Pacific Shoji Pty Ltd v Xia

1. [1]

   McCOLL JA: I agree with Leeming JA’s reasons and the orders his Honour proposes.

2. [2]

   LEEMING JA: Pacific Shoji Pty Ltd appeals from part of a judgment of the District Court in the amount of $268,739.14 plus interest of $52,926.17 in favour of the plaintiff, Ms Helen Rong Xia, following a trial of some 8 days: Xia v Pacific Shoji Pty Ltd [2017] NSWDC 161. Ms Xia was a former employee who sued her former employer claiming certain contractual entitlements. The two largest components of the judgment were claims for commission for finding a buyer for a factory in Dover, Tasmania ($150,000) and for the repayment of a loan of RMB300,000 (calculated, at the time judgment was entered, as AUD$57,972.01). Pacific Shoji had also brought a cross-claim against Ms Xia, but obtained a judgment of only $7,195.27 (plus interest of $1.777.01) in its favour. Its claim for damages for breach of contract or alternatively breach of fiduciary duty, in the amount of $117,865.98, was rejected.

3. [3]

   Grounds 1 and 2 of Pacific Shoji’s appeal challenge the finding that Ms Xia was entitled to be repaid RMB300,000 lent by her to it. Grounds 3 and 4 challenge the finding that Ms Xia was entitled to commission on the sale of the Dover factory. Ground 5-8 challenge the rejection of Pacific Shoji’s cross-claim for breach of contract and breach of fiduciary duty. Given the quantum of Pacific Shoji’s clams relating to the loan, the commission, and its cross-claim, its appeal is as of right: District Court Act 1973 (NSW), s 127.

4. [4]

   It was conceded at the conclusion of the hearing that grounds 7 and 8 (the grounds based on the rejection of the alleged breaches of fiduciary duty) could rise no higher than Pacific Shoji’s contractual claim, and counsel for Pacific Shoji did not address those grounds orally in chief. In light of some of the potential complexity which was touched on in the course of argument, he responded in reply:

5. [5]

   Given the additional complexities attending the claim in equity in light of the limitations upon the jurisdiction of the District Court, there is no occasion to deal with those grounds.

6. [6]

   No point was taken in this Court, or appears to have been taken at first instance, as to the jurisdiction of the District Court hearing and determining claims which were essentially commercial: cf the decisions noted in Australian Wholesale Meats (Sydney) v S&R Cool Logistics Pty Ltd [2018] NSWSC 1541 at [7]. There is no need to pause to consider whether, and if so how, this Court needs to satisfy itself that a judgment of an inferior court is within jurisdiction, for such doubts as there were have been resolved, with retrospective effect, by the amendments made by item 1.16[1] of Schedule 1 of the Justice Legislation Amendment Act (No 3) 2018, which is taken to have applied on and after 2 February 1998: see the amendments made by item 1.16[3].

7. [7]

   Each of Pacific Shoji’s challenges to the loan, the commission and the breach of contract turns on the reviewability of the primary judge’s assessment of the documentary and testimonial evidence at trial. Before turning to those grounds, it is convenient to say something in general terms about the trial conducted by the primary judge.

Overview of the trial

1. [8]

   The primary judge delivered a judgment of 274 paragraphs following an eight day trial in which there were numerous issues – many more than arise in this appeal. Her Honour made it clear that she regarded the quality of the advocacy during the trial as of “the highest standard” (at [15]), but nonetheless was confronted by a series of difficulties. These included:

   1. (1)

      the deficiencies in both parties’ pleadings, and the taking of points which should not have been taken in litigation to which s 56 of the Civil Procedure Act 2005 (NSW) applies;

   2. (2)

      the fact that documentary discovery was non-existent or only belatedly provided;

   3. (3)

      the fact that both of the main witnesses, namely, Ms Xia and Pacific Shoji’s managing director Mr Chris Spurrier, had formerly been involved in a romantic relationship and held grudges against each other, which the primary judge stated had the effect of multiplying the number of disputed factual issues;

   4. (4)

      the fact that Pacific Shoji’s business involved the preparation of false documentation (the euphemism “dummy invoices” was deployed) in order to permit Chinese clients to avoid or minimise customs duties;

   5. (5)

      the fact that each of Ms Xia and Mr Spurrier acknowledged they had lied to the other.

2. [9]

   The primary judge summarised some of these difficulties at [14], referring to Ms Xia, Mr Spurrier and the latter’s wife Ms Sonia Klaric (who was also ill-disposed to Ms Xia):

3. [10]

   Her Honour added at [62]-[63]:

4. [11]

   The primary judge saw each of those witnesses cross-examined at length. Her Honour’s reasoning as to credit was elaborate, but need not be reproduced or summarised here. She concluded at [65]-[66] as follows:

5. [12]

   There was no challenge to the unfavourable assessment of the credit of Mr Spurrier and Ms Klaric, nor to the relatively favourable, albeit qualified, assessment of the credit of Ms Xia.

6. [13]

   Further, one reason for the length of the trial was the multiplicity of issues. Much of her Honour’s judgment is taken up by the determination of issues which are not sought to be agitated on appeal. These included the non-payment by Pacific Shoji of Ms Xia’s entitlements as an employee to salary and leave (at [68]-[116]). They also include the rejection of some of Ms Xia’s claims (including to a profit share from a factory in Guangzhou and reimbursement for some business expenses) at [117]-[124]; there is no cross-appeal. It is unnecessary and therefore inappropriate to summarise any of these matters.

7. [14]

   The balance of these reasons take the following form. They first summarise the background, but only insofar as it is necessary to address the limited challenge made by Pacific Shoji on appeal. They then deal with the three issues, as to the findings of a loan, the claim to commission, and the rejection of Pacific Shoji’s cross-claim.

Factual background

1. [15]

   There was no challenge to any of the findings of primary fact made by the trial judge reproduced in the following section of the judgment.

2. [16]

   Pacific Shoji is an Australian company. Its shareholders are Mr Chris Spurrier (its sole director and a witness) and his parents. It exports live and frozen seafood, principally to China.

3. [17]

   Ms Xia started working part time at the Pacific Shoji’s factory in Taren Point, in southern Sydney, on a casual basis, in 2003 while she was completing a post-graduate degree. She and Mr Spurrier also commenced a romantic relationship. Although initially her job involved packing seafood products, she progressed to becoming a sales manager selling seafood to Asian countries and earning a salary of around $2,000 per month.

4. [18]

   In December 2004, Ms Xia accepted a full-time position as Pacific Shoji’s sales manager in Yantian, China. She continued in this position until April 2005. Her romantic relationship with Mr Spurrier apparently ended during this period. She gave evidence that although she worked for Dell Computers and later a company she described as “Industrial Scientific” between 2005 and 2007, she also “worked casually for Shoji throughout this period of time between May of 2005 and the start of 2007”. She maintained that she continued to have feelings for Mr Spurrier and that he continued to telephone her.

5. [19]

   In October 2005, Pacific Shoji sold its plant at Taren Point. The primary judge found that Ms Xia assisted in arranging the sale as part of her then position in Pacific Shoji, and earned a commission of $10,000, although she was no longer at that time a permanent employee. The primary judge regarded this as significant, because of the similarity with the claim for commission of the Dover Factory. Her Honour noted at [40]:

6. [20]

   In August 2007, Ms Xia accepted the full-time position as “Pacific Shoji China Manager”. She was stationed in China and managed sales to Chinese customers and to other Asian markets. A contract sent to her shortly thereafter stated that her salary was AUD60,000 including a AUD10,000 accommodation allowance. It also stated that she was entitled to commission of (inter alia) AUD0.50/kg for sales of live lobster, although subject to achieving a certain threshold, and it seems that in relation to sales of live lobster, Ms Xia did not achieve that threshold (at least, Mr Spurrier’s evidence was to that effect, and no submission based on commission for sales of live lobster was made in this Court).

7. [21]

   Two aspects of that employment are relevant to the evidence adduced at trial and the issues raised on appeal. First, sometimes Ms Xia and Mr Spurrier communicated by email, sometimes they exchanged text messages, and sometimes they spoke with each other. However, at least some of the communications between Ms Xia in China and Mr Spurrier in Australia were via what Ms Xia termed “Skype conversations” and Mr Spurrier described as “MSN chat conversations”. Whether or not two different applications were used does not matter for present purposes. But in any case, the conversations were written, and resemble an exchange of SMS messages. The messages were exchanged in real time, and are accompanied by a time stamp. The result is a document recording the exchanges and the time each message was sent (although it is unclear in some cases to which time zone reference is made). Documents recording some of those exchanges were tendered. In litigation where there was so much dispute as to the facts, it was natural that these records assumed some significance, because both parties accepted that they accurately recorded what each had written to the other at the time.

8. [22]

   In some cases, the same exchanges were reproduced in quite different formats in annexures to the affidavits of Ms Xia and Mr Spurrier. In these reasons, the messages exchanged by the parties (replete with spelling and other errors) have been reproduced verbatim, but in a common format.

9. [23]

   Secondly, during this time Pacific Shoji used Ms Xia’s personal bank account to conduct business in China. Ms Xia would collect payments from some of the company’s customers and remit those payments to Pacific Shoji from her personal account. There was a dispute at trial as to how this came about. At [49], the primary judge preferred the explanation given by Ms Xia, holding that Ms Xia was “reluctant to participate but did so because she did not have a choice”, accepting the following portion of Ms Xia’s evidence:

10. [24]

    As will be seen below, a great deal in this litigation turns on two shipments of Southern Rock Lobsters made in January 2012, just before Chinese New Year (which was a time of peak demand for the product). The redirection of these shipments comprise (a) the reason given for Ms Xia’s termination and (b) the quantum of Pacific Shoji’s claim for damages. Further, the denouement that Ms Xia had diverted both of those shipments from one relatively favoured customer to another disfavoured customer and had concealed this from Mr Spurrier took place shortly before Ms Xia advised that she had found a buyer for the Dover factory. It is necessary to deal with these shipments in some detail.

11. [25]

    The primary judge found that Pacific Shoji had “some good customers and some unreliable ones”: at [182]. Mr Spurrier had given evidence that Mr Chen Chang Qing, known as Tony Chen, was a “good customer” who had a good track record of prompt payment, while Mr Hang Hai Wei Hang, known as Tim Wang, was a “bad customer”. (Both men seem to have purchased through corporate entities, but it will be convenient to follow the language used by the parties and refer to Mr Chen and Mr Wang as the purchasers.) Mr Wang was regarded as a slow payer. There was evidence that it had taken many weeks and a meeting in Shanghai for him to pay for a large shipment of 1903kg made in January 2009. By January 2012 he owed Pacific Shoji approximately $58,000.

12. [26]

    Invoice 5146 identified 45 boxes of live Southern Rock Lobsters weighing 802.42 kg being shipped from Melbourne to Hong Kong on QF29 on 17 January 2012, for a price of $69,588.80 to Champion Trading Co. The air waybill was to the same effect. The primary judge stated that Champion Trading Co was a “transport company” which customers would use from time to time as the consignee on an air waybill: at [184]. However, the primary judge stated at [184] that:

13. [27]

    This seems to have been effected through a late change, instigated by Ms Xia, to the consignee identified on the invoice and air waybill. There was an exchange between Ms Xia and Mr Spurrier on 16 January between 12:59 and 1:06 as follows:

14. [28]

    (The reference to “SEGA” is to be understood as Sega Transport, the original consignee which was replaced by Champion Trading Co.) Consistently with what was said in that exchange, there was tendered an email from Ms Xia to Mr Spurrier recording the bank account transfer details for a transfer of AUD19,200 into Pacific Shoji’s Commonwealth Bank account in Middle Brighton dated 17 January 2012. The interbank transfer gave the description “INV 5146 PARTIAL PREPAY”. Mr Spurrier gave evidence that “neither Tony, nor any other Pacific Shoji customer had ever made a partial pre-payment for a shipment of produce”. The unpaid difference between the $69,588.80 and the $19,200 paid to Pacific Shoji is $50,388.80.

15. [29]

    Turning to the second shipment, on about 19 January 2012, there was a written exchange between Ms Xia and Mr Spurrier between 6:20 and 6:29 as follows:

16. [30]

    There was a second invoice, invoice 5153, issued by Pacific Shoji and dated 20 January 2012, for another shipment of 45 boxes of live Southern Rock Lobster to Hong Kong on QF29. Consistently with the conversation, there were 20 boxes of live Southern Rock Lobster grade C, 20 of grade D, and 5 of grade E, all at a stated price of AUD83 per kg. This time the weight was 812.96 kg and the price was $67,477.34. The air waybill was, once again, made to Champion Trading Co. On this occasion, the invoice was made to “Chen Chang Qing” (which is to say, Tony Chen).

17. [31]

    The primary judge found that, once again, Ms Xia made arrangements, without informing Mr Spurrier or Pacific Shoji, to divert that shipment so that it was delivered to Mr Wang’s company. Her Honour found at [185] that “[a]gain, without informing Pacific Shoji or Mr Spurrier, the plaintiff made arrangements with Mr Wang’s company and the shipment was delivered to HHWH.”

18. [32]

    In cross-examination, Ms Xia gave the following evidence:

19. [33]

    There were peculiarities in both invoices. Both misspelt “facsimile” and gave different telephone and fax numbers for Pacific Shoji. The former requested payment “upon receipt of INVOICE”, the latter “upon receipt of product”. The former identified a National Australia Bank account in Melbourne, the latter a Commonwealth Bank account in Middle Brighton, Victoria. The prepayment for the former invoice was paid into the Commonwealth Bank account, not the National Australia Bank account. And it seems odd that invoices of the same produce on the same Qantas flight to the same customer three days apart would have such differences.

20. [34]

    The answer may lie, at least in part, in the fact that both Ms Xia and Mr Spurrier accepted that both of these shipments were “fully smuggled”. That description was used by Ms Xia to describe shipments which were sent to Hong Kong or Vietnam, and from there taken into China without being declared in order to avoid the payment of customs duties.

21. [35]

    “Fully-smuggled” shipments were contrasted with what was described in the evidence as “the semi-illegal aspect” of Pacific Shoji’s business, whereby seafood was shipped directly to China, but with Pacific Shoji providing “dummy” (which is to say, fraudulent) invoices with a lesser price so as to reduce the payment of import duties.

22. [36]

    Ms Xia gave this evidence of these two shipments in an affidavit:

23. [37]

    In her verified defence to cross-claim, Ms Xia admitted that she had advised Pacific Shoji to issue documents in the name of Champion, and added that:

24. [38]

    Mr Spurrier was cross-examined about a practice of transporting produce to Vietnam or Kuala Lumpur. In the latter case, it was “re-tanked and then exported under Ausseafood’s label, so that would make them of Malaysian origin and then could be imported into China under the free trade agreement between Malaysia and China”. He accepted that this was “a way of achieving higher prices because of the lower duties”. Indeed, he gave evidence in his own affidavit that “for a fee, Ausseafood would repackage the lobster as ‘Malaysian’ origin and re-export the lobster to China”. In cross-examination, Mr Spurrier was unsure of the name of the company in Hanoi which performed the same function, but appeared to accept that the mechanism was the same.

25. [39]

    The primary judge also reproduced the following cross-examination of Mr Spurrier (at [52]-[53]) concerning “semi-smuggled” shipments.

26. [40]

    The primary judge made a finding as to why Ms Xia was prepared to use her own bank account and to process “dummy” invoices at [64]:

27. [41]

    Mr Spurrier described the practice of rendering “dummy invoices” as endemic in the industry. Whether or not that is so is neither here nor there for present purposes. I shall call these invoices fraudulent invoices, because that is what they are. They are a knowingly false statement, describing a transaction different from the true transaction, issued with the intention that the recipient will pay less import duty than the recipient was required to pay. Although they may have been issued at the customer’s request, they were also issued with the intent that Pacific Shoji could charge a higher price. They were supplied to Ms Xia who fully knew that they were intended to be used to defraud Chinese customs. Diluting or disguising this as a “dummy invoice” is wrong, although it might salve the consciences of the participants. Fraud should be called out for what it is.

28. [42]

    However, there was no illegality defence, nor any pleading of unclean hands in response to Pacific Shoji’s equitable claim. The issues arising on appeal do not require the making of any other findings of unlawful conduct, or the contravention of any criminal law, by any of the parties or witnesses.

29. [43]

    Mr Spurrier gave evidence that in February 2012, he began to get “very concerned” about the outstanding invoices owed by Mr Chen and Mr Wang. He said that according to Pacific Shoji’s accounts, Mr Wang owed three amounts totalling some $140,000 in respect of tax invoices dated 5 January 2012 ($58,833.31), 20 January 2012 ($18,456.78) and 24 January 2012 ($64,210.51), while Mr Chen owed money on six invoices, including invoices numbered 5146 and 5153, totalling approximately $388,000. Mr Spurrier flew to China to meet both men. He met Mr Wang, although he only told him that he would “try and pay as soon as I can.” He failed to meet Mr Chen who, so Ms Xia informed him, had had to leave the area for business purposes and would be unable to meet Mr Spurrier. The upshot was that Mr Spurrier had not secured payment of any of the amounts either of the two men owed.

30. [44]

    Ms Xia gave evidence that in April 2012 she had informed Mr Spurrier that Mr Wang had been arrested for import duty evasion. She also informed him that there was a “big customs crackdown” and that “customers have switched off phones. They are concerned about being traced.” Soon after, Ms Xia told Mr Spurrier that Mr Chen had also been arrested. The effect of the arrest of Pacific Shoji’s customers was that there were outstanding invoices of amounts owed to Pacific Shoji which were not being paid.

31. [45]

    In mid-January 2013 Ms Xia told Mr Spurrier that Mr Wang was out of jail, but that his financial position was not good. Ms Xia said that she then told Mr Spurrier words to the following effect:

32. [46]

    It is convenient to defer dealing with the evidence relating to the loan which Ms Xia claimed she had made to Pacific Shoji until addressing grounds 1 and 2 below.

33. [47]

    The primary judge found at [137] that in July 2010, Mr Spurrier asked Ms Xia whether she could find a buyer and offered to pay her “10% on the sale price up to $1 million, and then 20% for anything up to $2 million”. That was not the agreement upon which the sale ultimately turned, although it serves to explain why Ms Xia thereafter advertised the factory for sale at her own cost, and, in March 2013, she mentioned the sale to a customer known to Mr Spurrier, Mr Hanxiong Cai. It does not appear to have been disputed that Ms Xia also paid for Mr Cai’s flight from China to Tasmania to inspect the factory. It was accepted that in about June 2013, Ms Xia participated in that inspection trip in which Mr Cai was also shown Pacific Shoji’s operations in Victoria and South Australia.

34. [48]

    On 5 October 2013, Ms Xia and Mr Spurrier had a Skype exchange concerning the sale of the factory. It took place between 8:01 and 8:03 on 5 October 2013, after Ms Xia had referred to a possible purchaser of the Tasmanian factory:

35. [49]

    On 24 October 2013, Ms Xia sent a message on WeChat to Mr Spurrier that said:

36. [50]

    Ms Xia said she received no response, and so sent an email on 25 October, reiterating her messages, and concluding “Please contact me. The offer won’t be there forever”.

37. [51]

    On 25 October 2013, Ms Xia’s employment was terminated. Pacific Shoji said that it did so on the basis of the lies Ms Xia had told about the sales of seafood to Mr Tim Wang, as disclosed in the “confession” Skype exchange of 20 October reproduced below. Mr Spurrier said that he did not believe that Ms Xia had found a genuine buyer for the factory. Ms Xia regarded her termination as a consequence of her telling Mr Spurrier that she had finally found a purchaser for the Dover property.

38. [52]

    The steps taken to recover the indebtedness (including, so far as Mr Spurrier was concerned, from Mr Chen relating to invoices 5146 and 5153) may be passed over. The following very lengthy exchange, dated 20 October 2013, led to the termination of Ms Xia’s employment. It is best to reproduce it in its entirety (as did the primary judge at [213]). Reference will be made below to the passages in bold when addressing the grounds of appeal.

39. [53]

    In cross-examination, Ms Xia gave this evidence:

40. [54]

    On 25 October 2013 Pacific Shoji dismissed Ms Xia by letter in the following terms:

41. [55]

    Ms Xia ceased working thereafter, and was not paid her salary and accrued entitlements in full.

42. [56]

    On 4 May 2014, Ms Xia registered a caveat on the Dover property, and on 20 June 2014 she filed the statement of claim in the District Court commencing the present proceedings. On 28 July 2014, the agreement for the sale of the Dover factory to Mr Cai’s company was concluded. More detail of the steps taken to effect that sale is given when dealing with grounds 3 and 4.

The challenge to the finding of a loan (grounds 1 and 2)

1. [57]

   The entirety of the reasons of the primary judge addressing Ms Xia’s claim for repayment of a loan were at [125]-[132] as follows:

2. [58]

   (The reference to the “first three categories above” is a reference to Ms Xia’s claims, upheld by the primary judge and unchallenged on appeal, for payment of unpaid salary, leave and superannuation entitlements.)

3. [59]

   Pacific Shoji criticised the reasons of the primary judge, and maintained that there was insufficient evidence to establish that there was a loan.

4. [60]

   Pacific Shoji submitted that the only documentary basis Ms Xia had to rely upon is an email she sent to Mr Spurrier in May 2014 making the assertion the funds were hers personally. Her email to Mr Spurrier copied to a solicitor said:

5. [61]

   Pacific Shoji submitted that that email should be treated with caution as it was sent seven months after Ms Xia’s employment was terminated and that it was contradicted by two other pieces of evidence.

   1. (1)

      The first was an exchange on 3 July 2013 between Ms Xia and Mr Spurrier between 11:44 and 11:47:

   2. (2)

      There followed a series of statements by Mr Spurrier between 11:55 and 12:38. There was no response from Ms Xia until some 7 hours later. Pacific Shoji submitted that it was clear that Mr Spurrier did not agree that the RMB300,000 received from Mr Wang was to be treated as Ms Xia’s personal funds.

   3. (3)

      Secondly, Pacific Shoji submitted that in her affidavit of 22 October 2015, Ms Xia had effectively confirmed that she had accepted Mr Spurrier’s request in the July 2013 discussion that the funds received be treated as Pacific Shoji’s. Her evidence was:

6. [62]

   In response, Ms Xia submitted that on a fair reading of the whole of the evidence, her case was made out. She submitted (correctly) that she did not respond to Mr Spurrier’s statement in the 3 July exchange reproduced above, and that the affidavit fell short of an admission, because of the obligation she felt to Mr Spurrier, as well as being inconsistent with her demand in May 2014.

7. [63]

   Ms Xia submitted that the appropriate manner of dealing with the evidence was to assess it as a whole, together with consideration of the negative credit findings of the primary judge in relation to the director of, and chief witness for, Pacific Shoji, Mr Spurrier. She submitted that the totality of the evidence was that the funds were paid as a loan to Pacific Shoji and that where the parties’ stories differed, the primary judge’s credit findings ought to be accepted.

8. [64]

   It was accepted that there had been a transfer of RMB300,000 from the respondent’s personal account to Pacific Shoji. The transfer of RMB100,000 seems to have been the subject of an interbank transfer dated 18 September 2013 and on 20 October 2013 (the same day as the “confession” conversation), Ms Xia sent an email to Mr Spurrier with the subject “tim 100krmb=17492aud” and the message “pls apply to inv 5146”. It is not entirely clear when the RMB200,000 was transferred; both parties seemed to accept that that amount had been transferred to pay rent directly to an offshore landlord, apparently discharging Pacific Shoji’s obligations. I shall proceed on the basis, favourably to Ms Xia, that that was a transfer to the benefit of Pacific Shoji.

9. [65]

   The primary judge with respect correctly observed that the burden lay on Ms Xia to prove her case: at [130]. In order to make out that case, Ms Xia needed to establish more than the fact that Pacific Shoji had received funds from her personal account. She needed to establish to the civil standard the elements of a contract.

10. [66]

    Neither the pleading nor her submissions descended to any detail as to the terms of the loan, and I proceed on the basis, favourably to Ms Xia, that the loan was repayable on demand. I also proceed on the basis that it was interest free (Ms Xia did not claim any interest pursuant to an agreement).

11. [67]

    The primary judge made no findings of primary fact identifying when Ms Xia and Pacific Shoji agreed that the RMB300,000 would be lent and repaid. The gravamen of the reasons appears to be that the fact that Ms Xia transferred RMB300,000 of her own money of itself is sufficient to give rise to an entitlement to its repayment. With this I cannot agree. Although the circumstances are highly unusual, this is a case where, as the primary judge found, an employee who was a selling agent in China was required to pay from her own funds for sales made by her for which funds had not been received from the buyer. There is nothing to suggest that the payments were temporary loans, such that Pacific Shoji ultimately bore the solvency risk if a purchaser failed to pay. There is nothing to suggest that Pacific Shoji regarded the payments from Ms Xia as being loan funds, rather than the proceeds of sales.

12. [68]

    Although Ms Xia is correct to submit that she did not agree, in the exchange of 3 July 2013, to treat the payment as the direct payment of a customer’s debt, that does not discharge the burden borne by her of establishing that there was a promise by Pacific Shoji to repay funds to Ms Xia.

13. [69]

    It is true that Ms Xia gave testimonial evidence, years after the event, of conversations in which Mr Spurrier was said to accept or acknowledge that she had lent money to Pacific Shoji. For example, Ms Xia said that on 16 May 2014 she and Mr Spurrier had had a conversation in the following terms:

14. [70]

    This Court has not had the advantage of seeing Ms Xia give evidence. However, there is no reason to doubt the qualified assessment of her uncorroborated testimonial evidence given by the primary judge, and in any event, neither party invited this Court to do so.

15. [71]

    In respect of her claim to be repaid the RMB300,000, this was not merely a case where Ms Xia’s testimony was unsupported by contemporaneous documentation (which was the position for those of her claims which the primary judge rejected). The contemporaneous documents were inconsistent with an entitlement to be repaid. In particular, the “confession” exchange of 20 October 2013 refers repeatedly to Ms Xia paying 300k back to Pacific Shoji (“i got 300k from tim .... I have paid u”; “I paid you back ... 100k and 200k”) without any suggestion of this being a loan. Rather it was expressed by Ms Xia to be a payment to Pacific Shoji from funds she had received from Mr Wang, to whom she had covertly redirected the lobsters originally intended to be sold to Mr Chen.

16. [72]

    I would conclude that the claim that the RMB300,000 was a loan has not been made out, and that these grounds of appeal are established.

Commission for the sale of the Dover factory (grounds 3 and 4)

1. [73]

   The primary judge dealt with Ms Xia’s claim for commission under six headings, at [150]-[170], which may be summarised as follows (using the headings deployed by her Honour).

2. [74]

   First, under the heading “Was there an agreement to pay commission?”, the primary judge found that under cross-examination Mr Spurrier conceded that the agreement and its essential terms were provided by the Skype conversation referred to above. He also agreed that Mr Cai, whom Ms Xia had located, had purchased the factory.

3. [75]

   The matters under the second and third headings were not re-agitated on appeal. Secondly, under the heading “What was the sale price of the factory?”, Mr Spurrier maintained that the sale price was $1.3 million, because rent of $150,000 plus a management fee of $75,000 were distinct. Her Honour observed that this was contrary to the Skype exchange. The third point (“The identity of the seller”) reflected Ms Xia’s cross-examination on the basis that the vendor was unconnected with Pacific Shoji. However, contracts for the sale of business, and the sale of land, were executed by Pacific Shoji (and signed by Mr Spurrier). The primary judge noted that the submission anticipated by the cross-examination was withdrawn, and (with a measure of understatement) that “it was not a meritorious argument to have put”: at [155].

4. [76]

   The fourth point raised before, but rejected by, the primary judge was that “The sale of the factory occurred after termination of the plaintiff’s employment”. The primary judge rejected Pacific Shoji’s submission that Ms Xia was only entitled to commission if the sale was achieved while her employment was in place. The principal submission in support of these grounds of appeal was derived from this point.

5. [77]

   Fifthly, a pleading point was taken, and rejected, fairly elaborately, by the primary judge at [164]-[167].

6. [78]

   Although this Court was taken to the pleading, and it was said that the allegations were “at a level of generality” (transcript, 27 June 2018, p 31), I did not understand the point to be renewed on appeal. If that be wrong, I see no error in the approach taken by the primary judge.

7. [79]

   The sixth and final point was addressed under the heading “The sale price is $1.3 million, not $1.5 million”. This submission turned on the propositions that Ms Xia was only entitled to commission if the sale price was $1.5 million or more, and that the sale of business was to be disregarded from the contemporaneous sale of the land. The primary judge rejected the submission, concluding at [170]:

8. [80]

   Pacific Shoji relied on the finding at [150] as to the terms of the contract, expressly based upon the exchange in October 2013, to demonstrate that if there was a contract pursuant to which Ms Xia was entitled to commission, it was a contract whose terms were to be found in that exchange. In writing (but, so far as I can see, not in oral submissions) it was said that “the terms as discussed on 5 October 2013 were insufficiently certain to bring about a binding contract.” The main submission, both in the written and oral submissions, was that any contract could not merely be one that paid a commission as a “spotter’s fee” but rather required Ms Xia to have been personally involved in achieving a price of $1.5 million. This was the significance of the relevant conversation being that of October 2013. It was submitted that:

9. [81]

   It was then submitted that Ms Xia was not involved in any of the negotiations about price, all of which occurred after 25 October 2013, and that what had occurred was that Mr Cai had chosen merely to rent for six months, subsequent to which he bought the factory. In reliance on what was said in Moneywood Pty Ltd v Salamon Nominees Pty Ltd (2001) 202 CLR 351; [2001] HCA 2, it was submitted that it was necessary for Ms Xia to establish that she was an effective cause of the sale of the factory at a price of at least $1.5 million. As it was put orally:

10. [82]

    Ms Xia accepted that the terms of the contract were that a commission of 10% was payable only if a price for the “factory” exceeding $1.5 million was reached. That occurred, so long as the separate sale of the business for $275,000 is included in addition to the $1.3 million for the land and Crown lease. Although the point had been taken at trial, it did not appear to be agitated on appeal. If it had, I see no error in the primary judge rejecting it in the manner that occurred: what was being sold was not merely the land, but also the business conducted on the land, and it is truly so obvious that it goes without saying that the agreement as to commission was based on the price achieved by all of the assets associated with the Dover factory, not merely the real property.

11. [83]

    I would also reject Pacific Shoji’s written submission that the Skype exchange was insufficient to give rise to contractual obligations. The exchange has been reproduced above. I see no error on the part of the primary judge, who saw the parties give evidence, and saw and heard the way in which Ms Xia earned and was paid a commission for the sale of the Taren Point property, in concluding that the above exchange, parts of which were light-hearted, nonetheless gave rise to a binding contract. It is to be borne in mind that the exchange happened at a time when the purchaser had visited the site (apparently at Ms Xia’s expense) and was plainly interested in a purchase. The latter portion of the exchange made it plain that there was a reference to “not just an empty factory – its export business capabilities”, which included regulatory approvals; this confirms the appropriateness of adding the price for the sale of business.

12. [84]

    The principal point raised on appeal was that this was not a “spotter’s fee” or “finder’s fee” contract, but instead that the respondent needed to be involved in achieving the sale, rather merely than being the effective cause of the sale. That is quite different from the submission made to the primary judge, which was that because the sale occurred after Ms Xia’s employment had been terminated, she was not entitled to commission. That submission is readily rejected, especially (as the primary judge noted) in light of what had occurred with the earlier sale of the Taren Point premises.

13. [85]

    The more refined submission advanced on appeal must also be rejected, as one which had not been advanced at trial and cannot fairly have been advanced on appeal, in accordance with the principles described in Coulton v Holcombe (1986) 162 CLR 1; [1986] HCA 33. It is unnecessary to express any view as to whether the termination was caused by the lies she had told Mr Spurrier about the shipments to Mr Wang, or by a desire to avoid paying commission (or both). If the question is whether Ms Xia was the effective cause, notwithstanding the termination of her employment, that gives rise to different factual considerations which were not explored at trial. This was raised during the hearing in this Court:

14. [86]

    These matters were not explored by the primary judge, because no submissions were made in relation to them. It would be quite unfair for Pacific Shoji to succeed on a basis different from all six of the bases advanced by it at trial, by pointing to the absence of findings of Ms Xia’s involvement in the transaction which ultimately eventuated with the purchaser she had introduced, in circumstances where the absence of findings may have been attributable to the way the case was run a trial.

15. [87]

    These grounds of appeal are not made out.

Pacific Shoji’s cross-claim (grounds 5-8)

1. [88]

   Pacific Shoji had relevantly sought an order for damages or equitable compensation in the amount of some $117,865, which the primary judge rejected. That amount comprised the sum of the unpaid $50,388 owed on invoice 5146 (allowing for the receipt of $19,200) and $67,477 on invoice 5153. These were the invoices for “fully smuggled” shipments into Hong Kong (with the intention that they would be smuggled into mainland China without paying import duty) as to which Ms Xia lied to her employer and caused to be delivered to Mr Wang rather than to Mr Cheng.

2. [89]

   Pacific Shoji pleaded as a breach of employment contract claim that there were implied terms of duty and fidelity which the plaintiff breached by representing that she had sent the two shipments in question to the good customer (Mr Chen) when in fact she had sent them to the bad customer (Mr Wang) and that she had covered up her conduct in sending these shipments to the bad customer by a series of lies.

3. [90]

   The primary judge concluded that Ms Xia’s conduct “does not amount to breach of contract”: at [225]. Her Honour said that Ms Xia was:

4. [91]

   Her Honour also stated that Ms Xia was under pressure to make sales, and did not act for her own personal financial gain, and that the conduct was using “the name of one customer for goods ordered by another”. Her Honour said at [227]:

5. [92]

   It was accepted in this Court that Ms Xia lied to her employer about the sales. There is no reason to doubt that she did so, at least in part, because she knew that Mr Spurrier did not wish to make more sales to Mr Wang. There may have been other reasons contributing to her decision.

6. [93]

   This is not to excuse the treatment which the primary judge found was received by Ms Xia from Mr Spurrier, which no employee should receive. I am also conscious that both Ms Xia and Mr Spurrier were engaged in unlawful transactions. But that does not mean that an employee is free to lie to his or her employer about a material aspect of the employee’s work on behalf of his or her employer.

7. [94]

   In Concut Pty Ltd v Worrell [2000] HCA 64; 75 ALJR 312 at [25]-[26], Gleeson CJ, Gaudron and Gummow JJ said:

8. [95]

   An attempt was made in submissions to defend the reasoning of the primary judge:

9. [96]

   Contrary to the conclusions of the primary judge, and the submissions made in this Court on Ms Xia’s behalf, I would regard this as a case of breach of contract. There is no reason to doubt, not least from the “confession” exchange, that Mr Spurrier lost confidence in his China-based sales agent when she “confessed” that she had lied to him about sales, and that Ms Xia appreciated that that would be his reaction.

10. [97]

    The reasons of the primary judge in this respect are abbreviated. They do not contain the findings which are required in order to accept Ms Xia’s submission outlined above. As was evident from the Court’s questions during the hearing, the finding for which Ms Xia contended has, with respect, an air of unreality about it. Its premise is that Mr Tony Chen rejected the first shipment of lobsters (invoice 5146), leaving Ms Xia to find another purchaser. According to Ms Xia, Mr Chen rejected the shipment when he inspected it. It follows that this occurred after the exchange between Ms Xia and Mr Spurrier on 16 January concerning the late change to the paperwork when she told her employer “TONY ASK TO USE CHAMPION THIS TIME”. Thus, on Ms Xia’s case, this was a shipment where (a) details and price had been agreed before 16 January, (b) there was a late change instigated by Mr Chen shortly before despatch and (c) subsequently, on its arrival in Hong Kong, Mr Chen rejected the shipment, leaving it to Ms Xia to find another purchaser. Let all that be assumed. Where did the $19,200 received by Pacific Shoji on 17 January 2013 come from? Ms Xia told Mr Spurrier that that money came from Mr Chen, yet on her case he never received any product. Further, it is clear that 3 days later, on 19 January 2012, Ms Xia was unequivocally confirming that she had sold the second shipment (invoice 5153) to Mr Chen (the exchange includes “CS: IS THT CONFIRMED FOR TONY TO HK? HX: YES SAT TONY 20C 20 D 4-5E”). On her case, that was after Mr Chen had rejected the first shipment.

11. [98]

    The primary judge considered that there was “real doubt” about whether Ms Xia’s statements to Mr Spurrier about Mr Chen wanting shipments were true”: at [211]. However, for the purposes of resolving this appeal, it is not necessary to go further. Even if the entirety of Ms Xia’s account of what occurred in the third week of January 2012 be accepted, there is no escaping the fact that, as McColl JA observed during the hearing, Mr Spurrier although he travelled to China was unable to meet with Mr Chen. It is inconceivable that he did not have in mind precisely what each of Mr Chen and Mr Wang at that point owed Pacific Shoji. It is inconceivable that Ms Xia did not know as much. There can be no doubt that Ms Xia concealed from Mr Spurrier the identity of the actual recipient of both shipments for many months, until the “confession” exchange. It is plain from the “confession” exchange of 20 October 2013 that Ms Xia well appreciated that Mr Spurrier would be displeased when he discovered that the shipments had been sold to Mr Wang rather than Mr Chen.

12. [99]

    True it is, as Ms Xia submitted, that it was at least arguably within the scope of her authority to reallocate or redirect shipments. However, assuming that to be so, her conduct in concealing from Mr Spurrier that most of the debt was owed by Mr Wang, rather than Mr Chen, in circumstances where Mr Spurrier was so concerned that he flew to China to attempt to see both men, was conduct destructive to the necessary trust and confidence that was required of an overseas-based sales employee, thereby breaching an implied term of her contract of employment (which had been pleaded in Pacific Shoji’s cross-claim and admitted in Ms Xia’s defence to cross-claim).

13. [100]

    This was not a case where a company’s products were sold to a different purchaser, about which an employee told a lie which had no impact upon the employer or its business. This was a case where a company’s products were sold on credit to a different purchaser, being a purchaser which, to the knowledge of the employee, had a poor credit history and which in fact has failed to pay for the goods.

14. [101]

    For those reasons, and contrary to the finding of the primary judge, I consider that Pacific Shoji established that there was, at the least, a breach of contract by Ms Xia in failing to disclose to Mr Spurrier that in fact she had redirected the first and second shipments to Mr Wang.

15. [102]

    However, and to be fair, the likely reason for the absence of detailed findings of fact by the primary judge on this issue is that her Honour dealt more elaborately with what she described as “the real problem for the cross-claim, namely that the plaintiff’s conduct has not led to any loss”: at [228], because there was “no evidence that the money is unrecoverable from Mr Wang, who has signed a statement acknowledging his indebtedness”.

16. [103]

    For completeness, I note that an attempt was made in Pacific Shoji’s written submissions to regard the way this issue was treated by the primary judge as based on novus actus interveniens and mitigation, neither of which had been pleaded. On a fair reading of her Honour’s reasons (including what is said in [228], the headings preceding [229] and especially [255] “Conclusions concerning causation” and what was said at [255] and the ultimately conclusion at [261]:

17. [104]

    There were in theory two possible ways in which causation for Pacific Shoji’s claim for damages could be established. The first is that if there was a breach by Ms Xia in selling to Mr Wang, without informing Mr Spurrier that she was doing so, then the sales would not have been made and Pacific Shoji would have sold the shipments at the same price to a customer who would have paid. The second, for which is it sufficient for Pacific Shoji to establish a breach by Ms Xia in concealing from Mr Spurrier the fact that she had caused sales to be made to Mr Wang, was that Pacific Shoji, had it known earlier, could have recovered payment from Mr Wang, but by reason of the delay, was now no longer able to do so.

18. [105]

    I understood the gravamen of Pacific Shoji’s submissions on appeal to be directed to the second basis, being the basis which corresponds with the breach I have found to have been established. However, for the purpose of resolving these grounds of appeal, it may be assumed (favourably to Pacific Shoji) that Ms Xia lied to Mr Spurrier at the time the first and second shipments were despatched, and that that too amounted to a breach of contract, for it may readily be seen that no separate loss caused by that breach was made out.

19. [106]

    This first way of formulating the case was that if it had been known that sales were to be made to Mr Wang, they would have been made to other purchasers from whom recovery was less difficult. The only evidence adduced in support of sales being made to another purchaser was some testimonial evidence from Mr Spurrier. That is insufficient, even putting to one side the difficulties associated with such inevitably self-serving counter-factual evidence on reliance, having regard to the unchallenged adverse findings as to Mr Spurrier’s credit. More importantly, as will be seen below, it is inconsistent with the actual sales summarised by Mr Spurrier in his own affidavit.

20. [107]

    I turn to the claim for losses caused by the breach which I am satisfied occurred. The starting point is what is established objectively. This may be summarised as follows.

21. [108]

    First, in addition to a sale to Mr Wang on 5 January, Pacific Shoji made further sales to Mr Wang on 20 and 24 January 2012, in the amounts of $18,456.78 and $64,210.51 respectively. Ms Xia pointed to these as an answer to the case. In reply, Pacific Shoji acknowledged their force. The later two shipments are powerful evidence of a preparedness to sell at Chinese New Year prices to Mr Wang on credit.

22. [109]

    Secondly, although Mr Chen and Mr Wang were regarded by Pacific Shoji as carrying different solvency risks, the fact of the matter was that Pacific Shoji was prepared to sell, and did in fact sell, shipments of product to them on credit, thereby accepting the solvency risk. Both Mr Chen and Mr Wang were, to the knowledge of Pacific Shoji, purchasers who were attempting to avoid Chinese customs duties. With the benefit of hindsight, it is known that both men were arrested shortly afterwards. Neither paid promptly.

23. [110]

    Thirdly, Mr Spurrier’s own evidence was that:

24. [111]

    Fourthly, there is no suggestion that there was some other purchaser, who was prepared to pay cash for product which, despite its being frozen, was presumably perishable. There was evidence from Mr Spurrier that the original difficulty with Mr Wang was that he had, in 2009, sought to reduce the payment on a shipment because of a mortality claim, which Pacific Shoji rejected because the inspection took place after the time allowed by Pacific Shoji. That confirms the readily drawn inference that the product was perishable. And there seems to have been no issue that Pacific Shoji sought to sell in the period leading up to Chinese New Year in order to capture the higher prices that could then be achieved.

25. [112]

    Fifthly, Pacific Shoji has the benefit of Mr Wang’s undertaking to pay. Mr Spurrier gave evidence that Mr Wang undertook to pay him orally, and Mr Wang has signed an undertaking to do so, which was tendered before the primary judge. Her Honour noted at [256] that:

26. [113]

    In oral submissions, Ms Xia adopted a slightly more nuanced approach, reflecting the second way in which Pacific Shoji might establish causation:

27. [114]

    That submission acknowledges the reality that Pacific Shoji was prepared to sell product, on credit, to overseas customers, who to its knowledge were involved in attempts to evade their obligations to pay import duties. Doing so led to Pacific Shoji being the unsecured creditor of those purchasers. That is precisely the situation in which it remains today, based on Mr Wang’s written and oral promises to pay.

28. [115]

    Against this, Pacific Shoji pointed to the fact that there was some evidence that Mr Wang had funds available to pay Ms Xia who helped him pay some other of his debts. Ms Xia gave evidence that she had personally paid some of his debts, and he had repaid her. That does not assist Pacific Shoji. Mr Wang regarded Ms Xia as having been poorly treated by Pacific Shoji, a perception borne out by this litigation. The fact that Mr Wang repaid Ms Xia, who had used her own funds on his behalf while he was in gaol, does not support the conclusion that Mr Wang would have paid Pacific Shoji, which had poorly treated his friend and benefactor Ms Xia.

29. [116]

    Otherwise, there was no evidence of Pacific Shoji’s inability to sue Mr Wang or his company, whether in China or in Australia, nor of his inability to meet the obligation which he accepted he owed.

30. [117]

    It follows that no sufficient case has been advanced to establish that Pacific Shoji has suffered loss by being denied the chance to obtain payment from Mr Wang earlier, in 2013 or 2014. For those reasons, Pacific Shoji has failed to show error in the principal conclusion which was dispositive of its cross-claim, namely, that Ms Xia’s breach of contract was not causative of the loss. As noted at the outset of these reasons, it was accepted that the claim for breach of fiduciary duty could go no higher than the claim in contract.

Orders

1. [118]

   The result is limited success for Pacific Shoji, confined to grounds 1 and 2. The judgment of damages of $268,739.14 (exclusive of interest) should be reduced by $57,972.01, resulting in a judgment of $210,767.13 (exclusive of interest) in favour of Ms Xia.

2. [119]

   The materials in the appeal books do not disclose how interest was calculated. However, it should be a straightforward matter for so much of the pre-judgment interest as was attributable to the $57,972.01 component of the judgment to be deducted from the $52,926.17 of interest which was ordered at first instance. The orders below will provide for this to be computed by the parties.

3. [120]

   In light of the multiplicity of issues at trial, Pacific Shoji’s limited success on appeal does not warrant an alteration to the exercise of the discretion of costs at first instance, for Ms Xia still emerges with a substantial judgment in her favour.

4. [121]

   The costs of the appeal are another matter, although they will be very significantly smaller than the costs at trial. I am also conscious that these parties have a proven capacity to engage in disputation, which tends against an order dividing costs by issues, such that Ms Xia should pay Pacific Shoji’s costs of grounds 1 and 2 of the appeal, and Pacific Shoji should pay Ms Xia’s costs of grounds 3-8 of the appeal; such an order could not be quantified without regard being had to both side’s costs. Taking the broadbrush approach consistently with Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219, Pacific Shoji should pay 60% of Ms Xia’s costs in this Court.

5. [122]

   For those reasons, I propose these orders:

6. [123]

   SACKVILLE AJA: I agree with Leeming JA.