Amealco Holdings P/L & Ors. v Advent International Investments P/L

Re: AMEALCO HOLDINGS PTY LIMITED; LIE SOEN KING and WATI LYNARKO
And: ADVENT INTERNATIONAL INVESTMENTS PTY LIMITED; JOHN WONG and SIMON WU
No. NG587 of 1990
FED No. 246
Number of pages - 59
Trade Practices - Damages

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Foster(1) J

CATCHWORDS

Trade Practices - misleading or deceptive conduct - unconscionable conduct - real estate development - failure to disclose beneficial ownership of property - failure to translate documents into language understood by the applicants - representations that the price included all necessary documentation for building - no provision in contract of sale for assignment of entitlement to development and building application approvals - respondents instructing solicitor to act on purchase without disclosing separate identity of purchasers.

Damages - valuation of property without development and building application approvals - consequential losses.

Trade Practices Act 1974 (Cth) - s 4, s 52(1), s 52A(1)

HEARING

SYDNET, 15, 16, 19, 20 August 1991; 25 October 1991; 16-19 March 1992

#DATE 23:4:1993

Counsel for the applicants: Mr C. Stevens QC

Ms K. Drayton

Instructed by: Margaret Tan and Associates

Counsel for the respondents: Mr R. Colquhoun

Instructed by: Kaplin Reeves and Co

ORDER

The Court orders that:

1. A declaration be made that the respondents and each of them in trade or commerce engaged in conduct with the applicants that was misleading or deceptive or was likely to mislead or deceive them in breach of s 52(1) of the Trade Practices Act 1974.

2. A declaration be made that the respondents and each of them in trade or commerce engaged in conduct with the applicants in such circumstances which engagement was unconscionable and contrary to the provisions of s 52A(1) of the Trade Practices Act.

3. A declaration be made that by reason of the conduct of the respondents and each of them the applicants have suffered loss and damage.

4. A declaration be made that the document entitled "Heads of Agreement" is invalid.

5. Judgment be entered in favour of the applicants against the respondents in the sum of $185,000.00.

6. The cross-claim be dismissed.

7. The respondents pay the applicants' costs of the application and the cross-claim.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

FOSTER J The second and third applicants in these proceedings are husband and wife. They are directors and shareholders of the first applicant ("Amealco"), which is a "shelf" company acquired by them in circumstances to which I shall make reference in these reasons.

The first respondent ("Advent") is a company owned and controlled by the second and third respondents. It is a corporation within the meaning of s 4 of the Trade Practices Act 1974 (Cth) (the "Act") and at all relevant times was engaged in trade and commerce within the meaning of the Act. The second and third respondents used Advent as a vehicle for the carrying on of certain aspects of their business. Each of the second and third respondents was, at the time of the events with which this litigation is concerned, a qualified accountant and held a degree in business administration. Through Advent and in other ways they offered a range of commercial services to the business community in Sydney, particularly to Chinese businessmen.
The applicants' statement of claim asserts that:-

"The Respondents each carried on the business of and held itself and themselves out to the Applicants as, inter alia, a consultant in real estate and in buying, selling and development of real estate and in advising on such matters, in the setting up of companies, sale of companies, taxation, migration and in property management".

The evidence in these proceedings, including translations of advertisements placed by the respondents in local Chinese language newspapers clearly establishes these facts. It also establishes that the respondents sought to attract the custom of persons entering Australia as business migrants under the relevant Commonwealth Business Migration Scheme. The respondents sought to enter into dealings with such migrants whereby, for reward to themselves, they assisted the migrants in making appropriate investments in Australia, utilising funds brought by such migrants from overseas. It is clear that these investments quite regularly took the form of real estate development. The respondents offered the service of selecting appropriate parcels of real estate and then assisting in the acquisition of those parcels on behalf of the migrants, obtaining all necessary authorisations for development, planning the development and organising necessary finance and construction. It appears that none of the respondents was a licensed real estate agent but that the respondents dealt with such agents in the acquisition of suitable development sites for their clients.
The second applicant ("Lie") is an Indonesian Chinese who came to Australia pursuant to the Business Migration Scheme. The events with which this litigation is concerned occurred in 1988 and thereafter. However, he came to Australia in 1987 with a proposal for development of land in Western Australia. This was a quite elaborate proposal. The documentation relating to it is part of the evidence in this case. It shows that, in 1987, Lie and others were interested in developing a large tavern and motel unit complex in Western Australia. The documents indicate, as was established to be correct, that Lie had had considerable business experience in Indonesia. He managed a family hotel enterprise in Bandung, a major urban centre, increasing the size of that enterprise both in terms of the number of persons employed and the size and extent of its premises. He also played a managerial role in a business, again of reasonably substantial size, which produced PVC piping for industrial use.
The Western Australian proposal did not go ahead. However, Lie was present in Australia in relation to it in 1987. He came to Sydney and, whilst here, he made what appears to have been fairly brief contact with the second respondent ("Wong") who was then conducting an investment advisory business in premises at Bondi. The two men had some discussion about business migration opportunities and, it appears, Lie left a copy of the Western Australian proposal with Wong who caused some inquiries to be made about it through a solicitor, Ms Batey. It does not appear that anything eventuated between them in relation to this proposal.
However, in 1988 Lie and his wife came to Australia with a view to establishing residence and an appropriate business under the Business Migration Scheme. Lie made contact again with Wong, who by that time had established business with the third respondent ("Wu") both in the form of a partnership and also through the vehicle of Advent. This contact led to Lie's entering into the business arrangements with the respondents which have given rise to this litigation. Lie has made claims against the respondents for various breaches of consumer protection provisions of the Act to which I shall make reference hereafter. It is convenient, in the first place, to refer to the facts as I find them from the evidence given in these proceedings.
Lie and his wife arrived in Australia towards the end of April 1988. It is clear that they brought with them fairly substantial funds with a view to making necessary investments in Australia and establishing their home here. They had a child attending the University of New South Wales and, in the first instance, they were interested in acquiring a residence in the general area of the university. I am satisfied that Lie had regard to the contact he had made previously with Wong and also observed advertisements placed by the respondents in Chinese language newspapers which referred to the range of services that they had available and to their expertise in the areas in which those services were offered. Lie was interested in the possible purchase of a property at Malabar which was to be submitted for public auction. He wanted some information as to auction procedures and, no doubt, as to the reasonable price range for the property. He sought out Wong who had changed his office address to that of Advent in office premises in George Street, Chinatown. Having located Wong he had the first of a large number of business discussions with him. Early in these discussions Wong introduced him to Wu, with whom, thereafter, much of the ensuing discussion and negotiation took place. The evidence establishes that, so far as the real estate aspects of the respondents' business were concerned, Wu attended to the marketing and financial aspects of development proposals whilst Wong dealt with the technical and construction side and with the requirements of local councils. However, for the most part both men dealt with Lie in relation to the proposal that was subsequently entered into.
The evidence makes it tolerably clear that Lie was not interested in the property at Malabar as a development proposal. He was considering it as a residence for himself and his family. I consider it probable that, so far as this property was concerned, he was merely seeking some gratuitous advice from Wong. However, in the course of their first discussion which took place in May 1988, I am satisfied that Lie gave some general indication that he was interested in investing in real estate development as a business migrant and that Wong indicated that he would be able to assist. However, the conversation centred upon the Malabar property and the system of auctions. Wong told Lie that he would check the property out and suggested that Lie contact him after two or three days. Lie did this. He returned to the office and was introduced by Wong to Wu as being Wong's partner. Lie was accompanied by his wife, the third applicant, as he was on a number of occasions when he had discussions with the respondents. On this occasion both Wong and Wu were at some pains to point out their expertise in accountancy and real estate. It was mentioned that Wu was a "JP" which meant that he was "trusted by the Government and public".
The conversation between the parties took place in a meeting room in the respondents' offices. There was a number of photographs of properties displayed on the walls of the room. These properties were pointed out by Wong and Wu as being properties that they were managing or developing. I am quite satisfied that Wong and Wu were seeking to impress Lie with their general expertise in real estate development. I am also satisfied that they attempted to turn Lie off the purchase of the Malabar property on the basis that the price was too high and that they had a better property for him. This property was situated at 40 Melville Street Ryde and was a substantial parcel of real estate upon which it was asserted eight villa homes could be erected. The respondents showed Lie a brochure and indicated that the property could be purchased in the first instance for $620,000. I am also satisfied that Lie was told that he could "make profit of two houses there". It also appears that he was shown a document which has been referred to in the case as a "feasibility study" which set out information in relation to the property. He was given the document to take away. I shall refer in more detail to this document later.
Lie was more interested in the Malabar property and was, at that stage, not interested in the proposal in relation to the Ryde property. He told them he wanted to attend the auction and buy the Malabar property. The first discussion ended on this note.
Lie was unsuccessful at the auction and a day or so later he returned to the respondents' office. He informed them that he had been unsuccessful at the auction, whereupon they indicated that he was lucky not to have bought the Malabar property because the property at Ryde would be more suitable for him. A discussion then ensued as to this property. Before I deal with this discussion and subsequent discussions and negotiations, it is appropriate to make some findings and comments as to background facts and circumstances.
Although not much evidence was directed to this feature of the case in its early stages, it became tolerably clear as the case unfolded that there were communication difficulties between the second and third applicants and the second and third respondents. Lie and his wife, being Indonesian nationals, spoke fluent Indonesian. They also spoke fluent Mandarin Chinese. In 1988 Lie, I am satisfied, had no significant ability to speak or comprehend English. Despite submissions to the contrary I am satisfied that he then could not read English. He could, however, comprehend written numbers. His wife had no significant ability in English at all. I am satisfied that both Wong and Wu could converse in Mandarin Chinese but only at a low level of fluency. They came from Hong Kong. They were fluent in Cantonese Chinese which was their preferred language. They were each reasonably proficient in English. They gave evidence in English, evincing, at times, a little difficulty in expression and understanding.
Despite Wong and Wu having these slight difficulties with the language, I felt, nevertheless, that I was able to form a reasonably accurate impression of their demeanour and manner of giving their evidence. Both Lie and his wife required the assistance of an interpreter to interpret their evidence, which was given in Indonesian, into English. Lie acknowledged that he had acquired greater facility in speaking and comprehension of English since arriving in Australia in 1988 but, in the context of giving evidence, he preferred to make use of the interpreter. I consider that this was, in the circumstances, reasonable. It necessarily made observation of his demeanour as a witness more difficult but not impossible.
Mrs Lie's evidence did not contribute much to the case, although in certain respects to which I shall make reference later, she provided some corroboration of her husband's testimony. Despite being an educated woman, she seemed to have a poor recollection of conversations at which she was present. Although I felt some initial concern as to this quality of her testimony, I ultimately came to the view that, perhaps for reasons attributable to her cultural background, she merely accompanied her husband to the meetings with Wong and Wu without seeking to involve herself in those discussions or to attend to their content with any intention of subsequently recalling them. I am also satisfied that between May and October 1988 she and Lie lived in a motel at Camperdown and, apart from persons known as Sutardi whom they had known many years before in Indonesia and whom they met by chance in Sydney in June, they had no friends or acquaintances in Australia. It is perhaps not unreasonable, in those circumstances, that she would have gone with her husband even on business occasions so that they might provide company for each other.
As the case developed, increasing reference was made to an assistant accountant employed by the respondents. She was referred to as Winnie. She was Chinese and spoke fluent Mandarin and Cantonese. Lie agreed, in cross-examination, that she was present at most of the conversations between the parties. However, he does not appear to have been asked as to whether she played any role in those conversations. Wong and Wu in their evidence asserted that she played quite an active role as an interpreter. When Lie, Wong and Wu were having communication difficulties in the Mandarin dialect, she would regularly assist by Mandarin/Cantonese translations for the benefit of all parties. Insofar as Wong and Wu asserted that they explained matters of significance to Lie through the use of Winnie as an interpreter and there were significant areas of dispute as to whether this had been done, Winnie was clearly an essential witness. She was not called by the respondents. A belated attempt was made to explain her absence. It appears that some time before the commencement of the case she had returned with her husband to Hong Kong. However, it was quite apparent that she could have been found with reasonable ease and some worthwhile effort made to obtain evidence from her. Also, there is some evidence in the case, which I accept, that on at least one occasion, namely a car trip in which Wong and Wu took Lie and his wife and also members of the Sutardi family to look at building sites, Winnie was present but played no role as a translator. This was despite the fact that the other persons had only Mandarin as a common language. I have come to the conclusion that the failure of the respondents to call Winnie in the context that it was asserted that she played a significant interpretative role, is not sufficiently explained and her absence from the case makes it, at least, difficult to accept that she was used by the respondents to clarify matters they were seeking to explain to the applicants. I accept that Wong and Wu must have realised from the outset that, in dealing with Lie, they were dealing with a person who was unlikely to understand fully what was being said to him about the transactions under discussion and who would be unable to read for himself documents which they provided to him and which were in the English language.
There were at least two such documents of significance. The first was the "feasibility study" to which I have already made reference and the other was a document which was described as "Heads of Agreement". It is clear that these documents were standard documents used by the respondents in their business. The feasibility study document, which was headed "Cost and Profit Analysis", was a document given to potential clients and which provided information on a proposed development to which it applied. The details in relation to each individual development were added to the document in blank spaces provided in the document for that purpose. The "Heads of Agreement" document was one designed to provide, after its execution, an agreement in writing between Advent and the party or parties entering into the development agreement. It was expressed to be "a joint venture" agreement "to develop the residential properties in Sydney". In broad terms it provided for the purchase of an appropriate site and the construction on that site of appropriate buildings. The purchaser of the site was to be a company provided by Advent for that purpose. Advent was to become, for a fee, the manager of the project. I shall refer to the detail of these documents later in these reasons. Suffice it to say, at this point, that I am quite satisfied that Lie could not have read the documents, although he could probably have comprehended the numerals appearing in them. He was entirely reliant upon the documents being fully explained or read to him in Mandarin. He could not otherwise have comprehended them. I am also quite satisfied that this would, at all times, have been obvious to Wong and Wu. I reject the suggestion made but faintly in Wu's evidence that Lie had some ability to read English.
It is also appropriate, before embarking upon a consideration in these reasons of the conflicting evidence as to the course of discussion and negotiation between Lie and Wong and Wu, to indicate my findings as to the relationship of Wong and Wu to the property at 40 Melville Street Ryde.
The evidence establishes that the property had been owned by a company Design Development Pty Limited ("Design Development") until its sale and transfer on 20 May 1988 to a company Winning Design Incorp. Pty Limited ("Winning Design"). As part of the sale Design Development assigned to Winning Design its entitlement to approvals granted by Ryde Council to development and building applications relating to the property. Previously the property had been the subject of an option to purchase granted by Design Development to a company Elsona Holdings Pty Limited. This company was, apparently, a shelf company provided by the respondents to certain clients, in accordance with their ordinary practice in the acquisition and management of development projects. For reasons which are not entirely clear to me on the evidence but which seem to relate to sudden and severe financial problems on the part of the clients, the option could not be exercised. Because of booming conditions in the real estate market the option price was considerably lower than the then reasonable market price. I am satisfied that Wong and Wu saw an opportunity, in effect, to acquire the property at an advantageous price for their own use and benefit. They made this acquisition through the use of Winning Design as a vehicle.

The evidence further establishes that Winning Design had itself been acquired by the respondents as a shelf company for use in a development project. That project had fallen through and the company was therefore unutilised. Wong and Wu were proposing in this period to convert Advent into a public company. They wished to have another company to use as a vehicle for family investments. They chose Winning Design for this purpose, with the intention that its operations would be kept separate from those of Advent. Evidence was given as to the share structure and directorships of Winning Design. It was conceded by Wong and Wu that, as a result of trust arrangements, they each owned beneficially a half share of the company. The registered office of the company was changed to Wu's private residential address. It was submitted on behalf of the applicants that this fact, coupled with the fact that no indication appeared on the share register or relevant company documents of the proprietorial interests of Wong and Wu, indicated a desire to conceal from anyone who might be interested the existence of those proprietorial interests. Although I have some suspicion that this might be so, I am not persuaded that I should make a finding to that effect. It is sufficient that Wong and Wu were in fact from 28 May 1988 the effective owners of the Ryde property. They had obtained it at the very advantageous price of $410,000 on that date, the property then being worth well over $500,000.
It is also clear that they had borrowed the whole of the purchase price from the Bank of Singapore and were incurring substantial holding charges. Nevertheless, the acquisition of the property could reasonably have been regarded by them as a windfall. I am also satisfied that they were desirous of achieving a profit on resale of the property as quickly as possible. Indeed, shortly before entering into discussions with Lie about the property, they had arranged for Winning Design to sell the property for a price of $540,000 to a company, apparently also a shelf company provided by them, Havelte Holdings Pty Limited. This company was to be the vehicle for acquisition of the land by a Mr Ted Lee ("Lee"), a person known to the respondents and, apparently, having had previous business association with them. Advent was to undertake the management of the development in the respondents' ordinary course of business. This contract had either broken down or was in the process of doing so at the time Lie made contact with the respondents. The evidence of Wu was to the effect that Lee was not able to obtain finance to go ahead with the project. Lee was not called. I accept that Wong and Wu regarded themselves as being in a position to effect a sale of the property to Lie on more advantageous terms, if possible, than those embodied in the previous agreement with Lee.
Against this background I turn to consider the evidence of Lie, Wong and Wu as to their dealings with each other in relation to the Ryde property.
As I have said, the Lies were told that they had been lucky not to have bought the Malabar property as the Ryde land was more suitable for them. Lie said in evidence that he was told by Wong and Wu, "the land in Ryde, you can build 8 villa houses on it, good profit and I will manage that for you". Lie raised the question of price and was told "about the price, we can discuss it with the owner of the land, as the land is not mine". He was also told to make a quick decision as if he did not buy the property it would be bought by someone else. Lie said that it was represented to him by Wong and Wu that the price would include the property with all the necessary documentation papers and that after payment he could proceed with building on the land. The respondents would obtain the loan for the construction.
In the context that they told him that the land was owned by someone else, Lie's evidence was that he said to them "do not take profit from my side" to which he received the response "we are not going to take any profit out of you. I only take from the management fee". According to Lie's evidence he made this statement on more than one occasion and received similar replies. At one point of his evidence he indicated that the statement was in the nature of a customary cautionary statement used in negotiation. The respondents indicated that, apart from denying that the statement was ever made, they were unaware of any such custom in negotiation between Chinese. Although the expression puzzled me at first, its repeated use in the context of Lie's giving evidence that he was told that someone other than the respondents owned the property has led me to accept that it was really an exhortation not to take a secret commission. In other words, that Wong and Wu should sell the property to him at the price actually accepted by the owner/vendor and not add anything to that price for their own benefit. The use by Lie of this phrase is therefore consistent with his having been informed that the respondents were not the owners of the property but were able to deal with the owner on Lie's behalf.
Lie also said that at the conclusion of this first discussion about the property he was advised to make a quick decision as somebody else was interested in the property and also that he, as a business migrant, was required by the Government to enter into some business within two years or risk losing his licence to remain in Australia. Reference was also made to the respondents providing a company to be used in the purchase of the property.
Lie said that he told them that he would think the matter over and would return to his motel. He said that a few days later he received a phone call from Wong who asked him to come to the office to discuss the matter further saying "we will make a compromise and we can arrange a price for this". Lie accepted the invitation. He and his wife went to the office a couple of days later and were invited to go to Ryde to look at the property. They accepted the invitation and were driven to the property by Wu together with his secretary Winnie. On arrival at the property, an inspection was made. Wu told Lie that the land was good, that it had a good view and that many new migrants from Hong Kong would be interested in buying houses built there. The houses could be sold for $230,000 to $250,000 per unit and would sell fast once they were built, the building taking about six months to complete. After the inspection the party returned to the respondents' office and a talk was held in the meeting room. Wu asked Lie to buy the property. Lie exhibited some reluctance on the basis that he had no experience in developing properties in Australia. He mentioned once again that if were to buy the property he would want them to be fair and not take a profit from him. He also said that he would like to meet the owner of the property. In relation to this request he was told that that was not the custom in Australia and that it was sufficient to meet "the consultant or the agent, the intermediate person".
According to Lie some fairly serious negotiation was then entered into. Although nothing is said expressly in Lie's evidence to this effect, it is clear that, on his version, he must have accepted that Wong and Wu were at least able to enter into a worthwhile negotiating process with him even though they were not the owners of the land, would be receiving only a management fee and had no financial interest in the price to be paid for the property. The negotiation involved both the price of the property and also the management fee. Lie's evidence, also, indicates, though not very clearly, that the discussion involved the use of the feasibility study document. This document is Exhibit C. It is not clear whether it is the same document that was given to Lie originally or whether it was a copy of the document which had been retained in the respondents' office. During the course of the discussion alterations were made to figures appearing on the document. They were made by Wu. The document is important for the purposes of this case. Rather than set it out in these reasons, I append it as Schedule 1.
It will be observed that the document identifies the site and gives a fulsome description of it. It then deals with the subject of Land Cost in the following words:-

"The total land cost is $600,000.

The price already includes preparation of the development application (DA) which has been approved, and building application (BA). Currently BA has been submitted and is expected to be approved within two weeks. This situation reduces the development time from 12 to 6 months because construction can commence immediately after BA approval."

Lie asserted that he tried to bargain the price down to $575,000. He said that he told them "I am prepared to buy with the price of $575,000 provided all the documentation and paper to build and develop is complete and he is not going to take any advantage of this because I am not aware of the regulations in Australia".
In response to this exhortation he was told that he should trust the respondents as "we are a big international company. I am a JP. I am an accountant. We are used to this type of work."
Lie said that he also bargained in relation to the management fee and was successful in having it reduced from $92,000 to $80,000. He further said that Wu made amendments to the document whilst the discussion proceeded. The document clearly has been amended in ink on the second page in the portion referred to as "Detail Cost and Profit Analysis". There is no dispute that the amendments were made by Wu. As will be seen he gave fairly detailed evidence about them. I shall return to the amendments when discussing Wu's evidence.
Lie's evidence, in relation to this discussion, continued by asserting that he was told by Wong and Wu that for a price of $800 they would set up a company to buy the property. Also they said they would pass on Lie's offered price of $575,000 to the owner. The discussion terminated on the basis that the respondents would get in touch with Lie in two or three days' time.
Lie's evidence continued that he received a telephone call from Wong two or three days later requesting that he come to the office for a further discussion. Lie considered that he was on this occasion, as on others, accompanied by his wife. On arrival at the office he was informed by Wong and Wu that his offer had been accepted. Winnie was, as usual, present. He was further told that "a contract of buying and selling would be prepared". He was also told that a bank account in the name of the purchaser company would be opened at the Bank of Singapore. Although it is not entirely clear, it appears that Lie's evidence was to the effect that this conversation took place on a date shortly before 10 June. On 10 June he once again attended the offices with his wife. On this occasion they both signed the document (Exhibit D) which is entitled "Heads of Agreement". This is, again, an important document for the purpose of the case. I attach it to these reasons as Schedule 2. According to Lie the document was signed by himself and his wife in the following circumstances. It was placed before him by Wong who opened the document and told him, indicating, to "sign here". In relation to this request Lie asserted in his evidence that "I ask him could you please translate this into Mandarin because I do not understand this and he said, 'It is not a custom in Australia to use Mandarin language, just trust me, it will be in the English language'". His wife corroborated him as to this statement having been made by Wong. Lie testified that he relied upon what Wong said in the presence of Wu and Winnie, and that he trusted them and accordingly placed his signature where he was directed to do so. His wife did likewise. He said that he recollected Wu placing his signature on the document as well.
Lie was asked what was his understanding of the nature of the document. He answered that it was "the purchase of the property for the price of $575,000, including the cost of all the documentations needed, excluding the building costs of course for development". It is to be noted that the figure of $575,000 appears in the document as "Land Cost". Lie also recalled that it was on 10 June that the company, the first applicant, Amealco, was made available to him and his wife and that Wong was appointed secretary of the company.
According to Lie the next event was an attendance by him at the respondents' offices for the purpose of opening an account at the Bank of Singapore. This occurred on 14 June. He attended at the respondents' offices and was advised by Wu that it was necessary to open the bank account so that money could be used to buy the property and later borrowed for construction purposes. He was presented with signature cards for the purpose of opening the account. When he became aware that Wong's name was also on the cards as being a person able to operate on the account he did not agree to taking any steps to enable Wong to have access to the account. It appears that the account was in the name of Amealco. As Lie put it, he "did not agree and rejected the idea of Mr Wong being able to sign on my card on my account".
The evidence in relation to this incident is very sparse. It appears that Lie effectively prevented Wong from being able to draw monies on the Amealco account. He did not expressly say why he did this but I am prepared to infer that even at this relatively early stage, Lie was beginning to have some uneasiness at least about Wong. He was a younger man and Lie may well have been finding him somewhat overenthusiastic in his promotion of the whole project.
In any event, at the respondents' request Lie returned to their offices on 15 June with the cheque book obtained from the bank upon the opening of the account. The book was then taken by Winnie and two cheques were written out, one for $57,500 for the deposit on the purchase price of the Ryde land and the second for $10,000 being the first instalment of the management fee. Lie was told by the respondents that the deposit cheque was to "pay the vendor, the owner of the property" and that the $10,000 management fee was payable "since the transactions of the buying land has been established".
Lie was also asked to sign a further document which he described as "a trust to be able to borrow money from the bank". This document has never been further identified in the case. He declined to sign it. Again he gave no reason but I infer that he was uneasy about allowing access to the bank account by others than himself. He was given a receipt for the $57,500 deposit. It was endorsed upon an Advent form of receipt for the $10,000 management fee. The receipt for the deposit read "Advent has taken 10% deposit $57,500 for vendor of land 40 Melville Street Ryde, to be used for exchange of contract on 15/6/88". It was signed by Wu.
It is to be noted that the name of the vendor was not mentioned in this document nor was it mentioned in any of the documents previously signed by Lie.
On the same occasion Lie signed a document which was the purchaser's contract for the purchase by Amealco of the Ryde property from Winning Design. It was a common form agreement for the sale of land. It showed the vendor's solicitors as being Kaplin Reeves and Co of Clarence Street Sydney and the purchaser's solicitors as Saul and Batey of Ashfield. The name of the purchaser had been changed on the front of the contract. It had originally been "Havelte Holdings Pty Limited". This name had been struck out in ink and the name "Amealco Holdings Pty Limited" substituted in ink. An alteration in ink had been made to the price and deposit, the alterations being, as to the price, from $540,000 to $575,000 and, as to the deposit, from $54,000 to $57,500. The balance had been altered from $486,000 to $517,500. These alterations had, again, been effected in ink. The contract was otherwise a straightforward contract for the purchase of residential land. It contained no special provisions as to the purchaser making available to the vendor documentation evidencing the approval of any development application and/or building application in respect of the land.
Lie said that no part of this document was translated for him from English into Mandarin Chinese. It was not suggested that he take the document away so that it might be explained to him. Nothing was said about the alterations that had been made which have been referred to above. He was asked by the respondents to sign the document having been told that it was "for the buying of the property". He said that they told him that one week after he paid the deposit he could begin with the demolition of the building on the land and start building the villas.
Lie said that a few days later Wong telephoned him at the motel and said "come to my office and sign the trust so that you can start building". He said that this was necessary "so I can borrow the money from the bank". Lie said that he told Wong that he didn't want to borrow the money from the bank and that he did not want to sign the trust document. However, it appears that he gave as his reason to Wong that he was too busy to go to Wong's office.
He said that a few days later he got a message from Wong that he was required to pay $21,000 for stamp duty. He was surprised, but accepted that it was an imposition by Government regulation. He accordingly arranged for Wong to be put in funds to enable the duty to be paid. It is clear that the request for the funds had come from Ms Batey, the solicitor acting for Amealco. As appears quite clearly from her evidence, she was of the understanding that Amealco was one of Wong's companies. She accordingly dealt with Wong as though he were the effective purchaser. She was unaware of the existence of Lie and Lie did not meet her until the purchase was settled on 18 July. There is no dispute in the case that Wong and Wu instructed Ms Batey to act for Amealco without in any way advising her that Amealco was purchasing from a company that was effectively owned and controlled by them.
Ms Batey made it quite clear in her evidence, as would be expected, that had she known that Amealco was not a company being used as a vehicle for a real estate purchase by the respondents, she would have been at some pains to ascertain for whom she was acting. As it was, she accepted instructions from Wu that there was no need to make any inquiries as to the state of any development or building application in respect of the property. She was told that there was no problem about those matters and that, in effect, they were under control by Advent. Accordingly, she made no inquiries in that area and did not require the insertion in the contract of any provisions designed to ensure that the purchaser, Amealco, would obtain the benefit of Winning Design's entitlement to the benefits of the existing development and building applications.
The contract which had been executed by Lie and his wife on behalf of Amealco was duly exchanged with the contract executed on behalf of Winning Design on 16 June.
After the exchange of contracts and the provision of the amount of the stamp duty but before the settlement of the purchase of the Ryde property, Lie made the acquaintance of an estate agent, a Chinese gentleman by the name of Lum. It appears from other evidence that he was put in touch with Mr Lum by his newly found acquaintance Mr Sutardi. After speaking with Mr Lum he made some inquiries in relation to the company Havelte Holdings Pty Limited, which company appeared on the front of the contract. As a result of making those inquiries he was introduced to Mr Ted Lee. He says that information he received from Mr Lum and Mr Lee caused him to change his attitude towards Wong and Wu. Indeed, it is acknowledged by Wong and Wu that after the contracts were exchanged a coolness developed between them and Lie. Wong and Wu say that this was evidenced by evasive behaviour on the part of Lie whenever a request was made by telephone that he provide the amount of some $27,000 which was required to be paid by way of contribution to Ryde Council for open space. This contribution was payable to enable the release of the approved building plans. It seems clear that until this step was taken it was not possible to put in hand the development work on the site. As will appear later, there were further impediments to the commencement of work.

Both Wong and Wu in their evidence refer to requests made fairly regularly to Lie in the period between exchange of contracts and settlement for the provision of this Council contribution. Lie gives no definite evidence on this subject. However, he speaks of requests being made to him to sign the "trust documents". I have come to the view that Lie, Wong and Wu are probably referring to the same subject matter. Lie was not at all disposed to provide monies or authorise the provisions of monies unless they were clearly required. I am satisfied that he had become suspicious of Wong and Wu and was not prepared to let them handle any payments.
It is clear that when the time for settlement of the purchase arrived, Lie was not prepared to allow Wong to handle the transaction. Although the evidence is sparse, I am prepared to accept that, at Lie's insistence, Wong provided him with the copy of a letter from Ms Batey setting out her requirements for settlement including the cheques that were to be drawn. Lie then attended to the settlement himself. He went to Ms Batey's office at Ashfield, accompanied by Mr Lum. He did this, he said, because he did not wish to be cheated by Wong whom, at this point of time, he clearly distrusted. After settlement he instructed Ms Batey not to give any documents to Wong. He retained them himself. The documents he received included the certificate of title to the Ryde property but did not include any documents relating to Council approvals of building work. As already indicated, the contract imposed no obligation upon the vendor, Winning Design, to hand over such documents.
Other evidence makes it clear that there existed, in July, other impediments to Amealco's assuming the rights of Winning Design to existing development and building approvals in relation to the Ryde property. These approvals had originally been granted to Design Developments and had been assigned to Winning Design as part of the purchase transaction between those two companies. However, Design Development had entered into certain guarantees described in the evidence as "bank guarantees". The documents are not in evidence but there is no dispute as to their effect. It appears that Ryde Council required a guarantee of payment of certain survey and drainage works and that the Metropolitan Water, Sewerage and Drainage Board required a similar guarantee. The amounts involved were approximately $39,000 in relation to the first guarantee and $11,000 in respect of the other. These guarantees were sought from and given by Design Development as part of the conditions of approval of the development proposal. It appears that release from these guarantees from Design Development could only be obtained upon the purchaser entering into similar guarantees. Wong, on behalf of Winning Design, was apprised of this requirement early in July. However, he had taken no steps to institute fresh guarantees. In those circumstances the Council made known to Design Development that it looked to that company as guarantor, even though the property had been on-sold to Winning Design. Design Development's response was to instruct the Council that it was not to release the Council approvals to anyone even if the person seeking release had a written authority from Design Development to take over the approvals. It is clear that this difficulty was not made known to Lie nor to Amealco's solicitor Ms Batey.
Very close to the time of settlement, 18 July 1988, Lie learnt of Winning Design's purchase of the property on 20 May 1988 for the price of $410,000. It is not clear to me on the evidence whether he acquired this information shortly before or shortly after the settlement. He also learnt that Wong and Wu were effectively the owners of the Ryde property. This clearly confirmed his view that he had been cheated by Wong and Wu. He determined to have nothing further to do with them. Accordingly, he repudiated the management agreement and advised them through his then solicitors that he would not permit them to manage the property and required the return to him of the $10,000 already paid under the management agreement. Wong and Wu denied Amealco's right to terminate the management agreement. Correspondence continued between the solicitors in which the respondents asserted that they were ready, willing and able to perform their obligations under the agreement and threatening actions for damages in the event of Amealco maintaining its repudiation. Advent also took certain steps in relation to the building approval to which I shall make reference later. The dispute was not resolved and Advent eventually took proceedings in the District Court for damages for breach of contract. After the commencement of these proceedings in this Court that action was discontinued and brought instead as a cross-claim in these proceedings.
I come then to consider the case presented by the respondents.
Broadly speaking, the respondents asserted that they were not guilty of deceitful conduct to Lie but were rather victims of it at his hands. They claimed that Lie having decided that the development property at Ryde was a good one determined to acquire the property and develop it himself, thus saving the cost of the management fees payable to Advent. They asserted that he sought and advanced spurious excuses for terminating the agreement.
In furtherance of these broad assertions, they claimed that Lie was very far from being an ignorant immigrant liable to be preyed upon; rather he was an astute business man, a clever and determined negotiator, who fully understood the situation and was following consciously a predetermined plan.
In relation to their claims as to Lie's business aptitude, they pointed to the facts, established in the evidence, that Lie, as he himself acknowledged, had come to Australia with a view to entering into property development and that, besides continuing to hold the Ryde property for development purposes, he had in fact successfully undertaken other developments in other suburbs of Sydney. These had been entered upon after the termination of the agreement between Amealco and Advent and were developments of the same general nature. Indeed, Wu asserted that during the course of negotiations in relation to the management fees that were to be charged by Advent in respect of the Ryde property, Lie had asserted to Wu that he, Lie, had experience in development, could undertake the development of Ryde himself and questioned, therefore, why he should pay Advent to do it for him. This statement was made, according to Wu, in the context of Lie seeking a reduction of the management fee.
It was further claimed by the respondents that Lie was not relying upon what they were saying to him. He was receiving outside advice. In particular, it was suggested, that Mr Sutardi was providing such advice and that Mr Sutardi's son, said to be a student of architecture, was also providing advice. In this context they also asserted that they did not undertake, in any way, the role of advising Lie in relation to the purchase of the Ryde property. They sought to categorise the transaction as being simply an offer to Lie of a "package deal" namely that they would sell him the land together with approved development and building plans and would supervise the construction of the villa units for a fee. Consistently with this depiction of the transaction, they accepted that, as they were acting for him in relation to the purchase of the land, they were under an obligation to disclose their interest in it. Both Wong and Wu said that they did so by informing him, in the Mandarin dialect, and, presumably, with the assistance of Winnie, that they had an interest in and control of the land. Wu said that the Mandarin phrase for "an interest" in land conveyed necessarily the concept of part ownership. As to Lie's claim that he had said to them on more than one occasion "do not take a profit out of me" Wong and Wu both denied that Lie made this statement and, indeed, scoffed at the suggestion. Wu said that it was simply not the sort of thing that Lie would have said in a negotiation situation. He was simply too astute a businessman and negotiator to adopt such a tactic.
They also denied the sequence of events asserted by Lie. They said that rather than attending at their offices only by appointment and then leaving to enable the respondents to put proposals to "the vendor", Lie would come to the office unannounced and seek to enter into negotiations about the price of the land and also the size of the management fee, the suggestion being that after he became aware of the land, he was very enthusiastic and took the initiative in negotiating for the purchase of it.
They also denied that they failed reasonably to disclose that there were additional steps to be taken and further monies to be paid before the approved building plans could be released by the Council. They claimed that Lie was made fully aware of the requirement to pay the Council contribution of some $27,000 and that, despite regular requests, he avoided putting the respondents in funds to make the payment. They asserted that he adopted this approach because, having entered into the contract to buy the land he had decided to take over the development himself to the exclusion of the respondents.
It must be said that Lie's evidence made no attempt fully to deal with all the discussions between him and the respondents. I feel that it is likely that there were more discussions than those to which he refers. There is no suggestion that, apart from the Malabar property, he was, in June and July 1988, interested in the acquisition of any properties other than the Ryde property although, quite clearly, he became interested in and proceeded to develop other properties later in 1988 and thereafter. If, indeed, he was seeking to depict himself in his evidence as merely a naive immigrant seeking to invest money in Australia then that is a picture of him which I do not accept. However, in fairness, I should say that I did not necessarily gain this impression. However, it must be said that I felt he did not hasten to disclose matters which would indicate his possession of business acumen in the property development field.
It is clear that Lie and the respondents both give evidence of a particular occasion when negotiation produced the figures of $575,000 for the development property and $80,000 for the management fee, these being the figures which were included in the Heads of Agreement document entered into on 10 July. It seems clear on both cases that this discussion took place on the basis of a consideration of the terms of the feasibility study. However, Wu, and to a lesser extent Wong, gave elaborate evidence as to the circumstances leading up to this discussion and of the discussion itself. It is necessary to refer to this evidence.
Wu testified that on his first meeting with Lie he showed him a copy of the feasibility study and went through it with him, mainly concentrating on the figures. He said that after the meeting the Lies took away the feasibility study document. He said that after the first meeting there were probably a couple more meetings when Lie just popped in for "discussion on the feasibility study mainly how, you know, how the project in going to go about and how we handled various things and some drawings and some discussion on the layout". He gave evidence that after a couple more meetings of this kind Lie expressed interest in seeing the site. The respondents acceded to this suggestion and organised a meeting to go out to the site. A party consisting of Wu, Lie and Mrs Lie and Winnie went to the site in a car driven by Wu. Wu says that Lie was enthusiastic about the site and asked him whether the price was negotiable. It was then, according to Wu, that he informed Lie that he, Wu, had an interest in and control of the land and would be able to make a deal.
Lie said he would discuss the matter further and asked whether he could bring along a friend to have a look at the site and advise him. According to Wu a further site inspection was arranged. On this occasion Mr and Mrs Lie, Wong and Wu and Winnie drove out in a Toyota van. On the way to the site they picked up Mr Sutardi and his son at Longueville. Wu said that Mr Sutardi's son was introduced as a final year architecture student at the University of New South Wales. Sutardi was introduced as a businessman who had been in Australia for a while. Wu said that they all visited the site and also other sites which Advent managed at Naremburn, Lane Cove and, maybe, Epping.
After the inspection, Wu said that the Lies came back to the office. Lie said that he was happy about the project and inquired as to what would happen next. Wu said that he showed him the standard form of Heads of Agreement and explained that "we are going to put this thing as a whole package to you and basically we sell you the land and we help to manage your project and the way to govern our relationship is the Heads of Agreement". Wu said that he provided Lie with a standard form of the Heads of Agreement and that that form did not have a guarantee clause on the back page nor a clause relating to accelerated payments. The form was blank as to the names of the contracting parties and as to the capital structure of the venture. In the proceedings Wu said that the details of the capital structure which appear in the form in evidence were supplied later by Lie. This must be correct as the information could only have come from that source. Wu said that he went through the Heads of Agreement with the Lies. In this regard he gave the following evidence:-

"We went through the documents in mainly talking about the duty of the manager section and tell them what we are going to do and then Mr Lie raised the question of the land price again, to say - you know, can I pay less than $600,000 on the land because I'm looking for long term relationship with you and you know, is the price selling to me is right. In that meeting Mr John Wong was there. I remember John - Mr Wong said to him again that: Sure, I mean, we have interest and control of the land and we can reduce the price to you when we reach the agreement, final agreement and Mr Lie asked him and: Is the price of the land justified? I can't remember the exact wording of it, it's basically in that nature, and then Mr Wong say - Mr Wong bring up two documents, one is a valuation report by Stuart Upton which stating the value of the land at $560,000, valued at that price and a copy of real estate agents opinion from Eastwood Real Estate Agents, stating the land price is, in his opinion, roughly $600,000 to $680,000. And we actually went through the two reports with Mr Lie basically confirm that this is not our opinion, this is the opinion from the third party that is roughly the round figure of the valuation and also I think - I remember I said in regards to the valuation report to Mr Lie that value are normally value being - you know, dropping doctrine of conservatism we normally value the land a little bit lower and that's $560,000 with all fee paid probably lower than the actual market price to justify myself. And also again at the point of time we have point out that 560,000 is the land price, that does not include stamp duty and the council contribution."

In relation to the valuation report by Stuart Upton he said that he pointed out to Lie that it was a conservative valuation in a rising market. As to this, there is no doubt that the prices of land were rising rapidly throughout 1988. Wu further said that the Lies took the valuation reports away with them at the conclusion of this discussion. It must be noted that Lie categorically denied being shown either of the valuations during the course of discussions with Wong and Wu. The reports have been tendered in evidence. There can be no doubt that they must have been in existence at the time of discussions between Wong, Wu and Lie, although I do not think there is any specific evidence on the matter, as it seems likely that they would have been called into existence for the purpose of being provided to lending institutions.
According to Wu, the critical discussion occurred about two days later in early June. In the following evidence he gave an elaborate account of it:-

"Mr and Mrs Lie came back and had a negotiation with you?--- Yes. I think, yes, in early June - I don't know whether there's any further meetings before that but anyway, that's one of the important meeting that Mr and Mrs Lie come to our office and Mr Lie say, I'm ready to finalise this thing and let's sit down and negotiate it. There are quite a few things we negotiate. The first thing your still end price. At that time we sit down - I can't remember whether Mr John Wong was present in the - during the meeting. He may come in on and off but I'm the main person negotiate with them and Winnie Yau was present and Mr and Mrs Lie was present and we had the heads of agreement sitting along side with the feasibility study and then we negotiate a land price. The land price was basically, you know, backward and forward negotiation. You know, I want 600, 590, and he wants 520, 550, that kind of negotiation. We reached the points that we agree on, 575, and I scribble the feasibility study on the second page which is exhibit C. Because the land price is reduced from $600,000 to $575, the reduction basically is $25,000, and I marked down minus $25 there and then put down 625 alongside with it, and that's my handwriting. The second item we negotiate is the - our management fee. Mr Lie said, Simon, you know I don't necessarily have to give you to manage the project, I'm a developer who can do it myself, I don't need to pay you that amount. I can just go out and do it myself, it maybe more difficult but I can do it. I say, Mr Lie, no, if it is a pure selling of the land to you I won't do it because I can get higher price out in the market price. I'm looking for long term working relationship with you and I want to - the management portion of the project is part of the package I'm selling to you, but I can reduce the price so that again backward and forward in negotiation on the 925, sorry, $92,540 management fee. Initially in the feasibility study we reduced down to Winnie, actually, sorry, are reduced down to $90,000 I put it down alongside on the paper and then 85 and then cross it out again. Finally, we reached $80,000 there."

He continued in his evidence saying:-

"Mr Lie basically say, 'I want a minimum cost to do this project'. So we work around the figures. We work around those figures in the reduced form, what we agree 625 for the land, 672, and we say, 'We might be able to save some cost on the architect by some negotiation with architect so we might be able to reduce to 25.' At one stage we have reached agreement the management fee is 82,500. We subsequently again changed to 80.

Well, those two figures of 25,800 and 82,500 were only sort of provisional figures that you noted down during the course of negotiation?---That's correct. The 625 and 80 is basically corresponding to the heads of agreement which become the final figures which we have agreed upon. Very well.

MR COLQUHOUN: Then was there any further discussion?---I can't remember when we organised the company for Mr and Mrs Lie, probably some meeting before that meeting, I can't remember exactly. Then he give me some handwriting on how he want to proportion the company, being he own 40 per cent and his wife 20 per cent and his son and daughter 20 per cent each, and those actually would probably occur a bit earlier. Then we - under his instruction we get a shelf company and put that into effect. There's one more thing we were - in that particular meeting we were negotiate. Mr Lie said to me, 'Simon, if you are confident about the project, can you guarantee me making no loss on this project?'"

To this question Wu asserted that he returned the answer: "Yes, I'm happy to guarantee you that you will make no loss upon the sale of all these properties."
In relation to this topic he gave the following further evidence:-

"MR COLQUHOUN: Did you say anything to him about long-term relationship?---Yes, well, I basically say, 'Because of the fact that I want to create a long-term good working relationship with you and I am confident about this project, I'm willing to guarantee you making no loss upon the sales of these houses.' We changed the documents, the heads of agreements in their essence, and Mr Lie basically said that, you know, 'You been good to me and I good to you, and I'm willing if we can pre-sell some of these properties before we complete it, I'm happy to accelerate the payment in regards to the management fee to you.' That is the reason the insertion of the two additional clauses in the last page of the heads of agreement.

So, at that stage, just to clarify that, I think you said this, at that stage then you inserted two additional clauses into the heads of agreement?---Yes.

One of which related to a form of guarantee?---Yes. Right?---The guarantee clause we now looking at the heads of agreements. It's a difference one. The guarantee clause at the time, yes, we will guarantee Amealco making no loss upon the sales of all the properties."

There followed an attempt to clarify this evidence, which resulted in the following evidence being given:-

There was discussion about a form of guarantee clause and something was actually written down ---? ---Yes. ---on a heads of agreement document but it wasn't the final form?---That's correct.

All right?---And that clause was in and also the final clause on the accelerated payment was also in search at the time along with Mr Lie's name and all the other filling parts of the documents."

Wu continued by saying that the Lies were happy and that they left that particular meeting saying they would come back. They did this a few days later, roughly around 10 June 1988. This was the day upon which the Heads of Agreement were signed. Wu said that before this took place there was a further conversation which he related in evidence as follows:-

"What else was said, if anything?---Yes, he did say something to me. He said: I'll talked to some friends and advisers and they suggest to me that I should not sell these properties, or I should only sell some of this property in order to avoid the property tax, and he asked me can I do that. I say: Really, this is your project, this is your properties, you can do whatever you like. Then I thought: Well, hey, wait a minute, there's something I have to change then, because of the guarantee clause. I cannot guarantee you making no loss if you keep those properties. And did you say anything to Mr Lie on that topic?---I say exactly that to Mr Lie.

I see, right?---And Mr and Mrs Lie - Mr Lie said to me and say: That's easy, we can just change the guarantee by sale of this properties into the valuation - justify it by valuation. So, that is the time we change the final version of the guarantee clause from sale of the property into the guarantee them making no loss, based on the valuation of the property bills.

Yes, what happened then?---Then we both happy, both sides are happy, we sign the documents. And then, that's at - well, after actually we signed the documents and Mr Lie making some off cut conversation with me and then one of them is in the following manner, he said: Simon, I may be selling this property - you know - some of this property to my friends which is - you know very easy to sell, and I may keep some of this property. At that point of time I feel very uncomfortable about the guarantee. What then, I was thinking - I said to him: What then if you are going to sell this property to your friends at a loss and you keep the rest of the property and then you know the whole project come out, in calculation wise, become a loss and that's very unfair to me, and he agree on that and we finally agree to strike out the guarantee clause and then we both initial it on that clause, the striking out of the clause. So, after that was done, what other conversation did you have?---Yes, I asked him - well because we already sealed the deal in terms of management contract, the next thing for us to perform as a manager, to do what we're supposed to do, and the first thing is acquisition of the land and I ask Mr Lie, now we're going to buy the land under, to transfer the title, you know, from Winning Design into Amealco and do you have a lawyer to use. He said, not really and I said - back track a little bit, from some of the documents on Mr Lie, Mrs Lie's file, I was aware of the fact that Mr Lie know Miss Sandra Batey some nine months ago and so I recommend Miss Sandra Batey to Mr and Mrs Lie and ask them, since Miss Batey has helped you nine months ago, can I recommend her to you and Mr Lie say, that's fine and one point of the stage he - I never know Miss Batey until that incident. Miss Batey was - have done some work for Mr John Wong. I never know Miss Batey at the time."

Thereafter, Wu said that he gave instructions to Ms Batey and to the vendor's solicitors "to organise the transference, the exchange of the contracts ...".
There is, of course, very considerable difference between the evidence of Lie and of Wu. Unfortunately, for some reason the elaborate sequence of events deposed to by Wu was not put to Lie. The situation therefore remains that the evidence is fairly starkly conflicting. In cross-examination, Wu agreed that he never told Lie to discuss matters with Ms Batey. He knew that the BA and DA were valid. He told Lie that everything was under control. He denied having said to Lie that he could get a profit of two houses out of the project. He did agree, however, that Lie asked to see the owner of the land. In this regard he gave the following evidence:-

"Dealing with that bit by bit, did Mr Lie ever say, 'I'd like to discuss the price with the owner of the land'?---He always say - he always ask that.

Well, then, when he first asked it, why didn't you say to him, 'Mr Wong and I own it completely" instead of just saying, 'I have a part interest in it'?---No, I didn't even say that until when we come back from the first visit on the site.

That was, in fact, the second occasion that Mr Lie had come into your office?---No, no, no. The first time we go to the site probably is the fourth time he come to our office, may even be fifth time."

Wu also agreed that the contract of sale was signed by Lie on behalf of Amealco in the offices of Advent. He accepted that Lie signed the document at the places that Wong indicated when turning the pages and that the document was never translated to Lie in Mandarin Chinese.
It is useful in evaluating the evidence to have regard, in the first instance, to the written documents, the feasibility study and the Heads of Agreement. These indicate to my satisfaction that more must have occurred in the discussion and negotiation process than is referred to in Lie's evidence. Of course, more may have emerged in his evidence if specific matters had been put to him. However that may be, it is clear that at some discussion between Wu and Lie the alterations to the figuring on the feasibility study took place. The front page of that document indicates that:-

"The total land cost is $600,000.

The price already includes preparation of the development application (DA) which has been approved, and building application (BA). Currently BA has been submitted and is expected to be approved within two weeks. This situation reduces the development time from 12 to 6 months because construction can commence immediately after BA approval."

If one then turns to the second page under the heading "Detail Cost and Profit Analysis" one sees the first item "Land Cost and Council Contribution and Stamp Duty - $650,000". Additions made by Wu indicate that $25,000 was to be subtracted from that figure making a composite total for the three items of $625,000. I am quite satisfied that this alteration was made as a result of negotiation between Lie and Wu whereby the land cost of $600,000 was reduced to $575,000. The result of that reduction would be to leave that part of the first item which was attributable to Council contribution and stamp duty significantly intact.
The figure of $575,000 was quite clearly carried through to the Heads of Agreement where it appears on the first page as being the amount of "Land Cost". I am quite satisfied that despite some ambiguity in the wording of the documents, it was never the intention of Wu or Wong to represent to Lie that the payment of $575,000 would cover the amount of the contribution to Ryde Council which was in fact about $27,000. The feasibility study quite clearly speaks of a Council contribution being included as a separate item, although the precise cost of it is not itemised. If Lie was of the view that his payment of $575,000 for the land also covered the amount of the Council contribution he was in error, perhaps as a result of some misunderstanding on his part but not as a result of any representation express or implied made to him by the respondents.
I am also satisfied that there was negotiation between Lie and Wu resulting in Wu making amendments to the management fee originally set out in the feasibility study. I am satisfied that there was discussion between the two men as a result of which that figure was reduced from $92,540 to a final figure of $80,000. The ink additions are strongly suggestive of a course of bargaining whereby the final figure was arrived at after other figures had been suggested and discarded. I am satisfied that Lie was sufficiently aware of what was occurring in this negotiation to play a meaningful part in it and also to achieve the figure for which he was aiming. Clearly, in this part of the negotiation he would have had no problems about the decision having to be referred for approval. He was negotiating directly with the intended manager.
I am also satisfied that, at least in the initial stages, Lie was prepared to approach his dealings with Wong and Wu on the basis that some long time relationship might be set up. Clearly, from Lie's point of view it would have been advantageous to him in his endeavours to become a property developer in Australia to have an ongoing relationship with persons who had experience in that area. That is, providing he could trust those persons. He was, of course, at an obvious disadvantage. Whatever his business acumen and experience in Indonesia might be, he had no business experience in Australia. He could not speak English nor read it. He was unaware of local laws, rules and regulations affecting property development. It is quite reasonable, in my view, that he should have approached Wong and Wu on the basis that if they dealt fairly with him, a long term relationship might ensue. I am also satisfied that Wong and Wu had in mind that it might well be to their advantage to establish such a relationship with Lie.
I am satisfied, however, that it must have been plainly obvious to them that whatever the extent of Lie's business skill and experience, he was not able to comprehend written English and was dependent upon the contents of documents being either translated or properly explained. He was in the situation where advantage could easily be taken of him. Moreover, whether or not they purported to offer advice to Lie, they undoubtedly undertook to act on his behalf in relation to the acquisition of the Ryde property and in its development. Insofar as they were seeking to sell him property which was effectively theirs, they were obviously in a situation where a conflict of interest existed. Acting for Lie they should have been seeking to achieve the best possible price for him. Acting for themselves in the sale they would obviously have had an interest to achieve the highest possible price in their favour. Obviously there was a duty of full disclosure imposed upon them. Furthermore, the situation required that Lie be separately advised. I simply cannot and do not accept the proposition advanced on behalf of the respondents and by them in their evidence that the relationship between them and Lie could be characterised simply as that of one merchant offering a package deal, land plus management, to another merchant dealing at arms length. Nor do I accept that Lie was receiving independent advice in relation to his dealings with the respondents.
Much was made by the respondents of the alleged role of Mr Sutardi in advising Lie. I am satisfied on the evidence that Sutardi was in fact only a casual acquaintance. He had known Lie's father in connection with the hotel business in Indonesia and the meeting between the two families in Australia was purely by chance in a restaurant in Chinatown. I am satisfied that at the time when this meeting took place Lie trusted Wong and Wu and was seeking to establish some form of ongoing business relationship. He introduced Sutardi to them not as a person who would be advising him in his transactions with them, but as a possible future client for Advent. It was in this character that Mr Sutardi and his son went on the trip in the Advent van around the various development sites that have been referred to. Moreover, I am satisfied that this journey took place after Lie had signed the contract to purchase the land and before the cooling off in his relations with the respondents occurred.
The evidence of Mr Sutardi's son who accompanied them on this inspection tour makes it quite plain that it was not a trip designed to enable Mr Sutardi to see the land at Ryde and offer advice to Lie about it, but rather its purpose was to enable Wong and Wu to bring some entrepreneurial pressure to bear upon Sutardi. Sutardi's son is quite clear in his evidence that there was some pressure to buy being exerted on his father. I consider that the inference is open that Sutardi formed a poor opinion of Wong in particular and passed that view on to Lie. Indeed, Lie said that he received such a warning from Sutardi. Also, it was Sutardi who put Lie in contact with Mr Lum, the estate agent, and through him with Lee who then informed him of the proposed Havelte purchase for $540,000 which had come to nothing. I do not accept that portion of Wu's evidence which asserted that Lie introduced Sutardi as an adviser and organised the inspection tour for the purpose of Sutardi giving him advice, nor do I accept that that tour took place before the conversation which Wu alleged to have occurred in relation to the Heads of Agreement. This portion of his evidence only serves to cast doubt on his general credibility.
In evaluating the evidence I have, of course, had regard to the demeanour of witnesses. Although I experienced some misgivings as to Lie's performance in the witness box I nevertheless found him a more satisfactory witness than I did Wong or Wu. I found their testimony less than impressive. I considered that Lie's evidence, despite what appeared to be some reluctance to acknowledge facts adverse to his case, nevertheless, contained a hard core of truth. Conversely, I considered that the evidence of Wong and Wu exhibited characteristics of rehearsed reconstruction. This was particularly so in the area of their major vulnerability, namely that of their conflict of interest.
I simply do not accept that either of them told Lie that they had any interest in the Ryde property. I accept that they engaged in a charade of telling Lie at the conclusion of negotiation or discussion sessions that they would refer the matter to the vendor and get back to him. I found that part of Lie's evidence credible and his demeanour in the giving of it impressive. Conversely, the parts of the respondents' evidence dealing with the topic of disclosure of interest had all the hallmarks of convenient reconstruction.
In my view, both Wong and Wu regarded Lie, despite the disadvantages under which he was labouring, as being a fairly astute businessman. They were well aware that they stood to make a windfall profit from the sale of the Ryde property, having regard to the advantageous price at which they had purchased it. Furthermore, they had purchased it by borrowing the full amount of the purchase price and were therefore incurring holding charges which would eat into their potential profit if the property were not on-sold with reasonable speed. I was not impressed with the evidence that it would have been possible to have achieved, at least in any reasonable time, prices in excess of the $575,000 price that Lie was prepared to pay. I am satisfied that, in those circumstances and in the situation where a previous transaction at a lower price was not going ahead, they were anxious to sell to Lie at the price they were negotiating. They would have been aware that if they had revealed to Lie their own interest in the property that he would have asked further questions of them which might have forced them to reveal the profit they were making. In those circumstances they would have considered that he would either have backed away from the deal or sought a substantial reduction in price. They had strong motives for not revealing their ownership of the property to Lie. I am satisfied that they did not do so.
Additionally, I am satisfied that they represented to Lie that once he had paid over the money he would be able to commence building promptly. It was part and parcel of this representation that they asserted to him, as he claimed in his evidence, that he would receive all necessary documentation to enable him to build. As I have already indicated, I am not satisfied that the representation went so far as to assert that he would not be involved in paying the Council contribution necessary to obtain the ultimate release of the building plans. However, I am satisfied that it certainly went as far as assuring him that the payment of $575,000 would entitle him as against the vendor to receive all the vendor's entitlement to develop and build. For this representation to be made good it was necessary that Amealco be put in a position of having contractual rights against Winning Design requiring the handing over of documents evidencing the approval of the development and building applications.
I am quite satisfied also that the respondents represented to Lie that they would be taking no profit out of the transaction other than the management fees contracted for in the Heads of Agreement. This was part and parcel of the representation that they were not the owners of the property and that in dealing with the owners on behalf of Amealco they would make no profit.
I am satisfied that these representations operated as an inducement to Lie in causing Amealco to enter into the contract of purchase.
Moreover, the conduct of the respondents in instructing the solicitor Ms Batey not to concern herself with development and building approvals resulted in no contractual terms being inserted into the contract which would have protected Amealco in this regard. The admitted failure of the respondents to translate the contract or explain it to Lie at the time when they obtained his signature to it only served further to disguise from him the fact that his company was not receiving that protection.
A number of claims are made in the statement of claim. In view of the findings that I have made it is not necessary that I consider all of them.
In the statement of claim, complaint is made that misleading and deceptive misrepresentations were made by the respondents to the effect that neither had any prior or present interest in the ownership of the Ryde property. Complaint is also made that the respondents in trade or commerce engaged in unconscionable conduct contrary to the provisions of s 52A(1) of the Act in that they "advised the applicants to purchase land which was overpriced, in which the respondents had an interest or former interest, which property was not conveyed with the building approval and building permit and which purchase was in concert with a purported deed of agreement containing harsh and unconscionable terms".

I consider that these complaints are amply made out. I need say no more in respect of the first. As to the second, the result of the instructions given to Ms Batey was that the first applicant, Amealco, purchased for $575,000 a development property which, because of the absence of any contractual right on its part to obtain the DA and BA was clearly not worth the price being paid. I am also of the view that the management agreement was so bound up in the Heads of Agreement with the purchase of the land that it was, without more, tainted by the unconscionability attached to that purchase. Manifestly it could not, in conscience, operate in circumstances where the managers were demonstrated to be untrustworthy.
I am satisfied therefore that the applicants are entitled to the declarations that they seek in paragraphs 1 and 2 of the application. I do not find it necessary to consider finally whether they are entitled to the other declarations sought. I express the view that in respect of at least some of them there would be difficulty in fitting the facts as found into the statutory framework relied upon. In all the circumstances I am prepared to make the tenth and eleventh declarations sought namely that "by reason of the conduct of the respondents and each of them the applicants have suffered loss and damage" and to grant a declaration that the Heads of Agreement document is invalid. I consider the Act provides ample power for the making of these declarations.
It remains, then, to consider the applicants' claim for damages. It must be noted at the outset that the applicants at no stage made any claim to repudiate the contract of purchase. They sought merely to repudiate the management agreement. I therefore do not approach the matter on the basis that they are seeking to recover the purchase price and to return the property to Winning Design. The applicants were prepared to retain the property and, as the evidence indicates, they did so at the time of these proceedings.
I consider that, whatever view Lie had formed as to the trustworthiness of the respondents, he was satisfied to retain the property even if he were not satisfied with the price he had paid for it. The property simply remained in what might be described as his development portfolio. Indeed, as I shall indicate, he made efforts to develop it.
A great deal of evidence was directed to the question of the correct valuation of the Ryde property at the time when the applicants purchased it. I do not propose to refer to it in any detail. The property quite obviously had a different value depending upon whether it was sold merely as a block of land with an old house on it or such block with an approved development application and building application, or with an approved development application only. The evidence of valuers called in the case was, as is not unusual, in a state of conflict. Quite clearly, there was a swiftly rising market for development sites of the quality of the Ryde property. Indeed, evidence was called by the respondents to the effect that at the time of the settlement prices significantly in excess of $600,000 might have been obtained. It was indeed a theme of their case that they were being generous to the applicants in order to secure their continued business. In situations such as this, courts can only do the best they can to reach a decision amongst competing evidence.
I could find no reason to select the approach of one valuer as being markedly superior to all others. As at the time of settlement, when Lie had lost his trust in Wong and Wu, I do not consider that he was bereft of outside advice. Although he had signed a contact to purchase the land, he had not paid the purchase money. In my view, he made a conscious decision to go ahead, in circumstances where he felt cheated and might well have made a decision to repudiate all his contractual arrangements with Wong and Wu, seek the return of the monies he had paid and simply give up the land. That he chose not to do so is indicative to me that he was not wholly dissatisfied with the price itself. Although I was not impressed with the evidence as to values in excess of $600,000, I was equally unimpressed with the suggestions that the value of the land was markedly less than the contract price. I have come to the conclusion that, on the basis that the development application and building application approvals were readily available and that there was no impediment to the commencement of building within a reasonable time, that the price of $575,000 actually paid by the applicants was a reasonable price.
The price, however, was for the land with the approvals and the right to build within a reasonable time. At the time Lie paid the price, he would have been under the misapprehension that in fact the approvals were available to him. In the first instance he had no contractual right to them, as the result of the instructions that had been given by Wu to Ms Batey. Moreover, there were clear difficulties, unknown to him, relating to the release to him of the building application approval. Design Development had placed the embargo upon it to which I have already made reference. Wong and Wu had also taken steps to prevent the release to Lie of the building approval. This had been done by the alteration of the transfer document originally received from Design Development so that it effected the transfer from that company to Advent rather than to Amealco. The altered document had been sent to the Council with the result that Amealco was not, so far as the Council was concerned, the appropriate entity to receive the building plans. This action had been undertaken by Wong on the basis that he was exercising a lien after the repudiation of the management agreement.
As to the availability of the development application consent, the evidence is unclear. Clearly the applicants had no right under the contract to receive the document. Presumably Wong and Wu had possession of it. The fact remains, however, that the development application itself had been granted for the eight villa development on the land. No further fees were payable to Council in respect of it and, so far as I can see, it was available to be utilised. However, the building approval was clearly not readily available for reasons other than the necessity to pay the Council contribution. In these circumstances I consider that the approach to damages should, in the first instance, be one of assessing the effect upon the price paid by the applicants of the absence of availability of building approval.
Doing the best I can on the evidence in the case, I consider that a reasonable approach to the assessment of damages in this regard is to hold that the absence of ready availability of building approval reasonably reduced the value of the Ryde property at the time of settlement by approximately 13%. I therefore find that at the time when the applicants paid the price of $575,000 on the basis of representations made to them by the applicants, they received property worth only $500,000.
The applicants make claim in addition for consequential losses. The evidence relating to these is sparse and difficult. Although it was said that Mr Lie would be recalled on the question of damages, this did not occur. His son was called. I found his evidence difficult and unconvincing. I am prepared to accept that some effort was made, after the dismissal of the respondents, by Amealco to proceed with the development. At that point of time, obviously, the difficulty in relation to the building plans would have become apparent. Apart from the problem which had been created by Wong's alteration of the transfer of the benefit of the building application approval from Amealco to Advent, there would have been the need to resolve the problems of the bank guarantees with Design Development. As I have indicated, I do not regard the requirement of payment of the Council contribution, unpalatable as that may have been to the applicants, to be a matter creating any liability in the respondents.
As best as I can understand the situation, it would appear to be that the applicants found themselves confronted with problems, one of which was the requirement of the payment of the Council contribution, when they sought to proceed with the development which they had purchased. It may well have been, and there is no significant evidence to the contrary, that those problems could have been overcome fairly readily by a direct approach to both Design Development and Advent. I have a strong impression that they adopted the view that they were not prepared to pay the Council contribution because they, erroneously, considered that they had been cheated in this regard by representations from Wu and Wong that it was included in the purchase price. Some evidence from Mr Sutardi's son is suggestive of this. In the event they did not proceed with the purchased development but, instead, decided to seek development of the property in a different way. They sought to develop the land with ten villas rather than eight. I can only assume that this development was sought on the basis that it would be productive of greater profit to them. This development did not receive Council approval. The matter then appears to have gone into limbo, whilst the applicants pursued other developments in other areas. Ultimately they sought to return to the Ryde development only to be informed by the Council that as it had not been proceeded with within the period of two years from the granting of the original approval, that approval had lapsed.
On the basis of this chain of events the applicants seek recoupment from the respondents of a large number of costs incurred, including those involved in the preparation and lodgment of the application for a ten villa development. In my view, the claim made for consequential losses is largely insupportable. I can see no proper basis for the awarding of any amount for damages other than something to compensate them for costs that would reasonably have been incurred over a reasonable period required for the obtaining of a fresh approval for building in accordance with the original development approval. They cannot recover the cost of obtaining that approval as this head of loss has already been taken into account in the reduced value of the land.
I am prepared to allow one year's Council rates in the amount of $1,698.21 and one year's Water Board rates in the amount of $483.15 as being payments unnecessarily incurred through delay in the project. I also allow the amount of accountants fees paid in attempts to obtain Amealco's company documents that were being improperly retained by the respondents. The amount of that fee is $512.00.
The period of delay reasonably incurred before the project could be commenced would also have resulted in an interest opportunity cost in respect of the $575,000 paid for the purchase of the land. Precision is not possible in this area. I think it appropriate to allow under this head a figure which together with the other items that I have allowed produces a total of $45,000.
This figure should be added to the $75,000 loss on purchase price of the property producing a figure of $120,000.
I am also satisfied that the applicants have established a case for the repayment of $7,679.90 from the amount of $10,000 paid by way of instalment of the management fee. This figure was an agreed figure in the event of the entitlement being established. I am satisfied that this amount should reasonably have been regarded as included in the purchase price and not as the subject of a separate charge.
The total loss of $127,679.90 was incurred partly in June 1988 and partly at varying times during the ensuing years. The applicants are entitled to interest on this sum to date. It is impossible to be precise in this calculation. Doing the best I can, I add interest bringing the total amount recoverable to $185,000. I enter judgment in favour of the applicants for $185,000 plus costs.
In the circumstances, Wong and Wu are clearly persons involved in the contraventions of the Act. I therefore enter judgment in favour of the applicants against the respondents.
As I have set aside the management agreement the cross-claim based upon it cannot succeed. I am satisfied that, in the circumstances, work done by the respondents was of no value to the applicants. The claim based on quantum meruit also fails. I therefore dismiss the cross-claim with costs.

[1993] FCA 246

23 APRIL 1993