Zhang v Peng

The evidence

1. The Court Book, which was prepared for a hearing which was to commence on 6 October 2021, contains material which is not part of the parties' cases as well as out-of-date pleadings. There is also a "Supplementary Court Book" containing the current version of the pleadings and an assortment of other material including affidavits not relied upon (Tcpt, 05 April 2023, p 223) and material about translation arguments of no further relevance to the hearing. The Supplementary Court Book need only be consulted as to the pleadings, but I have erred on the side of caution by setting out the contents of those pleadings in some detail.
2. The most important documents in the Court Book are the affidavits, financial records and WeChat messages between the plaintiff and defendant. The WeChat messages appear at different pages of each of these Court Books; in the original Court Book they appear at pp. 90 - 102 and in the Supplementary Court Book they also appear as an annexure to an affidavit sworn by an accredited translator, Yan Cheng, who re-translated certain passages (Supplementary Court Book, pp. 122 - 136). All transcript references in this judgment are taken from the original Court Book, including references for the affidavits from the plaintiff and defendant.
3. The affidavits relied upon by the plaintiff are the following: 1. Affidavit of Yajun Zhang of 2 June 2020. 2. Affidavit in reply of Yajun Zhang of 21 September 2021.
4. The affidavit of Yan Peng of 13 November 2020 was the sole affidavit read in the defendant's case.
5. The sole witnesses called were the plaintiff and defendant.

The parties' identification of the issues in these proceedings

1. The plaintiff has identified the issues as being those set out by Halley J in Xuan v Xu, namely a claim for misleading and deceptive conduct under the two legislative regimes pleaded in the statement of claim, whether the representations pleaded to arise from the oral conversations and WeChat messages had been made (including relevant credit issues) and there was reliance upon them, and the quantum of the claim. In addition, as to the negligent misrepresentation claim, the issues of duty of care and asserted breach of that duty arise.
2. The defendant's Schedule of Issues failed to identify legislative issues, omitted issues in dispute (such as credit), failed to address matters set out in paragraphs 16 - 19 of the defence (contributory negligence), failed to identify challenges to translation (which appear to have been abandoned during the hearing) and did not refer to quantum.
3. I have been guided by the identification of the relevant issues made by Mr Zipser as well as the judgment of Halley J in Xuan v Xu. I have also taken into account recent decisions on the correct approach to the assessing of evidence from the parties where actions of this kind are brought, notably Gan v Xie [2023] NSWCA 163 and Lantrak Holdings Pty Ltd v Yammine [2023] FCAFC 156.
4. A feature of the defendant's case is that, as Mr Zipser noted more than once, Mr Bell did not cross-examine the plaintiff on a wide range of issues. Mr Bell's main argument is that the plaintiff's evidence should not be accepted in its entirety because she acknowledged error in her description of the source of the funds that she invested.

The representations pleaded

1. The plaintiff claims that, on a series of occasions commencing from December 2015, the defendant encouraged the plaintiff to invest in a platform known as "MFC", which was operated by MBI International Sdn Bhd, a company in Malaysia. This involved making two sets of representations as follows: 1. The representations set out at paragraph 12(a)-(m) of the statement of claim ("the December 2015 Investment Representations"). 2. Further representations made between February 2016 and January 2017, as set out in paragraph 15(a)-(k) of the statement of claim ("the 2016 Investment Representations").
2. The December 2015 Investment Representations are set out in the statement of claim as follows: 12 During the Chatswood Visit and in conversations over the phone over the following two weeks, the defendant made the following statements to the plaintiff in relation to the MFC Platform: 1. In order to participate or invest in the MFC Platform investors would need to open an online account. 2. Investments are made by purchasing units at a cost of $US5,000 each equivalent to $AU7,000 each. 3. Units could be traded by investors. 4. The value of units never goes down and only goes up. 5. Investors would get their principal back within around one and a half years. 6. The higher the amount investors invested, the more profits they make and the quicker they get back their principal. 7. Investors can withdraw part of their investment at any time for cash. 8. Investing money on the MFC Platform was completely risk free. There was no risk to investors of losing their principal. 9. Investors on the MFC Platform earn good returns on their investment. 10. The defendant had invested more than $200,000 on the MFC Platform, received good returns, received the principal back, and then re-invested the principal on the MFC Platform. 11. The company which runs the MFC Platform has businesses in many industries which make good profits, and uses the profits to make distributions to investors on the MFC Platform. 12. The defendant would personally guarantee any investment by the plaintiff, and would reimburse the plaintiff if the plaintiff lost money. 13. The present was a good time to invest on the MFC Platform. 14. The defendant will manage the online account and her investment on behalf of the plaintiff. ("the December 2015 Investment Representations") Particulars 1. Conversations between the parties during the Chatswood Visit. 2. Conversations between the parties over the phone in the two weeks following the Chatswood Visit.
3. The statement of claim then sets out that, induced by these representations, the plaintiff invested $AU21,000 ($US15,000) by giving the defendant this sum in cash to invest.
4. The plaintiff then invested a further sum after the 2016 Investment Representations were made. These are set out in the statement of claim as follows: 15 Between February and December 2016 the defendant made the following representations to the plaintiff in relation to the MFC Platform: 1. There continues to be no risk to investors of losing their principal on the MFC Platform. 2. Investors continue to make lots of money investing on the MFC Platform. 3. The MFC Platform continues to be a good investment opportunity. 4. If the plaintiff invests $100,000 on the MFC Platform, she will get the principal back in six months to one year. If the plaintiff invests less money on the MFC Platform, she will get the principal back in 18 months. 5. The more money an investor invests on the MFC Platform, the sooner the investor gets back their principal. 6. Since December 2015, the company which operates the MFC Platform has established additional businesses, or businesses in additional industries, to generate income for investors on the MFC Platform. 7. The defendant has become rich and wealthy from investing on the MFC Platform. 8. The defendant had invested $200,000 on the MFC Platform, received the principal back in a little more than six months, and continues to make money on the investment of $200,000. 9. The plaintiff's investment in January 2016 of $21,000 is going well, and the plaintiff will get back the principal of $21,000 in about six months. 10. If the plaintiff gives the defendant more money to invest on the MFC Platform, the defendant will invest the money on behalf of the plaintiff on the MFC Platform. 11. Investors can withdraw money they invest at any time by selling GRC points. ("the 2016 Investment Representations")
5. The statement of claim then sets out that, induced by these representations, the plaintiff took the following steps: 16 Induced by and in reliance on the 2016 Investment Representations, and in continuing reliance on the December 2015 Investment Representations: 1. By early January 2017 the plaintiff decided to invest a further $92,500 on the MFC Platform. 2. Between 3 and 10 January 2017 the plaintiff gave or transferred $92,500 to the defendant, to invest on the MFC Platform, as follows: 1. bank transfer of $AU40,000 on 3 January 2017 to defendant's nominated Westpac bank account, being an account of defendant; 2. two cheques totalling $AU16,665.00 on 10 January 2017 deposited to defendant's nominated Westpac bank account, being an account of defendant; 3. cash deposit of $AU35,835.00 on 10 January 2017 to defendant's nominated Westpac bank account, being an account of defendant.
6. As is set out in paragraphs 17 - 22 of the statement of claim, the plaintiff attempted to obtain the return of the sums invested, but with no success. The defendant was able to recover a small amount on the plaintiff's behalf. The reasons for the plaintiff's inability to do so include the opaque structure of the Platform and the plaintiff's inability to access her own account; her evidence is that at all relevant times only the defendant was able to access it.
7. The plaintiff claims that the December 2015 Investment Misrepresentations were misleading on the following bases: 24 In so far as the December 2015 Investment Representations were with respect to any future matter, the defendant did not have reasonable grounds for making those representations. Particulars The plaintiff will rely on section 4 of Schedule 2 to the Competition and Consumer Act 2010 (Cth) (ACL), or alternatively s 12BB of the Australian Securities and Investment Commission Act 2001 (Cth) ("ASIC Act"). 25 The representations in paragraph 12(h) above were misleading on the basis that: 1. The representations to the effect that investing money on the MFC Platform was risk free and there was no risk to investors of losing their principal were false. The MFC Platform was or involved elements of a pyramid scheme. There was a significant risk that investors would lose the principal they invested. 2. To the extent that the representations were with respect to future matters, the defendant did not have reasonable grounds for making the representations. 3. The representations included an implied representation that the defendant believed the representations were true. However, the defendant knew the representations were not true, or did not believe the representations were true. 26 The representation in paragraph 12(e) above was misleading on the basis that: 1. The representation that investors would get their principal back within around 18 months was false. The MFC Platform was or involved elements of a pyramid scheme. There was a significant risk that investors would not get their principal back. If an investor got their principal back, there was no mechanism which ensured that the investor would get the principal back within 18 months. 2. To the extent that the representation was with respect to a future matter, the defendant did not have reasonable grounds for making the representation. 3. The representation included an implied representation that the defendant believed the representation was true. However, the defendant knew the representation was not true, or did not believe the representation was true. 27 The representations in paragraph 12(i) above was misleading on the basis that: 1. The representation that investors on the MFC Platform earn good returns on their investment was false. First, the MFC Platform was or involved elements of a pyramid scheme. There was a significant risk that investors would lose all or most of their principal, and receive only a small amount of money as "distributions" on their investment. Second, as at December 2016 many investors had not received a good rate of return in the sense of money in their hand or their bank account. The receipt of GRC points was not a return on an investment. Third, to the extent that some investors had received money in their hands or bank accounts, this was not a return from the Company on their investment. Instead, this was money invested by subsequent investors on the MFC Platform. 2. To the extent that the representation was with respect to a future matter, the defendant did not have reasonable grounds for making the representation. 3. The representation included an implied representation that the defendant believed the representation was true. However, the defendant knew the representation was not true, or did not believe the representation was true. 28 The representations in paragraph 12(j) above were misleading on the basis that: 1. The representation that the defendant invested more than $200,000 on the MFC Platform was false. If the defendant invested money on the MFC Platform, it was significantly less than $200,000. 2. The representations that the defendant received her principal back, and then re-invested the principal on the MFC Platform, were false. First, if the defendant invested $200,000 or more, she did not receive this money back into her hands or bank account. Second, if the defendant received this money back into her hands or bank account, the money was not paid by the Company as a return of her investment, but the money came from other investors who the defendant persuaded to invest on the MFC Platform. Third, if the defendant received this money back into her hands or bank account, she did not re-invest the money on the MFC Platform. 29 The representations in paragraphs 12(k) above were misleading on the basis that: 1. The representation that the company which ran the MFC Platform used profits from its businesses to make distributions to investors on the MFC Platform was false. The MFC Platform was or involved elements of a pyramid scheme. The company which ran the MFC Platform did not use profits from its businesses to make distributions to investors on the MFC Platform. 2. The representation included an implied representation that the defendant believed the representation was true. However, the defendant knew the representation was not true, or did not believe the representation was true. 30 The representations in paragraphs 12(l) above were misleading on the basis that: 1. The defendant did not intend, at the times she made the representations, to reimburse the plaintiff if she lost money.
8. The plaintiff claims that the 2016 Investment Representations were misleading on the following grounds: 35 In so far as the 2016 Investment Representations were with respect to any future matter, the defendant did not have reasonable grounds for making those representations. Particulars The plaintiff will rely on section 4 of Schedule 2 to the Competition and Consumer Act 2010 (Cth) (ACL), or alternatively s 12BB of the ASIC Act. 36 The representation in paragraph 15(a) above was misleading on the basis that: 1. The representation to the effect that there continued to be no risk to investors of losing their principal on the MFC Platform was false. The MFC Platform was or involved elements of a pyramid scheme. There was a significant risk that investors would lose the principal they invested. 2. To the extent that the representation was with respect to a future matter, the defendant did not have reasonable grounds for making the representation. 3. The representation included an implied representation that the defendant believed the representation was true. However, the defendant knew the representation was not true, or at least did not believe the representation was true. 37 The representations in paragraph 15(b) and (c) were misleading on the basis that: 1. The representation that investors continued to make lots of money investing on the MFC Platform was false. First, the receipt of GRC points did not equate to making money. Second, by the second half of 2016 many investors were not making money on the MFC Platform. Third, by the second half of 2016 many investors were unable to recover their investments from the MFC Platform. 2. The representation that the MFC Platform continued to be a good investment opportunity was false. The MFC Platform was or involved elements of a pyramid scheme. There was a significant risk that investors would lose the principal they invested. 3. To the extent that the representations were with respect to a future matter, the defendant did not have reasonable grounds for making the representations. 4. The representations included an implied representation that the defendant believed the representations were true. However, the defendant knew the representations were not true, or did not believe the representations were true. 38 The representations in paragraph 15(d) above were misleading on the basis that: 1. The representations that the plaintiff would get her principal back within the time frames the subject of the representations were false. There was a significant risk that investors would not get their principal back. If an investor got their principal back, there was no mechanism which ensured that the investor would get the principal back within the time frames the subject of the representations. 2. To the extent that the representations were with respect to a future matter, the defendant did not have reasonable grounds for making the representations. 3. The representations included an implied representation that the defendant believed the representations were true. However, the defendant knew the representations were not true, or did not believe the representations were true. 39 The representation in paragraphs 15(f) above was misleading on the basis that: 1. The representation that the company which ran the MFC Platform had established additional businesses, or businesses in additional industries, to generate income for investors on the MFC Platform was false. The company which ran the MFC Platform had not established additional businesses, or businesses in additional industries, to generate income for investors on the MFC Platform. 2. The representation included an implied representation that the defendant believed the representation was true. However, the defendant knew the representation was not true, or at least did not believe the representation was true. 40 The representations in paragraph 15(g) and (h) above were misleading on the basis that: 1. The representation that the plaintiff had become wealthy from investing on the MFC Platform was false. To the extent that the defendant's wealth had increased, her wealth had increased from persuading other people to invest on the MFC Platform and receiving part or all of the money they invested, and not from a return received from the Company. 2. The representation that the defendant invested $200,000 on the MFC Platform was false. If the defendant invested money on the MFC Platform, it was significantly less than $200,000. 3. The representations that the defendant received her principal back in a little more than six months was false. First, if the defendant invested $200,000 or more, she did not receive this money back into her hands or bank account. Second, she did not receive the money back in a little more than six months. 41 The representations in paragraph 15(i) above was misleading on the basis that: 1. The representations that the plaintiff's investment of $21,000 in January 2016 was going well and the plaintiff would get the principal back in about six months were false. At the time the defendant made the representations, the plaintiff was unlikely to get the principal of $21,000 back. 2. To the extent that the representations were with respect to a future matter, the defendant did not have reasonable grounds for making the representations. 3. The representations included an implied representation that the defendant believed the representations were true. However, the defendant knew the representations were not true, or did not believe the representations were true. 42 The representation in paragraph 15(j) above was misleading on the basis that: 1. At the time the defendant made the representation, she did not intend to invest some or most of the money the plaintiff gave her on the MFC Platform. 2. To the extent that the representation was with respect to a future matter, the defendant did not have reasonable grounds for making the representation.
9. It has been necessary to set out these extracts from the pleadings as there is no quicker way to identify the issues in circumstances where the hearing had to be adjourned in 2022 when the plaintiff discovered that the defendant, relying on Xuan v Xu, intended to submit that the plaintiff's claim had been brought under the wrong legislation, in that there was no reference to the ASIC Act. The defendant initially challenged the entitlement to amend but later consented to an amended pleading being filed. It is still unclear as to which of these statutory regimes is the more applicable. As Halley J made findings under both these statutory regimes, I have adopted the same course.

MFC's operation and marketing

1. Although extreme caution must be exercised when considering factual findings in proceedings brought by third parties against the same defendant, the description of MFC by Halley J in Xuan v Xu at [6] is both concise and compelling: "… a sham investment scheme that preyed on vulnerable and unsophisticated investors seduced by the promise of extraordinary returns and beguiled by the complex explanations of the allegedly risk free returns and benefits it could provide, and the methods by which it was promoted and marketed to invited guests."
2. Halley J's description of MFC is cited and adopted by Fitzgerald J in Li v Yeung [2023] NZHC 1374 at [2]. In Gan v Xie (at [42]-[46]), the Court of Appeal held that the MFC investment scheme met the description of "pyramid scheme" for the purposes of s 45(1) of the ACL. This was because funds invested by new participants in the scheme, such as the plaintiff, provided a financial benefit to existing participants by enabling the conversion of otherwise irredeemable credits into legitimate currency and the prospect of receiving a financial benefit, in the form of bonuses, upon the referral of further participants to the scheme substantially induced, objectively, new participants to provide that financial benefit: [32]-[43] (White JA), [126] (Simpson AJA) and [127] (Basten AJA).
3. The defendant did not go so far as to admit that MFC was a pyramid scheme, but does not dispute Mr Zipser's description of the operating and marketing of MFC as set out in paragraphs 5 - 11 of his submissions of 5 May 2023. The manner of operation described in those submissions, derived from answers given by the defendant in cross-examination, paints a vivid picture of how the plaintiff was lured into investing funds by the defendant into a scheme which I am satisfied is a pyramid or Ponzi scheme, for the same reasons as those given by Halley J in Xuan v Xu.
4. The way the MFC platform worked was as follows: 1. Person A can only invest in the MFC Platform by paying money to another investor, Person B, who provides in return a unit of virtual currency called "M credits" (Tcpt, 4 April 2023, p 110(31)-(50)). Person B transfers the M Credits from his or her own MFC account to an account which is then set up by Person B for Person A on the MFC Platform. 2. A key feature of the corporate structure is that any new investor must be introduced by an existing investor, who creates or opens an account on the platform for the new investor under the direct line of, or under, the existing investor (Tcpt, 4 April 2023, pp 112, 124). The new investor pays money to the existing investor in return for the transfer of what are called "M credits", through the platform, from the account of the existing investor into the account of the new investor. Investors can only purchase these credits from an existing investor (known as an "upper member"). 3. How is a new investor attracted to the platform? This is where all the marketing and seminar activity comes in. New investors are told by those who market the platform that in order to invest they must purchase "balls" for $US5,000 each. This market strategy encourages new investors to invest at least $5,000 who then go on to use the platform to buy and sell M Credits in an attempt to make money. 4. How do investors make money? The platform sets the price for the transfer or sale of M Credits from one investor to another (Tcpt, 4 April 2023, pp 140, 234). Those prices are such that, at a set point in time, the M Credits purchased from the so-called "upper member" at a lower rate and then sells the M Credits to the person below them at a higher rate. The existing investor makes a profit from the gap between the lower and higher rates. In the present case, Mr Bell agreed (Tcpt, 5 April 2023, pp 234, 262) that this gap was about 10%. The defendant described this as being a reward "because I have spent my time, my energy… to [sic] helping the people" (Tcpt, 5 April 2023, p 234). 5. Another unit of virtual currency was called "GRC Points", which were correlated with the amount invested. GRC Points can be converted to M credits and one M credit equals to 1 US dollar. GRC Points can be used to purchase goods and services from businesses which accepted payments by GRC Points (Tcpt, 4 April 2023, p 124(39)-(45)). The MFC Platform was supposed to make distributions about twice a year to existing investors, who received additional GRC points based on the amount of their investment (Tcpt, 5 April 2023, p 217(40)-(44)). The larger a person's investment, the more points they received. Another factor appears to have been the number of accounts held; the defendant had approximately 20 such accounts and agreed in cross-examination that this would be beneficial for the receipt of these additional points. 6. As is commonly the feature in pyramid structures such as this, the price of these GRC Points always went up and never went down.
5. A key feature of this platform was the use of seminars at which grateful recipients of financial largesse would tell their stories so that other participants would be encouraged to grow their wealth by using the platform. The defendant referred a number of times in her evidence to how she was helping others by getting them to invest. She said she was there to "help the ordinary people to make some money to improve their life" (Tcpt, 4 April 2023, p 115(42)), "helping the people" (Tcpt, 6 April 2023, p 234(24)); "I just want to help them" (Tcpt, 4 April 2023, p 142(20)).
6. There was only ever good news at these seminars and get-togethers. One example of what the MFC Platform said about its success was a statement taken from their website, about which the defendant was cross-examined (Tcpt, 4 April 2023, p 120): "GRC points are like shares, but unlike shares, the value of GRC points always increases and never decreases. So, you receive additional GRC points on each distribution and the value of your GRC points always increases and never decreases."
7. Another (Tcpt, 4 April 2023, p 121) was: "The time in which you get your principal back depends on how much you invest. The more you invest, the quicker you get your principal back."
8. The defendant agreed that she had either read these on the website (Tcpt, 4 April 2023, p 120) or heard it said, but denied that she had made any such representations to the plaintiff (Tcpt, 4 April 2023, p 123).

Was the defendant a victim or a participant in the scheme?

1. All of the key features of this investment structure point to a pyramid scheme that is just waiting to crash. Many thousands of people lost substantial investments when MFC crashed, and some of them had similar or even better qualifications in finance, economics and investment than the defendant. Was the defendant lured into a scheme whereby she, like so many others, was duped?
2. This is a question which would generally be dealt with in the course of analysis of the evidence rather than as a preliminary matter. Unusually for cases of this kind, I propose to deal with the defendant's knowledge of this being a scam before the analysis of the evidence.
3. This is for two reasons. The first is that, in the course of cross-examination, the defendant boasted of her moneymaking schemes and stated that she had always known that MFC was not a serious investment, but a "game" in which she had only invested $5,000. When Mr Zipser put to her that she had in fact later invested a much larger sum, namely $US50,000, she gave the following response: "Q. At the time that you paid 50,000USD to purchase the M credits, the purchase the 45,000 M credits which appears at page 297, did you believe that you could increase your wealth by purchasing these 45,000 M credits? A. I never think about this, building my wealth through MFC. It's a game. I just use my spare money, just have fun. Q. So when you say, "It's a game," what do you mean by that? A. If you open the MFC..(not transcribable)..from website, it said it's a - it's a - a game, perform, it's not for finance - financial product, it's not investment. You - you through this conduct invest - investment, you can have some credit, you are able to stay in the hotel, have - use a point to go to restaurant, go to travel. I think it's, like, fun. Q. Ms Peng, a minute ago you said, "It's a game". A. Yeah. Q. Can you explain what you mean by - A. I build my wealth through property market. So MFC to me, it is just something little for me to have fun with. It's a game. To me it's a game. I don't expect this one can bring me big wealth. Q. But you accept that the fact that you paid 50,000USD to purchase 45,000 M credits means that you believed that it would increase your wealth, even in a small way? A. Small way - if - if it does help, it be good, if - if it doesn't help, it's still fun for me." (Tcpt, 4 April 2023, p 127(48)-p 128(23))
4. The point of the game was to get the money back "first" which, in the light of the nature of this game, is an acknowledgement that investment was highly risky to investors. The defendant claimed she had told this plaintiff this at the time: "A. Okay, that's fine. Whatever. When I have a chance, my way to do - to play this game is try to get money - my money back first. This is also what I said to her." (Tcpt, 5 April 2023, p 198(25))
5. It was, moreover, a game that the defendant had been playing since early 2015, right up until she deemed it wise to stop because of "safety concerns": "Q. So you may well have said to Ms Zhang, that you'd received your principal back. A. I didn't. If I still get my principal back, so that means I will have nothing much left in the platform. Okay, that means game over. Q. But you could get your principal back and then re-invest it, couldn't you? A. What's the point. I can't leave it. Q. And by October - if one jumps two years ahead to October 2017. So I want you to move forward a year and a half to October 2017. By that point in time, had you got any principal back? A. Yes. Q. And what principal had you got back and when? A. Can't remember. Q. So if you can't remember, how do you know? A. Because I remember. This is a fact. I got - if I can sell, I got some principal back for safety concern. Q. So are you saying that by October 2017, you have got some principal back because of safety concerns? A. Yes. Q. So I'm keen to know the date on which you got your principal back because of safety concern. Was it in 2016? A. Yeah, got some back in 2016. Q. So at some time in 2016, you got some of your principal back because of safety concerns. Is that right? A. Yeah. Q. Now when you say that you got some of your principal back because of safety concern, was that the $5,000 principal that you invested in February 2015? Or was it the $50,000 that you invested in March of 2016? A. Altogether." (Tcpt, 5 April 2023, p 203(12)-(47))
6. This was the mask slipping for a defendant who had deposed on oath that, in March 2016 she had "confidence in MFC" (affidavit at [17]); that she believed her investment of $US50,000 would "increase [her wealth] in a small way" (Tcpt, 4 April 2023, p128(17)-(20)); that she (as at December 2015) "thought the platform was going gangbusters" (Tcpt, 5 April 2023, p 192(35)); that she believed and was "confident" she would "get [her] principal back of $50,000 and get lots of GRC points in addition" (Tcpt, 5 April 2023, p 192(44)-p 193(01)); that she had "confidence" in the MFC Platform (Tcpt, 5 April 2023, p 195(5)-(8)); and that she "believed the MFC Platform was a platform by which one could get long-term profits". In fact, she had long known that the MFC Platform was "a game" in which she could "just have fun": Tcpt, 4 April 2023, p 127(49)-p 128(15), Tcpt, 5 April 2023, p 198(23)-(24). She had made her fortune in the property market and even the sum of $US50,000 was a trivial amount to her.
7. The defendant reverted back to her "victim" (Tcpt, 5 April 2023, p 183) status after this slip, claiming that she had known nothing until March 2017 when MFC crashed: "Q. --so probably at that time, you still believed that the MFC platform was a platform by which one could get long-term profits? A. You believe as your own choice. But we can't control the platform, because there's not - we're not the boss. We can't control everything. Everything's got risk - I remind her from beginning. Q. Was it sometime in 2017 that you started to no longer believe that you could get long-term profits from the MFC - the M - A. Yeah. After - yeah, after the crash, of course. I realised and we all become the victims. Q. I think in your affidavit you said the crash was in the second half of 2017? A. Yeah. Q. So from about that time onwards, you ceased to believe that one could get long-term profits from the MFC platform. A. Yeah." (Tcpt, 5 April 2023, p 183(35)-(50))
8. This date was refined to mid-2017. When it was pointed out to the defendant that she had written to the plaintiff on 22 September 2017 saying that MFC was still reliable for long-term investments, she changed her evidence again, putting the date of difficulties at the end of 2017. She then reverted to her previous evidence that she invested a small sum in order to have something to play with: "Q. But - so what changed between December 2015 when you say you were not confident because it was a new thing and March 2016 when you were so confident that you invested $50,000 USD of your hard-earned money? A. 2015? I'm curious. I want to spend little money to play with." (Tcpt, 5 April 2023, p 195)
9. In her WeChat messages to the plaintiff, the defendant boasted that she had received her own principal back "in about half [sic] year" (CB 97). If so, she would have received it in about October 2016 (six months after the $50,000, although she also invested another $20,000 at some unspecified date), while the MFC Platform was still viable, and at a time when she was telling the plaintiff not to withdraw her funds now but to wait "one or two years" (CB 91). I am satisfied that the source of the defendant's pride is that she was sufficiently aware of the risk to withdraw her funds before MFC collapsed, advice she did not pass on to the plaintiff.
10. This brings me to the second reason for determining this issue early on, namely that, although the defendant knew the plaintiff did not know how to withdraw the funds and sought her help, despite offering to help and having the relevant financial information to enable her to withdraw all the plaintiff's funds, the defendant did not do so. Instead, she dropped hints about how others were making "long term profit" (CB 95) and offered to take the plaintiff to "attend classes" (CB 97). She also dropped hints about the desirability of another investment scheme she said she had put 1M CNY into, namely a scheme called "Falconaire" (CB 94).
11. As an Economics graduate from one of China's most prestigious universities and an experienced mortgage broker and investor, the defendant knew from very early on that the MFC Platform was, to use her own word, a "game". Her refutation of the plaintiff's concerns that it was a Ponzi scheme (CB 92, 13 March 2017) was disingenuous; the defendant had removed her own funds from this investment months beforehand while at the same time urging the plaintiff to leave her money invested. She compounded this misleading and deceptive advice by failing to follow through on the plaintiff's requests for help in the withdrawing of the invested money.
12. I am satisfied, for the reasons set out more fully in the review of the evidence set out below, that the defendant had realised the MFC Platform was "a game" from the outset in February 2015. It was a game where the plaintiff and other gullible members of the community were pawns in a complex scheme permitting only persons already signed up to use it, and where the only real way to make money was to bring in more victims and/or make existing victims pay more. I am also satisfied that the plaintiff's inability to use the system after she had signed up made her even more of a pawn in the hands of the defendant.

The plaintiff's and defendant's knowledge of, and use of, the MFC Platform

1. The plaintiff's evidence is that she never accessed or used her accounts on the MFC platform. She gave evidence that she was unable to use them from the beginning and this was a matter of concern to her (CB 34, paragraph 25).
2. As Mr Zipser notes in his submissions at paragraph 41, there is no documentary evidence that the plaintiff ever used or accessed the accounts that the defendant set up for her. This was another reason for her dependence on the defendant. Her inability to use the system was a constant problem to her to the end (on 17 October 2016, she sent a WeChat message which concludes "I must learn how to use it" (CB 90); on 18 January 2018, she says "I am too stupid, cannot learn it, I cannot make myself available on the platform to keep buying or selling to make whatever points" (CB 99)).
3. The defendant claimed that, when she set up the plaintiff's account on the MFC Platform in January 2016, she could not use it as she did not have the password and login for the account (Tcpt, 5 April 2023, p 159). However, the password and login are clearly visible on the copy of the defendant's file she produced: CB 244, 245 and 246. I am satisfied that the evidence set out below demonstrates that these logins and passwords were known to the defendant at all times.
4. The defendant did not produce much in answer to notices to produce, but those account records which are available show the plaintiff's account being accessed and even operated on a number of occasions by the defendant in 2016 and 2017. These dates included June 2016, 1 January 2017, 28 February 2017 and 17 March 2017, some of which she eventually acknowledged (Tcpt, 5 April 2023, pp 165-170). What is more, this was done without consulting or seeking authorisation from the plaintiff other than on one occasion in June 2016.
5. Mr Bell disputes this, saying that the plaintiff must have had access to her account, because "in paragraphs 40 and 76 of her 2 June 2020 affidavit (CB 38 and CB 46) she says that she had access to her own account in 2018 and printed pages 7 to 9 and 10 to 13 of the exhibit from her account" (submissions, paragraph 107). However, that printout had been generated in December 2019, after the plaintiff had sought legal advice and assistance; Mr Bell cannot point to any earlier access. This is long after the confrontation between the plaintiff and defendant in December 2017, when the plaintiff is still saying she cannot access her account and the defendant says she will help, and only a matter of months before proceedings were commenced in 2020.
6. At paragraph 22 of his submissions, Mr Zipser points to the constantly changing explanations behind the defendant's claim about not being able to have access to the plaintiff's account. This dense maze of inconsistencies is so difficult to follow that it is easier to simply set out his description of the series of contradictory statements the defendant made: "[W]hen the defendant was cross-examined on her response to a notice to produce dated 17 September 2021 (notice to produce is at CB 290-293 and documents produced by defendant are at CB 294-303), the defendant initially said "some of the information already blocked" (T246/49), then she said she could not access some accounts because "I forgot [the] pin" (which is a different excuse) (T247/25-30), then she said she had recorded the pin numbers for all her accounts in a notebook which she lost before this court proceeding commenced (T249/30-31), then she said she "can't remember when I lost" the notebook (T249/43) (which is inconsistent with her answer one minute earlier that she lost the notebook before the court proceeding commenced), then she had difficulty explaining how she could say in her affidavit at [89] "I have 20 accounts under my own control" and at [106] "I continue to hold MFC accounts and have accumulated points in them" if she had lost pins for all the accounts before the court proceeding commenced (T249/46-250/40), then she blamed the lawyer who prepared these paragraphs of her affidavit (T250/44- 251/1), then she said that by November 2020 "the platform doesn't work anymore" (T251/8-9) (which is inconsistent with the fact that the defendant produced some documents in December 2020 and September 2021, but not others), then she said "I didn't try" to access the MFC Platform until she responded to the notices to produce (T251/10-30) (in response to which her Honour queried how she could know whether or not the MFC Platform was working if she did not try access the MFC Platform)."
7. I am satisfied that the defendant could, and did, have access to the plaintiff's accounts because the documents she produced in answer to the Notice to Produce had the login and password and she told the plaintiff several times in her WeChat posts (for example, CB 91) that she had done this. That means all the other explanations are evasive reconstructions, or false, or both.
8. In addition, as noted above, I make a preliminary finding that the defendant was playing a "game" from the first, a finding derived from her own admissions, independently of any credit issue or other factual material. I am also satisfied, from the documentary material, that the defendant had set up accounts which she knew the plaintiff could not access and treated these as her own plaything. When determining what the parties said in the course of oral conversations, I take these specific findings into account. That does not mean that I have a closed mind to the facts of the case as put by the defendant, but that I have exercised caution, in relation to that fact-finding, by taking these factual findings into account.

The plaintiff

1. The plaintiff grew up in China and, after completion of studies at the Peking University, emigrated to Australia in 2001. She became an Australian citizen in 2003. She married and started a family. She owned a townhouse in Chatswood, where she lived when she was in Sydney, but was absent overseas caring for her mother for most of the time period relevant to this claim. The plaintiff's townhouse is subject to a mortgage of approximately $670,000 (as at December 2015). Her only asset of significance is an investment apartment in Brisbane, subject to a mortgage of approximately $350,000 (as at December 2015). She has about $70,000 in a bank account and some superannuation. She has no prior history of investment and no experience of trading in shares or otherwise being involved in moneymaking schemes.
2. The plaintiff's first language is Mandarin. She can communicate in English but does not speak or read English fluently. Her affidavit evidence was translated from, and she gave evidence in, Mandarin.
3. Although the plaintiff gave her occupation as "manager", she was not in paid employment for some time prior to her encounters with the defendant. As noted above, her mother, who lived in China, was ill and she spent the majority of her time in China looking after her. She was absent from Australia for months at a time both before and after making her investments.
4. The plaintiff first met the defendant at a party in Australia in 2001 for the Peking University's Alumni Association. This association met about twice a year and did not always meet in Sydney (plaintiff's affidavit in reply, paragraph 7). In the following years, she and the defendant occasionally met for social reasons when she was in Sydney. When they met, they spoke about mundane matters, such as what they had done since they last saw each other. There has been no tender of photographs or other records to demonstrate that this was anything other than a casual friendship arising from the circumstances of having attended the same university in China.
5. The defendant suggests, in her affidavit (CB 202) that the plaintiff had a successful business in China importing cattle and feed from Australia, employing 100 people, and that she spoke at a meeting of the Alumni Association about how successful and prosperous her business was. The defendant also claimed the plaintiff told her that she had set up a self-managed superannuation fund portfolio for the purpose of property investment. The plaintiff was not cross-examined about these claims and they are not the subject of any submissions. I am satisfied that there is no evidence of the plaintiff having any significant business skills.
6. The plaintiff's demeanour in the witness box and other issues relevant to her credit are set out in more detail below. I note, however, that, in terms of background, work experience and general sophistication, the plaintiff would have been no match for the defendant, a skilled businesswoman practising as a real estate agent and mortgage broker in New South Wales, with all of the verbal and managerial skills that come from holding that kind of employment.

The defendant

1. The defendant has a degree in Economics from Peking University. She migrated to Australia in 1999. She is divorced and has one child. She has worked as a real estate agent since completion of a real estate agents course in 2013. She holds a Class 2 license as a real estate agent and additionally held a mortgage broker's licence up until 2019. She has been very active in the Peking University Alumni Association, of which she was a past chairman. She has many activities in the community, including being president of a performing arts society.
2. As is to be expected from a person with the defendant's work history, her English is excellent. Her affidavits were prepared in English and she gave evidence in English.
3. She agrees that she met the plaintiff in about 2001 through the Alumni Association and that since then they have met "from time to time" (CB 202). This was not out of friendship, but out of duty as a former president of the association, according to paragraph 24 of the defendant's affidavit, where she states: "Around December 2015 Ms Zhang rang me and wished to meet up. It was not surprising to me that Ms Zhang rang. From time to time members of the Alumni Association would ring and I consider it part of my duties to meet with them." (CB 202)
4. What differed on this occasion, from the previous occasions where the plaintiff and defendant had met up, was that nearly a year before, at the beginning of 2015, a friend of the defendant had told her about MFC. At paragraph 9 of her affidavit (CB 200), the defendant sets out that this is short for "Malaysia Fans Club" and is operated by a company incorporated in Malaysia named MBI. She started attending seminars from February 2015 onwards and was added to a WeChat group for MFC members. The defendant says that after "attending several seminars and researching MFC in February 2015" she decided to join. Her activities between participating in these conferences from February 2015 up until the time she met the plaintiff in December 2015 are put in only the most general terms in her affidavit, and reference to her own investment activities are scant. As at December 2015, she had only a small investment in the MFC Platform of one ball ($US5,000).
5. A clearer picture of the extent of the defendant's involvement in MFC emerged from cross-examination. The activities referred to elliptically in her affidavit as "several seminars" (CB 201) were both numerous and lengthy. These included a three-day seminar in Hong Kong, for which she gave differing dates, but which appears to have been held at the end of February 2015 (Tcpt, 4 April 2023, pp 104, 131), seminars in Sydney (Tcpt, 4 April 2023, pp 105, 107 and 109) and at least 10 seminars conducted through the WeChat group (Tcpt, 4 April 2023, p 108). It is not clear how long the defendant continued to participate in these activities, but I note her offer on 20 October 2017 to take the plaintiff to "attend classes" (CB 97).
6. Attending so many seminars is a crucial indicator of the nature and extent of the defendant's use of the MFC platform, which Mr Zipser submits is use of an "enthusiastic" nature (submissions, paragraph 30). However, as was the case with many aspects of the defendant's evidence, obtaining admissions from her as to the number and nature of these activities was very difficult. For example, she claimed not to have attended any seminars before she initially made her first investment (Tcpt, 4 April 2023, p 102) and then, on it being put to her that this was inconsistent with her statement that she joined after "several" seminars, claimed that the seminars she attended were "informal" (Tcpt, 4 April 2023, p 102), adding that these were "general chatting" on WeChat. As to the number of seminars and when they occurred, she at first answered "I don't know" (Tcpt, 4 April 2023, p 108) and "I'm not sure" (Tcpt, 4 April 2023, p 110). She later acknowledged that these seminars were very frequent but claimed that she tried to find excuses not to go, because she was "too busy with her other job" (Tcpt, 4 April 2023, p 109), a revealing admission of the role MFC seminars were playing in her life at that time. When asked why she attended so many seminars, she said it was because it was "a very fast, global, growing new business" (Tcpt, 4 April 2023, p 108).
7. Mr Zipser submits that the defendant's enthusiasm for attending these conferences is significant. This is because many of the stock phases the plaintiff said the defendant used in their conversations, such as "the more you invest, the quicker you get your principal back" and "investing in the MFC Platform is risk-free" were phrases coming from the seminars, where there were repeated as a kind of mantra (examples are set out in Mr Zipser's submissions of 5 May 2023 at paragraphs 52 and 53). Some of these seminars sound like religious "revivalist" meetings, where emotional investors show their gratitude to MFC by sharing stories of how they have increased their wealth and realised dreams such as sending their children to private schools (Tcpt, 4 April 2023, p 118). There are echoes of these tugs on the emotion in the WeChat posts; for example, the plaintiff's posts on how she was expected to show gratitude for being permitted to participate are set out at paragraphs 116 - 117 below.
8. The plaintiff never attended any of these seminars so she would be unable to produce these statements from her own knowledge. Nor would she have picked up these representations in the WeChat groups as, by the time the plaintiff was able to read them, this was because she had already invested. There is no evidence before the Court that she became familiar with these representations from any source other than the defendant; nothing to this effect was put to her in cross-examination.

The parties' versions of the conversation in December 2015

1. The plaintiff and defendant give very different versions of the conversation they had in December 2015 which led to the plaintiff making her investment. On some issues, both the plaintiff and defendant contradict themselves as to what was said. The most significant of these contradictions are, in the case of the plaintiff, the source of the funds she advanced on 7 January 2016 and, in the case of the defendant, whether she told the plaintiff that she would receive a 10% commission on any - indeed, all - sums invested by the plaintiff in MFC.

The plaintiff's version of the conversation

1. The plaintiff returned from Beijing to Sydney on 15 December 2015. She was due to fly back to Beijing to look after her mother on 23 February 2016 (CB 53). She telephoned the defendant and invited her to her home. In the course of having a discussion about their recent activities the defendant said to her: "Since the last time we saw each other I have invested money in a great investment opportunity with good returns. It is called the MFC Platform." (CB 30)
2. The plaintiff replied that she had never heard of the MFC platform and the defendant replied: "The MFC Platform is a good investment opportunity. When you invest, you receive GRC points into your account on the MFC Platform. The value of GRC points always increases, and never decreases. Each year you also receive two distributions on your investment by which you receive more GRC points. For example, if you have 100 GRC points before a distribution, you may have 180 GRC points after the distribution. Since the value of GRC points always increases, when you sell your GRC points you earn big money. Also, you will get some credit. You can use the credit to book hotels around the world, shop in online shopping malls, and travel. I used the credit to book hotels in China on my last visit to China." (CB 30)
3. The defendant told the plaintiff that these "points" were like "shares", adding: "GRC points are like shares. But, unlike shares, the value of GRC points always increases and never decreases. So you receive additional GRC points on each distribution, and the value of your GRC points always increases and never decreases." (CB 30)
4. The plaintiff said the defendant told her that an investor must wait a period of time before getting their principal back because "the more you invest, the quicker you get your principal back. Depending on how much you invest, you may need to wait about one and half years to get your principal back." The purchase was effected by buying "balls" costing a maximum of US$5,000. Three balls made a golden group, seven balls made a platinum group and 21 balls made a diamond group.
5. The defendant described the investment as "risk free" several times. She explained that this was because "you get your initial investment back after one year, and the value of your GRC points goes up and never goes down. She added that she herself had invested "more than $200,000" on the MFC Platform, from which she had received "good returns". This included receiving her principal ($200,000) back, which she claimed she had reinvested. The importance of these statements is that her own success in terms of getting her principal back and making even more money was put forward as the reason the plaintiff should invest. "I have received my principal back which I then re-invested. I would not invest my money if there was a risk. There is no risk op this platform."
6. I note that the defendant denies saying she had invested such a sum as $200,000. She in fact invested a much smaller sum; as at December 2015, she only had $US5,000 invested. However, in her WeChat message of 18 September 2017, she boasted of great wealth, having given three investment properties to her daughter and then "take back 2 million and paid the mortgage of other investment properties" (CB 96). I am prepared to accept that the defendant's exaggerations of her own investment were made as described by the plaintiff.
7. Furthermore, the defendant added that she was not the only one making money. She knew other investors who had done so, such as her "superior" in the scheme, Tian Ma, who bought a house in Malaysia using credits (the "superior" was the person at the higher level to an investor in the MFC Platform).
8. I note that this reference to other investors making fortunes on the MFC Platform is repeated by the defendant in her WeChat messages to the plaintiff. In her message of 22 September 2017 (CB 95), she refers to a "friend" who "invested $AU150,000 and became [sic] million immediately, after distribution became 1,900,000". She also refers to a "Tsinghua alumni" (Tsinghua being the other prestigious university in China) who invested $AU300,000, urging the plaintiff that she should "try to achieve million GRC".
9. The defendant rounded up her presentation of the exciting possibilities for the MFC Platform by giving the plaintiff a guarantee, saying: "I guarantee you will not lose money you invest in the MFC Platform. If you lose money, I will repay you. I guarantee you will make a very good profit.
10. The defendant then offered to show the plaintiff the MFC Platform website, asking if the plaintiff had a computer she could log onto in order to do so. She then found the MFC Platform and showed the website, demonstrating some of its features by pointing to a graph and some figures and saying: "This is the GRC price. The GRC price always increases and never decreases."
11. The plaintiff asked how the MFC Platform earned such high returns and how it made distributions of the kind referred to by the defendant, who replied: "The company which runs the MFC Platform is a large and established Malaysian company called MBI. MBl has businesses in many industries which make good profits. The businesses are in construction, property, agriculture, hotels, shopping malls and hospitals. MBI uses the profits from these businesses to make distributions to investors."
12. She also asked how the money invested was returned: "YP: When you invest money, you receive GRC points. You can sell GRC points on the MFC Platform at any time if you want to withdraw money. There are always other investors who want to purchase more GRC points. If you want to sell your GRC points, they will be purchased by other investors immediately. Otherwise, the parent company MBI will buy your GRC points within one week. The time in which you can get your principal back depends on how much you invest. The more you invest, the quicker you get your principal back. Depending on how much you invest, you may need to wait about one and half years to get your principal back. You can then promptly get your principal back."
13. The defendant again urged her to invest, saying: "You should invest in the MFC Platform. To invest, you must open an account on the MFC Platform. You cannot open an account yourself. The platform policy is that a new investor must have a superior to open an account for the new investor. Give me money to purchase three single balls. I will open an account for you and make the investment. I have helped 20 other investors open their accounts on the MFC Platform."
14. The plaintiff said that the returns sounded good, but the scheme sounded "complicated", and it would take time to look after the investment. The defendant replied: "There are online lectures about the MFC Platform called MFC Academic. You can learn about the MFC Platform from the lectures. I can also teach you. YZ: I hate study. YP: You do not need to understand everything about the MFC Platform. Many investors do not fully understand it. But they are buying in and selling out to make money. I have made good profits from investing in the MFC Platform. I am also investing money in the MFC Platform which my sister gave me. The platform will make good money for you. You will not lose your money. Trust me. I have a good view on investment because I have an economics degree."
15. One of the guarantees of the excellence of this investment was that the defendant reminded the plaintiff that she had an Economics degree. The plaintiff already knew this, but she saw it as a form of reassurance that the defendant had the skills to see a good investment and to understand how finance and investment worked.
16. The next issue was how much to invest. The defendant explained that "the more money you invest, the more GRC points you will receive, the more profit you will make, and the quicker you get back your principal." She gave an example if the plaintiff were to invest $100,000. The plaintiff was hesitant and the defendant continued: "I recommend you invest $100,000. But if you want to invest step by step, you should start by purchasing at least three single balls. Each single ball costs US 5,000. The exchange rate on the platform is 1 USD = 1.4 AUD [sic]. So it would cost AUD 21,000 to purchase three single balls. If you have the money, I recommend you purchase three golden groups. Each golden group costs US 15,000. Or you could purchase a platinum group for US 35,000 or a diamond group for US 105,000. Some investors have refinanced their property or withdrawn money from their mortgage offset account to invest big money on the platform. They have earned lots of profits. If you purchase less than three single balls, you will not make good profits and it will take longer to get your principal back."
17. The plaintiff said she was thinking of starting by purchasing one single ball, a course the defendant warned against, saying: "If you purchase only one single ball, you will not make good profits. More money in, more profit out, you should purchase at least three single balls."
18. I note that, at the time the defendant gave this advice to the plaintiff, she did not reveal that this was not what she herself had done. She had only purchased one ball as at the time of the December 2015 meeting, although she would later purchase more in March 2016.
19. At the end of the meeting, the plaintiff was interested in the investment, but concerned that she had not understood the details and did not know whether or not she could learn to use the platform which had been shown to her on her laptop by the defendant. The plaintiff was not prepared to invest straight away and there the discussion ended.
20. The defendant telephoned the plaintiff several times over the next two weeks and in the course of each conversation, the plaintiff asserted, sought to try to persuade her to invest on the platform. She would start these conversations by asking if the plaintiff had any more questions, continue them by saying it was a good time to invest, and end by stressing that the plaintiff should "invest now to avoid missing out on the distribution" (CB 35).
21. After thinking about the three golden balls which cost $21,000, the plaintiff decided to invest this amount. Her reasons for changing her mind and making this investment on 7 January 2016 were the defendant's assurances that she would help the plaintiff operate her account and the defendant's recommendation of the investment as being risk-free, conducted by an established company and which furthermore was a company in which the defendant had herself invested.
22. The plaintiff's account of this conversation does not contain any reference by the defendant to the commission that the scheme permitted the defendant to receive. The defendant's account of what she said to the plaintiff during this first meeting differs on just about every issue, but the question of whether commission was mentioned is of particular importance to credit.
23. Another important issue, in relation to the plaintiff's credit, is where she obtained the money to invest in the scheme. She attaches to her affidavit a statement from the ANZ Bank for the period between 15 December 2015 and 15 January 2016 and said she withdrew the following amounts on the following dates: 18 December (Friday) $1,000 21 December (Monday) $3,000 in three withdrawals of $1,000 made on Sat, Sun and Mon 23 December (Wednesday) $4,500 24 December (Thursday) $5,500 4 January (Monday) $1,000 6 January (Wednesday) $3,000 in two withdrawals 7 January (Thursday) $2,700
24. In fact this was wrong, as the defendant pointed out in her affidavit in reply. Some of the funds came from the plaintiff but other sums came from the plaintiff's superannuation fund and from an account in the name of her daughter. The defendant submits that the incorrect evidence the plaintiff gave about the source of the funds is so devastating to her credit that she should not be accepted as a witness of credit on any issue.
25. As is set out below, the defendant claimed in her affidavit in reply that, in response to an inquiry from the plaintiff, she did reveal she would receive a commission. Whether that was said, and what was said, needs to be seen in the context of her evidence generally.

The defendant's version of the conversation

1. The defendant's version of the conversation is set out in her affidavit as follows: "28 We had the following conversation, in Mandarin, to the best of my recollection. Me: "At the beginning of February 2015, at the recommendation by one of my friends I encountered the MFC platform. I was told that this is a Loyalty Reward Scheme, it was initiated by Zhang Yufa, a Malaysian Chinese. This was the first time I was exposed to such kind of information, and I thought it might be a new economic model. I believe this is an era of rapid development of information technology, and I am a person who is always willing to try new things. So I decided to join as Jing who had a registered wallet nominate me as a new member. I transfer the sum of US$5000 to Jing from beginning. In a few months after, especially my attendance of various seminar in Hong Kong. I decided to obtain more reward points accounts to facilitate my ability for various redemption. Members can use rewards points to shop, eat. stay in hotels, travel, and buy supermarket gift cards. The business school of the MFC company, known as M Academy has repeatedly sent people to hold large-scale promotional meetings in Sydney. Many fans in Sydney also went to Malaysian companies to inspect projects. The project has nearly 10 million global fans in a few years." (CB 203)
2. The defendant says she then showed the plaintiff the website on the plaintiff's own computer and said to the plaintiff: "You must read, understand thoroughly before you make any decision whether to join or not." (CB 203)
3. The defendant says the plaintiff then asked what benefit there was for the defendant to "sign her" to join MFC. The defendant says she replied as follows: "Ms Zhang asked me what benefit is there for me to sign her [sic] to join MFC. I said words the effect of: "The MFC will reward me with 10% of your joining as a member. If you commence to join with one ball, I will be rewarded 10% from your one ball. The ball commence from a minimum of $US100 up to $US5,000 which is the highest. It all depends how comfortable you are to becoming a member of this MFC Platform. You can join with $US100 to start off. See how you feel and the progress of how comfortable you may be. In any kind of participation scheme it is prudent to test the waters first and ascertain the risk. This is crypto currency something new to us and the world"." (CB 204)
4. If the defendant had disclosed that she was receiving commission, this statement would have been misleading. She says her commission was 10% "from your one ball" if she buys a ball, which is not the case - the defendant would be entitled to 10% of everything. If the joining as a member only involved $100, that would mean that the defendant was only entitled to $10 commission. Even on the version of events given by the defendant, she was misleading the plaintiff.
5. The defendant says she then left the plaintiff's home and was not contacted until three or four weeks later. The defendant was very busy at the time as "the property market was bullish and prosperous with Chinese buyers" (CB 204). She says that the plaintiff said: "I cannot remember the exact date of our conversation Ms Zhang rang me and said word to the effect of: I am now ready to join MFC with three lots of $5,000 which means $15,000.00. I have read much and understand well now. I feel alright to became a member through you. Me: please start with $US100 first $15,000 is a lot to start." (CB 204)
6. The defendant's claim that she urged her to start with $US100 and that this was even possible is implausible. If the plaintiff invested $100, what would she be entitled to under a scheme which requires $5,000 just for the purchase of one ball? In fact the defendant had only purchased one ball herself, with the result that she did not have enough points to register the plaintiff as a member and had to acquire these from other participants in the scheme. She then transferred her own money to collect the points and this enabled her to receive from the plaintiff the sum of $AU21,000 which was equivalent to $US15,000, the cost of three balls.
7. The next issue about which there is a dispute is whether the defendant asked the plaintiff to pay cash. The defendant had had other transactions in cash, as she eventually conceded (Tcpt, 5 April 2023, p 221). Very little turns on this but, conformably with my findings in favour of the plaintiff on other issues, I prefer her evidence. Part of my reason for doing so is that the complex manner in which the plaintiff's investment of $US15,000 was carried out was very convoluted, for the reason, I am satisfied, that the defendant wanted to be sure that she, and not her "upper member" (Mr Tian Ma) received the 10% commission. When the plaintiff transferred $US 21,000 to the defendant, the defendant purchased 11,400 credits from Tian Ma for $15,960 and then transferred 13,500 M credits (namely Tian Ma's 11,400 M Credits and 2,100 credits the defendant had) to the plaintiff (Tcpt, 6 April 2023, pp 231 - 233). The defendant purchased from Tian Ma at a rate of $1.40 per unit and sold to the plaintiff at a rate of $1.56 per unit (Tcpt, 6 April 2023, pp 232 - 233), thereby making a profit of broadly 10%. The making of this profit was resolutely denied by the defendant until Mr Bell eventually conceded (Tcpt, 6 April 2023, pp 262 - 263) that the defendant had made a profit from this transaction with the plaintiff of "broadly 10%".
8. At the time she opened the account, the defendant clearly had access to the plaintiff's account; Exhibit A included the plaintiff's login and password details. The defendant claimed that she needed to ask for these details on each occasion but I do not accept this evidence. It is clear from the defendant's WeChat post of 28 February 2017 that she did not need to ask the plaintiff for any login and password details; she could simply look up the plaintiff's account for her balance and other information (CB 91); the account records (at CB 244, 245 and 246) confirm that the defendant stored the login and password details. The account records show that the defendant accessed and operated the plaintiff's account, although the defendant was reluctant to admit this (Tcpt, 5 April 2023, pp 165 - 170) identified such access dates as June 2016, January 2017, 28 February 2017 (as confirmed by CB 91) and 17 March 2017. I am satisfied that the defendant did so without seeking the plaintiff's permission.

Further contact leading to the 2016 representations

1. The plaintiff and defendant corresponded occasionally by WeChat between the time of the plaintiff's first investment and the time of the second investment. The plaintiff was not cross-examined about her claim (affidavit, paragraph 43) that the defendant repeated her earlier claims that the price of GRC points was going up, that the company running the Platform had established businesses in more industries and that this company was co-operating with other businesses in China to enable the GRC points to be used to purchase hotel accommodation and the like. Those messages are no longer available as the plaintiff no longer has the mobile phone containing them.
2. The plaintiff had returned to China early in 2016 to care for her mother and during this time contacted the defendant only by WeChat. She returned to Sydney for a few weeks in June and shortly before 17 June met the defendant at a café of the defendant's choosing. She noticed the defendant was wearing expensive clothing and carrying an expensive handbag. The plaintiff felt admiring and envious. She says the defendant said to her (CB 39): "The MFC Platform continues to be a wonderful investment opportunity. It is a money-printing machine. I am now rich from investing on the MFC Platform. I do not have to work. I make money while sleeping. You always make money on the MFC Platform. You never lose money."
3. The defendant offered an incentive to the plaintiff to keep up her involvement in the Platform by saying she could arrange for an interim payment to be made to her. She says the defendant said (CB 40): "Your investment on the MFC Platform is going well. Following your investments in January, you received many additional GRC points. I have sold some of the GRC points for you for $6,110. If you give me details of your bank account, I can transfer the money to you."
4. It is an indication of the degree of control the defendant had over the plaintiff's account that she had not only done this herself rather than leaving it to the plaintiff, but had done so without even consulting the plaintiff beforehand.
5. The plaintiff was excited to hear this and provided the details. However, this was a gift with a hook inside it, because the defendant then prevailed upon the plaintiff to invest more money. She compared the Platform to "a hen that always lays eggs" (CB 40) and said that the plaintiff should invest at least $100,000 if not $200,000: "The more money you invest, the more money you will make. Also, the more money you invest, the sooner you get back your principal. If you had invested $100,000 in January, you would have your principal back by the end of the year. But because you only invested $21,000, the process of getting back your principal is slower. Many investors are continuing to make a lot of money from investing in the MFC Platform. I and my superior continue to make a lot of money."
6. There was more conversation to the like effect. The defendant said she had invested $200,000 and invited the plaintiff to do the same, but counselled against withdrawing any further sums as she would get "40% more profit" (CB 41) if she left it in. At one stage, making a pun on the word for the number "two", the defendant said that "a fool can make money on this platform."
7. The plaintiff was hesitant, despite receiving the $6,110 transferred to her account by the defendant. A few days before she was scheduled to return to China, the defendant telephoned her to urge her once again to invest more, saying there would be a distribution in September and not to miss out. The plaintiff remained hesitant and returned to China until December 2016.
8. From October 2016, when the text of the WeChat posts can be examined, the question of what was said by whom can be matched to those statements. For the reasons set out in more detail below, the contents of those messages unequivocally support the plaintiff. The earliest of these, namely the post on 17 October 2016, refers to the defendant arranging to sell some of the plaintiff's GRC points and the increase in rates from 0.26 - 0.28 (CB 42).
9. The plaintiff returned to Australia for a few weeks from 22 December 2016 to 13 January 2017 as her son was getting married. She met the defendant (whom she had asked to the wedding) in a park in the last week of December 2016. She told the plaintiff that her superior had made "tens of millions", that she had helped more than 20 of her friends (including her sister) to invest, and that the plaintiff should do so too. She said the plaintiff could recover her $21,000 in six months' time but urged her to invest another $100,000.
10. The plaintiff replied that she could not manage $100,000 but said that she had $40,000 (CB 43). The defendant urged her to invest more. When the defendant went to the plaintiff's son's wedding and saw how many red packets he received, she suggested these be used. The plaintiff then contacted her and said she wanted to invest $52,000, part by cheque and part in cash. The defendant told her to deposit these sums in the defendant's bank account, which she did.
11. The plaintiff returned to China on 13 January 2017 and from this point on the WeChat messages corroborate what occurred. The plaintiff has become anxious after reading about Ponzi schemes on Baidu and the defendant reassures her; the plaintiff wants to withdraw her money but the defendant says she must keep it there to make money; the defendant says she will withdraw the sum but does not do so (CB 90 - 99). The same pattern is repeated in 2019.
12. What does the defendant say happened? She says that the plaintiff rang her after her son's wedding, wanting to invest $50,000 (CB 205), which she turned into three accounts, one of them in the name of the plaintiff's daughter-in-law. She does not answer the description of events and conversations given in detail by the plaintiff, saying instead: "Ms Zhang left many unpleasant and offensive messages on WeChat. I deleted her from my WeChat. The effect of deleting her as my contact on WeChat is that WeChat deleted my copy of all the messages from her to me and from me to her and I do not have access to them." (CB 206)
13. Apart from the plaintiff's final message of 23 July 2018, where she accused the defendant of lying (after the defendant told her MFC would not collapse and just needed "time to adjust"), there is nothing in the plaintiff's messages that is in any way discourteous.
14. The plaintiff and defendant also had a meeting in December 2017. The plaintiff had been in China from August to December 2017 to look after her mother. Shortly after she returned, the defendant invited her to lunch at the Golden Globe seafood restaurant in Burwood, saying she would introduce her to some of the leaders in MBI, the company behind the MFC Platform, who would know ways to get the plaintiff's principal back. When the plaintiff attended, a middle-aged woman spoke to those present in very general terms. She did not say anything about how the plaintiff could get her money back. When she spoke to the defendant about how to get her money back, the defendant told her that MFC was being "adjusted" and that withdrawals were not possible, and that the best way to get back the principal was to invest more money. By this stage, the plaintiff was crying, so she left the restaurant.
15. The defendant did not answer this evidence in her affidavit, but said the following in cross-examination (Tcpt, 6 April 2023, p 274(23)-(44)): "Q. Ms Peng, one final matter. In December of 2017, do you recall an occasion on which Ms Zhang came to a lunch at a restaurant where you were at? A. Yes. Q. Would it be fair to say that there was a confrontation between the two of you when Ms Zhang was very upset and began to cry? A. No. It was in a group. More than ten people. So, my upper line, her name's - forgot. Wang. By surname. Surname Wang. We have lunch in Burwood, Golden Seafood Restaurant. So many people were there. I said, "I don't - I don't know how to explain to you. I can't say it well. Can you listen to the upper line? How - how - she going to know more than me. More information about the platform. Can you come to Burwood?" So, we have a meeting discuss what's going on. And when she come to the restaurant, she said, "Look at people, locally people you are with." When I talking with other people, she ask me questions. I said, "Can you wait?" And then she just stand up, take the bag - handbag - and walk - walk out of the restaurant very angrily. So, and then I realised she left. I - I just left the restaurant too. I - I try to find her. So, I find her in the Burwood Train Station. She just yell at me in the - in the platform. And even the security or the - the staff asking what's going on."
16. Even at a time when MFC had passed the point of no return, the defendant was still advising her to put more money into the investment. While the defendant's version appears to be that the "upper line" person, Ms Wang, was saying this rather than the defendant, the fact remains that this was the advice the plaintiff was being given until the bitter end.
17. Even after the plaintiff left the Burwood restaurant in tears, the defendant continued to claim that all that was happening was an "adjustment" and that she could help the plaintiff get her money back. She told the plaintiff that she needed to take over all her accounts to do so. On 14 May 2018, when the plaintiff again asked the defendant for help in recovering her investment, and whether she needed to take over the accounts to do so, the defendant replied (CB 99): "YP: I recently need to settle a property. I do not have extra money to buy for the moment. MBI is adjusting now, which was not expected. Many of my accounts have become "Asset package". When you are back, let's see if our big boss has any idea ... I am still waiting to share with you about recent information and other operation methods I have known. Recently, MBI leaders are discussing methods about allowing Australian members to cash out. Did you register by using Chinese identity card or Australian one? You can cash out if you registered by Chinese identity card. I really want to help you ... There were so many things happened at the same time in last occasion. I was so regretful after that ... You need to know new changes of the platform. I am also willing to get your principal back, at least ... If you are still willing, I can operate your accounts and continue to get your principal back slowly ... If I hurt you, I sincerely apologise for it."
18. The defendant was making similar promises on 23 July 2018. She referred again to the platform needing "time to adjust" in answer to the plaintiff's complaint that the defendant "must have known the characters of that so-called leader long time ago (a reference to both Tian Ma and Yu Jie) and asking why she was expected to feel gratitude for these "up-line" investors in the scheme: "YZ: ... Did you say the platform was good, everyone can make money. Why I am the only one who complain I did not earn money, and blame me that I am not being gratitude to you!" (CB 101)
19. The plaintiff referred again to being expected to show "gratitude": "YZ: I now understand how to make money in this platform: up-line to earn money from down-line ... and ask down-line to be gratitude [sic] to up-line. YP: I am so sorry for now. The platform was very good. Now the platform is adjusting. It is not expected." (CB 101)
20. The defendant still appears to be keen to give the plaintiff investment advice; as well as her reference to Falconaire earlier, in this message she went on to ask if the plaintiff had bought "Huan Ke GOLD". "Did not" was the plaintiff's terse reply.
21. The defendant's final message was as follows: "PY: Recommendation to friends was to let them make money. At least I did for that. My own old [sic] and young sisters participated in [sic]. Will I hurt them?.. . Many platforms will take investor's money and run away. But this platform will not collapse. It will take some time to adjust." (CB 102)
22. The plaintiff's response was "Keep lying…" (CB 102). It was following this response that the defendant took the initiative of blocking her on WeChat.
23. It is not in dispute that the MFC Platform did collapse, although the precise date, apart from it occurring in mid-2017 is not in evidence. The defendant's continued representation of the MFC Platform as a safe rather than a risky investment for about a year after that collapse needs to be seen in light of the collapse of the Platform at this earlier time, as Mr Zipser points out in his submissions of 5 May 2023 at paragraph 21.

Determining what was said in the course of oral representations

1. Both the plaintiff and defendant swore affidavits upon which they were cross-examined, although the cross-examination of the plaintiff was very limited. The defendant was extensively cross-examined as to representations contained in her WeChat messages. The accounts differ widely. The question is how to establish, with a degree of precision, precisely what was said.
2. The difficulties in determining what was said in the course of oral representations is a factor often referred to in relation to claims of allegedly misleading words or conduct in the course of a conversation: Watson v Foxman (1995) 49 NSWLR 315 at 318-9. This issue was referred to by the Court of Appeal in Gan v Xie at [119] and [112], and the approach taken in that court was cited with approval by the Full Court of the Federal Court in Lantrak Holdings Pty Ltd v Yammine at [277]: "Before leaving this aspect of the appeal, I make the following observations on the way in which evidence was given in the case. In Kane's Hire Pty Ltd v Anderson Aviation Australia Pty Ltd [2023] FCA 381 at [124], I cited with approval the statement by McLelland CJ in Eq in Watson v Foxman at 318-9 that where allegedly misleading conduct consists of the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. As I said at [125], that is plainly a question of degree, not a demand for unattainable perfection, and that reasoning has now been approved by the New South Wales Court of Appeal in Gan v Xie [2023] NSWCA 163 at [119] and [122] (White JA, with whom Simpson AJA and Basten AJA agreed). My remarks were primarily directed to ending the longstanding practice in New South Wales of drafting affidavits in a way which converted a witness's actual memory of only the gist of a conversation into direct speech, thus giving a false appearance of verbatim memory, prefaced by the confusing formula that the conversation occurred "in words to the following effect"."
3. The manner in which the statements in these proceedings have been prepared reflects this manner of presentation of affidavits. There are, however, significant differences: 1. First, there is a constant pattern, throughout these oral exchanges, of information very similar to that set out on WeChat. Although in the Statement of Issues the defendant sought to have me determine the contents of the oral conversations separately from the WeChat exchanges, this would be an unrealistic and artificial approach to the transactions (I note that the almost universal use of messaging apps such as WeChat will no doubt make determination of the issue of what was said in oral conversations much easier for courts in the future.) A similar situation arose in Xuan v Xu where the plaintiff had taken the precaution of recording her meeting with the defendant, and the transcript was able to corroborate whether the representations were made. 2. Second, the defendant in the course of cross-examination actually boasted of knowing from the first that the MFC Platform was a risky "game" which she enjoyed playing but in which she was too astute to invest any significant sum in for herself, preferring to make her fortune from her real estate activities.
4. Where there is corroboration of what was said from an independent source, such as an exchange of emails or social media messages (or, in the case of Xuan v Xu, a surreptitiously recorded conversation), the problems identified by these decisions tend to fall away, in that it is not a case of one person's account versus another. That is why the WeChat messages exchanged between the parties for the period some months before the second investment up until the encounter in the Burwood restaurant in June 2018 are of such evidentiary importance.

The written evidence of representations

1. The defendant provided a table of oral representations as matched up to the written representations as part of Mr Bell's submissions dated 4 July 2023. However, all this document does is to list the oral representations in the statement of claim and put the word "no" in the column for written representations.
2. Despite the defendant's blanket denial that any of the representations identified were repeated in these posts, analysis of them shows to the contrary. Examples are as follows: 1. Particulars 12(a) and (b) (that an investment account is necessary and that investments are made in units of $5,000): It is implicit in all of the WeChat messages that the plaintiff was told that, to invest in MFC, investors need an online account (the one from which the defendant offers to take out the principal that the plaintiff is anxious to get back), and that a basic amount of $US15,000 was invested in this way (CB 91). These facts were not in issue in the case. 2. Particular 12(c) (that units could be traded by investors): If this is a reference to using units for shopping and hotel accommodation, the defendant says she has done this "many times" (CB 92) and refers to doing so in Shanghai, Beijing and Shenzhen, as well as in Australia (such as in a Burwood restaurant). 3. Particular 12(d) (that the value of units never goes down and always goes up): The defendant acknowledged that this was a statement made on the MFC website, although she could not remember making such a statement herself (Tcpt, 4 April 2023, p 122). She repeatedly told the plaintiff that she was not worried about the Platform and about the success of others, such as Tian Ma who made "tens of millions" and an Australian friend who had turned $AU150,000 into $1.9 million (CB 95). 4. Particular 12(e) (that investors would get their principal back in 18 months): The defendant refers to this repeatedly in the WeChat messages: for example, she reiterates, on October 20, 2017, in response to the plaintiff's complaint that she is worried she will not get her investment back in one and a half years, that the plaintiff "will [get back the principal] in one and a half years" (CB 97). In fact, the defendant adds, "I got my principal back in about half a year". She also tells the plaintiff that her initial investment of $US15,000 is now worth $US28,000 and "within one or two years" of the investment she can withdraw it (CB 91). When the plaintiff complains that after "two years I did not get any principal back", the defendant promises that she will get this in two months and that in the interim the value would "increase continuously" (CB 97). 5. Particular 12(g) (that investors can withdraw part of their investment at any time for cash): The defendant, knowing the plaintiff cannot operate her account herself, repeatedly offers to "get your investment back" (CB 90, 92, 93, 94) but at the same time counsels against it, even saying she regretted taking out too much of her own money (CB 96). 6. Particular 12(h) (that the investment was risk-free): Although the precise word "risk-free" is not used, MFC is repeatedly described by the defendant as being connected to more and more industries, offering "many incredible things of future tendency" (CB 92) which is making millions for investors (see (g) below). 7. Particular 12(i) (that investors get good returns): The defendant's statement that the plaintiff's $US15,000 has become $28,000 and that the plaintiff's return is "very high" (CB 91). Unlike other platforms which disappear without a trace, "MBI is so great on which you invest small money and get long term profit." (CB 95). She illustrates this with a number of examples: a friend whose $AU150,000 investment became $AU1.9M, an "alumni from Tsinghua" who invested $300,000 (CB 95), her superior Mr Tian Ma, who has made "tens of millions" and, most of all, herself. 8. Particular 12(j) (the defendant had invested more than $200,000 and received good returns and the principal back which she then reinvested): In response to a question from the plaintiff that she should try to achieve a million GRC, the defendant modestly replies: "Almost, will achieve after this distribution" (CB 95). The defendant goes on to add that she now regrets she "withdrew too much cash" (CB 96). After giving her daughter 3 investment properties, she had taken back $2 million and used this to pay the mortgages on the "other investment properties" (CB 96). There are similar statements in other WeChat posts (for example, CB 92). Independently of being misleading, this claim of very large investments is also untrue, as the defendant never invested sums of this size. 9. Particular 12(k) (that MFC has businesses in many industries making good profits which it then uses to make distributions to MFC investors): The defendant repeats this almost word for word in the 13 March 2017 message, where she is responding to the plaintiff's concern that this is a Ponzi scheme. The plaintiff's WeChat says that she has researched Ponzi schemes on Baidu and that it is necessary for there to be a real business underneath it. The defendant responds that MFC is connected with "more and more real industries" and that she had bought items in shops "many times" in this way. She goes on to state that it is not a Ponzi scheme and that if she thought it was she would "never have told you" (CB 91). She also refers to consumer points that can be "used for shopping" (CB 91) and staying for free in a Shanghai hotel in this way (CB 90) as well as in Shenzhen and Beijing (CB 94). 10. Particular 12(l) (that the defendant personally guaranteed the plaintiff's investment and would reimburse her if she lost money): What the defendant says is that she "will be responsible to get all your principal back to you" rather than give a formal guarantee (CB 94) and to this end she repeats that she is organising the payment and it will be here soon. If I view this as a representation that she would be responsible for taking steps to obtain the return of the principal, that is slightly different but nevertheless clearly supported by her own words. In fact despite making this representation and despite knowing that the plaintiff could not operate the platform the defendant took no further steps whatever to recover the principal. Part of the reason for this is that in March 2017, when she wrote these words, MFC was heading for trouble, but it does not appear to have crashed until about the middle of the year. 11. Particular 12(m) (that now was a good time to invest): The defendant's whole theme was that others (such as the Tsinghua alumni and her superior Tian Ma) were making a fortune and that further investment would result in long term profit for a small investment (CB 95). In addition, the plaintiff would have her "continuous GRC after you get your principal back" (CB 95). She counselled the plaintiff "just to believe and follow without any doubt" the "big leader" (CB 97) (also called the "big boss": CB 100), who will have ideas about how to cope with the unexpected "adjustment" MRC is going through in May 2018. 12. Particular 12(n) (that the defendant would manage the online account and the plaintiff's investment on her behalf): Most of the WeChat posts show the defendant is either doing or offering to do this. She also gives the plaintiff advice, such as not to withdraw now but to wait, and that now is a good time to invest.
3. The following WeChat entries relate to the following representations: 1. Particular 15(a) (that there continues to be no risk): See above, especially CB 93. 2. Particular 15(b) (that investors continue to make lots of money investing on MFC): See above, especially CB 95, with the references to the Tsinghua alumni and to the Australian investor. 3. Particular 15(c) (MFC continues to be a good investment opportunity): See above, especially CB 95. 4. Particular 15(d): (If the plaintiff invested $100,000 she would get the principal back in six months to one year and would get the principal back in eighteen months): See above, especially CB 97. 5. Particular 15(e) (the more investors invest, the sooner they get back their principal): See above. 6. Particular 15(f) (Since December 2015, the company operating MFC has established additional links to business and industries to generate income for investors): See above, especially CB 92. 7. Particular 15(g) (the defendant has become rich and wealthy from investing on the MFC platform): Mr Zipser referred to CB 96, where the defendant refers to taking back $2 million to pay out mortgages on real estate investments, but there are hints throughout not only about the wealth the defendant has accumulated as a result (such as her references to continuing to buy and sell property: CB 96 and 99) but also the other benefits such as hotel accommodation and shopping trips in China (CB 90, 94) and even a seafood restaurant in Burwood (CB 94). She says she still has almost a million GRC (CB 95). It is only when the plaintiff starts reading angry messages from other investors that she starts to challenge the defendant (CB 101 - 102). 8. Particular 15(h) (that the defendant had invested $200,000 and received her principal back in six months while continuing to make money by reinvesting): See above, especially CB 97, where the defendant said that she "got her principal back in about half a year". 9. Particular 15(i) (that the plaintiff's investment in January 2016 of $AU21,000 was going well and that she would get this principal back in about six months): The defendant told the plaintiff categorically that her "very high" return was now $28,000 (CB 91) and cites her own ability to have the principal returned in six months (CB 97). 10. Particular 15(j) (that if the plaintiff gives the defendant more money the defendant will invest this for her): See above and especially CB 95, 96 and 97. 11. Particular 15(k) (that investors can withdraw money they invest at any time): Not only is this specifically stated at CB 92 (where the defendant says she will help her do this) and at CB 93 (where the defendant says she helped others do this), but according to Mr Bell's schedule the defendant acknowledges that, while she does not recall it, she may have said something similar (see paragraph 80 of her affidavit of 13 November 2020).
4. I am satisfied that each of the representations about which the plaintiff complains is corroborated by the contents of the WeChat messages.

The parties' challenges to each other's credibility

1. Each of the plaintiff and defendant challenged their opponent's credibility.

The defendant's challenge to the plaintiff's credibility: the plaintiff's error about the source of the $21,000 investment

1. The plaintiff made a mistake, in her first affidavit as to the origin of a payment of a sum of $21,000 that she made to the defendant in January 2016. She said that she paid this sum from her own account by cash or EFT. In fact this sum came from several sources including her own superannuation fund. She corrected this error in her affidavit in reply of 21 September 2021 (CB 181) to set out that the sources for the funds as identified by the defendant are correct.
2. The defendant places a great deal of weight on this error, asserting first that it was such damning evidence that none of the plaintiff's evidence on any topic could be trusted and that her recollection of all other events is thus either dishonest or unreliable.
3. The problematic sentence occurs in the plaintiff's first affidavit, where she explains: "2. In paragraph 32 of my affidavit dated 2 June 2020 ("the 2020 Affidavit") I stated that ''shortly after 7 January 2016, I met Ms Peng and gave her $21,000 in cash". Ms Peng states in paragraph 69 of her affidavit dated 13 November 2020 ("the Peng Affidavit"): "I never received any funds in cash from Ms Zhang. On 22 January 2016 I received $21,000 in my bank account Ms Zhang sent me an email with a payment summary attached." 3. On reflection, Ms Peng is correct in stating that, in relation to the payment of $21,000, I transferred the money into her bank account on about 22 January 2016. 4. Aided by statements from two Westpac accounts I operated in January 2016 which are annexed and marked with the letter "A", my recollection is as follows. By the evening of 7 January 2016 l had $21,000 in cash in my house ready to give to Ms Peng. Ms Peng and I had previously had a conversation in which she proposed that I give the money to her in cash, and I agreed. Between 7 and 15 January 2016 I phoned Ms Peng, told her that I had $21,000 in cash to give her and tried to make an arrangement to meet her to give her the money. Ms Peng then proposed that I transfer the money into her bank account. She then sent me her account details by WeChat. 5. Although I had withdrawn $21,000 from my ANZ account, the account had a daily transfer limit of $20,000. I had a Westpac business account from which I could transfer money to other accounts, but without a daily limit of $20,000. I took the following steps: a) From the amount of $21,000 which I had withdrawn from my ANZ account between 18 December 2015 and 7 January 2016, on 15 January 2016 I deposited $10,000 into my Westpac deposit account (account with BSB 732-090 and account number 56-3395). A reason I only deposited $10,000 was because I had decided to keep the balance of $11,000 at home for per'. b) In relation to the passing of time between 7 and 15 January, I expect that it was not until 15 January that it was convenient for me to do some banking in Chatswood. c) On 22 January I transferred $21.000 by EFT to my Westpac business account. The reason I transferred the money to my business account was because the deposit account had a limit of $1,000 on transfers to third parties. d) On the same day (22 January) I then transferred $21,000 from my Westpac business account to Ms Peng, e) Annexed to the Peng' Affidavit is a payment summary I sent her. The document records that I described the transaction as "FMC". This was a reference to the MFC Platform."
4. This was a simple issue; nothing turns on where the funds came from. It appears to have been raised because the defendant was proposing to argue at the hearing that the claim should have been brought not only by the plaintiff but also by her superannuation fund and her daughter as well; as this had not been pleaded, this would not have been permitted as no plea to this effect had been made. The plaintiff immediately corrected her earlier affidavit evidence in her affidavit in reply, and the facts of that correction were clearly accurate, as their accuracy was not challenged.
5. The plaintiff's error on this issue does not mean that her recollection of all other events is dishonest or unreliable. This kind of error is part of the difficulties of witness affidavits and statements adverted to by Jackman J in Lantrak Holdings Pty Ltd v Yammine at [277].

The defendant's credibility

1. The defendant's case was essentially that she was well aware, from her activities as a mortgage broker, of the obligations she bore if she gave any financial advice to anyone, and that she should be believed on her version of events for this reason. Mr Zipser first points to the issue of whether the defendant had disclosed the very substantial commission (10% of every penny invested) she would receive from the plaintiff's investment as being a key credibility issue in the case.
2. Independently of the issue of commission, the defendant's affidavit evidence did not deal with significant issues (such as the meeting at the Burwood restaurant or the WeChat messages) or was inconsistent with reliable corroborative material such as the WeChat posts. Her oral evidence consisted of multiple inconsistent explanations which became mazelike. Mr Zipser has analysed one strand, namely her claims of not being able to access the plaintiff's account, as is set out in the section of this judgment on the parties' knowledge of and use of the MFC Platform.
3. Just as unsatisfactory, in terms of credit, was the defendant's refuge behind the claim of not being able to remember. While the number of times the plaintiff said she could not remember could be counted on one hand (Tcpt, 3 April 2023, p 42(29), p 45(45), p 60(30), p 61(5) and p 88(26)), the defendant said she could not remember more than sixty times in the course of her cross-examination. To give two examples, on one page of the transcript (Tcpt, 6 April 2023, p 238) she said she could not remember seven times (Lines 3/10/18/20/33/38/49) and while she had some recollection of the June 2016 meeting she no longer had any recollection now (Tcpt, 6 April 2023, p 238(4)-(49)), which must cast doubt on her asserted recollection of the meeting leading to the first investment.

What was said about commission?

1. The plaintiff's evidence is that nothing was said about the defendant receiving a commission. She stated in her affidavit in reply: "I did not ask Ms Peng what benefit she might receive from signing me to join or invest money in MFC or the MFC Platform. At the time, it did not occur to me that Ms Peng might receive a benefit from signing me to join or invest money in MFC or the MFC platform. Ms Peng did not, at this or any other time, tell me that she would receive a benefit or reward from MFC for persuading me to invest in or join MFC. If Ms Peng had told me this, I would have been more cautious about investing in the MFC Platform." (CB 184)
2. As Mr Zipser noted in his oral and written submissions, the plaintiff was not cross-examined on these statements.
3. Even on the version of events given by the defendant in her affidavit, the commission referred to was 10% of the joining fee, which was 10% of one ball, although by recommending an initial investment of $US100 (CB 204) the defendant paints a picture of getting 10% of $100, which would be $10. The plaintiff did in fact invest $US15,000, and even if the plaintiff had understood that commission was payable on that sum, no such revelation was made about subsequent investments. A year later the plaintiff invested a further $90,000 and the defendant effectively accepted in the witness box that she got a 10% commission on the $90,000 but on her own version of events she did not tell the plaintiff that she got that commission (Tcpt, 28 July 2023, p 285). Mr Bell explained this by saying it is what financial advisers usually do (Tcpt, 28 July 2023, p 285): "With respect, that's what happens with a financial adviser, your Honour. For each further investment, the financial adviser is getting his commission. That's the first thing, your Honour. I'm not sure the financial adviser has to say, "I get a 10% commission. Each further item you put in I still get another 10% commission," if it's flagged first. That's the first thing about it, your Honour. The second thing about it is it's not pleaded as a misrepresentation."
4. However, even on the defendant's version of what she says, she told the plaintiff, she represented that the commission would be a one-off commission for the first investment.
5. Even the defendant's suggestion that the enquiry about "what benefit is there" was introduced into the conversation by the plaintiff is implausible. If, during a conversation about investment, whether in real estate or in the stock market or even more convoluted modern equivalents such as cryptocurrency markets, a statement to the effect that a particular financial product is a good investment does not of itself engender the enquiry as to what commission (or, as Mr Zipser termed it, a "kickback") the person making the statement is getting for saying it. Similarly, if the defendant had recommended an investment property, or investment in a particular publicly listed corporation, in circumstances where that person is not a financial advice provider, even a relatively naïve member of the community such as the plaintiff would not expect that the recommendation was made in circumstances where commission was even likely. Even if this were not the case, as noted above, the defendant's reply that she would be rewarded with 10% of the amount for joining as a member "if you commence to join with one ball" is wholly inconsistent with the reality, which is that the defendant would be rewarded with 10% of every investment the plaintiff ever made.
6. This brings me to the principal reason why the defendant submits I should accept her version of events, namely that she received training as a mortgage broker and real estate agent about ethical obligations, and that these were of the kind that meant that she would never recommend an investment in anything other than an objective fashion and in circumstances where she urged the recipient of any such information to make all proper enquiries before embarking on such a course.
7. The difficulty with that submission is that for anyone so alive to the ethical obligations of recommending an investment to have acted as the defendant did, she would have needed to be fully frank about her entitlement to commission, which would have required a full disclosure of receiving 10% throughout the whole course of the dealing.
8. I am satisfied that the defendant never mentioned receiving any commission to the plaintiff, let alone the 10% of the joining fee she sets out in her affidavit. I take into account, in addition to the above, the defendant's evasive answers at Tcpt, 4 April 2023, pp 137 and 140-141 concerning commission she had taken, the degree of control the defendant had over the plaintiff's account in terms of access through a password and the defendant's superior knowledge of how the platform worked. In addition, I take into account that by the time she spoke to the plaintiff in December 2015, the defendant had spent almost a year of close involvement in the MFC Platform and related activities, including attending seminars and encouraging investments, to the extent that it was interfering with her work, as she herself acknowledged.

Implausible and untruthful evidence

1. Mr Zipser submits that, as well as on key issues such as whether she disclosed an entitlement to commission, the defendant's evidence was demonstrably false, implausible, contradictory or inconsistent on many if not most issues. He specifically referred to the following: 1. Tcpt, 4 April 2023, p 107(30)-(32) - The defendant stated in cross-examination that the MFC Platform was nothing more than a loyalty reward scheme (analogous to "fly-buys" and the like). There is an "LR" scheme ("Loyalty Rewards") referred to in the WeChat messages at CB 94 as operating in China, but the defendant provides no evidence of how any so-called "loyalty scheme" would justify the complex maze of transactions for investment in this scheme as opposed to simply getting credit for sums paid. This was not a case of accidental choice of words; the defendant sought at every stage of her evidence (as she did in her WeChat messages) to deny that MFC was known by her, almost certainly from the first, as a Ponzi scheme. 2. Tcpt, 4 April 2023, p 116(43)-(45) - The defendant initially stated in cross-examination that the people below her on her line on the MFC Platform were "all my family members". Yet, as the cross-examination progressed, the defendant accepted that she sold/transferred M Credits to Tan Feng (who the defendant said was her daughter's ex-boyfriend) (Tcpt, 4 April 2023, p 117(45)-p118(3), Tcpt, 4 April 2023, p 140(1)-(37)) as well as to Juli Yan (CB 295-296; Tcpt, 5 April 2023, p 218(45)-p 220(35)) and Jing Wang (Tcpt, 5 April 2023, p 225(41)- p 228(22)) (who were not family members). She admitted to managing around 20 accounts. This is a minor issue but it shows a lack of frankness. 3. On 4 April 2023, the defendant accepted in cross-examination that "to invest you purchase a ball for US 5,000" and three balls made a golden group (Tcpt, 4 April 2023, p 121(25)-(45)). On 5 April 2023, the defendant initially denied this was correct (Tcpt, 5 April 2023, p 189(20)- p 190(37)) before eventually accepting again this was correct (Tcpt, 5 April 2023, p191(12)-(13)). This was one of several occasions where the defendant would make a concession but then retract it. 4. Tcpt, 4 April 2023, p 127(49)- p 128(3) - The defendant said in cross-examination "I never think about ... building my wealth through MFC". One of the key reasons for the plaintiff to believe the defendant was her boasts in the WeChat posts about the large profits she had made on the MFC Platform, her expensive clothing and handbag which she said came from her investment activities, and her statements that she was now a wealthy woman (CB 94 - 96). 5. Tcpt, 4 April 2023, p 128(3) - The defendant said in cross-examination that the MFC Platform "is not investment". This assertion was inconsistent with other evidence in which the defendant accepted that she invested money on the MFC Platform and sought to make money from her investment. 6. Tcpt, 4 April 2023, p 132(40)-(49) - The defendant initially stated in cross-examination that, other than the three occasions she purchased M Credits on the MFC Platform explained in her affidavit at [17], she "can't remember" if "there were other occasions in 2015 or 2016 that [she] purchased M Credits". As the evidence subsequently put to the defendant indicated, the defendant purchased and sold other M Credits in 2015 and 2016 and sought to make money from the transactions. This was another example of how, during cross-examination, she said she could not remember anything about these transactions and denied them until the documentation was put to her. 7. Tcpt, 4 April 2023, p 136(39)-p 138(14) - In a context where the defendant received $52,500 from the plaintiff for the sale of M Credits in January 2017, the defendant was being cross-examined on how much she paid an upper member Jing Hua Liang to purchase the M Credits. The defendant's bank records indicated the defendant paid Jing Hua Liang $47,363, which means the defendant made a profit of about $5,000 on the transaction. Once the defendant realised the purpose of this line of questioning in cross-examination, at Tcpt, 4 April 2023, p 136(39)-p 138(14) she changed her evidence as to additional money she asserted she paid to Jing Hua Liang in this period, giving the explanation "I withdraw cash because they don't want all online transfer" (Tcpt, 4 April 2023, p 136(44)-(46)) and "during that period Jing Hua Liang and her brother went to holiday in Gold Coast" and they asked the defendant to transfer the balance of the payment after their return two weeks later (Tcpt, 4 April 2023, p137(49)-p138(14)). These two explanations are inconsistent with each other, and both are implausible. 8. Tcpt, 5 April 2023, p 184(22)-(48) - In about June 2017, the MFC Platform faced significant financial problems and, shortly afterwards, trading ceased. However, in WeChat messages sent by the defendant to the plaintiff in September 2017, the defendant still tried to persuade the plaintiff to invest up to $200,000 more. She said in cross-examination that in September 2017 she "genuinely believed that one could get long-term profits when investing on the MFC Platform". The defendant admitted in cross-examination that when the MFC Platform crashed in mid-2017, "everything is gone - the bubble is broken": Tcpt, 5 April 2023, p 209(50). That did not stop her continuing to try to persuade the plaintiff to invest up to $200,000 more. 9. Tcpt, 5 April 2023, p 185(33)- p 186(5) - Similarly, in an attempt to support representations in WeChat messages sent by the defendant to the plaintiff in October 2017, the defendant claimed in cross-examination that in October 2017 she believed that "the price of GRC will increase continuously". It is implausible that in October 2017 the defendant held this belief as the Platform had crashed. 10. The defendant was cross-examined on her recollection of her conversation with the plaintiff at the plaintiff's house in December 2015. The defendant frequently initially denied she made a specified representation to the plaintiff but, when confronted with evidence suggesting she made the representation, changed her evidence and said "I can't remember": see for example Tcpt, 5 April 2023, p 187(24)-(36), Tcpt, 5 April 2023, p187(38)- p189(17). The defendant's evidence that she "can't remember" is probably true, in which case each of her initial denials were false evidence. 11. Tcpt, 5 April 2023, p 198(39)- p 202(8) - The defendant stated at (Tcpt, 5 April 2023, p 198(39)-(40)) that "even in 2015 ... I start to try to get my money back as soon as possible". This evidence was inconsistent with the plaintiff's affidavit evidence (Tcpt, 5 April 2023, p 201(19)-(23)) When this was pointed out, the defendant then changed her evidence and said "I can't remember" (Tcpt, 5 April 2023, p 202(8)). 12. Tcpt, 5 April 2023, p 205(37)-(38) - The defendant said that "after 2017 I still set up some more account in MFC account". However, the defendant had also given evidence that when the MFC Platform crashed in mid-2017, "everything is gone - the bubble is broken": Tcpt, 5 April 2023, p 209(50). It is impossible to reconcile these conflicting statements. 13. Tcpt, 5 April 2023, p 218(41)- p 221(20) - The defendant initially denied that she ever received cash payments from investors in return for selling them M Credits: Tcpt, 5 April 2023, p 218(41)-(43). However, once the defendant was confronted with the evidence, she accepted that she sometimes received cash payments: Tcpt, 5 April 2023, p 221(16)-(20). It is likely that the defendant knew and recalled when first asked about this that she sometimes received cash payments. 14. The defendant states in her affidavit at [17] that she invested "a further $20,000 to buy points" on the MFC Platform. The defendant stated at least twice in cross-examination that she made this investment in 2018: see Tcpt, 4 April 2023, p 129(11)-(12) and Tcpt, 6 April 2023, p 270(40)-(44). Since trading on the MFC Platform ceased in about June 2017 at which point "everything is gone" (Tcpt, 5 April 2023, p 210(50)), the defendant's evidence that she invested a further $20,000 after this point in time is implausible.

Conclusions concerning credit

1. The plaintiff had a good recollection of the events and conversations, as opposed to the defendant, who had significant memory issues and who failed to set out evidence in reply to the plaintiff's description of events (such as what happened in the restaurant at Burwood). Her evidence is consistent with the WeChat messages which cover the period from shortly before the second investment until the final confrontation between the parties. The plaintiff gave evidence in a straightforward and frank manner, making concessions where appropriate. The only error she made was to misdescribe the source of the funds for the first investment and I have accepted her explanation for this.
2. The defendant had a poor recollection and contradicted her own evidence on several issues, as Mr Zipser set out in the list of unsatisfactory evidence he provided which is set out above. She did not answer the WeChat post issues at all, beyond denying that any aspect of the WeChat correspondence in any way reflected what was said during the conversations between the parties. Her demeanour while saying this was all a game and that she had made her wealth elsewhere was that of a person who found these proceedings a waste of time over sums she appears to regard as trifling. Her WeChat posts contain sly hints to having fun and about how she has "several good projects, all based on the mentality of playing" (CB 98).
3. Taking all of the above into account, I accept the plaintiff as a witness of credit and accept her description of events as to what has occurred. I would not accept the evidence of the defendant on any issue unless there was independent corroboration from a reliable source. As is set out above, the contemporaneous documentation supports the plaintiff's version of events.

The relevant principles of law

1. For the reasons explained in Xuan v Xu and as set out in Mr Zipser's written submissions of 27 September 2022 (after proceedings were adjourned to enable the parties to consider this issue), the plaintiff may advance a claim for misleading conduct either under ss 18 and 236 of the ACL (by application in New South Wales pursuant to the Fair Trading Act) or under ss 12DA and 12GF of the ASIC Act. As previously noted, in Xuan v Xu findings were made under both statutes, and I propose to do the same.
2. The question of whether representations about investing money in the MFC were made "in trade or commerce" is addressed in Xuan v Xu at [250]-[251] and [281]. The parties agree that these statements of principle are correct but, if they had not, I would have set out the principles in the same manner as those set out by Halley J. Nor is there any dispute as to whether the representation was made "in relation to financial services" for the purpose of s 12DA.
3. The general principles as to whether representations are misleading or deceptive are set out by Halley J in Xuan v Xu at [252]-[256]: 1. Whether or not conduct is misleading or deceptive, or is likely to mislead or deceive, is to be determined by having regard to the respondent's conduct as a whole, viewed in the context of all relevant facts and circumstances at the time the conduct takes place: Google Inc v Australian Competition and Consumer Commission (2013) 249 CLR 435; [2013] HCA 1 at [6]-[15] (French CJ, Crennan and Kiefel JJ). 2. The phrase "likely to mislead or deceive", does not require proof that anyone was actually misled or deceived. The test is objective. 3. Conduct is likely to mislead or deceive if there is a real or not remote possibility of a person being misled (as opposed to mere confusion). 4. When considering the speech and/or conduct, the central question is whether the impugned speech and/or conduct, viewed as a whole, has a sufficient tendency to lead a person exposed to form an erroneous assumption or conclusion about some fact or matter. 5. Where it is an individual who alleges misleading and deceptive conduct, that conduct should be assessed in respect of that individual, including the factual circumstances surrounding the conduct: Butcher v Lachlan Elder Realty Pty Limited (2004) 218 CLR 592; [2004] HCA 60 at [37] (Gleeson CJ, Hayne and Heydon JJ).
4. I also note his Honour's observation at [273] that there is no material difference in the expressions "false or misleading" and "misleading and deceptive" in terms of their legal application.
5. I also adopt his Honour's observations as to future representations. Some of the representations pleaded here are "future matters" (s 4 of the ACL and s 12BB of the ASIC Act) and the explanation of these matters as set out in Samsung Electronics v LG Electronics (2015) 113 IPR 11 at [84] is accepted by the parties. This means that if the defendant made a representation with respect to a future matter (for example, that while other platforms suddenly disappeared, MBF was "so great" that for a small sum of money the plaintiff would receive "long term profit": CB 95), ss 4 and 12BB have the effect that the defendant did not have reasonable grounds for making the representation, the representation is misleading. The defendant is taken not to have had reasonable grounds for making the representation unless evidence is adduced to the contrary. The defendant did not adduce any evidence from which any rational inference could be drawn that she had reasonable grounds. Nor, for that matter, did she adduce any evidence that any of the representations were not misleading or deceptive. She simply denied making them at all (or, alternatively, could not recall the events in question).
6. There are two sets of representations, namely those made in December 2015 and those made in 2016.

The December 2015 representations

1. As to the December 2015 representations, Mr Zipser, in his written submissions, has set out the principal misrepresentations as being the following: 1. Investment was risk-free (particular 12(h); see paragraph 25 of the statement of claim). 2. Investors would get the principal back in 18 months (particular 12(e); see paragraph 26 of the statement of claim and paragraph 20 of the plaintiff's affidavit). 3. Investors earn good returns (particular 12(i); see paragraph 27 of the statement of claim). 4. The plaintiff had herself invested more than $200,000 in MFC (particular 12(j); see paragraph 28 of the statement of claim). 5. MFC profits from its business were used to make distributions to its investors (particular 12(k); see paragraph 29 of the statement of claim and paragraph 20 of the plaintiff's affidavit). 6. The defendant would reimburse the plaintiff if she lost money (particular 12(l)); see paragraph 30 of the statement of claim and paragraph 18 of the plaintiff's affidavit.
2. Judging by the Table provided as an attachment to the defendant's submissions of 4 July 2023, I assume that the defendant not only denies making all these representations as well as the other representations in that Table, and also denies that those representations are misleading, although no evidence was led to this effect.
3. The making of each of these representations is supported by the affidavit and oral evidence of the plaintiff, which I have accepted and preferred to that of the defendant, as well as by the contents of the WeChat statements made by the defendant.

The 2016 representations

1. A summary of these representations is made by Mr Zipser as follows: 1. Investing continued to involve no risk (particular 15(a); see paragraph 36 of the statement of claim). 2. Investors continued to make lots of money (particulars 15(b) and (c); see paragraph 37 of the statement of claim). 3. The plaintiff would get her principal back within represented time frames (particular 15(d); see paragraph 38 of the statement of claim). 4. The company running MFC had additional businesses to generate income (particular 15(f); see paragraph 39 of the statement of claim). 5. The amounts the defendant said she had invested in MFC (particulars 15(g) and (h); see paragraph 40 of the statement of claim). 6. Representations about the ongoing safety of the plaintiff's $21,000 investment in MFC (particular 15(i); see paragraph 41 of the statement of claim). 7. Representations about the investment of the plaintiff's money in MFC (particular 15(j); see paragraph 42 of the statement of claim).
2. As is the case with the December 2015 representations, it is unclear from paragraphs 7 and 15 of the defence whether the defendant simply denies making these representations but concedes that, if they were made, they were misleading, or whether she denies that they were misleading. As is the case with the December 2015 representations, I have assumed the former.
3. Every one of these representations is corroborated by the contents of the defendant's WeChat messages. In addition, some are obviously false on the facts, such as the defendant's representations (CB 96) about how much she was investing and how much money she was making on the platform. Her WeChat message about being able to gift three properties to her daughter and use a withdrawal of "2 million" (which I assume were GRC withdrawals) to pay off mortgages of "other investment properties" paints a picture of the defendant making staggering profits. She also boasts of her other financial coups which she says are so time-consuming she cannot spend more time on MFC, such as her investment of one million CNY in Falconaire, a "big business/big investment" (CB 94) which would become $720,000 after 20 months. (Although Falconaire is another widely recognised Malaysian Ponzi scam which collapsed in 2017 (Wan v Ji [2022] NSWDC 269), the defendant was not cross-examined about her other financial activities, so I draw no conclusions about her recommending Falconaire to the plaintiff, other than to note that this was the defendant's explanation for not investing more in MFC).

Reliance

1. The plaintiff must prove that she relied on the relevant representation as a matter of fact (Lloyd v Grace, Smith & Co [1912] AC 716; Briess v Woolley [1954] AC 333; Commercial Banking Co of Sydney Ltd v R H Brown & Co (1972) 126 CLR 337) and, if those factual matters are established, that her reliance upon the representations was reasonable (Tepko Pty Ltd v Waterboard (2001) 206 CLR 1; [2001] HCA 19 at [47]).
2. A common thread in Mr Bell's submissions on both the ACL and ASIC claims as well as the alternatively pleaded negligence claim was that the plaintiff had only herself to blame because the profits (and indeed the whole scheme) were so obviously unlikely that no rational person could be taken in by them. Courts are, however, well aware of the deployment of carefully crafted powers of persuasion used in these scams, aimed at tapping into the uncertainties and insecurities of ordinary members of the community such as the plaintiff in these proceedings. This point was made by Stevenson J in Mackinnon as plaintiff representative of 153 plaintiff group members v Partnership of Larter, Jones, Miraleste Pty Ltd t/as USG Partner and Johnson, t/as "STC Sports Trading Club" (No 8) [2019] NSWSC 1658 (appeal dismissed: Johnson v Mackinnon (No 2) [2022] NSWCA 22) at [75]: "The inherent improbability of a representation made under the Australian Consumer Law may be relevant to the question of whether the statement is "of such a nature as would be likely to provide…inducement" (to adopt the words of Wilson J in Gould v Vaggelas) to the representee in question. But in a case where, as here, the extravagant representations were, as I find, made for the precise purpose of inducing gullible investors to part with their money, the Court would be slow indeed to reject the evidence of persons such as Mr Mackinnon to whom the representations were directed."
3. Stevenson J added at [84] - [86]: "It may be that Mr Mackinnon was gullible to accept the extravagant claims made in the Proposal. A more sophisticated or sceptical person in Mr Mackinnon's position may have not been persuaded by the claims made in the Proposal to invest in STC. However, I am satisfied that the matters stated in the Proposal were, in fact, matters which caused Mr Mackinnon to make his investment and, to return to Wilson J's words, were "of such a nature as would be likely to provide such inducement". I am therefore satisfied that Mr Mackinnon invested in STC "because of" the statements in the Proposal and thus "because of" Ms Johnson's misleading or deceptive representation that the statements in the Proposal were true."
4. I am similarly satisfied that the plaintiff, who was in a similar position as Mr Mackinnon, has established, in relation to each of the transactions, that she relied upon the representations of the defendant, each of which I find were not only made, but were also misleading and deceptive, in circumstances where it was because of these statements, and only because of them, that the plaintiff invested in the MFC Platform.

Conclusions concerning the claims for misleading or deceptive/false or misleading conduct

1. I am satisfied for the reasons set out above that each of the representations made on each occasion was not only misleading or deceptive but also, for the purpose of the ASIC Act, false or misleading. Those representations relate to at least of or more of the quality, value, performance characteristics, uses and/or benefits of the MFC Platform.
2. I am satisfied that individually as well as cumulatively these representations materially - indeed, entirely - contributed to the loss suffered by the plaintiff. I am satisfied that the representations made by the defendant were the sole reason for the plaintiff's investment. It was never made clear what sources, if any, other than the defendant that the plaintiff had consulted, such as the MFC website, during the brief few weeks between the first representations and the first investment. The plaintiff was residing in China for all but very short periods in 2016 and again in 2017 and there is no evidence about what information (if any) there was about the MFC Platform in China, a country notorious for its control of the internet. The origin of the MFC Platform was Malaysia, not China.
3. Accordingly I am satisfied that in making each of the representations the defendant, in trade or commerce, engaged in conduct in relation to financial services that was misleading or deceptive (or was likely to do so), in contravention of s 12DA of the ASIC Act and that the plaintiff suffered the loss and damage pleaded; she is thereby entitled to damages pursuant to s 12GF of the ASIC Act.
4. I am also satisfied that the defendant made false or misleading representations that financial services were of a particular quality and performance level which was in contravention of s 12DB of the ASIC Act resulting in damages pursuant to s 12GF.
5. I also formally find that the defendant engaged in conduct which was misleading or deceptive (or likely to be so) in contravention of s 18 of the ACL and that the plaintiff is entitled to damages pursuant to s 236.
6. Before dealing with the issue of quantum I set out my findings in relation to the alternate claim for negligent misrepresentation.

The claim for negligent misrepresentation

1. The plaintiff pleads that a duty of care in respect of economic loss was owed as follows: 1. The defendant made the representations for the purpose of inducing the plaintiff to commit financially to an investment on the basis that the representations were true. 2. The defendant assumed responsibility towards the plaintiff in recommending a financial investment. 3. The plaintiff relied on the representations. 4. It was reasonable for the plaintiff to rely on the representations. 5. The defendant had a financial interest in the plaintiff relying on the defendant's representations.
2. As to the first tranche of representations, particulars of the breach of duty of care, in the form of making representations which were false and/or without reasonable grounds are set out at paragraphs 57 - 68 of the statement of claim and, as to the second, at paragraphs 71 - 84. Particulars of reliance and loss are also provided.
3. The defence consists of blanket denials and it is unclear from the pleading whether the defendant denies owing the plaintiff a duty of care. At paragraph 114 of his written submissions of 13 June 2023, Mr Bell states that duty of care is denied but supplies no further information in the two sentences of his submissions which follow.

Duty of care

1. Gleeson CJ, Gummow and Hayne JJ stated in Tepko Pty Ltd v Water Board at [47]: "The statement of principle by Barwick CJ in Mutual Life & Citizens' Assurance Co Ltd v Evatt regained vitality after the consideration in Shaddock of the reasoning of the majority in the Privy Council in the Evatt litigation. In his judgment, Barwick CJ referred to various features of the special relationship in which the law will import a duty of care in utterance by way of information or advice. They were restated by Brennan J in San Sebastian Pty Ltd v The Minister. Two of the points made by Barwick CJ are of immediate significance for this appeal. The first is the statement that: "the speaker must realize or the circumstances be such that he ought to have realized that the recipient intends to act upon the information or advice in respect of his property or of himself in connexion with some matter of business or serious consequence". The second is that: "the circumstances must be such that it is reasonable in all the circumstances for the recipient to seek, or to accept, and to rely upon the utterance of the speaker. The nature of the subject matter, the occasion of the interchange, and the identity and relative position of the parties as regards knowledge actual or potential and relevant capacity to form or exercise judgment will all be included in the factors which will determine the reasonableness of the acceptance of, and of the reliance by the recipient upon, the words of the speaker."
2. The relevant principles have recently been considered by the Court of Appeal in Anchorage Capital Master Offshore Ltd v Sparkes [2023] NSWCA 88 where the Court stated the following at [266]: "The myriad relevant factors that inform whether a duty of care arises include foreseeability of harm to the plaintiff; vulnerability of the plaintiff to harm from the defendant's conduct (including the capacity and reasonable expectation of a plaintiff to take steps to protect itself); reliance by the plaintiff upon the defendant; any assumption of responsibility by the defendant; proximity (in a physical, temporal or relational sense) of the plaintiff to the defendant; the existence or otherwise of a category of relationship between the defendant and the plaintiff; the existence of conflicting duties; and conformance and coherence in the structure and fabric of the common law."
3. I have not accepted the defendant's claim that the plaintiff somehow initiated the conversation about investing of any kind. I am satisfied that the defendant brought the topic up because she wanted to persuade the plaintiff to invest in a scheme and thereby earn herself a 10% commission. She owed the relevant duty when she made the misleading and deceptive statements orally in December 2015 and during 2016 and repeated their contents in her WeChat messages thereafter. In those circumstances, all of the criteria identified in Tepko Pty Ltd v Water Board are made out. Those representations included referring to her Economics degree from Peking University, which was a statement designed to persuade the plaintiff that the defendant was very knowledgeable about such matters and also her statements in the WeChat message of 13 March 2017 that the MFC Platform was not a Ponzi scheme (CB 92); the opening words of this message ("You need to understand this platform") convey a clear message that the defendant is knowledgeable in these matters whereas the plaintiff is not.
4. Accordingly, I am satisfied that the defendant owed a duty of care to the plaintiff.

Breach of Duty

1. I apply the factual findings set out above. Each of the representations, individually as well as collectively, amount to a breach of duty of care.
2. I am satisfied that the defendant breached that duty by making the representations pleaded in circumstances where she knew or ought to have known of their falsity and where she in fact boasted of being aware of the truth and of regarding investment in this risky enterprise as a game and as part of what she called "the mentality of playing" (CB 98).

Causation and loss

1. The plaintiff relies upon s 5D of the Civil Liability Act 2002 (NSW) which provides as follows: 5D General principles (1) A determination that negligence caused particular harm comprises the following elements - (a) that the negligence was a necessary condition of the occurrence of the harm (factual causation), and (b) that it is appropriate for the scope of the negligent person's liability to extend to the harm so caused (scope of liability). (2) In determining in an exceptional case, in accordance with established principles, whether negligence that cannot be established as a necessary condition of the occurrence of harm should be accepted as establishing factual causation, the court is to consider (amongst other relevant things) whether or not and why responsibility for the harm should be imposed on the negligent party. (3) If it is relevant to the determination of factual causation to determine what the person who suffered harm would have done if the negligent person had not been negligent - (a) the matter is to be determined subjectively in the light of all relevant circumstances, subject to paragraph (b), and (b) any statement made by the person after suffering the harm about what he or she would have done is inadmissible except to the extent (if any) that the statement is against his or her interest. (4) For the purpose of determining the scope of liability, the court is to consider (amongst other relevant things) whether or not and why responsibility for the harm should be imposed on the negligent party.
2. The evidence shows that the plaintiff would not have made the investments she did without the defendant making the representations that I have found her to have made, as set out above. Those representations were not only relied on at the time of the investments but were continuing. As the WeChat messages demonstrate, each time the plaintiff expressed concern, that concern was dismissed, and each time the plaintiff asked her to help take the money out of the investment (which the plaintiff was unable to do herself), the defendant fobbed her off with further false statements.
3. Causation has therefore been established.

Contributory negligence

1. Although not referred to in the defendant's statement of issues or during oral argument, the defendant's submissions of 4 July 2023 (referring to paragraphs 16, 17 and 18 of the defence) raised this issue in relation to the claim for negligent misrepresentation, raising what was asserted to be the factually similar case of Tomasetti v Brailey [2011] NSWSC 1446. Mr Tomasetti, a Senior Counsel, claimed his accountant made representations about investments which the trial judge referred to as "astounding" and as demonstrating that he was "as negligent as [the defendant] was alleged to have been" (at [817] - [818]). Mr Bell submits that the representations made by the defendant, if made, were "too good to be true" and that a reasonable person would have "made inquiries of financial professionals and sought professional advice" as well as monitoring those investments and selling some or all of them to recover what she could.
2. The first observation I would make is that any claim of contributory negligence would be relevant if the plaintiff's claims under the ASIC Act and the ACL fail entirely. Contributory negligence was not available as a defence under those claims, and a plaintiff is entitled to rely upon that cause of action which produces the most favourable results for him or her (Perpetual Trustee Company Ltd v Milanex Pty Ltd (in liq) [2011] NSWCA 367 at [84] - [89]).
3. As to the findings in Tomasetti v Brailey in relation both to claims of negligent advice and contributory negligence, these were fact-specific and, in the case of Mr Tomasetti, directed to a plaintiff with exceptional skills in terms of investment knowledge, who had never made any inquiry whatever. However, his wife, who did not have such skills, was in fact successful in her appeal and awarded damages (Tomasetti v Brailey [2012] NSWCA 399; Tomasetti v Brailey [2013] NSWSC 1282); her actions and knowledge are more comparable to that of the plaintiff in these proceedings. If anything, it is the defendant who has high qualifications of the kind possessed by Mr Tomasetti.
4. One of the reasons Mr Tomasetti lost is that he did no research of his own, with the result that the court found that he was as reckless as his advisor. The plaintiff was in a difficult position in relation to research, as she was in China for most of the relevant period, and there is no evidence as to what information would have been available to her there apart from the WeChat discussion group of which she became a member in 2016. When the plaintiff did do some research on Chinese internet websites, the defendant told her she did not understand. In particular, the plaintiff asked the defendant early on in their WeChat exchange: "Have you heard about Ponzi scheme in history [sic]? Check it in Baidu. Distribution must be supported by performance of an entity of business. Will this system use the money (CB 92) from person [sic] entered later to the person who entered earlier?"
5. The defendant, in her somewhat condescending reply, stated categorically that it was not a Ponzi scheme, adding that if it were, she would "never" have told the plaintiff about it: "You need to understand this platform, it is connected with more and more real industries. I have shopped for [sic] many times. I do not consider it as a Ponzi scheme. If so, I would never have told you." (CB 92)
6. This description of "shopping" in the message set out in the previous paragraph is best explained by the WeChat message on CB 91, where the defendant says the points can be "used for shopping". The defendant is saying that the scheme is not a Ponzi scheme because it is connected to "real industries" with products that could be bought or sold. The MFC Platform collapsed because it was a Ponzi scheme, something I have found was known to the defendant more or less from the beginning of her involvement with the Platform.
7. Moreover, the plaintiff made numerous attempts to recover her investment by asking the defendant to help, as she could not access her accounts herself. The defendant had a different excuse on each occasion for not doing so, ranging from the claim that there were "many incredible things in the future" (CB 92) to stating that an alumni from Tsinghua University (the other top university in China) had recently invested $AU300,000, adding that she has another friend who "invested $AUD150,000 [sic] and became million [sic: should be "millionaire"] immediately, after distribution became $1,900,000." Even in July 2018 she is still claiming that money cannot be withdrawn because "the platform is adjusting" (CB 101). She tells the plaintiff that withdrawal is easy and she was able to recoup her own initial investment in "about half [a] year" (CB 97), the inference being that the plaintiff will get her principal back soon. With all this reassurance, it is no wonder that the plaintiff's response is to accept her advice and say "sure, I will listen to you" (CB 93).
8. The WeChat conversations demonstrate a sustained effort by the defendant to mislead the plaintiff and to prevent her from withdrawing her money.
9. I am satisfied that no claim for contributory negligence can be made out.

Quantum

1. The loss suffered is particularised as follows: "45 By reason of the defendant's breach of section 18 of ACL as pleaded above, or s 12DA of the ASIC Act as pleaded in the alternative above, the plaintiff has suffered loss and damage, being: (a) the amount of $21,000 the plaintiff gave to the defendant in January 2016; and (b) amounts totalling $92,500 the plaintiff gave or transferred to the defendant in January 2017. less $16,784 which has been repaid to her, such sum being $96,716.00."
2. In his submissions of 4 May 2023, Mr Zipser revises the sum claimed to $96,716.00. There is no challenge to the mathematics of this amount.
3. I was not addressed on interest or costs and grant liberty to apply.

Orders: 1. Judgment for the plaintiff for $96,716. 2. Costs and interest reserved, with liberty to apply. 3. Exhibits retained until further order.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 02 November 2023