Chen v Chu

1. [1]

   This case is about a thoroughly unscrupulous real estate agent.

2. [2]

   The plaintiffs are members of one family. The defendant is a real estate agent who acted as a senior consultant to a property developer.

3. [3]

   The plaintiffs were looking to buy an apartment in Sydney to live in, and they had enough money to buy it without finance. He introduced them to a penthouse apartment, in a partly constructed development being sold by the developer. They paid a substantial deposit.

4. [4]

   The defendant then induced them to release their deposits on unsecured loan to the developer at a high interest rate. The plaintiffs had to take out a mortgage to complete. [1] He then induced them to purchase 28 apartments off-the-plan from the developer, using the deposit and further deposits they paid. The defendant earned a commission on every sale. He induced them to release those deposits to the developer on unsecured loan for its own use. They ultimately spent over $7 million on these deposits.

5. [5]

   The developer was insolvent throughout and used their money as a part of a Ponzi scheme [2] (or a variation of it).

6. [6]

   Inevitably the developer collapsed. The plaintiffs lost all the money they had released.

7. [7]

   The plaintiffs say that the agent engaged in conduct that was misleading or deceptive or likely to mislead or deceive or made false or misleading representations because of which they suffered damage. They sue him. They succeed.

8. [8]

   Where it is not necessary to distinguish between individual plaintiffs, I will refer to them collectively as the plaintiffs.

9. [9]

   Where I refer to individual plaintiffs or the defendant by their first names, I intend no disrespect.

Ralan

1. [10]

   Ralan Group Pty Ltd (now in liquidation) (Ralan) was a private apartment developer which was founded in 1998. Ralan collapsed on 30 July 2019, when it went into voluntary administration and later was placed into liquidation, owing creditors and investors some $306 million.

2. [11]

   Its managing director Mr William O’Dwyer (O’Dwyer), was subsequently bankrupted and convicted of fraud. He is in prison.

3. [12]

   Where I refer to Ralan or the Group, this includes associated entities which operated under the Ralan banner. Unless it is material to do so, no distinction is drawn between Ralan itself and those entities.

4. [13]

   Ralan (or associated entities) were in the habit of selling apartments “off-the- plan”, that is, apartments which were planned to be, but at the time of sale had not been, built. Ralan sold many apartments to the plaintiffs in buildings which it never built, and never will.

5. [14]

   Ralan had a scheme, dubbed the “Released Deposit Scheme”, which entailed offering purchasers a high interest rate if their deposit was released and lent to Ralan for its own use. It is not in dispute that at least part of the released deposits were used to fund losses and interest payable to other participants in the Released Deposit Scheme.

6. [15]

   The interest was to be paid by crediting the purchaser upon settlement of the purchase. This meant that if there was no settlement there would be no credit. Any benefit to be obtained by the purchaser from the loan was thus contingent on Ralan building the apartments.

Teresa

1. [16]

   The first plaintiff is Su-Hui (Teresa) Chen. Teresa has a degree from Griffith University in international business. She is plainly intelligent. There was evidence about her business experience and activities in which she had been involved. Teresa has a reasonable but manifestly imperfect command of spoken English. I accept her evidence that when reading English documents, she ordinarily uses a dictionary.

2. [17]

   The second plaintiff is the trustee of Teresa’s superannuation fund.

3. [18]

   Teresa gave affidavit evidence and was cross-examined at length. An entirely unjustified and ineffective attack on her credit was made, based largely on an assertion that she underplayed her proficiency in English and her business experience.

4. [19]

   Teresa was a truthful witness and I accept her evidence.

Mrs Lan

1. [20]

   The third plaintiff, A-Kan Chen Lan (Mrs Lan), is Teresa’s mother. She lives in Taiwan, and I infer, is a senior person. She did not testify and there was no evidence as to her proficiency, if any, in English, although, I am prepared to infer that she has little or no English.

2. [21]

   Most of the transactions pertinent to Mrs Lan personally were entered into on her behalf by Teresa acting under a General Power of Attorney, signed by Mrs Lan on 10 March 2018.

3. [22]

   Her husband (Teresa’s father), Wen Chin Chen, was referred to in the proceedings as Uncle Chen. In a note he describes himself as elderly. He too resides in Taiwan and was apparently financially successful there. He appears to have been the ultimate source of a significant part of the money which was lost. I shall refer to him as Mr Chen. I am prepared to infer that he has little or no English.

Tim

1. [23]

   The fourth plaintiff, Xueying Ke (Tim) Edstein, is Teresa’s son.

2. [24]

   At the time of the events which give rise to these proceedings, he was a law student. He is now a solicitor of this Court. He is proficient in spoken Mandarin but does not read the language.

3. [25]

   Tim gave affidavit evidence and was cross-examined at length. In the end (and in something of a shift in position), counsel for Gary described him as an honest witness (which he plainly was). However, counsel sought to impeach his evidence about all of the raft of representations he says Gary made, on the footing that his memory of the specific things he says Gary said has “confused with time and thereby become more partisan against the defendant and more favourable towards the interests of his family”. Given the specificity of Tim’s evidence about what Gary said, it is difficult characterise this submission as anything other than going to Tim’s integrity. There was no legitimate basis for the attack. In any event, I reject it.

4. [26]

   Tim was a truthful witness and I accept his evidence.

Amy

1. [27]

   The fifth plaintiff, Amy Chu Yan (Amy) Edstein, is married to Tim. In her affidavit she describes herself as an event planner. Her participation in the relevant events was limited but not immaterial.

2. [28]

   Amy gave affidavit evidence and was cross-examined briefly. Amy was a truthful witness and I accept her evidence.

Said Jahani

1. [29]

   Said Jahani (Jahani) is a registered liquidator who was appointed as one of the voluntary administrators, and later as one of the liquidators, of Ralan. He provided an expert report in which, amongst others, he opined that Ralan was insolvent from 4 February 2014 and that the entity which in each case sold property to the plaintiffs was insolvent at the time of each sale.

2. [30]

   He was briefly cross-examined. His evidence was not challenged, and I accept it.

Gary

1. [31]

   The defendant, Koon Tung (Gary) Chu, is a real estate agent. He reads and writes Mandarin and English. He holds a Bachelor of Business from the University of Technology Sydney. For some limited time, he worked as a mortgage broker. He has been licensed as a real estate agent in both this State and in Queensland for some years.

2. [32]

   Gary provided services to Ralan, he says, as a contracted agent in his capacity as a director of other companies and, for a short time, as a sole trader. He has been unable to find the retainer agreements he says he had with Ralan. He is clearly intelligent and commercially astute. He has a good command of English for a person for whom it is a second language.

3. [33]

   I observed him in the witness box for an extended period. He was an unsatisfactory witness and by his own admission passed on significant information to the plaintiffs which was false. His excuse was that he was told by Ralan to tell them this. His evidence sits uncomfortably with his own contemporaneous conduct and the inherent probabilities.

4. [34]

   I do not accept his evidence other than where it is corroborated by objective contemporaneous material, or the evidence of the plaintiffs, or it is against his own interests.

5. [35]

   In contrast, the evidence of each of the plaintiffs was entirely plausible and consistent with the objective contemporaneous material and inherent probabilities. Inevitably there were minor differences and inconsistencies between plaintiffs.

6. [36]

   Gary’s only affidavit in the proceedings was affirmed on 2 December 2021.

Australian Consumer Law

1. [37]

   The following sections of the Australian Consumer Law (ACL) are pertinent:

2. [38]

   Sections 18 and 29 are in Chapters 2 and 3 respectively.

3. [39]

   Section 131(1) of the Competition and Consumer Act 2010 (Cth) provides that the ACL only applies as a law of the Commonwealth to the conduct of corporations, not individuals. However, s 28 of the Fair Trading Act 1987 (NSW) provides that the ACL applies as a law of New South Wales. Section 32 of that Act extends the application of the ACL from only corporations to:

   1. (1)

      persons carrying on business within NSW;

   2. (2)

      persons ordinarily resident in NSW; and

   3. (3)

      persons otherwise connected with NSW.

ASIC Act

1. [40]

   The following sections of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act) are pertinent:

Civil Liability Act

1. [41]

   The following section of the Civil Liability Act 2002 (NSW) (CLA) is pertinent:

2. [42]

   Equivalent provisions are contained in pt 2 of the Civil Liability Act 2003 (Qld).

3. [43]

   I have endeavoured so far as is practicable, to recount the relevant events, including conversations, in chronological sequence.

4. [44]

   After buying an apartment from Ralan in a partly constructed development, the plaintiffs purchased off-the-plan in three different proposed developments in Queensland and in one development in Sydney. Relevant events pertaining to different developments sometimes occurred in parallel. For ease of understanding, I have recounted events pertinent to each development separately. This means sacrificing strict chronology to some extent.

5. [45]

   Many conversations recounted by the parties were in, or partly in, the Mandarin language. Significant relevant dealings were via a Mandarin messaging system called Line Chat. Translations of both voice recordings and written messages are in evidence.

6. [46]

   Although it contributes to the prolixity of this judgment, it is necessary to set out the entirety or large parts of many alleged conversations because the false, misleading and deceptive conduct complained of consists of oral representations made by Gary.

7. [47]

   The plaintiffs’ affidavits set out conversations in direct speech, in compliance with the long-standing practice in this State to do so (I have made some observations about the practice below). Each of the conversations is prefaced with the words “to the following effect”. In recounting those conversations, I have omitted those words.

8. [48]

   Gary disagrees with the plaintiffs’ “description of events” in their affidavits and the conversations and communications they say they had with him. Gary’s affidavit of 2 December 2021 does not traverse or respond to particular paragraphs of, or conversations recounted in detail, in the plaintiffs’ affidavits.

9. [49]

   What follows recounts the numerous purchase contracts entered into and deposits released by the plaintiffs under the Released Deposit Scheme. As things progressed, deposits or parts of deposits paid for some properties were “transferred” and used as deposits for other properties. I have not detailed these transfers because it is not necessary to do so. Ultimately, the plaintiffs lost all the deposits they paid and released.

28/10 Drovers Way Lindfield

1. [50]

   In 2013, Gary and Teresa were introduced for the first time. She was looking to purchase an apartment for herself and Tim to live in and for her parents to use when they visited from Taiwan. She was referred to Gary by her friend Jessica.

2. [51]

   Gary says he understood that Teresa’s ability to speak and read English was very good. I observed Teresa giving evidence and being cross-examined in English. She is reasonably proficient, but I have no doubt that she would not understand, without assistance, the terms of a legal document in English (especially a disclaimer written in legalese), or technical or legal speak. In the end result, the level of her English proficiency has little, if any, role to play because she no doubt understood what Gary told her in Mandarin.

3. [52]

   Gary was later introduced to Tim. During 2013 and 2014, Gary would pick Teresa up from her house in Roseville (a suburb on the Upper North Shore of Sydney) and drive her to properties. Gary showed Teresa and Tim various apartments including in Killara and Gordon (both Upper North Shore suburbs), but Teresa and Tim did not consider them suitable. At Gary’s suggestion, Teresa and Tim began considering purchasing “off-the-plan”. Gary says that when they told him that they did not like the apartments he showed them he said:

4. [53]

   Teresa says that Gary said:

5. [54]

   In 2013 and 2014, Teresa went to Gary’s office in Chatswood (also on the North Shore) where he showed her leaflets with the name “Ralan Group”, which depicted properties being developed and being sold. Some of these leaflets are in evidence. They show building activity. It is fair to say that they paint a rosy picture of property prospects in Australia and, in particular, of property on the Queensland Gold Coast.

6. [55]

   Under cross-examination, Tim gave evidence about his own research into purchasing real estate in NSW in 2014. He looked at websites and went to some inspections. He was also cross-examined about the Ralan newsletters. He gave evidence that he received a newsletter every second or third month. He gave evidence that he quickly skimmed them and would have talked to Teresa about what was in them. He was asked about disclaimers which are contained in the newsletters and accepted that Ralan was saying, in simple terms, that “you couldn’t rely on things said about investing in apartments”. He did not agree that he could not rely on anything said by sales representatives, like Gary, about loans to Ralan. He correctly, in my view, characterised the newsletters as talking about property and construction, and mostly about what was happening on the Gold Coast without mentioning the viability or financial stability of Ralan. Whatever else may be said about these disclaimers, they had no effect on Tim’s trust in or reliance on Gary.

7. [56]

   In 2015, Gary introduced Tim to a penthouse apartment in a Ralan development at 28/10 Drovers Way, Lindfield (Lindfield), also on the Upper North Shore, which was then under construction. He said that Gary told him it would probably be finished in about 12 months, that the price and property were good and that if he purchased it that day, he would “make 10% profit in an instant.” Gary denies that he said these words and says that it is not his practice to tell purchasers that they can make a profit buying a property, let alone make a profit “in an instant”. I prefer Tim’s evidence. There are various other instances of Gary holding out that the plaintiffs would make (indeed certainly make) a capital gain.

8. [57]

   Tim phoned Teresa who was in Taiwan at the time, and they made a decision to buy Lindfield immediately. Tim says that after reading through the proposed contract, he asked Gary whether they needed a lawyer to look at the contract. He says that Gary said:

9. [58]

   Gary denies that he said this and maintains that he told them on multiple occasions to get independent legal and financial advice. I do not believe him.

10. [59]

    A recurring theme in Gary’s evidence is that he never gave any advice or made any statement without caveating it with words such as “Ralan Group says” or “Ralan Group informs me”, “William O’Dwyer said”, “it’s up to you to make your own mind up”, and “you need to take your own advice”, and that the plaintiffs were given multiple disclaimers which they read. He takes the position that he was a mere conduit for Ralan.

11. [60]

    As to words such as “Ralan Group says”, not only is it implausible that he used them at all, let alone invariably, but his evidence is contradicted by contemporaneous objective evidence in the form of what he himself wrote and what he said on voice messages. There did not appear to be a single instance where he caveated any statement he wrote or made on a voice message in this way.

12. [61]

    Another example is Gary’s evidence that whenever he gave a contract to the plaintiffs (and other purchasers) he said words to the effect “This is the sale contract documents. You need to read all of them carefully and get your lawyer to explain the documents to you.” His evidence was that every time Tim and Teresa bought in a new development, he said words to the effect “the sale contracts and the deposit loan agreements recommend that you get independent legal advice and financial advice. You should do that.” I find it inherently implausible that he would have told them this over 25 times. I believe the plaintiffs that what Gary said was that the contracts were all standard and a lawyer was not needed until settlement.

13. [62]

    In support of his denial that he discouraged the plaintiffs from hiring lawyers, Gary gave evidence that he referred Teresa to a lawyer to prepare her will and to lawyers to act on the settlement of Lindfield. Preparation of a will is an entirely different exercise to the exchange of “standard contracts” and reference to a lawyer for settlement of Lindfield is consistent with the plaintiffs’ evidence that Gary said they only needed a lawyer on settlement.

14. [63]

    Teresa says Tim called her, told her about Lindfield and they agreed that he should buy it. They discussed whether they had enough money in the bank to cover a deposit and Teresa said they did. They intended ultimately to move in, and they did so.

15. [64]

    On 2 February 2015, Tim signed a contract with Ralan Beaconsfield Pty Ltd for $1,430,000. He paid a deposit of $216,000. The contract for Lindfield may well have been accompanied by (and I proceed on the basis that it was) a document entitled “Client Details” which included the following disclaimer:

16. [65]

    I also proceed on the basis that the contract was accompanied by an “Information Sheet” which included the following notation (although Tim did not accept that this was part of the Lindfield contract – the material in evidence did not establish the position either way):

17. [66]

    At this point began the trouble.

18. [67]

    Prior to this, the plaintiffs had only been interested in acquiring a property to live in. They had the money to pay for it without borrowing. Gary saw that the plaintiffs had a significant amount of cash and took the opportunity to exploit the situation for his own gain.

19. [68]

    Tim says that on the day the Lindfield contract was signed the following conversation between him and Gary took place:

20. [69]

    I interpolate that Gary says that what he said was “William O’Dwyer has said the loans are to be used as part of the funds for development of Ralan Group projects.” He gave evidence that he was at a sales meeting where O’Dwyer said “the loans are to be used as part of the funds for development of Ralan Group projects”. To the extent that there is a difference in meaning between this and what Tim says Gary said, I prefer Tim as to what was conveyed. Once again, I consider it implausible that Gary would have used such prefatory words.

21. [70]

    Tim says he then called Teresa and they had the following conversation:

22. [71]

    Teresa’s version of this conversation is:

23. [72]

    Tim says that Gary phoned to ask whether they wished to release their deposit and get the 15% interest. He was no doubt trying to move things along in that direction. Tim agreed to release the deposit paid on Lindfield to Ralan in return for 15% interest per annum. The transaction for the release of this and other deposits was in the form (mutatis mutandis) of the following letter from the purchaser to O’Dwyer (prepared by Ralan):

24. [73]

    As can be seen, the letter incorporates a personal guarantee from O’Dwyer.

25. [74]

    The named borrower varied, but mostly it seems to have been Ralan Capital Investments Pty Ltd.

26. [75]

    Tim says that later in February 2015, Gary called him, and the following conversation took place:

27. [76]

    Tim says that after this he and Teresa had the following conversation:

28. [77]

    Teresa said that she also had the following conversation in February 2015 with Tim:

29. [78]

    Consistent with the recurring theme of his evidence, Gary says that whenever he was asked by any potential purchaser, including Teresa and Tim, about releasing deposits to Ralan he only ever said words to the effect “the interest the developer offers will be” and then said the percentage interest rate. I do not accept his evidence. It is inherently unlikely that he would have used this type of terminology. In any event, I believe Teresa, Tim and Amy as to what Gary said.

30. [79]

    Between February 2015 and June 2015, Tim paid and signed authorities to Ralan for the release of further “deposits” of $83,000 and $50,000. Each time, a fresh loan agreement was executed.

31. [80]

    Teresa says that in July 2015, she spoke to her father about releasing further money and he told her that she could release the full purchase price to get the 15% interest benefit as detailed by Gary in relation to the purchase of Lindfield.

32. [81]

    After this (but before Lindfield settled), Teresa met Gary at his office in Chatswood where she says Gary advised her to put Lindfield into her own name rather than into Tim’s. She says he told her “It is not good for your son to know too much otherwise the children get spoilt and lazy. They need to learn to go out and earn their own money.” Teresa agreed to do this. She asked him if she needed a lawyer and he said no, it was a simple document, and he would arrange for a lawyer he knew to prepare the document. She just needed to sign. She paid him $400 in cash for the document. She never met the lawyer.

33. [82]

    Gary’s version of this is that it was Teresa’s suggestion and that she said she was worried about the future marriage relationship of Tim and Amy. His version is that he said he respected her decision, but that she would need to work it out with Tim. Gary says he spoke with Louise Johnson, a manager at Ralan, who said Ralan would agree to the change.

34. [83]

    In her affidavit dated 15 March 2022, Teresa deposed that she did not say anything to Gary regarding having any reservations about Tim and Amy’s relationship as they were not engaged at that time. However, in her affidavit of 9 August 2024, she says Gary started a discussion on the topic, and it is possible she also said she was concerned because Tim was living with Amy at the time, and she understood that under Australian law there is a concept of a de facto relationship. Under cross-examination she accepted that she did not want Tim to be the owner because she did not know what would happen in the future in this relationship with Amy. Teresa was criticised as having given inconsistent evidence. If there was an inconsistency it is inconsequential, and openly disclosed by Teresa. She was not challenged on it. In any event, an original intention to have the apartment in her name is not inconsistent with the existence of the supposed concern.

35. [84]

    On 7 September 2015, the contract for Lindfield was rescinded by agreement with Ralan. Teresa was substituted as the buyer. Tim says that he originally signed because Teresa was in Taiwan and there was time pressure to buy. He says that it was always intended that Teresa would be the purchaser. This no doubt reflects his understanding. There was no controversy about the change.

36. [85]

    In September 2016, Gary travelled to Taiwan where he met with Mr Chen and Teresa. After a restaurant lunch, they went to Teresa’s home. Mrs Lan was present. Teresa says that Gary said:

37. [86]

    Mr Chen responded that he would pay the full amount.

38. [87]

    Gary says that before they left, Teresa asked him to explain to her father what Ralan was planning in Surfers Paradise. She said that she was investing money he had given her and would like Gary to explain it to him. He says she mentioned a friend in Taiwan who might be interested in buying a Ralan apartment and suggested that if she bought from Gary, they could share the commission as a reward. As it happens, the friend did not buy.

39. [88]

    Between 7 September 2015 and 14 September 2016, Teresa signed authorities to release further deposits (including “interest” received on prior deposits) paid to Ralan on Lindfield, totalling over $1,000,000.

40. [89]

    On 7 December 2016, Lindfield settled. Teresa received $84,542.67 in “interest” by way of a reduction of the sum payable on settlement.

41. [90]

    Lindfield was the one and only sale contract and loan with any of the plaintiffs which Ralan fulfilled.

Gold Coast “Ruby” and “Sapphire” projects

1. [91]

   Surfers Paradise is on the Queensland Gold Coast.

2. [92]

   Ralan developed a high-rise apartment-hotel development there known as Ruby 1 which opened in November 2018. Ralan had the idea to develop a further three high-rise blocks, to be known as Ruby 2, 3 and 4 respectively, on the site of the Paradise Resort Hotel. It also had plans to develop two further residential apartment towers near Budds Beach in Surfers Paradise, to be known as Sapphire. No construction on Ruby 2, 3 and 4 or Sapphire had begun when Ralan failed. Needless to say, it never did begin.

3. [93]

   Tim says that in about April or May 2015, Gary called him, and the following conversation took place:

4. [94]

   Tim then had a conversation with Teresa:

5. [95]

   Teresa says that between February and May 2015, Gary called her to talk about the Gold Coast projects. He told her that it was a great opportunity to invest. He invited her to his office to talk more about it.

6. [96]

   On one occasion, Gary picked her up from her house and took her to his office, where she says they had the following conversation:

7. [97]

   Gary denies that he ever said to any of the plaintiffs that an apartment would achieve a guaranteed return. His evidence is that on occasion he said to Tim and Teresa the following words:

8. [98]

   I feel no actual persuasion that Gary hedged what he told the plaintiffs in this manner. His conversation does not sit comfortably with what he wrote and what he said in voice messages.

9. [99]

   Tim says that in about April or May 2015, he and Teresa met with Gary to discuss the possibility of buying properties on the Gold Coast. He says they had the following conversation:

10. [100]

    Teresa’s version of what Gary said is:

11. [101]

    Teresa says that as a result of these conversations she believed that there was a great investment opportunity on the Gold Coast and that the 15% interest on the deposits released was a good offer so that they could earn money while the development was being completed. Based on what Gary told her she believed that Ralan was stable and was a good company and she had no reason to disbelieve him.

12. [102]

    Tim says he considered what Gary had said and believed that purchasing apartments in the Gold Coast developments and releasing the deposits for 15% interest was a good investment and that Ralan was a good company on a very successful path.

13. [103]

    The vendor of apartments in Ruby 2 was Ralan Paradise No. 2 Pty Ltd.

14. [104]

    Teresa says that in about early May 2015, Tim and she met with Gary about purchasing on the Gold Coast and Gary said:

15. [105]

    Teresa responded that they wanted to go ahead and asked if, when they signed, they should have a lawyer. Gary replied that the format of the contract was the same, they would just be spending money and would only need a lawyer for settlement.

16. [106]

    On 1 May 2015, Teresa signed a contract for the purchase of Lot 2908 Ruby 2 for $870,000, paying a deposit of $87,000. The Reference Schedule to the contract, makes provision for the insertion of details of the “Buyer’s solicitors”. The words “Represent herself” were written in, presumably by Gary. All in all, she paid deposits on this Lot totalling $441,988 and (save for $100) released it all to Ralan under the Released Deposit Scheme.

17. [107]

    I proceed on the basis that this, and each subsequent sale contract entered into between the plaintiffs and Ralan for the apartments on the Gold Coast, was accompanied by:

    1. (1)

       a document stating that: “[b]y signing below, the Buyer acknowledges having received and signed this cover page and all of the accompanying documents in the order outlined above”;

    2. (2)

       a document entitled ‘Project Statement’ stating:

18. [108]

    Each contract (cl 1.1) contained the following acknowledgment:

19. [109]

    In addition, each contract (cl 6.1(a)) made provision for the purchaser to write in details of any representation or warranty relied on. The space was in each instance struck through with a line. Each contract (cl 6.1(b)) contained acknowledgments from the purchaser of having obtained, or having had the opportunity to obtain, independent advice about the project, the contract and all disclosed materials, and income tax matters. Each contract contained (cl 6.1(c)) an acknowledgement that the purchaser relied on their own independent investigations and advice.

20. [110]

    Each contract (cl 31.1) also contained warranties from the purchaser that it had not relied on or been induced to enter into the contract by any representation or warranty made by the seller, the agent or any other person, it had obtained or had the opportunity to obtain independent advice, and it had relied entirely on its own independent investigations and advice.

21. [111]

    On 11 May 2015, after the contract for Lot 2908 in Ruby 2 was signed, Gary told Teresa that he had another apartment for sale on the Gold Coast. He invited her to his office. She says that he said:

22. [112]

    On that day, she signed a contract to purchase Lot 5104 Ruby 2 for $905,000. In the Reference Schedule, under “Buyer’s solicitor” the handwritten words “Represent myself” appear. She paid a total of $510,488 and agreed to release $419,888. Subsequently, the amount released and interest earned (at least notionally) of $49,802 was transferred to the purchase of another property.

23. [113]

    Gary denies that he told them that he was rich, but he did not deny having told them about Geoff. Gary did invest in one Ruby 2 apartment, but it emerged (at the end of the hearing) that he had paid a deposit of $25,000, of which he paid only $4,000. The balance was set off against his 2015 sales bonus. The evidence did not reveal what part, if any, of this bonus was derived from sales to the plaintiffs. This was the only off-the-plan purchase in Queensland Gary made. It is to be contrasted with the some 23 apartments in Queensland which the plaintiffs bought.

24. [114]

    Gary denies ever having described the Released Deposit Scheme as being available to VIP customers. He says that the VIP scheme was one which gave repeat investors discounts on purchases. Ralan did have a VIP scheme which operated in this way, and it is agreed that Ralan’s records show the plaintiffs having received a Discount Amount with a notation “VIP discount”.

25. [115]

    Gary also denies having offered the plaintiffs to put in more than 10% deposits. His evidence is that Teresa asked him on several occasions whether she could do so because she wanted to earn 15% interest on more money because she thought it was an excellent return.

26. [116]

    Teresa records that Gary told her on multiple occasions that:

27. [117]

    I believe Teresa, Tim and Amy that Gary referred to the Released Deposit Scheme as being available to VIPs. Their evidence is not undermined by the fact that there might have been a VIP scheme under which discounts on purchase prices were given. Teresa, Tim and Amy were cross-examined on the significance, if any, to them of the Released Deposit Scheme being available to VIP customers only (if that was the case), with a view presumably to establishing that the VIP description played no part in their decision to invest. Tim gave the following plausible evidence as to why it was of significance:

28. [118]

    Teresa’s equally plausible response was:

29. [119]

    Amy’s response was that it would probably matter but she did not elucidate why.

30. [120]

    I find that Gary did describe the Released Deposit Scheme as being available to VIP customers only and that Tim and Teresa were, in part, motivated by that misrepresentation in their decision to participate.

31. [121]

    In support of his version that the plaintiffs asked him to ascertain whether Ralan would agree to more than 10% deposits, Gary said he checked with Louise Johnson at Ralan who said they could do that if they wanted, and he told Teresa what Louise had instructed him. However, Louise Johnson was not called and his checking with Louise is equally consistent with him wanting to offer more than 10%.

32. [122]

    I also find, as Tim says, that Gary, in connection with Lindfield raised the possibility of depositing more money into the trust account to get the most out of the 15% interest and that he raised it with Teresa and Mr Chen in Taiwan. I also accept, as Teresa says, that, on 11 May 2015, Gary suggested she put extra cash into the account and earn 15% interest. There is no doubt that Tim, Teresa and Mr Chen were attracted by the high interest rate promised.

33. [123]

    Gary made the point that he did not receive any commission from purchasers releasing their deposits and that the same commission was paid by Ralan even if the purchaser did not release their deposit. This overlooks the fact that in numerous cases deposits paid were reassigned to other sales on which he did receive commission.

34. [124]

    In or around August 2015, a friend of Tim, Daniel Hsieh, was intending to buy Lot 4204 Ruby 2. Gary had already prepared the documents for sale, but Hsieh decided not to proceed. Tim and Teresa decided to buy it. On 12 August 2015, Tim signed a contract to purchase Lot 4204 Ruby 2 for $903,000, paying a deposit of $92,000 of which $91,900 was released to Ralan.

35. [125]

    I interpolate that on 8 May 2018, Teresa, acting under the General Power of Attorney from Mrs Lan, entered into contracts on her behalf with Ralan to buy Lots 3902, 3505 and 5606 Ruby 2 paying deposits totalling $799,976, all (save for $300) of which was released to Ralan.

36. [126]

    On about 24 November 2015, Tim says he and Teresa met with Gary at Ralan’s office where the following conversation took place:

37. [127]

    The vendor of Ruby 3 was Ralan Paradise No. 3 Pty Ltd.

38. [128]

    On 28 September 2015, Teresa signed and exchanged contracts to purchase Lot 3008 Ruby 3 for $940,000, paying a deposit of $94,000. She paid a total of $589,700 of which $500,000 was released. She says that Gary told her that this project was of high quality, was in a good location, the price was cheaper than what other developers would be offering and there would be luxury retail stores on the ground floor.

39. [129]

    In about November 2015, according to Teresa, the following conversation took place:

40. [130]

    Gary denies having said that the Gold Coast will always be viable. He admits having mentioned direct flights from Wuhan and that Ruby had sold more than 80%. He denies the remainder.

41. [131]

    I prefer Teresa’s evidence.

42. [132]

    On 24 November 2015, Tim bought Lot 4309 Ruby 3 for $950,000 and paid a deposit of $95,000 of which $94,900 was released.

43. [133]

    On 8 April 2016, Teresa bought Lot 4108 Ruby 3 for $973,000. She paid a total of $507,300 of which $409,900 was released.

44. [134]

    On 5 April 2018, Teresa, acting under the General Power of Attorney, entered into contracts on behalf of Mrs Lan for the purchase in Ruby 3 of Lot 3710 for $1,930,000 and Lot 3708 for $675,000. Ultimately, over $2,000,000 was paid and released on these Lots.

45. [135]

    The vendor of Sapphire was Ralan Budds Beach No. 1 Pty Ltd.

46. [136]

    Teresa, Tim, Amy and Mrs Lan bought apartments in Sapphire as follows:

47. [137]

    By March 2017, Tim and Amy had become interested in purchasing an investment property together. Tim, Teresa and Amy had a discussion at home about investing on the Gold Coast. Teresa said she could organise a meeting with Gary. Amy met Gary with Tim, she went to Gary’s office. She says Gary said:

48. [138]

    Amy says Gary presented her with a folder containing a number of articles regarding the property market on the Gold Coast. She says they had the following conversation:

49. [139]

    She and Tim decided to buy Lot 5410 Sapphire. On or around 3 April 2017, they went to Gary’s office. She says the following conversation, mainly in English, took place:

50. [140]

    Sometime in April 2017, Teresa went to the Gold Coast to have a look at Ruby 1.

51. [141]

    On 6 September 2017, Teresa’s parents arrived in Australia from Taiwan. Together with Teresa they met Gary. She says the following conversation about the Gold Coast Investments being developed by Ralan took place:

52. [142]

    Mr Chen took notes of the conversation. They are in evidence. Teresa says that Gary offered Mr Chen tax advice. Mr Chen’s notes corroborate this. Gary also took notes. They are in evidence. Gary’s notes have numerous figures in them, but they were not referred to during the trial.

53. [143]

    On 16 December 2017, Teresa attended Gary’s office in Chatswood where she says the following conversation took place in relation to Lot 5707 Sapphire:

54. [144]

    On 2 February 2018, the following line and voicemail messages were exchanged between Teresa and Gary:

55. [145]

    Gary’s unqualified statement that “[t]here definitely will be capital gain” is worthy of note.

56. [146]

    Gary’s position on this exchange is that he was comparing the plaintiffs’ Gold Coast properties with other developers’ projects on the Gold Coast which were selling for higher prices than for what Teresa contracted to buy. It is difficult to reconcile this with what he actually said. There is no reference to other developments.

57. [147]

    On 30 March 2018, there was the following message exchange between Teresa and Gary:

58. [148]

    Also, in about March 2018, by which time the plaintiffs had bought some 19 apartments off-the-plan in Surfers Paradise, Gary called Teresa and they had the following conversation:

59. [149]

    On 15 and 16 May 2018, the following exchange of messages and voicemails took place between Teresa and Gary:

60. [150]

    Gary’s position is that he was expressing his opinion as to what he thought was the potential outcome of the investment and also on his and his family’s investments on the Gold Coast which was based on the history of land values rising in Australia (as a general rule of thumb of property doubling every several years), as well as population growth reports about the Gold Coast, tourism and land prices. His expression, “this is for sure, for sure, we will not be mistaken in our view”, leaves little room for doubt as to what he was saying.

61. [151]

    In June 2018, Gary suggested to Teresa that she establish her own private managed superannuation fund and referred her to Mr Panbo Ye, a tax advisor and financial planner. Teresa says Gary said to her:

62. [152]

    As appears from Table A, she bought Lot 908 Sapphire though her superannuation fund.

63. [153]

    On 10 September 2018, Teresa, her parents and Gary, met at her home in Sydney. She says that the following conversation took place between Gary and Mr Chen:

64. [154]

    Gary denies that this conversation happened. His evidence is that he explained what properties were available for sale and that the 15% interest deposit release was available to all purchasers. He maintains that he said words to the effect “you will have to make your own investigations and form your own opinion about whether it is a good investment for you.” I do not believe him. Mr Chen lives in Taiwan and was plainly looking to Gary for guidance. The suggestion that Gary told him to make his own investigations is implausible.

65. [155]

    In November or December 2018, Gary informed Teresa that the interest rate on released deposits would be reduced to 12% in future.

8 Townsend Place Arncliffe (Arncliffe)

1. [156]

   The vendor of Arncliffe was Ralan Arncliffe Pty Ltd.

2. [157]

   In September or October 2017, Gary picked up Teresa from her home and they went to his office in Chatswood where they had the following conversation:

3. [158]

   Teresa conveyed this conversation to Tim.

4. [159]

   Tim says that in about October 2017, him and Gary had the following conversation:

5. [160]

   In November 2017, Teresa says she and Gary had the following conversation about Arncliffe:

6. [161]

   Teresa, Tim and Mrs Lan bought apartments in Arncliffe as follows:

Tax Advice

1. [162]

   Gary denies Teresa’s assertion that he gave her tax advice. He says that he merely referred her to a financial planner and gave no advice himself. He did, with respect to the establishment of her private superannuation fund, refer her to a financial planner, but his own contemporaneous writings gainsay his position that he never gave any advice.

2. [163]

   For example, on 2 February 2018, the following line and voicemail messages were exchanged between Teresa and Gary:

3. [164]

   Another example, he left the following voice message for Teresa on or about 20 June 2018:

4. [165]

   Gary also left the following voice messages for her between 19 and 22 February 2019:

5. [166]

   Gary nevertheless resolutely stuck to his guns.

Stability of Ralan

1. [167]

   As to statements about the stability of Ralan attributed to him by the plaintiffs, Gary says he never made “any of those sorts of comments”. He says that he:

2. [168]

   He asserts that he said to prospective purchasers, including Teresa and Tim, words to the effect:

3. [169]

   He says that over the same period that the plaintiffs were buying properties from Ralan, he and his relatives also signed contracts to buy apartments in Arncliffe and on the Gold Coast. As mentioned earlier, it transpired that Gary himself bought only one apartment on the Gold Coast. He also apparently bought one apartment in Arncliffe. There is material which suggests that he paid $85,000 as a deposit on Arncliffe but what is equally clear is that the sale did not complete. Whether he released the deposit or what happened to it was not revealed.

4. [170]

   Gary maintains that he did not say anything along the lines that Ralan or O’Dwyer were financially stable, shrewd, or making money, and until Ralan went into external administration, he was unaware of Ralan being in any kind of difficulty. He says that had he known Ralan would be in financial difficulty or in liquidation he would not have acted as an agent selling their properties and would not himself have bought any. He would also have warned his relatives not to buy. He denies that he said he looked at the accounts or financial statements of Ralan and he says that he never made any comments about the financial strength or viability of Ralan. He agrees that he did say that Ralan had done many projects and was working on many more.

5. [171]

   Gary gave evidence that the following factors were part of the reason he had no suspicion that Ralan was in trouble:

   1. (1)

      completion of Ruby 1;

   2. (2)

      Arncliffe was almost 80% constructed;

   3. (3)

      in March 2019, O’Dwyer told a sales meeting that Ralan would start building stages 2-4 shortly;

   4. (4)

      on 15 July 2019, Ralan sponsored a piano competition on the Gold Coast;

   5. (5)

      Ralan’s newsletters did not indicate any financial difficultly; and

   6. (6)

      over the years, Ralan built and completed many blocks of apartments.

6. [172]

   It is appropriate at this point to make specific reference to the November Conversation and the March Conversation.

7. [173]

   The November Conversation reveals that Gary knew that there was a disconnect between the truth and what Ralan was revealing to its banks. The banks were not being told that trust money was being used. As Mr Jahani’s report reveals, Ralan concealed the Released Deposit Scheme from its secured lenders from its commencement. Ralan falsified trust account ledgers to show that the deposits remained in the trust account full and did not disclose this information to lenders when seeking funding for new projects.

8. [174]

   On Gary’s behalf it was sought to deploy this conversation as showing that Tim was on notice that Ralan was engaged in questionable activities, which it was put, was a factor negativing his asserted reliance on later representations made by Gary. Counsel for Gary went so far as to suggest that Gary made Tim aware of criminal behaviour of Ralan. After the Court pointed out that this was in effect putting that Gary was aware of criminal behaviour counsel put the proposition in ameliorated terms.

9. [175]

   Tim was cross-examined at some length about what he took from this conversation, including whether he would not have thought that Gary was involved in some “dodgy” business dealings and would have been cautious to rely on what Gary said initially. I have no difficulty in accepting Tim’s evidence that he did not appreciate the possible significance of the disclosure at the time and that it did not necessarily cause him to think that Ralan was not financially stable. After all, Gary conveyed that the banks were fighting for Ralan’s business (in Mandarin “grab business”). As to the Gold Coast, he conveyed that Ralan had already sold a number of apartments, all was going well, there was a high pre-sales number and construction was under way. The Gold Coast would be successful.

10. [176]

    Seen in context, this conversation was more about conveying optimism about Ralan’s prospects than about disclosure of its questionable and illegal activities. The disclosure part would have largely been drowned out by the background noise made by Gary. What it does reveal (somewhat disturbingly) is that Gary had knowledge of these things and was content to go along with them.

11. [177]

    As to the March Conversation, Gary did not dispute it. As an ex-mortgage broker and an experienced real estate agent, he would have known that what he was telling her was a lie. His excuse was that he was told by Ralan to say what he did. Either way the conversation reveals that he, to put it mildly, is indifferent to the truth.

12. [178]

    I am prepared to accept that until Ralan collapsed Gary did not have any real suspicion that it would collapse and that he believed it was stable, even though his own investment off-the-plan was minimal and he knew Ralan was acting improperly. This enhances the probability that he conveyed to the plaintiffs what they say he conveyed about Ralan’s stability, prospects, success and profitability, and the qualities of O’Dwyer. It also provides support for Tim’s evidence that he did not see what Gary said in the November Conversation as setting off alarm bells.

13. [179]

    At the same time, however, Gary maintained that he never saw Ralan’s accounts and was never privy to its financial information. In the circumstances, it can hardly be said that he had a reasonable basis for conveying anything about Ralan’s profitability, stability, prospects of it or its off-the-plan projects, or trustworthiness. He had no reasonable basis for asserting that O’Dwyer was honest.

Reliance

1. [180]

   Tim says that:

   1. (1)

      following the meetings with Gary and Teresa in April and May 2015 he considered what Gary had told them about the stability of Ralan, the viability of the investments on the Gold Coast, and the success of the purchase of Lindfield;

   2. (2)

      he was relieved to have finally purchased a property in Sydney. He felt comfortable with Gary, and he trusted his endorsement of Ralan as a developer that was experiencing growth and success by expanding their development projects to the Gold Coast;

   3. (3)

      he believed that purchasing apartments in the Gold Coast developments and releasing the deposits to obtain the 15% interest benefit was a good investment and that Ralan was a good company on a very successful path;

   4. (4)

      following his conversation with Gary in October 2017 about Arncliffe, he believed that it would be a good opportunity and good investment to purchase a property in the Arncliffe development. He was convinced that releasing the deposit for the purchase of the Arncliffe property to obtain the 15% interest benefit was a good investment decision because it was with Ralan, and he was very confident in Ralan based on what Gary had told him about it; and

   5. (5)

      in reliance on what Gary told him about Ralan developments and the stability of Ralan, he purchased properties on the basis that there would be 15% interest return.

2. [181]

   Teresa says that:

   1. (1)

      in February 2015 Gary’s statements regarding purchasing off-the-plan properties and the investment opportunity that purchasing Lindfield offered, made her feel like Gary was trustworthy and that his company, Ralan, was stable. Those representations made her feel like Ralan was a good company;

   2. (2)

      she believed, from what Gary had told her, that purchasing Lindfield was a good investment based on the 15% interest return that was offered to her;

   3. (3)

      as a result of her conversations with Gary between February and May 2015 in relation to the Gold Coast developments, she believed that there was a great investment opportunity on the Gold Coast and that the 15% interest on the deposits released was a good offer so that they could earn money while the development was being completed. Based on what Gary told her, she believed that Ralan was stable and was a good company;

   4. (4)

      she says that relying on what Gary told her about the viability of the Gold Coast for investments she continued to invest in Ralan’s Gold Coast projects;

   5. (5)

      she relied upon Gary’s representations that Sapphire was a good project to invest in, and that she would have the benefit of earning 15% interest on released deposits. She purchased Lot 6004 and continued to purchase other apartments in the project in reliance on Gary’s representations;

   6. (6)

      on each occasion on which she agreed to invest in different apartments, to release the deposits, or transfer deposits, she did so because she believed what Gary had told her about the investments;

   7. (7)

      she would never have invested had she known that Ralan was in financial difficulties at any time, or that Mr O’Dwyer was not the kind of shrewd and honest developer that Gary described to her; and

   8. (8)

      in reliance on what Gary told her about the stability of Ralan and the success of the developments, she purchased properties off-the-plan with the promise of a 15% interest return on the deposits released.

3. [182]

   Amy says that it was her understanding the money that was being released was for the purpose of a term deposit in which 15% interest would be earned each year. Further, it was her understanding that the money released and the interest earned would contribute to the purchase price at settlement.

Ralan Collapses

1. [183]

   On 30 July 2019, Ralan went into voluntary administration. Phillip Campbell-Wilson, Graham Killer and Said Jahani were appointed joint and several administrators to the Group. They reported to creditors on 28 November 2019.

2. [184]

   On 10 March 2020, Ralan went into liquidation. The administrators were appointed as liquidators. The liquidators reported to creditors on 16 March 2020.

3. [185]

   Jahani’s report contains detailed information about Ralan and what it had been up to. Jahani opines that, as at 4 February 2014, Ralan, Ralan Capital Investments Pty Ltd and each of the vendors referred to above were trading while insolvent.

4. [186]

   O’Dwyer proposed a Deed of Company Arrangement (DOCA) which involved purchasers buying apartments from another developer and receiving credit for some of what they had paid. Remarkably, Gary supported him in this endeavour. His faith in O’Dwyer did not seem to be shaken. The DOCA did not ultimately proceed.

5. [187]

   On 25 May 2020, Gary sent Teresa the following messages:

6. [188]

   The reference to the new company is apparently to another developer with which O’Dwyer and Gary had become associated.

7. [189]

   It is not in dispute that the plaintiffs will not recover any money from Ralan.

The Plaintiffs

1. [190]

   The plaintiffs correctly did not press a claim based on unconscionable conduct and relied only on ss 18 and 29 of the ACL and ss 12DA and 12DB of the ASIC Act.

2. [191]

   The plaintiffs say that by the conversations recounted above, Gary made the following representations:

   1. (1)

      Tim and Teresa would, by reason of the purchase of Lindfield, be treated as VIP clients which entitled them to release their deposit; [3]

   2. (2)

      if they released their deposit, they would receive 15% interest per annum on any deposit monies; [4]

   3. (3)

      the option to release their deposit and earn 15% per annum was a great deal; [5]

   4. (4)

      by releasing their deposit and obtaining 15% interest on that money, the interest would cover the stamp duty at completion; [6]

   5. (5)

      the funds released would be used in meeting the costs of construction of the building in which the apartment would be located and in some instances as working capital for Ralan; [7]

   6. (6)

      the deposit offer was exclusive and made only to VIP clients and that the offer was a “great deal” and there was a high probability that the plaintiffs would realise the benefits conferred by the offer; [8]

   7. (7)

      Ralan was stable with a lot of projects which were good investment opportunities; [9]

   8. (8)

      Ralan had a stable cash flow; [10]

   9. (9)

      Ralan was highly profitable; [11]

   10. (10)

       the principal of Ralan, O’Dwyer, was an honest person; [12]

   11. (11)

       for the Lindfield transactions they would not need a lawyer or financial advisor to provide them with advice and would only need a conveyancer upon settlement; [13]

   12. (12)

       the contracts were of a standard or conventional character and as such did not warrant the obtaining of independent legal advice; [14]

   13. (13)

       additionally and specifically, in respect of the acquisitions of Lot 2908 in Ruby 2, Lot 3008 in Ruby 3, Lot 6004 in Sapphire and Lot 170 in Arncliffe that:

3. [192]

   They say:

   1. (1)

      Gary’s representations were false, misleading or deceptive or likely to mislead or deceive because:

   2. (2)

      Gary’s representations that the Released Deposit Scheme would yield 15% per year on the loans were representations that services were of a particular standard or quality and were false or misleading because the plaintiffs were not, and had no reasonable prospects of being, paid interest;

   3. (3)

      Gary’s representations about the Released Deposit Scheme was conduct in relation to financial services, namely, the acceptance of loan monies in return for 15% interest;

   4. (4)

      with respect to Gary’s representations that they were statements of opinion, he had no reasonable basis for holding these opinions or conveying them to the plaintiffs;

   5. (5)

      with respect to Gary’s representations that were as to future matters he did not have reasonable grounds for making them and has not adduced evidence to the contrary;

4. [193]

   The plaintiffs say that because of Gary’s representations, they purchased the properties and released their deposits, and thereby suffered damage.

5. [194]

   I record that the plaintiffs did not lead any expert evidence from a legal practitioner on what advice would likely have been given on the off-the-plan purchases from Ralan or the release of their deposits on an unsecured basis.

The Defendant

1. [195]

   Gary’s primary defence was that the conversations recounted by the plaintiffs did not happen or did not happen in the terms recounted. This entails not accepting the evidence of the plaintiffs and accepting Gary’s evidence. He put submissions as to why he, and not they, should be believed.

2. [196]

   He argued that if he was found to have said that Ralan was stable, this conveyed only that it had a history of delivering projects in the past and bore no relationship to the present state of affairs or to the future and hence, was not misleading or deceptive.

3. [197]

   Otherwise, Gary did not put in issue that if he were found to have made the representations, they were false, misleading or deceptive.

4. [198]

   He did not put in issue that the representations were made in trade and commerce.

5. [199]

   He did not put in issue that the Released Deposit Scheme constituted the supply of financial services or that if he were found to have made the claimed representations in relation to the Released Deposit Scheme, they were in connection with the promotion of it.

6. [200]

   He accepted that a representation that the 15% interest rate was limited to VIPs was a representation as to “nature”, which I took to mean “standard or quality” (under s 12DB of the ASIC Act).

7. [201]

   He accepted that if there was a representation that the chance of recovery (presumably of the interest) was high, it would be one as to the “standard of the service”. But he submitted that the representations pleaded were more about the profitability or stability of Ralan rather than as to the standard, quality, value or grade of the loan services.

8. [202]

   He argued that he did not engage in conduct within the meaning of the ACL or the ASIC Act because he was a mere conduit for information put out by Ralan and that the plaintiffs would have realised that he was only passing on information as a conduit. He also argued that the transactions took place in the context of disclaimers.

9. [203]

   He argued that the Court should find that whatever he said to the plaintiffs was not relied on by them and was not causative of their loss and damage. He argued that representations made prior to Lindfield should be held not to have had any effect beyond Lindfield, that is, beyond December 2016 when it settled and that representations made in connection with specific apartments should be held not to have had any effect beyond the particular apartment.

10. [204]

    He also argued that because of various disclaimers in the sale contracts and loan documents the Court should find that the plaintiffs never relied on his representations. He argued if the Court found that the plaintiffs knew or were indifferent to, Ralan’s deceit of its banks or were indifferent to the disclaimers or knew that they should obtain their own independent advice, Gary’s conduct was not causative of their loss. He argued that no actionable misrepresentations were made because the provision in the contract for the purchasers to disclose any representations was struck through.

11. [205]

    Separately, he argued that there was no evidence that Mrs Lan had relied on Gary’s representations in entering into the two contracts signed personally by her.

12. [206]

    Gary did not (nor could he realistically have done so) put in issue that his representations were falsified. Ralan was insolvent, conducting its business dishonestly, unstable, and unprofitable. Ralan was using the released deposits not for construction, but to fund losses and pay other lenders interest on their released deposits. There was no realistic prospect of the plaintiffs ever receiving their interest, not least of all because there was no realistic prospect of the Gold Coast developments being completed, with the consequence that there was no realistic prospect that there would ever be settlement and accordingly that they would receive their interest. They were not good investments and never yielded (nor would they ever have yielded) any capital gain. The Released Deposit Scheme was available to all Ralan purchasers. O’Dwyer was profoundly dishonest.

13. [207]

    Gary raised a proportionate liability defence, relying on s 34 of the CLA (and the equivalent QLD provision) on the footing that:

    1. (1)

       each of the companies of the “Ralan Group” (an undefined term which was said to have been adopted from the Further Amended Commercial List Statement (FACLS)) and/or Mr O’Dwyer caused, independently of each other or jointly, the plaintiffs’ loss and damage by providing marketing documents, brochures and newsletters to the plaintiffs and Gary as to the marketing, sale and progress of construction of Ralan developments and Ralan, and not informing or warning the plaintiffs or Gary about any financial difficulties;

    2. (2)

       the material was misleading because it did not disclose Ralan’s insolvency or the Ponzi scheme; and

    3. (3)

       the plaintiffs, in particular Tim, relied on the newsletters in determining to purchase and release deposits.

14. [208]

    Gary argued that the plaintiffs’ claim under s 29 of the ACL and the whole claim under the ASIC Act were statute barred because the Amended Commercial List Statement and the FACLS respectively, were amended to include them after the expiry of the 6-year limitation period. This argument entails the proposition that the amendments only took effect from the date they were made, not from when the proceedings commenced.

15. [209]

    He did not put quantum in issue.

Representations

1. [210]

   It follows, from my acceptance of the plaintiffs’ evidence, that each of the representations pleaded has been made out.

2. [211]

   I reject the submission that the representation that Ralan was stable was one only about the past. It was a representation both as to the present and as to Ralan’s future prospects.

3. [212]

   Gary had no reasonable basis for making representations about the future of Ralan or its developments.

4. [213]

   Gary had no reasonable basis for expressing any of his opinions about Ralan’s stability, prospects or financial standing. On his own admission, he never inquired about Ralan’s financial position and knew nothing about it. His position is made worse by my finding in relation to the November Conversation.

5. [214]

   The representations concerning the availability of the Released Deposit Scheme only to VIP clients, as to its yield, and as to how the funds would be used by Ralan were all in connection with the supply or use of financial services and as to the standard, quality or value of those services: see ASIC v Rent 2 Own Cars Pty Ltd (2020) 147 ACSR 598.

Mere Conduit

1. [215]

   In determining whether Gary acted as a mere conduit purporting to do no more than pass on information supplied by Ralan or O’Dwyer, his conduct must be viewed as a whole. Everything relevant he did up to the time when the plaintiffs purchased each property and released each deposit must be taken into account.

2. [216]

   In Yorke v Lucas (1985) 158 CLR 661 at 666, the High Court said:

3. [217]

   The mere conduit defence is without merit.

4. [218]

   It relies heavily on the proposition that an objective person in the position of the plaintiffs would have considered, and that they did consider, that Gary was merely passing on information for what it was worth without adopting it. This in turn necessitates the Court accepting that Gary told the plaintiffs that what he was telling them was what Ralan had said. Not only do I not believe that he told the plaintiffs this, but I do not accept that he was told it by Ralan.

5. [219]

   In any event, I am not satisfied that Ralan was the source of the information the subject of Gary’s representations, including that:

   1. (1)

      the Released Deposit Scheme was available only to VIP clients;

   2. (2)

      Ralan was stable;

   3. (3)

      Ralan had a stable cash flow (in relation to this Gary disavowed knowledge of its cash flow);

   4. (4)

      Ralan was highly profitable (in relation to this Gary disavowed knowledge of its profitability);

   5. (5)

      O’Dwyer was an honest person (in relation to this, Gary did not say that O’Dwyer or Ralan was the source of this information - It borders on the fanciful that O’Dwyer or Ralan told him this); and

   6. (6)

      the plaintiffs did not need a lawyer.

6. [220]

   Gary was an experienced real estate agent with knowledge of, and experience in, the things he was talking about, and the plaintiffs were not. What he told them was self-evidently intended to aid his selling effort.

7. [221]

   Outside of the representations, Gary conveyed to the plaintiffs many things which could not conceivably have come from Ralan, such as his tax ideas, that he had invested money, that his family had invested money, and that he was rich. The notion that the plaintiffs would have taken some things he said as being conveyed as a conduit for Ralan and others as coming from him personally is fanciful.

8. [222]

   I have also found that Gary did not make the statements he says he made that the information he was giving was coming from Ralan or O’Dwyer.

9. [223]

   The plaintiffs manifestly trusted Gary in his own right and from the perspective of the plaintiffs as the recipients of information from him, Gary was no mere conduit.

Loss

1. [224]

   The plaintiffs must establish that their loss was suffered because of the conduct complained of. The relevant question is whether or not there is sufficient connection between the conduct complained of (assuming it is made out) and the damage, for the damage to be regarded as because of or by the conduct. Whether or not that connection exists is essentially a question of fact to be determined by reference to common sense and experience and one into which policy considerations and value judgments necessarily enter: March v E & MH Stramare Pty Ltd (1991) 171 CLR 506; Travel Compensation Fund v Tambree t/as R Tambree and Associates (2005) 224 CLR 627 at 639-640; Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; Wallace v Kam (2013) 250 CLR 375 at 385-6.

2. [225]

   They must establish that the conduct complained of caused them the loss they claim they suffered by purchasing the apartments and releasing their deposits. They do not need to establish that the conduct complained of was the sole or predominant cause of what they did, it is sufficient if it was a contributing cause. What they must show is that despite any other contributing factors, they would have adopted a different course, that is, not have purchased and released their deposits, had the conduct complained of not occurred: Sidhu v Van Dyke (2014) 251 CLR 505 at 530-532.

3. [226]

   The plaintiffs relied on each of Gary’s individual representations. But their cumulative effect was overwhelming. I reject the suggestion that the effect of Gary’s misrepresentations made in the context of Lindfield, or for that matter, with respect to any other investment the plaintiffs made, ceased to have effect at any time prior to the plaintiffs’ last investment.

4. [227]

   They believed that they were participating in the Released Deposit Scheme throughout because they were VIP clients. They believed that Ralan was stable, profitable, and successful. They believed that they were making good investments and that they would receive the promised return, interest and capital gains. They believed that O’Dwyer had integrity. Out of Gary’s own mouth, he persuaded Teresa to invest in Arncliffe.

5. [228]

   The representations were made as part of Gary’s efforts to sell property and that is the effect they had. The representations played a major role in inducing the plaintiffs to buy the apartments and participate in the Released Deposit Scheme, to the extent that, I find, that but for them, the plaintiffs would not have invested beyond Lindfield and would not have released their deposit for Lindfield. They would not have released any of their deposits.

6. [229]

   But for Gary they would have owned an unencumbered apartment in Lindfield.

7. [230]

   Because of him they lost their money.

8. [231]

   So far as Mrs Lan is concerned, the submission that there is no evidence of her reliance on what Gary said is without merit. The plaintiffs are one family. Various members signed various contracts. It borders on the inconceivable that had the other plaintiffs not been induced to buy by Gary’s misrepresentations, Mrs Lan would have bought in any event. Conversely, the inference that she was also the victim of Gary’s misrepresentations is irresistible even to the extent of not taking legal advice.

9. [232]

   The presence of disclaimers played no role in the plaintiffs’ reliance on what Gary said. They did not have the effect of neutralising Gary’s misleading conduct. The disclaimers did not affect the causal link between what he did and the loss they suffered. They suffered loss because they believed Gary.

10. [233]

    It is apt to observe that the disclaimers are in contractual documents between the plaintiffs and Ralan, to which Gary is not party.

11. [234]

    I believe Teresa when she said she did not read the disclaimers. She would not have understood them anyway without assistance.

12. [235]

    Tim was aware of disclaimers in the sale contracts and loan documents. He had trust in Gary. He understood that he was acknowledging in the loan agreements that Ralan had told him to get his own financial, taxation and legal advice which he did not do. Instead, he asked questions of Gary.

13. [236]

    Amongst others, Gary had told him that no legal advice was warranted because the contracts were standard.

14. [237]

    There is no evidence that Mrs Lan read any disclaimer or that if she had read it, she would have understood it.

The Proportionate Liability Defence

1. [238]

   This defence is available with respect to conduct in contravention of s 18 of the ACL, but not of s 29, and available with respect to conduct in contravention of s 12DA of the ASIC Act, but not of s 12DB. [19] For this reason alone, the defence, even if otherwise available, does not assist Gary.

2. [239]

   Gary’s misrepresentations in relation to the availability and qualities of the Released Deposit Scheme contravened s 29 of the ACL and s 12DB of the ASIC Act. Subject to the non-availability of Gary’s limitations defence, those representations and the plaintiffs’ reliance on them are sufficient, in themselves, for the plaintiffs to have judgment against him.

3. [240]

   I deal with the limitations defence below. The proportionate liability defence to s 18 of the ACL and s 12DA of the ASIC Act fails in its own right.

4. [241]

   In his Amended Commercial List Response (ACLR) filed 15 December 2021, Gary pleaded the proportionate liability defence extensively, but ultimately relied only on the following:

5. [242]

   The reference to ‘CLS’ is to the Commercial List Statement. Paragraphs C7 to C18 plead facts about Ralan, including its precarious financial position and the operation of the Ponzi scheme.

6. [243]

   There is an initial difficulty with Gary’s pleading because it attributes acts and omissions to each of the companies in the “Ralan Group” without identifying each company. Jahani’s expert report reveals the existence of a plethora of companies beyond Ralan Group Pty Ltd and the various vendor companies to the plaintiffs, which have no ostensible connection with the plaintiffs. “Ralan Group” is not a defined term in the ACLR. It was put on behalf of Gary that the pleading had adopted the term “Ralan Group” from FACLS in which it was also not defined. However, that is a different matter because the plaintiffs’ claim is not against any company but against Gary and identification of any particular company in the “Ralan Group” was not strictly necessary, whereas it is in pleading a proportionate liability defence, not least of all because s 34(2) of the CLA refers to a person and acts or omissions by that identified person: Ucak v Avante Developments [2007] NSWSC 367 at [35].

7. [244]

   At the hearing, the plaintiffs moved to strike out the defence so far as it referred to every member of the “Ralan Group”. That application was warranted, and it succeeds.

8. [245]

   The words “each of the companies in the Ralan Group and, further and in the alternative,” where they appear in paragraph 111 of the CLR to the FACLS will be struck out.

9. [246]

   But the proportionate liability defence would fail in any event because the pleaded acts and omissions of Ralan or O’Dwyer did not cause any of the loss or damage to the plaintiffs.

10. [247]

    Gary argued that Ralan and O’Dwyer were concurrent wrongdoers because:

    1. (1)

       since 2009, Ralan and O’Dwyer falsified Ralan’s accounts and ran a quasi-Ponzi scheme but represented to their secured lenders, the general public, and their customers that Ralan was successful and profitable, but for which, Ralan could not have traded during or after 2014;

    2. (2)

       since 2014, Ralan and O’Dwyer traded while insolvent and but for which Ralan would not have traded during or after 2014; and

    3. (3)

       Ralan provided the defendant and the plaintiffs with the information the subject of these proceedings.

11. [248]

    It is not established that Ralan provided either the defendant or the plaintiffs with the information “the subject of these proceedings” (which I take to comprehend all of the content of all the misrepresentations).

12. [249]

    The plaintiffs’ damage was caused by Gary, and Gary alone. This is a case about what Gary said about Ralan, not about what Ralan said or did not say about itself.

13. [250]

    It is to be remembered that I have found that Gary knew of Ralan’s dishonest practices.

14. [251]

    It was their investment in Ralan that caused the plaintiffs the loss, not the fact that Ralan was worthless. As Senior Counsel for the plaintiffs aptly put it, “but for [Gary], the plaintiffs would have had a nice unit in Lindfield and could have speculated in property with other developers who weren’t running a Ponzi scheme”.

15. [252]

    Finally, I record that Gary put that if the proportionate liability defence succeeded, the appropriate reduction was 50%. Even if the defence had succeeded, any reduction would have been minimal.

Limitations Defence

1. [253]

   These proceedings were initiated on 4 December 2020. The plaintiffs’ claim under s 29 of the ACL were introduced by amendment on 19 July 2022, and their claims under the ASIC Act were introduced by amendment on 1 May 2024.

2. [254]

   I proceed on the footing that, as at 1 May 2024, more than 6 years had passed since the plaintiffs’ causes of action against Gary accrued, although I have significant doubt that this is correct. Ralan collapsed on 30 July 2019, and it is eminently arguable that that is when the plaintiffs suffered their loss and their cause of action arose then: see Wardley Australia Ltd v Western Australia (1992) 175 CLR 514. It is, however, not necessary to decide this.

3. [255]

   Sections 64(1) and (3) of the Civil Procedure Act 2005 (NSW) provide:

4. [256]

   Sections 65(1), (2)(c) and (3) provide:

5. [257]

   Gary’s argument depends on the amendments introducing the claims under s 29 of the ACL and the ASIC Act taking effect on the date of the amendment and not from the date on which the proceedings were commenced.

6. [258]

   I confess to having had difficulty understanding the argument. He apparently relies on s 64(3) which provides that when a cause of action which arose after the commencement of the proceedings is added, the amendment takes effect with respect to that cause of action on the date on which the amendment is made. But neither of the amendments under discussion added a cause of action which arose after the commencement of the proceedings. They both arose at the same time as the other causes of action.

7. [259]

   More importantly, however, it was not in issue that the new causes of action arose from the same or substantially the same facts as those giving rise to the original claims within s 65(2)(c). That being so, under s 65(3), the amendments took effect from the date on which the proceedings were commenced because the Court did not order otherwise. The argument appeared to suggest, contrary to the plain wording of s 65(3), that for the amendment to take effect from when the proceedings were commenced, the Court had to so order.

8. [260]

   The two sections operate congruently to achieve the policy objective that a party who, by amendment, introduces a statue barred cause of action does not get the advantage of the presumption that the amendment takes effect from when the proceedings were commenced unless the new cause of action arose from the same or substantially the same facts as those giving rise to the original claims.

9. [261]

   Counsel for Gary volunteered that the Court could now make the order he argued was necessary and could point to no prejudice suffered by Gary which would stand in the way of the Court doing so. No such order is necessary, but I will make it anyway, in case I am wrong. I order that all amendments made by the plaintiffs to their Commercial List Statement take effect from when the proceedings were commenced.

10. [262]

    In the context of their submissions on credit, the plaintiffs made reference to Kane’s Hire Pty Ltd v Anderson Aviation Australia Pty Ltd [2023] FCA 381 which is one of a trilogy of decisions [20] of Jackman J in the Federal Court of Australia in which His Honour criticised the long-standing practice in this State of using direct speech to recount conversations, usually prefaced with the words that the conversation was “to the following effect”.

11. [263]

    His Honour expressed the view that evidence in this form is ethically problematic, as well as concealing the true nature and quality of the witness’s memory or conveying a false impression of that memory.

12. [264]

    Contrary to His Honour, I see nothing ethically problematic about this practice. I consider it to be salutary.

13. [265]

    As occurred in this case, it conduces to a disciplined approach in the recounting by a witness of what was said. The use of the phrase “to the following effect” makes it clear that what is being recounted is the witnesses’ best recollection of what was said, that is the gist, rather than the ipsissima verba.

14. [266]

    Inevitably, even if indirect speech is used, where the conversation is disputed and material, the deponent will be cross-examined as to what they say were the words used.

15. [267]

    As in this case also, where a party seeks to rely upon spoken words as a foundation for a cause of action the conversation must be proved to the reasonable satisfaction of the Court. This means that the Court must feel an actual persuasion of its occurrence or its existence. In the absence of some reliable contemporaneous record or other satisfactory corroboration, a party may face serious difficulties of proof. Such reasonable satisfaction is not a state of mind that is obtained or established independently of the nature and consequences of the fact or facts to be proved. The seriousness of an allegation made, inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question of whether the issue has been proved to the reasonable satisfaction of the Court. Reasonable satisfaction should not be produced by inexact proofs, indefinite testimony, or indirect inferences: see Briginshaw v Briginshaw (1938) 60 CLR 336 at 362; Helton v Allen (1940) 63 CLR 691 at 712; Rejfek v McElroy (1965) 112 CLR 517 at 521; Watson v Foxman (1995) 49 NSWLR 315 at 319.

16. [268]

    Having observed two of the plaintiffs in the witness box for a reasonably lengthy period of time, nothing related to the practice adversely affected the cogency and credibility of their testimony. To the contrary, it conduced to my feeling an actual persuasion that the conversations to which they deposed occurred. This was generally consonant with my reasonably lengthy experience as a trial judge.

17. [269]

    Finally, it is apt to observe that it is a practice, not an irrefrangible rule of law. It does not entail a conclusion that indirect speech is impermissible, inadmissible or inutile. Whether it is will depend on the circumstances and the precise form in which the evidence is given. It is not infrequently the case that indirect speech is of no value in the fact-finding process because it is expressed in vague and conclusionary terms.

18. [270]

    There will be judgment for the plaintiffs against the defendant for a total of $7,438,548. I will stand the matter over for a short period to allow the plaintiffs to bring in short minutes reflecting the judgment amount applicable to each plaintiff, including pre-judgment interest calculated from 30 July 2019, and for the parties to draw my attention to any issues (apart from costs) which require to be dealt with.

19. [271]

    I provisionally order the defendant to pay the plaintiffs’ costs. This order will solidify unless, within seven days of delivery of this judgment, any party notifies, in writing, the opposing parties and my Associate that some other order is sought, specifies what it is and provides brief reasons why. If such notice is given, the order will not take effect and I will make directions for the resolution of costs.

20. [272]

    The exhibits are to be returned.