Shun Sheng Pty Ltd v Lei

First issue: the termination of the partnership

1. The most substantial of the five issues, was the first, namely, whether the partnership terminated on 30 June 2019, as Ms Wei contended, or in October 2021, as the primary judge found in accordance with the submissions of Ms Lei and Mr Kitsos. This was addressed with some care by the primary judge at [231]-[241]. The majority of the grounds of appeal challenged aspects of this part of the reasoning of the primary judge. The most convenient course will be to reproduce each of those paragraphs which is challenged, followed by the submissions made in respect of it by Ms Wei, and their resolution.
2. Paragraphs 231 was as follows: Alleged termination of partnership: In my view, the first major factor which tells against Ms Wei's version of events is that the 30 June date does not really fit with the sequence of events. It is notable that when Shuang was established, Ms Lei appears to have been excluded from being a cheque signatory. But this happened in April 2019, and Ms Wei did not attempt to explain the discrepancy. On the other hand, Ms Lei apparently continued to have access to a corporate credit card, but that does not fit with the 30 June date either. The evidence shows that Ms Lei had the credit card at least until October 2019, and, as already noted, I was not convinced by Ms Wei's attempts to explain this away.
3. The thrust of the submissions made in relation to this reasoning was that the cessation of Ms Lei's entitlement to sign cheques a couple of months before 30 June 2019 did not really tell against Ms Wei's case that the partnership was dissolved on 30 June, nor did Ms Lei's use of a corporate credit card for a period of three or fourth months thereafter. It is true that these objectively established financial aspects of the partnership are not dispositive, but the primary judge did not regard them as such. The fact that Ms Lei continued to use a corporate credit card for four months after the alleged dissolution of the partnership is probably of greater weight than the cessation of signing rights a few months before 30 June. The more important aspect however is the concluding words in [231] that the primary judge was "not convinced by Ms Wei's attempts to explain this away". That expressly invokes his Honour's demeanour based finding of Ms Wei.
4. Paragraph 232 was as follows: There is a further point about the sequence of events. In her affidavit, Ms Wei placed the weekly payments to Mr Kitsos as having been agreed in July 2019. In fact, they began as early as February 2019. Ms Wei herself, in cross-examination, changed her story about this (see [137] above). Once it is accepted that the payments had already begun before 30 June, then the whole story about matters coming to a head on that date becomes illogical.
5. The reference to Ms Wei's changing of her evidence at [137] is to the following: In the course of cross-examination, Ms Wei also cast doubt on her affidavit evidence that she started paying Mr Kitsos $4000 a week after the alleged conversation with him in the first half of July (see [91] above). She appeared to suggest that prior to the conversation in her affidavit, there had been an earlier conversation to the effect that they (Mr Kitsos and Ms Lei) did not have enough money, and so borrowed money from her.
6. This departure by Ms Wei from her affidavit was described repeatedly in this Court as a "blemish". But there was no error on the part of the primary judge to regard it as rather more significant than that label might suggest. It is to be borne in mind that Ms Wei's case was that things were brought to a head on 30 June 2019, and shortly thereafter payments were made to Mr Kitsos as part of an agreement whereby he would assume liability for Ms Lei's debt and be given some time to repay the business. Accordingly, earlier payments to Mr Kitsos detracted from a key aspect of that case. Hence, there was no error for a judge whose task was to resolve diametrically opposed accounts by the parties of what occurred to have regard to divergences between the affidavit evidence and what was admitted in cross-examination and to contribute to his assessment of credibility and reliability. Nor was there any error in having regard to the admissions in cross-examination to cast doubt upon Ms Wei's underlying case.
7. The primary judge then addressed the evidence bearing upon the subsequent conduct of the parties. Mr McGovern SC submitted that this was impermissible reasoning, based on post-contractual conduct, on the basis that his case was that the partnership had been brought to an end by a contract between the parties. But the issue between the parties was whether or not the partnership had been brought to an end, and in order to determine that issue, which went to the existence or otherwise of the oral contract for which Ms Wei contended, this evidence bearing upon the parties' conduct was plainly relevant.
8. The subsequent conduct related to Ms Lei's attendance on the premises, her appropriation of some $110,000 in cash, the fact that JobKeeper payments were made to her and the custody of certain worksheets of the business.
9. The point of the $110,000 in cash is that it is plain from the documentary evidence that there tended to be limited amounts of cash on the premises, and so it would have been necessary for Ms Lei to visit dozens of times in order to have taken the amount which Ms Wei said she had taken. Her doing so sits uneasily with the partnership having been brought to an end on 30 June 2019. There was no error on the part of the primary judge to reason on that basis.
10. The primary judge summarised the JobKeeper payments at [142]: A Shuang bank statement in evidence contained a credit, received from the ATO, on 20 September 2020, of $18,000. Ms Wei accepted that this was money received by the business through the Commonwealth Government's JobKeeper program. There were then various debits made on 26 September, each in the amount of $1308. Two had as their description, "PAYG". A further two were described, "PAYG Jun". And a further two were described, "PAYG Wei". Ms Wei accepted that the two payments represented JobKeeper payments to Ms Lei, but she denied that she arranged for those payments because Ms Lei was working in the business at the time. Ms Wei confirmed that she asked her accountant to apply for JobKeeper, but suggested that "they" (presumably, Mr Kitsos and Ms Lei) had asked her to.
11. It is difficult to see why Ms Lei was entitled to the same form of JobKeeper allowance as Ms Wei and Mr Kitsos received if, as Ms Wei contended, the partnership had been dissolved more than a year earlier. Once again, his Honour's finding at [236], "I was not at all impressed by Ms Wei's attempt to present herself as acting at the dictation of Mr Kitsos and Ms Lei", is a finding that discloses no error, having regard to the incontrovertible evidence of the JobKeeper payments that were made. Once again, not only was there no error in forming the view that Ms Wei's explanation reflected adversely to her credibility, but the fact of payments being made to Ms Lei also told against Ms Wei's case that the partnership had long since been dissolved.
12. In this Court, the following submission was made: MCGOVERN: … Our submission is simply that the relevant rules - and I perhaps should give your Honour reference to the rules. The rules are the Coronavirus Response Package (Payments and Benefits) Rules 2020. And those rules draw a distinction between JobKeeper payments to employees on the one hand and a situation where you have a payment that could be made to a business participant in circumstances where only one individual would be entitled to the JobKeeper payment. The eligible business participant defined in cl 12 in the case of a partnership is that the individual must be a partner in the partnership. Bearing in mind that Mr Kitsos gave no evidence on this topic and he was the one who had to make the application under the rules, and the evidence that was given by my client was not challenged by the opposition in cross-examination as to her explanation. Neither Ms Lei nor Mr Kitsos ever asserted that they were employees of Shuang. But all that the JobKeeper payment does is to demonstrate that whatever else was the case, Ms Lei was not a partner because she was not an eligible business participant. PAYNE JA: Well if that's true, neither was your client because she receives a PAYG amount on this bank statement as well if you go to 142. MCGOVERN: Which leads to an inevitable conclusion that the payment was sought to be procured for the benefit of getting the payment rather than by reference to anything in the reality of their relationship. So it doesn't tell against the proposition about not being a partner, but may lead to conclusions about the repute of the people who sought to make the application. In this case, Mr Kitsos on behalf of the company and also the involvement of my client, but not to demonstrate partnership.
13. I do not accept these submissions. The bank records show that payments were made to each of Ms Wei, Ms Lei and Mr Kitsos shortly after receiving grants from the government. In each case the payments were in the same amount. It is quite possible, as Mr McGovern volunteered, that the payments were "procured for the benefit of getting the payment rather than by reference to anything in the reality of their relationship". But the fact that Ms Lei was receiving the payments at all, however they be characterised, is strikingly inconsistent with Ms Wei's case that the partnership had been brought definitively to an end more than a year earlier.
14. The point about the custody of the worksheets was expressed by the primary judge at [237]: There is also the apparent fact that Ms Lei had custody of the worksheets for the business after 30 June 2019. I appreciate that, on Ms Wei's case, Ms Lei needed to work out how much she owed. But I think it is unlikely that, if the partnership had been terminated, Ms Wei would have allowed its original primary records, which its conditions of consent required it to maintain, to be retained by Ms Lei. Certainly, there would have been no reason to entrust Ms Lei with the records for the period after 30 June 2019, when, on Ms Wei's case, she was conducting the business as a sole trader, for her own exclusive benefit.
15. There is no error in that reasoning.
16. The appellants placed heavy emphasis on the evidence that Ms Lei had returned her copy of the keys on 30 June 2019. It is true that that evidence supports their contention that the partnership came to an end then. However, it was necessary for the primary judge to weigh all of the evidence which bore on that proposition. That is what his Honour did. The result was a more nuanced finding at [241]: Ms Lei may have been causing problems for the operation of the partnership, including by appropriating some of the takings, in 2019. It is plausible that the parties agreed that Ms Lei would repay any monies she had appropriated (together with advances on her profit share, see below) and would not come into the premises, or at least would not have keys to the premises, until she had straightened herself out. But such an agreement would only have been a temporary arrangement concerning the management of the partnership business. It would not have been inconsistent with Ms Lei having a continuing interest in the partnership. What Ms Wei must prove is a final and immediately effective termination of that interest. Having regard to the factors I have mentioned, and the general difficulties with Ms Wei's credibility, I am not satisfied that she has done so.
17. All that was said against that was that "the straightening herself out agreement was not argued by the respondents, nor was it the subject of any evidence from the respondents to that effect". But it is quite plain that Ms Lei was gambling large amounts of money (for example documentary evidence established that in the period from 12 November 2018 until 26 June 2019 she had lost $14,535.97 from a turnover of $180,552.49 at the Wenty Leagues Club). But the more important point is that the primary judge refrained from making actual findings that Ms Lei would not come to the premises until she had "straightened herself out". His Honour's reasons transparently recorded his engagement with the whole of the evidence and the various possibilities presented by it, with a view to determining the ultimate issues presented for determination. The ultimate finding was that Ms Wei had not discharged the burden placed upon her. That was an orthodox mode of reasoning, consistent with the conventional approach of refraining from making factual findings, especially findings which are adverse to a party or witness, where it is not necessary to do so.
18. Paragraph 235 was as follows: Furthermore, it is not merely a question of access to, and working in, the business premises. The evidence about the February 2020 payment to Ms Lei's nephew (see [141] above) was not easy to follow, but it is difficult to see how it would have happened if Ms Lei had nothing more to do with the business, as Ms Wei claimed.
19. The evidence to which the primary judge referred was as follows: Counsel also asked Ms Wei about a page of the worksheet for 25 February 2020. Ms Wei appeared to accept that it contained a note, "Give Yun Long Jun Lei payslip fee $150 equals left $1000", in her handwriting. Ms Wei agreed that Yun Long is Ms Lei's nephew. Counsel asked if Ms Wei recalled that Ms Lei had requested that Yun Long have a payslip prepared for him for a car loan application, to which Ms Wei responded, "maybe, probably. I really can't recall". Counsel then asked if the cost of preparing the payslip by the accountant was $150, and Ms Wei thought this was right. But Ms Wei denied counsel's suggestion that this amount was deducted from money payable to Ms Lei of $1000, and also denied counsel's suggestion that the note was about an adjustment to money owed to Ms Lei because she was still working in the business at that time.
20. Ms Wei submitted that the one-off payment to Ms Lei's nephew was of insignificant weight. She also relied upon her evidence that this had nothing to do with Ms Lei. But those submissions misapprehend the use made by the primary judge of this evidence. It was merely one piece of a vast amount of evidence - many thousands of pages, and testimonial evidence over days of hearing - but it was nonetheless a piece of evidence which bore upon the probabilities of whether, as Ms Wei contended, the partnership had been brought to an end eight months earlier.
21. There was also evidence that Ms Lei had purchased some fruit as an offering to the Buddha, which she brought to the premises, and for which she was reimbursed from business money. That was one aspect mentioned by the primary judge at [234], with which Ms Wei took issue. The primary judge said: I was not satisfied with Ms Wei's explanation of the episode in January 2020, when Ms Lei was apparently at the premises setting up an offering to Buddha and using business funds to pay for it. Furthermore, Ms Wei herself alleged that Ms Lei appropriated $110,000 in cash, and taking that amount of money would have required many (probably dozens) of visits. The allegation seems to proceed on the basis that Ms Lei had a significant degree of unchallenged access to the business over the period. I am not saying that Ms Lei was necessarily present all the time after 30 June 2019, but I accept that she visited the premises and took part, at least to some extent, in the operation of the brothel, on occasions.
22. Ms Wei submitted that at most that evidence demonstrated that Ms Lei had turned up, uninvited, with the fruit offering and was reimbursed. Once again, this misapprehends the gravamen of his Honour's reasoning. The first point made in [234] is not so much the events which (it was common ground) occurred, but with Ms Wei's explanation of the episode; once again, this reflects the advantage his Honour possessed in seeing and hearing Ms Wei being cross-examined on it. The appellants launched a large challenge to this aspect of his Honour's reasoning: Ms Wei is left with no understanding as to why it is that that evidence of hers is rejected. It's not put forward as a case by Ms Lei. She's denied what's put to her in cross-examination and yet his Honour then is not satisfied with the explanation. There's a point at which general credit findings have to give way to an analysis in relation to particular matters. Just because someone is not credible on one particular point doesn't mean that their entire evidence is not to be accepted. The Court would have to conclude that his Honour's use of his advantage as the trial judge and looking at the demeanour of the parties as such as to entitle him to reject Ms Wei at this point. If your Honours put to me that that's exactly what he can do because that's what the High Court has said, our submission is that a party is entitled to understand the basis upon which their evidence is to be rejected and particularly when it's unchallenged in the sense that the other party does not join issue with it. So it does become unchallenged testimony within the category of exception in Fox v Percy.
23. The primary judge had earlier recounted the salient evidence concerning the fruit being offered to the Buddha at [140]: Counsel asked Ms Wei about a notation which appeared on the worksheet for 24 January 2020. She agreed that the notation meant that Ms Lei purchased fruit as an offering to Buddha, and that it was in her handwriting. She also agreed that she was recording the fact that Ms Lei had purchased fruit as an offering to Buddha, which was the fruit being put in the brothel for that purpose. Counsel suggested that Ms Lei did so because she was working in the business. Ms Wei denied this. Somewhat unconvincingly, Ms Wei suggested that business money had been used to purchase the fruit, even though there was no connection between the business and the offering. When asked why she had paid with business money then, she answered: because she said she bought some fruits for the Buddha but I didn't want to use her fruits to offering the Buddha, so I wanted to give her money. But at that time, I didn't have money with me so I used the business money to pay her first. Counsel asked Ms Wei if she was saying that Ms Lei turned up, out of the blue, for no reason, just to give her fruit for the Buddha. Ms Wei agreed.
24. This is self-evidently a minor point, but one that is difficult to reconcile with the partnership coming to an end on 30 June 2019. The worksheet for 20 January 2020 records "Coco". The cross-examiner established that 20 January was around Chinese New Year, that the fruit had been purchased as an offering to the Buddha to be placed in the brothel for that purpose. There ensued the following exchange (and much more which has not been reproduced): HIS HONOUR Q. Was it something that you thought your customers would expect? A. INTERPRETER: No. Every - every client actually has different religions or beliefs. No. Q. Well, what was the point of it then? A. INTERPRETER: I don't know to say. Q. Well, I think you told me that money came out of the business takings to pay for this offering? A. INTERPRETER: Yes. But, because she bought the fruits, but I didn't have money at that time so I just asked the receptionist for the money first and gave it to her. Q. But this was the business's money? A. INTERPRETER: Yes. Q. What was the connection between the business and making the offering? A. INTERPRETER: I don't think so, no. Q. What was the connection? A. INTERPRETER: No connection. Q. Why use the business's money to pay for it then? A. INTERPRETER: Because I didn't - because she said she bought some fruits for the Buddha but I didn't want to use her fruits to offering the Buddha, so I wanted to give her money. But at that time, I didn't have money with me so I used the business money to pay her first. … Q. So, your evidence was that from 30 June 2019 had no further role in the business and didn't come to the business. Isn't that your evidence? A. INTERPRETER: Yes. Q. Do you say that she turned up out of the blue for no reason on 24 January 2020 just to give you fruit for the Buddha? A. INTERPRETER: Yes. Q. I want to suggest to you that that's incorrect. And that this transaction was recorded by you as a day-to-day transaction occurring in the business at a time when Jun was still working in the business. A. INTERPRETER: Incorrect.
25. It was amply open to the primary judge to reject Ms Wei's attempts to reconcile her claim that the partnership had ended on 30 June 2019 with the business repaying Ms Lei for fruit she brought to the brothel as an offering to the Buddha around Chinese New Year seven months later.
26. Despite that extended excursus on the offering of fruit to the Buddha, probably more important are the second and third sentences of the paragraph, to which Ms Wei offered no challenge. But on her case, Ms Lei had taken cash in excess of $100,000 from the business, and the time sheets recording how the business operated plainly supported a finding by the primary judge that that would have involved dozens of visits. All of this sits uneasily, to say the least, with the findings sought by Ms Wei that the partnership had come to an end on 30 June 2019.
27. At [237], the primary judge referred to "the apparent fact" that Ms Lei had custody of the worksheets for the business after the alleged termination of the partnership. This was said to be a finding that was wrong as a matter of fact, this time by reference to the evidence of Ms Lei that she only had the sheets between January 2020 and March 2020. It may be that the primary judge erred in this aspect of his reasoning. But it is one of a large number of factors, all of which point against the conclusion for which Ms Wei contends.
28. The next matter upon which the primary judge relied is at [238]-[239]: A final difficulty for Ms Wei's case is the evidence about the events of October 2021. First, the WeChat messages between Ms Wei and Ms Lei on 1 and 2 October [199]-[200] above) show that there was an accounting process going on between them, which was co-operative in nature, and involved input from both sides. Mr Kitsos' text message of 7 October ([201] above) is to the same effect. Indeed, Mr Kitsos records that the process had, by then, been going on for almost five years. This does not strike me as the sort of way in which the task would have been undertaken if the partnership had in fact been terminated more than two years before. Furthermore, in their WeChat messages of 1 and 2 October, Ms Wei and Ms Lei were clearly proceeding on the basis that once the lockdown ended, Ms Lei would be resuming an active role in the partnership; indeed, she was to be "boss of the shop" ([199] above). On the evidence, that remained the case until 8 October, when Ms Wei had Shun Sheng incorporated and, it seems, transferred the business to it. Although it is not essential to decide what made her change her mind, the sequence of events suggests that this was a response to Mr Kitsos' refusal, on 7 October, to pay her the $500,000 she was asking for.
29. Against the inference drawn by the primary judge, Ms Wei said that her reference to Ms Lei being the "boss of the shop" had not been put to her in cross-examination. That may be true, but the main point made by his Honour is that the WeChat messages were inconsistent with the partnership having terminated on 30 June 2019. There was nothing obscure about that aspect of Ms Lei's case; in the course of opening the case at trial, counsel for Ms Wei referred to the messages and said: HIS HONOUR: When you say transcriptions, these are translations, are they, of something on WeChat that was originally in Mandarin? ALLEN: Yes. Each party puts a different characterisation on the correspondence. Jun says it shows that she was part of the business in October 2021. Nancy's characterisation is clearly the two discussing the formal taking of accounts, or informal taking of accounts.
30. In this Court, Ms Wei submitted that there was a problem with the tense in the "unproven" translation which had occurred, although this Court was not directed to any challenge having been made to its admission into evidence, and once it was in evidence, it was available for use for the purpose relied upon by the primary judge.
31. The final matter relied upon by the primary judge was at [240]: Finally, there is Ms Wei's own evidence, in the form of her December 2021 affidavit, that she locked Mr Kitsos and Ms Lei out of the business in October 2021, because she no longer wished for them to be involved in it ([208] above). This was a clear acknowledgement that, as at October 2021, Ms Lei, as well as Mr Kitsos, had a role in the business. Ms Wei had no explanation for this, and I found her attempts to deal with it in cross-examination unconvincing.
32. I did not understand Ms Wei to make any submissions attacking the force of the reasoning in that paragraph which is, with respect, self-evident and powerful. And it is yet another example of his Honour's reliance upon Ms Wei's unconvincing attempts in cross-examination to address the inconsistencies with the objective evidence upon which his Honour placed weight.
33. The ultimate conclusion reached by his Honour was, appropriately, nuanced. As expressed by the primary judge at [241]: As already noted, Ms Lei may have been causing problems for the operation of the partnership, including by appropriating some of the takings, in 2019. It is plausible that the parties agreed that Ms Lei would repay any monies she had appropriated (together with advances on her profit share, see below) and would not come into the premises, or at least would not have keys to the premises, until she had straightened herself out. But such an agreement would only have been a temporary arrangement concerning the management of the partnership business. It would not have been inconsistent with Ms Lei having a continuing interest in the partnership. What Ms Wei must prove is a final and immediately effective termination of that interest. Having regard to the factors I have mentioned, and the general difficulties with Ms Wei's credibility, I am not satisfied that she has done so.
34. I do not accept that any basis has been established to challenge the ultimate finding that Ms Wei had not established the partnership had been brought to an end on 30 June 2019. Indeed, I am unpersuaded that any material aspect of the elaborate challenge advanced in this Court to that finding has been made out.

Second issue: the terms on which the partnership ended on 30 June 2019

1. This was not the subject of separate challenge. It depended upon Ms Wei's testimonial evidence, and falls away in light of the reasons and conclusion on the first issue.

Third issue: weekly payments to Mr Kitsos

1. The third issue for determination concerned the nature of the weekly payments made to Mr Kitsos. Here there seemed to be some misapprehension of the reasoning process adopted by the primary judge. It is necessary to reproduce the relevant paragraphs ([245]-[248]): Nature of weekly payments to Mr Kitsos: In my view, Ms Wei's assertion that the weekly payments to Mr Kitsos represented a salary for services rendered is inherently implausible. The payments could theoretically have been payments for supervising renovation works, but that would have been for a limited period, and it is not how the payments were explained in Ms Wei's version of events. It is hard to see how, if the partnership had been terminated, it would have made economic sense for Ms Wei to keep Mr Kitsos on at $4,000 or $5,000 per week, for month after month and year after year. I think that an inherently more likely explanation for these payments is that they were an advance against Ms Lei's entitlements from the partnership, which were being calculated by Ms Lei and Ms Wei. Presumably, they would have been paid to Mr Kitsos out of a joint desire on the part of Ms Wei and Mr Kitsos to ensure that they were not gambled away by Ms Lei and would be properly accounted for. Support for this view comes from the language attributed to Ms Lei by Ms Wei herself, in her version of the alleged conversation in mid-July 2019. In that conversation, Ms Lei is presented as having an interest in the payments. That would explain why it was she who might have discussed the matter with Ms Wei and sought the increase in the weekly payment, rather than Mr Kitsos. Later, it could well have been thought that, once the weekly payments were added in, the amount to be paid by Ms Lei at the end of the account would be a substantial one. That would explain why Mr Kitsos and Ms Lei might have given undertakings to pay a sum to Ms Wei once the Baulkham Hills property had been sold. It is not, however, necessary to reach an affirmative conclusion on any of this. It is sufficient to say that I do not accept Ms Wei's characterisation of the payments.
2. Ms Wei maintained that those paragraphs contained findings which were wrong, or unfounded by any evidence. Contrary to Ms Wei's submissions, nothing in those paragraphs amounted to a finding that these payments were an advance to Mr Kitsos against Mr Lei's entitlement from the partnership. With all respect to the submissions advanced to the contrary, it is difficult to see how the primary judge could have been clearer, when identifying the implausibility of Ms Wei's assertion at [245], positing an "inherently more likely explanation" in [246]-[247], and concluding in [248] with the statement that it was "not … necessary to reach an affirmative conclusion on any of this", and that "[i]t is sufficient to say that I do not accept Ms Wei's characterisation of the payments".
3. Insofar as Ms Wei submits that the findings in those paragraphs are incorrect, or made without any evidentiary basis, the submission is based on a false premise. No such findings were made.
4. To the extent that Ms Wei posited that the universe of possibilities was confined to an acceptance of Ms Wei's case, or a finding that the payments were made in account of Ms Wei, once again the submission relies upon a false premise. As was pointed out during oral argument, a third alternative is that the primary judge simply held that Ms Wei had failed to discharge the onus which rested upon her.
5. It is clear that Mr Kitsos was receiving cash in the amount of $5,000 per week at some time during the relevant period. He did not deny that in his affidavit, and he accepted in cross-examination that this occurred at least in April 2021. But it is nonetheless clear that acceptance of Ms Wei's case in respect of the payments to Mr Kitsos, as a part of the new agreement between Ms Wei, Ms Lei and Mr Kitsos, required an acceptance of Ms Wei's testimonial evidence, and no error has been shown in the primary judge's assessment of the credibility and reliability of that evidence, or his conclusion that she had failed to discharge the onus upon her.

Fourth issue: did Mr Kitsos guarantee Ms Lei's obligations?

1. The fourth issue for determination was whether, as Ms Wei contended, Mr Kitsos had subjected himself by alleged conversations to the position of Ms Lei's guarantor. This was addressed by the primary judge at [249]-[254], because the issue bore upon whether the partnership had been terminated: Alleged personal guarantee by Mr Kitsos and undertaking to pay $1.1 million on account: Even putting aside for the moment my general reservations about Ms Wei's evidence, her account of the alleged conversation with Mr Kitsos in the first half of July 2019 does not inspire confidence. Ms Wei starts by referring to the possibility of suing Ms Lei. She then has Mr Kitsos propose a $4,000 salary arrangement for himself, to enable him to service the mortgage on the Bella Vista property until the Castle Hill property can be sold. Then Ms Wei asks him for a personal guarantee of Ms Lei's liabilities, and an undertaking to repay after the Caste Hill property is sold, in return for Ms Wei "holding off", for some unidentified period, on suing Ms Lei. Mr Kitsos agrees and obligingly undertakes to tell Ms Lei (thereby bringing her in as a party). In doing so, he repeats back that "you won't sue us because I promised to pay you if she doesn't", conveniently underlining the alleged quid pro quo. I appreciate that a promise to refrain from suing, even for an unspecified period, may be good contractual consideration: JD Heydon, Heydon on Contract (2019, Lawbook Co) at 155 [15.370]. But even if I did not have severe reservations about Ms Wei's credibility, it would stretch credulity to accept that an obligation of a liability of hundreds of thousands or even millions of dollars would have been proposed and accepted in this way. It is simply too good to be true. In any event, I have rejected the characterisation of the weekly payments to Mr Kitsos asserted in Ms Wei's version of the conversation. Once that it is gone, the whole edifice collapses. Nor do I accept Ms Wei's version of the alleged October 2020 conversation, in which Ms Lei and Mr Kitsos supposedly agreed to make payment of $1.1 million, on account of Ms Lei's liability (as supposedly guaranteed by Mr Kitsos). The conversation as alleged by Ms Wei, is, in my view, quite inconsistent with the IOU signed on that occasion. That IOU conspicuously failed to specify any particular amount as being due. Nor was it signed by Mr Kitsos as the supposed guarantor. Furthermore, it stated that the amount would only be paid once the amount due is determined. That is quite inconsistent with an obligation to pay $1.1 million immediately. It must be acknowledged that in October 2021, Mr Kitsos did send text messages to Ms Wei in which he undertook (using the word "I" rather than "we") to pay the amount due when determined (see [201] above). Indeed, Mr Kitsos also obtained, for the purpose of tendering to Ms Wei, a cheque for $500,000. Clearly, he intended it to be applied against Ms Lei's liability under the partnership account then being conducted. This conduct is, however, not relied upon separately as creating any contractual obligation and Ms Wei did not accept the money. In the context of the case advanced on behalf of Ms Wei, Mr Kitsos' undertakings to pay could, at most, have been some sort of acknowledgement of an earlier agreement. On balance, those undertakings do not cause me to reconsider the views which I have expressed. In the first place, Mr Kitsos did not expressly refer back to any promise supposedly made in July 2019 (or October 2020 for that matter). Mr Kitsos simply said that he had said that he would pay, which could refer to an undertaking given at any earlier point in time. He did not link that earlier undertaking with any particular request for a quid pro quo on the part of Ms Wei. In short, the later undertakings are not an acknowledgement of an earlier contract of guarantee. Furthermore, it is clear that the finances of Ms Lei and Mr Kitsos were intertwined. In that context, Mr Kitsos could readily have undertaken to make a payment on Ms Lei's behalf, without accepting personal liability for her debts.
2. His Honour returned to this at [285]: For reasons I have given, I am not satisfied that Ms Wei has established that Mr Kitsos in fact made any agreement to pay Ms Lei's debts to Ms Wei (or Sunshine Island). It is not necessary to consider whether any such agreement was supported by good consideration. The guarantee claim against Mr Kitsos fails on the facts. However, Mr Kitsos may have an obligation to account to the partnership and I will deal with that below.
3. The appellants said that there had not been a proper foundation to reject the "too good to be true" conversation. It was said, "We submit that in order to draw that conclusion, it would have been necessary to put to the witness that what she was saying was made up or fabricated, in order to make that finding." Despite senior counsel for Ms Wei being directed by the Court to parts of the cross-examination during the hearing, the submission was not withdrawn. Instead it was renewed. Senior counsel returned to this point later in his address: But in circumstances where no cross-examination was directed to put that proposition to the witness as a matter of basic Allied Pastoral Holdings v The Commissioner or Browne v Dunn principle to have drawn that conclusion. If it's a conclusion that's adverse to the applicants that it wasn't warranted.
4. Those submissions are factually incorrect. It was squarely put to the witness, repeatedly, that that was wrong, and that it had been "subsequently invented". In fact, this particular conversation, whereby Mr Kitsos conveniently assumed the obligations of a guarantor for a very large amount of money, was repeatedly the subject of attack. It will suffice to refer to the second day's cross-examination (noting that the "too good to be true" conversation is in paragraph 84 of Ms Wei's 7 December 2022 affidavit, and her subsequent recounting of Mr Kitsos' undertaking to Ms Lei is in paragraph 85), where the following exchange occurred: Q. And nowhere in this affidavit of 23 December 2021 do you record any conversation with Theo or Jun about them selling their house or agreeing to an account, or using the word, guarantee. That's right, isn't it? None of that appears in this affidavit. A. INTERPRETER: That's right, correct. Q. And that's because you never had conversations with Jun and Theo in which those matters were discussed. A. INTERPRETER: Incorrect. No. Q. And the detailed conversations that you've put in your current [7 December 2022] affidavit in paragraphs 84 and 85 are conversations that you've subsequently invented. Isn't that right? A. INTERPRETER: Incorrect, no.
5. Nothing more need be said of this aspect of the challenge to the primary judge's reasoning concerning a palpably improbable oral guarantee.

Fifth issue: did Ms Lei and Mr Kitsos agree that Ms Lei's liability was at least $1.1 million, which they would pay in consideration of being given time to sell their Castle Hill property?

1. This issue once again turned on testimonial evidence. There was a written document, described as an "IOU", but it did not identify any amount of money said to be owing. The primary judge said at [224]: The only contemporaneous written document which is relevant is the October 2020 IOU, which is contemporaneous with the fifth alleged agreement, but does not contain any record of the critical $1.1 million term alleged by Ms Wei. Her case is thus entirely dependent upon the Court accepting her account of the five oral conversations which she alleges. The principles stated by McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 318-319, about the difficulties facing a plaintiff making a case based on alleged oral representations, clearly apply.
2. His Honour resolved the issue at [251]: Nor do I accept Ms Wei's version of the alleged October 2020 conversation, in which Ms Lei and Mr Kitsos supposedly agreed to make payment of $1.1 million, on account of Ms Lei's liability (as supposedly guaranteed by Mr Kitsos). The conversation as alleged by Ms Wei, is, in my view, quite inconsistent with the IOU signed on that occasion. That IOU conspicuously failed to specify any particular amount as being due. Nor was it signed by Mr Kitsos as the supposed guarantor. Furthermore, it stated that the amount would only be paid once the amount due is determined. That is quite inconsistent with an obligation to pay $1.1 million immediately.
3. Ms Wei was cross-examined at length about her account of this conversation, it being put to her squarely that "these conversations in paragraphs 87 and 88 of your affidavit didn't occur". It was put to her that the conversations would have been included in the 23 December 2021 affidavit she swore when proceedings were originally commenced, and they had not been.
4. No error has been shown in the finding of the primary judge that Ms Wei failed to establish this aspect of her claim.

General approach to review of factual findings

1. The foregoing is sufficient to dispose of the appeal. However, it is perhaps desirable to respond directly to the final ground of appeal. Ground 17 challenged the process of fact finding adopted by the primary judge, and was linked to the approach which the appellants maintained should be adopted by this Court. In Ms Wei's written submissions, it was said (omitting citations): [N]o party was found to be a reliable witness. The Court is in as good a position as the primary judge to decide on the proper inferences to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the primary judge. The Court is not excused from the task of weighing conflicting evidence and drawing its own inferences and conclusions. In this case, Wei's evidence was largely unchallenged. The following principles may assist in evaluating such evidence: a. as a general proposition evidence which is not inherently incredible and which is unchallenged ought to be accepted; b. it may be wrong, unreasonable or perverse to reject unchallenged evidence; c. while a court is not bound to accept unchallenged evidence, failure to act on such evidence without good reason may be erroneous and a court is entitled to accept unchallenged evidence with greater assurance than otherwise; d. a court should not readily decline to act on unchallenged evidence unless it is glaringly improbable.
2. In oral address, the appellants maintained the submission that Ms Wei's evidence was relevantly unchallenged. The essential point was that Ms Lei's bare denial of a conversation which was relatively elaborately contained in Ms Wei's affidavit was not sufficient: LEEMING JA: Just tell me why you say it isn't sufficient? [Why] what is said at para 96 of Ms Lei's affidavit isn't sufficient to put into dispute whether or not the two women agreed to terminate the partnership on 30 June 2019? MCGOVERN: Well because there is para 70 and culminating in para 73 of the affidavit of Ms Wei and the detail that is related therein together with the internal consistency in that material by addressing relevant surrounding circumstances not having been contested, our submission is that it should have fallen into the category of being unchallenged evidence. That evidence was unchallenged, but if your Honours are against me and say that it was sufficient for para 96, then it would be challenged. We say it is a bare denial in those paras 96 to 99 that, left unexplained, the leaving of the key in the office, which itself was an incontrovertible fact that after 30 June conversation imbuing the fact that the key was left in the shared office, it is consistent only with the fact that she had left the partnership business keys for Ms Wei to collect and that from that time onwards she didn't have the keys to the partnership business. That is an objective fact that is corroborative of the testimony.
3. This misapprehends the way in which this Court will review findings of fact. The primary judge concluded that Ms Wei had not made out any of the elements of her case. All involved her testimonial evidence. Ms Wei was found to be unreliable. His Honour found himself "left with no confidence that her evidence on any disputed issue was candid or reliable". And all of the issues were in dispute. This was unquestionably the case where both sides had served affidavits on the same issues. It is not to the point that Ms Wei was more verbose in her description of a conversation which had on her case occurred, and Ms Lei much more concisely denied it.
4. An attempt was made by Mr McGovern (who had not appeared at trial), and who led Mr Allen (who had appeared at trial), to attack the findings made by the primary judge by reference, in part, to the testimonial evidence of Ms Wei. That was done in circumstances where much of her evidence had been contradicted and denied by Ms Lei and Mr Kitsos in the affidavits served prior to the trial. It was also done in circumstances where, so it was said, she had not been cross-examined on her affidavit. All of this was said to enable or entitle this Court to review the findings of fact made by the primary judge.
5. It will be apparent from what has already been said that parts of the submissions advanced in support of the appeal were not grounded in what occurred at the trial. Ms Wei was confronted in cross-examination with the propositions that much of her case was false. When Ms Wei was cross-examined to the effect that aspects of her evidence were incorrect, then her evidence on those issues cannot be regarded as "uncontested testimony" for the purposes of a submission that this Court should reach a different factual conclusion.
6. There is also a difficulty in point of principle with aspects of the appellants' submissions. The submissions draw upon what was said in Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [28]: Over more than a century, this Court, and courts like it, have given instruction on how to resolve the dichotomy between the foregoing appellate obligations and appellate restraint. From time to time, by reference to considerations particular to each case, different emphasis appears in such reasons. However, the mere fact that a trial judge necessarily reached a conclusion favouring the witnesses of one party over those of another does not, and cannot, prevent the performance by a court of appeal of the functions imposed on it by statute. In particular cases incontrovertible facts or uncontested testimony will demonstrate that the trial judge's conclusions are erroneous, even when they appear to be, or are stated to be, based on credibility findings. (Footnotes omitted)
7. That passage should be read together with the passages which follow at [29]-[31]: That this is so is demonstrated in several recent decisions of this Court. In some, quite rare, cases, although the facts fall short of being "incontrovertible", an appellate conclusion may be reached that the decision at trial is "glaringly improbable" or "contrary to compelling inferences" in the case. In such circumstances, the appellate court is not relieved of its statutory functions by the fact that the trial judge has, expressly or implicitly, reached a conclusion influenced by an opinion concerning the credibility of witnesses. In such a case, making all due allowances for the advantages available to the trial judge, the appellate court must "not shrink from giving effect to" its own conclusion. Finality in litigation is highly desirable. Litigation beyond a trial is costly and usually upsetting. But in every appeal by way of rehearing, a judgment of the appellate court is required both on the facts and the law. It is not forbidden (nor in the face of the statutory requirement could it be) by ritual incantation about witness credibility, nor by judicial reference to the desirability of finality in litigation or reminders of the general advantages of the trial over the appellate process. It is true, as McHugh J has pointed out, that for a very long time judges in appellate courts have given as a reason for appellate deference to the decision of a trial judge, the assessment of the appearance of witnesses as they give their testimony that is possible at trial and normally impossible in an appellate court. However, it is equally true that, for almost as long, other judges have cautioned against the dangers of too readily drawing conclusions about truthfulness and reliability solely or mainly from the appearance of witnesses. Thus, in 1924 Atkin LJ observed in Société d'Avances Commerciales (Société Anonyme Egyptienne) v Merchants' Marine Insurance Co (The "Palitana"): "... I think that an ounce of intrinsic merit or demerit in the evidence, that is to say, the value of the comparison of evidence with known facts, is worth pounds of demeanour." Further, in recent years, judges have become more aware of scientific research that has cast doubt on the ability of judges (or anyone else) to tell truth from falsehood accurately on the basis of such appearances. Considerations such as these have encouraged judges, both at trial and on appeal, to limit their reliance on the appearances of witnesses and to reason to their conclusions, as far as possible, on the basis of contemporary materials, objectively established facts and the apparent logic of events. This does not eliminate the established principles about witness credibility; but it tends to reduce the occasions where those principles are seen as critical. (Footnotes omitted.)
8. The point being made in that familiar passage concerns when an appellate court may interfere with findings which have been, or are likely to have been, influenced by the appearance of a witness when giving his or her evidence. For that to occur, the appellate court must identify matters which are "incontrovertible" or "glaringly improbable". True it is that there is reference to uncontested testimony. But on no fair reading of the reasons of the High Court does that mean that it is sufficient to identify one or more parts of the evidence of a witness who has been disbelieved generally upon which the witness was not cross-examined, label those parts as "uncontested testimony" and thereby supply a foundation for a review of demeanour based findings.
9. If there were any doubt about that, it is resolved by what was said in Lee v Lee (2019) 266 CLR 129; [2019] HCA 28 at [55]: A court of appeal is bound to conduct a "real review" of the evidence given at first instance and of the judge's reasons for judgment to determine whether the trial judge has erred in fact or law. Appellate restraint with respect to interference with a trial judge's findings unless they are "glaringly improbable" or "contrary to compelling inferences" is as to factual findings which are likely to have been affected by impressions about the credibility and reliability of witnesses formed by the trial judge as a result of seeing and hearing them give their evidence. It includes findings of secondary facts which are based on a combination of these impressions and other inferences from primary facts. Thereafter, "in general an appellate court is in as good a position as the trial judge to decide on the proper inference to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the trial judge". (Footnotes omitted.)
10. The reasons given above demonstrate that all of the findings challenged in this appeal, either the findings of intermediate facts or the ultimate findings that Ms Wei had failed to discharge the onus which lay upon her, were findings which were likely to have been affected by impressions about her credibility and reliability. Indeed, the large majority were expressly affected by such impressions. Nothing like a proper basis has been made out for this Court to interfere with those findings consistently with the principles identified in Fox v Percy and Lee v Lee.

Conclusion and orders

1. For those reasons, no aspect of the grounds of appeal has been made out. Although in light of the full argument which has occurred, there should be a grant of leave, the appeal should be dismissed. There is no reason for costs not to follow the event.
2. I propose the following orders:
3. Grant leave to appeal.
4. Direct the appellants to file a notice of appeal in the form of the draft notice of appeal within 7 days of today, and otherwise dispense with the rules concerning service.
5. Appeal dismissed.
6. Appellants to pay the respondents' costs.
7. PAYNE JA: I agree with Leeming JA.
8. GRIFFITHS AJA: I agree with Leeming JA.

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