person he put himself forward as, and suggests a degree of reconstruction following legal advice.
The fundamental problem, however, is that the evidence makes no sense. The plaintiff says that he himself chose, contrary to the terms of the License Agreement and without consultation of Ms Zhang, to make a payment in cash to avoid "comingling", but took no step to obtain any receipt or record of any kind in relation to the alleged $20,000 cash payment.
One explanation put forward by Mr Harding SC in his submissions is that the plaintiff (at some point in late February or early March 2020) formed the view that the terms of the License Agreement might be read as indicating that an additional $20,000 security deposit was required, and that Mr Shao then began claiming that this payment had been made, but in cash. This was, however, not put to the plaintiff in cross-examination in terms, and I do not propose to speculate further as to his reasons for claiming there was a cash payment of $20,000.
These findings would be sufficient of themselves to hold that, notwithstanding evidence of withdrawal by the plaintiff of $20,000 cash on the day in question, there was no payment of $20,000 cash to Ms Zhang, either on that same day, or at all. However, the above inconsistencies and implausibilities are only the beginning of the plaintiff's problems in relation to acceptance of his evidence.
Before setting these out, I briefly note that there were in fact payments of $20,000 made in relation to the discharge of the plaintiff's obligations under the lease: "Q. It was your understanding as well, wasn't it, Mr Shao, that the contract required you to pay an annual licence fee of $20,000? INTERPRETER: Yes, it was actually the fee for use of a certificate. …. Q. By 16 January 2020 you had paid amounts totally about $185,000 towards purchase of the business. That's right, isn't it? A. INTERPRETER: Yes. Q. And the last payment that you had made under the agreement was on 31 December 2019 and it was a payment of $20,000? A. INTERPRETER: Yes. Q. And you still had over $120,000 to pay under the agreement, didn't you? A. INTERPRETER: Yes. Q. But you say, do you, that about two weeks after making the last payment of $20,000 you had a conversation with Ms Zhang whereby you both agreed to call off the purchase. Is that your position? A. INTERPRETER: Because she promised to transfer the lease up to 1 January, but then the lease has not been transferred, so I spoke to her. I said, "Can we can I just have a pause until I have the transaction of that lease?" and she agreed." (T 94 - 95)
These payments of $20,000 were not, however, ever suggested to be the cash payment asserted to have been made on 25 June 2019, or to have anything to do with them. I mention them only for the sake of completeness in terms of evidence about payments of $20,000.
The first of these additional problems with the evidence is the contradictory evidence given as to where, when and how the payment in cash was made. Initially, the plaintiff claimed that, when he met Ms Zhang on 25 June 2019 at the shop, he gave her $20,000 in cash by waiting for her outside the shop, at the door entrance: "Q. Did you go into the shop? A. INTERPRETER: No. Q. You stayed outside, did you? A. INTERPRETER: Yes." (T 147)
Somewhat confusingly, he also said that he went inside the shop to look for her and asked the receptionist if she was there, but was told that she was not there (T 148).
Both these statements in evidence are inconsistent with the plaintiff's answers to particulars, which had stated that the handing over of this money took place at the business premises. When asked to explain this, the plaintiff said in his evidence that he had given her money in the doorway of the shop (T 155).
These are relatively minor differences in terms of location. The difficulty for the plaintiff is that he sent a WeChat message to Mr Yan stating: "I put the 20,000 cash in a bank envelope and handed it to her at the front counter" (T 155). This is not merely inconsistent with cash being handed to Ms Zhang in the doorway, but also raises another difficulty, namely how he was able to fit $20,000 in cash into a bank envelope.
The plaintiff initially said that he did not enter the shop at all, and was waiting for Ms Zhang "outside of the shop, at the door entrance" at 6.10 pm (T 147). When asked about whether he had inquired at reception as to whether Ms Zhang was there, he added that "when I went I asked the reception was Coco there and the answer was no, so I was standing outside I was outside of the shop. I didn't go in" (T 148). When shown the particulars which stated that he made the cash payment at the premises of the business, he then claimed that this transaction took place in the doorway (T 155). He was then shown a message which said that he handed the envelope to Ms Zhang at the front counter (T 177): "Q. You also said that you handed the envelope to her at the front counter, didn't you? A. INTERPRETER: Yes. Q. That evidence is completely inconsistent with the evidence that you gave yesterday that you gave the envelope to Coco at the doorway of the premises? A. INTERPRETER: To my recollection, or my understanding, at that time I was sitting at the doorway or outside of the door of the shop, but the reception was just behind the door… … Q. It's also inconsistent with your evidence yesterday that you were sitting outside of the door entrance of the shop when you gave it to Coco? A. INTERPRETER: Maybe to my understanding it was a quite big area. The reception area is quite big." (T 177)
Dealing with the issue of location first, a photograph of the premises demonstrates that the front door is about 2 to 3 metres away from the front counter.
Asked whether the payment had in fact been made in the shop, or at its doorway, the plaintiff agreed that it had been paid in the shop and said his earlier evidence that the money had been paid outside the shop, or at the doorway to the shop, was "really wrong" (T 179). He blamed this on "memory error" because he was "very nervous in the court" (T 178). It was put to him that his evidence about this was, however, false rather than the result of nervousness: "Q. Your statement to Mr Yan in this WeChat message that you handed the envelope to Coco at the front counter is false, isn't it? A. INTERPRETER: It is true that I gave the money to her. If I had not paid the money, how could I possibly take the shop over and start to manage it? Q. What I said to you, Mr Shao, was your statement that you handed the money to her at the front counter was false. Do you agree or disagree? A. INTERPRETER: Paying the money is true, but where, or the location or, I should say, position of where to pay the money may have some difference or errors. INTERPRETER: Sorry, Mr Harding. I should have used the word "discrepancy". "There might be some discrepancy as to where I pay it". Q. Are you now expressing some doubt, Mr Shao, as to whether what you said to Mr Yan in this message was true? A. INTERPRETER: The content I sent it to him is true. Q. So what is the truth, Mr Shao? A. INTERPRETER: The content of the message." (T 179)
However, this was not a difficult question to answer. The plaintiff was being asked to describe where and when he had handed an envelope containing a large sum of cash to Ms Zhang. The location where this memorable transaction occurred is not something that either party would forget. Nor, in my view, is it likely that such a payment would be made in the street or even in a shop doorway, where the chance of an alluring bundle (it is unclear, but the balance of the evidence suggests that the cash in the envelope could be seen) being seen and snatched by a passing third party would have to be a factor for consideration.
Dealing next with the envelope issue, the plaintiff was very vague about the type and size of the envelope which would be required to contain $20,000 in cash. Was the envelope closed and sealed, or open and showing that there was money in it? How did Ms Zhang know it was money unless she could see the money? After all, even on the plaintiff's own evidence, there had been no prior warning that he was going to present her with a large bundle of cash. Just how big (or small) was the envelope in question? If a standard bank envelope, it would have been not merely full but bulging and impossible to close, and how did she fit that envelope full of loose notes into her handbag? These questions were simply not answered.
There is also the question of the time at which the payment was made, as the particulars provided on his behalf by his solicitors had said that this transaction took place during the daytime (T 153). His explanation was that he did not notice whether 6 pm was daytime or twilight. However, those particulars did not give "6 pm" as the time, something the plaintiff was unable to explain (T 155). He then volunteered that the payment of $20,000 might have been made later, between 6 pm - 6.30 pm.
Even more difficult to accept is the failure of Ms Zhang to count the sum or even to look at the contents of the envelope in any detail. How did she know it was money at all, let alone $20,000? The envelope must have been open to demonstrate its contents. All she did, according to the plaintiff, was put the envelope in her bag, saying she trusted him (T 156 - 157).
The purpose of the payment is also varied. Somewhat differently to the explanation offered on his behalf by his legal representatives, the plaintiff claimed in cross-examination (T 153 lines 10 - 15): "INTERPRETER: Okay, I just want to clarify the number. So, the 18,500 is for the licence agreement for six months and also she requested 20,000 pay in cash as she said because this is the deposit I will refund to you eventually so if I can pay for the cash to - she can refund to me eventually so she request me to pay in cash and then she can pay me back and then in that way she doesn't have to pay tax."
This offhand reference to Ms Zhang having "requested" a cash payment is as close as the plaintiff gets to actually referring to a request by Ms Zhang for a cash payment (the precise details of when and where this conversation took place were never revealed). In addition, as noted above, at paragraph 15 of his second affidavit, the plaintiff had earlier explained paying cash in this fashion as being "the best way to isolate this refundable deposit, so that it did not become comingled with the funds I was otherwise going to transfer to the business bank account, which may be depleted over time due to the operation of the business" (Exhibit A, second affidavit, paragraph 40).
There is nothing in any of the affidavits referring to any request by Ms Zhang for payment to be in cash. When the plaintiff was asked the reason for this omission, he said that he had told his lawyers about it and that "it should be in there" (T 153): "Q. Well, what was the purpose of the $20,000 you say? A. INTERPRETER: On the 21st I made agreement with Ms Zhang about that licence agreement. She request 20,000 as a deposit and 10,000 10,000 is for operating of the business and then 1,000 18,500, if I am not wrong, is for Sorry, can I ask Mr Shao about 18,500? HER HONOUR: Yes, you can. INTERPRETER: Okay, I just want to clarify the number. So, the 18,500 is for the licence agreement for six months and also she requested 20,000 pay in cash as she said because this is the deposit I will refund to you eventually so if I can pay for the cash to she can refund to me eventually so she request me to pay in cash and then she can pay me back and then in that way she doesn't have to pay tax. HARDING Q. Those things that you say were said by Ms Zhang are not in your affidavit, are they? A. INTERPRETER: I told my lawyer. It should be in there."
Finally, and perhaps most tellingly, there is no reference in any of the contemporaneous documents, WeChat communications or (prior to the 4 June 2021 affidavit of the plaintiff) any affidavit evidence about a cash payment being either sought or made. If this was a refundable deposit, why would not the plaintiff have been anxious to ensure there was a record of his having paid it? He accepted during cross-examination that it was important to obtain a written record of having paid this large cash sum to Ms Zhang personally but said that there was "no written record" because it was "a matter of trust" (T 156). Once again it was put to him that there was no reference to these conversations in his affidavit, for which he blamed his lawyers: "INTERPRETER: Sorry, I've been cut off again. Okay. When I gave the money when I gave the payment to Zhang I did say to her "please count it" and then she replied, "No need, I trust you" and then she put the money into her bag. HARDING Q. None of this is your affidavits, is it, Mr Shao? A. INTERPRETER: I've told all of that to the lawyers. Q. You read your affidavits before you affirmed the truth of them, didn't you? A. INTERPRETER: Yes, but anyway it's just too much information. A lot a lot of content. Q. You read your affidavits carefully, didn't you, Mr Shao, before you affirmed the truth of them? A. INTERPRETER: Yes. Q. And if, as you say, there had been a conversation between you and Ms Zhang about counting the money you would have included that in your affidavits. That's right, isn't it? A. INTERPRETER: It should be. Q. But you didn't, did you? A. INTERPRETER: I did read it but I didn't pay attention the figures, there are too much of details. Q. Are you saying you weren't paying much attention when you signed your affidavits? A. INTERPRETER: It's too much in particular, maybe I didn't I didn't really pay attention to that much. Q. Are you saying that you weren't paying much attention when you signed your affidavits? A. INTERPRETER: I tried my best to pay attention to it but this the - my limitation. I have my limitation. Q. The fact is you're making up this conversation right now, aren't you? A. INTERPRETER: This is a fact." (T 157)
This issue of "trust" brings me to the evidence of Mr Yan, the person in whom both the plaintiff and Ms Zhang invested a great deal of trust. Not only was he present at the meeting which followed the payment of $20,000, but it seems highly unlikely that he would not have known about this payment being part of the deal. Whether or not such a payment was made would be a topic about which he might be expected to know something. There was nothing about it in his affidavit.
The plaintiff initially said this omission (namely to tell Mr Yan about the cash deposit) was a deliberate act on his behalf as according to "Chinese tradition", such matters were not discussed: "Q. Can I just clarify your answer, Mr Shao. Are you saying that there was conversation at the dinner about the fact that you had paid $20,000? A. INTERPRETER: According to Chinese tradition, the money is not to be discussed outside of the circumstance. So the money has is paid, so we don't we're not discussing it. Q. Are you saying that there was no discussion at the dinner about the fact that you had paid $20,000? A. INTERPRETER: No. Q. You gave the money to Ms Zhang, you say, and after that there was no discussion about it; is that right? A. INTERPRETER: Yes. Q. There was no discussion with Mr Yan? A. INTERPRETER: No, I didn't I didn't mention it to Mr Yan." (T 156)
This might have been convincing, had it not been for the plaintiff's WeChat message to Mr Yan, at 9.45 am on 23 July 2021, which was to the effect that the plaintiff claimed he had indeed told Mr Yan about the cash payment on 25 June 2021.
The text of the WeChat message was as follows: "Hello Mr Yan. I believe you have read the pleadings. I did give the twenty thousand in cash to Coco. You had not arrived at the time. She was there first. I put the twenty thousand in cash in a bank envelope and handed it to her at the front counter. This is the truth. I have told you already that night when we had dinner. There would be a record from the surveillance camera at the shop. You were the guarantor for me in the purchase of the business. I do not want to drag you into any trouble. However, if I am found liable, you might be the next person sued. That's why I have never mentioned this but now Coco had brought this up. I don't know why she would say so. As a friend, I do not want to get you into trouble. I hope you would seriously consider this." (Exhibit 1, NAATI-accredited translation of WeChat text)
The first issue is whether the plaintiff discussed either the sending of this text with his solicitors (in terms where the issue of a cash payment of $20,000 had emerged only very late in the claim). Mr Harding SC put to the plaintiff: "Q. What day did you have a conversation with your solicitors about the sending of this letter? INTERPRETER: Sorry, I didn't get the date. A. INTERPRETER: It was in the middle of April. It was talking about the second agreement. Q. It can't have been the middle of April, can it, Mr Shao, because this letter is responding to an amended cross claim which my clients filed only on 29 July. A. INTERPRETER: Because we were talking about - INTERPRETER: Sorry, go on. A. INTERPRETER: This is what we've been talking about, so about the shop, but if you are talking about which particular portion of that, I'm not really quite sure. We've been talking about so many things." (T 140-141)
It was put to the plaintiff that he had sent this message after reading Mr Yan's affidavit. He initially denied reading it, then acknowledge he had read it not very seriously" and "not very carefully" (T 174). He then made another attempt to deny knowing the contents of the affidavit (T176) and sought to blame his "limited English" (T 176) although, as I have noted below, his English was good enough for him to understand his affidavits without translation.
However, the WeChat message referred to above crucially goes on to say "I have told you already that night when we had dinner" (Exhibit 1). When shown this message, he changed his evidence to say: "Q. Are you now telling her Honour that on 25 June you told Mr Yan that you had given Ms Zhang $20,000? I'm sorry, Madam Interpreter, I added those words, I'll just start again. Are you now saying, Mr Shao, that at the dinner on 25 June, you told Mr Yan that you paid Ms Zhang $20,000? Is that what you are now saying to her Honour? A. INTERPRETER: Yes." (T 180)
He then added: "Q. Mr Shao, just before the break you told the Court that you told Mr Yan at the dinner that you had paid $20,000 to Ms Zhang, didn't you? A. INTERPRETER: Yes. Q. Yet you gave evidence yesterday, didn't you, that you never told Mr Yan of that matter? A. INTERPRETER: Maybe what we express a different way. Maybe we express in different way, and then, I said I paid the deposit to Mr, and he also aware of it. Q. So your evidence yesterday and today about what you told Mr Yan at dinner, or didn't tell him, is completely inconsistent, isn't it? A. INTERPRETER: Maybe it's something I remember, my memory error. Q. Maybe or definitely a memory error? A. INTERPRETER: It's my memory error." (T 180)
I note that the plaintiff gave similar answers when inconsistencies between his evidence and that of Ms Zhang were pointed out: "Q. The fact is, isn't it, Mr Shao, that when you prepared that affidavit you were taking care to respond carefully to everything that Ms Zhang had alleged in her affidavit? A. INTERPRETER: Yes, I did read it. Q. You read Ms Zhang's affidavit carefully, didn't you? A. INTERPRETER: Yes, I read it, and my lawyer also was at present. Q. You read it carefully with your lawyer, didn't you? A. INTERPRETER: Yes. Q. It's not correct, is it, that you only read Ms Zhang's affidavit briefly? A. INTERPRETER: I did read it carefully, not accurate. Yes."(T 81)
The plaintiff's reference to having limited English is one of a series of references he gave during his evidence to himself as a person unfamiliar with the law or business generally. For example, he stated (T 80): "Q. You may be misunderstanding my question, Mr Shao. What I'm asking you is not whether you're okay in business. What I'm asking is whether you're experienced in a number of different business areas? A. INTERPRETER: I can't really see I'm very experienced, I'm learning while I'm doing because at that time, I didn't have anything to do."
I am satisfied that the plaintiff was well aware of what Mr Yan had said in his affidavit, and in particular that he had not referred to this evidence. This is why the question of whether the plaintiff put pressure on him to change his evidence is so important, as I have noted in my discussion of this issue in more detail below.

[19]

Attempting to get Mr Yan to change his evidence

After Mr Yan swore an affidavit which did not refer to the payment of $20,000 in cash, the plaintiff sent him a WeChat message on 23 July 2021 (which was a matter of days before the hearing commenced). Part of that message was as follows: "Mr Yan, I believe you have read the pleadings. I did give the twenty thousand in cash to Coco…. You were the guarantor for me in the purchase of the business. I do not want to drag you into any trouble. However, if I am found liable, you might be the next person sued… As a friend, I do not want to get you into trouble. I hope you would seriously consider this."
The plaintiff was initially reluctant to admit that he had been in contact with Mr Yan at all and denied it until the relevant WeChat message was drawn to his attention (T 161): "Q. Have you been in touch recently, Mr Shao, with Mr Yan? A. INTERPRETER: Are you talking about recently? From when to when? Q. Let's say any time this year? A. INTERPRETER: No. Q. I want to suggest to you that you sent Mr Yan a WeChat message on 23 July just six days ago? A. INTERPRETER: Yes, but he didn't reply. I don't know whether this is regarded as "in touch"."
Even then, he denied that it was for any purpose in relation to the cash payment of $20,000 (T174 - 175): "Q. When you sent this message, you knew, didn't you, that Mr Yan had made an affidavit in these proceedings? A. INTERPRETER: Yes, I know… … Q. You knew, didn't you, that Mr Yan, in his affidavit, had given evidence in relation to your claim that you had paid $20,000 in cash to Mr Zhang? A. INTERPRETER: I didn't realise that. So my initial purpose, or my initial plan was to try to get him to tell the truth to the Court. Q. He had given evidence that was inconsistent with your evidence, didn't he? A. INTERPRETER: I may not have really seen the particulars, or the details. Q. Mr Shao, you're not seriously suggesting, are you, you hadn't read Mr Yan's affidavit? A. INTERPRETER: That's right, I had not seen that, so I sent this message to him. Q. You had read the affidavit of Mr Yan, hadn't you, Mr Shao? A. INTERPRETER: Yes, I had briefly read it, but not very seriously. Not very carefully. I only knew that it was evidence, I only read it as evidence, so not very carefully…"
As noted elsewhere in this judgment, this was a common response from the plaintiff when challenged about his knowledge of the case. He continued to claim that he did not know that Mr Yan had denied seeing him pay the $20,000 (T176): "Q. That's not what I asked, Mr Shao. What I asked you is whether you agree that you knew in Mr Yan's affidavit he had denied ever seeing you pay $20,000 in cash to Ms Zhang. You knew that he said that in his affidavit, didn't you? A. INTERPRETER: I only knew that he gave evidence, but I didn't know the content of what, of that evidence, of that affidavit. Q. Are you now telling her Honour that you didn't know any of the contents of the affidavit, Mr Shao? A. INTERPRETER: You may say that. And therefore I sent this WeChat message. Q. You said earlier, didn't you, that you had read the affidavit, just not carefully? A. INTERPRETER: I had done, I had done my best, but because of my limited English I may not really read every of the details."
It is hard to see the contents of this Wechat message as anything other than a demand from the plaintiff to Mr Yan to change his evidence.
Where a litigant makes statements of this kind to a witness, courts need to exercise a very great degree of caution. Such conduct may, in some circumstances, amount to contempt of court: Prothonotary of the Supreme Court of New South Wales v Mallegowda [2016] NSWSC 1087. As Adams J noted in those proceedings, the administration of justice depends upon witnesses being prepared to come forward and tell the truth about the facts in their knowledge that are relevant to the matter before the courts. Any conduct which interferes or is intended to interfere with this process should be viewed with concern. This would be a serious credit problem for the plaintiff in any proceedings (I note the observations of the Court of Appeal in Mallegowda v Sood [2019] NSWCA 37 at [30] in this regard). Not only the contents of the message, but also the plaintiff's attempts first to deny and then justify it, must reflect adversely on the plaintiff's credit.

[21]

Did the parties agree to terminate the purchase agreement on 16 January 2020?

The plaintiff's evidence on this topic was hopelessly contradictory. First, he seemed to consider that while he had "called it off" at about this time, if the lease could have been transferred, he would have continued to purchase the business: "Q. Mr Shao, are you telling the Court that after your conversation with Ms Zhang, that you didn't have any further liability to her under the purchase contract? A. INTERPRETER: Yes, because I called it off. "(T 98)
He repeated this at T 98, where he said his understanding was that "she would have continued to transfer". He said at T 127, "If the lease cannot be transferred, how can I possibly keep paying her money and agree to the contract?" and that "It's not me in [sic] breaching it first".
Did the plaintiff consider he was no longer bound by the purchase agreement or not? This was squarely put to him at T127, where Mr Harding SC pointed out the obvious inconsistency, but all the plaintiff would say was "It is all true": "Q. At the time that you gave your instructions to your solicitors to write this letter, you still regarded yourself as bound by the purchase contract, didn't you? A. INTERPRETER: Yes. Q. Yet you earlier gave evidence, didn't you, that after the 16 January conversation, you didn't think you continued to be bound by the purchase contract; that's right, isn't it? A. INTERPRETER: If the lease cannot be transferred, how can I possibly keep paying her money and agree to the contract? Q. You haven't answered my question, Mr Shao. What I suggested to you was that earlier you gave evidence to her Honour that after the conversation of 16 January 2020 you thought you were no longer bound by the purchase contract. Do you remember giving that evidence? A. INTERPRETER: If the contract was not fixed, of course I am not bounded. It's not me in breaching it first. Q. Mr Shao, again you haven't answered my question. What I asked you is whether you agree or disagree with the following. You gave evidence earlier that after the conversation on 16 January 2020 you thought that you weren't bound any more by the terms of the contract. Do you agree or disagree? A. INTERPRETER: I agree. Q. That evidence that you gave earlier was not true? A. INTERPRETER: It is all true. Q. They can't both be true, Mr Shao. You gave evidence earlier that at 16 January you thought you weren't bound, yet not five minutes ago you said to me, or you agreed, that at the time your lawyers wrote this letter you did think you were bound. Which is the truth? [Objection]. … INTERPRETER: Okay. Sorry. What Mr Shao said, "I did attempt to be bound by the contract and continue the contract'. HARDING Q. You agree, don't you, that you thought that you were bound by the contract when your solicitors wrote this letter? A. INTERPRETER: I want to buy the business, of course I want to be bound. I want to comply. Q. You thought at 3 February 2020 that you were bound to comply under the contract? A. INTERPRETER: Yes, of course, I want to settle the contract. Of course I want to. Q. Is the answer to my question yes? A. INTERPRETER: Yes." (T 127 - 8)
The conversation attributed to Ms Zhang, offering to refund his money if the lease could not be transferred, was similarly inconsistent. Putting to one side the absence of such material from his pleadings or affidavit evidence, the versions of what she was purported to have said were not only inconsistent with each other but with the conduct of the parties subsequently.
The defendants summarise the evidence (or lack thereof) to explain what really happened on 16 January 2020 as follows: 1. There is no reference to the agreement being called off in any contemporaneous documentation. The parties had already demonstrated their ability to put matters in writing in relation to the creation of the agreement; the failure to call it off was just as significant. There was no reference to this asserted calling off in any of the WeChat conversations between the parties on that date at any time. Additionally, there was no reference to this asserted calling off in any of the correspondence between the solicitors between 24 January 2020 and 22 May 2020, although six letters were exchanged over this period. The plaintiff's explanation for not referring to the quality of the contract was because "I still want to continue the contract" and "that's why I didn't mention it" (T 124). Even more persuasively than the absence of reference to the calling of in the lawyer's correspondence is the fact that it is not referred to in the statement of claim. 2. The correspondence between the solicitors, commencing with the letter sent by the plaintiff's solicitor on 3 February 2020, is not merely silent on any alleged agreement to call off the transaction but also inconsistent with any such agreement having been made. The 3 February 2020 letter threatens to formally rescind the agreement if information is not provided, and the letter of 14 February 2020 talks of proceeding with the rescission of the second agreement (actually the third agreement, as the parties were not including the July agreement at the time). If the plaintiff had told his solicitors the transaction had been called off, this correspondence would never have been sent. The inference that the plaintiff did not tell his solicitors about a conversation to call off the transaction occurring on 16 January 2020 is the logical conclusion. 3. Although Mr Yan was the guarantor of each of the three agreements, the plaintiff never took any steps to advise or consult Mr Yan of a termination of the alleged agreement, even though Mr Yan was, according to the plaintiff's understanding, liable under the contract for his obligations (T108). It would have been expected that not only the plaintiff that the defendants would have notified Mr Yan if this had in fact occurred. 4. Mr Yan's evidence is in fact to the contrary. He set out in his affidavit that he met the plaintiff in the city and asked him: "Sam, when you going to pay Coco? I introduced you to Coco. I have to maintain my name. Are you short of money because the business is doing badly? Sam: Business is great. Yan-zong, I'll pay her. You don't have to worry."
This conversation is not denied by the plaintiff. 1. Ms Zhang's conduct is also inconsistent with there having been even a discussion of termination of the agreement. For example, on 26 February 2020, she sent him the instalment for the end of the month in the usual way. If the agreement had been called off, it would be expected that the plaintiff would have immediately pointed out that fact. In fact he simply did not respond at all to this message. His explanation is that the parties' lawyers were dealing with the matter. That would be a perfectly acceptable answer if the lawyers had in fact referred to the calling off of this agreement in their letter, but they did not do so. 2. Calling off the sale would not have assisted the defendants' self-interest. Ms Zhang needed to sell the Coco business because she had debts, including family debts, to pay. This is corroborated by the quick steps she took to sell the business once it became apparent that the plaintiff would not proceed any further. There is every likelihood, given her debt situation, that, if she had been aware of the plaintiff's intention to call off the sale on 16 January 2020, she would have taken such steps much earlier. 3. The plaintiff's explanation of the purpose of his call to Ms Zhang on 16 January 2020 is more likely to have been in relation to wanting an explanation about bank statements: "Q. Mr Shao, you gave evidence a few moments ago that it was on this telephone call that you became concerned about the fact that the lease may not be able to be transferred to you. Is that your evidence? A. INTERPRETER: Yes. Q. That was the first time that you began to become concerned about the matter. Is that right? A. INTERPRETER: Yes, on 16 January when we were having a chat, I did feel that." (T 115 lines 7 - 15) 1. Given the seriousness of such a step, I consider it is implausible that the calling off of the whole agreement would have been raised in the offhand fashion described by the plaintiff. 2. A different date is given for the first indication of the plaintiff's desire to terminate the agreement in his second affidavit, where he claims to have raised concerns about the lease transfer issue much earlier, namely in or around early December 2019. When asked about this inconsistency in terms of the date when the issue was first raised, the plaintiff said that he did not like to raise the issue because it was the New Year period. However, the plaintiff had been perfectly happy to raise other issues over this period of time, including payment of staff wages and to seek to obtain copies of bank statements.
At paragraph 86 of his affidavit, the plaintiff confirms his claim that the parties called off the transaction, which is hard to reconcile with his evidence (at T 98) as follows: "Q. Mr Shao, are you telling the Court that after your conversation with Ms Zhang, that you didn't have any further liability to her under the purchase contract? A. INTERPRETER: Yes, because I called it off. … Q. Was it your understanding that as a result of your conversation with Ms Zhang on 16 January 2020 that Ms Zhang would no longer be bound, under the contract to sell you her business? A. INTERPRETER: My ultimate purpose is still trying to purchase the business but I need to have the lease transferred before. Q. Mr Shao, I'm not asking you about the lease transfer or your ultimate purpose, you must understand that. What I'm asking you, Mr Shao, is whether you understood, as a result of the conversation with Ms Zhang on 16 January, that you allege, whether as a result of that conversation Ms Zhang was no longer bound to sell you the business. A. INTERPRETER: My understanding is Mr Shao, please keep going. My understanding is that she would have continued to transfer. Our point is whether the lease be transferred."
The plaintiff's initial position was that, following the conversation on 16 January 2020, he was no longer bound to proceed with the purchase of the Coco business. In those circumstances it is hard to see how he could have thought that the defendants would have continued to transfer the business. However, these irreconcilable positions are clear from the plaintiff's solicitors letter of 3 February 2020 which requested information about the business, adding that if the information was not provided," we are instructed to formally rescind the Agreement" (Exhibit 1).
Did the plaintiff consider the purchase agreement was still on foot, or not? The plaintiff was asked about the statements made by his solicitors in this letter at transcript 127: "Q. At the time that you gave your instructions to your solicitors to write this letter, you still regarded yourself as bound by the purchase contract, didn't you? A. INTERPRETER: Yes."
When the inconsistency in these two positions was pointed out, the plaintiff agreed that he had given two different accounts, but said it was all true: "Q. When you made this affidavit, Mr Shao, you gave instructions to whoever typed this up that what is written there at paragraph 11 was the effect of the conversation that you had with Ms Zhang on 16 January? A. INTERPRETER: Yes, that's correct, in this paragraph. Q. Nowhere else in any of your two affidavits have you given a different version of the conversation on 16 January which includes reference to a refund of moneys, have you? A. INTERPRETER: Because I've been always trying to settle this business this contract, and she has also constantly agreed or promised. So I didn't really think of putting this in there. Q. What you said in your evidence moments ago that Ms Zhang had said to you on 16 January that she would give you a refund of moneys if the lease wasn't transferred was wrong. Do you agree with that? A. INTERPRETER: No, that's not correct. She did say that to me. Q. If she did say that to you, Mr Shao, you would have written it in your affidavit, wouldn't you? A. INTERPRETER: Maybe I forgot that, but I've been always trying to settle this contract. I just want her to transfer the lease. Q. When you say, "Maybe I forgot about it", are you seriously telling her Honour that when you made this affidavit you forgot words which you now remember were said, Mr Shao? A. INTERPRETER: My initial purpose of view is trying to settle the contract to make the deal going through, so I don't want to have anything really affect that. Q. It's a simple question, Mr Shao. I'm asking you whether you are telling the Court when you made your affidavit on 30 November 2020 you forgot about Ms Zhang also saying to you that she would refund the moneys if the lease wasn't transferred? Is that what you are saying to her Honour? A. INTERPRETER: Maybe it's too many, or too much. Forgot. Q. Is the answer to my question yes? A. INTERPRETER: Yes." (T 103-104)
The plaintiff also volunteered that there was a subsequent conversation with Ms Zhang by telephone in the course of which she had said that if the lease could not be transferred she would refund his money (T 99), although this once again was not referred to in any affidavit. In fact, the affidavit material is silent as to the return of the $185,000 the plaintiff had already paid. The plaintiff's explanation for failing to address these issues in his affidavits was that "I forgot" (T 104).
The evidence about this meeting was crucial to the plaintiff's case. His unreliable and inconsistent account of this conversation is to be contrasted with the consistent account given by Ms Zhang, the contemporaneous documentation, the accounts of these events are set out in the solicitors' respective correspondence over this period and the unreliability of the plaintiff's evidence generally.
There is also corroborative evidence that Ms Zhang wanted to, and did, sell the business. The sale of the Coco business to another purchaser, including the circumstances in which she set about taking the necessary steps to sell only after it became clear that the plaintiff would not continue with the transaction, are of significant value as evidence.
Finally, there is the corroborative evidence of Mr Yan. His evidence is attacked largely on the basis that he is concerned about exposing his own legal risk and liability as guarantor under the agreements, and as having agreed to give evidence to assist Ms Zhang. However, I note his explanation for his role in this transaction at T 365 as follows: "Q. Ms Yan, you are the guarantor under three contracts between Mr Shao and Ms Zhang; correct? A. INTERPRETER: The intention at that time was that I was the witness. Q. Are you saying that you weren't the guarantor under the contracts? A. INTERPRETER: No, I was the middleman. What happened was Shao wanted to contract the business, and then to purchase the business, and Coco was agreeable, too. So I acted as the person in between and, therefore, I did what I did. Q. Is it your understanding now that you are the guarantor under the contracts? A. INTERPRETER: That's still [sic]."
Mr Yan's description of his role in the transaction as a facilitator and witness is not something I should likely disregard, having regard to the potential for cultural factors to be taken into account. Mr Yan's evidence about his role as the confidant of both parties remained consistent (T 381 line 6 - 35 and also T 383 lines 15). Yet he gave no evidence whatsoever of there being an agreement to call off the purchase on 16 January 2020 or indeed on any other occasion. I also note the absence of contemporaneous documentation in terms of WeChat messages.
For the above reasons, I am satisfied that there was no conversation with Ms Zhang on 16 January 2020 in the terms alleged by the plaintiff. I am satisfied that he knowingly lied about what was said, in order to assist his own case.

[22]

Was the plaintiff an unsophisticated businessman?

Although the plaintiff sought to portray himself as a person of limited business expertise who had only been in Australia for a few years, this was at best an understatement and at worst untruthful.
First, after initially denying business experience, he acknowledged that he was a director and shareholder in a company named Kingsinfintech Management NZ, an accounting firm which offered broking and custodial services: "Q. Broking, like share broking. A. INTERPRETER: Yes. We attempted and the business does involve in some sort that sort of business. HARDING Q. Yes, well, it's registered, isn't it, as a business performing financial services under the laws of New Zealand? A. INTERPRETER: Yes, it is a series of accounting or financial business. Q. Does it also offer custodial services?" (T 77)
After an objection to this question was ruled on, the plaintiff answered only in the most general way, attempting to minimise his role, and claiming that most of the work was done by a "friend": "Q. Well, are you able to explain, as a director of the company, or a previous director, what the custodial service meant in the context of this company's activities? A. INTERPRETER: Okay. Because the person who is operating that is not was not me, I was not quite sure so it was one of my friend, he did - he did most of the operational business or the content. Q. But you were a director of the company, Mr Shao, you must have known what the company was doing, surely." A. INTERPRETER: Okay. The company is mainly doing the financial business but anything, in particular, I'm not quite sure." (T 78)
The plaintiff also acknowledged being a director of Australia Eastpac Group Asia Market Management & Development Co. a company incorporated in Australia, which had connections to China's Belt and Road Initiative: "Q. And that company has been involved in participating in a Chinese belt and road investment expo, hasn't it? A. INTERPRETER: Yes, we attempted to do it. Q. Were you a director of that company? A. INTERPRETER: Yes. Q. Are you a director of that company now? A. INTERPRETER: No. Q. When did you cease being a director of that company? A. INTERPRETER: It's been a long time, I can't remember and also the company has never really been operated. We just been trying to contact some clients but never really been in the real operation." (T 79)
The plaintiff's claim that this company had "never really been" in operation was speedily shown to be incorrect, and once again the plaintiff asserted that the work was done by someone else (in this case, "my partner"): "Q. Well, would you please turn to page 25? Do you recognise this as a publication posted to an online media source that refers to Australia Eastpac Group Asia Market Management & Development Co? This advertisement was published online, wasn't it, on or about 30 July 2019? INTERPRETER: Sorry, Mr Harding, what's the date again please, the 30th of? Q. July 2019. A. INTERPRETER: Okay. I'm not quite sure I'm not quite sure with that part. It's also what my partner has manage for that. Q. Well, you were nominated on this document, weren't you, at page 26, as being a contact? A person to contact? Do you see at the bottom of page 26 your name is A. INTERPRETER: Which line please? Q. Five lines up from the bottom? A. INTERPRETER: Yes. Q. Stephen Liang. A. INTERPRETER: Yes. So, he's one of my - he's my partner. It's him that launched all information for media. Q. I see. So, you'd agree, wouldn't you, Mr Shao, that you have got experience in a number of different businesses? A. INTERPRETER: Okay. It was my name for trading and also I've got my partner assisting me doing that. Q. I'm not talking about your partner, I'm talking about you, Mr Shao, and I'm asking whether you agree that you are a person experienced in different business activities? A. INTERPRETER: Okay. It is money for trading so feel I'm okay in this kind of business. Q. You may be misunderstanding my question, Mr Shao. What I'm asking you is not whether you're okay in business. What I'm asking is whether you're experienced in a number of different business areas? A. INTERPRETER: I can't really see I'm very experienced, I'm learning while I'm doing because at that time, I didn't have anything to do." (T 79 - 80)
It was in this context that it was put to the plaintiff that he had represented himself as an experienced businessman in his dinner conversation with Ms Zhang, a claim he attempted to deny, despite not having challenged her statements in his affidavit, and in which he claims to know nothing about the beauty business because he is a "man" (T 84).
Mr Harding SC put it to him that his significant business experience was in fact the basis upon which he thought he could make a profit in the beauty business: "Q. One of the reasons you expected to be able to run this business for profit is that you felt you had a fair bit of experience in running different businesses? A. INTERPRETER: Because they promise that they will help me, and also they've got very good beauty staff. That's how I got confident from. Q. Are you denying, Mr Shao, that you have been involved and experienced in a number of different businesses? A. INTERPRETER: Yes, of course, participate or involved in different business. To involve in beauty business was only just try to see if there is any other possibilities for any different business." (T 87)
This largely incomprehensible answer is made to avoid a concession by the plaintiff that he has extensive business experience not only in Australia but also in New Zealand as a businessman, company director and company operator, and that he was relying upon this expertise in terms of the Coco beauty business proposal. He eventually acknowledged this (T 88), and that he had told Ms Zhang that he had experience in business (T 88 - 89), although he volunteered that she said she had business expertise as well.
The plaintiff also acknowledged having an electrical business and a solar panel business (T 90). Then there is Mr Yan's unchallenged description of knowing the plaintiff through "the Chinese cinema industry" (affidavit, 13 July 2021, paragraph 4). It is evident from his affidavit that he knew little about whether the plaintiff had qualifications as an electrician; he thought from his activities that he was a businessman.
Mr Yan also volunteered the following exchange of information, in which the plaintiff told him he did in fact have some prior experience: "Me: You want to buy? Why? You're a man, what do you know about beauty and therapy? Sam: I used to be in this business. I have a plan. Could you telephone Coco and arrange a time for me to meet her and discuss?" (Paragraph 12).
What "used to be in this business" means was not explained. However, Mr Yan's high opinion of the plaintiff's business skills was given on more than one occasion. He said at T 371: "A. INTERPRETER: What should I say, you know, that's why I said I'm new to it. Mr Shao is a very clever person. He's very capable. He said he had many businesses. He told me to rest assured he will make this a success."
He specifically recalled the plaintiff telling him that he had a "clever plan", and went on to add that the plaintiff also had a clever plan about the "movie society" with which they were both involved: "Q. How do you know that's when you arrived? A. INTERPRETER: I remember about that day, because I was about to return to go back, and I had to discuss with Sam about the movie society and he had - about which he has a plan, and he was very clever - and he had a very clever idea about that." (T 381)
His evidence was that at all relevant times, the plaintiff had not only told him that he was an able businessman and that the Coco business was going well, but that his business skills were known in the community: "A. INTERPRETER: I met Sam in early 2019 through someone else. He was said to be a clever man, a very capable man and has done businesses in many industries, and then after that he was full of ideas and I do believe that he was very capable, and so I acknowledge his capability and when it came to the point where he came to buy the business, I believed that he would ‑ you know, he would turn it into a success. So when he offered ‑ when he proposed to contract the business, Coco did have some hesitation, so he asked ‑ he or she asked me to act as a witness, and asked me to rest assured." (T 386).
All of the evidence points to the plaintiff being an experienced and skilled businessman. While there is little evidence of his prior involvement in the beauty industry, I note that Mr Yan was not cross-examined about his claim that the plaintiff told him he had prior experience in this field.

[25]

The credit of Mr Yan

Although Mr Yan was called by the defendants, his evidence was that he had been just as much a friend of the plaintiff as of Ms Zhang, both before and after the transactions in question.
Mr Yan gave his evidence in an honest and straightforward manner. He was not caught out in any lies or misstatements. The basis for attack on his credibility as a witness is essentially that he was at risk to liability as a guarantor under the agreements. It is submitted that he has given evidence in favour of Ms Zhang's case to avoid liability on the guarantee. It was also put to him that he had a poor recollection of events.
As noted above, in relation to Mr Yan's credit generally, he was a witness who remained on good terms with both parties at all relevant times and there is no submission that his evidence on other issues are lies or misleading statements. The best the plaintiff can do is to suggest that he tailored his evidence in unspecified ways in order to help the defendants win because he feared being sued as a guarantor. As Mr Yan's position was that he was some kind of intermediary or negotiator of the "chengbao" for both parties, that concern is unlikely, in my view, to have been at the forefront of his mind.
When it was put to Mr Yan that he was giving evidence to assist Ms Zhang, he relied "No. I'm just obliged to tell you what happened at that time, based on the facts" (T 373).
Mr Yan's evidence about when and where the events of the 25 June meeting took place are consistent with WeChat message times for that evening (Exhibit A, CB 2, Tab 9, p. 368) and confirm the correctness of the time he gave for this encounter as starting at between 6.12 and 6.15 pm (not 6 pm as claimed by the plaintiff) with an arrival time before 6.30 pm. Mr Yan had good reason for recalling the meeting because he was leaving for China the following day and there were "many things" he and the plaintiff had to talk about, including their film and movie activities. I reject the submission that Mr Yan had somehow confused himself or had otherwise forgotten what occurred at this meeting. Mr Yan generally showed a good recollection of the events in question.
As a witness whose evidence on all issues can be accepted, Mr Yan's contribution to the fact-finding exercise is crucial. His categorical rejection of there being any payment of $20,000 in cash is of particular importance, as is the evidence that he did not know about the purported agreement between the plaintiff and Ms Zhang on 16 January 2020 to cancel the agreement.

[26]

The claim for misleading or deceptive conduct

In broad terms, the plaintiff needs to establish firstly, conduct on the part of the defendants; secondly, conduct that is misleading or deceptive; thirdly that there was reliance on the conduct; and fourthly, loss or damage caused by the conduct. The misleading or deceptive conduct is asserted to be silence as to the terms of Clause 43 of the lease.
A finding of misleading or deceptive conduct is open where that conduct, by word or deed, conveyed a misrepresentation (Wardley Australia Ltd v Western Australia (1992) 175 CLR 514). Where the misleading conduct is an omission to inform, or silence, the failure to refer must be viewed in the context of the facts as a whole. In Demagogue Pty Limited v Ramensky (1992) 39 FCR 31 at 32, Black J stated: "Silence is to be assessed as a circumstance like any other. To say this is certainly not to impose any general duty of disclosure; the question is simply whether, having regard to all the relevant circumstances, there has been conduct that is misleading or deceptive ... to speak of 'mere silence' or a duty of disclosure can divert attention from that primary question. Although 'mere silence' is a convenient way of describing some fact situations, there is in truth no such thing as 'mere silence' because the significance of silence always falls to be considered in the context in which it occurs. That context may or may not include facts giving rise to a reasonable expectation, in the circumstances of the case, that if particular matters exist they will be disclosed".
The principles were helpfully summarised by White J, writing for the Full Court, in Eastern Garden Pty Ltd v Stone and Another [2005] SASC 157. White J first set out the warning of Gleeson CJ in Lam v Ausintel Investment Australia Pty Ltd (1989) 97 FLR 458 at 475 that: "Where parties are dealing at arms' length in a commercial situation in which they have conflicting interests it will often be the case that one party will be aware of information which, if known to the other, would or might cause that other party to take a different negotiating stance. This does not in itself impose any obligation on the first party to bring the information to the attention of the other party, and failure to do so would not, without more, ordinarily be regarded as dishonesty or even sharp practice."
White J went on to summarise the relevant principles as follows: "…I identify the following principles as being particularly pertinent to the present appeal. 1. Conduct which consists of remaining silent can, in some circumstances, constitute misleading or deceptive conduct. 2. Where the silence relied on, if it is to come within the extended definition of engaging in conduct contained in s 4(2) of the Trade Practices Act, must fall within the notion of "refusing to do an act", that refusal must be other than inadvertent. 3. In considering whether there is a contravention of s 52, silence is to be assessed as a circumstance like any other. 4. Mere silence without more is unlikely to constitute misleading or deceptive conduct. Remaining silent will, however, constitute misleading or deceptive conduct if the circumstances are such to give rise to the reasonable expectation that if some relevant fact does exist, it will be disclosed. 5. A reasonable expectation that a fact, if it exists, will be disclosed will arise where either the law or equity imposes a duty of disclosure but is not limited to those circumstances. It is probably not possible to categorise all the circumstances in which a reasonable expectation of disclosure may arise but they include circumstances in which a statement conveying a half truth only is made, circumstances in which the representor has undertaken a duty to advise, circumstances in which a representation with continuing effect, which although correct at the time it was made has become incorrect as a result of some subsequent event, and circumstances in which the representor makes an implied representation. 6. In considering whether a party engaged in commercial dealing may have a reasonable expectation that a fact, if it exists, will be disclosed, one needs to keep in mind that it will often be the case in such dealings that one party has more knowledge about a relevant matter than the other and yet will not, in accordance with ordinary commercial expectations, be guilty of misleading or deceptive conduct in failing to make that knowledge known to the other. In this regard, in Lam v Ausintel Investments Australia Pty Ltd Gleeson CJ said: "Where parties are dealing at arms' length in a commercial situation in which they have conflicting interests it will often be the case that one party will be aware of information which, if known to the other, would or might cause that other party to take a different negotiating stance. This does not in itself impose any obligation on the first party to bring the information to the attention of the other party, and failure to do so would not, without more, ordinarily be regarded as dishonesty or even sharp practice." [Footnotes omitted]
The reference to "some circumstances" is significant, as is the statement that "mere silence", without more, is unlikely to constitute misleading or deceptive conduct. Silence that is capable of amounting to misleading or deceptive is not a "stand-alone" piece of conduct in the same way as an actual statement or act. In the absence of some positive duty to speak, silence can only be misleading or deceptive against a background of other facts known to both parties which make what is actually said so incomplete that it conveys a misrepresentation. There must be a relationship between the conduct and the state of mind of the relevant participants. The test is objective and the circumstances in which the duty to disclose will arise will depend on the facts of each case.
The question is whether or not, on the facts of the case, the grounds relied upon by the plaintiff (failure to refer to Clause 43 of the lease), constitute circumstances, such that there would be an obligation on the defendants to bring those matters to the attention of the plaintiff, or if the plaintiff should be bound by virtue of the fact that it executed the agreement as it was written. If the defendants fail to bring Clause 43 of the lease to the plaintiff's attention, have they engaged in misleading and deceptive conduct by that silence?
This is not a case where it is submitted that Ms Zhang, in her anxiety to sell the business, knew about the terms of Clause 43 and deliberately withheld those terms from the plaintiff. Nor is it a case where the requirement for the landlord to transfer the lease came as a surprise. Although there is very little direct evidence on this issue, both parties appear to have proceeded on the basis that, if the plaintiff went ahead with the purchase of the business, the landlord would have to be asked to transfer the lease. The plaintiff's complaint appears to have been that he wanted the lease transferred to him before he had completed the purchase payment. He asserted that Ms Zhang was refusing to do so, not because the purchase price was not complete, but because she anticipated there would be problems with the landlord (Meriton) agreeing to the transfer of the lease: "Q. Mr Shao, are you saying that it's your case in these proceedings that even after your conversation with Ms Zhang on 16 January 2020 you continued to remain bound by a contract to purchase the business? A. INTERPRETER: My condition the precondition is the lease has to be transferred. Q. The lease was never going to be transferred before you made full payment, Mr Shao, as you well knew? A. INTERPRETER: To transfer the lease to me after up to on 1 January. Q. You haven't made all the payments as at 1 January, Mr Shao? Why would the lease be transferred to you? A. INTERPRETER: The reason I didn't pay the full fees, because there is a date of the payment on the contract. So she has to transfer the lease to me. Q. The contract doesn't say that, does it, Mr Shao? A. INTERPRETER: This is what I need her to do, and she promised. Q. Mr Shao, you well knew that you weren't going to get a transfer of the lease until you'd made all the payments for the business, didn't you? A. INTERPRETER: What I'm going to do if I made a full payment and I haven't got the lease transferred, what am I going to do? And also I was I got to know that the management in the Meriton Tower had a very vigorous requirement to the leaser, and then based on my experience it would be very difficult to have the transaction of the lease, and she said she will try her best to help me. Q. When you said on your experience, what experience were you referring to, Mr Shao? A. INTERPRETER: This is not what I said. That's what she said. She said the management in Meriton Tower had a very vigorous or strict requirement to all the leasers. That's what she said. Q. That's not true, is it, Mr Shao? A. INTERPRETER: This is true. This is what she said. This is what was said. Q. Do you say or do you not say that at this conversation on 16 January you said to Ms Zhang that you should call off the purchase? Did you say that or not? A. INTERPRETER: Yes, I did. I said that. Q. You knew perfectly well there was nothing in the purchase agreement that you signed in November 2019 about transferring the lease to you? A. INTERPRETER: On 4 November, the day that we signed the contract, I asked her when the lease can be transferred. She said, "The new year, 1 January". Q. Mr Shao, the purchase contract that you had with Oceania had been a written contract that you and Ms Zhang had signed, hadn't it? A. INTERPRETER: Yes. Q. You signed that agreement in the presence of Mr Yan? A. INTERPRETER: Yes. Q. Mr Yan also signed the agreement? A. INTERPRETER: Yes, as far as I recall." (T 95 - 96)
This is a reference to at paragraph 11 of the plaintiff's affidavit of 30 November 2020 to a conversation he had with Ms Zhang on or around 16 January 2020: "I: When will the lease be transferred? I can't purchase the business if the lease is not transferred. Zhang: There will be some difficulties because Meriton, the lessor, is very strict. I think Meriton may not approve the lease transfer because of your lack of business experience. I: But you said it could be done around New Year. How can I continue with this purchase if the lease is not transferred? Why don't we call off the purchase for now, so that you can speak to Meriton to sort out the least? Once the lease issue is resolved, we can proceed with the purchase again. Zhang: OK then let's do that. I will find a way to solve the transfer of lease issue. Once that is solved, we enter into a new agreement for the purchase of the business. Meanwhile you can still operate the business in accordance with the first agreement."
This is one of a series of pieces of evidence demonstrating an earlier discussion of transfer of the lease, which in turn makes it clear that the plaintiff was well aware that the lease would have to be transferred (and, by implication, the terms for such a transfer under the lease).
This is confirmed by the plaintiff's acknowledgement, in his affidavit of 4 June 2021, that he was aware, at the time of the second agreement, of the absence of reference to anything about the lease of the premises (adding that although he did not obtain legal advice he had "picked up several issues" of which this was one). He goes on to say that he signed the agreement "notwithstanding the above" and that that he trusted Ms Zhang would in good faith negotiate with him for the "transfer of lease" (paragraph 71). What is more, he goes on to say that the third agreement of 4 November 2019 was "intended…to replace the July agreement, not only because it is more details, but also because it had rectified the issues I had raised with the July agreement" (paragraph 74).
Any doubts about whether the parties were discussing the transfer of the lease are entirely dispelled by paragraphs 82 and 83 of this affidavit (which were admitted on a restricted basis as evidence of the plaintiff's subjective feelings: "However, I started to have a growing concern as to whether the business could be transferred to me at all. The source of my concern primarily arose from the least. After all, the business has no value if I am not able to operate it from the Premises and should I be forced to move to another Premises, I would love all the goodwill and marketing advantages that had already been established, for which I was paying monies. Throughout my discussions with Zhang, we had a number of conversations discussing the process of transferring the least to me. The conversation set out in paragraph [241.1] of Zhang's affidavit was one of many conversations we had on this subject matter. Zhang always told me words to the effect that 'she would speak to the lessor, Meriton, when she finds the timing appropriate, and even if the lease could not be transferred, she could hold the lease on my behalf."
The plaintiff goes on to state that, as he had by December 2010 paid $186,800, he wanted to be sure that the transaction "had no legal or administrative problems" before paying any more. The plaintiff has acknowledged seeing the lease in December, although he claims he only read it and says Ms Zhang took it away again.
While I have not accepted the plaintiff's claims that Ms Zhang said that Meriton might be difficult because of the plaintiff's lack of business expertise, or agreed to pause the contract, I am satisfied that the references to transfer of the lease indicate that he had sufficient commercial knowledge to be aware that the lease would have to be transferred. He went on to repeat these claims: "Q. Thank you. Are you also saying that Ms Zhang no longer had any obligation under the written agreement to sell you her business? A. INTERPRETER: The reason ‑ the reason that I called it off means if she can still keep transferring ‑ continue and transfer the lease I can still continue." (T 98)
He repeated it yet again: "Q. Was it your understanding that as a result of your conversation with Ms Zhang on 16 January 2020 that Ms Zhang would no longer be bound, under the contract to sell you her business? A. INTERPRETER: My ultimate purpose is still trying to purchase the business but I need to have the lease transferred before. Q. Mr Shao, I'm not asking you about the lease transfer or your ultimate purpose, you must understand that. What I'm asking you, Mr Shao, is whether you understood, as a result of the conversation with Ms Zhang on 16 January, that you allege, whether as a result of that conversation Ms Zhang was no longer bound to sell you the business. A. INTERPRETER: My understanding is Mr Shao, please keep going. My understanding is that she would have continued to transfer. Our point is whether the lease be transferred." (T 98)
This is not evidence of Ms Zhang being silent about the lease. On the plaintiff's own version of events, this is evidence suggesting that he was aware, and aware for some time, not only of the need for the lease to be transferred, but that the landlord might cause problems, but that he understood that Ms Zhang was going to help him to get the transfer. The sticking point was that he wanted the transfer to occur before, not after, he had paid the purchase price in full, which was contrary to the agreement, as he acknowledged in cross-examination.
In the present case, this was a commercial negotiation between individuals who had each elected not to consult a legal practitioner and where concepts of Chinese law and custom understood by both of them applied (for example, the role both parties considered to be played by Mr Yan in the transaction has no equivalent in statutory or common law principles for contractual law in Australia). However, one thing is clear: although not included in the licence or purchase agreements, both sides knew that the lease would have to be transferred to the plaintiff for him to continue to manage the business, and both sides had agreed that the transfer would occur after the purchase price was paid. The plaintiff also knew, on his version of the facts, that, if necessary, Ms Zhang would be prepared to lie to the landlord and "hold the lease on my behalf" (paragraph 83 of his second affidavit) if Meriton refused to accept the transfer.
Ms Zhang's evidence is that, at all relevant times, the lease was kept in the shop and therefore available to the plaintiff any time he wished to consult it. It was clear that the terms of the lease contained crucial information about, not only the transfer of the lease, but other information the plaintiff would need to know, such as rent review clauses, covenants, the contact details for the landlord and the like. The likelihood of the plaintiff never looking at this document at all until December 2019, despite revising the July agreement in order, to use his phrase, to "pick things up" about the obligations and entitlements under the lease (including the transfer), would be infinitesimally small.
Nor is it a problem that the lease is in English. Although the plaintiff claimed that when he saw the lease it contained many legal words he did not understand, he was still able to read it. He can read English and was able to read and understand his own affidavits (T 170, 176) without these being translated for them (there is no certificate from a translator) and answered questions in cross-examination in circumstances suggesting he understood not only his own affidavit evidence without translation, but also that of Ms Zhang (T 84). While he said that his ability to read his affidavits, as opposed to documents such as the lease, was because he had a solicitor at his elbow to help, I consider that he was still sufficiently able to read English to understand a document such as the lease, which was in plain and simple terms (especially Clause 43) as opposed to obscure terms. He conceded at T 59: "Q. Mr Shao, when you made your first two affidavits in these proceedings, you did so without the assistance of a translator; that's correct, isn't it? A. INTERPRETER: Yes. Q. And that's because you are able to read written English; isn't that right? A. INTERPRETER: Basically, briefly, all of it. Q. I'm sorry, briefly? INTERPRETER: All of it. I mean, what the witness means, is briefly, he can understand all the content."
Taking all of the above into account, I am satisfied that the plaintiff was aware not only of the lease's contents but also of the possibility of problems of transfer of the lease. I am satisfied he was not only aware of clause 43 but unconcerned about it. This is because, even on his own evidence, his expectation was that, if there was some problem with the transfer, Ms Zhang (or Oceania) would arrange to hold the lease on his behalf.
One of the factors leading to this finding is the "Chinese" nature of the relationship between the parties as evidenced by their approach to the whole of the transaction. Rather than consult lawyers, they relied on their own drafting, and on Mr Yan as a kind of guarantor of good faith. Ms Zhang drafted their agreement and, when the plaintiff was unhappy with the second agreement (which he noted did not contain any reference to the lease) they entered into a third agreement designed to pick up the issues the plaintiff was unhappy about. In those circumstances, I am satisfied that not only did the plaintiff look at the lease, but he formed his own opinion of its contents based on his experience as a businessman and company director and on the parties' common cultural understanding of legal obligations (a kind of "Australian law with Chinese characteristics"). He did not rely upon Ms Zhang's statements (or omissions), as he acknowledges in his affidavits as set out above, and it was only after consulting a solicitor that the claim of breach of Clause 43 was raised.
The next issue is the defendants' alternate submission that silence about Clause 43 was not misleading or deceptive because the terms of the licence agreement were not in breach of Clause 43 of the lease, in that the defendant was a "tenant".

[27]

The defendants' "tenant" argument

I note the definition of "tenant" in Clause 1(1) of the lease, which includes the persons identified in Clause 1(iii), namely "the Tenant's employees, agents and assigns". Following his entry into the licence agreement, the plaintiff did in fact become an employee of Oceania and was paid a wage, as he acknowledges in his affidavit material (I note the defendants also rely (submissions of 24 September 2021, paragraph 261) on his solicitors' letter of 3 March 2021 refers to him as "working for the Business", but I regard this as being a generalised statement rather than as an admission).
The defendants submit that this means that, as an employee of Oceania, the plaintiff would in fact have fallen within the definition of "tenant" for the purposes of the lease. It is not strictly necessary to determine this, the argument goes, because, by executing the licence agreement, the plaintiff became an agent or "assign" of Oceania, in that he was using the business equipment, paying the wages and the like. The licence agreement gave the plaintiff exclusive possession of the premises and the only "hold back" areas related to some aspects of the business's bank accounts, which had nothing to do with assignment of use of the premises.
The result is that the licence agreement gave the plaintiff rights as an employee, agent or assign of the company, and therefore the parties did not mortgage, transfer or otherwise deal with the lease in contravention of Clause 43(1)(a) or 43(1)(b). The plaintiff was having a "try before you buy", but not actually licencing the business in the sense prohibited by the lease.
By analogy, if Ms Zhang's health problems had prevented her from working and she had brought in someone else to manage the premises, whether on the understanding that this person might buy the business later or not, that would similarly not have been a breach of the terms of the lease. Oceania remained in possession of the premises at all times. What was licensed (as is set out in Clause 1(a) of the licence agreement) was the "business" known as Coco Medical Cosmetology Centre, not the leased premises where the business was conducted.
For the above reasons, if I have erred in holding that no representation was made, I would alternatively accept the defendants' submissions that, as the plaintiff fell within the rubric of "employee" and/or "assign", his conduct of the business would not have amounted to a breach of the lease.
The most significant impediment for the plaintiff is, however, whether he in fact relied upon the permitted licence representation at all, or whether it is a post-contractual construct based on the legal advice he sought when he decided (for other reasons, according to the defendants) not to proceed with the contract.

[28]

Did the plaintiff rely upon the "permitted licence representation"?

The principal disputed issue of fact in relation to the lines is whether or not the plaintiff had access to the lease from July 2019 and was in a position to form his own view and obtain advice about its contents. The plaintiff's submissions of 20 October 2021 (at paragraph 23) assert that the plaintiff "did not have access or regard to the lease and, in particular, whether the licence was permitted thereby, in entering into the agreements or in making the instalment payments, and the Court would err if it was to conclude that he ought to have done so". This submission appears to infer that I should find, not only did the plaintiff not have access to the lease, but that the court should accept that, in circumstances where it had not been provided to him, he ought to have sought to obtain it. This submission about the unavailability of the lease and the assertion that the plaintiff was not an experienced businessman (submissions of 20 October 2021, paragraph 24) are the mainstays of this claim.
Despite the plaintiff's reliance upon his statement of understanding set out in paragraphs 2 and 3 of his fourth affidavit, there is ample evidence that the plaintiff not only saw and read the lease, and that he discussed it with Ms Zhang on a number of occasions. The relevant extracts from the affidavits and evidence, as set out above, include the following: 1. Paragraphs 71 - 72 of Ms Zhang's affidavit of 23 February, 2021 set out that she kept the lease in the shop amongst the "important" papers; she confirmed this in cross-examination: T 299. 2. The plaintiff's admissions of having seen the lease (T 184), although he claimed not to have done so until December 2019 and then not to have understood it. 3. The plaintiff's acknowledgement that he received a copy of the lease in February 2020 (T 187). 4. The plaintiff's description of discussions with Ms Zhang about transferring the lease to him, which he described as being numerous (affidavit of 30 November 2020, paragraphs 82 and 83). 5. The plaintiff said that he picked up the absence of reference to the lease in the second agreement and that this was one of the reasons why he wanted to have it redrafted (affidavit of 30 November 2020, paragraph 71). 6. Ms Zhang said that they talked about the Lease, but in the context that there would be no transfer until the full purchase price was paid (T 304, T 309). 7. Finally, and most tellingly, the plaintiff still wanted to proceed with the purchase of the Coco Beauty Business even after his legal representatives had obtained the lease and given him advice about its contents, including Clause 43 (T 187 - 188).
The relevant extracts of this evidence are set out in the factual findings above. What these extracts demonstrate is that the plaintiff had the same wish and desire before, during and after having seen the lease (and even after receiving legal advice) to proceed with the purchase of the business. This is, in the plaintiff's own case, in circumstances where he understood that there was a risk that the lease could be terminated.
Ms Ashworth criticises the defendants' submissions on this issue as containing "inaccuracy and unfairness", although what these errors and missed descriptions consist of is the failure to accept the plaintiff's denial of this knowledge at paragraphs 2 and 3 in his fourth affidavit of 26 July 2021. I have not found the plaintiff to be a witness of credit in these proceedings and I do not accept the assertions he makes in this affidavit.
I agree with the defendants' submission (at paragraph 286) that the evidence demonstrates the plaintiff was prepared to proceed with the transaction irrespective of the risks he now claimed to be exposed to. I consider there is evidence of knowledge by the plaintiff that the licence was not permitted by the lease, at the latest by December 2020, and that his willingness to proceed or continue with the licence and agreement to purchase remained unabated. In those circumstances, there was no reliance.

[29]

Repudiation

As I have found that the conversation asserted by the plaintiff to have taken place on 16 January 2020 did not occur, and that Ms Zhang did not agree to "pause" the contract as a result, that means the purchase agreement remained on foot on that date and for the period following up until the plaintiff terminated the purchase agreement in terms which I am satisfied amount to repudiation.
The relevant legal principles for repudiation are set out in the plaintiff's submissions of 24 September 2021 and are not in dispute. The repudiation here is of the "continued long failure to complete" kind (Caprice Property Holdings Pty Ltd v McLeay [2015] 1 Qd R 206 at [34]; see also Holland v Wiltshire (1954) 90 CLR 409, where the continued failure to complete amounted to repudiation entitling the other party to sue for the loss when the business was subsequently sold for a lower price). Where the innocent party accepts the repudiation, that may be communicated by statements or by acts, such as selling to another (Holland v Wilshire at 423) or commencing proceedings (Woods v Woods (2000) NSWSC 851 at [14] - [16]; Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 at 570; Ogle v. Comboyuro Investments Pty Ltd (1976) 136 CLR 444, at p 460). In the present case, not only have the defendants accepted the repudiation by selling to a third party and by seeking relief in a cross-claim, but the plaintiff himself has commenced proceedings.
I am satisfied that the plaintiff's "continuing" repudiation of the agreements consisted of: 1. Failure to pay the second instalment of $70,000 due on 29 February 2020. In response to correspondence seeking this sum, the plaintiff's solicitors advised on 3 March 2020 that the plaintiff's last day of work would by on 8 March 2020. That letter also foreshadowed that the plaintiff proposed to commence proceedings on the basis that the agreements were void, conduct inconsistent with any intention to perform the agreement. 2. Following further correspondence on 6 May 2020 clearly evincing that the plaintiff did not consider himself bound by the agreements, he then failed to pay the third instalment of $50,088 due on 10 May 2020. 3. After commencing proceedings on 18 May 2020, the plaintiff failed to pay the outstanding second and third instalments referred to above by the extended deadline of 25 May 2020. 4. After further correspondence from his solicitors on 26 May 2020 asserting that the purchase agreement was "incapable of performance", the plaintiff filed and served a defence to the cross-claim which included a pleading that the purchase agreement had been "rescinded in January 2020" and continued to fail to perform his obligations under the contract. He claimed, in his affidavit of 30 November 2020, that on 16 January 2020 Ms Zhang had agreed to his suggestion to call off the purchase "for now" (paragraph 11).
As a result of termination of the contract following a repudiatory breach, the aggrieved party may seek damages equivalent to the value of performance of the contract or for what are called "loss of bargain damages". That is what the defendants did. Having accepted the repudiation, they went on to sell the business to Zero Degree Group Pty Ltd on 18 December 2020, informing the plaintiff of this in the evidence served on 23 February 2021.
The evidence demonstrates a series of responses by the defendants any one of which could amount to repudiation, ranging from the filing of the defence and cross-claim to the sale of the business to the third party. The most obvious step to take, in terms of accepting the repudiation, is to sell the business in question to a third party, and the date of that sale (18 December 2020) ought to be regarded as the date upon which the repudiation was accepted.
For the above reasons, I accept the defendants' submissions that the conduct of the plaintiff as set out above in fact constituted repudiation of the agreement, a repudiation which was accepted when the Coco business was put up for sale and then sold.
In addition to, or in the alternative to, the claim for misleading or deceptive conduct, the plaintiff brought a claim for restitution.

[30]

The plaintiff's claim for restitution

The plaintiff's submissions of 11 September 2021 seek restitution of the instalment payments on the basis of a total failure of consideration. It is asserted that the entitlement to restitution does not require the court to determine the circumstances of the termination, but only that the purchase agreement has been terminated. Three scenarios are set out, namely by consent, for breach and repudiation (see paragraph 29), each of which is asserted to amount to the total failure in question. The plaintiff submits that the party who has made such payments in those circumstances is entitled to restitution for unjust enrichment, the unjust factor being the retention by the other party of the payments without providing the bargained-for performance. This finding, if made, would "gazump" the defendants' claim for loss of bargain damages for the plaintiff's repudiation of the purchase agreement.
A claim for restitution must, however, remain subject to any counterclaim by the innocent party for damages resulting from the breach of contract (Terrex Resources NL v Magnet Petroleum Pty Ltd and Others [1998] 1 WAR 144 at [149] per Burt J). Even if the plaintiff were entitled to restitution of the $185,000, any such entitlement would still have to be offset against the counterclaim for damages (McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at 479; Du Buisson Perrine v Chan [2016] WASCA 18 at [26]: "subject to the vendor's right to counterclaim for damages").
However, any entitlement to restitution would depend upon the terms of the purchase agreement, because this governs the parties respective rights in relation to the amounts paid. This is because the right to damages for loss of a bargain following the termination of a contract repudiation is just as much a contractual entitlement is the right to recover the sums due before termination. In Mann v Paterson Constructions Pty Ltd (2019) 267 CLR 560 Kiefel CJ, Bell and Keane JJ stated at [12] - [13]: "12 The right to damages for loss of bargain that arises in such a case is, in this respect, no less a creature of the contract than the right to recover sums that become due before its termination. In Lep Air Services Ltd v Rolloswin Investments Ltd, in a passage subsequently approved by Brennan J in Progressive Mailing House Pty Ltd v Tabali Pty Ltd, Lord Diplock said: "Generally speaking, the rescission of the contract puts an end to the primary obligations of the party not in default to perform any of his contractual promises which he has not already performed by the time of rescission ... The primary obligations of the party in default to perform any of the promises made by him and remaining unperformed likewise come to an end as does his right to continue to perform them. But for his primary obligations there is substituted by operation of law a secondary obligation to pay to the other party a sum of money to compensate him for the loss he has sustained as a result of the failure to perform the primary obligations. This secondary obligation is just as much an obligation arising from the contract as are the primary obligations that it replaces". 13 Lord Diplock's analysis serves to focus attention upon the point that the terms of the contract govern the amount of compensation payable by way of damages for loss of bargain. Even though the innocent party is no longer entitled to performance of the executory terms of the contract, the terms of the terminated contract inform the quantum of damages recoverable: "The damages are assessed by reference to the old obligations but the old obligations no longer exist as obligations."[ As will become clear, in such a case a restitutionary claim unconstrained by the bargain made by the parties would impermissibly cut across the parties' contract."
As is pointed out in the defendants' submissions of 24 September 2021 at paragraphs 356 and 357, applying these principles to a claim founded on restitution, their Honours stressed that restitution reclaims must respect contractual regimes and the allocation of risk made under those regimes: "In circumstances where the respondent has enforceable contractual rights to money that has become due under the contract, there is no room for a right in the respondent to elect to claim a reasonable remuneration unconstrained by the contract between the parties. As Deane J explained in Pavey & Matthews, in such a case there is a "valid and enforceable agreement governing the [respondent's] right to compensation", and there is therefore "neither occasion nor legal justification for the law to superimpose or impute an obligation or promise to pay a reasonable remuneration". To allow a restitutionary claim in these circumstances would be to subvert the contractual allocation of risk. As Beatson has said: "[W]here P confers a benefit on D pursuant to a contract, the valuation of that work is a matter of contract, which ... respects the parties' valuation. Valuation is in a sense part of risk allocation: P is taking the risk of market rises and D of falls in the market. To allow P to recover anything other than the contract value - such as the objective value, the market value, or a reasonable value - would be to reallocate that risk.""
Clause 7 of the purchase agreement specifically addressed how any sums paid by the plaintiff prior to default on final performance was to be addressed. The plaintiff's answer to this is that this clause is a penalty clause. This has been neither pleaded with the subject of evidence or, for that matter, cross examination even if it had been, I'm satisfied on the evidence before me that Clause 7 was a pre-estimate of risk, and it is in fact the risk which turned out to be the correct risk.
For the above reasons, in circumstances where the parties had an agreed contractual regimes specifically allocating risk between the parties, I am satisfied that the plaintiff has no entitlement to seek the return of the moneys paid in any event.

[32]

The cross-claim and the defendants' claim for damages

The defendants set out a table of total losses on the cross-claim at paragraph 347 of their submissions of 24 September 2021. That table is as follows: Item Amount From section N1 above - expectation $35,088. loss on sale of the Coco Beauty Business following Mr Shao's repudiation, pursuant to general law principles or alternatively pursuant to cl. 8 of the Purchase Agreement. (This amount takes account of the Defendants retaining the $185,000 paid by Mr Shao under the July Agreement and Purchase Agreement; if those funds were to be returned to Mr Shao, the amount of damages would increase by that sum). From section M above - expectation $180,000. losses, being foregone recurring licence fees of $20,000 pursuant to cl. 9 of the Purchase Agreement - calculated over 9 years on the basis of the 4 years remaining on the current lease of the Premises and an assumed further 5 year lease being entered into. Additional rent required to be paid by $53,840.46. the Second Defendant between April and December 2020. Additional costs (including for wages) incurred by the Defendants to maintain the Coco Beauty Business following $27,600. Mr Shao's breaches of the Purchase Agreement. Agent fees to sell the Coco Beauty $24,200. Business following Mr Shao's breaches of the Purchase Agreement. Contribution to lease assignment cost $1,650.00. upon sale of the Coco Beauty Business on 18 December 2020. Solicitor Fees incurred in the sale of the Coco Beauty Business. $1,980.00. From section L above - costs incurred in relation to customer debts. $8,530. Total $329,258.46

[35]

Loss of bargain damages

The defendants' claim for damages consists largely of the financial difference between the original sale price with the plaintiff and the subsequent sale price. In those circumstances, the issue of the financial performance of the business is largely irrelevant.
The plaintiff (submissions of 29 September 2021, at paragraphs 6 - 9) submits that the loss of bargain damages claim must fail because the measure of damages for loss of bargain is a difference between the contract price of what is sold and the market value. The existence of such a loss must be assessed on a like-for-like basis by leading evidence of market value, and not merely relying upon the price paid by the new purchaser. The market value of the business cannot be established by the price paid on new purchaser. For that evidentiary reason alone, the second defendant's claim for loss of bargain damages must fail in limine.
This is a misstatement of the relevant legal principles. There is no one "right way" (or "only way") to demonstrate loss. It is permissible for a party claiming such a loss to put it on the base of the market value as being the amount at which a resale has been or could be made. In Carpenter v McGrath (1996) 40 NSWLR 39 Sheller JA, referring to McGregor on Damages, specifically stated that the amount of damages the vendor was entitled to recover for loss of bargain is the full contract price less the net market value of the property left on the vendors hands, "that is to say the amount at which a re-sale has been or could be made deducting therefrom the costs of re-sale".
Where a party has resale property which is the subject of a claim, not only is evidence of the resale price admissible, but it may be regarded as the best evidence of the market value of the property. In El Ali v Tritton (2019) 19 BPR 39447 at [55], Payne JA stated: "Finally, even if it were true, as the appellant submitted, that the respondents had "turned their back" on the Third Contract in February 2016 by purchasing another property instead, the best evidence of the market value of the property at that date was $800,000. The suggestion that the offer made by the respondents of $775,000 was a better indication of market value as at February 2016 should be rejected. In the absence of any evidence about the terms upon which that offer was made, the mere fact that the amount offered was less than $800,000 provides no sufficient guide to market value. The submission that a difference of two months between the February date and the April date is not, in the circumstances here, persuasive."
The defendants' written submissions of 24 September 2021 draw the attention of the court to the observations of the High Court in Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 83: "The settled rule, both here and in England, is that mere difficulty in estimating damages does not relieve a court from the responsibility of estimating them as best it can: Fink v. Fink (1946) 74 CLR 127, at p 143; McRae v. Commonwealth Disposals Commission (1951) 84 CLR 377, at pp 411-412; Chaplin v. Hicks (1911) 2 KB 786, at p 792. Indeed, in Jones v. Schiffmann (1971) 124 CLR 303, Menzies J. went so far as to say that the "assessment of damages ... does sometimes, of necessity involve what is guess work rather than estimation": at p 308. Where precise evidence is not available the court must do the best it can: Biggin and Co. Ltd. v. Permanite Ltd. (1951) 1 KB 422, per Devlin J. at p 438. And uncertainty as to the profits to be derived from a business by reason of contingencies is not a reason for a court refusing to assess damages: see McGregor on Damages, 15th ed. (1988), pars 357-359."
The plaintiff next submits (paragraphs 11 ff) that the claim for loss of sale of the business fails as a matter of law and fact for the following additional reasons. It is submitted that the court would have no confidence that the purchase price paid by the new purchaser (which is described, curiously, as "purported") is not a figure in which the court can have any confidence as it bears no relationship to the true market value of a business which was primarily cash based. There are no complete records of cash receipts for the business and it is submitted that the court should be highly suspicious of the "entirely unsatisfactory nature" (at paragraph 19) of the evidence which is asserted to reveal "substantial disparities in the potential value of the business or the inputs upon which market value would depend such as profitability and turnover" (at paragraph 19).
The tax returns (Exhibit F) show that, for the financial year ending 2017, the business made a $137,000 loss. For the financial year ending 2018, the business made a $139,000 loss. For the financial year ending 2019, the business made a $136,000 loss and, although not reflected in a tax return, the evidence discloses that, in the financial year ending 2020, the financial year ending 2020, the business made a $3,320 loss. Ms Ashworth's submission is that, far from the defendants incurring any loss in connection with the plaintiff's operation of the business, the plaintiff had in fact saved the defendants money, Ms Ashworth submitted that I should not accept that a fluctuating and unfixed amount represented a genuine estimate of loss on the part of the second defendant for a business that had been loss making for a number of years.
What this evidence suggests, if anything, is at the actual market value of the business is less than the amount for which was sold, in which case the loss of bargain damages would be higher.
These submissions carry little weight where there is evidence of an actual sale to a bona fide purchaser. It was a matter for the plaintiff to lead expert evidence as to value or alternatively to have required the purchaser to be cross-examined on the affidavit he swore for the purpose of these proceedings. It was not put to Ms Zhang that the subsequent sale of the business in December 2020 was a sham.
Another relevant factor is that part of the problem in terms of selling the business is that Ms Zhang was obliged to tell the business broker that the business was encumbered with $90,000 worth of customer debts following the plaintiff's unsatisfactory running of the business. This meant that the subsequent purchaser, who had originally offered to pay $200,000 before this disclosure, paid only $91,000. This was not a mere subtraction of this sum, but an indication of the impact on the market value of the business consequent on the plaintiff's breaches of contract in terms of his management of the business.
What the plaintiff does not do is to challenge the value of the stock upon which the purchase price is made. Although I expressed interest in seeing the depreciation schedule (T 279), and was surprised that it only refers in the most generic way to beds and computers, Ms Zhang not only put the astounding value of $300,000 on equipment costs (T 227 - 228) but later increased this to $460,000 - $470,000 (T 270). This does not include the shop fit-out, which was an additional amount. However, Ms Zhang was not cross-examined about these purchases, and there is no expert evidence (either on this topic or the value of the business name). To the contrary, there is evidence from Ms Sabrina Xia of Link NSW to the effect that the equipment is "in good condition" and worth "at least $150,000" (CB 2, Tab 6, affidavit of Ms Zhang, paragraph 221). I propose to accept the defendants' evidence on this issue without further comment.

[40]

Loss of licence fees - is there a double recovery?

The licence fee set out in the purchase agreement was $20,000 per annum (see Clauses 5, 6 and 9). The lease runs from 2019 to 2024, which is five years. The defendants calculated the loss of the licence fee on the basis of payment for nine years, as there were four years remaining on the lease at the time of the plaintiff entering into the purchase agreement.
The likelihood, given the settled nature of the business, was that the lease would be renewed at least one or more times, hence the allowance for one full five-year period and one lesser period of 4 years. For the first year of the lease (2019), the $20,000 fee is captured under the loss of bargain damages for the purchase price; for the remaining years (from 2020 onwards) the $20,000 licence fee is claimed.
This is not a double recovery as claimed by the plaintiff.
The plaintiff also argues that there is no evidence of this; this is an extension of the general argument in relation to the cross-claim that some form of expert evidence is necessary in order to establish economic loss. What the defendants are claiming here is the loss of a chance for a licence in terms of a deprivation of any commercial opportunity, whether arising from breach of contract or some other cause of action. Mr Harding's submissions of 1 November 2021 helpfully set out these principles as follows: 1. The law awards damages for deprivation of any commercial opportunity, whether arising from breach of contract, tort or statutory contravention; 2. Damages have been recognised as available for loss of an opportunity, such as to prosecute a litigious claim; 3. In a loss of chance case, whether arising under contract, tort or statutory contravention, the plaintiff must first prove on the balance of probabilities that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value); 4. It is not necessary to establish that the chance would probably have been realised; loss of a chance is compensable even if its realisation is unlikely on the balance of probabilities, and even as low as 1 per cent; 5. Once the existence and loss of a chance have been established, damages are to be assessed by reference to the court's assessment of the degree of likelihood that the commercial opportunity would have yielded success had it been pursued; 6. Although in this process there is a need to weigh various factors, there is no requirement of a mathematical appraisal of the likelihood of every possible occurrence 7. The value of an opportunity that has been lost is to be ascertained by reference to the "degree of probabilities or possibilities"; 8. Uncertainty in quantification does not prevent an assessment provided some broad estimate can be made or a broad-brush approach taken; 9. Damages need not be proved with mathematical exactitude and the court will use its best endeavours to arrive at a fair figure; 10. Where precise evidence is not available, the Court must do the best it can; 11. In a loss of chance case, the inquiry is thus an imprecise and indeterminate one to be carried out within very broad parameters. The trier of fact may have to form conclusions on slender materials.
I have adopted and applied this helpful summary of the principles in terms of the calculation of damages in the cross-claim.

[41]

Damages for breach of the purchase agreement

I note Ms Ashworth's statement that the defendants and plaintiff agree on the methodology for quantification of the loss (plaintiff's submissions, 20 October 2021, paragraphs 129 - 130). While this is challenged by the defendants (defendants' submissions, 1 November 2021, paragraph 140), I agree that, even on the basis of the plaintiff's own approach, the damage caused by this breach of contract would be compensable.
As to additional rent and additional costs, I accept the defendants' evidence that from the date the plaintiff ceased involvement with the business (his last day of work being 8 March 2020) until completion of the sale on 18 December 2020, the Coco Beauty Business made a loss, in circumstances where that loss is entirely due to the combined impact of the incompetent way the business was being run (with the result that customer credits were incurred) and the sudden and unexpected withdrawal of the plaintiff from the business, in circumstance where the unchallenged evidence of Ms Zhang was that she could not work in the business for health reasons.
I note the following evidence supporting this finding: 1. The customer records for the period March to December 2020 (CB1 Tab 6, pp 617 - 962) demonstrate that during this period the Coco Beauty Business received only $1,451 in cash. 2. The ANZ statements for Oceania over the same period show withdrawals exceeding deposits in a total sum of $82,900. 3. Ms Zhang's personal CBA account for the period 9 November 2020 to 8 February 2021 shows merchant deposits and HICAPS receipts totalling $7,417 for the period 9 November 2020 to the date of completion of the sale to the new owner (19 December 2020).
These figures add up to a loss of $74,000.
An important adjustment has to be made, however, for the impact of the pandemic. The business was receiving relief payments as well as not paying rent (which accumulated as a debt to be payable on the sale of the business). The plaintiff did produce one page from his own bank account, but it is of little assistance. I am satisfied that, independently of the pandemic, the Coco Beauty Business was losing significant sums of money,
The plaintiff sought to argue that the Coco Beauty Business was cash-based and that cash payments had to be allowed for, noting Ms Zhang's statement in her first affidavit that the business was "primarily" cash based which, by inference, meant that the takings were much higher. Ms Zhang said in cross-examination (T 238) that this was an error. I accept that this is an error because, if the business were indeed cash-based, nobody would have better evidence of this than the plaintiff himself, from his own experience running the business, and that was not his evidence. In addition, the customer records for the period March to December 2020 corroborate this.
It is hard to see how the plaintiff can refute the pleading in the cross-claim that the plaintiff breached Clauses 2, 6 and 7 of the purchase agreement, since he failed to make the payments in question by the due date (see paragraphs 40 - 46 of the cross-claim). Not only was he in breach of these provisions of the purchase agreement from 29 February 2020 but he committed further breaches from 3 March 2020 by failing to meet expenses of the business for which he was liable under Clause 2. For these reasons, he is liable for the additional costs and losses claimed by the company as a consequence of all these breaches.

Shao v Zhang & Anor; Zhang & Anor v Shao

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Judgment (46 paragraphs)

Legislation Cited (1)

Cases Cited (22)

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