Gan v Xie

1. [1]

   WHITE JA: This is an appeal from orders of the District Court (Gibb DCJ) (Youxian Gan v Eileen Xie (District Court (NSW), 25 February 2022, unrep)).

2. [2]

   The appellant, Ms Gan, was the plaintiff in the proceedings below. The respondent, Ms Eileen Xie, was the defendant. The primary judge gave judgment for the respondent. Ms Gan was ordered to pay Ms Xie’s costs.

3. [3]

   Ms Gan alleged that she was induced by misrepresentations made by Ms Xie to invest $305,150 and RMB805,000 in a pyramid scheme called “MFC”, being an online platform operated by a Malaysian company, MBI International Sdn Bhd. Ms Gan alleged that she invested in the scheme as a result of representations made by Ms Xie that:

4. [4]

   Ms Gan pleaded that these representations were made by Ms Xie to her orally at the Burwood RSL on 29 August 2016 during a meeting at which Ms Wei Yun Liu was present.

5. [5]

   Ms Gan also alleged that Ms Xie participated in a pyramid scheme in contravention of s 44 of the Australian Consumer Law and that, as a result of that contravention, she suffered loss and damage. The acts of participation alleged were confined to the making of the pleaded representations. Ms Gan alleged that the representations made by Ms Xie were made in trade or commerce, were misleading or deceptive, and she suffered loss or damage because of those representations. She also alleged that Ms Xie did not inform her that in order to make money she would need to recruit people to participate in MFC, or that it was a pyramid scheme, and thereby engaged in conduct that was misleading or deceptive.

6. [6]

   It is not disputed that Ms Gan invested her moneys in the MFC scheme, the scheme collapsed and she lost the moneys she invested.

7. [7]

   Ms Gan invested her moneys into the scheme through Ms Xie. She also brought a claim for restitution of unjust enrichment. It was not in issue on appeal that Ms Xie acted as a conduit for Ms Gan’s investment. The claim for restitution of unjust enrichment was not pressed on appeal.

8. [8]

   Section 44 of the Australian Consumer Law (Sch 2 to the Competition and Consumer Act 2010 (Cth)) provides:

9. [9]

   Section 45 provides:

10. [10]

    Sections 44 and 45 are contained in Div 3 of Pt 3.1 in Ch 3 of the Australian Consumer Law. Section 236 provides that a claimant may recover the amount of any loss or damage suffered because of the conduct of another person that contravened a provision of Ch 3 from that person.

11. [11]

    It would be arguable that Ms Xie induced or attempted to induce Ms Gan to invest in MFC. But the Amended Statement of Claim did not allege a contravention of s 44(2). The Amended Statement of Claim alleged that Ms Xie participated in a pyramid scheme in contravention of s 44(1). Ms Xie did participate in MFC, including by acting as a conduit for Ms Gan’s funds. But the pleaded acts of participation were confined to the representations allegedly made by Ms Xie. On the hearing of the appeal, the solicitor who appeared pro bono for Ms Gan, Mr Zhao, confirmed that the trial had been conducted on that basis.

12. [12]

    The primary judge held that none of the representations alleged in the Amended Statement of Claim had been made by Ms Xie. Her Honour held that Ms Gan was an unreliable witness and neither straightforward nor frank. Her Honour rejected Ms Gan’s contention that she relied on statements said to have been made by Ms Xie. Her Honour found that Ms Gan’s decision to invest was informed by what she was told by Ms Liu and not by Ms Xie. Her Honour found that “Anything said or done (or not) by the defendant was not relevantly causal in the plaintiff[s] decision to ‘invest’ her money in the MFC scheme”. Her Honour inferred that if Ms Xie had not been the conduit another would have been found. Her Honour held that the scheme was not a pyramid scheme. She rejected the allegation of misleading conduct by silence on the grounds that recruiting new members was not the only way to make money.

13. [13]

    Grounds 1 and 2 of the Notice of Appeal challenged the primary judge’s finding that MFC was not a pyramid scheme and a ruling in relation to the pleading of that issue.

14. [14]

    Ground 3 of the Notice of Appeal was that the primary judge erred in not finding that Ms Xie participated in a pyramid scheme contrary to s 44(1) of the ACL.

15. [15]

    Ground 4 asserted that the primary judge’s assessment of Ms Gan’s credit and her consequent findings as to causation were infected by four errors, namely:

16. [16]

    Grounds 5, 6, and 7 challenged the primary judge’s rejection of the evidence of two witnesses called by Ms Gan: Ms Zhong Ming Di Si and Ms Jenny Wills. Objection to their evidence was taken at trial on the basis that their evidence was tendency evidence in respect of which no tendency notice had been served and which had no significant probative value. The primary judge did not rule on the objection at trial. The witnesses were cross-examined on the basis that their evidence might be admitted. The primary judge ultimately found their evidence to be inadmissible. Her Honour also found that in any event she would not have accepted their evidence had it been admissible. Ms Gan had submitted that their evidence had significant probative value by demonstrating that Ms Xie had the tendency to promote the MFC platform by making representations to the same or similar effect as those Ms Gan said had been made to her.

17. [17]

    The appellant was represented for most of the trial by solicitors and counsel. The trial lasted for 15 days. On the last day of the trial, the solicitors retained for the appellant advised the primary judge that because the appellant no longer had resources to pay for legal representation, they no longer had instructions to appear. The matter was adjourned but the appeal book does not disclose that there was any appearance by counsel or solicitors for the appellant on the adjourned date.

18. [18]

    I infer that Ms Gan had some pro bono assistance in formulating the grounds of the Notice of Appeal. Mr Zhao appeared pro bono for the appellant on the hearing of the appeal. But the grounds of appeal were not those which would be expected if drafted by competent counsel who was fully briefed.

19. [19]

    The Notice of Appeal did not expressly challenge the primary judge’s findings that none of the alleged representations had been made. Ground 3 asserted that the primary judge ought to have found that Ms Xie participated in a pyramid scheme. The Amended Statement of Claim had alleged that she did so by making the alleged representations. Nonetheless, there was no explicit challenge to the judge’s findings that none of the representations had been made.

20. [20]

    Ground 4 challenged the primary judge’s assessment of Ms Gan’s credit on only three grounds. Ground 4(d) appears to limit the effect of upholding ground 4(a)-(c) to the judge’s finding that Ms Gan would have invested in the scheme in any event. As appears below, there are more fundamental reasons for querying the primary judge’s approach to the assessment of Ms Gan’s credit, including, but not limited to, her rejection of both the admissibility of Ms Wills’ and Ms Di Si’s evidence, and her rejection of that evidence if it were admissible. Their evidence, if accepted, made it more probable that Ms Xie made representations to Ms Gan to the effect she alleged. It would then be relevant to an assessment of Ms Gan’s credibility.

21. [21]

    A successful challenge to the primary judge’s credit findings adverse to Ms Gan would necessarily impugn the reliability of the judge’s findings that none of the representations was made and her Honour’s findings as to lack of reliance.

22. [22]

    The respondent submitted that, because grounds 4 to 7 were not germane to the appellant’s “pyramid scheme” case, and because there was no challenge to the primary judge’s finding that she had not engaged in misleading or deceptive conduct, grounds 4 to 7 went nowhere. Moreover, because the pleaded allegation that the respondent participated in the pyramid scheme was confined to the allegation that she did so by making the alleged representations, none of the grounds of appeal went anywhere.

23. [23]

    The better view is that if the challenges to the primary judge’s credit findings adverse to Ms Gan and her Honour’s rejection of the evidence of Ms Wills and Ms Di Si are set aside, that necessarily impugns her Honour’s ultimate findings that the alleged representations were not made in so far as they were based on her findings about Ms Gan, Ms Wills, and Ms Di Si.

24. [24]

    For the reasons which follow, the primary judge’s finding that the MFC platform was not a pyramid scheme should be set aside. In assessing the credibility of the witnesses, the primary judge had an advantage not enjoyed by this Court. Nonetheless, her Honour’s adverse credit findings should also be set aside. This is not a case where the primary judge’s conclusions based on her credibility findings are contrary to incontrovertible facts, uncontested evidence or compelling inferences (Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [28]-[29]). However, the primary judge palpably misused her advantage as a trial judge. As Basten JA said in Nominal Defendant v Smith [2015] NSWCA 339; (2015) 73 MVR 257 (at [11]):

25. [25]

    Her Honour erred in rejecting the admissibility of the evidence of Ms Di Si and Ms Wills and erred in her assessment of their evidence and Ms Gan’s evidence, by requiring that she be satisfied that they remembered the words Ms Xie spoke, rather than the gist of what she conveyed.

26. [26]

    Regrettably, a new trial is required.

Grounds 1 and 2: MFC was a pyramid scheme

1. [27]

   Ms Xie described how the MFC platform worked. MFC was a membership based system. The members were called “fans”. It was described as a “loyalty membership management system” and “a strictly non-investment program or financial tool”. To join the platform and become a member, a person had to be introduced by an existing member called a “sponsor”. The MFC platform maintained a record of who introduced each new member. Each new member’s account was linked within the MFC structure to the account of the person who introduced the new member. To join the platform and become a member, a person had to purchase “advertising packages” available in US dollars at a cost in different tranches of between $100 and $35,000. The only way of purchasing an advertising package was through the use of MFC virtual currency called “Registered Coin” or “Registered Credit” (“RC”). RC was purchased by new and existing members from their sponsor or, if their sponsor did not have sufficient RC to sell, the sponsor would arrange for another member in the same line above or below the sponsor to sell the RC. An account on the MFC platform was created with each advertising package purchased. Advertising packages related to real advertising space on websites maintained by the promotors of the scheme. Each new member’s account was initially linked to the account of the member who introduced them (the sponsor) or to some other member by agreement with the sponsor. The names of members above the sponsor who introduced the person to the MFC platform were not disclosed.

2. [28]

   Ms Xie deposed that when she joined the platform, she was told that her sponsor would receive a bonus when she opened an account. Ms Xie sponsored a Wendy Xu, who in turn sponsored a Lucy Liu, who in turn sponsored the appellant, Ms Gan.

3. [29]

   Ms Xie described the purchase of advertising packages as being the acquisition of an “atom” in a triangle of seven atoms. Any atom in the triangle would be activated by the purchase of an advertising package for US$5,000. A member could acquire the whole or part of an “atom”. Members could buy parts of an atom or more than one atom. Ms Xie deposed:

4. [30]

   Ms Xie described how RC could be redeemed. She deposed:

5. [31]

   On the respondent’s own description of the scheme, it had the characteristics of a pyramid scheme.

6. [32]

   The MFC platform satisfied the requirement of s 45(1)(a) of the ACL in that it was a scheme in which new participants were required to provide to another participant or participants in the scheme a benefit for the other participant or participants. New participants were required to purchase RC from existing participants in the scheme. This was one of only two ways in which existing participants could convert virtual credits into real money. The other way was by acquiring and then disposing of M Credits. But only 55% of the value put into an M Credit account could be cashed out.

7. [33]

   The primary judge held that it was not established that new participants made a “participation payment” as defined because, in return for the payments made, they received virtual benefits at the designated exchange rate and that the benefits conferred upon other participants were not provided by the new participants, but by the mechanics of the system.

8. [34]

   The primary judge said that the bonuses that flowed to existing members when a new account was opened for a new member were generated by the system itself and formed no part of, nor used, any of the real money that a new participant provided, either directly or indirectly.

9. [35]

   But it is clear that a new member did provide a financial benefit indirectly in the form of a bonus or bonuses to an existing member or members. Even if these were not provided directly “to” an existing participant, they were “for the benefit of the other participant or participants” (s 45(1)(a)). In addition, a new member could only join the scheme by using real money to purchase RC of an existing member. This was one of only two ways in which an existing member could withdraw real money from the scheme. As the primary judge said:

10. [36]

    The provision of real money by a new participant to an existing participant in the scheme by the sale of that participant’s RC provided liquidity to an existing participant who sold the RC.

11. [37]

    In this case, Ms Gan deposed that her first investment of A$60,150, being the then equivalent of US$40,000, was paid to Ms Xie on her understanding that Ms Xie would then make the investment for her. Ms Xie deposed that she did say to Ms Gan that she could pay money to her to buy RC if she wanted to join MFC because she had RC to sell at that time and Ms Gan’s sponsor, Ms Lucy Liu, did not. The primary judge found that in fact the money was not applied in the purchase of RC from Ms Xie. She accepted Ms Xie’s evidence that she did not sell her own RC at the time because she was building up her RC balance at the time and not cashing out. Instead, the payment by Ms Gan was transferred immediately by Ms Xie to another account. The primary judge said:

12. [38]

    But all this means is that, if the RC was not purchased from Ms Xie, it was purchased from some other scheme participant to enable Ms Gan to acquire the advertising packages.

13. [39]

    The primary judge erred in finding that s 45(1)(a) was not satisfied.

14. [40]

    The primary judge also held that s 45(1)(b) was not satisfied because the payments made by new participants were not substantially induced by the prospect held out to them that they would be entitled, in relation to the introduction of further new participants, to be provided with a recruitment payment, that is, a benefit either for themselves or for themselves and others.

15. [41]

    In reaching this conclusion, the primary judge relied on the evidence of Ms Gan, and witnesses called by her, that they did not join the scheme on the basis that they would receive a recruitment payment for the introduction of further new participants. Ms Gan deposed that she was uncomfortable doing sales and Ms Xie assured her that there was another way, being a “static approach” that did not require her to do anything but still make money. Instead of introducing other people, she could simply create more of her own accounts under her own structure and still make money. The primary judge said that Ms Liu’s evidence was much to the same effect.

16. [42]

    Section 45(1) describes the “characteristics” of a scheme which is proscribed as a pyramid scheme. The “characteristics” of a scheme denote the objective features of the scheme. The recruitment of a new member would reward the existing account to which the new account was added by the provision of the New Account Introductory Bonus (and potentially a Balance Bonus and Bonus Bonus) (see [29]). That account would then receive further bonuses if the new account member recruited new participants. Importantly, 70% of those bonuses were credited to the M Credit Account, which could be cashed out.

17. [43]

    The fact that the plaintiff and her witnesses were not attracted by a need to recruit new members does not mean that that was not an objective characteristic of the scheme that would be a substantial inducement to new members. Rather, it indicates that they did not understand the scheme in which they invested.

18. [44]

    There was an issue at trial which is the subject of ground 1 of the Notice of Appeal concerning the pleading of what was said to constitute the pyramid scheme. Ms Gan’s Amended Statement of Claim pleaded the elements of s 45(1)(a) and (b) and provided particulars. After the service of evidence, she sought to amend those particulars in a way which broadly reflected the evidence. Objection was taken to the amendments. The primary judge ruled that she would allow the filing of a Further Amended Statement of Claim but only on condition that the proceeding be adjourned. Ms Gan declined to proceed with the proposed amendment to particulars if that would necessitate an adjournment. She was right to do so. The elements of s 45 were pleaded.

19. [45]

    The features of the scheme that make it a pyramid scheme appear from Ms Xie’s evidence. There was no prejudice to her by Ms Gan’s proceeding on the original particulars but having regard to Ms Xie’s own description of the scheme.

20. [46]

    For these reasons, contrary to the conclusion of the primary judge, the scheme in which Ms Gan invested was a pyramid scheme.

Ground 3: Section 44(1): Ms Xie’s participation in a pyramid scheme

1. [47]

   Ms Xie participated in the scheme. She deposed that in April 2015 she joined MFC. She invested in the scheme herself, but her own investment in the scheme could not be causative of loss to Ms Gan. Ms Xie deposed that she believed that Ms Gan understood what was entailed in investment in MFC and the risks involved in that investment. She deposed that she went out of her way to teach Ms Gan how to navigate her own way on the MFC platform and to assist her and answer her queries every time she contacted her, which Ms Gan did frequently between August 2016 and 31 December 2016.

2. [48]

   Ms Xie deposed that she told Ms Gan that MFC was not risk free and that Ms Gan should only invest money in MFC that she could face losing without affecting her lifestyle and living standards. When Ms Gan was prepared to invest US$40,000 in MFC (which Ms Xie said was a sum of Ms Gan’s choosing) she told Ms Gan that she could pay the money to her to buy RC if she wanted to join MFC. This was because she had RC to sell at the time and Ms Gan’s sponsor, Ms Liu, did not. She agreed to manage Ms Gan’s accounts initially until Ms Gan was confident to do it herself. Ms Xie deposed that Ms Gan specified to her amounts that she wanted to send to open accounts for various members of her family and sent her their identification details. Ms Xie set up for Ms Gan accounts both for Ms Gan’s initial investment, and for an investment of a further US$80,000 on 24 September 2016.

3. [49]

   It is admitted on the pleadings that Ms Gan deposited the following sums on the following dates to Ms Xie’s bank account for the purpose of assisting Ms Gan to open accounts with MFC at Ms Gan’s request:

4. [50]

   Whether or not this would be enough to establish Ms Xie’s participation in the scheme within the meaning of s 44(1) is not a question which arises, having regard to the limited basis on which that allegation was advanced at trial.

Ms Gan’s and Ms Xie’s evidence

1. [51]

   All of the persons involved were of Chinese ethnicity and their conversations were in Mandarin. Ms Gan employed Zhang Shijing Lawyers as her solicitors, evidently also of Chinese ethnicity. Her affidavit was in English. A certified interpreter, Mr Nan Xia, deposed that he sight-translated the affidavit to Ms Gan in Mandarin, and she informed the person responsible for the preparation of the affidavit, through him, that she understood his interpretation and agreed with the contents of the affidavit. The affidavit was then affirmed.

2. [52]

   Ms Gan deposed that Mandarin was her first language and that she could not speak English very well, and that the affidavit had been prepared with the aid of an interpreter. Her affidavit was admitted subject to rulings on particular paragraphs that were rejected on the grounds of hearsay, relevance or opinion about which no issue is raised on the appeal. She deposed that she became aware of the MFC platform and the company MBI in about August 2016 through a friend, Ms Lucy Liu. She attended an MFC platform seminar at Parramatta RSL in August 2016 and, after the seminar ended, Ms Liu introduced her to Ms Xie. A lady sitting next to her at the seminar was introduced to her as Ms Wendy Xu. She deposed that Ms Xie told her that the platform was very successful and could make money for everyone. On driving back from the seminar she told Ms Liu that she was not interested in the platform.

3. [53]

   In her affidavit, Ms Xie did not respond to Ms Gan’s evidence that after the seminar at Parramatta, Ms Xie said to her that “the platform is very successful and can make money for everyone”.

4. [54]

   In cross-examination, Ms Gan said that she recalled nothing in particular said by Ms Xie at the Parramatta meeting on 28 August 2016.

5. [55]

   Ms Gan deposed that, on 29 August 2016, Ms Liu invited her to the Burwood RSL which she attended. She saw Ms Xie with Ms Liu. They had lunch and coffee. She deposed that Ms Xie told her that the MFC platform would make “100% money with no risk at all”; that Ms Xie had doubled her money, having invested $500,000, and had bought many real properties; that the company was a legal company; and that she had earned a lot of money by participating in the platform. She said that Ms Xie invited her to visit the company in November and that, if she did visit, she would not have to pay anything except the airfare. She said that Ms Xie represented that there was no risk; that she would get her principal back after one year; that she did not have to do anything but would earn money even while she was sleeping; and that Ms Xie took out a piece of paper and a pen and drew a diagram and said:

6. [56]

   Ms Gan deposed:

7. [57]

   Ms Gan transferred $60,150 to Ms Xie’s account on 31 August 2016. On 29 August 2016 Ms Gan had transferred most of that sum from her mortgage offset account into her joint home loan account.

8. [58]

   The primary judge found that Ms Gan’s movement of money from her mortgage offset account into her joint home loan account demonstrated that she had decided to “invest” on that day, 29 August 2016. Her Honour noted that Ms Gan disavowed any recollection of anything said by Ms Xie on 28 August 2016. Her Honour found that there was no meeting between Ms Xie and Ms Gan on 29 August 2016. Her Honour found that the meeting which Ms Gan deposed had occurred in Burwood on 29 August in fact took place on 31 August 2016. Her Honour said that Ms Gan’s “…assertion of reliance rests upon her having acted on that which the defendant said (or did not say) at Burwood, since the plaintiff disavows any recollection of anything relevant said by the defendant at Parramatta”.

9. [59]

   In her affidavit, Ms Xie did not give an account of what she said to Ms Gan at Parramatta on 28 August 2016. The transcript of Ms Xie’s oral evidence was not included in the appeal papers. But in his submissions at trial, counsel for Ms Xie said that the best available evidence of what Ms Xie said to Ms Gan on 28 August 2016 were two pages of handwritten notes that Ms Xie made and handed to Ms Gan at that meeting. According to the submissions, in her oral evidence, Ms Xie confirmed the notes and that she handed them to Ms Gan. A typed copy of the notes in English translation was tendered. As counsel for Ms Xie submitted, the notes make no reference to MFC being risk free, or that she could withdraw cash at any time, or that Ms Gan would not need to do anything in order to make money. The primary judge quoted and accepted counsel’s submission. But page 2 of the notes includes the following:

10. [60]

    This appears to be corroborative of Ms Gan’s evidence that she was told that whereas a stock may increase or decrease in value, the value of GRC always increased and never decreased (“Only rise, no↓”). It also appears to corroborate Ms Gan’s evidence that Ms Xie said “Sure fire profits. In one year split twice” (“$↑↑↑; 1st batch virtual wealth; 2 distributions/year”).

11. [61]

    The primary judge did not address this. This may have been because no submission was made about it at trial by the appellant’s counsel in final submissions. It may have been because the primary judge regarded it as irrelevant because it referred to what was said at a meeting at Parramatta on 28 August, Ms Gan said she recalled nothing in particular said by Ms Xie on that day, and the primary judge concluded that therefore she did not rely on anything said on that day.

12. [62]

    Ms Gan denied having had any substantial conversation with Ms Xie on 28 August 2016. According to the respondent’s submissions at trial, Ms Liu described a lengthy and detailed discussion by Ms Xie on that date. Ms Liu’s affidavit was not included in the appeal papers.

13. [63]

    The primary judge found that Ms Gan did not rely on anything said by Ms Xie when, on 29 August, she transferred funds from one of her accounts to another in anticipation of making the investment. The primary judge did not address the question of whether Ms Gan might have been wrong about the place and date, but right, or substantially right, about what she was told.

14. [64]

    On the appeal, Mr Zhao submitted that the primary judge wrongly assumed that there were only two meetings between 28 and 31 August 2016, one at Parramatta on 28 August, and the other at the Burwood RSL on 31 August. In her affidavit Ms Gan made no reference to a meeting at the Burwood RSL on 31 August. But text messages clearly indicated that there was such a meeting. Hence, the respondent said, and the primary judge accepted, any inducement by Ms Xie for Ms Gan to invest was given to Ms Gan on or before 29 August. Because there was only one meeting by then (at Parramatta on 28 August) where Ms Gan, on her own evidence, had not made a decision to invest in reliance on anything said by Ms Xie, her investment was not made in reliance on anything said by Ms Xie.

15. [65]

    In response, in her submissions on appeal, Mr Zhao submitted that because it was never put to Ms Gan in cross-examination that no meeting occurred on 29 August, this left open the uncontradicted possibility of three meetings.

16. [66]

    I do not accept this submission. Ms Gan’s own evidence was that there were only two meetings: one on 28 August and the other at Burwood RSL on 29 August. WeChat messages between Ms Xie and Ms Gan established that the second meeting took place on 31 August.

17. [67]

    Ms Gan’s WeChat message on 29 August to Ms Xie “Eileen please send me the URL Link. I’ll try it myself”, is consistent with there having been some substantial discussion on or prior to 29 August between them. Whether that discussion was on 28 August, as would appear to be the case from Ms Xie’s evidence, or 29 August as Ms Gan deposed, should have been neither here nor there.

18. [68]

    The primary judge’s finding that Ms Gan did not rely on anything said to her by Ms Xie, because it should be inferred from the fact that she transferred funds from her mortgage investment account to her joint account on 29 August 2016 and professed no recollection of anything said to her by Ms Xie on 28 August 2016 (coupled with her Honour’s rejection that the meeting at the Burwood RSL took place on 29 August 2016), does not account for the fact that, on 31 August 2016 which, according to Ms Xie, was the date the meeting at the Burwood RSL took place, Ms Gan transferred $60,150 not to Ms Liu, but to Ms Xie. The primary judge found that Ms Gan was motivated to make the payment as a result of representations made to her by Ms Liu, not by representations made by Ms Xie. But that does not explain why the payment was made to Ms Xie, not to Ms Liu, to acquire RC.

19. [69]

    The fact that Ms Gan’s initial payments were made to Ms Xie is highly suggestive that the payments were made after Ms Gan had had one or more conversations with Ms Xie about investments in the MFC scheme, whether those conversations took place on 28, 29, or 31 August 2016. Even if Ms Liu’s representations about the MFC scheme were a material contributing cause of Ms Gan’s decision to invest, the fact that she made her initial investments through Ms Xie is consistent with her evidence that she relied on representations made by Ms Xie in relation to investments in the scheme.

20. [70]

    The assessment of the parties’ credit was complicated by the fact that the plaintiff’s witnesses’ evidence was given in Mandarin and interpreted. The primary judge was critical of the interpreter, saying that the interpreter was “involved” with most of the plaintiff’s witnesses and took an “active role” in the course of interpreting their evidence. The trial was conducted by audiovisual link and the transcript reveals many failures of the AV link.

21. [71]

    Ground 4(b) asserts that the primary judge erred in finding that at times the interpreter took an active role in the course of interpreting. It appears from the transcript that the primary judge was unnecessarily brusque in her exchanges with the interpreter and wrongly asserted that the interpreter was not properly carrying out her role. For example, there was the following exchange:

22. [72]

    The primary judge appears not to have allowed the interpreter to explain the difficulty that the witness said yes to whether she made a choice, and meant no, in the sense of “no, I didn’t take the brochure”, as appears from the final answer.

23. [73]

    The example of the interpreter taking an “active role” given by the primary judge was as follows:

24. [74]

    I fail to see how the interpreter’s statement warranted criticism.

25. [75]

    But this is by the way. There is no indication in the primary judge’s reasons that the difficulties she identified with the interpreter affected her assessment of Ms Gan’s credit. Rather her Honour said:

26. [76]

    Ground 4(a) was directed to an observation by the primary judge that the interpreter Ms Wang gave a different translation of a document attached to Ms Gan’s second affidavit than the English translation of that document that accompanied the affidavit. Ground 4(a) asserted that the translator of the written evidence materials was not the Ms Wang who was the interpreter at trial. The appeal papers did not demonstrate whether or not that was so (Ms Wang sight-translated Ms Gan’s second affidavit but it does not appear whether she also translated documents attached to it). But assuming it to be so, there is nothing to suggest that the issue with translation affected the primary judge’s assessment of Ms Gan’s credit.

27. [77]

    The primary judge said that she applied McLelland CJ in Eq’s observations in Watson v Foxman (1995) 49 NSWLR 315 at 319:

28. [78]

    Her Honour also said that she applied the approach of Black J in Re Kit Digital Australia Pty Ltd (in liq) [2014] NSWSC 1547 at [7] that:

29. [79]

    Her Honour said that, where there was a conflict with a contemporaneous record, she preferred the contemporaneous record to the oral evidence.

30. [80]

    However, the primary judge did not take account of Ms Xie’s contemporaneous note referred to at [59] above, nor, on the issue of reliance, the significance of the fact that Ms Gan’s investment was made through Ms Xie.

31. [81]

    The matter is complicated because the appeal papers did not include Ms Liu’s first affidavit.

Grounds 5, 6 and 7: tendency evidence

1. [82]

   Ms Gan sought to adduce evidence from two witnesses, Ms Zhong Ming Di Si and Ms Jenny Wills (Xiao Tuang Shan). They deposed to having had conversations with Ms Xie in relation to their investments in MFC in 2017.

2. [83]

   In her first affidavit, Ms Di Si deposed that she was fluent in both English and Mandarin. She deposed that on 30 November 2017 she was introduced to Ms Xie by a friend and that Ms Xie introduced the MFC virtual platform to her in words to the following effect:

3. [84]

   She deposed that, on 5 December 2017, Ms Xie said in words “to the effect of”:

4. [85]

   She deposed that Ms Xie made further representations to her that, if her evidence were accepted, would indicate that Ms Xie had a tendency to make representations about the MFC platform to similar effect to that those which Ms Gan had deposed were made by Ms Xie to her in 2016.

5. [86]

   Ms Wills gave evidence to much the same effect. She deposed that she was fluent in English and Mandarin and that, through the course of communications in 2016 and 2017, Ms Xie said to her words to the effect of:

6. [87]

   No objection was taken to these affidavits on the ground that they gave the witnesses’ own understanding, expressed in English, of the effect of the words spoken to them by Ms Xie in Mandarin. But the primary judge, of her own motion, rejected the affidavits on the basis that the words spoken were not spoken in English, but in Mandarin. Her Honour said:

7. [88]

   Following that observation, the affidavits of Ms Di Si and Ms Wills were reaffirmed overnight with the assistance of an interpreter.

8. [89]

   The respondent objected to the affidavits of 31 August 2021 on the ground that they were inadmissible as tendency evidence, or coincidence evidence, or were irrelevant, or were unfairly prejudicial under s 135 of the Evidence Act 1995 (NSW). The primary judge said:

9. [90]

   The hearing was conducted by audiovisual link. The primary judge recorded:

10. [91]

    Even if the primary judge recognised some of the “electronic spectators” as being the deponents, Ms Di Si and Ms Wills, that would provide no basis for her Honour’s assertion that “they’ve carefully recut their affidavits” and that this was a very serious problem.

11. [92]

    Those affidavits were also rejected because the witnesses did not depose to the words said in Mandarin with those words translated by an accredited translator.

12. [93]

    As a result of this ruling, Ms Di Si and Ms Wills made further affidavits on 31 August 2021 in which they deposed to representations made to them by Ms Xie. These were transcribed in the affidavit using Mandarin Chinese characters. Those affidavits were later translated into English and admitted into evidence subject to the respondent’s objections as to their admissibility.

13. [94]

    In Rogic v Samaan [2018] NSWSC 1464, Kunc J observed that practitioners should follow the “Recommended National Standards for Working with Interpreters in Courts and Tribunals”, [1] when preparing an affidavit for a witness who is “culturally or linguistically diverse” (at [152]-[158]).

14. [95]

    Ms Gan’s affidavits that were interpreted to her complied with that standard. The standard did not require Ms Gan to depose, using Mandarin characters, to the words spoken to her by Ms Xie, or her understanding of the effect of the words spoken, and the Mandarin script being translated into English by an accredited translator.

15. [96]

    In Szeto v Situ (No 2) [2019] NSWSC 1312, Emmett AJA said:

16. [97]

    I agree with Emmett AJA’s preference for an accredited translation where the witness professes to recall the actual words spoken. The primary judge’s insistence on an accredited translation of the witness’ recollection of the Mandarin words spoken, where the witness professed a fluency in both Mandarin and English, is only explicable on the basis that her Honour regarded the actual words said as vital.

17. [98]

    Ms Di Si and Ms Wills did not purport to recollect the precise words that were said by Ms Xie. They used the widely adopted method of putting the gist or substance of what they professed to remember as conversations in direct speech, qualified by the statement that words were said “to the effect” of the words purportedly quoted. Once it is recognised that they did not profess to recall the precise words used, and professed fluency in English, there was no proper reason to reject the deponents’ first affidavits.

18. [99]

    To make their final affidavits, the deponents had to recall in August 2021 what had been said in conversations with Ms Xie in 2017. Understandably, there were differences between their recollections as expressed in English in their first affidavits made in July and August 2020 and their recollections as expressed in Mandarin in 2021 and then translated into English by an accredited translator.

19. [100]

    In her affidavit as translated, Ms Di Si said that Ms Xie told her that the price of GRC would only increase and not decrease; that “you would be able to double your [principal] within a year”; that there was no risk to the investment and it was not possible to lose money; that Ms Di Si should invest as soon as possible; that the earlier she joined, the quicker she could start making money; that if she wanted to cash out, she could sell the GRC after which 55% would become cash; that there were two strategies, static and dynamic; that she could make money even if she did not introduce other people; “After you buy these GRC you do not have to do anything. You just leave it there and the value will keep increasing with each distribution, non-stop”.

20. [101]

    The translation of the affidavit of Ms Wills records that Ms Wills deposed that Ms Xie said to her in Mandarin words to the effect:

21. [102]

    Ms Di Si deposed that words to the effect of those she reported were said to her at meetings with Ms Xie on 30 November and 5 December 2017 and later repeated at other meetings. Ms Wills deposed to the effect of words said to her by Ms Xie over numerous phone calls and an attendance by Ms Xie at her home, mostly in 2017.

22. [103]

    There are strong similarities between Ms Gan’s evidence as to what Ms Xie said to her in August 2016, and what Ms Di Si and Ms Wills said Ms Xie said to them in November and December 2017. In particular, all deponents said that Ms Xie represented that:

23. [104]

    Not all of the above were in the same terms as the pleaded representations (see [3]). But they provided the context in which the pleaded representations were said to have been made and, if accepted, supported the likelihood that the pleaded representations referred to at [3(a), (c) and (d)] were made.

24. [105]

    The primary judge did not rule during the hearing on the respondent’s objections to these affidavits. Accordingly, cross-examination proceeded as if the affidavits had been admitted.

25. [106]

    The primary judge ultimately rejected the admissibility of the affidavits. One ground for this decision was that notice had not been given of the appellant’s intention to adduce tendency evidence as required by s 97(1)(a) of the Evidence Act. Ms Gan’s counsel submitted that it was made plain to the respondent comparatively early in the proceedings, by the service of the affidavits, that she proposed to adduce the evidence in question. The primary judge said “I have not dispensed with the notice requirement and do not”. But her Honour did not take issue with the substance of the submission.

26. [107]

    In relation to Ms Wills’ evidence, her Honour said that her initial affidavit lacked an address and thus did not comply with cll 5 or 6 of the Evidence Regulation 2020 (NSW). Ms Wills’ later affidavit, along with Ms Di Si’s later affidavit, did provide an address, albeit the address of her solicitors. The absence of an address could not rationally have had any effect on a decision as to whether to dispense with the requirement of notice under s 100(1) of the Evidence Act.

27. [108]

    The essential point was that the affidavit had been served so that Ms Xie knew what evidence would be sought to be adduced, and the nature of that evidence as tendency evidence. In the context of civil proceedings, that the affidavits put Ms Xie on notice as to the type of evidence Ms Gan sought to adduce from Ms Di Si and Ms Wills ought to have been regarded as a factor weighing heavily in favour of dispensing with the requirement for the service of a tendency notice (see, eg, Toben v Jones (2003) 129 FCR 515; [2003] FCAFC 137 at [168]. Cf R v Harker [2004] NSWCCA 427 at [35]). For much the same reason, it was unlikely that Ms Xie would have suffered prejudice from the admission of tendency evidence, of the substance of which she had received adequate notice (see, eg, Cantarella Bros Pty Ltd v Andreasen [2005] NSWSC 579 at [19]; Ford v Ingham Enterprises Pty Ltd ABN 20 008 447 345 (No 3) [2020] FCA 1784 at [157]-[160]). These two matters ought to have factored into the primary judge’s consideration of whether it was appropriate to dispense with the requirement to serve a tendency notice (having regard to the criteria specified in s 192(2) of the Evidence Act). Reasonable notice of Ms Gan’s intention to adduce the evidence had been given (s 97(1)(a)), although not in the prescribed form (s 99). Where the judge did not rule on the admissibility of the affidavits at trial so that cross-examination proceeded as if they had been admitted, it was irrational to reject the affidavits on the ground that notice under s 97 had not been given. The primary judge erred in not dispensing with the notice requirement.

28. [109]

    In assessing the admissibility of the evidence of Ms Wills and Ms Di Si, the primary judge ought to have proceeded on the assumption that their evidence could be accepted (IMM v The Queen (2016) 257 CLR 300; [2016] HCA 14 at [17], [39], [44], [45], [49]). If accepted, the evidence had significant probative value.

29. [110]

    The substantial ground for rejecting the admissibility of the evidence of Ms Di Si and Ms Wills was expressed as follows:

30. [111]

    The primary judge’s statement that if she otherwise rejected Ms Gan’s evidence, then the evidence of Ms Di Si and Ms Wills was irrelevant, was a non sequitur. If Ms Di Si’s and Ms Wills’ evidence had significant probative value by demonstrating a tendency on the part of Ms Xie to make representations about the scheme to the same or similar effect as some (it need not be all) of the representations Ms Gan said had been made to her, that would be a matter that the judge should have taken into account in deciding whether she believed Ms Gan.

31. [112]

    The primary judge said:

32. [113]

    The significance of the temporal connection between tendency evidence sought to be relied upon and the conduct in issue will depend upon the subject matter of that conduct and the tendency evidence. If the conduct in issue is alleged sexual abuse, tendency evidence of abuse at later times than the charged offence may be of less probative value than evidence of earlier abuse, but this is not necessarily so (R v Dann [2000] NSWCCA 185 at [36]; RH v R [2014] NSWCCA 71 at [89]-[129]; (2014) 241 A Crim R 1). If the conduct in issue is the making of representations about the takings or profitability of a business, which change over time, a close temporal connection between the conduct in issue and the tendency evidence may be required for the tendency evidence to be of significant probative value. But there is no suggestion in this case that the features of MFC changed between 2016 and 2017.

33. [114]

    There is a striking similarity between the evidence of Ms Di Si and Ms Wills as to some of the representations made by Ms Xie to them and the evidence of Ms Gan as to the representations made by Ms Xie to her.

34. [115]

    Their evidence that they were told that the price of GRC will only increase and not decrease and the amount of GRC that they would hold would be based on a multiplier set by the company, usually 1.5 to 2, is consistent with Ms Xie’s notes of the GRC characteristics extracted at par [59]. They deposed that Ms Xie said “This means you will be able to double your principal within a year”. The primary judge made no reference to the notes in assessing the reliability of their evidence.

35. [116]

    Ground 7 contends that the primary judge erred in finding that there was no significant probative value in the evidence of Ms Wills and Ms Di Si. In reaching that conclusion, the primary judge considered both the admissibility and reliability of their evidence. Ground 7 challenges both the primary judge’s rejection of the admissibility of their evidence and her Honour’s reasons for rejecting the reliability of their evidence.

36. [117]

    The primary judge rejected Ms Wills’ evidence that she was fluent in both English and Mandarin Chinese. It appears that the primary judge also at least had reservations about Ms Di Si’s assertion that she was fluent in both English and Mandarin. Her Honour said:

37. [118]

    The primary judge erred in rejecting the evidence of Ms Wills and Ms Di Si on the ground that they had no separate and specific recollection of particular words said by Ms Xie in any specific conversation such that their evidence was unreliable and had no probative value.

38. [119]

    The fact that precise words used, and the specific occasion on which words were used, are not recalled, does not mean that a person’s memory of the substance or “gist” of what was said must be rejected. I agree with the following observations of Jackman J in Kane’s Hire Pty Ltd v Anderson Aviation Australia Pty Ltd [2023] FCA 381 at [121]-[129]:

39. [120]

    Any objection that evidence in indirect speech of the substance or gist of what was said is inadmissible as opinion evidence, being the witness’ inference drawn from observed and communicable data, is met by s 78 of the Evidence Act (Connex Group Australia Pty Ltd v Butt [2004] NSWSC 379 at [12]-[27]; Lithgow City Council v Jackson (2011) 244 CLR 352; [2011] HCA 36 at fn 40; Australian Competition and Consumer Commission v Yazaki Corp (No 2) [2015] FCA 1304 at [54]-[63]; (2015) 332 ALR 396; Australian Competition and Consumer Commission v BlueScope Steel Ltd (No 3) [2021] FCA 1147 at [66]-[68]; (2021) 157 ACSR 77).

40. [121]

    The primary judge reasoned that, because the witnesses only professed a recollection of the gist of what they were told and could not say when and in which particular conversation or conversations the statements were made or where the conversations took place, their evidence was unreliable. It has been recognised for at least 90 years that memory is not a literal reproduction of the past (Schacter et al, ‘The Cognitive Neuroscience of Constructive Memory’ (1998) 49 Annual Review of Psychology 289 at 290). Because memory is constructive it is prone to errors. It is not merely on that account to be rejected.

41. [122]

    As Jackman J observed at [125] of Kane’s Hire Pty Ltd v Anderson Aviation Australia Pty Ltd, the observations of McLelland CJ in Eq in Watson v Foxman are not a demand for unattainable perfection. The primary judge did not engage with the question of whether Ms Gan, Ms Di Si, and Ms Wills should be accepted as having accurately recounted the gist, rather than the actual words, of Ms Xie. Her Honour did not consider whether Ms Xie’s notes, that she said were notes of discussions with Ms Gan on 28 August 2016, corroborated material parts of the conversation which Ms Gan deposed took place on 29 August. Her Honour considered that, because Ms Gan had no recollection of anything said on 28 August 2016, she did not rely on anything said on that day, without considering whether Ms Gan may have been mistaken as to date and place, but not as to the substance of what was said. This affects her Honour’s finding that Ms Gan did not rely on anything said by Ms Xie because Ms Gan transferred money from one of her accounts to another on 29 August 2016 and her Honour found that the meeting at which Ms Gan said that representations were made to her to invest did not take place until 31 August 2016. But her Honour failed to consider the significance of the fact that Ms Gan’s investment was made on 31 August and was made through Ms Xie.

42. [123]

    These errors undermine the primary judge’s findings that none of the alleged representations was made, and that Ms Gan did not rely on anything she was told by Ms Xie. There were no contemporary objective materials inconsistent with the alleged representations having been made.

43. [124]

    It is not possible for this Court to decide the contested issues of fact. Regrettable though it is, there must be a new trial.

44. [125]

    I propose the following orders.

    1. (1)

       If and to the extent necessary, extend the time for service of the notice of appeal to 24 May 2022.

    2. (2)

       Allow the appeal.

    3. (3)

       Set aside the orders and judgment of the District Court of 25 February 2022.

    4. (4)

       Order that the proceedings be remitted to the District Court for a new trial before the Court, differently constituted.

    5. (5)

       Order that the respondent pay the appellant’s costs of the appeal.

    6. (6)

       Order that the costs of the proceedings in the District Court be reserved for consideration of the judge determining the new trial.

45. [126]

    SIMPSON AJA: I agree with White JA.

46. [127]

    BASTEN AJA: I agree with the orders proposed by White JA, and with his reasons for them.