Lin v Zheng

BELL CJ: I agree with the reasons of Payne JA and the orders his Honour proposes.

PAYNE JA: The appellant, Mr Lin, seeks leave to appeal from the orders made by Black J in Quantum Investments (Aust) Pty Ltd & Ors v Zhi Wei Lin trading as Jack Lin (No 2) [2022] NSWSC 1558 (“the No 2 judgment”), which quantified the amount the successful plaintiffs were entitled to recover for the reasons given in Quantum Investments (Aust) Pty Ltd & Ors v Zhi Wei Lin trading as Jack Lin [2022] NSWSC 1387 (“the principal judgment”). The application for leave to appeal was heard concurrently with the appeal.

The proceedings arose from four loans made in connection with a residential development at Turramurra (“the Turramurra Project”). The first (Mr Zheng), second (Ms Luo), third (Dr Wang), fourth (Ms Qian) and fifth (Moral Success Developments Ltd (“MSD”)) respondents and the third plaintiff below (Mr Shen) (together, “the Lenders”) advanced funds as a loan on an unsecured basis to Mr Lin’s company, Quantum Investments (Aust) Pty Ltd (“Quantum”), for the purchase and development of land at Turramurra as a residential apartment building. Quantum agreed to pay the respondents interest at the rate of 20% per annum. Quantum on-lent the funds on an unsecured basis to a developer, MV Golden Destiny Development (Turramurra) Pty Ltd (“the Developer”), to conduct the Turramurra Project. The Developer agreed to pay Quantum interest at a rate of 30% per annum. Quantum was not repaid in full by the Developer and Quantum did not repay the Lenders in full.

The Lenders sued Mr Lin to recover their shortfall, alleging that they had been induced to make their loans to Quantum by misleading or deceptive conduct engaged in by Mr Lin, which was relied upon by the Lenders to their detriment. The Lenders claimed damages or compensation and consequential orders against Mr Lin.

On 14 October 2022, the primary judge delivered the principal judgment, finding that all of the Lenders were successful, except for the third plaintiff, Mr Shen. Mr Shen failed as the statement made by Mr Lin upon which he relied was not made until after Mr Shen had made his payment to Quantum. Mr Shen did not identify any basis on which a statement made after the event caused relevant loss to him. No appeal was brought by Mr Shen.

The proceedings had been dismissed at the commencement of the hearing in respect of the first, seventh, eighth and tenth plaintiffs, who failed to appear. As the successful plaintiffs had not properly quantified their loss, his Honour granted the parties leave to file further evidence and make submissions about that issue. On 15 November 2022, the primary judge made the following orders in the No 2 judgment:

A deal of unnecessary complexity was introduced to this case by the large number of separate meanings attributed by the pleadings to reasonably clear words spoken on only a few occasions by Mr Lin. Despite in each case a reasonably short conversation being the substance of the alleged misleading or deceptive conduct, separate meanings were pleaded as follows:

The focus of this appeal was the Guaranteed Repayment Representation and the Second Guaranteed Repayment Representation which the primary judge found were established on the evidence in relation to all of the Lenders. The primary judge found at [116] of the principal judgment that the Guaranteed Repayment Representation and the Second Guaranteed Repayment Representation referred to a “guarantee” in the sense of an assurance of repayment. His Honour found that the representation was of a more general character than the Guarantee Representation, which was to the effect that Mr Lin personally guaranteed Quantum’s liability under loans made by the Lenders to it. The primary judge found that on the correct construction of Mr Lin’s conduct, the Guarantee Representation was established in relation to Dr Wang and Ms Qian and MSD, but not Mr Zheng or Ms Luo. The Lenders’ case in relation to the Security Representation, the No Risk Representation and the Low Risk Representation failed and no cross-appeal was brought by the Lenders.

The primary judge found, at [121], that both the Guaranteed Repayment Representation and the Second Guaranteed Repayment Representation were established by Mr Zheng, Ms Luo, Dr Wang and Ms Qian and MSD. The primary judge held that these representations were misleading or deceptive as there was no proper basis for Mr Lin to provide any assurance that the Lenders would be repaid.

In relation to Mr Zheng, the primary judge found that Mr Lin had made the Guaranteed Repayment Representation and the Second Guaranteed Repayment Representation by saying to Mr Zheng words to the effect of “[w]e guarantee 20% interest per year” and “guarantee to return your money” after the two year and six month period for which it was required. His Honour determined that the additional evidence on which Mr Zheng also relied, namely representations that “my money will be secure because of the value of the land” and his belief that “I would really make a lot of money", did not support the alleged representations.

In relation to Ms Luo, her case was built on Mr He’s evidence of things said to him by Mr Zheng which were conveyed to Ms Luo with Mr Lin’s authority. The primary judge accepted that Mr He was told by Mr Zheng that Mr Lin would pay back the funds advanced, which the primary judge accepted established the Guaranteed Repayment Representation and the Second Guaranteed Repayment Representation, where Mr Zheng’s statement was “consistent with the representation made by Mr Lin to Mr Zheng with the apparent intent that he convey it to other Lenders”. His Honour was not convinced that Mr He’s evidence of a guarantee of the “return” (or interest) rather than the principal, relayed by Mr Zheng, supported Ms Luo’s Guarantee Representation claim.

Dr Wang and Ms Qian relied on Dr Wang’s evidence, which the primary judge accepted, that Mr Lin referred in July 2014 to a guarantee that Dr Wang and Ms Qian would get their money back, referring to other properties that he owned to support that guarantee. This statement established that the Guaranteed Repayment Representation and Second Guaranteed Repayment Representation were made.

The primary judge also accepted, albeit hesitantly, that a statement was made by Mr Lin through Mr Xu to MSD to the following effect:

The primary judge held that thereby the Guaranteed Repayment Representation and Second Guaranteed Repayment Representation were made.

The primary judge concluded that none of the Lenders established that the Security Representation was made. No party to the appeal sought to agitate any issue relevant to these findings.

The primary judge found that the No Risk Representation and the Low Risk Representation were made but was not satisfied that causation had been established. As this matter was close to the heart of the appellant’s submissions in this Court, I will set out the primary judge’s reasons in a little detail.

His Honour found that Quantum’s (or Mr Lin’s) capacity to repay the loans would likely be affected by the failure of the Turramurra Project and noted the discussion on this subject in Dawson v LNG Holdings [2008] NSWSC 137 which concerned an investment promising “marginally higher returns” than the interest rate of 20% per annum which Quantum agreed to pay the respondents. His Honour concluded that:

His Honour outlined a number of factors at [126] which caused him to reject the submission that the Lenders could have understood that the loan was without risk or had minimal risk:

The primary judge accepted the evidence of Dr Wang that Mr Lin said to Dr Wang and Ms Qian words to the following effect:

His Honour also accepted Dr Wang’s evidence that after reading a loan agreement document he and Ms Qian received from Mr Lin, he and Mr Lin had a conversation to the following effect:

MSD relied on Mr Xu’s evidence that Mr Lin relevantly told him “I will bear all of the economic and legal risks involved in the project” and “… there is no risk for you to get repaid. I will be responsible for all risks in the Turramurra [P]roject”. The primary judge accepted that a representation of this general character was made to MSD through Mr Xu, which at least amounted to Mr Lin accepting that he was responsible for the repayment of a loan made by MSD to Quantum.

On these bases, the primary judge found that the Guarantee Representation had been made by Mr Lin to Dr Wang and Ms Qian and MSD (through Mr Xu), but not to the other Lenders. The Guarantee Representation was a continuing representation which was made about a future matter without a reasonable basis.

The primary judge found that the Guaranteed Repayment Representation and the Second Guaranteed Repayment Representation were a cause of the Lenders advancing money to Quantum for the Turramurra Project. The representations made by Mr Lin were calculated to induce investment in the Turramurra Project and likely would have done so. The primary judge also found that the Lenders to whom the Guarantee Representation was made, Dr Wang and Ms Qian and MSD, could reasonably rely on those representations.

Mr Zheng, Ms Luo, Dr Wang and Ms Qian and MSD succeeded in establishing their claims on a “no transaction” basis. Mr Zheng admitted he received $131,257.83 from Quantum, Ms Luo admitted she received $109,381.52 from Quantum, Dr Wang and Ms Qian admitted they received $54,690.76 from Quantum, and MSD admitted that it received $54,690.76 from Quantum. His Honour explained that those amounts established the minimum amounts by which judgment in favour of Mr Zheng, Ms Luo, Dr Wang and Ms Qian and MSD should be reduced, but did not allow the amount of the judgment in their favour to be determined. His Honour gave Mr Zheng, Ms Luo, Dr Wang and Ms Qian and MSD an opportunity to establish that those were also the maximum amounts they received, and hence the maximum amounts to be deducted from their judgments.

The primary judge addressed quantification in the No 2 judgment and made the orders set out at [6] above.

By grounds 1 and 2, which concerned the judgment in favour of Mr Zheng, the appellant contends:

The appellant submitted that the primary judge erred in treating the Guaranteed Repayment Representation and the Second Guaranteed Repayment Representation as conveying that Mr Lin was personally assuming the risk that the outcome of the Turramurra Project would not be achieved. It was submitted that the evidence on which the primary judge based his finding at [111] that the Guaranteed Repayment Representation and the Second Guaranteed Repayment Representation had been made by Mr Lin to Mr Zheng was the evidence of the conversation at [11] of Mr Zheng’s affidavit dated 28 May 2021. That evidence, the acceptance of which is not challenged by the appellant, was:

It was submitted by the appellant that the evidence that Mr Lin said “[w]e guarantee you 20% interest per year” and “guarantee to return your money” after the 2 year 6 month period (which his Honour referred to at [111]) must be considered in its context. That answer was a response to Mr Lin’s question, “How much money can be made from this project?”. In that context, Mr Lin submitted that the answer did not convey that he was assuming any personal responsibility to meet the obligations of Quantum, since neither the question nor the answer was concerned with that topic at all. Although the word “guarantee” was used by Mr Lin, he submitted that in the context it did not convey anything more than a “promise”, in the same way that any borrower promises to repay.

Counsel for the appellant (on appeal but not at the trial), Mr Lawrance SC, submitted that the critical question was what the words spoken by Mr Lin conveyed. He submitted that Mr Lin used the word “guarantee” simply to convey an assurance that Mr Zheng would get his money back, rather than giving a personal undertaking to pay that money himself. This, the appellant submitted, was demonstrated by Mr Lin’s assurance that there was no risk because of the land, rather than because of any personal undertaking given by Mr Lin. The appellant submitted that the statement by Mr Lin that he “will be running the whole project” also merely conveyed that Mr Lin was involved in the project and that Mr Zheng would get his money back from the borrower. Again, it was submitted that this did not convey that Mr Lin was assuming a personal obligation to guarantee the repayment of the money. Mr Lawrance SC also submitted that at the time the relevant monies were advanced by Mr Zheng, he was aware that he was advancing them to a company, Quantum, rather than to Mr Lin personally.

The respondent submitted that the meaning ascribed to the words spoken by Mr Lin by the primary judge was correct. It was submitted that the context strengthens the primary judge’s conclusion as Mr Zheng’s question was directed to the financial benefit of entering the transaction and Mr Lin’s response was aimed at inducing Mr Zheng to do so, by providing a promise that the money would be returned.

Conduct is misleading or deceptive or likely to mislead or deceive if it has a tendency to lead a person into error: Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640; [2013] HCA 54 at [39] (French CJ, Crennan, Bell and Keane JJ). It is not necessary for a plaintiff to establish that a person engaging in misleading or deceptive conduct intended to mislead or deceive. The relevant question is whether, viewed objectively, the relevant conduct was misleading or deceptive or likely to mislead or deceive: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191; [1982] HCA 44 at 197 per Gibbs CJ, 216 per Brennan J.

Conduct is likely to mislead or deceive if there is a real and not remote chance or possibility that a person is likely to be misled or deceived, and this is so even though the possibility of that occurring is less than 50 per cent: Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60 at [112] per McHugh J.

In Butcher at [109] (followed by a majority of the High Court in Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 at [102]) McHugh J said:

Section 4 of the Competition and Consumer Act 2010 (Cth) sch 2 – Australian Consumer Law (ACL) derives from s 51A of the predecessor to the ACL, the Trade Practices Act 1974 (Cth). Section 4 applies where a representation is made and that representation is with respect to a “future matter”. As such, it places an evidential burden on the person who made the relevant representation to adduce evidence that there were reasonable grounds for making it. The term “future matter” is not defined in the ACL. Whether a statement related to a future matter depends upon the words used and the context in which they were used: Digi-Tech (Australia) Ltd v Brand [2004] NSWCA 58; (2004) 62 IPR 184 at [99]-[102]; Australian Competition and Consumer Commission v Woolworths Group Ltd (2020) 281 FCR 108; [2020] FCAFC 162. A representation will only be with respect to a future matter if it is in the nature of a promise, forecast, prediction or other like statement about something that will only transpire in the future.

A statement of what the representor believes a future position will be may be a representation with respect to a future matter even if it implies a representation as to the representor’s state of mind, depending on the words used and the context: Digi-Tech at [99]; Sykes v Reserve Bank of Australia (1998) 88 FCR 511; [1998] FCA 1405.

There will not be 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 and Consumer Commission v Dateline Imports Pty Ltd (2015) 161 FCR 513; [2015] FCAFC 114 at [100]. The fact that a representor may believe in a particular state of affairs does not necessarily mean that there are reasonable grounds for that belief: Cummings v Lewis (1993) 41 FCR 559; [1993] FCA 190. Reasonable grounds for making a representation about a person’s intention in relation to a future matter involve both an intention to perform the representation and an ability to perform it: Awad v Twin Creeks Properties Pty Ltd [2012] NSWCA 200; see also HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640; [2004] HCA 54 at [13], referring with approval to Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217 at 238-239 and 240-241 per Ormiston J.

There was no challenge to the primary judge’s finding that the following statement was made by Mr Lin to Mr Zheng:

The pleading as it related to the words spoken by Mr Lin was unnecessarily complex. The characterisation question raised by the appellant in ground 1 took advantage of confusion introduced by an overly elaborate Second Further Amended Commercial List Statement which identified multiple “representations” said to have been made in the same short conversation. Mr Zheng failed in his claim that the Guarantee Representation was made in that short conversation. That is, the primary judge did not accept that Mr Lin had personally guaranteed to repay Quantum’s liability, in the sense of providing a surety for the loan, under loans made by Mr Zheng to Quantum.

It may be accepted that the Guaranteed Repayment Representation and the Second Guaranteed Repayment Representation did not contain a promise by Mr Lin personally to guarantee to repay Quantum’s liability under loans made by Mr Zheng to it. That, however, is not the relevant question. As the primary judge correctly found, Mr Lin provided Mr Zheng with a guarantee, in the sense of an assurance, that he would be repaid by Quantum. That was a statement about a future matter. Mr Lin did not seek to demonstrate that he had reasonable grounds for making that statement. Mr Lin’s case before the primary judge was that the statements attributed to him by Mr Zheng were not made by him.

The fact that Mr Lin gave this assurance to Mr Zheng meant that, if causation could be established, Mr Lin was liable to pay damages to Mr Zheng for loss and damage suffered “by” Mr Lin’s conduct. The fact that Mr Zheng failed to prove that Mr Lin personally agreed to provide a surety for the loan is of no consequence. A person may be liable to pay damages to another if the first person engages in misleading or deceptive conduct about a loan to a third party and the second person relies on that conduct to his or her detriment by making that loan. It is not a necessary element of liability that the person engaging in the misleading or deceptive conduct personally provided a guarantee of repayment by the third party, in the sense of providing a surety. The absence of a promise by Mr Lin to provide a surety here does not affect the primary judge’s conclusion about the correct characterisation of the representation made by Mr Lin to Mr Zheng.

In many ways this is a straightforward case. The appellant did not challenge the finding that Mr Lin told Mr Zheng that “[w]e guarantee you 20% interest per year” and “guarantee to return your money after” the two year and six month period for which it was required. The representation, in terms, contained a statement or assurance by Mr Lin about a future matter, that Mr Zheng would be repaid the loan amount plus interest. Mr Lin bore the onus of demonstrating that he had reasonable grounds to make that statement or give that assurance. That, he failed to do. In context, the words spoken by Mr Lin in response to Mr Zheng’s question, “How much money can be made from this project?”, also conveyed a meaning of a promise or assurance of payment of the principal and interest, rather than a promise by Mr Lin to meet the obligations of Quantum. It was, however, a statement or assurance about a future matter. Mr Lin failed to prove that he had reasonable grounds for making that statement or assurance about a future matter. The Guaranteed Repayment Representation and the Second Guaranteed Repayment Representation were misleading or deceptive representations.

The focus of this ground of appeal was the submission that the pleaded representations should be understood as alleging that Mr Lin was personally guaranteeing repayment, in the sense of providing a surety. The fact that this submission could be advanced by the appellant rather highlights the unnecessary complexity of the pleading. I do not accept that the pleading of the Guaranteed Repayment Representation and the Second Guaranteed Repayment Representation asserted, or that the primary judge accepted, that Mr Lin was personally assuming the risk, in the sense of providing a surety. There is a difference of substance between a promise to provide a contract of surety, the subject of the Guarantee Representation, and a simple assurance with respect to a future matter, that the funds advanced to Quantum would be repaid, which was the subject of the Guaranteed Repayment Representation and the Second Guaranteed Repayment Representation.

It is not a matter, as the appellant submitted, of whether, in making the Guaranteed Repayment Representation and the Second Guaranteed Repayment Representation, Mr Lin accepted personal responsibility or not. It may be accepted that at the time the relevant monies were advanced by Mr Zheng, he was aware that he was advancing them to a company, Quantum, rather than to Mr Lin personally. This does not avail Mr Lin. The statutory norm provides that a person “must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive”. The primary judge was correct to find that the Guaranteed Repayment Representation and the Second Guaranteed Repayment Representation were made by Mr Lin and that they were misleading or deceptive.

I would reject ground 1 of the appeal.

Ground 2 concerns the finding of causation made by the primary judge at [127]:

The appellant submitted that the primary judge erred in concluding that the Guaranteed Repayment Representation and the Second Guaranteed Repayment Representation were a cause of Mr Zheng making a loan to Quantum. It was submitted that the No Risk Representation and the Low Risk Representation were materially the same as the Guaranteed Repayment Representation and the Second Guaranteed Repayment Representation. It was submitted that those representations all concerned the probability that the Lenders would get their money back. It was submitted that it was glaringly improbable that the respondents had relied on the Guaranteed Repayment Representation and the Second Guaranteed Repayment Representation when they were found by the primary judge not to have relied on the No Risk Representation and the Low Risk Representation, which were substantially the same.

The appellant further submitted that his Honour’s finding of causation in relation to Mr Zheng at [127] was not based on Mr Zheng’s evidence, but was instead based solely on inferences drawn from the nature of the Guaranteed Repayment Representation and the Second Guaranteed Repayment Representation. It was said to be significant that Mr Zheng did not give evidence that he entered that loan because of a belief that Mr Lin was assuming some form of personal responsibility in respect of it. He did however give evidence that he was aware he was paying money to Quantum.

The respondents submitted that there was nothing glaringly improbable in the finding of reliance in relation to the Guaranteed Repayment Representations but not in relation to the No or Low Risk Representations. The flaw in the appellant’s argument in relation to ground 2, the respondents said, is its premise that the different representations were substantially the same. The Guaranteed Repayment Representations conveyed an assurance of repayment in the event of the project’s failure, whereas the No or Low Risk Representations conveyed that the project had no or a low risk of failure.

The primary judge acted upon the well-known principles regarding reliance explained in Gould v Vaggelas (1984) 157 CLR 215; [1984] HCA 68 at 236:

What must be established is a causal connection between the alleged representations and the loss for which they seek compensation: Wardley Australia Ltd v Western Australia (1992) 175 CLR 514; [1992] HCA 55 at 525–526; Henville v Walker (2001) 206 CLR 459; [2001] HCA 52 at 469–470 [17] (Gleeson CJ), 480 [61] (Gaudron J), 488–489 [94] (McHugh J with whom Gummow J agreed) and 508–509 [159]–[160] (Hayne J with whom Gummow J agreed). In a claim for misleading or deceptive conduct constituted by representations, acts done by the person to whom the representation was made in reliance upon the misrepresentation will “constitute a sufficient connexion to satisfy the concept of causation”: Wardley at 525.

A material representation, in the sense of a representation that is “objectively likely” to act as an inducement to act in a particular way, will be a cause of the relevant loss or damage if it contributed to the loss or damage in some way, even if “other factors or conditions … played an even more significant role in producing the loss or damage”: Henville at 493 [106] (McHugh J, with whom Gummow J agreed), 509 [163] (Hayne J, with whom Gummow J also agreed).

In an appropriate case, reliance may be inferred: Hanave Pty Ltd v LFOT Pty Ltd [1999] FCA 357; (1999) 43 IPR 545 at [11] per Wilcox J, and at [45] per Kiefel J.

The principles stated at 236 of Gould v Vaggelas do not provide an exhaustive rule but may be used as a guide. Gould v Vaggelas has been followed on numerous occasions in the High Court as an appropriate guide to form a conclusion about causation under s 18 of the ACL and its predecessor, s 52 of the Trade Practices Act. In Berry v CCL Secure Pty Ltd [2020] HCA 27; (2020) 271 CLR 151 Bell, Keane and Nettle JJ stated:

Having regard to these principles, the primary judge correctly concluded that the Guaranteed Repayment Representations conveyed an assurance of repayment in the event of the Turramurra Project’s failure, a future matter. The No and Low Risk Representations conveyed a statement of present fact or opinion that that the Turramurra Project had, present tense, no risk or a low risk of failure. They were quite different representations.

In rejecting Mr Zheng’s contention that he had had suffered loss or damage by the conduct of Mr Lin, his Honour did not accept that Mr Zheng could reasonably rely on the No or Low Risk Representations. By contrast, the primary judge found that Mr Zheng could reasonably rely on the Guaranteed Repayment Representation and the Second Guaranteed Repayment Representation. No error has been shown in the conclusion of the primary judge that it was reasonable for Mr Zheng to rely on the Guaranteed Repayment Representation and Second Guaranteed Repayment Representation.

The primary judge correctly found that the nature of the Guaranteed Repayment Representation and Second Guaranteed Repayment Representation did not preclude a finding of actual reliance, as it was not unreasonable to rely upon them. Although there were no explicit findings of subjective reliance, such a conclusion was implicit in his Honour’s findings. It was not necessary for Mr Zheng to give evidence that he understood the legal effect of Mr Lin’s words to be that Mr Lin was assuming personal responsibility to repay the loan. As I have said, that is a mischaracterisation of the Guaranteed Repayment Representations. Mr Zheng gave evidence that he understood that his money was “secure in the land”, which was sufficient to demonstrate subjective reliance. The absence of a formulaic statement of what Mr Zheng relied upon did not preclude his Honour from finding that, in the circumstances, and applying the guidance in Gould v Vaggelas, the correct inference to be drawn was that Mr Lin’s statement had its intended effect of inducing Mr Zheng to enter into the transaction.

Ground 2 should be rejected.

Grounds 3, 4 and 5 relate to Ms Luo. The appellant contends:

By ground 3, the appellant argues that the Guaranteed Repayment Representation and the Second Guaranteed Repayment Representation were not pleaded in relation to Ms Luo. Neither the Further Amended Commercial List Statement nor the Second Further Amended Commercial List Statement alleged that those Representations were made to Ms Luo.

Ms Luo submitted that in the Lenders’ Closing Schedule, which was provided on the last day of the trial after the close of evidence and was to be restricted to the pleaded representations, the Second Guaranteed Repayment Representation was included in the representations relied upon by Ms Luo. In her closing submissions before the primary judge, Ms Luo also submitted that she entered into the agreement with Quantum and advanced funds pursuant to it in reliance on the Second Guaranteed Repayment Representation.

The appellant submitted that because this was not a case where the proceedings, with the acquiescence of the parties, travelled beyond the pleaded issues, the Guaranteed Repayment Representation and the Second Guaranteed Repayment Representation should not have been included as a representation forming part of Ms Luo’s case and his Honour should not have entertained that case.

Although the conversation relied upon by Ms Luo was pleaded, it is correct, no doubt by error in cross-referencing the overly complicated “representations” said to have arisen from that conversation, that the Guaranteed Repayment Representation and the Second Guaranteed Repayment Representation were not alleged by Ms Luo. It is clear, however, that both parties approached the case at trial on the basis that, at least, the Second Guaranteed Repayment Representation had been made to Ms Luo.

In a case such as the present, it is necessary to look at the actual conduct of the proceedings to see whether a point was or was not taken at trial: Water Board v Moustakas (1988) 180 CLR 491; [1988] HCA 12 at 497. As I have said, the pleading refers to the evidence of Ms Luo, built on Mr He’s evidence of things said to him by Mr Zheng which were conveyed to Ms Luo with Mr Lin’s authority. The primary judge accepted that Mr He was told by Mr Zheng that Mr Lin would pay him back, which the primary judge accepted established the Guaranteed Repayment Representations. Mr Zheng’s statement to Mr He was “consistent with the representation made by Mr Lin to Mr Zheng with the apparent intent that he convey it to other Lenders”.

I have concluded that the parties fought the case before the primary judge on the basis that his Honour should entertain, at least, Ms Luo’s Second Guaranteed Repayment Representation case. That case was addressed in the Lenders’ Closing Schedule and in Ms Luo’s closing submissions. No objection to Ms Luo advancing the Second Guaranteed Repayment Representation case was taken at the hearing. On appeal, no prejudice in the primary judge considering Ms Luo’s Second Guaranteed Repayment Representation case was identified. The absence of prejudice is unsurprising in light of the appellant’s submission to this Court that the various representations on which the Lenders relied were substantially the same. Ms Luo’s claim was in a sense derivative of the claim made by Mr Zheng as it was his statements to Mr He, made with Mr Lin’s authority, which formed the basis of Ms Luo’s claim. On the actual conduct of the case before the primary judge the parties addressed Ms Luo’s Second Guaranteed Repayment Representation case. There was no error in the primary judge addressing an issue the parties asked to him to decide.

I would reject ground 3.

The judgment in favour of Ms Luo depends upon the finding that Mr Lin’s statement at [11] of Mr Zheng’s affidavit dated 28 May 2021 conveyed the Second Guaranteed Repayment Representation. That is the subject of ground 1, which, by ground 4, the appellant also relies on against Ms Luo.

For the same reasons I have rejected ground 1, I would reject ground 4.

In relation to ground 5, the appellant relied on the same arguments made in support of ground 2. That is because the primary judge’s reasoning supporting the conclusion that the Second Guaranteed Repayment Representation was a cause of Ms Luo’s loss is the same reasoning by which his Honour concluded that the Second Guaranteed Repayment Representation had caused Mr Zheng loss. The appellant submitted that the primary judge made the same error as it identified in ground 2.

For the same reasons I have rejected ground 2, I would reject ground 5.

Grounds 6 and 7 of the appeal concern Dr Wang and Ms Qian. By grounds 6 and 7, the appellant contends:

The appellant submitted that the primary judge erred by not addressing the evidence of Dr Wang and Ms Qian, who were both proficient in English, that they had read and understood that the loan agreement and draft loan agreement did not contain a guarantee. The appellant made a derivative argument that those matters supported the conclusion that the Guarantee Representation had not been made or that they had not relied on that representation. It was submitted that the primary judge did not address the argument that it was implausible in the circumstances that Dr Wang would have signed the loan agreement, which omitted to mention the alleged guarantee, and would have kept no documentary record of an oral guarantee. The primary judge also did not refer to the evidence that the only change to the draft loan document that Dr Wang requested (after discussing the matter with Ms Qian) was to change their address. That evidence was one of the main reasons advanced by the appellant for why the evidence of the conversation recorded at [50] of the primary judgment should not be accepted and was important or critical to the determination of an issue in dispute. Accordingly, he submitted that his Honour’s failure to deal with it constituted a failure to give adequate reasons.

Ground 6 is an attack framed as being about inadequate reasons. In truth, it is a collateral attack on the primary judge's factual findings that Mr Lin made the Guarantee Representation and the Guaranteed Repayment Representations and that Dr Wang and Ms Qian relied upon those representations. The attack against those factual findings is not made directly, no doubt because the obstacles identified in Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 could not be overcome. The complaint is framed as being that the primary judge did not give specific reasons rejecting the appellant's submissions about the importance of the fact that the draft loan agreement nor the final version contained a guarantee.

The quality and detail of reasons necessary to be regarded as adequate was summarised by Bell P in New South Wales Land and Housing Corporation v Orr (2019) 100 NSWLR 578; [2019] NSWCA 231 at [65]-[68]:

I would reject ground 6(a), which asserts a failure to provide adequate reasons for the finding that the Guarantee Representation was made.

The primary judge found that Mr Lin said to Dr Wang:

The primary judge found that Dr Wang and Ms Qian then decided to lend Quantum $500,000 towards the Turramurra Project. After receiving a loan agreement from Mr Lin and raising with him why it had no guarantor, the primary judge accepted Dr Wang’s evidence was that Mr Lin responded:

The primary judge found that, in context, this reference to a “guarantee” did amount to a representation that Mr Lin personally guaranteed repayment of the loan and that Mr Lin would pay Dr Wang out if Quantum did not do so. Dr Wang gave the following unchallenged evidence of his understanding of what he had been told at [30] of his affidavit:

The contest at trial was whether Mr Lin said the words Dr Wang attributed to him. The primary judge found that the conversations occurred in the terms Dr Wang gave evidence about. The task of the primary judge was then to characterise that conduct and decide, relevantly, whether the Guarantee Representation arose, in context, from what Mr Lin had said. The primary judge engaged in that task. His Honour considered all of the evidence presented to him and made findings about what had been said by Mr Lin. His Honour then characterised what was said as amounting to a representation in the terms of the pleaded Guarantee Representation. The primary judge’s conclusion was that what had been said by Mr Lin, in context, amounted to a representation that Mr Lin was a guarantor of Quantum’s liability to Dr Wang and Ms Qian. In the context of the issues presented to his Honour for determination, the reasons given achieved the minimum acceptable standard. I would reject ground 6(a).

Ground 6(b) is essentially the same complaint as ground 6(a), that the primary judge erred in failing to give adequate reasons in respect of his finding that Mr Lin made the Guaranteed Repayment Representations to Dr Wang. The issue at the trial was the content of the conversation between Mr Lin and Dr Wang. His Honour addressed that contest at length and gave extensive reasons for his conclusion preferring Dr Wang’s evidence. No further reasons were required. The primary judge’s conclusion was what had been said by Mr Lin, in context, amounted to a representation that the Guaranteed Repayment Representation had been made. No more elaborate or detailed reasons were required supporting that construction of what his Honour found had been said. Ground 6(b) should be rejected.

Ground 6(c) complains about an absence of adequate reasons for the primary judge’s conclusion that the Guarantee Representation was a cause of Dr Wang and Ms Qian’s loss. Far from ignoring the evidence that Dr Wang had a degree of financial sophistication and had read the documentation provided, his Honour made findings at [48]-[50] that:

His Honour addressed all of the factual issues raised for him to determine. His Honour was best placed to decide whether to accept the different versions of the conversations deposed to by Dr Wang and Mr Lin. His Honour accepted Dr Wang was an “honest” witness with a “generally reliable” recollection and preferred his evidence to that of Mr Lin: at [52]. No more elaborate reasons were required for preferring Dr Wang’s evidence to that of Mr Lin. Having found what was said, his Honour’s explanation of reliance was sufficiently reasoned, based as it was on the unchallenged evidence of Dr Wang on his state of mind (see [77] above) and the mode of reasoning described in Gould v Vaggelas. No more elaborate reasons were required. Ground 6(c) should be rejected.

In relation to ground 7, the appellant relies on the arguments made in support of ground 2. He submitted that, having concluded that the No Risk Representation and the Low Risk Representation were not causative of loss, his Honour should have reached the same conclusion in respect of the Guaranteed Repayment Representations, which were substantially the same.

As I have rejected ground 2, I reject ground 7 for essentially the same reasons.

Grounds 8 and 9 concern the judgment in favour of the fifth respondent, MSD. By those grounds, the appellant contends:

The appellant submits that there was evidence that Mr Xu had read a translated version of the loan agreement or a draft of it, or that the loan agreement or draft loan agreement had been translated to him. It would have been apparent from a translation of the loan agreement or the draft loan agreement that it contained no guarantee. Those matters, the appellant submits, suggested that Mr Lin did not make the statements that he would “bear all of the economic and legal risks involved in the project” and that “there is no risk for you to get repaid. I will be responsible for all risks in the Turramurra [P]roject” (which were found to convey the Guarantee Representation and the Guaranteed Repayment Representations). Otherwise, he submits, if those statements were made, then those matters suggested that the representations did not cause Mr Xu to believe that MSD’s loan would be secured by a personal guarantee given by Mr Lin. That argument was made below, although admittedly in more general terms than how the argument was put in relation to Dr Wang and Ms Qian. The failure to address those matters allegedly constituted a failure to give adequate reasons.

Ground 8 is another collateral attack on factual findings, namely, that Mr Lin made the pleaded representations to Mr Xu and that Mr Xu, on behalf of MSD, relied upon those representations. As with ground 6, the attack is not made directly against the factual finding. No doubt this is because of the constraints imposed by the principles in Fox v Percy.

The complaint is framed as being that the primary judge did not give adequate reasons because his Honour did not squarely address the submissions about evidence which "tended to suggest” a different factual scenario than that found by the primary judge.

As Mr Lawrance SC accepted in his written submissions on appeal, no specific submissions were put below, either orally or in writing, in relation to this evidence concerning Mr Xu. The appellant submitted that the relevant argument “was put in more general terms in relation to all of the respondents”. He pointed to the following submissions put at the hearing below by counsel then appearing for Mr Lin:

None of these submissions raise for consideration evidence which "tended to suggest” a different factual scenario than that found by the primary judge. The complaint that the primary judge did not give adequate reasons for rejecting evidence which "tended to suggest” a different factual scenario is without substance. There was no error in the primary judge failing to give reasons for rejecting evidence which "tended to suggest” a scenario not put in cross-examination nor the subject of any submission made by Mr Lin.

Ground 8 should be rejected.

In relation to ground 9, the appellant relies on the arguments made in support of ground 2.

I would reject ground 9 for the same reasons given in rejecting ground 2.

During the hearing of the appeal, in response to issues raised by the Court, leave to amend the notice of appeal was sought to amend ground 6 to read as follows (proposed amendments underlined):

Leave to amend should be refused. There is an inconsistency in the evidence read by Dr Wang. That inconsistency was not explored in the evidence below. There are passages in Dr Wang’s evidence which appear to suggest that a decision was made to invest at least part of the money advanced before the critical conversation with Mr Lin took place. Dr Wang was not, however, cross-examined about his evidence at Blue 59 [28] that following the critical conversation with Mr Lin, “My wife and I then decided to loan $500,000 towards the Turramurra Project” (emphasis added). Mr Lin, having elected not to explore the inconsistency in the evidence at trial, cannot fairly raise the matter on appeal.

If the matter had been raised at trial, and Dr Wang confronted about the apparent inconsistency in his evidence, it is likely to have been clarified, one way or the other. Dr Wang lost the opportunity to do that by reason of the forensic decision not to draw attention to this issue at the trial. The point sought to be raised by the proposed amended notice of appeal may have been a good point at the trial, had it been pursued. It was not. Leave to amend the notice of appeal should be refused.

For the foregoing reasons I propose the following orders:

WHITE JA: I agree with Payne JA.