Wan v Ji

[2022] NSWDC 269

District Court of NSW|2022-06-24

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At a glance

Source facts

Court

District Court of NSW

Decision date

2022-06-24

Catchwords

TORTS - action variously framed in the alternative, alleging deceit
misleading and deceptive conduct
and monies had and received - whether provisions of Australian Consumer Law are engaged
CONTRACT - enforceability of alleged guarantee of capital losses in an investment scheme Legislation Cited: Australian Consumer Law Cases Cited: Derry v Peek (1889) 14 App Cos 337

Source

Original judgment source is linked above.

Catchwords

TORTS - action variously framed in the alternative, alleging deceitmisleading and deceptive conductand monies had and received - whether provisions of Australian Consumer Law are engagedCONTRACT - enforceability of alleged guarantee of capital losses in an investment scheme Legislation Cited: Australian Consumer Law Cases Cited: Derry v Peek (1889) 14 App Cos 337

Judgment (24 paragraphs)

[1]

Table of Contents Nature of case [1] - [2] Falconaire scheme [3] - [5] Claim [6] - [9] Defences [10] - [13] Evidence overview [14] The plaintiff [15] - [18] The defendant [19] - [20] The connection between the parties [21] Plaintiff's submissions [22] - [24] Defendant's submissions [25] - [27] Credit findings [28] - [32] Issues [33] - [34] Issue 1 - Agency [35] - [36] Issue 2 - Whether the Australian Consumer Law applies [37] - [43] Issue 3 - Whether misleading and deceptive conduct established [44] - [47] Issue 4 - Claim of money had and received [48] - [56] Issue 5 - Enforceability of the claimed guarantee [57] - [64] Issue 6 - Quantification of damages [65] - [68] Interest [69] Disposition [70] Costs [71] Orders [72]

[12]

Credit findings

The plaintiff gave his evidence through an interpreter. It was therefore difficult to assess the actual content of his answers. He appeared sincere and spontaneously open in his responses to questions. Some of those responses were expressed with apparently vehement and elevated emotion. He conceded he was angry with the defendant about the events that are the subject matter of the litigation.
I accept that at the various times when the plaintiff paid moneys to the defendant and to others acting on behalf of Falconaire, he believed those funds would be invested on his behalf in Falconaire. I also accept that the plaintiff sincerely believed that the defendant had, on several occasions, given him a guarantee that had served to whet his appetite for his further investment in Falconaire, in the expectation that such investments would be highly profitable for him. The factual basis for those beliefs and the timing of any such guarantee requires consideration.
I gained the impression that the defendant gave her evidence somewhat hesitantly, in English. In coming to that view, I have made due allowance for the fact that English was her second language. My assessment of the defendant as a witness was that she has significantly understated the extent of her involvement in encouraging the plaintiff to invest in Falconaire. I found her to be an unsatisfactory witness on critical matters in dispute.
Both the plaintiff and the defendant made admissions against their respective interests in the litigation. The plaintiff conceded that in the events in question, he had been imprudent and careless in his approach to investing in Falconaire. The defendant conceded that she had made several expressions of guarantee to the plaintiff at the various times he had expressed doubts about Falconaire as an investment. The terms and the effect of such expressions of guarantee require consideration.
A factual dispute to be determined is the total amount the plaintiff paid to the defendant or other persons purporting to represent Falconaire, where the defendant disputes some elements of the plaintiff's claim as to the extent of the payments he actually made to her, as distinct from the payments that he had made to others for investment in Falconaire. For reasons that will be identified in the course of dealing with the quantum of damages, I considered that distinction to be irrelevant and not requiring further analysis.

[15]

Issue 2 - Whether the Australian Consumer Law applies

The plaintiff claims the benefit of the consumer protection provisions of the ACL. Those provisions are only engaged if the events in question can be shown to have occurred in the course of trade or commerce.
The plaintiff submitted that the defendant had engaged in the activity of encouraging people, including him, to pay money to her on the promise that she would invest it for them in Falconaire. The plaintiff pointed to the fact that the defendant's bank account showed a deposit of $130,000 in the quarter 28 April 2016 to 28 July 2016, which was unexplained, and which was by far in excess of her earnings from NSW Health as a pathology collector, equating to about $10,000 per quarter: Exhibit "B", p 270. It was submitted this indicated the defendant was engaged in the activity of trade or commerce.
The defendant submits that none of the representations alleged by the plaintiff as against the defendant could be reasonably or accurately characterised as having occurred in the course of trade or commerce: Williams v Pisano (2015) 90 NSWLR 342; [2015] NSWCA 177, at [36]-[38].
In my view, the state of the evidence provides an insufficient foundation upon which to base a finding that the defendant was engaged in trade or commerce. In my view, for the reasons that follow, the defendant's submission must be accepted.
The plaintiff's trade and commerce submission was based on an unwarranted speculation that does not constitute satisfactory proof on the balance of probability. It is speculative to assume, as the plaintiff has submitted, that the defendant's communications to her on her WeChat group amounted to conduct in trade or commerce. It is also speculative to assume that the unexplained activity shown in her bank account amounted to conduct in the course of trade or commerce.
In my opinion, the evidence does not reasonably establish that the parties were engaged in mutual communications, negotiations, bargains and transactions that, by their nature, constituted commercial arrangements that separate the activity in question from the immense array of circumstances in which money changes hands in society: Williams v Pisano (2015) 90 NSWLR 342; [2015] NSWCA 177, at [36]-[37].
I therefore reject the plaintiff's submission that his transactions with the defendant constituted conduct in trade or commerce that attract the consumer protection provisions of the ACL.

[17]

Issue 4 - Claim of money had and received

The plaintiff claims that the defendant should not be permitted to be unjustly benefitted or enriched at his expense on account of her having received his money without reimbursing him for his losses in the form of a restitutionary quantum meruit award for damages: Pavey & Matthews Pty Ltd v Paul [1987] 162 CLR 221.
In contrast, the defendant submits that the plaintiff's claim of unjust enrichment cannot be sustained on the evidence in this case. In my view, for the reasons that follow, that submission must be accepted.
There are three essential elements required to establish the plaintiff's claim of unjust enrichment, namely, a benefit received by the defendant, at the plaintiff's expense, involving an unjust element.
Whilst I accept that the defendant stood to receive the benefit of conferral of Falconaire VIP status, the gift of mobile telephones and travel entitlements as a consequence of the plaintiff being introduced to Falconaire and agreeing to channel his funds to Falconaire, I find that because the plaintiff received the valuable consideration of travel benefits for himself, he has not established the essential element of an unjust factor that would otherwise mandate the conclusion of a failure of consideration requiring a reversal of the transactions in question.
I am satisfied that the plaintiff entered into the transactions in question with an eager willingness, in the expectation that he would benefit from free overseas travel, which he commenced to receive, and for the benefit of anticipated high profits, but which did not eventuate. Those expectations, although they involved elements of gamble or risk, nevertheless amounted to good, valuable and therefore valid consideration.
I find that the plaintiff had, by his admitted imprudence, allowed himself to be lured into investing in Falconaire, which has ultimately been shown to have been a Pyramid or a Ponzi scheme. I find that he did so in the expectation of receiving the described benefits.
The fact that the plaintiff received the benefit of overseas travel and accommodation as an incident of his investment in Falconaire is of determinative significance. In those events he was admittedly careless and allowed himself to be wilfully blinded to the risks in that he failed to act with the caution of due diligence. I do not accept that the defendant knew the investment was flawed or fraudulent at the time when she encouraged him to invest in Falconaire.
The plaintiff received the benefit of the real or tangible consideration comprising free overseas travel, accommodation and sustenance, despite having overall, incurred a loss. That was the risk he took. Therefore, the necessary and essential element of unjust enrichment has not been satisfied: In the matter of Caernarvon Canobolas Pty Ltd (In Liq) [2022] NSWSC 382, at [250]; following Lumbers v W Cook Builders Pty Ltd (In Liq) (2008) 232 CLR635, [2008] CLR 27, at [80].
Accordingly, the plaintiff's claim that the defendant has been unjustly enriched in respect of monies had and received from him must be rejected.

[18]

Issue 5 - Enforceability of the claimed guarantee

By the defendant's affidavit of 26 May 2022, she denied that in September 2016 she told the plaintiff she would guarantee his capital investment in Falconaire: Exhibit "B", Tab 13, pp 206 - 207, paragraphs 12 to 13.
However, the defendant later conceded that on 28 October 2017, she said words to him to the effect that she would guarantee and cover any capital loss that he might incur as a consequence of investing in Falconaire: T80.36; T81.33; Exhibit "B", Tab 6, p 66. Her affidavit of 26 May 2022 was to the same effect: Exhibit "B", Tab 13, pp 227 - 228, paragraphs 50 to 51.
The issue of whether or not the defendant provided the plaintiff with an enforceable guarantee to cover any capital losses that might arise from his investment in Falconaire stands to be evaluated and determined on the basis of the conversations that proceeded between the parties and in light of their limited written and oral communications as recorded on their telecommunication devices, including their use of the WeChat platform. In those circumstances, it is convenient and appropriate to consider the conflicting testimony in light of the contemporaneous WeChat and other communications as translated and annexed to the affidavit evidence.
Those exchanges are set out in chronological order, as follows: 1. At 19:16 hours on 22 October 2017, contrary to the defendant's denial of any knowledge that the company had no funds, in her affidavit, she sent a contrary message to the plaintiff in the form of a 36 second voicemail which has been translated as follows: "The has (sic) company no more money. … Anyway, the company will not give you a single cent. About this, you better keep silent for the moment. This is what they told me. I guess nobody in the group knows about it and I am the only person who knows it. There are only a few hours left anyway. Will you be at home this evening? I shall come to your home after work." [Exhibit "B", Tab 6, p 60] 1. At 13:17 hours on 26 October 2017, after some earlier WeChat exchanges on 23 October 2017 and 24 October 2017, the plaintiff sent a message to the defendant, translated as follows: "Have read Bobby's speech you have transmitted. The whole thing is a scam. You have drawn me into this scam. I will no more believe any next step." [Exhibit "B", Tab 6, p 63] [Emphasis added] 1. At 9:59pm on 28 October 2017, the defendant left a 59 second message on the plaintiff's telephone, which has been translated as follows: "Ji Hong Lan: Wan, I asked Mill just now, but I feel that they, the checker company seems to be doing checkered coin business indeed. Then ... because this is what was said. I have asked them whether we should reach an agreement. That is: Jiu Ying reaching an agreement with us. That is: repaying them the principal, because she didn't … … that. I have just heard Bobby say so. Then, I am personally telling you that the principal you have invested, of course (which is) mine, that is: if I can get my money back, I will help you operate. Just let me know if you are not happy and feel that theirs is a fraud company. Then I promise you that I shall gradually repay you, return your principal from what I have in my hand, my wages. I will settle all the accounts with you. But your principal is rather large, I will not repay you the whole lot at once. So I don't know how to reach an agreement with you. You will either report to the police or...." [Exhibit "B", Tab 6, p 66] [Emphasis added] 1. At 3:01pm on 3 November 2017, the plaintiff left a voice message on the defendant's mobile telephone which, translated, was as follows: "Jane Jian: For such a long time, you haven't given a word of comfort to your lower line, not a single word of apology. Instead you are redoubling efforts to protect the company. How much of the checkered coin has the company given you while you are protecting the company? Have a look at how much. I have had a look at it that it has dropped down to such a level, but you are still wishing to make money for it. You are making money from your lower line. You must have made quite an amount of money! How would you calculate your conscience? Can that be measured with money? You are still making money from your lower line." [Exhibit "B", Tab 6, p 78] 1. At 5:56pm on 3 November 2017, the plaintiff left a voice message on the defendant's mobile telephone which, when translated, was as follows: "Jane Jian: For that investment of checkered coin, the White Bone Demon has shown it real shape. Bring out the demon detecting mirror and arrest that White Bone Demon. Whoever prevents people upholding justice is a ringleader." [Exhibit "B", Tab 6, p 78] 1. At 7:39pm on 3 November 2017, the plaintiff left a voice message on the defendant's mobile telephone which, translated, was as follows: "Jane Jian: She is leading that team into a quagmire, into a pity of mud. You are cheating us out of money. Probably you are part of it, I am telling you. Don't pretend. You will be punished upside down In Australia in the end. Just have a look at your virtue." [Exhibit "B", Tab 6, p 78] [Emphasis added] 1. At 18:29 hours on 8 November 2017, the plaintiff sent the defendant a WeChat message which, as translated, was to the effect that he was in need of funds as he was in debt, and he was seeking the return of his money from her: Exhibit "B", Tab 6, p 69; 2. At 7:45am on 11 November 2017, the plaintiff sent the defendant a WeChat message which, as translated, was to the effect that he was still waiting for her to reply to his request for payment: Exhibit "B", Tab 6, p 72; 3. At 18:53 hours on 21 November 2017, the defendant left a voice message on the plaintiff's mobile phone, which translated as follows: "I will be paid wages next time before 8th. You will be given $1,000 for sure. I believe that Mill doesn't have any money. Ah! You just said what you want. Didn't this BOBBY of ours - Didn't I say that I have transmitted it in the (WeChat) group? By the end of this month. If he can withdraw money this month, everybody will be liberated." [Exhibit "B", Tab 6, p 72] [Emphasis added]
The defendant's message to the plaintiff on 22 October 2017, as recorded at sub-paragraph (1) of paragraph [57] above was of ominous portent. It obviously concerned the plaintiff. By 26 October 2017, the plaintiff realised he had been drawn into a scam and he was blaming the defendant for that predicament, as is evident from his message to the defendant on that date, as recorded at sub-paragraph (2) of paragraph [57] above.
It was against that background that on 28 October 2017, the defendant was concerned that the plaintiff might make a report to the police about the fraud which had affected them. In those circumstances, the defendant made a promise to pay out the plaintiff's principal once she had the funds to do so, provided he did not make a report to the police, as is evident from the terms and effect of the defendant's telephone message cited at sub-paragraph (3) of paragraph [57] above.
Significantly, in her oral evidence, and consistent with the plaintiff's account, the defendant agreed that on 28 October 2017, the effect of her telephone call to the plaintiff was that she had agreed to guarantee the repayment of his principal: T81.33. I do not accept the defendant's bland denial to the contrary as set out in her last affidavit: Exhibit "B", Tab 13, pp 227 - 228, paragraph 51.
I find that in those circumstances, the promise of a guarantee of the plaintiff's principal, as outlined above, was given to him by the defendant for good consideration. This meant the defendant guaranteed to the plaintiff that he would not lose his capital. The effect of that finding is that the plaintiff can enforce his claim against the defendant for reimbursement of his capital loss after offset for the payments that have already been made by the defendant.

Wan v Ji

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Catchwords

Judgment (24 paragraphs)

Parties

Cases Cited (3)

Cited By (1)