Haiye Developments Pty Ltd v The Commercial Business Centre Pty Ltd

In August 2015, the First Plaintiff, Haiye Developments Pty Ltd (“Haiye”), and Fifth Defendant, Pionnier Pty Ltd (“Pionnier”), agreed to purchase and develop the property known as 60B Gray Street and 26 Princes Highway, Kogarah, NSW (“the First Kogarah Property”). Haiye and Pionnier agreed to purchase and develop the First Kogarah Property through a corporate special purpose vehicle and to that end, incorporated the Third Defendant, Pionnier Property Development Pty Ltd (“PPD”). Between the date of its incorporation and 23 April 2021, Haiye and Pionnier held 75 and 25 of the 100 issued shares in PPD respectively.

Through PPD, Haiye and Pionnier purchased the First Kogarah Property in late 2015. Settlement occurred in early 2016. Prior to PPD’s purchase of it, the First Kogarah Property had built upon it a two-storey commercial building and an associated open plan car park area and garage. Haiye and, apparently, Pionnier intended to develop a residential building on the First Kogarah Property to accommodate approximately 80 units.

Both simultaneously with, and following, their purchase of the First Kogarah Property, several other transactions are said to have been entered into by Haiye, Pionnier, PPD, the other parties to these proceedings and other third parties. Those transactions (summarised in [11] below), it is alleged, are infected with misrepresentation, fraud, deceit, breach of fiduciary duties, impropriety and illegality. The Court has been required to untangle this web of transactions and determine what, if any, relief is available to the parties to whom loss can be attributed.

The facts of the underlying dispute the subject of these proceedings are complex. That is often the case when allegations of fraud are involved. The primary allegation advanced against those to whom I shall refer as the Active Defendants (see paragraph [8] below) is that by their involvement in a fraudulent enterprise, they have caused, or played a part in causing, substantial damage to the Plaintiffs. The primary architect of the fraudulent enterprise, it is alleged, is a former Federal Parliamentarian, Mr Nickolas Varvaris; the Second Defendant in these proceedings. Although Mr Varvaris’ involvement in the enterprise is undeniably central to the Plaintiffs’ case, the Plaintiffs have abandoned their claims against him on account of his bankruptcy subsequent to the commencement of these proceedings.

Additional claims advanced against other defendants – including PPD, Citywide Financial Services Group Pty Ltd (the Fourth Defendant) (which traded as “Varvaris & Co” and to which I will refer as such or as “Citywide Financial Services”), A & T Education Holdings Pty Ltd (the Eighth Defendant) (“A & T Education”), Citywide Property Group Pty Ltd (the Ninth Defendant) (“Citywide Property Group”) and Red Horizon Travel Services Pty Ltd (the Tenth Defendant) (“Red Horizon”) – have also been abandoned. Those companies have either been placed into liquidation, have had a voluntary administrator appointed or have been deregistered.

At the outset of the hearing, the Active Defendants made certain concessions on a non-admissions basis which went some way to resolving matters in favour of the Plaintiffs (set out in [293] to [295] below). The Plaintiffs – namely, Haiye and its two Chinese shareholders, Jianzong He (as to 51% of Haiye) and his father Haiqiang He (as to 49% of Haiye), the Second and Third Plaintiffs respectively – nevertheless continued to press their claims against The Commercial Business Centre Pty Ltd (the First Defendant) (“CBC”), Pionnier, Hua Liu (the Sixth Defendant) and Kei Kwok (the Seventh Defendant).

Following the commencement of these proceedings, CBC was also placed into liquidation. However, on 6 April 2021, orders were made by consent granting the Plaintiffs leave to proceed against it and its liquidator has been excused from appearing but has been granted liberty to address the Court as to the form of any final orders to be made against it (if any).

For the balance of these reasons, without intending any disrespect, I shall refer to Mr Jianzong He as “Chris”, Mr Haiqiang He as “Mr He”, Ms Hua Liu as “Alysha” and Mr Kei Kwok as “Dennis”. Alysha and Dennis are husband and wife and, together with Pionnier, I shall refer to the three of them collectively as the “Active Defendants”.

It is convenient at this point also to note three further corporate matters:

It should also be noted at the outset that, but for several documentary tenders, the Active Defendants did not call any evidence, although several paragraphs of affidavits affirmed by Alysha and Dennis were tendered against them by the Plaintiffs. Those paragraphs (or parts of paragraphs) were largely admissions made by Alysha or Dennis as to the accuracy of Chris’ and Mr He’s evidence. For reasons set out in [331] to [333] below the Court has concluded that Alysha’s and Dennis’ evidence would not have assisted them and, where evidence for an inference adverse to their interests otherwise exists, the Court can more easily draw that inference by reason of their failure to give evidence.

The Plaintiffs’ case turned on four transactions for which Mr He funded Haiye:

To understand in overview why the Court has decided that the Plaintiffs, in particular Haiye, should substantially succeed, a reader of these reasons should bear in mind the following seven fundamental conclusions which the Court has reached.

First, much of what passed between the parties was through the medium of the messaging platform known as WeChat. The Court had many pages of transcripts of those contemporaneous and unguarded discussions, translated into English when it had been originally conducted in Chinese. It has been necessary to reproduce these at length in what follows because they, without more, tell the story generally in favour of the Plaintiffs and against the Active Defendants and Mr Varvaris.

Second, while as their own counsel acknowledged, Chris and Mr He were not in all respects ideal witnesses, the Court accepts their evidence as truthful, not least because it was consistent with the WeChat evidence. With only one relevant but explicable exception (see [418] below), their evidence is also generally corroborative of each other. One aspect of particular relevance is that wherever Chris and Mr He have given evidence that statements made by any of Alysha, Dennis or Mr Varvaris were not contradicted or qualified by either of the other two, the Court accepts that evidence.

Third, the Plaintiffs read an affidavit of Mr Tom Chan, the sole director, secretary and shareholder of Landmark. He was not required for cross-examination. The effect of his evidence was that he had never had anything to do with Pionnier or anyone connected with it in relation to a proposed sale of the Second Kogarah Property to Pionnier, and that Landmark had never had any intention of selling the Second Kogarah Property to Pionnier. He disavowed what appeared to be his signature on documents that purported to relate to such a transaction.

Relying primarily on Mr Chan’s evidence (but also on matters such as to whom various funds were misappropriated), the Court is well satisfied to the Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34 (“Briginshaw”) standard that all the references to any proposal to purchase the Second Kogarah Property that fell from Alysha, Dennis and Mr Varvaris were a complete fabrication and were known by all of them to be such. This finding of their joint knowledge is further dealt with in [430] to [437] below.

Fourth, not least because it was propounded by Alysha, Dennis and Mr Varvaris as relating to the purchase of the Second Kogarah Property, the Court is well satisfied to the Briginshaw standard that the invoice from Bingemann which is the subject of these proceedings was fraudulent – and which is referred to in these reasons as the “Fake Bingemann Invoice” – and was known to be such by Alysha, Dennis and Mr Varvaris.

Fifth, one submission put in Alysha’s defence was that on many occasions she was not herself making any representation but was merely acting as a conduit by interpreting into Chinese for the benefit of Chris (who understood conversational English) and Mr He (who did not understand English) what was being said in English by Mr Varvaris. While there are some examples of where the text and context show that Alysha was doing no more than interpreting, the Court is satisfied that is not the case on matters of substance. Taking all the evidence together, but especially the WeChat discussions, the Court has no difficulty in concluding that Alysha was present not as a mere conduit, but as a totally engaged principal in the proposed transactions. She was not an interpreter who had no stake or interest in what she was conveying. She was a principal who happened to be able to translate for Mr Varvaris and, as such, the Court finds was adopting and making her own whatever Mr Varvaris was saying and thereby adding her own voice to his attempts to persuade (and in some cases cajole) Chris and Mr He to finance Haiye’s role in the various purported transactions. So much is demonstrated by her references to “we” and “us”, for example, “Nick can help us get the best terms through his connections to maximise our profits” (see [57] below). The Court makes the same conclusion for the same reasons in relation to Dennis on those occasions where he was translating what Mr Varvaris said.

Sixth, the totality of the evidence makes clear that Alysha and Dennis were active participants in the various transactions together. While Alysha had the larger role, presumably because of her “big sister” relationship with Chris, the fact that Alysha and Dennis were married fortifies the Court in its conclusion that Alysha and Dennis essentially had the same knowledge about what was in fact going on. The Court draws that conclusion more easily by reason of their failure to give evidence to the contrary or at all.

Seventh, while their own Senior Counsel made clear that he was not attempting to portray Alysha and Dennis as complete innocents, his main attack on Chris and Mr He was that they were knowing (or sometimes deliberately blind in the Nelsonian sense) participants in a scheme orchestrated by Mr Varvaris. The gravamen of this submission was that Chris and Mr He were not victims of a fraud worked by Mr Varvaris, Alysha and Dennis, but rather fellow participants in a dubious (if not illegal) scheme. The Court rejects this for these reasons:

Mr A P Cheshire SC and Ms S Jeliba of Counsel appeared for the Plaintiffs. Mr G A Sirtes SC and A L Oakes of Counsel appeared for the Active Defendants.

The Court finds the facts to be as is set out in paragraphs [23] to [256] below, including by reason of accepting the evidence of Chris and Mr He for the reasons set out in paragraphs [300] to [316] and [327] to [330] below.

In 2002, Mr He, Mrs Li Yaner (Mr He’s wife), and Chris (his son) migrated to Auckland, New Zealand from China. Mr He, Mrs Yaner and Chris became permanent residents of New Zealand shortly thereafter and remained there until 2006, at which time Mr He and Mrs Yaner returned to China. Chris remained in New Zealand and attended both high school and university, later graduating from the University of Auckland with a Bachelor of Business.

Although Chris attended both high school and university in New Zealand, and in doing so studied in English, he can only speak and understand English at a “conversational level”. Chris’ native language is Cantonese, although he is also fluent in Mandarin as is the case for Mr He and Mrs Yaner (although Mr He and Mrs Yaner have a very limited understanding of English).

In 2006, Chris first met Alysha and Dennis in Auckland through a mutual friend.

By 2010, Chris had returned to China. Following his return, Chris arranged to introduce his father to Alysha for her to discuss with Mr He a milk powder business opportunity that she was pursuing in China. As Mr He had no experience in marketing food products, he declined to entertain Alysha’s offer to distribute milk powder in southern China.

Between 2011 and early 2015, Chris maintained a relationship with Alysha and Dennis, albeit Chris spent most of his time in Guangzhou, China. Throughout this period, Chris formed a strong relationship with both Alysha and Dennis, often referring to Alysha as his “big sister”. That relationship appeared to be reciprocated by Alysha, who often referred to Chris as her “little brother”. It is clear that as their relationship developed, particularly in or around 2015, Chris began to repose significant trust in Alysha and Dennis.

In early 2015, Mr He, Mrs Yaner and Chris travelled to Sydney for a holiday and spent some time with Alysha and Dennis, who were now located in Sydney. At that time, Mr He, Mrs Yaner and Chris were interested in investment opportunities that were available in Australia. They returned to China after having spent a short time in Sydney.

On 20 June 2014, Wah Ming Pty Ltd (“Wah Ming”) entered into a Put and Call Option Deed (“the Wah Ming Option Deed”) with AFC Holdings Pty Ltd (“AFC Holdings”) in respect of the property situated at 2-24 Princes Highway, Kogarah, NSW (“the Landmark Property”). The following matters are of present relevance in relation to this transaction:

Wah Ming intended to develop the Landmark Property. Although the details of that development were not before the Court, it is apparent that Alysha had a substantial role in the preliminary development steps taken by Wah Ming. Mr Varvaris also appeared to be involved in the development, however, his involvement was minimal and his role in the development process is unclear.

On 8 May 2015, Wah Ming and AFC Holdings entered into a Deed Varying Option Deed (“the Option Variation Deed”), by which the parties agreed that the contract for the sale of the Landmark Property was to be dated 8 May 2015 and the completion date was extended to 31 August 2015. By the Option Variation Deed, AFC Holdings agreed to extend the completion date in consideration for Wah Ming’s payment of an additional $580,000 which, together with the option fee payment under the Wah Ming Option Deed, would comprise the 10% deposit payable under the contract for sale. Wah Ming was also required to pay an additional non-refundable extension fee of $550,000. Thus, by their entry into the Wah Ming Option Deed and Option Variation Deed, Wah Ming had incurred liabilities to AFC Holdings in the amount of $1,710,000.

On 5 August 2015, Wah Ming entered into two agreements with Landmark, to one of which AFC Holdings was also a party. By the agreement between Wah Ming and Landmark, Landmark agreed to take over Wah Ming’s purchase of the Landmark Property in consideration for the payment of $1,160,000 (being the deposit paid by Wah Ming to AFC Holdings) and a fee of $3,200,000 to Wah Ming. By the agreement between Wah Ming, Landmark and AFC Holdings, Wah Ming and AFC Holdings agreed to rescind the contract annexed to the Option Variation Deed.

Wah Ming thus realised a profit from the Wah Ming Option Deed and Option Variation Deed in the sum of $2,650,000 (i.e. $3,200,000 less the non-refundable fee of $550,000 paid by Wah Ming to AFC Holdings).

On 17 June 2015, Chris and Mr He returned to Sydney to inspect a property at the Greenland Centre development in Sydney’s CBD. Shortly upon their arrival, Chris made an off the plan purchase of the penthouse of the Greenland Centre.

Whilst in Sydney, Chris and Mr He spent most of their time with Alysha and Dennis, who introduced Chris and Mr He to various people including real estate agents and business partners. Chris and Mr He were introduced to these figures, it appears, both to open their eyes to the Sydney property market (and property development market) and test whether Chris and Mr He would be interested in investing in Australia. As they did so, Alysha and Dennis were quick to flaunt the various properties they asserted they owned and leased or intended to develop throughout Sydney. It is clear that not only did Alysha and Dennis seek to ingratiate themselves with Chris and Mr He; they also sought to vaunt their success in dealing with, and developing, property in Sydney.

There is, however, a peculiar feature to Alysha’s and Dennis’ behaviour throughout Chris’ and Mr He’s trip to Sydney in June 2015. Whilst on the one hand, they had no hesitation in reiterating their success in purchasing and developing property, they also made it clear that they were somewhat cash deficient. Whilst, ordinarily, it is not unusual for property developers to be cash deficient at times, the unusual circumstances of this case warrant greater attention to such detail.

While not initially interested in pursuing property development opportunities in Australia, as Alysha and Dennis chauffeured Chris and Mr He throughout Sydney, Chris and Mr He began to develop an interest in properties in Sydney. They also began to learn about property development yields, the cost associated with developing apartments in Sydney and the regulations associated with purchasing and developing properties, including the nature of, and process associated with, development applications. Having said that, Chris’ and Mr He’s understanding of these matters remained, at least at this stage, trivial.

Although Chris and Mr He only intended to remain in Sydney for a short period to facilitate their inspection and purchase of the penthouse of the Greenland Centre, upon Chris learning of property development opportunities that were available to him in Sydney, they decided to remain in Sydney. At this time Mr He opened two bank accounts at the Town Hall branch of HSBC. One bank account was held in Mr He’s name solely (“the 439 Account”); the other was held in his and Chris’ name jointly (“the 440 Account”). The funds held in both the 439 Account and the 440 Account were funds drawn from Mr He’s personal bank accounts. By opening the 440 Account, it was Mr He’s intention to facilitate Chris’ access to funds in Australia as he was planning to reside in the Greenland Centre penthouse upon its completion.

On 19 June 2015, at a dinner with Alysha, Dennis, their business partner – to whom the parties referred throughout the proceedings as “Vicky” – and other guests, Chris and Mr He were first introduced to Mr Varvaris, with whom Alysha had a close relationship. Mr Varvaris was introduced to Chris and Mr He by Alysha. It was at this time that Chris and Mr He became aware that Mr Varvaris was a former mayor of Kogarah and a federal parliamentarian.

Several days after their initial introduction to Mr Varvaris, Alysha invited Chris and Mr He to travel to Canberra with her for her to introduce them properly to Mr Varvaris. It was intended that Alysha, Chris and Mr He would meet with Mr Varvaris, and other federal politicians including the Minister for Immigration, at Parliament House in Canberra.

On or about 24 June 2015, Chris, Mr He, Alysha and others attended Mr Varvaris’ office at Parliament House. They also attended a dinner with Mr Varvaris that evening. Although Mr He was unable to speak with Mr Varvaris directly without having Alysha interpret for him, Chris was able to converse with Mr Varvaris directly.

Chris and Mr He assert that several conversations took place at this dinner and throughout their trip to Canberra more generally. Chris deposes that Mr Varvaris said the following to him at the dinner:

Mr He deposes that he had the following conversations with Alysha:

Chris and Mr He returned to China shortly following their trip to Canberra.

On 29 July 2015, Chris and Mr He returned to Sydney with the intention of purchasing another apartment for them to reside in when they returned to Sydney from China (from time to time) as the Greenland Centre penthouse was, at that time, several years from completion. Much like their first visit, Chris and Mr He spent most of their time with Alysha and Dennis throughout this trip and had several meetings, most (if not all) of which were instigated by Alysha or Dennis (or both) to discuss property development opportunities. Mr He deposes that at one such meeting, Alysha said the following to him:

At another meeting in early August 2015, Alysha introduced Chris and Mr He to Mr Joe Owen, a real estate agent. Mr Owen was marketing a property in Rockdale which had an ostensible development potential of 60 residential units and a floor of commercial shops (“the Rockdale Property”).

Several days after their introduction to him, Chris and Mr He attended the Rockdale Property with Mr Owen and Dennis. Chris, Mr He, Alysha or Dennis (or some combination of those four people) made an offer for the purchase of the Rockdale Property shortly after Chris and Mr He’s inspection of it. Although the details of the offer (i.e. who made the offer, upon who’s behalf it was made, how the parties were to apportion the purchase price etc.) are not in evidence, it is clear that someone, most likely Alysha, made an offer to purchase the Rockdale Property for $12,500,000. That offer was rejected.

Throughout the process of their inspection of, and subsequent offer to purchase, the Rockdale Property, Mr He, Chris and Dennis had several conversations about incorporating a company to use to purchase the Rockdale Property. Dennis later introduced Chris and Mr He to Fei Gao, who was the accountant ultimately used by Chris, Mr He and Dennis to incorporate Haiye and PPD.

On 13 August 2015, Haiye was incorporated. Chris and Dennis were appointed as directors of Haiye. Dennis was appointed as a director of Haiye because one of its directors is required to ordinarily reside in Australia: s 201A(1) of the Corporations Act 2001 (Cth) (“Corporations Act”). Although Dennis was a director of Haiye, he was not involved in the operation of that company. Principally, Chris had the day-to-day carriage of Haiye and its affairs. Of the 100 shares issued upon Haiye’s incorporation, Chris held 51 shares and Mr He held 49 shares.

On 14 August 2015, Mr He purchased an apartment in St Leonards.

In the week or two after their offer on the Rockdale Property was rejected, Chris asserts that he had the following conversation with Alysha:

Mr He deposes that Alysha said the following to him in the week or two after their offer on the Rockdale Property was rejected:

Alysha has accepted that she said the words attributed to her by Mr He, but for the words “Nick’s father is a Greek priest”.

On 16 August 2015, Chris and Mr He first inspected the First Kogarah Property. Chris deposes that he had the following conversation with Alysha and Mr Varvaris at that inspection:

Alysha has accepted that she said the words attributed to her in the first paragraph of the first extract and all of the second extract, but for the words “[h]e used to be the mayor but he has been promoted now”.

Chris also deposes that Alysha translated the following, which was said by Mr Varvaris to Chris and Mr He (which Alysha accepts she translated):

Mr He also deposes to several conversations, which were either words said by Alysha on her own accord or what was said by Mr Varvaris and translated for him by Alysha. Those conversations include (the first two extracts are words said by Alysha translating what was said by Mr Varvaris; the final extract contains words alleged to have been said by Alysha on her own accord):

Alysha accepts that the words attributed to her by Mr He were said by her but for the words “Nick was the former mayor of Kogarah and he got promoted”.

Around the time of Chris and Mr He’s first inspection of the First Kogarah Property, Alysha invited Chris and Mr He to join a WeChat messaging group with her, Dennis and Mr Varvaris (“the Group WeChat”), which invitation they accepted. Ms Yaner was also initially a member of the Group WeChat, however, she left the group in about August 2016.

In the Group WeChat, Mr Varvaris was often referred to (primarily by Alysha) as “the classmate” or “the schoolmate”.

Several other WeChat threads were also created and used to converse including the following:

These WeChat threads became the primary means through which Chris and Mr He would converse with Alysha, Dennis and Mr Varvaris, other than in person. Importantly, because the WeChat software has a translation function, Mr He was able to translate the messages sent in English into Cantonese and reply to those messages in Cantonese, which could similarly be translated into English by Mr Varvaris and the other English-speaking members of the Group WeChat.

On 17 August 2015, Chris and Mr He attended the First Kogarah Property for a second time, albeit on this occasion with Dennis. Chris and Mr He depose to several conversations they had with Dennis on this occasion. Chris deposes that he had the following conversation with Dennis:

Mr He deposes that Dennis said the following:

Later that day, Chris and Mr He attended Alysha’s and Dennis’ residential property in Pymble (“the Pymble Property”). Chris deposes that he, Mr He, Alysha and Dennis had several conversations about their potential purchase of the First Kogarah Property, including the following:

Both Alysha and Dennis have accepted that the conversation as set out by Chris accurately reflects the conversation had that evening. Mr He also deposes to a similar conversation, the effect of which is similarly accepted as having been said by Alysha and Dennis.

Later that evening, Chris received a copy of the contract for the sale of the First Kogarah Property, which was sent to him by Alysha. Chris did not read the contract but forwarded it to his solicitor, Mr Eddy Vay of Longton Legal (also known as Mr Eddy Wei).

Shortly following 17 August 2015, Chris met with Alysha and Mr Varvaris to discuss further PPD’s purchase of the First Kogarah Property. Chris deposes that the following conversation took place:

On 19 August 2015, Chris, Mr He and Dennis incorporated PPD. Chris and Dennis were appointed as directors of PPD.

On 24 August 2015, Chris, Mr He and Dennis attended a meeting at Mr Varvaris’ office in Kogarah to discuss PPD’s purchase of the First Kogarah Property. Chris deposes that he was handed a document by Mr Varvaris which Mr Varvaris asserted was the contract for PPD’s purchase of the First Kogarah Property. Chris also deposes that the following was said by Mr Varvaris at this meeting, which was translated to him and Mr He by Dennis:

Chris also deposes that he had the following exchange with Mr Varvaris at this meeting:

By his affidavit, Dennis has accepted that Chris’ account of these conversations is an accurate record of what was said at the 24 August 2015 meeting.

Mr Varvaris did not disclose who he intended to engage to act on PPD’s behalf for the purpose of its purchase of the First Kogarah Property. Chris and Mr He later learned that Blackstone Waterhouse Lawyers had been engaged by Mr Varvaris.

Chris also deposes that it was at about the time of the 24 August 2015 meeting that Alysha said to him:

By her affidavit, Alysha has accepted that she said these words to Chris.

At the conclusion of their meeting, Chris signed the document handed to him by Mr Varvaris. Chris did not keep a copy of that document and cannot recall what the document was. As it turned out, the document signed by Chris was not the contract for the sale of the First Kogarah Property, but was likely to have been an Option Deed entered into by PPD and Al-Jaafaria Society Incorporated (“Al-Jaafaria”), the vendor of the First Kogarah Property.

The meeting held at Mr Varvaris’ office on 24 August 2015 was the first time that a “supplementary contract” was mentioned, albeit a split in the purchase price was discussed at Chris’ and Mr He’s first inspection of the First Kogarah Property. For the balance of these reasons, I shall refer to the “supplementary contract” as exactly that.

On 25 August 2015, Chris and Dennis opened a bank account in PPD’s name with the Commonwealth Bank of Australia at the World Square branch (“the CBA Account”). Chris and Dennis were co-signatories on the account. Shortly after the CBA Account was opened, Chris had the following conversation with Dennis (which Dennis has accepted to be an accurate record of the conversation):

Later that afternoon, Chris and Mr He attended the Pymble Property for dinner and to further discuss PPD’s purchase of the First Kogarah Property. Mr Varvaris arrived at approximately 9:30pm that evening. Chris deposes that upon Mr Varvaris’ arrival, he had the following conversation with Dennis:

At 9:49am on 26 August 2015, Alysha sent the following message to the Group WeChat:

By this message, the Court finds Alysha was relaying a message from Mr Varvaris that Al-Jaafaria had accepted PPD’s offer to purchase the First Kogarah Property.

At 2:46pm on 26 August 2015, Alysha sent the following message to the Group WeChat:

By this message, the Court finds Alysha was intending to convey the account to which Haiye’s cheque was to be drawn for Haiye’s share (i.e. 75%) of the deposit for the Supplementary Contract in the amount of $75,000.

Upon receiving this message, Chris and Mr He attended the HSBC branch in the Sydney CBD and obtained two bank cheques. The first bank cheque was drawn in favour of the Chris Apostolakos Solicitor Law Practice Trust Account for the sum of $75,000, being Haiye’s share of the 10% deposit payable by PPD pursuant to the Supplementary Contract (“the Supplementary Contract Deposit Cheque”). The Supplementary Contract Deposit Cheque was deposited into the Chris Apostolakos Solicitor Law Practice Trust Account on 13 November 2015.

The second bank cheque was drawn in favour of the trust account of Longton Legal for the sum of $701,250, being Haiye’s 75% share of the 10% deposit payable by PPD under the contract for the sale of the First Kogarah Property (“the Primary Contract Deposit Cheque”). Mr He used his personal funds to purchase both the Supplementary Contract Deposit Cheque and the Primary Contract Deposit Cheque.

The funds transferred by the Supplementary Contract Deposit Cheque were, unbeknownst to the Plaintiffs, later disbursed as follows:

Later that evening, Chris and Mr He attended a Liberal Party fundraising dinner at the Waitan Restaurant in Haymarket. Whilst at the event, Chris handed Mr Varvaris the Supplementary Contract Deposit Cheque. Chris deposes that he had the following conversation with Mr Varvaris:

On 27 August 2015, Chris and Mr He returned to China.

On 8 September 2015, Alysha sent a message to Chris on the Alysha WeChat which contained a text message from Mr Varvaris to Alysha. That message read:

On 13 and 14 September 2015, Chris and Alysha exchanged further messages via the Group WeChat regarding PPD’s purchase of the First Kogarah Property. Chris says that as a result of those communications, he instructed Mr Vay to draw a cheque on Longton Legal’s trust account for $701,250 in favour of Al-Jaafaria, in satisfaction of Haiye’s 75% share of the 10% deposit under the contract for sale of the First Kogarah Property.

On 17 September 2015, PPD and Al-Jaafaria exchanged counterpart Deed of Put and Call Options (“the First Kogarah Property Option Deed”). Chris was of the mistaken belief, at the time, that the contract for the sale of the First Kogarah Property was exchanged on this date.

The First Kogarah Property Option Deed contained the following salient terms:

On 6 October 2015, Chris and Mr He returned to Sydney for Chris and Mr He to further progress PPD’s purchase and development of the First Kogarah Property and to attend to establishing the Golden Sands Chinese Restaurant in Hurstville with Mr Varvaris, Alysha and Dennis. The Golden Sands Chinese Restaurant was a further, separate, joint business endeavour entered into by Chris, Mr He, Mr Varvaris, Alysha and Dennis.

Chris deposes that shortly following his arrival in Sydney, he had a conversation with Mr Varvaris, in which Mr Varvaris said the following to him:

On 10 October 2015, Chris, Mr He, Mr Varvaris and Dennis attended an introductory meeting with a man named Angelo from Candalepas Associates. Chris deposes to having the following conversation with Mr Varvaris at this meeting:

On 11 October 2015, Chris, Alysha and Dennis exchanged several messages on the Group WeChat and arranged to have lunch in the city the following day. In those messages, Chris requested that Dennis bring copies of the contract for the sale of the First Kogarah Property to their meeting. Although Chris requested copies of the contract for the sale of the First Kogarah Property, he asserts that he intended to request the documents relating to both the Primary Contract and the Supplementary Contract.

On 12 October 2015, Chris, Mr He, Alysha and Dennis met, at which time Dennis handed Chris a document that was dated 17 September 2015, although Chris cannot now recall what that document was. The document was, in all likelihood, the First Kogarah Property Option Deed.

Neither Chris, nor Mr He, has ever received a copy of the Supplementary Contract (assuming there was such a document).

On 14 October 2015, Chris, Mr He and Alysha discussed the potential profitability of PPD’s proposed development of the First Kogarah Property, inter alia, via the Group WeChat. That exchange included:

On 15 October 2015, Chris, Mr He, Alysha and Mr Varvaris met in person to discuss PPD’s proposed development of the First Kogarah Property. Chris asserts that although he cannot recall the discussion had on that occasion, nothing was said to change his understanding that:

On 26 October 2015, Chris and Dennis were appointed as directors of Golden Sands Hospitality Pty Ltd (“Golden Sands Hospitality”) (formerly Risun Solar Energy Pty Ltd), which operates the Golden Sands Chinese restaurant in Hurstville. At that time, Chris and Dennis personally held 40 and 60 of the 100 issued shares respectively, although the shares were not beneficially owned by either Chris or Dennis. Chris asserts he was advised by Dennis and Mr Varvaris at around the time of their appointment as directors that Dennis held 30% of the company’s shares for Mr Varvaris.

On 9 and 10 November 2015, Alysha and Angelo Candalepas (referred to in [95] above) exchanged several emails. Of present relevance is the email from Alysha to Mr Candalepas on 10 November 2015:

On 17 November 2015, Alysha and Mr Candalepas exchanged further emails about the progress of PPD’s development of the First Kogarah Property.

In late 2015, Mr He returned to China.

On 19 December 2015, Chris, Mr He and Alysha exchanged messages on the Group WeChat in which they were discussing Chris and Mr He’s business visa application. Alysha appears to have been assisting Chris and Mr He obtain a business visa. That exchange includes the following messages:

The “inviting company” referred to in this exchange was a company associated with Mr Varvaris (it appears that Mr Varvaris may have held shares in Citywide Property Group through a corporate shareholder). That company was supporting Chris and Mr He with their business visa application, which was obtained in early January 2016, by which time Chris had also returned to China. I deal with this further in [571] below.

Chris deposes to having a conversation with Alysha and Mr Varvaris in about late 2015 or early 2016, in which he says Mr Varvaris said the following:

On 28 January 2016, Alysha sent the following messages to the Group WeChat:

By reason of the first message, Chris and Mr He say they understood that PPD’s purchase of the First Kogarah Property would settle on 17 February 2016. Accordingly, they made arrangements to return to Sydney in mid-February 2016. By the second message, Chris asserts he understood Alysha to be referring to the property referred to in his discussion with Alysha and Mr Varvaris in late 2015 or early 2016 (see [107] above).

On 1 February 2016, Chris, Alysha, Dennis and Mr Varvaris exchanged the following messages via the Group WeChat:

On 2 February 2016, Alysha and Mr Varvaris exchanged the following further messages on the Group WeChat:

On 11 February 2016, Dennis received an email from Blackstone Waterhouse Lawyers reminding him that the last day for PPD to exercise its option under the First Kogarah Property Option Deed was 16 February 2016. Dennis responded to that email later that evening stating:

Blackstone Waterhouse Lawyers responded to Dennis’ email later that evening, advising Dennis of the steps required for PPD to exercise its option and complete its purchase of the First Kogarah Property, including indicating the amounts payable by PPD upon its purchase of the First Kogarah Property. Chris was not copied into this correspondence, nor was Mr He.

On 16 February 2016, Chris, Mr He, Alysha and Mr Varvaris exchanged the following messages on the Group WeChat:

Later that evening, Chris, Mr He and Mrs Yaner met with Alysha, Dennis and Mr Varvaris at the Lotus Restaurant. Chris asserts that the following took place at the dinner:

Mr He deposes that the following took place at the dinner at the Lotus Restaurant:

Ms Yaner asserts that the following took place at the dinner:

Contrary to Chris’ and Mr He’s views as set out at [109] above, the First Kogarah Property did not settle on 17 February 2016. PPD did, however, exercise its option under the First Kogarah Property Option Deed on that date.

On 20 February 2016, Chris, Mr He and Alysha attended a meeting at Mr Varvaris’ office. Chris asserts that he cannot recall the details of what was said at the meeting, however, he does recall that the meeting was about:

Chris asserts that Alysha said the following to him at the end of the meeting:

Mr He asserts that Alysha said the following to him throughout the meeting:

Mr He says that he left the meeting on the understanding that they could purchase land from their neighbour and that contract documents would be prepared.

On 26 February 2016, Mr He, Alysha and Dennis exchanged the following messages on the Group WeChat:

On 27 February 2016, Chris, Dennis and Mr Varvaris exchanged the following messages on the Group WeChat:

On 28 February 2016, Chris, Mr He, Alysha and Mr Varvaris exchanged the following messages on the Group WeChat:

On 29 February 2016, the following messages were exchanged on the Group WeChat:

Mr He asserts that in late February or early March 2016, Alysha said the following to him:

Mr He asserts that he was, therefrom, content to proceed with PPD’s purchase of the Landmark Property because he understood that the vendors were prepared to sell the land.

On 1 March 2016, the following messages were exchanged on the Group WeChat:

On 2 March 2016, Chris, Mr He and Dennis attended the offices of Blackstone Waterhouse Lawyers and met with Anthony Jreige. Mr Vay of Longton Legal also attended the meeting in his capacity as Chris and Mr He’s solicitor.

Chris says that at that meeting, Mr Jreige handed him a document entitled “Settlement Sheet” and said the following:

As he said this, Mr Jreige wrote the words “Blackstone Waterhouse Lawyers Trust Account $8,918,000” on a piece of paper. Chris took a photo of that piece of paper, in addition to Mr Jreige’s business card and the Settlement Sheet, and sent messages to the Group WeChat attaching those photographs.

According to Mr He, throughout the meeting Dennis translated what was being said by Mr Jreige, including the following:

Later that day, the following messages were exchanged on the Group WeChat:

On 3 March 2016, the following messages were exchanged on the Group WeChat:

Later that evening, Chris, Mr He, Alysha, Dennis and Mr Varvaris met at the Pymble Property. Chris asserts that the following took place at that meeting:

Mr He asserts that the following took place at the 3 March 2016 meeting:

Dennis has accepted that he said the words attributed to him by Mr He, although he asserts that in doing so, he was translating what was said at that meeting by Mr Varvaris.

Mr He also asserts that he had the following conversation with Alysha either at the 3 March 2016 meeting or shortly thereafter:

Alysha has accepted that Mr He said the first sentence of what is attributed to him.

On 4 March 2016, the following messages were exchanged on the Group WeChat:

Later that evening, Chris, Mr He, Dennis, Dennis’ sons and Mr Varvaris attended the Century Restaurant in the Star Casino for dinner. At the dinner, Mr Varvaris handed Dennis a document, which Dennis signed without having read it. Dennis then handed the document to Chris for him to sign. Chris asserts that as he was handed the document, Dennis said the following to him:

Mr He asserts that Dennis said the following to Chris as he handed the document to him:

Chris asserts that he then signed the document, which was a copy of an Option Deed for PPD’s proposed purchase of part of the Landmark Property (“the Second Kogarah Property Option Deed”). Most, if not all, of the conversations until this point concerned the Landmark Property in its entirety. However, the Option Deed only contemplated part of the Landmark Property, which was the Second Kogarah Property.

Chris gave a copy of the Second Kogarah Property Option Deed to Mr Vay the next day. Shortly after providing that document to Mr Vay, Chris asserts that Mr Vay said to him:

After having spoken with Mr Vay, Chris and Mr Varvaris exchanged the following messages on the Group WeChat:

On 6 March 2016, Chris sent the following messages in the Group WeChat:

On 7 March 2016, Chris, Mr He, Dennis and Mr Varvaris attended a meeting at Mr Varvaris’ office in Kogarah. At that meeting, Dennis wrote out a cheque in the amount of $2,229,500 in favour of the Blackstone Waterhouse Lawyers trust account. Chris asserts that at the time, Dennis said the following to Chris:

Mr He asserts that he had the following conversation with Dennis at that meeting:

After their meeting at Mr Varvaris’ office, Chris and Mr He attended the Town Hall HSBC branch to purchase two bank cheques from Mr He’s funds. Mr He purchased the following bank cheques:

The funds transferred pursuant to the Second Supplementary Contract Cheque were later disbursed, unbeknownst to the Plaintiffs, as follows:

The Plaintiffs allege that Alysha, Dennis, Pionnier and/or Mr Varvaris caused or directed those funds to be transferred. The Plaintiffs also allege that Alysha, Dennis, Pionnier and/or Mr Varvaris caused or directed $30,000 of the funds to be retained by Citywide Property Group and used for its own benefit. It is not necessary for the Court to make a finding about who actually arranged for the transfers to occur.

Upon receiving the two cheques from HSBC, Chris and Mr He attended Mr Varvaris’ office and handed over the Second Supplementary Contract Cheque.

Chris asserts that he received a phone call from Alysha later that afternoon, during which she said the following to him:

Chris, Alysha and Mr Varvaris also exchanged the following messages on the Group WeChat later that afternoon:

On 8 March 2016, Chris and Mr He attended the offices of Blackstone Waterhouse Lawyers and handed over Haiye’s and Pionnier’s cheques. In doing so, Chris ignored Alysha’s request as set out at [154] above.

In the evening of 9 March 2016, Chris, Mr He, Alysha, Dennis and Mr Varvaris held a meeting at the offices of Mr Varvaris’ accounting firm, Varvaris & Co (which is, in fact, Citywide Financial Services Group Pty Ltd t/as Varvaris & Co) in Kogarah. The purpose of the meeting was for the parties to discuss PPD’s purported purchase of the Second Kogarah Property. Chris asserts that the following took place at this meeting:

Mr He asserts that the following took place at the 9 March 2016 meeting:

Alysha asserts that, in addition to those aspects of Chris’ and Mr He’s recollection of the meeting with which she agrees, the following conversation took place at the meeting on 9 March 2016:

Alysha asserts that at this juncture in the conversation, both Mr He and Mr Varvaris were becoming increasingly angry. Alysha claims that in trying to settle Mr He and Mr Varvaris, she had the following conversation with Mr He and Mr Varvaris:

On 10 March 2016, Chris asserts that he had the following telephone conversation with a representative of Blackstone Waterhouse Lawyers:

Chris deposes that he then spoke with his father and said the following to him:

Mr He recalls a similar conversation.

Mr He asserts that he then phoned Dennis and had the following conversation with him:

Throughout the day on 10 March 2016, Chris, Alysha, Dennis and Mr Varvaris exchanged the following messages on the Group WeChat:

In the evening of 10 March 2016, Chris and Dennis exchanged these messages on the Dennis WeChat:

Early in the morning of 11 March 2016 these messages were exchanged in the Group WeChat:

After having received the final message from Dennis, Chris and Mr He attended the Town Hall branch of HSBC and Mr He obtained a bank cheque for $3,564,000 in favour of Varvaris & Co using funds from the 439 Account (“the Second Kogarah Property Cheque”). That amount was intended to represent Haiye’s 75% share of the deposit in respect of PPD’s purchase of the Second Kogarah Property. While they were at the bank, Mr He asserts that he said to the bank manager:

Thereafter, these messages were exchanged on the Group WeChat:

Both cheques were recorded as having been credited to a bank account held by Citywide Financial Services Group Pty Ltd t/as Varvaris & Co (“the Citywide Financial Services Bank Account”) on 11 March 2016.

On 12 March 2016, Chris, Mr He, Dennis and Mr Varvaris held a meeting at Mr Varvaris’ office in Kogarah. Chris asserts that the following took place at that meeting:

Both Chris and Mr He assert that they held a meeting with Alysha, Dennis, Mr Varvaris and Mr Andrew Box of Bingemann Consulting Pty Ltd (“Bingemann”) at Mr Varvaris’ office in Kogarah in mid-March 2016, although neither can recall whether that meeting was the meeting held on 12 March 2016. Given that Chris and Mr He returned to China on 13 March 2016, it is more probable than not that the meeting with Mr Box was held on or before 12 March 2016. Chris asserts that the following took place at that meeting:

Mr He asserts that the following took place at the meeting:

On 14 March 2016, these events took place:

On 15 March 2016, the sum of $2,231,762.83 (which was the amount owing by Pionnier in respect of its share of PPD’s purchase of the First Kogarah Property) was withdrawn from the Citywide Financial Services’ Bank Account and a bank cheque was purchased for that amount in favour of Al-Jaafaria.

Later that day, these messages were exchanged on the Group WeChat:

On 16 March 2016:

In the afternoon of 16 March 2016, these messages were exchanged on the Group WeChat:

On 22 March 2016, a transfer was made from the Citywide Financial Services Bank Account to an account held by Alysha in the amount of $400,000.

On 7 April 2016, Dennis and Chris received a letter from Blackstone Waterhouse Legal confirming that PPD’s purchase of the First Kogarah Property was completed on 16 March 2016.

On 18 April 2016, Mr Box sent an email to Alysha. That email included:

On 29 April 2016, Alysha and Mr Varvaris attended a meeting with Mr Box. Chris asserts that he was not aware that the meeting had been arranged and did not attend it.

On 29 May 2016, a representative of Bingemann wrote to “Alysha c/- City Wide at Montgomery Street Kogarah NSW 2000” in relation to “Proposed Development – Princess Hwy Kogarah”. The letter relevantly states:

Mr He asserts that in early or mid-2016, he had a conversation with Alysha during which Alysha said to him:

On 1 June 2016, Mr Varvaris received a fee proposal from Mr Box:

On 3 June 2016, Alysha received the following email from Mr Box, a copy of which was also sent to Mr Varvaris:

On 3 June 2016, Mr Box sent a further email to Alysha and Mr Varvaris seeking their instructions to proceed with two quotes.

On 15 June 2016, these messages were exchanged on the Group WeChat:

On 6 July 2016, Mr Varvaris received an email from Mr Box attaching a consultants’ fee estimate. The body of the email was:

The consultants’ fee estimate attached to Mr Box’s email was a spreadsheet of anticipated costs for the development, the sum total of which was $2,960,500.

On 20 July 2016, Alysha and Mr Varvaris received the following email from Mr Box:

The excel spreadsheet attached to Mr Box’s email indicated a revised fee estimate for the development of $1,598,750.

Later that morning, Alysha and Mr Varvaris received this email from Mr Box:

The invoice from Bingemann contained these salient features and information:

The form of this invoice becomes important in understanding what happened in relation to the Fake Bingemann Invoice as set out in [235] and following.

On 22 June 2016, Chris and Mr He attended a meeting at Alysha’s school with Alysha and Mr Varvaris. Chris asserts that during that meeting, Mr Varvaris said the following, which was translated for Chris and Mr He by Alysha:

Chris asserts that as at June 2016, he did not have any experience with developing, selling or renting serviced apartments. It was for that reason, he says, that he had a conversation with his friend who was an accountant later that afternoon to discuss the viability of serviced apartments. Chris asserts that he had the following conversation with his friend:

On 23 June 2016, these messages were exchanged on the Group WeChat:

On 6 July 2016, these messages were exchanged on the Group WeChat:

In about late July 2016, Chris asserts that he became concerned that he and his father had paid a large sum of money for the deposit on the Second Kogarah Property but had not received any documents recording receipt of the deposit or a contract for Bingemann’s services. Chris asserts that he raised these concerns with his father, which prompted Mr He to say:

Mr He asserts that it was at this time that he also began to feel uncomfortable about his dealings with Alysha and Mr Varvaris for the following reasons:

Mr He asserts that it was for these reasons that he organised a meeting with Mr Vay in late July 2016. At that meeting, Mr Vay was provided with a copy of the Deed of Agreement between PPD, Landmark and CBC for PPD’s proposed purchase of the Second Kogarah Property. It is unclear whether Mr Vay was also provided with a copy of the Option Deed.

Chris says that at that meeting, Mr Vay said the following:

Chris asserts that Mr Vay also made some handwritten notes on the Deed of Agreement.

On 27 July 2016, Chris sent photographs of two pages from the Deed of Agreement that Mr Vay had marked up by hand to the Group WeChat.

Between 31 July 2016 and 3 August 2016, Chris sent these messages to the Group WeChat:

In early August 2016, Chris had the following conversation with Mr Varvaris, which was translated by Alysha:

Chris also asserts that he had the following conversation with Mr Varvaris at around the same time, which was also translated by Alysha (the final paragraph was not, Chris asserts and the Court accepts, Alysha translating what was said by Mr Varvaris):

On 4 August 2016, Mr Varvaris sent an email to Chris and Alysha, which attached an amended Deed of Agreement. The email read:

The Deed of Agreement contained these clauses:

Notwithstanding the reference to an attached option deed in clause (a), an option deed was not attached to the Deed of Agreement, nor Mr Varvaris’ email of 4 August 2016.

After receiving the proposed Deed of Agreement, Chris asserts that he made a telephone call to Mr Vay and said the following to him:

Mr He also asserts that he had the following conversation with Mr Vay:

On 7 August 2016, Alysha sent a message on the Group WeChat attaching a photograph of an invoice purporting to be from Bingemann dated 15 July 2016 in the amount of $895,125 (including GST). That invoice was what is referred to in this judgment as the Fake Bingemann Invoice. These messages were then exchanged:

The Fake Bingemann Invoice had the following features and information:

At 11:21am on 9 August 2016, Mr Varvaris sent an email to Chris and Alysha attaching the fee proposal referred to at [183] above. Chris asserts that he had not seen a copy of Bingemann’s fee proposal until he received it from Mr Varvaris on 9 August 2016.

At 5:53pm on 9 August 2016, Mr Vay sent an email to Mr Varvaris and Alysha by which Mr Vay sought to “discuss details in relation to the acquisition of [the Second Kogarah Property]”.

At 2:52pm on 10 August 2016, Mr Varvaris sent an amended Deed of Agreement to Chris, Alysha and Mr Vay. The amended Deed of Agreement contained these clauses:

Again, despite reference to it in clause (a), neither the amended Deed of Agreement, nor Mr Varvaris’ email, attached an option deed.

After receiving Mr Varvaris’ amended Deed of Agreement, Chris asserts that he had the following conversation with Mr Vay:

From 3:50pm on 10 August 2016, the following messages were exchanged on the Group WeChat:

Later that afternoon, Chris and Alysha exchanged these messages on the Alysha WeChat:

At 5:30pm on 10 August 2016, Mr Vay sent an email to Chris, Alysha and Mr Varvaris outlining his concerns with the proposed Deed of Agreement. Various issues were raised by Mr Vay, including whether there would be an indemnity to PPD “that the deposit paid will definitely be refunded back”.

Mr He deposes that he had the following conversation with Mr Vay on or about 10 August 2016:

Mr He deposes that after speaking with Mr Vay, he immediately called Chris and had the following conversation:

Chris asserts that this conversation prompted him to write to Mr Varvaris and Alysha on the Group WeChat demanding a receipt for Haiye’s payment of its share of the 60% deposit of PPD’s purchase of the Second Kogarah Property. In response to that demand, Mr Varvaris sent a copy of an invoice and a receipt from CBC to the Group WeChat, notwithstanding that payment had been made to Varvaris & Co and (at least the uncontradicted evidence is that) neither Chris nor Mr He permitted those funds to be transferred to CBC. These documents purported to show that the deposit moneys for the Second Kogarah Property in the amount of $4,752,000 had been paid to CBC on or about 15 March 2016.

Around the time of his receipt of the invoice and receipt, Mr He asserts that Alysha said to him:

Mr He’s evidence is that although he was angry and concerned that the funds for Haiye’s share of PPD’s 60% deposit on its purchase of the Second Kogarah Property had been disbursed to CBC against his express request, he remained of the view that the receipt offered Haiye some protection, he accepted Alysha’s assurance and formed the view that Haiye’s money was safe for the following additional reasons:

On 11 August 2016, these messages were exchanged on the Group WeChat:

On 12 August 2016, the following additional messages were exchanged on the Group WeChat:

Mr Varvaris’ email attaching the proposed Deed of Agreement was sent to Chris, Alysha and Mr Vay. The version of the Deed of Agreement (which was in the same terms as those set out at [218] above) attached to Mr Varvaris’ email was purportedly signed on behalf of Landmark by ‘T Chan’. That signature appeared above the name ‘Tom Liu’. The Deed of Agreement was also purportedly executed by Christopher Michael on behalf of CBC.

Notwithstanding that the Deed of Agreement appeared to be signed by a Tom Liu (or T Chan), Landmark’s sole director, Tom Chan, denies having signed the Deed of Agreement. Mr Chan also gives evidence, which was unchallenged, that the signature appearing above the name ‘Tom Liu’ is not his signature.

Upon receiving confirmation from Mr Varvaris that he had sent a signed version of the Deed of Agreement, Mr He asserts that he had the following telephone discussion with Mr Vay:

The following messages were exchanged on the Group WeChat later that afternoon:

In the afternoon of 12 August 2016, Chris and Mr He attended a HSBC branch and purchased a bank cheque for $671,343.75 in favour of Bingemann (“Haiye’s Bingemann Invoice Cheque”). Haiye’s Bingemann Invoice Cheque was purchased from Mr He’s personal funds.

Later that afternoon, one of Alysha’s employees collected Haiye’s Bingemann Invoice Cheque from HSBC.

The bank records of Bingemann Holdings Pty Ltd record receipt of Haiye’s Bingemann Invoice Cheque on 15 August 2016.

In the afternoon of 15 August 2016, Mr Varvaris sent an email to Mr Box, copied to Alysha, the subject of which was “Refund Funds”. The email reads:

On 17 August 2016, the sum of $671,378.75 was withdrawn from the account of Bingemann Holdings Pty Ltd and transferred to the account of A & T Education.

On 31 August 2016, the sum of $400,000 was transferred from the account of A & T Education to an account held by Alysha personally.

The balance of Haiye’s Bingemann Invoice Cheque (i.e. $271,343.75) was, the Plaintiffs assert, used to make payments to Golden Sands Hospitality by A & T Education on behalf of Dennis as a credit to his director’s loan account. The Plaintiffs submit that the following transactions comprise Dennis’ use of the balance of the funds transferred by the Haiye’s Bingemann Invoice Cheque:

The above transactions are recorded in a director’s loan account for Dennis with Golden Sands Hospitality.

On 13 September 2016, Mr Box sent an email to Mr Varvaris attaching an invoice from Bingemann. That invoice was:

Mr Varvaris forwarded Mr Box’s email, and the attached invoice, to Alysha later that day.

On 10 October 2016, Mr Box sent an email to Mr Varvaris, to which Alysha was copied, attaching an invoice from Bingemann. That invoice was:

On 10 November 2016, Mr Box sent an email to Mr Varvaris in which he set out the amounts due and payable by PPD for consultants, including Bingemann. The total amount owing at that date was $36,880.25. Mr Varvaris forwarded that email to Alysha on 23 November 2016.

On 7 December 2016, Citywide Financial Services lodged a Form 484 with ASIC to the effect that Chris was no longer a director of PPD. The form was signed by Dennis.

On 8 December 2016, $400,644.32 was withdrawn from PPD’s bank account.

Also on 8 December 2016, Citywide Financial Services lodged another Form 484 with ASIC recording Chris being reappointed as a director of PPD. That form was also signed by Dennis.

On 3 March 2017, these proceedings were commenced by Summons.

On 26 March 2017, Mr Varvaris and Mr Box sent the following emails to one another:

That email chain was forwarded by Mr Varvaris to Alysha later that evening.

On 16 June 2017, Angelo Candalepas sent an email to Alysha, which included:

It is unclear whether the payment of $92,050 is in reference to a payment made in relation to PPD’s development of the First Kogarah Property.

On 2 February 2019, Mr Box sent a letter to Alysha, which states:

The invoices attached to Mr Box’s letter are numbered “Kog 1” to “Kog 8”. The invoice numbered “Kog 1” is for the sum of $13,200 (including GST). Mr Box’s letter did not attach an invoice for $895,125.

The Plaintiffs’ Amended Statement of Claim (“ASOC”) pleads the following causes of action:

The following three further issues also arise for consideration:

The issues set out in [258] above were not expressly pleaded in the Active Defendants’ Further Amended Defence. On 6 April 2021, the Active Defendants filed a Notice of Motion by which they sought leave to amend their Further Amended Defence to raise the discretionary defences of unlawful purpose, illegality and unclean hands. The reflective loss issue, by contrast, was first raised by Mr Sirtes SC on the ninth day of the hearing. It was not, therefore, contemplated in the Active Defendants’ Notice of Motion and I shall deal with it separately.

On the first day of the hearing, the first matter with which the Court had to deal was the Active Defendants’ Notice of Motion. After hearing the argument (which was conducted for the Active Defendants by Mr Oakes), the Court dismissed the motion. I indicated that I would give my reasons for that order as part of the Court’s final reasons for judgment.

The Active Defendants’ Further Amended Defence had stood on the record since it was filed on 28 October 2019.

On 25 March 2021, I convened a pretrial directions hearing to deal with any preparatory matters that might require attention for the hearing fixed to commence on 12 April 2021. During the course of that directions hearing, Mr Sirtes SC indicated “lest there be any issue about this” that at least in relation to the equitable relief being sought by the Plaintiffs, the Active Defendants would be relying on the doctrine of unclean hands. In response to a question from me, he said that this had not been formally pleaded and that in his submission it did not have to be, but that nevertheless his clients could amend their pleading to make clear that the defence would be relied on.

Among the various directions and notations I made at the end of the pretrial directions hearing were:

My intention, which was communicated to the parties, was that if the Active Defendants were of the view that an amendment to the pleadings was required, I would deal with any amendment application when the matter was before me for the hearing of another motion on 6 April 2021.

On 26 March 2021, the Active Defendants’ solicitors wrote to the Plaintiffs’ solicitors providing particulars of the proposed discretionary defences.

By letter dated 29 March 2021, the Plaintiffs’ solicitors responded that they objected to the equitable defences being raised without those matters having been pleaded.

When the matter came before me on 6 April 2021, the Active Defendants had not yet provided a draft amended pleading to the Plaintiffs. In those circumstances, I made directions for a motion and affidavits to be filed to enable the amendment application to be dealt with on the first day of the hearing.

The Active Defendants’ proposed amendment was to add this paragraph:

While I was mindful that the Active Defendants bore the onus of satisfying the Court that their application should be allowed, I asked Mr Cheshire SC to address first to explain why his clients opposed the amendment.

Mr Cheshire SC began by reminding the Court of what was said in Aon Risk Services Aust Ltd v ANU (2009) 239 CLR 175; [2009] HCA 27 at [103] (citations omitted):

Mr Cheshire SC submitted that when making an application to amend pleadings at such a late stage, an explanation for any delay was essential. Among other things, it was necessary to understand whether the Active Defendants had made an earlier forensic decision not to raise the defences and were now seeking to resile from that decision.

The Active Defendants’ application was supported by an affidavit of Ms Zhang, the Active Defendants’ solicitor who had day-to-day carriage of the proceedings, filed on 6 April 2021. Mr Cheshire SC drew to attention that the affidavit did no more than recite the recent events that led to the application, and offered no explanation of why the issue of the equitable defences had not been raised until the directions hearing on 25 March 2021.

Mr Cheshire SC next submitted that it was no answer for the Active Defendants to say there was no prejudice to the Plaintiffs because the Active Defendants only proposed to rely on the existing evidence in support of the defences. It was also no answer for the Active Defendants to say that the defences arose from matters pleaded by the Plaintiffs. Because the defences were not pleaded, the Plaintiffs had been denied the opportunity to seek discovery, issue subpoenas and put on specific evidence to meet the case now sought to be put against them.

Most importantly, Mr Cheshire SC argued that there was nothing in the evidence filed by the Active Defendants before 25 March 2021 which might have put the Plaintiffs on notice that such defences might be raised.

Finally, it was it was contended for the Plaintiffs that the amendment included serious, unparticularised allegations in a rolled-up form. These were matters that should have been properly pleaded and particularised to enable the plaintiffs to understand the serious allegations they would have to meet.

For the Active Defendants, Mr Oakes made four points.

First, he submitted that issues of the kind raised by the proposed amendment had in fact been alive in the proceedings through the defence of CBC, Mr Varvaris, Citywide Financial Services and Red Horizon filed on 24 August 2017, which included:

Mr Oakes submitted that because of those matters pleaded in the other Defendants’ defence, the Plaintiffs had been on notice that these were issues in the proceedings since 2017.

Second, Mr Oakes submitted that the Plaintiffs could not be prejudiced by the Active Defendants being granted leave to amend because the proposed pleading dealt with purely legal questions, which were already raised on the Plaintiffs’ evidence. He drew to attention that the other Defendants’ pleading (set out at [277]) was filed before the Plaintiffs filed their evidence in chief, and that the Plaintiffs did not seek further and better particulars from those Defendants at the time.

Third, insofar as it was contended that the proposed pleading was deficient in form, Mr Oakes submitted that the pleading had been further particularised in the Active Defendants’ pretrial outline of submissions dated 7 April 2021, which included, for example:

Fourth, Mr Oakes put that there was a real question about whether the defence of unclean hands had to be pleaded (relying on EDPI Pty Ltd v Rapdocs Pty Ltd [2007] NSWSC 195 at [64]-[65] per Brereton, J as his Honour then was, and Nu Line Construction Group Pty Ltd v Fowler (aka Grippaudo) [2012] NSWSC 587 at [28] per Ward J, as her Honour then was). Similarly, there were circumstances (none of which, it was accepted, had yet arisen) in which the Court could consider an unpleaded defence of illegality (relying on Trampoline Enterprises Pty Ltd v Fresh Retailing Pty Ltd [2019] VSCA 74 at [108]-[109] per Kaye, McLeish and Hargrave JJA, quoting Knowles v Fuller (1947) 48 SR (NSW) 243 (“Knowles v Fuller”)). In Knowles v Fuller, Jordan CJ explained those circumstances as follows (at 245):

In brief response to Mr Oakes’ submissions, Mr Cheshire SC made two further submissions.

First, he informed the Court that by an Amended Defence dated 12 March 2018, CBC, Mr Varvaris, Citywide Financial Services and Red Horizon had withdrawn the defences set out at [277] above, leaving only paragraph 332 of that defence in the following amended form:

Second, Mr Cheshire SC accepted that the authorities to which Mr Oakes had referred allow the defences of unclean hands and illegality to be raised in some cases without having been pleaded. That being so, he contended that rather than grant leave to amend, the appropriate course was to have an argument at the conclusion of the hearing about whether and the extent to which the defences could be raised without having been pleaded in the precise factual context as it stood at the end of the hearing.

I approached the Active Defendants’ application upon the basis that it depended upon s 64(2) of the Civil Procedure Act 2005 (NSW) (the CP Act) which, subject to s 58 of the CP Act, requires that “all necessary amendments are to be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings”. Section 58 of the CP Act provides that in considering an amendment application, the Court is to act in accordance with the dictates of justice, which themselves invoke ss 56 and 57 (the overriding purpose and objects of case management), as well as matters listed in s 58(2)(b) to the extent the Court considers them relevant. In the present case I considered that s 58(2)(b)(ii) (timeliness of interlocutory activity) and s 58(2)(b)(vi) (degree of injustice as a consequence of any order) were relevant.

Bearing those statutory provisions in mind, there were four reasons why I dismissed the Active Defendants’ motion.

First, the Active Defendants’ application was brought not in a timely fashion but at the last possible moment, in a case which had been on foot for some years and had already had one final hearing date adjourned due to the COVID-19 pandemic. The absence of any explanation for this delay weighed heavily against the application being granted. Insofar as Mr Oakes faintly suggested from the bar table that the Court could infer that the Active Defendants’ legal advisers had only begun turning their minds to the detail of the case in the month before the hearing, I did not accept that was a satisfactory explanation even if – assuming in the Active Defendants’ favour but not deciding – it was open to be inferred in the absence of any other evidence.

Second, I accepted Mr Cheshire SC’s submission that the proposed amendment contained a series of very serious allegations in rolled-up form. The proposed amendment was bad as a matter of proper pleading and could not be saved by the further exposition, such as it was, in the defendants’ pretrial outline of submissions. Allegations of such seriousness, in some places tantamount to fraud and criminality, should have been fully pleaded and particularised, and it would have been contrary to the dictates of justice to permit the pleading in the form proposed.

Third, I accepted that allowing the proposed amendment at this very late stage would seriously prejudice the Plaintiffs. They would either have to ask for an adjournment (which they did not want, having already had to press for the present hearing to take place with Chris and Mr He appearing by video link from China over the objection of the Active Defendants) or meet a case without having had a proper opportunity to investigate and prepare evidence that was specifically responsive to it.

Furthermore, while I saw very little merit in the submission that the Plaintiffs should have been on notice of “these kinds of matters” being in issue by reason of the defence of the other Defendants (see [277]-[278] above), what little force there was in that submission was completely met by the defences having largely been abandoned by those Defendants in March 2018. Moreover, of those Defendants, only CBC (which is now in liquidation) continue to play any part in the proceedings, and then only to the extent that it would be heard if its interests might be affected by any final orders that the Court proposed to make.

Fourth, in weighing the respective degrees of prejudice to the parties, while allowing the amendment would seriously prejudice the Plaintiffs for the reasons I have already given, not allowing the amendment would not seriously prejudice the Defendants. This was because, for the reasons referred to at [281]-[284], it would be open to them to seek to raise the defences of illegality and unclean hands at the end of the hearing when all the relevant facts were known. I accepted Mr Cheshire SC’s submission that such an argument could and should be conducted with full knowledge of the precise facts being relied upon, as they would have emerged by the end of the hearing. As Mr Cheshire SC properly acknowledged, it would be difficult for his clients to resist the Active Defendants relying upon, for example, an admission of seriously fraudulent conduct that might have emerged in the course of cross-examination of Chris or Mr He.

Although the Court dismissed the Active Defendants’ Notice of Motion, submissions were made following cross-examination that the Plaintiffs have engaged in illegal conduct; namely, that the “Kogarah projects undertaken by the Plaintiffs were ex facie illegal” and further, that the purpose of the Plaintiffs’ purchase of the First Kogarah Property and the payments made by Haiye pursuant to the Supplementary Contract “was to receive favourable development consents by improper means and thereby obtain improper material advantage”. Counsel for the Active Defendants submit that notwithstanding that these matters have not been pleaded, they fall within the exemptions set out by Jordan CJ in Knowles v Fuller such that the Active Defendants are not precluded from raising them in defence of the Plaintiffs’ claims. The Court will consider these submissions later in these reasons.

Before turning to the pleaded causes of action, it is convenient at this point to record the Court should make note of several admissions made on behalf of the Active Defendants and consequential orders made in relation to them. By the opening written submissions for the Active Defendants, the Active Defendants accepted that:

On the first day of the hearing, Messrs Cheshire SC and Sirtes SC indicated their preliminary joint approval of proposed short minutes of order that would give effect to the admissions made in the opening written submissions for the Active Defendants, although the form of those orders were yet to be agreed upon.

By the ninth day of the hearing, the parties had reached agreement as to the form of the orders that ought to have been made to reflect the admissions made on behalf of the Active Defendants and the following orders were made by consent:

By these orders, the Court is no longer required to consider several of the causes of action propounded by the Plaintiffs including, for example, the claim against Alysha for monies had and received.

In Maria Saravinovksa v Krste (Chris) Saravinovski; Chris Saravinovski v George Saravinovski (No 6) [2016] NSWSC 964 (“Saravinovski (No 6)”) I set out a summary of the principles relevant to credit findings where there are disputed facts (at [464]-[473]):

Chris’ and Mr He’s credit were, at least on one view, central to the Plaintiffs’ primary claims of misleading and deceptive conduct, deceit and conspiracy. Several, if not most, of the alleged misrepresentations (see [418] below) are said to have occurred orally or by the Active Defendants’ and/or Mr Varvaris’ failure to contradict or qualify oral representations made by each other. The parties’ dealings were also, albeit not exclusively, largely conducted orally. Accordingly, on one view – certainly the view propounded by the Active Defendants – the Plaintiffs’ claims may rise and fall with the credit of the two protagonists.

That view, however, does not sit comfortably with the contemporaneous WeChat records, the admissions made by Alysha and Dennis in their Affidavits (which establish that there is significant agreement between the parties as to verbal conversations) and the Active Defendants’ agreement to the orders set out at [295] above, albeit that agreement was on a without admissions basis. Whilst Chris’ and Mr He’s credit is undeniably important to the outcome of these proceedings, even wholly adverse credit findings made against them would not necessarily be fatal to their case.

As might be expected, the Active Defendants made strong submissions to the effect that Chris was not a witness of truth, describing him as a "dreadful witness" who was "entitled and sneering". Among the examples cited by the Active Defendants were:

In their submissions relating to the credit of both Chris and Mr He, the plaintiffs' counsel engaged in what might be described, with no disrespect intended, as a qualified confession and avoidance. They accepted, as was set out in their written submissions, that it was “an inescapable finding that Chris He failed to answer questions in a direct way". However, it was submitted that this was not a basis to make a global credit finding against him, but that rather the Court should conclude that Chris was attempting to give as much information as he could rather than answer the question specifically.

The plaintiffs submitted that Chris' evidence should be analysed through the lens of his privileged circumstances. He had told the Court that after graduating university he was "idling" and had no motivation to work in China. Furthermore, the Court could take comfort from the fact that there were numerous areas where the Active Defendants had agreed with Chris' evidence and that his evidence was consistent with the story told by the extensive WeChat messages. This latter matter, it was submitted, demonstrated that the Active Defendants in effect admitted that much of the evidence of Chris and his father was true. The Court was also invited to bear in mind that the plaintiffs' evidence in chief was given at the beginning of 2017 and 2018, with evidence in reply being given in 2019. Owing to one Covid related adjournment of the proceedings, their oral evidence was then being given in May 2021.

I have carefully re-read the transcript of Chris' evidence. That re-reading confirms the impression I formed and noted at the time, being that when he was giving his evidence he was an unsatisfactory witness in the sense that he did not give concise and responsive answers to many of the questions he was asked. I accept there is much force in the Active Defendants' criticisms of Chris and the Plaintiffs' concession that Chris failed to answer questions in a direct way was properly made.

However, those observations are not a complete answer to the question which the Court must now determine, being whether Chris was essentially a truthful witness. His evidence was given in Mandarin from China by video link. It was interpreted into English in the court room in Sydney. There were occasional interruptions to the signal and imperfections in sound. As the trier of fact I do not speak Mandarin and have no relevant knowledge or experience of Chinese culture. These issues of language and culture mean the Court cannot safely rely on demeanour insofar as in other contexts it might be of some assistance in assessing whether a witness appears to be telling (or trying to tell) the truth. The Court must take the evidence as it finds it and weigh it against contemporaneous material and inherent probability.

I have weighed exchanges such as the following which took place between Chris and Mr Sirtes of Senior Counsel for the active defendants (T119:32-44):

To similar effect was this exchange with Mr Sirtes SC and then me (T163:1-34):

These are among the passages upon which the Active Defendants placed heavy reliance in support of their submission that the Court should find that Chris was not a truthful witness. However, I am unable to accept that submission. Notwithstanding potential issues of language, culture and not always perfect technology, I was left with the clear impression at the end of Chris's evidence that he was not an untruthful witness, but was rather a gullible and not particularly astute one. I am fortified in this conclusion by the fact that his evidence on critical matters is consistent with the picture that emerges from the history of the dealings between the parties as disclosed in the WeChat messages which have been set out at length above and the matters which the Active Defendants have accepted were in fact said. One answer struck me as particularly emblematic of Chris as a witness (T54:8-16):

I have no doubt that the first part of Chris' answer is truthful and that he did have a basic understanding that Council approval was required for developments. However, he then goes on to attempt to minimise his understanding, including by reference to his poor English. This is consistent with something of a pattern in his evidence, which was to downplay what he understood of the process and to downplay his capacity to understand English. I make this latter observation even allowing for the fact that Chris had been in China after returning from his education in New Zealand so that he may have lost fluency. However, I very much doubt that after having gone through high school and university in English, his understanding was as bad as he tried to make out. Nevertheless, his attempt at minimising such matters struck me as naïve rather than dishonest. Furthermore, my assessment of Chris was strongly influenced by what struck me as an entirely honest assessment of him by his own father, who did not have the greatest of confidence in his son's abilities, giving evidence that, "Well, like I mentioned about my son before, put lightly, he has not done anything substantial. So when he asked to buy a property, I want to be with him to look after him" (T210:12-15).

It is also in this context of Mr He’s disappointment and indulgence that I have assessed the attack made on Chris and Mr He in relation to documents prepared over the seal of Mr He’s Chinese company certifying that Chris was deputy general manager of that company. The documents were prepared in support of applications for business visas for Chris and Mr He supported by Citywide Property Group in late 2015. The Active Defendants submitted that Chris’ preparedness to present misleading documents to the Australian Government demonstrated that he would say anything he thought was in his interest. I accept the statements in the documents were untrue. However, the untruth - arising in the context of a disappointed and indulgent father and an indolent son - is not of a kind that bespeaks a propensity for dishonesty that would cast doubt on either man’s credibility in relation to the matters central to these proceedings.

Accordingly, while there was much about Chris' evidence that was open to criticism, I am not satisfied that on essential matters he was an untruthful witness.

The Active Defendants attacked Mr He's credibility with the same force and in similar terms to the criticisms they made of Chris. Similarly, and in my respectful view accurately, counsel for the plaintiffs accepted that Mr He "was also a witness who failed to give most of his answers in a direct way", but urged that this was not a basis to make global credit findings against him.

The Active Defendants' attack on Mr He was more generalised. They submitted that he was not really able to recall his affidavit evidence when it was put to him in cross-examination such that the Court could conclude that it was evidence that had been drafted for Mr He rather than by him. While there were certainly examples when he could not recall his affidavit evidence, I would not draw the conclusion invited by the Active Defendants.

They also attacked his oral evidence as rambling and unresponsive, and exhibiting every intention of implicating Alysha whenever he could. While Mr He's evidence did indeed exhibit similar qualities to Chris in terms of being discursive and not always responsive, my review of the transcript confirms the impression I had at the end of his evidence that while he was not a satisfactory witness, the unsatisfactory features of his evidence did not bespeak dishonesty.

As the WeChat material clearly demonstrates, for better or for worse Chris took the principal role in the relevant transactions. While Mr He was obviously an experienced businessman (although not, I accept, in property development) and as an older man had more life experience and, perhaps, common sense than his son, I accept the Plaintiffs' submission that Mr He's evidence should be understood through the lens that he was really there just to support his son. His evidence, and the language in which it was given, left me with the clear impression that Chris, as his only son, had been heavily indulged and that he (Mr He) was resigned to the fact that he would continue to indulge him.

So much emerged from what I considered to be both a telling and truthful piece of exchange (T212:41-213:17):

As with Chris' evidence, Mr He's evidence is consistent with the broader story told by the WeChat messages. Notwithstanding his inadequacies as a witness, I am satisfied that Mr He was a truthful witness.

Not much turns on Ms Yaner’s evidence. The highest her evidence in chief rises is its support of Chris’ and Mr He’s recollection of events at the 16 February 2016 dinner. Although her credibility and alleged ignorance of Chris’ and Mr He’s property development endeavours in Kogarah were attacked in cross-examination, Mr Oakes’ cross-examination did not diminish the force of her evidence, such as it was.

The Plaintiffs relied upon expert evidence from a town planner, Ms Clare Swan, and a valuer, Mr Anthony Alford. Neither expert was cross-examined and the assumptions underlying their respective reports were not challenged. Accordingly, I accept the evidence of both experts as it appears logical and credible.

Ms Swan’s evidence was contained in a report dated 3 August 2018. In that report, Ms Swan gave evidence that between 1 August 2015 and 13 March 2016 (which was the temporal scope of her report), the Kogarah Local Environmental Plan 2012 (“Kogarah LEP”) and Kogarah Development Control Plan 2013 (“Kogarah DCP”) applied to both the First Kogarah Property and the Second Kogarah Property. The relevant parts of the Kogarah LEP and Kogarah DCP are the following:

Having referred to these and other salient provisions within the Kogarah LEP and Kogarah DCP, Ms Swan proffered this opinion:

Mr Alford’s evidence was contained in a report dated 25 September 2018 and a supplementary report in relation thereto dated 8 April 2021. At the time of preparing both reports, Mr Alford had the benefit of Ms Swan’s report, upon which he placed significant reliance (particularly Ms Swan’s opinion vis-à-vis the likelihood of developing the First Kogarah Property and Second Kogarah Property for residential use) in forming his conclusionary opinions in respect of the value of the First Kogarah Property, the Second Kogarah Property and an amalgamated First Kogarah Property and Second Kogarah Property at various dates.

In his first report, Mr Alford expressed two primary opinions in response to questions put by the solicitors for the Plaintiffs. Those questions, and Mr Alford’s responses thereto (which are in italics), were as follows:

Mr Alford’s report of 25 September 2018 also contains the following convenient summary of his opinion of the market values of the First Kogarah Property, the Second Kogarah Property and the First Kogarah Property and Second Kogarah Property as if amalgamated as at 1 August 2015, 1 February 2016, 31 March 2016 and 10 September 2018:

By his supplementary report dated 8 April 2021, Mr Alford provided an update of his market valuation of the First Kogarah Property on an “as is” basis. The updated market valuation of the First Kogarah Property is $4,315,000 as at 8 April 2021.

Counsel for both the Plaintiffs and Active Defendants invited the Court to make adverse inferences consequential upon their respective failure to call witnesses. On the one hand, Counsel for the Active Defendants invited the Court to draw the following inferences on account of the Plaintiffs’ failure to call Mr Vay:

By contrast, Counsel for the Plaintiffs invited the Court to make general adverse inferences against each of the Active Defendants on account of the fact that their evidence was clearly relevant to the issues for determination, including, perhaps most importantly, the basis of the representations that were made.

In response to the Active Defendants' submissions concerning the Plaintiffs' failure to call Mr Vay, the Plaintiffs submitted that the Active Defendants had overstated the importance of Mr Vay, who could not give evidence as to the Plaintiffs' own personal understanding of the planning process, or their reliance on any representations. They submitted that the most that could be inferred from his not being called by the Plaintiffs was the "he could not give evidence, from his own independent recollection, of what had happened [on any relevant matter]" see Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345 at [168]-[169]; [2012] FCA 17.

I dealt with a similar submission concerning a failure to call a solicitor in Saravinovski (No 6), and identified in my judgment the relevant legal principles:

Applying those principles, the Court concludes that there is no basis to draw an adverse inference against the Plaintiffs in relation to their failure to call Mr Vay. Whatever passed between him and the Plaintiffs was privileged and no adverse interest will be drawn by reason of their failure to waive any such privilege.

Furthermore, I should record that there was a faint reference in the Active Defendants’ submissions to the possibility of the Plaintiffs having impliedly waived any privilege by reason of the representations on which they sued. However, that reference was not developed into a positive submission. If such a submission had been made, I would have rejected it. While the Plaintiffs' case was advanced on many bases, none of them put whatever may have passed between the Plaintiffs and Mr Vay in issue so as to constitute an implied waiver.

For their part, the Active Defendants by their Counsel, advanced the ambitious proposition that, notwithstanding their forensic decision not to give evidence, the Court "should be circumspect in drawing inferences against" them. Three reasons were given, which I reproduce from the Active Defendants' written submissions:

Given the serious nature of the allegations made in this case, none of these reasons is persuasive to prevent the Court from drawing both the inferences referred to in Kuhl quoted in Saravinovski (No 6) above. This is not only because of the seriousness of the allegations made by the Plaintiffs against the Active Defendants. For their part, the Active Defendants have made, by submissions that often seemed to be no more than innuendo, serious allegations against the Plaintiffs to the effect that the Plaintiffs were engaged in impropriety and illegality. If it was intended that the Court accept that both the Plaintiffs and the Active Defendants were somehow together involved in such activities, it is to be expected that the Active Defendants would have gone into evidence as the repositories of first-hand knowledge supporting those serious allegations. That evidence could, if necessary, have been given with the benefit of certificates in relation to the possibility of self-incrimination.

None of the reasons advanced on behalf of the Active Defendants constitutes a sufficient explanation for their not being called. This is a case where the Court draws an inference that the absence of the Active Defendants means that their evidence would not have assisted any aspect of their case. Furthermore, insofar as the Court in these reasons draws inferences unfavourable to the Active Defendants based upon other evidence, to save repetition I record now that all such inferences have been more readily and confidently drawn by reason of the failure of the Active Defendants to give evidence on their own behalf. In expressing that position globally, I also make clear that I have not applied any such inference to fill any gaps in the Plaintiffs' evidence but only to draw inferences in respect of which evidence otherwise exists.

On my count there are more than 100 pleaded individual false, misleading and deceptive representations or other conduct, which span 45 pages of the Amended Statement of Claim. It being incumbent upon the Court to consider the merits of each pleaded item separately, it would not be appropriate, in my view, to summarise them (see also what was said by French CJ and Kiefel J (as her Honour then was) in Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at 364; [2010] HCA 31 (“Miller”)). However, to avoid unnecessary repetition in these reasons, I set them out in full at [418] below, together with the Court’s findings.

The pleaded false, misleading and deceptive representations and other conduct are capable of partition into categories in several ways. I shall approach the representations by grouping them by reference to the transaction to which they principally relate (i.e. the First Kogarah Property, the Supplementary Contract, the Second Kogarah Property and the Fake Bingemann Invoice).

Counsel for the Plaintiffs advanced several general submissions in support of the Plaintiffs’ misleading and deceptive conduct case. Those submissions were:

Counsel for the Active Defendants also advanced the following general submissions addressing the Plaintiffs’ false, misleading and deceptive conduct case:

Counsel for the Plaintiffs’ submissions, specific to the First Kogarah Property, can be summarised as:

Counsel for the Active Defendants submissions in response can be summarised as:

Counsel for the Plaintiffs advanced the following submissions in support of the Plaintiffs’ case that the Active Defendants have engaged in misleading or deceptive conduct in respect of the payments made by Haiye pursuant to the Supplementary Contract:

Further submissions were advanced not only by Counsel for the Plaintiffs, but also by Counsel for the Active Defendants, on the issue of the purported illegality or impropriety of the Supplementary Contract. Those submissions, for reasons which I shall address shortly (see [429] below), are not matters properly to be considered in the Court’s determination of whether the Active Defendants have engaged in misleading and deceptive conduct for the purpose of s 18(1) of the ACL. I shall nevertheless briefly summarise Counsel for the Plaintiffs’ submissions on this issue insofar as it addresses the Supplementary Contract, as numerous submissions were advanced:

In response to the primary submissions made by Counsel for the Plaintiffs addressing the Plaintiffs’ misleading and deceptive conduct case in respect of the Supplementary Contract, Counsel for the Active Defendants advanced these submissions:

In response to Counsel for the Plaintiffs’ submissions on the issue of the purported illegality and/or impropriety of the Supplementary Contract, Counsel for the Active Defendants primarily submitted the payments made under the Supplementary Contract were either a bribe paid to Mr Varvaris to secure his influence or for him to use as he wished; in either scenario, the Plaintiffs sought to procure favourable planning treatment of PPD’s development applications.

The submissions advanced by Counsel for the Plaintiffs in support of the Plaintiffs’ misleading and deceptive conduct case in respect of the payments made by Haiye in purported satisfaction of the deposit for the Second Kogarah Property were primarily directed towards the Active Defendants’ conduct and/or silence throughout the parties’ discussions about purchasing the Second Kogarah Property. Indeed, but for the pleadings at paragraphs 77, 92, 118 and 132 of the ASOC, the Plaintiffs’ misleading or deceptive case against the Active Defendants in relation to the Second Kogarah Property is directed towards their conduct and/or silence, rather than express statements. In seeking to highlight Alysha’s and Dennis’ suspect conduct throughout the parties’ discussions, Counsel for the Plaintiffs drew the Court’s attention to:

Counsel for the Plaintiffs thus submit, on the basis of the foregoing, that not only were the representations (including those made by silence) about PPD’s proposed purchase of the Second Kogarah Property false, but the Active Defendants knew that to be the case. Further, because the Active Defendants have failed to adduce any evidence of the reasonableness of the representations as to future matters, those representations are taken to have been misleading.

In response thereto, Counsel for the Active Defendants advanced the following four primary submissions:

I will set out Counsel for the Active Defendants’ submissions in greater detail below.

The overarching theme of Counsel for the Active Defendants’ submissions on the Plaintiffs’ misleading and deceptive conduct case as regards the Second Kogarah Property transaction can be distilled, in my view, to one submission: the Active Defendants were just as duped by Mr Varvaris’ fraudulent scheme as the Plaintiffs. There is no evidence, Counsel for the Active Defendants submit, to suggest that Alysha and/or Dennis had any knowledge of Mr Varvaris’ plan to fabricate the entire transaction. Counsel for the Active Defendants drew the Court’s attention to:

Counsel for the Active Defendants submit that the evidence fails to demonstrate, to the requisite standard as espoused by Briginshaw and s 140 of the Evidence Act 1995 (NSW), that Alysha and Dennis were aware of Mr Varvaris’ fraudulent scheme and, absent that knowledge and involvement, the Plaintiffs’ claims should be dismissed.

As referred to in [344] above, the vast majority of the pleaded misleading or deceptive representations against the Active Defendants pertain to the Active Defendants’ alleged conduct and/or silence, rather than express statements. Insofar as the Active Defendants are said to have made representations by silence, Counsel for the Active Defendants submit that the Court cannot be satisfied, having regard to the totality of the circumstances, that Alysha and Dennis had any independent knowledge of the Second Kogarah Property transaction beyond what they knew from Mr Varvaris, nor that the Plaintiffs were aware that they had any such independent knowledge; the Active Defendants knew as much as the Plaintiffs did.

The Court should reject the Plaintiffs’ claim for deception by silence on account of the case falsely perpetuating the notion that the Plaintiffs were “outside the tent” and that the Active Defendants were “inside the tent” with Mr Varvaris and had full, or even partial, knowledge of what was actually going on.

As for the positive representations made by Alysha and/or Dennis either by conduct or express statements, the Court should reject the Plaintiffs’ evidence of these representations as being unreliable or, at the very least, should be circumspect in accepting it.

Counsel for the Active Defendants further submitted that should the Court accept that express statements were made by the Active Defendants, the Court should find that the statements were predominately made by Mr Varvaris or involved Alysha translating Mr Varvaris’ statements.

Counsel for the Active Defendants submit that even if the Court finds that the Active Defendants engaged in misleading or deceptive conduct, the Court should reject the notion that the Plaintiffs relied upon those representations in making the payment to Varvaris & Co.

Counsel for the Active Defendants drew the Court’s attention to these matters in support of the submission that it was the representations made by Mr Varvaris, rather than any representation made by Alysha or Dennis, upon which the Plaintiffs relied in making the payment to Varvaris & Co:

Counsel for the Active Defendants further submit that, in any event, the Plaintiffs were so negligent in protecting their own interests that any representations that were made by the Active Defendants were not a real inducement to the Plaintiffs transferring funds to Varvaris & Co.

The Plaintiffs’ payment of $3,564,000, on their case, was a payment made to Varvaris & Co to be held on trust for PPD’s purported purchase of the Second Kogarah Property. The loss that was suffered by the Plaintiffs in respect of that payment was, Counsel for the Active Defendants submit, Mr Varvaris’ breach of trust, rather than any representation made by the Active Defendants. That breach was thus either a novus actus interveniens or a distinct breach of trust for which the Active Defendants cannot be liable (noting also that the Plaintiffs have not pleaded a knowing assistance case against Alysha or Dennis). Accordingly, even if the Plaintiffs relied upon representations made by the Active Defendants, the only consequence of that reliance was that the Plaintiffs transferred money to Varvaris & Co. What happened thereafter was through no fault of the Active Defendants.

Counsel for the Plaintiffs’ submissions in support of the Plaintiffs’ misleading and deceptive conduct case in relation to the Fake Bingemann Invoice can be summarised as:

Counsel for the Active Defendants’ submissions in response can be summarised as follows:

The statutory basis of the Plaintiffs’ misleading and deceptive conduct claim is section 18(1) of the ACL. That section provides:

The following principles are relevant to the Plaintiffs’ claims pursuant to s 18(1).

First, whether the Active Defendants have engaged in misleading or deceptive conduct for the purpose of s 18 of the ACL is a question of fact, to be assessed objectively having regard to their (and Mr Varvaris’) conduct and the surrounding circumstances: see, e.g., Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at 625-6; [2004] HCA 60 per McHugh J (“Butcher v Lachlan Elder Realty Pty Ltd”); Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at 319; [2009] HCA 25 per French CJ (“Campbell v Backoffice Investments Pty Ltd”); Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 202 per Deane and Fitzgerald JJ; Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2020) 278 FCR 450 at 459; [2020] FCAFC 130 per Wigney, O’Bryan and Jackson JJ (“ACCC v TPG Internet Pty Ltd”); Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd [2011] WASCA 76; (2011) 248 FLR 193 at 207 per McLure P (“Owston Nominees”). It would, as McHugh J said in Butcher v Lachlan Elder Realty Pty Ltd, be erroneous “to look at isolated parts of [the Active Defendant’s and Mr Varvaris’] conduct”, including their alleged silence, in determining whether the Active Defendants have engaged in misleading or deceptive conduct: see 625. Further, as McLure P said in Owston Nominees at 207-208:

Second, whether the Active Defendants and Mr Varvaris have “engaged in conduct” ought to be determined by reference to a finding that they (or one of them) have engaged in “an act or, at a minimum, refraining otherwise than inadvertently from doing an act”: Johnson v Mackinnon [2021] NSWCA 152 at [248] per Brereton JA (with whom Macfarlan JA and Simpson AJA agreed) (“Johnson v Mackinnon”); see also Owston Nominees at 207.

Accordingly, and of importance to significant parts of the Plaintiffs’ case, silence can amount to misleading or deceptive conduct: see Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 32; [1992] FCA 851 per Black CJ; Miller at 368 per French CJ and Kiefel J (as her Honour then was). As the Full Court of the Federal Court said in Rafferty v Madgwicks (2012) 203 FCR 1 at 68; [2012] FCAFC 37 per Kenny, Stone and Logan JJ) (“Rafferty v Madgwicks”):

In Johnson v Mackinnon, Brereton JA further explained, with reference to what her Honour said in Owston Nominees at 208, that (at [253]):

Where silence is pleaded as having been misleading or deceptive or likely to mislead or deceive, the “focus is on whether the omission is intentional and deliberate”: Owston Nominees at 204; see also Johnson v Mackinnon at [249]. However, as her Honour further explained in Owston Nominees (at 208) (see also Johnson v Mackinnon at [254]):

Third, misleading and deceptive conduct may take a variety of forms, including where a false statement is contained in a contractual document. Whether such a statement amounts to a contravention of s 18(1) of the ACL is a matter of fact to be determined by reference to all the circumstances: Campbell v Backoffice Investments Pty Ltd at 322 per French CJ; see also Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 at 505; [1993] FCA 265 per Lockhart and Gummow JJ.

Fourth, the Court will analyse the conduct of the Active Defendants and Mr Varvaris in relation to the Plaintiffs alone, “bearing in mind what matters of fact each knew about the other as a result of the nature of their dealings and the conversations between them, or which each may be taken to have known”: Butcher v Lachlan Elder Realty Pty Ltd at 604-5 per Gleeson CJ, Hayne and Heydon JJ; Campbell v Backoffice Investments Pty Ltd at 319 per French CJ.

Fifth, the impugned conduct must have had a tendency to lead the Plaintiffs into error; that is, “to form an erroneous assumption or conclusion about some fact or matter”: ACCC v TPG Internet Pty Ltd at 458; see also Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198; [1982] HCA 44 per Gibbs CJ (“Parkdale”); Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640 at 651; [2013] HCA 54 per French CJ, Crennan, Bell and Keane JJ. The Plaintiffs need not prove that they were actually deceived or misled by the impugned conduct: Butcher v Lachlan Elder Realty Pty Ltd at 626 per McHugh J. It is nevertheless incumbent on the Plaintiffs to prove that the conduct of the Active Defendants and/or Mr Varvaris had a real or not remote chance or possibility of being likely to mislead or deceive the Plaintiffs: Butcher v Lachlan Elder Realty Pty Ltd at 626 per McHugh J, citing Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 at 87; [1984] FCA 180 (“Global Sportsman”).

Sixth, the intention of the maker of the representation is not relevant to the question of whether conduct is misleading or deceptive or likely to mislead or deceive, save for the circumstances adverted to in [366] above: Parkdale at 197 per Gibbs CJ and at 216 per Brennan J; Hornsby Building Information Centre Pty Limited v Sydney Building Information Centre Ltd (1978) 140 CLR 216 at 228; [1978] HCA 11 per Stephen J; Google Inc v Australian Competition and Consumer Commission (2013) 249 CLR 435 at 443; [2013] HCA 1 per French CJ, Crennan and Kiefel JJ (as her Honour then was) and at 466 per Hayne J (“Google v ACCC”). That being so, the Court will be more inclined to find (by inference or otherwise) that conduct is misleading or deceptive, or likely to mislead or deceive, where an intention to mislead or deceive is manifest: see S & I Publishing Pty Ltd v Australian Surf Life Saving Pty Ltd (1998) 88 FCR 354 at 362 per Hill, R D Nicholson and Emmett JJ.

Seventh, an intermediary acting as a mere conduit of information, who makes clear, in all the circumstances of the case (including where an intermediary adopts or endorses a misleading or deceptive representation), that he or she is not the source of that information and disclaims belief in its truth or falsity, will not be liable as a principal for misleading and deceptive conduct: Yorke v Lucas (1985) 158 CLR 661 at 666 per Mason ACJ (as his Honour then was), Wilson, Deane and Dawson JJ (“Yorke v Lucas”); Butcher v Lachlan Elder Realty Pty Ltd at 609 per Gleeson CJ, Hayne and Heydon JJ and 629 per McHugh J; Google v ACCC at 446 per French CJ, Crennan and Kiefel JJ (as her Honour then was) and 471 per Hayne J.

Eighth, as the High Court explained in Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 (“Concrete Constructions”), conduct is in trade or commerce where the impugned conduct (at 604 per Mason CJ, Deane, Dawson and Gaudron JJ):

The phrase “in trade or commerce” does not encompass all conduct in the course of the myriad of activities which do not bear a trading or commercial character, “but which are undertaken in the course of, or as incidental to, the carrying on of an overall trading or commercial business”: Concrete Constructions at 602-3. For conduct to be “in trade or commerce”, it ought not be divorced from any relevant actual or potential trading or commercial relationship or dealing: Concrete Constructions at 604.

Whether conduct satisfies the criterion espoused by the High Court in Concrete Constructions will vary on the particular facts of a given dispute. It is unhelpful to attempt to list conduct that “bear[s] a trading or commercial character” or formulate a general rule against which conduct can be determined as “bear[ing] a trading or commercial character”. That having been said, conduct of an inherently intra-corporate nature will not be conduct in trade or commerce: see, e.g., Aardwolf Industries LLC v Tayeh [2020] NSWCA 301 at [75] per Macfarlan JA (with whom Bell P and Leeming JA agreed); see also generally New Cap Reinsurance Corporation Ltd v Daya [2008] NSWSC 64; (2008) 216 FLR 126. Whether conduct is of an inherently intra-corporate nature will, nevertheless, depend on the facts of any given dispute.

The payment by a cestui que trust into a trust account in the furtherance of a commercial enterprise is conduct that bears a trading or commercial character. In Kowalczuk v Accom Finance Pty Ltd (2008) 77 NSWLR 205; [2008] NSWCA 343 (“Kowalczuk”), the Court of Appeal (J C Campbell JA; Hodgson and McColl JJA agreeing) considered, inter alia, the question of whether loans obtained by an individual and a company he controlled for investment with a third party (who, not unlike the present case, turned out to be a fraudster) was conduct “in trade or commerce” for the purpose of s 51AC of the Trade Practices Act 1974 (Cth) (“TPA”). Quite unlike these proceedings, in Kowalczuk, the loans were obtained for the purpose of on-lending to make a profit, but neither the individual, nor his company, were engaging in the business of investing: see 247 per Campbell JA (with whom Hodgson and McColl JJA agreed). In rejecting the assertion that the individual, or his private company, had engaged in trade or commerce, Campbell JA said (at 247):

Unlike what transpired in Kowalczuk, in these proceedings, Haiye transferred the sum of $3,564,000 to a trust account held by Varvaris & Co in the furtherance of PPD’s property development endeavours in Kogarah. To describe the payment of that sum to Varvaris & Co as merely the payment by a cestui que trust into a trust account, which the Active Defendants assert is not conduct in trade or commerce, ignores the true character of the transaction and omits the fact that the payment was made in the furtherance (or so the Plaintiffs thought at the time) of a commercial endeavour. It will be apparent from this digression from the statement of legal principles applicable to the Plaintiffs’ misleading and deceptive conduct case that the Court rejects the Active Defendants’ submission that Haiye’s payment of $3,564,000 to a trust account held by Varvaris & Co was not conduct in trade or commerce. The payment was one of several made by Haiye in the course of a commercial endeavour. That it was made in the character of a cestui que trust is not in and of itself determinative of the question whether it was in trade or commerce. The entire factual context must be taken into account.

It is also convenient at this point to deal with the Active Defendants’ submission concerning the Plaintiffs being alleged to have been involved in an illegal scheme. As I have already observed, the evidence relied on by the Active Defendants is too imprecise, and in many respects does not rise above innuendo, to warrant the serious finding (on the Briginshaw standard) that Chris and Mr He were engaged in an illegal scheme, a scheme which in vague terms was alleged to involve Mr Varvaris by bribery or otherwise illegally subverting the Council planning process (as opposed, it might be thought, to making representations to the Council as a public person of influence in the community in support of the proposed development). However, even if, contrary to the Court’s conclusion, there was an element of illegality, I also reject the submission that conduct cannot be in trade or commerce notwithstanding that by engaging in the conduct, a party has embarked upon, or was party to, an illegal scheme.

That the conduct was part of, or incidental to, an illegal act does not necessarily deprive it of its trading or commercial character. In this case the fundamental transaction was the purchase and development of land, which in and of itself was not illegal. In Brownbill v Kenworth Truck Sales (NSW) Pty Ltd [1982] FCA 7; (1982) 39 ALR 191 (“Brownbill”), Sheppard J considered a claim for misleading and deceptive conduct in relation to the purchase of a prime mover where it was said that the purpose for which it was to be used (and the only profitable use) was illegal because it would require the vehicle to be overloaded contrary to the roads legislation. His Honour rejected the submission that the plaintiffs were deprived of a remedy, including in relation to an allegation similar to the present case about a misrepresentation as to the value of the asset purchased (at 202-203):

Brownbill and other authorities in relation to illegal conduct and the ACL were recently considered, albeit in obiter dicta in Li v Liu [2022] NSWCA 67 (Beech-Jones JA; Meagher and White JJA agreeing) (“Li”):

The various representations sued on by the Plaintiffs in this case were made in trade and commerce because they related to the purchase and proposed commercial development of land. Furthermore, no aspect of the damages sought by the Plaintiffs is predicated on anyone acting illegally and there is no question of the Plaintiffs’ recovery of damages giving them a benefit derived from illegal conduct. Applying the principles set out in Brownbill and Li, those matters mean that an incidental element of illegality (assumed for the purposes of this argument but not found by the Court) would not deprive the Plaintiffs of a remedy under the ACL (or any other of their claims) if they otherwise demonstrate an entitlement to it. In other words, that a party has engaged in misleading and deceptive conduct in the course of, or incidental to, a broader illegal activity or scheme, does not deprive the conduct of its misleading or deceptive character. Whether a party who benefits from an illegal activity or scheme should be able to bear fruit from their illegality by means of a claim for misleading and deceptive conduct is a separate question altogether.

The Plaintiffs also place reliance upon s 4 of the ACL, insofar as they allege that the Active Defendants have engaged in misleading and deceptive conduct with respect to future matters. That section relevantly provides:

Section 4 of the ACL is facultative and should not be read as imposing any additional, separate or different liability to that imposed by s 18(1): Australian Competition and Consumer Commission v Woolworths Limited [2019] FCA 1039 at [90] per Mortimer J (“ACCC v Woolworths Limited”). The following legal principles thus apply in addition to, rather than in substitution for, those considered above.

First, the words “with respect to” are of the widest possible scope: Ting v Blanche [1995] FCA 781; (1993) 118 ALR 543 per Hill J, quoting Nowegijick v R (1983) 144 DLR (3d) 193 at 200 per Dickson J.

Second, as the Full Court of the Federal Court explained in Australian Competition and Consumer Commission v Woolworths Group Limited (formerly called Woolworths Limited) [2020] FCAFC 162 (at [132] per Foster, Wigney and Jackson JJ):

Third, a person will not have reasonable grounds “for making a representation if, at the time of making it, the representor did not have facts sufficient to induce, in the mind of a reasonable person, a basis for making the representation”: Australian Competition & Consumer Commission v Dateline Imports Pty Ltd [2015] FCAFC 114 at [100] per Gilmour, McKerracher and Gleeson JJ (“ACCC v Dateline”). It is not a question of the representor’s subjective belief, nor whether the representation proves, in due course, to be true: ACCC v Dateline at [99] and [101]; see also Cummings v Lewis (1993) 41 FCR 559 at 565; [1993] FCA 190 per Sheppard Neaves JJ; Global Sportsman at 88.

Fourth, by s 4(2) of the ACL, the representor bears an evidential burden of adducing evidence that they had reasonable grounds for making a representation. As will already be apparent, the Active Defendants’ failure to go into evidence means that to the extent that burden has been engaged, they have failed to meet it. The representee does not bear the dispositive burden of demonstrating that the representor did not have reasonable grounds for making the representation if the representor fails to adduce such evidence. The representee does, however, bear the dispositive burden if such evidence is adduced: see North East Equity Pty Ltd v Proud Nominees Pty Ltd [2012] FCAFC 1; (2012) 285 ALR 217 at 224 per Mansfield, Greenwood and Barker JJ; see also ACCC v Woolworths Limited at [90]-[91].

The Plaintiffs also plead that the Active Defendants are accessorily liable for the representations made by each other and Mr Varvaris. They do so on the following three alternative bases:

The three bases upon which the Plaintiffs rely as founding their claim against the Active Defendants as accessories derive from ss 2(1), 236 and 237 of the ACL. Those sections include:

I shall return to ss 236 and 237 later in these reasons. Their present relevance extends to their inclusion of the word “involved”. That is, the Court may make compensatory orders, or other orders as the Court thinks appropriate, against the principal contravener or a person involved in (i.e. an accessory to) the contravention.

For a person to have aided, abetted, counselled or procured the making of a representation, or to have been in any way, directly or indirectly, knowingly concerned in, or party to, a contravention, they must have intentionally participated in the principal contravention with knowledge of the essential elements of the misleading or deceptive conduct at the time of the alleged contravention; namely, the falsity of the representation in question or that the representor did not have reasonable grounds for making the representation: see Yorke v Lucas at 667-8, 670; see also Rafferty v Madgwicks at 62; Australian Securities and Investments Commission v Activesuper Pty Ltd (in liq) (2015) 235 FCR 181; [2015] FCA 342; (2015) 325 ALR 414 at 485 per White J (“ASIC v Activesuper”). That is so notwithstanding that knowledge of the essential elements of the misleading or deceptive conduct is not an element of the primary contravention: see Yorke v Lucas at 663 and 668.

In Yorke v Lucas, Mascon ACJ (as his Honour then was), Wilson, Deane and Dawson JJ said (at 667):

Their Honours continued (at 669):

In Yorke v Lucas, the Court referred at length to its prior analysis of accessorial liability in the criminal law in Giorgianni v R (1985) 156 CLR 473; [1985] HCA 29 (“Giorgianni”); in particular, the phrase "aided, abetted, counselled or procured". At 504-5, Wilson, Deane and Dawson JJ relevantly said of that phrase:

Their Honours continued (at 506-7):

At 505, their Honours refer to the requirement of actual knowledge without qualification. By contrast, in Giorgianni, Gibbs CJ referred to the following qualification of the requirement of actual knowledge (at 482):

The qualification espoused by his Honour was later reformulated by the Court in Pereira v Director of Public Prosecutions [1988] HCA 57; (1988) 82 ALR 217 (“Pereira”) where Mason CJ, Deane, Dawson, Toohey and Gaudron JJ observed (at 219-20):

Further reformulations of Gibbs CJ’s qualification in Giorgianni have also since been espoused in the context of accessorial liability for the purposes of the Corporations Act and the ACL, amongst other legislative instruments. For example, in ASIC v Activesuper, White J said (at 256):

Likewise, in Australian Competition & Consumer Commission v IMB Group Pty Ltd [2003] FCAFC 17, Cooper, Kiefel (as her Honour then was) and Emmett JJ said (at [135]):

What appears from these authorities in relation to the requirement of knowledge of the contravention, principally, is that accessorial liability requires actual knowledge of the essential elements of the contravention, which knowledge may be inferred from a combination of the defendant’s knowledge of suspicious circumstances and their decision not to make enquiries to remove those suspicions; otherwise known as wilful blindness.

Whether a person is, in any way, directly or indirectly, knowingly concerned in, or party to, a contravention also requires a sufficient nexus or “practical connection” between the purported accessory and the principal contravention. The phrase “knowingly concerned”, much like “aided, abetted, counselled or procured”, is a construct derived from the criminal law. In the context of the criminal law broadly, the word “concerned” “has been read as requiring facts connecting the accused with the commission of the relevant offence”: Trade Practices Commission v Australia Meat Holdings Pty Ltd [1988] FCA 338; (1988) 83 ALR 299 at 357 per Wilcox J, citing R v Goldie; Ex parte Picklum (1937) 59 CLR 254; [1937] HCA 65; Ashbury v Reid [1961] WAR 49; R v Houssain [1969] 2 QB 567; R v Kelly (1975) 24 FLR 441; R v Tannous (1987) 10 NSWLR 303 (“R v Tannous”). In Ashbury v Reid, (see also R v Nifadopoulos (1988) 36 A Crim R 137 at 140 per Kirby ACJ (as his Honour then was) (with whom Maxwell and Carruthers JJ agreed)) after having considered the word “concerned” with reference to its definition in the Oxford Dictionary, the Full Court of the Supreme Court of Western Australia relevantly said (at [51]):

After having referred to the above quote in R v Tannous, Lee J (with whom Street CJ and Finlay J agreed) explained that the accessory need not do anything to further the contravention; rather, that “by his conduct, that is by what he said and agreed to, he did in fact become associated with and thus involved, in the relevant sense” in the contravention: see R v Tannous at [308]. Put differently, the accessory must have been implicated in the contravention: see ASIC v Activesuper at 258; see also Emwest Products Pty Ltd v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union (2002) 117 FCR 588 at 596-7; [2002] FCA 61 per Kenny J.

Whether a person has conspired with others to effect a contravention of s 18(1) is somewhat distinct from the other subparagraphs of the definition of “involved”. In Australian Competition and Consumer Commission v Oceana Commercial Pty Ltd [2003] FCA 1516, Kiefel J (as her Honour then was) made the following (with respect) concise observation of what is meant by “has conspired with others” in the context of s 75B(1)(d) of the TPA (which is identical to subparagraph (d) of the definition of “involved” in s 2 of the ACL) (at [259]):

That observation is consistent with the approach adopted by the High Court in cases such as Yorke v Lucas; in particular, that the phrases now found in the definition of “involved” in s 2(1) of the ACL derive from the criminal law. Although the Court was not concerned with the phrase “has conspired with others” in Yorke v Lucas, there is nothing in that judgment to suggest that the phrase “has conspired with others” connotes conspiracy in its tortious, rather than criminal law, context. It would be wholly inconsistent with the Court’s decision in Yorke v Lucas (see, in particular, 669) to require a party to prove conspiracy in the context of accessorial liability for the purpose of the ACL (i.e. whether a person “has conspired with others”) to the tortious standard.

That conclusion is also consistent with the express words of subparagraph (d) of the definition of “involved”, when read in the context of the other subparagraphs of that definition. Quite unlike its criminal law counterpart, tortious unlawful means conspiracy requires, inter alia, execution of an agreement, either in whole or in part, to commit an unlawful act (see [510(1)] below). By contrast, in the criminal law, a person will have conspired with others if there is demonstrated “an agreement… to do an unlawful act or to do a lawful act by unlawful means”: see Ahern v R (1988) 165 CLR 87 at 93 per Mason CJ, Wilson, Deane, Dawson and Toohey JJ. One’s conspiracy to effect a contravention in the criminal law is thus complete upon the making of the agreement, although it is unnecessary to prove the precise date upon which the agreement was formed: R v Rogerson (1992) 174 CLR 268 at 281; [1992] HCA 25 per Brennan and Toohey JJ (“R v Rogerson”); see also Standen v Regina [2015] NSWCCA 211 at [418] per Bathurst CJ, Hoeben CJ at CL and McCallum J (as her Honour then was); see also Agius v R; Abibadra v R; Jandagi v R; Zerafa v R [2011] NSWCCA 119 at [62] per Johnson J (with whom Hall J and Tobias AJA agreed). As Brennan and Toohey JJ explained in R v Rogerson (at 281):

It would be wholly inconsistent with the other subparagraphs of the definition of “involved” for the Court to read into subparagraph (d) of that definition an obligation to execute, in whole or in part, an agreement to commit a contravention. One’s execution of a contravention would, unless the circumstances suggest otherwise, ordinarily implicate them as a principal contravener or as being involved in a contravention within subparagraphs (a) and/or (c) of the definition of “involved”.

Whether a person has conspired with others to effect a contravention for the purpose of the definition of “involved” would thus require only a finding that a person has agreed with another person (for example, the principal contravener) to effect a contravention; there being no requirement for the person allegedly involved to have otherwise participated in the contravention. Once a person participates in the contravention beyond that agreement, either as a principal contravener or within the confines of subparagraphs (a) or (c) of the definition of “involve”, the action against them for conspiring with others to effect the contravention merges with their liability for further participation. That is, for example, a party cannot be liable for both conspiracy to effect a contravention and also for committing the contravention that was the subject of the parties’ prior agreement. It is one or the other.

Thus, insofar as any of the Active Defendants and/or Mr Varvaris are principal contraveners of s 18(1) of the ACL, or involved in such a contravention within meaning of subparagraphs (a) or (c) of the definition of “involve”, they cannot also be said to be conspirators. Although this was not a matter raised by either party in the context of the Plaintiffs’ section 18(1) case, that the conspiracy cause of action merges with the substantive wrong upon which the Plaintiffs rely to substantiate a separate, individual cause of action was raised by Counsel for the Active Defendants in relation to the Plaintiffs’ tortious conspiracy case. It is therefore necessary for the Court to canvas briefly some additional legal principles relevant to the merger issue.

In Ward v Lewis [1955] 1 WLR 9 (“Ward v Lewis”), the Court of Appeal heard an appeal from a decision granting leave to amend a statement of claim alleging slander and conspiracy to commit slander. In allowing the appeal and striking out the paragraphs that pertained to the alleged conspiracy, Lord Denning (with whom Lord Morris agreed) relevantly said (at 11):

A similar conclusion was reached by Adam J in Rubenstein v Truth & Sportsman Ltd [1960] VR 473 where, in an action predominately alleging libel yet also alleging conspiracy to commit libel, his Honour struck out paragraphs of a statement of claim alleging conspiracy to commit libel. See also Sorrell v Smith [1925] AC 700 at 716 per Lord Dunedin; Cabasi v Vila (1940) 64 CLR 130 at 142-143; [1940] HCA 41 per McTiernan J, 151 per Williams J; O’Brien v Dawson (1942) 66 CLR 18 at 27; [1942] HCA 8 per Starke J.

In Trade Practices Commission v Allied Mills Industries Pty Ltd (1980) 32 ALR 570 (“Allied Mills”), Sheppard J also reached a similar conclusion. However, unlike the foregoing cases, Allied Mills concerned several applications to strike out whole or part of a statement of claim by which the plaintiff alleged contraventions of ss 45(2) and 76(1)(f) of the TPA. Section 45(2) of the TPA prohibited a corporation making a contract or arrangement, arriving at an understanding, or giving effect to a provision of a contract, arrangement or understanding if the proposed contract, arrangement or understanding contained an exclusionary provision or had the purpose, or would have or be likely to have the effect, of substantially lessening competition. The pleadings alleging breaches of s 45 of the TPA were “that the corporate respondents made arrangements, or entered into understandings, which are in breach of that section”: see Allied Mills at 571-2.

Section 76(1)(f) was in terms similar, albeit not identical, to subparagraph (d) of the definition of “involved” in s 2 of the ACL. The pleadings alleged a series of conspiracies to make the aforementioned arrangements or to enter into the understandings; that is, “the conspiracies relied upon [were] also the arrangements or understandings alleged in the other paragraphs in the statement of claim”: Allied Mills at 579.

In allowing the application to strike out the pleadings that alleged conspiracy, his Honour relevantly said (at 579):

His Honour reached the same conclusion with reference to the reasoning of Lord Denning in Ward v Lewis.

Prior to reaching that conclusion, however, his Honour referred to a submission by the first respondent that “as a matter of construction, the Act did not make unlawful a conspiracy to make an arrangement or enter into an understanding”: at 577. His Honour further explained the submission as follows (at 577):

Although his Honour declined to deal with the submission on account of the proceedings coming before him on a summary application to strike out a pleading, his Honour indicated a preliminary view that there was “force in the argument”: see 577-8.

With great respect, his Honour’s preliminary view is one with which I disagree, not least because the legislature clearly contemplated a potential separate action for conspiring to contravene s 45(2), much like the legislature has clearly contemplated a potential separate action for conspiring to effect a contravention of s 18(1) of the ACL.

I agree that an action to conspire with others to contravene a provision (the TPA formulation) or to conspire with others to effect a contravention (the ACL formulation) merges with the action for the principal contravention, where the principal contravention is alleged. Where I respectfully depart from his Honour, however, is that I am of the view that the TPA made unlawful a conspiracy (i.e. the making an agreement with others) to make an arrangement or enter into an understanding. Applied analogously to s 18(1), the ACL makes unlawful a conspiracy to engage in conduct that is misleading or deceptive or is likely to mislead or deceive, in trade or commerce. Where two parties conspire (i.e. agree) to effect a contravention of s 18(1) of the ACL, and only one party in fact contravenes s 18(1) of the ACL, only the former party will be liable for conspiring to effect a contravention. The action for conspiracy against the latter party will merge with the principal contravention. I would reach the same conclusion, and apply the same rationale, to s 45(2) of the TPA, albeit I accept that it is far more difficult conceptually to distinguish between an agreement to contravene s 45(2) and the contravention itself given the nature of the prohibited conduct.

I will now turn to my findings in relation to the many pleaded individual false, misleading and deceptive representations and other conduct. My findings are set out after each pleading:

It is convenient at this point to summarise the Court's findings in relation to the various representations and other conduct set out above, interpolating some of the critical dates.

The Court has found that Alysha engaged in this misleading and deceptive conduct:

The Court has found that Dennis engaged in this misleading and deceptive conduct:

The Court has found that Mr Varvaris engaged in this misleading and deceptive conduct:

In paragraphs [338] and following I sought to summarise the parties’ contentions. The findings I have set out above necessarily determine most of those contentions. I will now set out the balance of my conclusions for completeness.

I accept the Plaintiffs’ submissions set out in paragraphs [338(2) and (3)] above and accordingly reject the Active Defendants’ submission set out in paragraphs [339(1)(a) and (c)] above.

As to the Active Defendants’ submission at paragraph [339(1)(b)] above, the evidence demonstrates (and common sense suggests) that the representations concerning the true market value of the First Kogarah Property were part of the conduct which induced the Plaintiffs to acquire it. While future development potential was obviously important, the profitability of the transaction necessarily included having a view about the true market value both “as is” and developed.

The Active Defendants’ submissions set out at paragraph [339(4)] above are rejected. Having regard to the Court’s conclusions about Chris and Mr He as witnesses, the Court has no hesitation in finding that they relied upon the Active Defendants’ representations about the market value and what could be developed on the First Kogarah Property in committing and funding Haiye to pay its share of the transaction.

Insofar as the Court has found misleading and deceptive conduct on the part of the Active Defendants in relation to the Supplementary Contract, the Court is well satisfied that the Plaintiffs relied on the misrepresentations and would not have paid money towards the Supplementary Contract had they known the truth, whether by the misrepresentations being corrected or the silence being broken. I have already dealt elsewhere (see paragraph [377] above and following) with the legal ramifications of any alleged illegality on the Plaintiffs’ rights under the ACL (and more generally).

Throughout his oral closing submissions, Mr Sirtes SC used the terms “illegal” and “improper” somewhat interchangeably. There being, at least in my view, a fundamental difference between “illegal” and “improper”, I questioned Mr Sirtes SC on the difference between those terms, if any, in his submissions. My question, and Mr Sirtes SC’s response, was as follows (at T375:12-50):

Despite that attempt at clarification, I have concluded that the Active Defendants have been unable to identify the alleged illegality or impropriety with any degree of precision, largely leaving it as a matter of speculation or innuendo: on any view well short of what sustaining such a serious finding on the Briginshaw standard would require. It is in this context that I record for completeness my acceptance of the Plaintiffs’ submissions in paragraph [341] above.

Although much of the Plaintiffs’ case centred on misrepresentation by silence, the Court has found that Alysha did make direct misrepresentations about the Second Kogarah Property at the 9 March 2016 meeting and that on 4 March 2016 Dennis had represented to Chris and Mr He that Mr Varvaris had persuaded Landmark to sell the Second Kogarah Property to PPD. Furthermore, on any view, the fact that a large part of the Second Kogarah Property Cheque was used to pay Pionnier’s share (Dennis being the director of that company) of the purchase price for the First Kogarah Property, and $400,000 was paid to Alysha are essential reasons for the Court’s conclusion that Alysha and Dennis must have known that the whole story about Landmark was merely the next part of the deception of the Plaintiffs. The Court is fortified in this conclusion by the benefits Alysha (another $400,000) and (Dennis – alleged reduction in his loan account with Golden Sands) also received from the payment of the Fake Bingemann Invoice.

I next again record for completeness that I accept the Plaintiffs’ submissions set out in paragraphs [344] and [345] above.

Turning to the arguments raised by the Active Defendants recorded at paragraph [346] above and following, I have already set out in the Court’s findings by reference to the pleadings why the Court is satisfied the Active Defendants have engaged in misleading and deceptive conduct, including by silence when they had knowledge of the deception that was being worked. Similarly, the Court has no doubt the Plaintiffs relied on the positive misrepresentations and would not have paid the alleged deposit to purchase the Second Kogarah Property had they been told the truth or if the Active Defendants had broken their silence to share what the Court is satisfied the Active Defendants knew.

In reaching these conclusions adverse to the Active Defendants on the Briginshaw standard, I have carefully considered the arguments set out at paragraphs [348] and [349] above. However, they are overcome by the matters to which I have referred in paragraph [429] above. To the extent they might in isolation portray Alysha in particular as an innocent, I am satisfied that they were all part of the ruse in which the Court has found the Active Defendants were engaged in with Mr Varvaris.

I have dealt with at other points of these reasons why I reject the various submissions recorded at paragraphs [350] to [356] above. I have noted in particular the submission that the Plaintiffs were really relying on representations made by Mr Varvaris. In my respectful view, that is not borne out by the facts. It is plain that the Plaintiffs relied on what they were told by each of Mr Varvaris, Alysha and Dennis, each of them as active participants in the various transactions. The fact that everyone appears to have understood that Mr Varvaris would be negotiating and using his influence does not mean that the Plaintiffs did not rely on what Alysha and Dennis said. This is to ignore that the Plaintiffs were introduced to Mr Varvaris by Alysha and Dennis and that their pre-existing relationship of trust and confidence was with Alysha and Dennis.

The Court is satisfied, to the Briginshaw standard, that Alysha and Dennis were principals in the transactions and not mere intermediaries or mouthpieces for Mr Varvaris. The only exception are those few occasions which I have identified where the words used make it clear that what was happening was interpretation. However, even that was incidental to Alysha and Dennis’ conduct as principals. The Plaintiffs relied on what they said as principals, that reliance was fortified by the fact that they trusted them to interpret what was being said by and to Mr Varvaris. It is also that evident trust and confidence, together with the fact that the Plaintiffs did retain Mr Vay, that is the basis of the Court’s rejection that the Plaintiffs were negligent in protecting their own interests, so that there is no basis to reduce their damages under s 137B of the Competition and Consumer Act 2010 (Cth).

In assessing the Active Defendants’ conduct it is also important to recall that this must be done in the surrounding circumstances of what had passed between the parties, “bearing in mind what matters of fact each knew about the other as a result of the nature of their dealings and the conversations between them, or what each may be taken to have known” (see paragraphs [362] and [368] above). There is a cumulative quality to the various representations and dealings between the parties, where each new representation or silence must be understood by what had gone before, as the Plaintiffs were drawn further into what the Court is satisfied was the scheme of Mr Varvaris and the Active Defendants. This also permits the Court to engage in a degree of hindsight in assessing earlier conduct by what the Court is satisfied occurred later. To give an obvious example, a person may climb through a window of a house for many reasons, including lawful ones, but an unlawful purpose may be inferred if shortly afterwards it is found that both the person and valuable jewellery are no longer in the house.

It is next necessary to consider the Active Defendants’ argument set out at paragraph [357] above of novus actus interveniens. It can be disposed of briefly. The argument may have had force if the Active Defendants were completely ignorant of a scheme known only to Mr Varvaris. As has already been said, the Court has found they were not. In the events which happened it would be unreal and artificial to suggest that the sole consequence of the Active Defendants’ false and misleading conduct was that money was placed in the Varvaris & Co trust account. The Active Defendants knew, the Court has found, that there was no transaction with Landmark such that the transfer to Varvaris & Co was a step in the misappropriation of the funds.

It will be apparent from the Court’s findings set out with the pleading above that the Court accepts the Plaintiffs’ submissions set out in paragraph [358] above.

As for the Active Defendants’ submissions recorded in paragraph [359] above, the reasons I have just set out in relation to the Second Kogarah Property also explain why I do not accept that the Active Defendants were just as reliant on Mr Varvaris as the Plaintiffs or that the Active Defendants did not know that the Fake Bingemann Invoice was not real. At the risk of repetition, the Court is satisfied that the Active Defendants were “inside the tent with Mr Varvaris” and not outside of it.

While the Court is satisfied that the Active Defendants are all liable in accordance with the findings set out above, I will briefly deal with this question.

It follows from those findings that as between each of the Active Defendants and Mr Varvaris, each had knowledge of the essential facts that rendered the particular conduct misleading or deceptive. They therefore each aided and abetted the other and were directly or indirectly knowingly concerned in or a party to the contravening conduct of the others. For the reasons set out in paragraph [417] above, these findings mean that if there were any actionable conspiracy to effect the relevant contraventions, that cause of action has merged with the principal contraventions.

Before turning to the quantification of damages, there is a preliminary question as to which of the Plaintiffs is entitled to relief.

In their written closing submissions, which were received prior to the eighth day of the hearing, Counsel for the Active Defendants sought to draw to the Court’s attention the fact that the Plaintiffs have “taken little care to differentiate between any of them” and that, by their own evidence, Chris and Mr He have not suffered any loss. On Chris’ own evidence, he did not contribute any funds to the aforementioned transactions. He cannot, therefore, be the direct beneficiary of any relief from the Court. By Mr He’s evidence, the money paid from his personal funds was paid exclusively by him on behalf of Haiye. Counsel for the Active Defendants thus submit that if any of the Plaintiffs have suffered loss, it can only be Haiye - a submission which appears to be accepted by the Plaintiffs.

The submission continues:

On the ninth day of the hearing, Mr Sirtes SC developed this submission with reference to what was said by the High Court in Gould v Vaggelas and the Federal Court of Australia in Hodges v Waters (No 7) (2015) 232 FCR 97; [2015] FCA 264 (“Hodges v Waters”) and Morris v IMF Bentham Limited [2018] FCA 1009 (“Morris v IMF Bentham”). Having referred to these authorities, to which I shall briefly return, Mr Sirtes SC initially submitted that “not even Haiye is able to claim relief and that’s because we say that … its claim is one that is a claim for reflective loss and it can’t succeed”: see T371:8-10. Mr Sirtes SC, correctly in my view, later abandoned that submission and focussed his attack upon the Plaintiffs’ asserted evidentiary failure to prove that Haiye (or Mr He) has, in fact, suffered loss. As Mr Sirtes SC abandoned his reflective loss submission, there is no need for the Court to consider a submission in reply from Mr Cheshire SC that the Active Defendants should not be permitted to raise their reflective loss argument in closing submissions.

Before turning to Mr Sirtes SC’s ultimate evidentiary submission in more detail, however, reference should be made to what was said by the High Court in Gould v Vaggelas. That case concerned a dispute not unlike the present (albeit Mr He is one step removed from the transactions): a husband and wife were induced by misrepresentations to purchase a tourist resort through a company, Gould Holdings Pty Ltd (“Gould Holdings”). The terms of Gould Holdings’ purchase of the resort included a transfer of a property owned by the Goulds to the vendors and a mortgage to the vendors to secure the balance of the purchase price. Gould Holdings defaulted on the mortgage after two years of unprofitable trading and the vendors exercised their power of sale under the mortgage. The vendors also sued the Goulds as guarantors. The Goulds counterclaimed against the vendors for deceit; a claim upon which they were ultimately successful. What fell for determination by the High Court, inter alia, was the quantum of damage, if any, that may be recoverable by the Goulds as distinct from the damage suffered by Gould Holdings. In allowing the appeal, Gibbs CJ relevantly said (at 219):

Brennan J further expanded upon the reflective loss principle in some detail with reference to a hypothetical scenario. At 253-4, his Honour relevantly said:

The other two cases to which reference was made by Mr Sirtes SC in oral submissions (Hodges v Waters and Morris v IMF Bentham) do not expand upon these statements of Gibbs CJ and Brennan J in Gould v Vaggelas. To the extent that those cases address issues concerning one’s ability (or inability) to recover losses in their capacity as a shareholder of a company or unitholder of a trust, they are not of any present relevance because:

Returning to the submissions set out at [443] above, the gravamen of Counsel for the Active Defendants’ submission is that there is no evidence of the nature of the transaction between Mr He and Haiye or Mr He and PPD, including whether those funds were loaned by Mr He to Haiye and then by Haiye to PPD, or by Mr He directly to PPD. Counsel for the Active Defendants’ submission on this point is narrowly directed to the absence of sufficient evidence demonstrating a loan from Mr He to Haiye and then from Haiye to PPD, or from Mr He to PPD directly.

I reject Counsel for the Active Defendants’ submissions for the following reasons:

I therefore conclude that of the Plaintiffs, Haiye is the only party to whom loss can be attributed.

Having established that Haiye is the plaintiff entitled to damages, including under the ACL, the Court will next consider the parties’ submissions on quantification. These were the subject of further written submissions at the Court’s direction after the close of oral argument.

The parties agreed that in quantifying damages, the Court had to take into account (and give the Active Defendants the benefit of) the orders made at the hearing (set out in [295] above). One unusual feature of this case which is a consequence of those orders is that Pionnier has transferred its shares in PPD to Haiye. This means that PPD is now a wholly owned subsidiary of Haiye, which is itself owned by Chris (as to 51%) and Mr He (as to 49%). In economic terms, Haiye now has the benefit of 100% of the First Kogarah Property. For the purposes of quantifying damages, the plaintiffs relied on an updated valuation of the First Kogarah Property as at 8 April 2021, which established that the undisputed value of the First Kogarah Property was $4,315,200 (a 75% interest being $3,236,400, and 25% being $1,078,800).

It is that unusual feature which is the reason why, to the extent any differentiation is necessary, the Court takes as the primary basis for its quantification of damage s 237 of the ACL, but relying on s 236 in the alternative. Those sections include:

There was no dispute between the parties that in this case damages should be assessed as at the date of judgment. The Active Defendants in fact submitted that any loss of the Plaintiffs should be compensated pursuant to s 237, but relied on its discretionary nature to submit that the effect of the orders which the Court has already made meant that the justice and equity of this case was that no further liability should be visited on the Active Defendants and that Haiye’s losses should otherwise be left to lie where they fall.

That submission is rejected. Putting it broadly, Haiye should be compensated insofar as the amounts that were paid out on its behalf are not equivalent to what was received and giving credit for the value of the First Kogarah Property and the other allowances now made by the Active Defendants.

Nor does the Court accept the Active Defendants’ submission that what Haiye is suing for is some kind of uncrystallised future loss to the extent there may be a shortfall between sums advanced on behalf of Haiye and the assets available in PPD to repay it. That submission must fail in the face of the economic unity of ownership with PPD now being a wholly owned subsidiary of Haiye. It would be entirely artificial to say Haiye suffers no loss until it in fact seeks to recover what the Court has found should be treated as its advances made on behalf of PPD. In any event, insofar as s 237 is the jurisdictional basis for compensation, it extends in its terms to preventing or reducing loss or damage which is “likely to be suffered”.

In their final submissions as to damages, the Plaintiffs divided what they submitted was Haiye’s entitlement under the ACL into several components. I will consider each of these in turn. The first was:

The Active Defendants accepted this calculation of shortfall was arithmetically correct. However, they submitted that just because there was a shortfall did not automatically lead to the conclusion that this was the correct assessment of Haiye’s loss. The Active Defendants submitted that if the Court accepts that Haiye lent money to PPD, the purpose of that loan was for PPD to develop the First Kogarah Property. Any assessment of damages, it was argued, must be made in the context of development of that property and any ensuing profit which PPD could generate. It was contended that “although the expert evidence is that development approval for 80 residential units would be very unlikely, there is no evidence that [the First Kogarah Property] is not developable at all”.

In support of these arguments, the Active Defendants referred to the decision of Harrison J in PPK Willoughby Ltd v Baird [2020] NSWSC 1757 (“PPK Willoughby”). That case concerned the purchase and development of land in reliance upon negligent advice. However, the development had made a profit. While his Honour accepted that the plaintiff would not have bought and developed the land if it had been properly advised, the proper measure of loss was not the difference between the amount paid for the property and its real value but by ascertaining whether the plaintiff was worse off than if it had not entered the transaction. In this case the plaintiff was better off because it had made a profit on the development.

The Court accepts the Plaintiffs’ argument that PPK Willoughby is of no assistance to the Active Defendants in this case because the property in PPK Willoughby had in fact been developed and the townhouses built upon it sold. What is clear that Haiye would not have funded PPD to purchase the First Kogarah Property if Chris and Mr He had known that a development of 75 to 80 units would not be possible, which in practical terms is the effect of the Plaintiffs’ expert planning evidence.

Furthermore, the Active Defendants have not sought to adduce evidence concerning the current value of the First Kogarah Property either on an “as is” basis or by reference to its realistic development potential. Nor is there any evidence about what Haiye might now cause PPD to do with the First Kogarah Property.

For these reasons, the Court accepts this aspect of the Plaintiffs’ quantification of Haiye’s damages.

The next aspect of the Plaintiffs’ claim related to the Supplementary Contract:

The Active Defendants made two responses to this aspect of the Plaintiffs’ claim.

First, they submitted that there was no evidence that any of the amounts paid in respect of the Supplementary Contract were received by any of the Active Defendants. They drew attention to the fact that the Plaintiffs made a claim against CBC for $559,500 said to have come from the monies paid referable to the Supplementary Contract. Second, and consequent upon that, they submitted that Haiye should not be permitted to enjoy a double recovery from CBC as well as the Active Defendants, so that any order for compensation or damages against the Active Defendants should be limited to $265,500 (being $825,000 less the $559,500 judgment against CBC).

The Court accepts this aspect of the Plaintiffs’ claim. The fact that none of the money was received by any of the Active Defendants does not relieve them of liability when the Court has found that money was paid by reason of their misleading and deceptive conduct. Furthermore, in their reply submissions, the Plaintiffs make clear that they do not seek double recovery from CBC as well as the Active Defendants. In any event, as is set out in paragraphs [570] to [572] below, the Plaintiffs have not made out their claim against CBC.

The Plaintiffs’ claim in relation to the funds paid for the deposit of the Second Kogarah Property was expressed as:

The Active Defendants responded with this calculation:

It will be apparent from comparing these calculations that there were two areas of difference.

First, the Active Defendants contended that because Pionnier had agreed to transfer its shares in PPD to the Plaintiffs, the Plaintiffs have received the full value of the $2,231,762.83 which was applied towards the purchase of the First Kogarah Property. The Plaintiffs responded that to treat the payment in that way did not recognise that what the funds were applied towards was to purchase a 25% interest in the First Kogarah Property, which was worth considerably less than the amount paid.

The Court accepts the Plaintiffs’ argument. The first head of damages dealt with in paragraphs [458] to [463] above deals with the acquisition of the 75% interest in the First Kogarah Property. The head of damages now under consideration deals with the acquisition of the 25% interest. In my respectful view, the Plaintiffs’ approach appropriately reflects that reality.

The second area of difference is that the Plaintiffs add to their damages the $233,750 which was Pionnier’s contribution to the purchase of the First Kogarah Property. On the other hand, the Active Defendants submitted that by Pionnier agreeing to transfer its shares in PPD to the Plaintiffs, the Plaintiffs received the benefit of that amount which reduced (rather than increased) their loss.

I accept the principle which I take to underlie the Active Defendants’ submission. The Plaintiffs, in economic terms, now have the benefit of the entire value of the First Kogarah Property. It would, in my respectful view, be a form of double compensation for them to have both the First Kogarah Property and the benefit of what Pionnier paid towards the purchase of the First Kogarah Property. That benefit should be credited back to Pionnier. The question is in what amount?

The parties were agreed that by reference to the current market value of the First Kogarah Property, the 2.5% of the purchase price contributed by Pionnier amounts to $107,875. That is the amount which should be credited back to Pionnier by reducing the amount of damages otherwise recoverable under this head from the Active Defendants by the Plaintiffs.

The effect of these conclusions is that Haiye’s entitlement in respect of the funds paid for the deposit for the Second Kogarah Property should be calculated as follows:

The final head of relief claimed by the Plaintiffs under the ACL is the amount of $271,343.75, being the outstanding amount paid in respect of the Fake Bingemann Invoice after allowing for the repayment from Alysha of the $400,000 from that amount pursuant to the Court’s orders. The Court accepts that claim is made out and there should be judgment for Haiye against the Active Defendants in that amount.

Insofar as the Plaintiffs also have a separate claim against Dennis for $270,000 of that money, I accept the Active Defendants’ submission that the Court’s orders should not permit double counting of the amounts recoverable by the Plaintiffs in respect of what was paid in response to the Fake Bingemann Invoice. At paragraphs [567] to [569] below I set out why the Court is satisfied that Haiye is entitled to judgment against Dennis for money had and received for funds paid to satisfy the Fake Bingemann Invoice. The Plaintiffs will be given an opportunity as part of any submissions concerning the form of final orders to address how any orders should be expressed to avoid double recovery.

The representations upon which the Plaintiffs rely for the purpose of their misleading and deceptive conduct case are also relied upon in support of the deceit allegations. There being a significant factual overlap in the two causes of action, it is unnecessary for the Court to recite Counsels’ submissions addressing the purported false, misleading and/or deceptive representations. The factual findings the Court has made in relation to the claims under the ACL apply equally to considering the tort of deceit.

It is also necessary to record that, as the case was argued, little distinction was drawn between the action under the ACL (which was clearly the prime focus of everyone’s attention) and the case in deceit. With no criticism intended, it was implicit in the Plaintiffs’ case that if they succeeded under the ACL they should also succeed in deceit. The Active Defendants’ response was to the effect that the case in deceit should fail for the same reasons the ACL case should fail.

The only material point of distinction was what became only Haiye’s claim for aggravated and exemplary damages arising from either or both the torts of deceit and conspiracy. I will consider those two issues after dealing with the torts.

In Magill v Magill (2006) 226 CLR 551; [2006] HCA 51, Gummow, Kirby and Crennan JJ (“Magill v Magill”) explained the elements of the tort of deceit in the following terms (at 587-8):

One may make a false representation by an express statement, conduct or non-disclosure. Mere silence, however, will not give rise to an action in deceit, save for where there exists a legal or equitable duty to disclose the truth: Magill v Magill at 567 per Gleeson CJ, quoting Bradford Third Equitable Benefit Building Society v Borders [1941] 2 All ER 205 at 211 per Viscount Maugham; see also Lam v Ausintel Investments Australia Pty Ltd (1989) 97 FLR 458 at 475 per Gleeson CJ. Non-disclosure will, nevertheless, constitute a positive misstatement of fact where:

A representation must be one of fact, albeit that may include a statement of opinion, belief or intention, as there is implied in such a representation a fact that the defendant honestly holds the opinion or belief, or honestly intends to act in the way so represented: see, e.g., Bisset v Wilkinson [1927] AC 177; Krakowski at 578 per Brennan, Deane, Gaudron and McHugh JJ.

As to the second element of the tort, as set out in the above quoted passage from Magill v Magill, in Livers v Legal Services Commissioner [2020] NSWCA 317, McCallum JA (with whom Ward CJ in Eq and White JA agreed) considered the phrase “reckless carelessness” in the context of an appeal from the Civil and Administrative Tribunal in relation to professional misconduct proceedings against a legal practitioner. Although the phrase “reckless carelessness” is not of any present relevance, her Honour’s distinction and elucidation of the words “carelessness” and “recklessness”, in the following passage, is (at [43]):

As to the fourth element of the tort, although the representation need not be the sole inducement upon which the Plaintiffs relied, the impugned representation ought to have been a materially contributing factor to the Plaintiffs’ decision to act: see Henville v Walker at 480 per Gaudron J; see also Gould v Vaggelas at 236 per Wilson J.

By paragraphs 219-224 of the ASOC, the Plaintiffs also plead that the Active Defendants and Mr Varvaris are liable as joint tortfeasors for their joint direction of, participation in or party to a common design with each other in respect of the making of the representations.

Liability as a joint tortfeasor was considered by the Supreme Court in Fish & Fish Ltd v Sea Shepherd UK [2015] AC 1229, wherein Lord Sumption (albeit in dissent as to the outcome) relevantly said (at [37]; see also [55] per Lord Neuberger):

For parties to be liable as joint tortfeasors, their tortious conduct ought to be in the furtherance of a common design; inadvertence to the conduct by which a commission of the tort or the common design are said to arise is insufficient to impute liability upon a purported joint tortfeasor: see The Koursk [1924] P 140 at 159-160 per Sargant LJ.

Whether a director (here, Dennis) is jointly liable for the commission of a tort by the company for which he or she holds office (here, Pionnier) ought to be answered by reference to whether there is a sufficient concurrence in the act causing damage by the director and the company: see JR Consulting & Drafting Pty Ltd v Cummings [2016] FCAFC 20 at [334] per Bennett, Greenwood and Besanko JJ (“JR Consulting”), quoting The Koursk [1924] P 140 at 159 per Sargant LJ. A director will not be personally liable as a joint tortfeasor where they are merely acting qua director: Swancom Pty Ltd v Jazz Corner Hotel Pty Ltd (No 2) [2021] FCA 328; (2021) 157 IPR 498 at 562 per O’Bryan J. As Bennett, Greenwood and Besanko JJ explained in JR Consulting (at [335], [350] and [351]):

Also relevant to the Court’s determination of whether a director is a joint tortfeasor with a company within which he or she holds office is the director’s knowledge of the circumstances surrounding the commission of the tort. As Besanko J said in Keller v LED Technologies Pty Ltd (2010) 185 FCR 449 at 513; [2010] FCAFC 55 in the context of a design infringement dispute (which received approval by the Full Court in JR Consulting at [345]):

It is not necessary, in my respectful opinion, for the Plaintiffs to prove that Dennis (qua director) was aware that, by engaging in certain conduct, he has committed the tort of deceit as a joint tortfeasor. What must nevertheless be demonstrated is that Dennis had knowledge of the conduct by which the tort of deceit has been commissioned and participated in the furtherance of the common design of the commission of that tort.

The Court finds that each of the Active Defendants and Mr Varvaris committed the tort of deceit insofar as the Court has found each of them made misrepresentations to the Plaintiffs. That finding also extends to where there was a finding of misrepresentation by silence because in each case, in my respectful view, there was a legal obligation to disclose the truth so as not to engage in misleading and deceptive conduct under the ACL.

Insofar as any one of the Active Defendants of Mr Varvaris has been found to have committed the tort of deceit, the Court also finds that the others are joint tortfeasors in each such act. It will be apparent from the Court’s findings in relation to the Plaintiff’s ACL case that the Court is satisfied that each of them had the requisite knowledge and that they were engaged in the common design of seeking to deceive the Plaintiffs in respect of the Supplementary Contract, the alleged deposit for the Second Kogarah Property and in relation to the Fake Bingemann Invoice.

Conspiracy, much like fraud, is not an allegation that should lightly be made and ought to be pleaded with precision and particularity: Hughes v Western Australian Cricket Association Inc (1986) 19 FCR 10 at 54; [1986] FCA 465 per Toohey J; Australian Wool Innovation Ltd v Newkirk [2005] FCA 290 at [59] per Hely J (“Australian Wool Innovation”); Andrianakis v Uber Technologies (Ruling No 1) [2019] VSC 850 at [39] per Macaulay J; see also Uber Australia Pty Ltd v Andrianakis (2020) 61 VR 580 at [51]-[52]; [2020] VSCA 186 per Niall, Hargrave and Emerton JJA (“Uber”).

Counsel for the Active Defendants submit that the Plaintiffs’ pleadings of the tort of conspiracy are defective for failing to address the elements of the cause of action, to which can be added a complaint that the pleadings are inchoate and imprecise. The Court is thus, Counsel for the Active Defendants submit, prevented from finding that such an allegation of conspiracy can be substantiated, and the Plaintiffs claims must therefore fail.

The Plaintiffs pleaded causes of action for the tort of conspiracy pertain to the Active Defendants’ and Mr Varvaris’ purported involvement in what the ASOC terms the “Supplementary Contract Conspiracy”, the “Second Kogarah Conspiracy” and the “Bingemann Invoice Conspiracy”. Those pleadings are as follows:

The submissions advanced for the Plaintiffs on the Plaintiffs’ conspiracy case were, with respect, brief. Counsel referred the Court’s attention to what was said by Stevenson J in Mackinnon as Plaintiff representative of 153 Plaintiff group members v Partnership of Larter, Jones, Miraleste Pty Ltd t/as USG Partner and Johnson, t/as “STC Sports Trading Club” (No 8) [2019] NSWSC 1658 at [44]-[45]:

It is the second species of conspiracy upon which the Plaintiffs rely. As I understood Counsel’s submissions (and the pleadings), the unlawful act which the Plaintiffs allege is the purported deceit of the Plaintiffs by the Active Defendants and Mr Varvaris. I did not understand the Plaintiffs to rely upon their s 18(1) allegations or other causes of action (see below) to substantiate the conspiracy allegations.

Counsel for the Active Defendants were staunch in their submissions opposing the Plaintiffs’ conspiracy case, advancing these four submissions:

The primary gravamen of Counsel for the Active Defendants’ submissions on the deficiencies in the ASOC is that the pleadings do not specify the target of the purported conspiracy. The pleadings include an all-encompassing claim that each of the Plaintiffs were the target of the conspiracy. The pleadings also fail, in Counsel for the Active Defendants’ submissions, to plead any agreement or combination with the common intention of injuring any of the Plaintiffs, let alone one of them.

Counsel for the Active Defendants also take issue with the way in which the Plaintiffs have pleaded the Second Kogarah Property Conspiracy. Issue is principally taken with the words “deposit payable under the purported contract of sale for the Second Kogarah Property” because, at the time the funds were transferred to Varvaris & Co, there was no contract for sale, which is confirmed by paragraphs 110(a) and 110(b) of the ASOC (the documents referred to within those paragraphs having post-dated the transfer to Varvaris & Co).

The second submission advanced by Counsel for the Active Defendants rests on what I have canvassed in [407]-[417] above, although Counsel also drew the Court’s attention the following additional passage from Weinberg J’s judgment in McKellar v Container Terminal Management Services Limited [1999] FCA 1101; (1999) 165 ALR 409 at 445-6 (“McKellar”):

The unlawful conduct upon which the Plaintiffs rely to substantiate their conspiracy allegations is that the Active Defendants and/or Mr Varvaris have committed the tort of deceit. The tort of deceit is, however, pleaded as a separate cause of action upon which the Plaintiffs rely. The Plaintiffs thus do not, Counsel for the Active Defendants submit, have a separate, actionable claim that the Active Defendants have committed the tort of conspiracy.

By the third submission, Counsel for the Active Defendants contend that there is insufficient evidence, inferential or otherwise, to establish an agreement as between all of the Active Defendants and Mr Varvaris. As to the requirement of an agreement, Counsel directed the Court’s attention to what was said by Campbell J (as his Honour then was) in Fatimi Pty Ltd v Bryant & Ors [2002] NSWSC 750 (at [198]) (“Fatimi”):

The final submission advanced by Counsel for the Active Defendants was framed in the alternative: even if the Court is satisfied that the Active Defendants and/or Mr Varvaris made an agreement, the Active Defendants did not intend to injure the Plaintiffs, although injury to the Plaintiffs may have transpired. Counsel referred to this passage from Kiefel J (as her Honour then was) and Jackson J’s judgment in Dresna Pty Ltd v Misu Nominees [2004] FCAFC 169 at [12] (“Dresna FCAFC”):

A distinction must be drawn between an unlawful act that results in damage to a person and an unlawful act by which injury is intended. A further distinction must also be drawn, in Counsel for the Active Defendants’ submission, between ends, means and consequences. As Lord Hoffmann said in OBG Ltd v Allan [2007] UKHL 21 at [62]:

Lord Nicholls similarly observed (at [166]):

Counsel for the Active Defendants submit that not only did the Active Defendants not harbour an intention to injure the Plaintiffs, but it is not clear why Alysha or Dennis would have such a motive in circumstances where they were such close friends with Chris. It is also unclear why the Active Defendants would have engaged in such “easily discernible… monstrously short-sighted and inexplicably stupid” conduct – criminal conduct no less – in circumstances where they owned a property with the Plaintiffs and were establishing a restaurant business with the Plaintiffs in Hurstville.

The constituent elements of the tort of conspiracy to injure by unlawful means have been variously formulated: see, e.g., Maritime Union of Australia v Geraldton Port Authority (1999) 93 FCR 34 at 102; [1997] FCA 899 per R D Nicholson J; Australian Wool Innovation at [61]; Fatimi at [104]. They can be summarised as:

There is, however, no need for the Court to resort to a consideration of the constituent elements of the tort of conspiracy in the context of the present dispute. That is because the Plaintiffs do not have an actionable claim for conspiracy to commit the tort of deceit in circumstances where they rely upon that substantive wrong as a separate, individual cause of action. I have already canvassed the legal principles applicable to this reasoning and will not repeat them here (see [407]-[417] above).

Should I be incorrect in my conclusion that the Plaintiffs do not have an actionable claim for conspiracy to commit the tort of deceit, I would nevertheless reject the claim as I am not satisfied on the evidence to the Briginshaw standard that the Active Defendants and/or Mr Varvaris intended to injure the Plaintiffs in the requisite sense. While injury to the Plaintiffs may have been a consequence of the Active Defendants’ and/or Mr Varvaris’ conduct, I am not persuaded that they had an intention to injure. In other words, while they may have set out to deceive, the Plaintiffs have not established that the Active Defendants intended to injure.

Haiye pressed its claim for aggravated and exemplary damages arising from the torts of conspiracy and deceit. Its success in relation to the latter means that its entitlement (if any) to punitive damages must now be considered.

It was submitted for Haiye that it was entitled to claim both aggravated and exemplary damages notwithstanding that it was a corporation. Attention was drawn to the decision of Cavanagh J in Volvo Finance Australia v Waterfront Enterprises Pty Ltd (In liq) (No 2) [2020] NSWSC 262 ("Volvo Finance"). In that case, his Honour awarded the plaintiff finance company exemplary damages of $50,000 but did not, on the facts, award aggravated damages.

The difficulty for the Plaintiffs, as was correctly pointed out by the Active Defendants, is that not only did Cavanagh J not award aggravated damages in Volvo Finance, but it apparently was not put to him that aggravated damages could not be claimed by a corporate person. That aggravated damages are not available to a corporation is apparent from their purpose. This was described in the joint judgment of the High Court in Lamb v Cotogno (1987) 164 CLR 1; [1987] HCA 47 at 8 that "aggravated damages, in contrast to exemplary damages, are compensatory in nature, being awarded for injury to the plaintiff's feelings caused by insult, humiliation and the like".

Whatever other attributes may come with corporate personality conferred by statute, they do not extend to feelings. I accept the Active Defendants' submission that not only is the unavailability of aggravated damages to corporations correct as a matter of principle, but that it is also supported by a number of first instance authorities with which I respectfully agree: Hoath v Connect Internet Services Pty Ltd [2006] NSWSC 158 at [205]; Luxottica Retail Australia Pty Ltd v Grant [2009] NSWSC 126 at [39]; Dynamic Supplies Pty Ltd v Tonnex International Pty Ltd (No 3) [2014] FCA 909 at [42]; Universal Music Publishing Pty Ltd v Palmer (No 2) [2021] FCA 434 at [487].

Accordingly, the Court concludes that as a matter of law Haiye is not entitled to aggravated damages.

Turning to exemplary damages, the relevant principles appear in the judgment of the plurality of the High Court in Gray v Motor Accident Commission (1998-1999) 196 CLR 1; [1998] HCA 70 (citations omitted):

The Active Defendants, correctly, did not suggest that a corporation could not recover exemplary damages or that such damages did not apply to the tort of deceit. However, two submissions were advanced as to why the Court should not exercise its discretion to grant Haiye what was described as the "windfall" of exemplary damages.

First, it was clear from the evidence that Mr Varvaris was the architect of the deception concerning the Secondary Contract, the Second Kogarah Property and the Fake Bingemann Invoice. If the Court determined that exemplary damages should be awarded, the only person against whom it would be appropriate to do so was Mr Varvaris; and

Second, even if the Court was of the view that the Plaintiffs' claim was not barred by reason of their own participation in illegal conduct, Haiye was disentitled from an award of exemplary damages because the Plaintiffs were aware of the impropriety that was to occur in relation to obtaining development approval.

The Court rejects both of these submissions for reasons which have already been articulated in other contexts. As to the first, while Mr Varvaris may have been the architect of the deceptions visited on the Plaintiffs, the Active Defendants were knowing principals in what was being done. As to the second reason, the Court has already rejected the Active Defendants' submission that the Plaintiffs were participants in, rather than victims of, what occurred.

In assessing exemplary damages, I am conscious that moderation must be exercised (see XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd (1983-1984) 155 CLR 448; [1985] HCA 12 per Gibbs CJ at 463). Equally, if exemplary damages are to fulfil their purpose "they must not merely irritate, they must sting": Digital Pulse Pty Ltd v Harris [2012] NSWSC 33 at [133].

Haiye's claim for exemplary damages is brought against Alysha, of the one part, and against Dennis and Pionnier, of the other part. In my respectful view, that is how this aspect of the claim should be approached. This is because it is appropriate in the circumstances of this case to ignore their separate legal personalities and to treat Dennis and Pionnier as one and the same for the purposes of assessing exemplary damages. Such a treatment reflects the practical reality of what occurred and avoids what I consider would be a risk of over-compensation if exemplary damages were to be awarded against each of the Active Defendants individually.

It is the logical consequence of the findings which the Court has made about the Active Defendants' conduct and knowledge in relation to the Supplementary Contract, the Second Kogarah Property and the Fake Bingemann Invoice that the Court is satisfied these were acts and omissions of conscious wrongdoing in contumelious disregard of the Plaintiffs' rights. The exceptional remedy of exemplary damages is therefore warranted.

What was done by the Active Defendants involved breaching the trust which Chris had obviously developed over a long period of time in Alysha and Dennis and upon which Mr He also relied. There were, as the Court has found, multiple acts of deception over a long period of time in relation to substantial sums of money. Finally, whatever may have been Mr Varvaris’ responsibility, as between Alysha and Dennis, the facts demonstrate that Alysha played a larger role in leading the Plaintiffs on.

Taking into account the matters referred to in the preceding paragraph, in the exercise of its discretion the Court will order Alysha to pay Haiye exemplary damages in the sum of $35,000 and Dennis and Pionnier (jointly and severally) to pay exemplary damages in the sum of $25,000. I should also record that in reaching this conclusion I have accepted the Plaintiffs' submission that I should not take into account the various "without admissions" concessions made by the Active Defendants which led to the Court's orders referred to in paragraph [293] above. Even if I had, they would have made no difference to the exercise of discretion because they were only made for the first time through the medium of the Active Defendants' short outline of submissions served in the week before the hearing commenced. It is plain that they could and should have been made much earlier in the history of the dispute between the parties.

The Plaintiffs plead breach of fiduciary duties against each of Mr Varvaris, Alysha, Dennis and Pionnier. The principal pleadings upon which the Plaintiffs rely in alleging that each of Mr Varvaris, Alysha, Dennis and Pionnier owed fiduciary duties are:

At paragraph 99, the ASOC pleads that the Kogarah Development JVA was later varied in terms similar to those outlined in paragraph 18 of the ASOC to include the parties’ purported purchase and development of the Second Kogarah Property.

Although the Plaintiffs have not sought leave to proceed against Mr Varvaris, the issue of whether he has breached any fiduciary duties he is alleged to have owed to the Plaintiffs (and likewise, whether he has committed a breach of trust) is relevant to the Court’s determination of whether Pionnier and/or CBC are liable to the Plaintiffs for knowing receipt.

The primary alleged breaches of Mr Varvaris’, Alysha’s, Dennis’ and Pionnier’s fiduciary duties were that they fraudulently and dishonestly induced Haiye to:

The ASOC also contains allegations that Mr Varvaris, Alysha, Dennis and Pionnier fraudulently and dishonestly induced Chris and/or Mr He to provide Haiye with the funds it needed to make the various payments and thereafter misappropriated those funds or caused the funds to be misappropriated.

Counsel for the Plaintiffs’ submissions on the Plaintiffs’ breach of fiduciary duties case can be summarised as:

Although neither their submissions, nor the Plaintiffs’ pleadings, specify the duty that is alleged to have been breached, I infer from the ASOC that the Plaintiffs allege a breach of the no profit duty.

As for the existence of the fiduciary relationship, Counsel for the Plaintiffs’ submissions were limited to the existence of that relationship with Haiye, notwithstanding that the pleadings alleged the existence of a fiduciary relationship also with Chris and Mr He. For example, in their closing written submissions, Counsel for the Plaintiffs submit:

Presumably, Counsels’ submissions are limited to the existence of a fiduciary relationship with Haiye because, as was accepted in relation to the other claims, it is Haiye, rather than Chris or Mr He, who has suffered the loss by virtue of any breach of a fiduciary relationship: namely, by misappropriating the funds it paid in satisfaction of PPD’s purchase of the First Kogarah Property and also in purported satisfaction of the Supplementary Contract, the deposit for PPD’s purchase of the Second Kogarah Property and the Fake Bingemann Invoice. Insofar as Haiye used Mr He’s funds to make those payments, Haiye would be indebted to Mr He in a sum commensurate with the amounts paid from Mr He’s accounts. This proposition has been accepted by the Court (see paragraph [451] above).

In their submissions in support of the existence of a fiduciary relationship with Haiye, Counsel referred the Court to what was said by Black J in Vanguard Financial Planners Pty Ltd & Anor v Ale & Ors [2018] NSWSC 314 (“Vanguard”) (at [60]):

Counsel also directed the Court’s attention to the judgment of Leeming JA (with whom Bell P and Brereton JA agreed) in Pittmore Pty Ltd v Chan; Chan v Tan [2020] NSWCA 344; 104 NSWLR 62 (“Pittmore”) in support of a submission directed towards dishonesty in respect of a third party’s liability for inducing or procuring a breach of trust and the attendant knowledge required.

Counsels’ reference to Pittmore in the context of the Plaintiffs’ allegations that the Active Defendants and/or Mr Varvaris have breached their fiduciary duties was, with respect, not obviously apposite. In Pittmore, the Court of Appeal considered, inter alia, the requirement of knowledge and dishonesty in the context of a claim for procuring or inducing a breach of trust or fiduciary duties. Here, the Plaintiffs have not pleaded that any of the Active Defendants or Mr Varvaris (or any other party to the proceedings, for that matter) have induced or procured a breach of trust or fiduciary duties. Although the Plaintiffs have pleaded knowing receipt and assistance claims under the first and second limbs of Barnes v Addy (1874) LR 9 Ch App 244 (“Barnes v Addy”), such claims are distinct from a claim that one has induced or procured a breach of trust or fiduciary duties. Moreover, the Plaintiffs now do not press their knowing assistance claims, as they were only pleaded against those parties for whom the Plaintiffs do not have leave to proceed against. Thus, the extent to which Pittmore may have relevance to the present proceedings is, at best, incidental.

Counsel for the Active Defendants’ submissions in response can be summarised as:

Counsel for the Active Defendants also advanced submissions in the alternative that, should the Court find that fiduciary duties were owed and breached, any relief in equity ought to be refused by the Court on account of the Plaintiffs’ unclean hands.

The following five issues are raised on the Plaintiffs’ fiduciary duty pleadings:

For the following reasons, it is unnecessary for the Court to consider the third to fifth questions posed.

The terms “joint venture” and “unincorporated joint venture” do not have a settled meaning at law. In United Dominions Corp Ltd v Brian Pty Ltd (1985) 157 CLR 1; [1985] HCA; Mason (as his Honour then was), Brennan and Deane JJ said of the term “joint venture” (at 10):

Although the law largely remains unsettled, indicia have been developed in aid of discerning the formation of a joint venture in contrast to other arrangements by which multiple parties may own property or engage a joint endeavour. In Gibson Motor Sport Merchandise Pty Ltd v Forbes [2005] FCA 749, Crennan J espoused the following “[r]ecognisable and common characteristics of joint ventures” (see [80]):

Although her Honour acknowledged “that it is not appropriate to attempt to isolate which characteristics would be both necessary and sufficient for the constitution of a joint venture agreement” and that “[i]t is always a question of fact whether any particular undertaking constitutes a joint undertaking for mutual commercial gain” (at [81]), her Honour’s observations are, respectfully, not without importance and weigh heavily in the Court’s discernment of whether parties have entered into a joint venture arrangement.

An “unincorporated joint venture”, in contradistinction to an “incorporated joint venture” is, as the express words indicate, a joint venture pursued through a medium other than a corporate structure. As Vickery J explained in Ambridge Investments Pty Ltd v Baker [2010] VSC 59 (at [32]), an unincorporated joint venture may have “the characteristics of a partnership, with a separate legal personality, or it may simply be an association which does not exist as an entity separate from the legal personality of its participants.” By an incorporated joint venture, however, the participants incorporate a corporate structure and become shareholders in that structure.

In early August 2015, Chris, Mr He, Alysha and Dennis inspected and later made an offer to purchase the Rockdale Property, at which time neither Haiye, nor PPD, had been incorporated. Although neither Haiye, nor PPD, had been incorporated by the time of their offer to purchase the Rockdale Property, Chris, Mr He and Dennis had several conversations at the time of their inspection and subsequent offer to purchase the Rockdale Property about purchasing that property through a company.

Notwithstanding that Chris’, Mr He’s, Alysha’s and Dennis’ offer to purchase the Rockdale Property was ultimately unsuccessful, Chris, Mr He and Dennis subsequently decided to incorporate Haiye through which Chris and Mr He intended to purchase a property or part of a property with Alysha and Dennis (or a company controlled by either or both of them), although neither Chris, nor Mr He, were aware of the First Kogarah Property by the time of Haiye’s incorporation.

By 17 August 2015, Chris and Mr He had inspected the First Kogarah Property twice and had had discussions with Dennis about their and Alysha’s/Dennis’ respective proposed ownership of the First Kogarah Property.

In the evening of 17 August 2015, Chris, Mr He, Alysha and Dennis had a conversation in which Dennis said:

Two days later, PPD was incorporated by Chris, Mr He and Dennis. Thereafter, the parties exclusively contemplated purchasing (and in fact purchased) the First Kogarah Property, conducted the development on the First Kogarah Property and entered into the other related transactions through PPD. Although payments were made by Haiye and/or Pionnier on behalf of PPD, the parties have always conducted their investment through PPD.

In my respectful view the conclusion to be drawn from the evidence is that the parties never had an intention to purchase the First Kogarah Property and enter the subsequent related transactions through an unincorporated joint venture. Even assuming that they did, that intention was nevertheless later abandoned with the parties’ incorporation of PPD. As it was not a matter raised on the pleadings, I will not consider whether the parties have, by their incorporation of PPD and use of that company as a special purpose vehicle through which they conducted their Kogarah property dealings, entered into an agreement to form an incorporated joint venture.

By their incorporation of PPD and conduct of their Kogarah property endeavours through that company, the parties also have not formed a partnership. The distinction between a joint venture and a partnership may often be difficult to delineate, principally because, as Ward J (as her Honour then was) accepted in Walters v Scarborough [2011] NSWSC 1380 (at [265]), all partnerships are joint ventures but not all joint ventures are partnerships. One matter of clear distinction, however, is that “the relation between members of any company or association which is incorporated under the Corporations Act 2001 of the Commonwealth is not a Partnership within the meaning of th[e] [Partnership Act 1892 (NSW)]”: see s 2(a) of the Partnership Act 1892 (NSW).

At its highest, the parties’ relationship was that of shareholders in a company, and only Haiye and Pionnier could claim title to that position. As shareholders in PPD, Haiye and Pionnier have not formed a partnership arrangement. Further, as Chris, Mr He, Dennis and Alysha conducted their dealings exclusively through PPD, via Haiye and Pionnier, they too have not formed a partnership arrangement.

As the parties have neither formed an unincorporated joint venture, nor a partnership, they owe no fiduciary obligations to one another; nor do Haiye or Pionnier owe fiduciary duties to one another qua shareholders of PPD. There being no fiduciary duties owed, it is unnecessary for the Court to consider whether any or all of the Active Defendants and/or Mr Varvaris have breached fiduciary duties.

Furthermore, lest it be thought that the question is only to be answered by reference to whether there was a joint venture agreement (notwithstanding that is how it was pleaded, as I have set in paragraph [533] above), I accept the Active Defendants’ submission that neither Haiye, nor Pionnier, expressly or impliedly undertook to subordinate their interests to each other or the venture. This is the essential question in determining the existence of a fiduciary relationship (see Vanguard at [61]). Haiye and Pionnier (and the natural persons who stood behind them) were co-operating for commercial advantage, but they were doing so in their own commercial interests without subordination of those interests to the others.

The Plaintiffs’ plead breach of trust against Varvaris & Co only. The circumstances out of which that trust is alleged to arise is Haiye’s payment of $3,564,000 to Varvaris & Co in purported satisfaction of its share of PPD’s obligation to pay a 60% deposit for PPD’s purported purchase of the Second Kogarah Property. As will be abundantly clear by this point in the reasons, there was no such obligation.

The Plaintiffs nevertheless plead that Varvaris & Co held those funds on trust for Haiye pending completion of the purchase of the Second Kogarah Property and that in breach of trust, Varvaris & Co misapplied the funds, including by satisfying Pionnier’s obligation to pay its share of PPD’s purchase of the First Kogarah Property.

Varvaris & Co has been placed into liquidation. It is unclear when Varvaris & Co was placed into liquidation, as is the manner in which it was placed into liquidation. Notwithstanding when and how Varvaris & Co was placed into liquidation, the Plaintiffs do not have leave to proceed against it pursuant to either ss 471B or 500(2) of the Corporations Act. Although referred to in the Plaintiffs’ closing written submissions, it was not included in the Plaintiffs’ final written submissions on damages and I have assumed is not pressed.

The Plaintiffs plead knowing receipt and/or assistance claims against each of PPD, Pionnier, Varvaris & Co, CBC, A & T Education, Citywide Property Group and Red Horizon pursuant to the first and second limbs of Barnes v Addy, although the Plaintiffs no longer press their claims against PPD and they do not have leave to proceed against Varvaris & Co, A & T Education, Citywide Property Group and Red Horizon. That leaves only the knowing receipt claims against Pionnier and CBC, there being no knowing assistance claim pleaded against either of those companies.

Because the Court has concluded that neither the Active Defendants, nor Mr Varvaris, owed fiduciary duties to the Plaintiffs on the Plaintiffs’ pleaded case and because the pleaded breach of trust action against Varvaris & Co is also not pressed, it follows that the Plaintiffs’ claims pursuant to the first limb of Barnes v Addy against Pionnier and CBC must fail.

The Plaintiffs’ monies had and received claims are put in the alternative. By their ASOC, the Plaintiffs have brought claims for monies had and received against each of Alysha, Dennis, Pionnier, PPD, Varvaris & Co, CBC, A & T Education, Citywide Property Group and Red Horizon. As the Plaintiffs do not have leave to proceed against Varvaris & Co, A & T Education, Citywide Property Group and Red Horizon, and in light of the orders set out in [295] above, the Plaintiffs do not press their monies had and received claims against Alysha, Varvaris & Co, A & T Education, Citywide Property Group and Red Horizon. I have also assumed that the claim is not pressed against PPD (now that Haiye is the sole shareholder of PPD and that, therefore, Haiye (in effect) solely owns the First Kogarah Property) nor against Pionnier.

The only specific money claims referred to in the Plaintiffs’ final written submissions in respect of damages were against Dennis, CBC and Pionnier, and can be summarised as:

The principles relevant to the question of whether Dennis, CBC and/or Pionnier are liable in an action for monies had and received can be distilled from the Court of Appeal’s decision in Heperu Pty Ltd v Belle (2009) 76 NSWLR 230; [2009] NSWCA 252 (“Heperu”) in which Allsop P (as his Honour then was), with whom Campbell JA and Handley AJA agreed, endorsed this passage from K Mason, J W Carter and G J Tolhurst, Restitution Law in Australia, (2nd ed, 2008, LexisNexis Butterworths) at [305] (at [127]) (footnotes omitted):

In Heperu, Allsop P also affirmed the proposition that a plaintiff must show that the recipient knew or ought to have known of their receipt and/or possession or control of the funds in question prior to it being disposed of (if at all) and that it would be unjust or inequitable for the recipient to retain the funds: see [74]; see also National Commercial Banking Corporation of Australia Ltd v Batty (1986) 160 CLR 251 at 268-9; [1986] HCA 21 per Gibbs CJ. In discerning the standard underpinning “ought to have known”, his Honour referred to and accepted the following passage from Meagher, Gummow & Lehane's Equity: Doctrines and Remedies (4th ed, 2002, LexisNexis Butterworths) at 342 [8–270]:

Turning first to the claim against Dennis, the Plaintiffs’ case rested solely upon a director’s loan ledger purporting to reflect Dennis’ director’s loan account with Golden Sands Hospitality (see [241] and [242] above) and bank statements for A & T Education evidencing corresponding transfers to those reflected in the loan ledger. The Plaintiffs assert that the balance of the funds paid by Haiye to Bingemann in purported satisfaction of the Fake Bingemann Invoice (i.e. $271,343.75) were credited to Dennis’ loan account with Golden Sands.

The various primary business records to substantiate the movement of funds set out in paragraphs [239] – [241] above were in evidence. The only matter to which the Plaintiffs have not referred is that at the time the $671,378.75 was received by A & T Education, its account had an existing credit of $110,171.29. There were a number of debits to the account before the $100,000 was paid (in cash) from A & T Education to Golden Sands and applied to Dennis’ loan account. There was also a $160,000 deposit which was made on the same day that the $334,100 was paid out on 15 September 2016. In my view, the rule in Clayton’s Case should be applied, which I have calculated means $232,832.47 of the funds from the refund by Bingemann can be attributed to Dennis. The parties are at liberty to check this calculation and, if they wish, address on the application of the rule.

Insofar as the question of knowledge is concerned, given the Court’s findings about the knowledge of the Active Defendants, the Court is satisfied that Dennis would have been aware of the source of the funds being credited to his loan account. His liability does not depend upon him being aware of the precise sum. The Court finds Dennis is liable to Haiye for monies had and received in the sum of $232,832.47 (subject to the liberty reserved to the parties in the preceding paragraph as to how that sum has been calculated).

As for the Plaintiffs’ claim against CBC, it was undisputed that the sums of $25,000 and $534,500 were transferred from Red Horizon to CBC. It was also undisputed that those funds were provided by Haiye to Citywide Property Group, who thereafter transferred those funds to Red Horizon. The flow of funds from Haiye to CBC is thus undoubted.

The Plaintiffs nevertheless face the challenge of proving that CBC knew, or ought to have known, of its receipt and/or possession or control of the funds and the circumstances from which the funds derived. Although Mr Varvaris had a connection to CBC, it is unclear what that connection was. He did not (nor does he now) hold office with CBC, nor was he a shareholder in that company. The Plaintiffs nevertheless plead that CBC had the requisite knowledge by reason of the following matters, all of which require an inference of knowledge to be drawn by the Court:

The matters recited in the preceding paragraph are circumstantial. They are insufficient for the Court to reach a state of actual satisfaction on the balance of probabilities that CBC, through Mr Michael, had actual knowledge or ought to have known of the unauthorised derivation of the funds at the time of their receipt or while CBC had possession or control of those funds. The Plaintiffs’ claim against CBC fails for want of proof.

As the Plaintiffs are not entitled to equitable relief, there is no need for the Court to consider the parties’ submissions addressing the doctrine of unclean hands.

The parties will be given an opportunity to agree short minutes to give effect to these reasons, including as to costs. Subject to any special applications, costs should follow the event.