Awap Sgt 26 Investment Ltd v CN 2000 Holdings Ltd
[2020] WASCA 74
•14 MAY 2020
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: AWAP SGT 26 INVESTMENT LIMITED -v- CN 2000 HOLDINGS LTD [2020] WASCA 74
CORAM: BUSS P
MITCHELL JA
HILL J
HEARD: 20 & 21 FEBRUARY 2020
DELIVERED : 14 MAY 2020
FILE NO/S: CACV 121 of 2018
BETWEEN: AWAP SGT 26 INVESTMENT LIMITED
Appellant
AND
CN 2000 HOLDINGS LTD
First Respondent
CN (HONG KONG) LTD
Second Respondent
LI CHEN CHOU
Third Respondent
FILE NO/S: CACV 124 of 2018
BETWEEN: LI CHEN CHOU
Appellant
AND
AWAP SGT 26 INVESTMENT LIMITED
First Respondent
CN 2000 HOLDINGS LIMITED
Second Respondent
CN (HONG KONG) LIMITED
Third Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram: ALLANSON J
Citation: CHOU -v- AWAP SGT 26 INVESTMENT LTD [No 3] [2018] WASC 383
File Number : CIV 1384 of 2010
Catchwords:
Contract and debt - Whether money paid by third party was on account of debt owed by a party - Whether debt discharged by a third party payment under legal compulsion voluntarily entered into - Whether abuse of process to enforce debt where money was paid by a third party on account of debt - Whether foreign judgment gives rise to res judicata or issue estoppel in respect of non-party to foreign proceedings - Whether non-party to foreign proceedings privy in interest - Delay in judgment - Whether trial judge erred in finding as to the terms on which payment discharging a third party's debt was made
Restitution - Total failure of consideration - Whether payment made for the issue of shares that were never issued is recoverable by payee - Where admitted pleadings state that shares were issued and the issue of the shares was subsequently cancelled - Where evidence admitted at trial established that the shares were never issued and the shares (rather than their issue) were subsequently cancelled - Whether restitutionary claim to be determined on the pleadings or the contrary facts established by the evidence - Whether payee's resitutionary claim is established on either approach
Legislation:
Nil
Result:
Appeals dismissed
Category: B
Representation:
CACV 121 of 2018
Counsel:
| Appellant | : | P E Cahill SC and C M Beetham |
| First Respondent | : | M C Goldblatt |
| Second Respondent | : | No appearance |
| Third Respondent | : | No appearance |
Solicitors:
| Appellant | : | Tottle Partners |
| First Respondent | : | Lenhoff & Associates |
| Second Respondent | : | Lenhoff & Associates |
| Third Respondent | : | Lenhoff & Associates |
CACV 124 of 2018
Counsel:
| Appellant | : | M C Goldblatt |
| First Respondent | : | P E Cahill SC and C M Beetham |
| Second Respondent | : | No Appearance |
| Third Respondent | : | No Appearance |
Solicitors:
| Appellant | : | Lenhoff & Associates |
| First Respondent | : | Tottle Partners |
| Second Respondent | : | Lenhoff & Associates |
| Third Respondent | : | Lenhoff & Associates |
Case(s) referred to in decision(s):
Baltic Shipping Co Ltd v Dillon (1993) 176 CLR 344
Carna Group Pty Ltd v The Griffin Coal Mining Company Pty Ltd [2015] WASC 142
Central Piggery Co Ltd v McNicoll (1949) 78 CLR 594
Damberg v Damberg [2001] NSWCA 87; (2001) 52 NSWLR 492
Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640
Embleton Motor Co Pty Ltd v St Kilda Beach Taxi School and Staffing Pty Ltd [2014] WASCA 183
Equuscorp Pty Ltd v Haxton [2012] HCA 7; (2012) 246 CLR 498
Federal Commissioner of Taxation v St Helen's Farm (ACT) Pty Ltd (1981) 146 CLR 336
G v O [2018] WASCA 211; (2018) 53 WAR 393
Gramophone Co Ltd v Magazine Holder Co (1911) 48 SLR 1081; (1911) 28 RPC 221
Heckenberg v Delaforce [2000] NSWCA 137
Holdway v Arcuri Lawyers [2008] QCA 218; [2009] 2 Qd R 18
Ibrahim v Barclays Bank Plc [2012] EWCA Civ 640; [2012] 4 All ER 160
Jackson v Turquand (1869) LR 4 HL 305
Joyce v Anderson [2020] WASCA 48
Lee v Lee [2019] HCA 28; (2019) 93 ALJR 993
Maddocks v DJE Constructions Pty Ltd (1982) 148 CLR 104
Norcast S.ár.L v Bradken Ltd [No 2] [2013] FCA 235; (2013) 219 FCR 14
Re Associated Securities Ltd [1981] 1 NSWLR 742
Robinson Helicopter Co Inc v McDermott [2016] HCA 22; (2016) 90 ALJR 679
Roxborough v Rothmans of Pall Mall [2001] HCA 68; (2001) 208 CLR 516
Sydney Futures Exchange Ltd v Australian Stock Exchange Ltd (1995) 56 FCR 236
Tomlinson v Ramsay Food Processing Ltd [2015] HCA 28; (2015) 256 CLR 507
Vale v Sutherland [2009] HCA 26; (2009) 237 CLR 638
Vantage Systems Pty Ltd v Priolo Corporation Pty Ltd [2015] WASCA 21; (2015) 47 WAR 547
Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285
Zerjavic v Chevron Australia Pty Ltd [2020] WASCA 40
Contents
Summary
Factual background
Establishment of Awap
The Tans acquire an interest in Awap
The swimming club meeting on 29 November 2006
Subsequent correspondence and litigation in Singapore
Allotment of Additional Shares in 2007
Federal Court injunction
Judgment in the Singapore proceedings
Pre-settlement discussions about the Additional Shares
Settlement of share sale and cancellation of 'rights issue'
Issues in the primary proceedings and their resolution by the trial judge
Mr Chou's claim in debt
CN 2000's claim in restitution
CN (Hong Kong)'s claim for director's and management fees
Mr Chou's appeal to this court
Resolution of Mr Chou's appeal
Payments in discharge of another's debt
Significance of the Singapore judgment
Grounds 5 - 7: Res judicata and issue estoppel
Ground 8: Abuse of process by Awap
Conclusion as to grounds 5 - 8
Ground 9: Abuse of process by Mr Chou
Grounds 1 - 3 so far as they contend there was no binding agreement
Mr Chou's challenge to a finding of primary fact
Ground 1: Delay and reasons
General principles
The trial judge's reasoning process
Delay and reasons in this case
Evidence as to what was said at the swimming club meeting
Email communication by Mr Tan on 30 November 2006
Email correspondence 3 - 13 December 2006
Mr Lee's letter of 20 December 2006
Pleadings in the Singapore proceedings
Pleadings in Federal Court oppression proceedings
Completion of share transfer to the Tans on 17 December 2008
Mr Chou's email of 19 January 2009
Mr Chou's July 2009 affidavit
Federal Court proceedings in September 2009
Daniel Tan's June 2010 affidavit
Whether payment made on account of debt
Disposition of Mr Chou's appeal
Awap's appeal to this court
Resolution of Awap's appeal
Conduct relating to the issue of the Additional Shares
Legal effect of the above conduct
Total failure of consideration is established
Pleading issues raised by Awap
Awap fails on the pleadings in any event
Choice of law
Application to amend pleadings
Orders
JUDGMENT OF THE COURT:
Summary
These appeals arise out of a dispute between Chou Li Chen (Mr Chou), the brothers Tan Kah Hock and Tan Kah Hong (the Tans) and their associated companies. Consistently with the approach taken in the proceedings to date, we will refer to the Tans by the anglicised versions of their names, Daniel and Richard Tan. Mr Chou and the Tans are businessmen resident in Singapore.[1]
[1] Primary decision [3], [7].
Mr Chou and the Tans each held 50% of the shares in Awap SGT Investment Ltd (Awap). Mr Chou's shares were transferred to the Tans on or about 17 December 2008, pursuant to a consent judgment of the High Court of the Republic of Singapore. The Singapore judgment gave the Tans specific performance of an agreement for the sale of the shares, which had been reached at a meeting between Mr Chou and Daniel Tan at the Singapore Swimming Club on 29 November 2006 (swimming club meeting).[2]
[2] Primary decision [38], [45], [95], [108].
The trial judge relevantly determined two issues in dispute between the parties to the primary proceedings.
First, the trial judge dealt with a claim by Mr Chou against Awap for money which he, as a shareholder of that company, had lent Awap. While the debt was admitted, Awap contended that the agreement reached at the swimming club meeting operated to discharge Awap's debt to Mr Chou. The trial judge dismissed Mr Chou's claim, essentially on the basis that the price for the sale of shares in Awap included the discharge of any loans and any fees owed by Awap to Mr Chou. Mr Chou appeals against the dismissal of his claim.
Secondly, the trial judge dealt with a claim by CN 2000 Holdings Ltd (CN 2000), a company associated with Mr Chou, against Awap. CN 2000 sought restitution of $875,000 it had paid to Awap for the issue of shares in Awap, contending that there was a total failure of consideration for that payment when the issue of the shares was cancelled. The trial judge found that claim to be established. Awap appeals against the judgment given to CN 2000 on that claim.
For the following reasons, both Mr Chou's and Awap's appeals should be dismissed.
Factual background
The trial judge made the following factual findings.
Establishment of Awap
In 1997, Mr Chou and another businessman, Mr Foo, formed Awap as a vehicle to purchase and hold an investment property, called International House, in Western Australia. Awap is registered in Western Samoa.[3]
[3] Primary decision [3] - [4].
There were 50 issued shares in Awap. Half were owned by Goldpex Investments Ltd (Goldpex), a company associated with Mr Foo. Mr Chou held one share, and companies associated with Mr Chou, referred to below as the 'Assobuild companies', held 24 shares between them.[4]
[4] Primary decision [9], [32].
Awap had two corporate directors: Goldpex and CN (Hong Kong) Ltd (CN (Hong Kong)), a company associated with Mr Chou. Mr Chou was Awap's 'first secretary' (the equivalent to a company secretary in Australia) and had the day to day management of Awap, which operated relatively informally.[5]
The Tans acquire an interest in Awap
[5] Primary decision [5], [33] - [35].
On 31 March 2006, Goldpex sold its 25 shares in Awap to the Tans, following negotiations conducted between Mr Chou and Daniel Tan. The negotiations involved payments to clear Awap's debts to Goldpex, and a document was prepared releasing Awap from those liabilities.[6]
[6] Primary decision [38] - [40].
The relationship between the Tans and Mr Chou was troubled. As early as June 2006, Daniel Tan accused Mr Chou of wrongfully withdrawing a large sum from the partnership account, referring to 'your usual shady manner'. Mr Chou, in reply, referred to Daniel Tan's 'foul games'. It was clear in 2006 that joint ownership and control of Awap was not feasible. The Tans attempted to buy Mr Chou's interests in Awap.[7]
The swimming club meeting on 29 November 2006
[7] Primary decision [41].
Daniel Tan and Mr Chou met at the Singapore Swimming Club on 29 November 2006. They discussed who was going to buy the other out.[8]
[8] Primary decision [45].
The following matters were common ground. Mr Tan offered to buy Mr Chou out for a total price of AUD $9.8 million. Mr Chou agreed to sell his shares in Awap at that price, asking for the payment to be partly in Singapore dollars ($9.8 million) and partly in Australian dollars ($2.3 million). Mr Chou said he wanted the AUD $2.3 million as a deposit. At that time, Mr Chou (or his companies) were owed about AUD $2.2 million, including about AUD $1.825 million for Mr Chou's shareholder loans.
Otherwise, what was said at the meeting was in dispute at trial. In particular, there was a dispute as to whether:
(1)a concluded oral agreement for the sale of shares in Awap was reached at the meeting or whether the agreement was 'subject to contract'; and
(2)the purchase price included the discharge of Awap's indebtedness to Mr Chou.
Those issues remain contentious in the appeal.
The trial judge accepted Daniel Tan's account of what was said at the meeting.[9] That account was to the following effect. Mr Chou wanted payment in two currencies and said that the payment in Australian dollars was for his loan and fees. Mr Chou wanted payment for the equity in Singapore dollars, and AUD $2.3 million as a 'liability payment'. They shook hands to confirm the deal and, while shaking, Daniel Tan pointed with his left hand and said two things - one in Mandarin and one in Hokkien - meaning 'all is included' and 'included until the end'. Daniel Tan also said, in English, 'all in' while he and Mr Chou shook hands.[10]
[9] Primary decision [136].
[10] Primary decision [49], [52], [136].
The trial judge was satisfied that there was an agreement between Mr Tan and Mr Chou for the sale of the shares held or controlled by Mr Chou in Awap, and the agreed price included loans and any fees owed to Mr Chou.[11]
Subsequent correspondence and litigation in Singapore
[11] Primary decision [147].
Between December 2006 and February 2007, Mr Chou and Daniel Tan and their representatives engaged in correspondence disputing what was said at the swimming club meeting. The dispute concerned whether or not the agreement was binding, and the amount of a deposit which was payable.[12]
[12] Primary decision [60] - [69], [71] - [75].
On 30 December 2006, CN (Hong Kong), as director of Awap, resolved to register the transfer of the shares that had been held by the Assobuild companies to Mr Chou.[13]
[13] Primary decision [70].
On 3 May 2007, with Mr Chou continuing to refuse to complete the share sale, the Tans commenced proceedings against Mr Chou and the Assobuild companies in the High Court of the Republic of Singapore. The Tans claimed specific performance of the Agreement (as pleaded in the statement of claim), and damages in addition to or in lieu of specific performance.[14]
Allotment of Additional Shares in 2007
[14] Primary decision [78].
On 18 June 2007, CN (Hong Kong), as sole director of Awap, resolved to register the transfer of the shares Mr Chou held in Awap to CN 2000. On 21 August 2007, one of those shares was transferred to Goh Kim Hua.[15]
[15] Primary decision [87].
On 25 August 2007, Awap purported to appoint CN 2000 as an additional corporate director.[16]
[16] Primary decision [5], [88].
On 7 September 2007, CN (Hong Kong) gave notice of a general meeting of Awap to consider raising AUD $1.75 million in equity funding by a one‑for‑one rights issue of shares to existing members.[17]
[17] Primary decision [89].
The general meeting was held on 20 September 2007. The minutes record that the Tans, through their lawyer, asserted that:
(1)CN (Hong Kong) had been removed from being a director of Awap on 14 September 2007;
(2)the two company secretaries (including Mr Chou) had also been removed; and
(3)the meeting was invalid.[18]
[18] Primary decision [90].
The meeting resolved to raise AUD $1.75 million by the issue of 50 additional shares on a one-for-one rights issue, each share being US $1, and carrying a premium of AUD $375.[19]
[19] Primary decision [90].
On 21 September 2007, Mr Goh transferred his rights under the additional share issue to CN 2000. On 27 September 2007, CN 2000 took up the rights issue, paying AUD $875,000.[20] It is convenient to refer to the shares which are the subject of the rights issue as the 'Additional Shares'.
Federal Court injunction
[20] Primary decision [91].
In 2007, the Tans and their associated company, Deo Silver (Pte) Ltd (Deo Silver) commenced proceedings against Awap, CN (Hong Kong), Mr Chou and CN 2000 (as respondents) in the Federal Court of Australia.[21]
[21] Primary decision [9], [92].
On 27 September 2007, orders were made restraining the respondents in the Federal Court action from taking any further action regarding the affairs of Awap, including any action in relation to the purported meeting of 20 September 2007, without the prior written consent of the Tans and Deo Silver. On 28 September 2007, the Federal Court ordered that Awap be restrained from taking any action in respect to its affairs other than upon the written consent of each of Deo Silver and CN (Hong Kong).[22]
Judgment in the Singapore proceedings
[22] Primary decision [93].
On 17 October 2008, the solicitors for Mr Chou wrote to the solicitors for the Tans, advising that they were instructed that CN 2000 had reached an agreement with Mr Chou and stood ready to transfer the 25 Awap shares it had purchased from him back to Mr Chou to enable him to agree to the Tans' claim in their action for specific performance. Mr Chou agreed to sell the 25 shares at the pleaded price.[23]
[23] Primary decision [94].
On 30 October 2008, final judgment was entered by consent in the Singapore proceedings in the following terms:[24]
(1)Judgment be entered for [the Tans] for specific performance of the Agreement, including the transfer of all subsequent rights‑issued shares and bonus-issued shares, (if any) (collectively referred to as the said Shares) to [the Tans] but without prejudice to [Mr Chou's and the Assobuild companies'] and/or [CN 2000's] rights to claim in Australia the sum of A $875,000.00 plus interest, (if any) alleged to have been paid by [CN 2000] to [Awap];
(2)Completion shall take place within six (6) weeks from the date hereof;
(3)Completion shall include the transfer of the said shares and payment of S $9 million and A $2.3 million to [the Tans] solicitors to hold as stakeholders and to be released to [Mr Chou's and the Assobuild companies'] solicitors only upon final registration of the said Shares;
(4)Damages to [the Tans], if any, to be assessed; and
(5)Costs for [the Tans] to be agreed or taxed.
Pre-settlement discussions about the Additional Shares
[24] Primary decision [95].
On 3 November 2008, solicitors for Mr Chou wrote to the solicitors for the Tans, advising:[25]
Final Judgment has been entered into and approved by us on the understanding and on the basis that the sum of A $875,000 was paid by [CN 2000] to [Awap] as a loan and not as rights-issued shares. As such, the draft Final Judgment is to be engrossed and filed on this basis and understanding.
[25] Primary decision [96].
Mr Chou's solicitors also stated that there were no rights issued or bonus issued shares registered with the Samoan registry, and only 50 issued shares in Awap.[26]
[26] Primary decision [97].
On 29 November 2008, the Tans' solicitors requested to see copies of the documents necessary for completion, including duly executed transfer forms for the shares 'including all rights and bonus shares'; notices of resignation of CN (Hong Kong) as director and Mr Chou as secretary of Awap; and letters terminating the services of the local agent and accountant for Awap.[27]
[27] Primary decision [100].
This resulted in further exchanges between the solicitors. On 5 December 2008, the solicitors for the Tans referred to the Additional Shares, and claimed that the Tans were entitled to have those shares transferred to them under the terms of the judgment.[28]
[28] Primary decision [101].
In response, on 10 December 2008, the solicitors for Mr Chou repeated their position that the judgment had been signed on the understanding set out in their letter of 3 November 2008. But they also asserted:[29]
With regard to the [Additional Shares], our clients' position is that the shares were never registered in the Register of Members and with the Samoan Registry and thus there are no [Additional Shares] to be transferred to your clients. If it is indeed your clients' position that the [Additional Shares] were issued arising out of the payment of A $875,000 by [CN 2000], and are also liable to be transferred to your clients, then it stands to reason that your clients should then agree to pay $875,000 plus interest to [CN 2000] for [the Additional Shares].
[29] Primary decision [102].
On 11 December 2008, the solicitors for the Tans wrote requiring the Additional Shares to be transferred, 'irrespective of whether it had been registered'.[30]
[30] Primary decision [104].
On 15 December 2008, the solicitors for the Tans wrote again, referring to Mr Chou's contention that no share certificate had been issued for the Additional Shares and requiring a share certificate to be issued and transferred.[31]
[31] Primary decision [105].
Mr Chou's solicitors replied on the same day, advising that it would take about two weeks to obtain fresh blank share certificates. In a further letter on 15 December 2008, they advised that their instructions were that CN 2000 would be cancelling the allotment of the Additional Shares and resigning as director of Awap.[32]
Settlement of share sale and cancellation of 'rights issue'
[32] Primary decision [106].
Completion of the share sale occurred on 17 December 2008 with two instruments of transfer, by which:[33]
(1)in consideration of the sum of SGD $4,320,000 and AUD $1,104,000, Mr Chou did 'hereby bargain, sell, assign and transfer to [Daniel Tan], subject to actual receipt of the said Sum (the share price) plus interest accrued in the stakeholder's account of the transferee's solicitors', 13 shares in Awap; and
(2)in consideration of the sum of SGD $4,680,000 and AUD $1,196,000, Mr Chou did 'hereby bargain, sell, assign and transfer to [Richard Tan], subject to actual receipt of the said Sum (the share price) plus interest accrued in the stakeholder's account of the transferee's solicitors', 12 shares in Awap.
[33] Primary decision [108].
Mr Chou also provided a letter, dated 17 December 2008, signed as a director of CN 2000, in these terms:[34]
We refer to the allotment of 25 rights-issue shares of which 24 shares were allotted to us and one share was allotted to Goh Kim Chua [sic] pursuant to the Resolution passed on 20.9.07. Of date, we are entitled to the whole of the entire 25 shares allotted.
As no Share Certificates have been issued for the allotment of the entire 25 rights-issue shares and to facilitate the completion of the Consent Final Judgment of the High Court of the Republic of Singapore entered on 30.10.08 …, we hereby propose to treat the aforesaid 25 rights-issue shares as cancelled.
[34] Primary decision [109].
CN (Hong Kong) and CN 2000, as directors of Awap, resolved, subject to the written consent of each of CN (Hong Kong) and Deo Silver, as required pursuant to the orders of the Federal Court, to treat the Additional Shares as cancelled. CN (Hong Kong) and Deo Silver acknowledged in writing their consent to the resolution.[35]
[35] Primary decision [110].
Issues in the primary proceedings and their resolution by the trial judge
In 2010, Mr Chou, CN 2000 and CN (Hong Kong) commenced the primary proceedings against Awap in the General Division of this court. The following is a summary of the issues raised in the primary proceedings and the manner in which the trial judge resolved those issues.
Mr Chou's claim in debt
Mr Chou claimed that, from time to time between 12 February 1997 and 30 January 2009, he advanced funds to Awap, resulting in a debt at 30 January 2009 of AUD $1,825,000. He claimed repayment of the principal and interest at rates he says were agreed.[36]
[36] Primary decision [126].
Awap ultimately admitted the debt, but said that the debt was discharged or otherwise extinguished by the transfer of shares and payment pursuant to the judgment in the Singapore proceedings. Alternatively, Awap contended it would be an abuse of process for Mr Chou to seek to recover that debt from Awap as it had been discharged.[37]
[37] Primary decision [127] - [128].
As noted above, the trial judge found that the agreed price for the sale of shares in Awap included loans and any fees owed by Awap to Mr Chou.[38]
[38] Primary decision [147].
The trial judge found that the judgment in the Singapore proceedings settled between the parties to those proceedings the existence of an obligation on Mr Chou and the Assobuild companies to transfer the shares they held in Awap for payment of SGD $9 million and AUD $2.3 million. However, the judgment did not necessarily or conclusively determine any issue regarding the amounts Mr Chou claimed were now owed.[39] It was not an abuse of process for Awap to assert the discharge of that debt in the primary proceedings.[40] However, it was an abuse of process for Mr Chou to claim in these proceedings that there was no agreement for the sale of his shares in Awap to the Tans.[41]
[39] Primary decision [150], [152] - [153].
[40] Primary decision [154] - [155].
[41] Primary decision [156].
In dismissing Mr Chou's claim, the trial judge concluded:[42]
The judgment in the Singapore proceedings establishes the fact of the agreement against Mr Chou. It does not preclude dispute about the terms of that agreement, other than the price for the transfer of the shares. But, as set out above, I am satisfied that Mr Tan's evidence should be accepted and is sufficient evidence that the agreement included the discharge of Mr Chou's loan and fees.
Should it be necessary, I accept the alternative argument put forward on behalf of Awap. The Tans were not acting as agents for Awap. But the payment by the Tans of the S $9 million, and A $2.3 million was a payment under legal compulsion to discharge the debt of Awap, and is effective to discharge the debt even though the Tans voluntarily assumed the contractual obligation which was the basis of the Singapore judgment.[43]
[42] Primary decision [157] - [158].
[43] See Ibrahim v Barclays Bank Plc [2012] 4 All ER 160; Carna Group Pty Ltd v The Griffin Coal Mining Company Pty Ltd [2015] WASC 142 [21].
The trial judge's dismissal of Mr Chou's claim against Awap is the subject of his appeal (CACV 124 of 2018).
CN 2000's claim in restitution
As noted above, on 27 September 2007, CN 2000 took up the rights issue of shares, paying AUD $875,000 to Awap. On 17 December 2008, it was agreed that the Additional Shares were to be treated as cancelled. That agreement was reached in the context of the completion of the share sale agreement between the Tans, Mr Chou and the Assobuild companies, as required by the consent judgment. CN 2000, which was not a party to the Singapore proceedings, relevantly advanced a restitutionary claim for repayment of the AUD $875,000.
The trial judge upheld this restitutionary claim. His Honour's critical reasoning was as follows:[44]
The High Court has quoted with approval the description of failure of consideration in Birks, An Introduction to the Law of Restitution:
Failure of the consideration for payment … means that the state of affairs contemplated as the basis or reason for the payment has failed to materialise or, if it did exist, has failed to sustain itself.
As a matter of substance, CN 2000 has not received the benefit for which it paid $875,000. No share certificates were issued, and the share issue was subsequently cancelled. Any benefit to CN 2000 contemplated by its payment to Awap has disappeared, while Awap has the benefit of the payment of $875,000. This result could not have been in the contemplation of the parties when CN 2000 agreed to take and paid for the shares.
In my opinion, as a result of the failure of consideration, it would be unconscionable for Awap to retain the $875,000. CN 2000 is entitled to recover the purchase price of the cancelled shares as money paid to and received by Awap for a consideration that has failed. (citations omitted)
[44] Primary decision [169] - [171].
Allowing for interest, the trial judge entered judgment for CN 2000 against Awap for the sum of $1,399,424.66. That award is the subject of Awap's appeal (CACV 121 of 2018).
CN (Hong Kong)'s claim for director's and management fees
The trial judge also found in favour of a claim by CN (Hong Kong) to be paid director's and management fees. As there is no appeal from that aspect of his Honour's decision, it is unnecessary to discuss that aspect of the primary proceedings.
Mr Chou's appeal to this court
Mr Chou appeals against the dismissal of his claim for repayment of a debt owed by Awap on 10 grounds. The grounds of appeal are prolix (running over 10 pages), are not easy to follow and are not usefully reproduced here. In essence, the grounds contend that the trial judge erred in finding that:
(1)A binding agreement was reached between Mr Chou and Daniel Tan on 29 November 2006 (grounds 1, 2 and 3);
(2)It was an abuse of process for Mr Chou to contend in the primary proceedings that no binding agreement was reached (ground 9);
(3)The payment for the sale of the shares included the discharge of Mr Chou's loan to Awap (grounds 1, 4 and 10); and
(4)The judgment in the Singapore proceedings did not determine the issue of whether the loan to Mr Chou was discharged, so that res judicata and issue estoppel did not preclude Awap from contending that the debt was discharged and it was not an abuse of process for Awap to assert that defence (grounds 5, 6, 7 and 8).
Counsel for Mr Chou accepted that the above summary encapsulated the grounds of appeal.[45] Ground 1 also alleges that the trial judge gave inadequate reasons for his finding that the Tans and Mr Chou reached a binding agreement, a term of which was that the price paid for the shares included the discharge of Awap's loans and fees owed to Mr Chou, considering the delay in judgment delivery.
[45] Appeal ts 4.
Awap denies that any of these grounds are established.
Resolution of Mr Chou's appeal
Payments in discharge of another's debt
In the present case, the Tans paid SGD $9 million and AUD $2.3 million to Mr Chou.[46] Awap was not a party to the agreement for the sale of the shares or the Singapore proceedings in which the agreement was specifically enforced. In that context, it is convenient to begin by identifying the legal basis on which a payment by the Tans to Mr Chou can operate to discharge a debt owing by Awap to Mr Chou.
[46] See instruments of transfer at Green AB 179 - 180.
The general principle was stated by Dawson, Gaudron and Gummow JJ in Sheahan v Carrier Air Conditioning Pty Ltd,[47] a case concerning payments by a receiver out of the receiver's own funds to discharge debts owed to subcontractors by an insolvent company TOC. Their Honours observed:
The established pattern of English authority indicates that, at least as a 'general rule', if a payment were so made by the receiver to a creditor of TOC and accepted by the creditor in satisfaction of the debt of TOC, nevertheless the payment would not discharge the liability of TOC to the creditor, unless made as agent for and on behalf of TOC and with the prior authority of or subsequent ratification by TOC. … In any event, … [it has been held that] the creditor could not later maintain an action for the debt. This was because a subsequent action by the creditor against the debtor would be classified as an abuse of the process of the court. (citations omitted)
[47] Sheahan v Carrier Air Conditioning Pty Ltd (1997) 189 CLR 407, 430 - 431.
The position has been held to be different where payment by the third party on account of a debt is made under legal compulsion, even if the legal compulsion arises out of a contractual obligation voluntarily assumed by a party.[48]
[48] Ibrahim v Barclays Bank Plc [2012] EWCA Civ 640; [2012] 4 All ER 160 [49], applied in Carna Group Pty Ltd v The Griffin Coal Mining Company Pty Ltd [2015] WASC 142 [21] - [22].
Payment by a third party in discharge of another's debt may also operate to extinguish the debt where the payment is made pursuant to an agreement between the third party and the creditor and the privity doctrine is modified by a statutory provision such as s 11 of the Property Law Act 1969 (WA). In the present case, however, there is no evidence as to whether an equivalent provision exists under the law of Singapore, which would appear to be the proper law of any contract. Given the way in which Mr Chou's appeal can be otherwise resolved, it is unnecessary to discuss this issue further.
The principles referred to above explain the alternative contentions of Awap before the trial judge that:[49]
(1)any debt it owed to Mr Chou for a loan was discharged or otherwise extinguished; and
(2)alternatively, it would be an abuse of process for Mr Chou to seek to recover that debt from Awap as it had been discharged.
[49] Primary decision [128], Amended Substituted Defence, par 3(e) (Blue AB 140).
In the present case, ground 3 of Mr Chou's appeal contends that the trial judge erred in finding that Mr Chou and Awap, represented by the Tans, entered into the agreement at the swimming club meeting. However, in our view, the trial judge made no finding that the Tans acted as Awap's agent when they made the payment in settlement of the share sale. The passage at [147] of the primary decision, referred to in the ground, simply refers to an agreement between Daniel Tan and Mr Chou. The trial judge noted at [43] that it was not suggested that Daniel Tan was acting as Awap's agent.
Absent a finding that Daniel Tan acted as Awap's agent, the discharge of the debt owed by Awap to Mr Chou would depend on any payment on account of that debt being made by Mr Tan under compulsion (even if the compulsion arose from a voluntarily assumed contractual obligation). On that basis, it is relevant to inquire whether a binding agreement was reached between Mr Chou and the Tans at the swimming club meeting.[50]
[50] As to which see Vantage Systems Pty Ltd v Priolo Corporation Pty Ltd [2015] WASCA 21; (2015) 47 WAR 547 [87] - [113].
However, it is difficult to see how the binding nature of the swimming club agreement is critical to the determination of the appeal. Even if there was no obligation, the payments were made by the Tans to Mr Chou. If those payments were made on account of Awap's debt to Mr Chou, it would be an abuse of process for Mr Chou to accept those payments and then sue Awap for the same debt. That would be so even if there was no binding contract requiring the payments to be made. Further, the payments made in accordance with the order of specific performance of the High Court of the Republic of Singapore would be payable as a matter of obligation arising from the terms of that judgment.
In any event, for the reasons explained below, the trial judge was correct to conclude that it would be an abuse of process for Mr Chou to claim in the primary proceedings that there was no binding agreement.
The critical issue in Mr Chou's appeal is therefore whether the payments made by the Tans to Mr Chou were on account of the debt owed by Awap to Mr Chou. In the circumstances of this case, the resolution of that issue turns on whether Mr Chou and Daniel Tan agreed at the swimming club meeting that the payments were to discharge Awap's liability to Mr Chou for loans and fees.
Significance of the Singapore judgment
Grounds 5 - 7: Res judicata and issue estoppel
It is convenient to turn to grounds 5, 6 and 7 of Mr Chou's appeal. In essence, these grounds contend that a res judicata or issue estoppel arose from the Singapore judgment which precluded Awap from advancing a defence that the agreement reached at the swimming club meeting extinguished Awap's debt to Mr Chou. This argument will only be maintainable if Awap was the privy in interest with the Tans in the Singapore proceedings, or the Tans are the privy in interest with Awap in the present proceedings. Awap was not a party to the Singapore proceedings, although shares in Awap were the subject matter of the Singapore proceedings. The Tans are not a party to the present proceedings.
The relevant principles for present purposes were summarised by the plurality in Tomlinson v Ramsay Food Processing Ltd.[51] The following points may be noted from that summary:
[51] Tomlinson v Ramsay Food Processing Ltd [2015] HCA 28; (2015) 256 CLR 507.
(1)The rendering of a final judgment in the exercise of judicial power results in the merger of the rights and obligations in controversy, as between defined persons or classes of person, into that final judgment, equating to 'res judicata' in the strict sense.[52]
[52] Tomlinson [20].
(2)Three forms of estoppel have now been recognised by the common law of Australia as having the potential to result from the rendering of a final judgment in an adversarial proceeding:[53]
[53] Tomlinson [22].
(a)'Cause of action estoppel' operates to preclude assertion in a subsequent proceeding of a claim to a right or obligation which was asserted in the proceeding and which was determined by the judgment.
(b)'Issue estoppel' operates to preclude the raising in a subsequent proceeding of an ultimate issue of fact or law which was necessarily resolved as a step in reaching the determination made in the judgment.
(c)'Anshun estoppel' operates to preclude the assertion of a claim, or the raising of an issue of fact or law, if that claim or issue was so connected with the subject matter of the first proceeding as to have made it unreasonable in the context of that first proceeding for the claim not to have been made or the issue not to have been raised in that proceeding.
(3)Abuse of process, which may be invoked in areas in which estoppels also apply, is inherently broader and more flexible than estoppel. Although insusceptible of a formulation which comprises closed categories, abuse of process is capable of application in any circumstances in which the use of a court's procedures would be unjustifiably oppressive to a party or would bring the administration of justice into disrepute. It can for that reason be available to relieve against injustice to a party or impairment to the system of administration of justice which might otherwise be occasioned in circumstances where a party to a subsequent proceeding is not bound by an estoppel.[54]
(4)An estoppel may operate against a party to the earlier proceedings or a privy in interest. The basic requirement of a privy in interest is that the party must claim under or through the person of whom he or she is said to be privy.[55] A party to a later proceeding ('A') can be privy in interest with a party to an earlier proceeding ('B') on either of two bases:[56]
(a)A has some legal interest in the outcome of the earlier proceeding which was represented by B, or B has some legal interest in the outcome of the later proceeding which is represented by A. The interest of the privy must be a legal interest: an economic or other interest on the part of A in the outcome of the earlier proceeding is insufficient. Absent a legal interest, A's influence or control over the conduct of the earlier proceeding is irrelevant.
(b)After that earlier proceeding was concluded by judgment, A might have acquired from B some legal interest in respect of which B would be affected by an estoppel which A then relies on in the later proceeding.
(5)A person does not become bound by an estoppel by reason of a party having represented legal interests of that person in an earlier proceeding merely as a consequence of that party having lawfully asserted a claim which, if accepted, would have resulted in a determination enhancing or enforcing a legal entitlement of the person. In the absence of the person having authorised the assertion of the claim, the representation must at least have been of such nature as to have protected the person from being unjustifiably subjected to an unwanted estoppel.[57]
[54] Tomlinson [25].
[55] Tomlinson [17].
[56] Tomlinson [33], [35].
[57] Tomlinson [37].
Having regard to the above principles, there is no basis for finding that Awap was the privy of the Tans in the Singapore proceedings. There was no legal right or interest asserted by the Tans on Awap's behalf in those proceedings, in which the Tans sought to enforce an agreement for the sale of shares in Awap. No legal right or interest of Awap was asserted in the proceedings. The Tans, who were not officers of Awap, did not purport to exercise any right to represent Awap in the Singapore proceedings. The Tans were suing on their own account to enforce their agreement with Mr Chou and the Assobuild companies for the sale of the shares. Awap's legal rights and interests were not enhanced or enforced by acceptance of the Tans' claim in the proceedings. Awap had no opportunity to present evidence or make submissions protecting its own legal rights or interests in the proceedings.
Nor was Awap, in defending the primary proceedings, representing the legal rights or interests of the Tans. Rather, Awap defended a claim brought by Mr Chou in respect of a debt owed to him by Awap in its own right. No legal right or interest of the Tans was at stake in the primary proceedings. The fact that, as shareholders of Awap, the Tans might gain a practical or economic benefit if Awap's defence succeeded, is insufficient to establish privity of interest.
Therefore, because there is no privity of interest, no estoppel could preclude Awap from asserting in the primary proceedings that payment provided for under the agreement enforced in the Singapore proceedings discharged the debt it owed to Mr Chou. Because the question of the discharge of Awap's debts to Mr Chou was never raised in the Singapore proceedings, no res judicata arose from the judgment.
Ground 8: Abuse of process by Awap
Alternatively, by ground 8, Mr Chou contends that it was an abuse of process for Awap to assert as a defence to Mr Chou's claim that the debt was discharged, when a term to that effect was not pleaded in the Singapore proceedings. We do not accept that submission. There is no abuse of process involved in Awap asserting as a defence to Mr Chou's claim that the debt was discharged, as this was not in issue in the Singapore proceedings, to which Awap was neither party nor privy.
Conclusion as to grounds 5 - 8
For the above reasons, the absence of privity as regards Awap provides a complete answer to grounds 5 - 8. In light of the above conclusion, other matters raised by those grounds cannot lead this court to interfere with the trial judge's orders.
Ground 9: Abuse of process by Mr Chou
However, in our view, the trial judge was correct to conclude that it was an abuse of process for Mr Chou to claim in the primary proceedings that there was no agreement for the sale of shares in Awap to the Tans. To allow Mr Chou to assert in the primary proceedings that no binding agreement was reached at the swimming club meeting would bring the administration of justice into disrepute. Mr Chou consented to entry of judgment for specific performance of the share sale agreement in the Singapore proceedings. The order for specific performance was necessarily premised on the existence of a binding agreement. Pursuant to the judgment, Mr Chou received payment of SGD $9 million and AUD $2.3 million. In our view, it would bring the administration of justice into disrepute if Mr Chou was able to obtain that significant payment from the Tans on the basis of a consent judgment that was premised on the existence of a binding agreement and then seek a further substantial payment from Awap by asserting that there was in fact no binding agreement. The trial judge was correct to so hold, and ground 9 of Mr Chou's appeal, which asserts that the trial judge's finding was in error, is not established.
Grounds 1 - 3 so far as they contend there was no binding agreement
The failure of ground 9 means that it is unnecessary to deal with grounds 1, 2 and 3, to the extent those grounds contend that the trial judge erred in finding that a binding agreement was reached between Mr Chou and Daniel Tan on 29 November 2006. The principles as to abuse of process prevent Mr Chou from asserting that there was no binding agreement, either at first instance or on appeal.
Mr Chou's challenge to a finding of primary fact
In light of the above conclusions, the success of Mr Chou's appeal depends on him successfully challenging the trial judge's finding that it was a term of the swimming club agreement that the agreed payments would discharge Awap's debt to Mr Chou. We turn to consider that question.
Grounds 1 - 4 of Mr Chou's appeal are directed to challenging the trial judge's finding as to what was said at the swimming club meeting between Mr Chou and Daniel Tan. To that extent, they seek to impugn a finding of primary fact made by the trial judge.
In oral submissions counsel for Mr Chou in effect accepted that, if the finding summarised at [16] above as to what was said at the meeting is sustained, there was no challenge to the trial judge's legal conclusion that the swimming club agreement provided for, and was effective to, discharge Awap's debt owed to Mr Chou.[58] In our view, if that finding stands then it is properly concluded that an express term of the swimming club agreement that Awap's debts to Mr Chou were discharged.
Ground 1: Delay and reasons
[58] Appeal ts 5 - 6.
The trial of this matter took place from 3 - 7 April 2017. On 26 February 2018, there was a further hearing to deal with the question of Mr Chou's conviction of offences of dishonesty in Singapore. Judgment was not delivered until 11 December 2018, about 20 months after the conclusion of the main part of the trial. The focus of ground 1 of Mr Chou's appeal and the submissions advanced in support of that ground is on the delay in judgment delivery, the adequacy of the trial judge's reasons and the alleged lack of engagement with Mr Chou's case. The ground and submissions focus on the trial judge's resolution of what was said at the swimming club meeting.
General principles
The general principles governing the impact of inordinate delay in judgment delivery and the assessment of the adequacy of reasons were recently summarised in G v O.[59]
The trial judge's reasoning process
[59] G v O [2018] WASCA 211; (2018) 53 WAR 393 [62] - [68].
The trial judge noted that the only witnesses were Mr Chou and Daniel Tan. Each spoke English, and testified primarily in English, although with the assistance of an interpreter if required. The emails passing between the parties, and other documents, were in English.
The trial judge formed an unfavourable view of Mr Chou's credibility, based on evidence of his conduct on 19 January 2009. On that date, Mr Chou had emailed property managers for Awap attaching invoices in respect of his past costs. The email was marked 'private and confidential - strictly for your eyes only'. Mr Chou requested that the property manager download the attached files and then delete the email. Mr Chou's purpose in sending this email was to deceive the Tans as to when invoices were sent.[60]
[60] Primary decision [23] - [26]; see also [114] - [120].
In addition, in November 2017, in Singapore, Mr Chou was convicted on two charges of attempting to cheat a government agency administering a wage credit scheme to obtain a total amount of SGD $33,000 and sentenced to a short term of imprisonment. The offences were alleged to have been committed in December 2013.[61] The trial judge observed that the convictions for dishonesty reflected on Mr Chou's character and credibility as a witness, and were consistent with the view which his Honour had already formed.[62]
[61] Primary decision [19].
[62] Primary decision [27].
In relation to Daniel Tan, the trial judge observed:[63]
Daniel Tan was a difficult witness to assess. He spoke quickly, and his train of thought was not always easy to follow. At times he did not respond directly to questions. I do not, however, believe that he was evading questions. Like some other witnesses, he bucked against the restraint of an interrogation that sought to limit him to answering the particular question asked and, to him, was not on point.
[63] Primary decision [28].
The trial judge also noted other difficulties in assessing the evidence:[64]
More generally, there were language difficulties. English was not Daniel Tan's first language. And it may not have been Mr Chou's, although he spoke it well. The more serious difficulty was that Mr Chou and Daniel Tan gave evidence about a meeting where conversations were conducted, on at least one critical issue, in Hokkien or Mandarin. The difficulties that accompany recall of a conversation after 10 years were compounded by the fact that the witnesses were recounting in English a conversation in another language.
It was also apparent that there was a high level of distrust between Mr Chou and Mr Tan. The sale of Mr Chou's shares in Awap was precipitated by their inability to work together as co-owners. The emails immediately following the meeting to discuss the sale of the Awap shares demonstrate that each doubted the integrity of the other. Those sentiments appeared at times to affect their oral evidence.
[64] Primary decision [29] - [30].
The trial judge then proceeded to make findings as to the factual background. In doing so, the trial judge referred to the competing evidence of Mr Chou and Daniel Tan as to what was said at the swimming club meeting. The trial judge did not at that point determine the question of what was said, but observed:[65]
It is difficult to determine with any precision what was said. Neither party gave a clear account. Some of the conversation was in English, but some was not. Parts of the exchange between Mr Chou and Mr Tan are not within my understanding. Apart from the words in Mandarin or Hokkien, Mr Tan testified that there was the further exchange when shaking hand: he said to Mr Chou that 'whoever backed out on the promise would be cursed'.
The evidence about the meeting does not stand alone. The witnesses' accounts of the meeting need to be assessed by reference to the exchange of email correspondence following it, the proceedings commenced in Singapore to enforce the share sale, and the ultimate transfer of the shares.
[65] Primary decision [54] - [55].
The trial judge's reasons then make detailed findings as to the parties' conduct after the meeting, including the Singapore proceedings and the completion of the share transfer from Mr Chou to the Tans.[66]
[66] Primary decision [56] - [110].
The trial judge recognised that Awap bore the onus of proving the agreement and the court had to be satisfied that there was sufficient evidence to support a positive finding that the agreement alleged was made.[67] He also observed that the court could have regard to commercial context, and to both pre-contractual and post-contractual conduct, as relevant to determining whether an agreement had come into existence between the parties.[68]
[67] Primary decision [132] - [133].
[68] Primary decision [134].
The trial judge said that he accepted the evidence of Mr Tan as to the discussion at the swimming club.[69]
[69] Primary decision [136].
The trial judge then proceeded to consider the pre and post contractual conduct to enable 'an objective determination of whether there was a mutual intention to contract in the terms alleged by Awap'.[70] His Honour held that:
(1)The pre-contractual conduct of the parties shows a mutual intention to reach an agreement whereby one or the other of the shareholding groups in Awap would buy out the other. It does not take the matter further than that.[71]
(2)The later correspondence between Mr Chou and Mr Tan, and then their lawyers, is inconclusive.[72]
(3)While the Tans' pleading in the Singapore proceedings was inconsistent as to the date of the agreement, the particular of the date of the meeting was not critical and the pleading did not refer to the terms of the agreement, other than price and that the agreement was for the whole of the shareholding in Awap.[73]
(4)While the terms of the share transfers on 17 December 2008 did not include any reference to the price including loans and fees, the transfer was not an occasion for such a reference and the loans and fees had not then been put in issue.[74]
[70] Primary decision [138].
[71] Primary decision [139].
[72] Primary decision [140].
[73] Primary decision [143] - [144].
[74] Primary decision [145].
As to the later correspondence, the trial judge noted that Mr Chou's letters were consistent in maintaining that there was no concluded agreement. However, Mr Chou's conduct up to when the shares were transferred led the trial judge to treat those letters with caution. The creation of the rights issue in 2007, while the Singapore proceedings were ongoing, appeared calculated to circumvent any judgment that might be given against him and maintain (although indirectly) an interest in Awap. Mr Chou was obstructive in the process of transferring the shares in Awap to the Tans.[75]
[75] Primary decision [141] - [142].
The trial judge also accepted that to produce a commercial result, the purchase of Mr Chou's interest in Awap should result in a clean break with no outstanding loans or fees.[76]
[76] Primary decision [146].
The trial judge concluded:[77]
On balance, I am satisfied that there was an agreement between Mr Tan and Mr Chou for the sale of the shares held or controlled by Mr Chou in Awap, and the agreed price included loans and any fees owed to Mr Chou.
Delay and reasons in this case
[77] Primary decision [147].
In our view, the delay in this case was not such as to disable the trial judge from considering Mr Chou's case or evaluating the evidence. The contentious evidence affected by credibility considerations was of relatively short compass, and concerned what was said at the swimming club meeting. The language issues to which his Honour referred were apt to make the demeanour of the witnesses an unreliable guide to the credibility of their evidence, and the trial judge did not in fact rely on demeanour in assessing their evidence.
Rather, the trial judge looked to objective evidence of communications and conduct in making adverse credibility findings against Mr Chou. The trial judge's capacity to assess the evidence which led his Honour to approach Mr Chou's evidence with caution was not affected by the delay in judgment delivery. Further, in assessing Daniel Tan's evidence, and the objective intention established by that evidence, the trial judge had regard to the objective evidence as to the parties' conduct and the commercial purpose of the arrangements. His Honour's capacity to assess Daniel Tan's evidence by reference to those matters is not diminished by delay. In these circumstances, there was no imperative for the trial judge to explain in his reasons the steps taken to ensure that the delay did not compromise his Honour's ability to assess the parties' cases.
Counsel for Mr Chou referred to a number of Daniel Tan's transcribed answers to questions asked in cross-examination which are noted, in whole or part, as indistinct. It might be questioned whether the trial judge's comprehension of these aspects of Daniel Tan's evidence would have been better than that of the transcribers (who could replay and adjust the speed of the recording).
We do not consider the reasons to be otherwise inadequate. The actual intellectual process which led the trial judge to dismiss the appellant's claim is disclosed by the reasons. This court is in a position on appeal to assess the merits of the approach taken by the trial judge, which is revealed by his reasons.
Counsel for Mr Chou was critical of what he said was the failure by the trial judge to deal with the issue of whether there was a binding agreement and, specifically, to make any findings as to whether Mr Chou and Daniel Tan agreed that any agreement was 'subject to contract'.[78] Given the conclusions reached above, it is unnecessary for this court to deal with that argument. We merely note that:
(1)The allegations by Mr Chou in the primary proceedings - that Mr Chou and Daniel Tan agreed that any agreement was 'subject to contract' and that no concluded agreement was made - are inconsistent with the trial judge's finding in effect that, at the swimming club meeting, an immediately binding and enforceable agreement was made between Mr Chou and Daniel Tan for the sale of the shares held or controlled by Mr Chou in Awap, and that the agreed price included loans and any fees owed to Mr Chou.
(2)Those allegations by Mr Chou in the primary proceedings were inconsistent with the conduct of the Singapore proceedings including the final judgment entered by consent in the High Court of Singapore. The making of those allegations in the primary proceedings was an abuse of process.
[78] Appeal ts 19 - 28.
For these reasons, ground 1, which attacks the delay in judgment delivery and the adequacy of the trial judge's reasons, is not established. However, as discussed below, the fact of the delay between trial and judgment delivery has some impact on the approach to be taken by this court in reviewing the trial judge's factual findings.
Evidence as to what was said at the swimming club meeting
Daniel Tan's evidence as to what was said at the swimming club meeting was contained in the following passages of his witness statement,[79] which he adopted as his evidence in chief at trial.[80]
On or about 29 November 2006, I met with [Mr Chou] alone at the Singapore Swimming Club. I suggested to [Mr Chou] before the meeting that we bring along my lawyer in Singapore … but he rejected that suggestion.
We didn't talk straight away about business, but when we did come to the subject of Awap, I said to him that I was disappointed he never sold his 20% share to me. I said that it left things in a difficult position and he said that he agreed with that too. He said that we needed to settle as soon as we can.
He asked who was going to buy who out. We started by talking about the price that Richard Tan and I had paid to [Mr Foo]. I said to him that the price I had paid was an all in price - it included [Mr Foo's] loans, and for his share of the sundry creditors, minus capital gains tax. He said that he agreed that was the deal with [Mr Foo].
He said how much he would pay me and Richard to buy us out. We then took turns in making bids for buying the other out.
Each of the bid prices was made in Australian dollars. After we exchanged a number of bids, I offered to buy out [Mr Chou] at a price of A $9.8 million. [Mr Chou] said that he would accept that as his sale price, but he said that he wanted to have payment in both Singapore dollars and in Australian dollars.
When I asked him why he wanted payment in two currencies he said that's my way, you can't change my way. I said to him that this was acceptable if that's the way he wanted to do things. He then said that the payment in Australian dollars was for his loan and fees and he said the amounts. I do not remember the amounts that he said to me now, as I was not interested in the amounts, just the fact that everything was included. He said he would arrange for his solicitors to draft a written contract as soon as possible.
I said to him that there was a great difference from the price I had paid to [Mr Foo] done only 9 months ago.
I said to him that we should shake hands to confirm the deal. We held hands for quite a long time. As I shook his hand I pointed with my left hand and said (in Mandarin) '[all is included]' and then (in Hokkien) [included until the end] and then in English 'all in'. I told him whoever backed out to this promise will be cursed. [Mr Chou] then said to me that I did not need to be so serious and then surprised me by kissing me on the cheek. (emphasis added)
[79] Exhibit 8, par 52 - 59 (Green AB 55 - 56).
[80] Trial ts 333. In the original statement, the Mandarin and Hokkien was expressed in Chinese characters. On appeal, neither party took issue with the trial judge's finding, at [49] of the primary decision, as to the translation of the words which Daniel Tan said were used.
In cross-examination, Daniel Tan said that he understood from the swimming club meeting that Mr Chou wanted the AUD $2.3 million paid as a deposit as soon as possible.[81] He reiterated his account of the meeting in cross-examination in terms which appear generally consistent with his evidence in chief, but which are very hard to follow on the transcript.[82]
[81] Trial ts 365.
[82] Trial ts 367 - 368.
As noted above the trial judge accepted that part of Daniel Tan's evidence which is emphasised in this passage. If that evidence is accepted, then it was plainly open for the trial judge to find that it was a term of the oral agreement that the agreed price included loans and any fees owed to Mr Chou. The critical question in this appeal is whether the trial judge erred in accepting that aspect of Daniel Tan's evidence as to what was said at the swimming club meeting.
Mr Chou points to a number of matters which are said to be inconsistent with Daniel Tan's account of what was said at the swimming club meeting, which he contends should have led to a finding that the evidence was not reliable.
Email communication by Mr Tan on 30 November 2006
At 12.50 pm on 30 November 2006 (the day after the swimming club meeting) Daniel Tan sent an email to Mr Gary Browning, an officer of the Bendigo Bank[83] who was Daniel Tan's banker,[84] and Lee Mun Hooi, who was Daniel Tan's solicitor. The email read:[85]
Yesterday, I had a late high tea with [Mr Chou]. We have had a good talk, cleared some of our previous misunderstandings and we further proceeded to a final settlement to negotiate the purchase over [Mr Chou's] entire remaining 50% shares in [Awap].
We both agree that the purchase price is to the sum of Singapore $9 million plus Australian $2.3 million for his share of the 50 percent. My understanding is that an initial deposit is to be placed upon signing the contract and followed by A $2.3 million in 2 weeks thereafter and the finally full settlement within 30 days and in line with the official transfer of his share to us.
[Mr Chou] has requested that you give him a call to confirm this arrangement, which I have described above, and for the necessary documents to be prepared. I suggest that [Mr Chou] should sign an appropriate legal document prepared by Bendigo Bank and also relevant legal documents prepared by our lawyers in Singapore before the Bank releases the first payment to him.
Would you please let me have your advice and call me for a further [discussion] to the matter. (emphasis added)
This email was forwarded to Mr Chou later that afternoon.
[83] It was common ground that Mr Browning was an officer of the Bendigo Bank: see trial ts 128, 289.
[84] Trial ts 371.
[85] Exhibit 7.100 (Green AB 124).
This description, given the day after the swimming club meeting, does appear inconsistent with the account of the meeting given by Daniel Tan at trial. In the email, the purchase price is expressed to be for Mr Chou's 50% shareholding in Awap, rather than for that shareholding and the release of Awap's liabilities to him. The AUD $2.3 million is referred to as part of a deposit, rather than as a payment in discharge of Awap's liabilities to Mr Chou. The omission of any reference to the discharge of Awap's liabilities to Mr Chou appears significant in the context of an email to Bendigo Bank and Mr Lee who are asked to call Mr Chou and prepare legal documents to give effect to the transaction. It might be expected that, unless he had forgotten about the loan to Mr Chou or overlooked the issue, the email to Daniel Tan's financier and solicitor would have said something about what was to happen to Awap's debt to Mr Chou.
Email correspondence 3 - 13 December 2006
Mr Chou and Daniel Tan exchanged emails from 3 - 13 December 2006. The principal matters debated in those emails concerned whether a binding agreement had been reached at the swimming club meeting and the amount and terms of the deposit for the share purchase. Until 13 December 2006, there is nothing in the correspondence to suggest that the purchase price was other than for shares, and no mention of Awap's liabilities to Mr Chou being discharged. There is, at most, an oblique reference in an email sent by Daniel Tan on 13 December 2006, where he says:[86]
I am grateful that at least for once you have been honest to me stating that you have reached an agreement with me to sell the remaining AWAP shares to me and my brother at the price of S $9m plus A $2.3m (all inclusive). (emphasis added)
[86] Exhibit 7.100 (Green AB 120).
This exchange does tend to count against Daniel Tan's account of what was said at the swimming club meeting, as there is no clear statement that the purchase price was to discharge Awap's liabilities to Mr Chou.
Mr Lee's letter of 20 December 2006
On 18 December 2006, Mr Chou's solicitor, Kevin Kwek, wrote to Mr Lee (Daniel Tan's solicitor) setting out the 'in principle agreement' which he was instructed had been reached by their clients. In response, Mr Lee wrote to Mr Kwek on 20 December 2006, conveying his instructions, including that:[87]
1) Pursuant to several negotiations, your client subsequently agreed to sell all the remaining 25 shares in [Awap] held in the names of your client [and the Assobuild companies] which your client represented for the consideration sums of S $9 million and A $2.3 million.
2) The above consideration sums are all inclusive of any sums due and payable to your client and the 2 companies by [Awap] including but not limited to all directors fees, bonuses and monies owing to your client. (emphasis added)
[87] Exhibit 7.103 (Green AB 127 - 128).
In his response of 10 January 2007, Mr Kwek said:[88]
We had also provided our clients' understanding of the main terms of the in-principle agreement. In your subsequent reply of 20 December 2006, you added additional terms as being part of the in-principle agreement.
Of particular concern to our clients is the fact that your clients now do not agree to providing our clients with a non-refundable deposit of A $2.3m.
[88] Exhibit 7.111 (Green AB 130).
Mr Lee's letter of 20 December 2006 was the first clear indication from Daniel Tan or his representatives that the terms of the agreement reached at the swimming club meeting included the discharge of Awap's liabilities to Mr Chou. The contents of Mr Lee's letter are consistent with Daniel Tan's evidence as to what was said at the swimming club meeting. However, the fact that this was first communicated about three weeks after the swimming club meeting, and after Daniel Tan had consulted his solicitor, may be seen as inconsistent with the issue having been resolved at the meeting. If it had been, then reference to the term may have been expected in earlier correspondence.
However, Mr Chou's reaction to Mr Lee's 20 December 2006 letter is of greater significance than the sending of the letter. If agreement for the discharge of AWAP's significant liabilities to Mr Chou had not been reached at the swimming club meeting, it would be expected that Mr Chou or his legal representatives would have reacted to the contrary statement in Mr Lee's letter. Yet the response from Mr Kwek of 10 January 2007 focusses on the issue of payment of a non-refundable deposit. While Mr Kwek's letter refers to 'additional terms' and to the deposit issue being of 'particular' concern, it does not expressly raise any issue with the specific proposition that the purchase price was inclusive of sums owing by Awap to Mr Chou. Nor did Mr Chou or his legal representatives take issue with the statement in subsequent communications with Daniel Tan or Mr Lee.
Pleadings in the Singapore proceedings
The Tans issued a writ out of the High Court of the Republic of Singapore on 26 April 2007. Endorsed on that was a statement of claim, which set out the background of the Tans purchase of a 50% shareholding in Awap and a dispute between the plaintiffs and defendants as to an agreement for the sale of an additional 20% shareholding to the Tans. The statement of claim gave the following account of the subsequent agreement:[89]
Several meetings were then held in Singapore between [Daniel Tan and/or Richard Tan] with [Mr Chou] on the agreement to sell 20% of [Mr Chou's and the Assobuild companies'] shareholdings in [Awap].
These meetings subsequently culminated in an agreement in which [Mr Chou] for himself and on behalf of the [Assobuild companies] agreed to sell their entire shareholdings in [Awap] to the [Tans] at the price of S $9 million and A $2.3 million (the Agreement).
The Agreement was reached on the meeting held on 7 December 2006 between [Mr Chou] and [Daniel Tan] (for himself and on behalf of the [Assobuild companies]) and this Agreement was confirmed by [Mr Chou's] e-mail message of 11 December 2006 to [Daniel Tan].
[89] Exhibit 7.204 (Green AB 238 - 245).
The pleading as to the terms of the Agreement was reiterated in the Tans' reply.[90]
[90] Reply to the Defence of the 1st Defendant, par 7 (Green AB 257 - 258).
This pleaded account was given with the authority, and on the instructions, of Daniel Tan.[91]
[91] Trial ts 335.
There is an obvious error in the last paragraph, in that Daniel Tan clearly never acted on behalf of the Assobuild companies. However, this is not a significant error, as it appears that the drafter has simply mixed up references to the first plaintiff and first defendant in the Singapore proceedings.
There is also an inconsistency between the pleading and Daniel Tan's evidence as to the date of the meeting at which the agreement was reached. The meeting is referred to as taking place on 7 December 2006, whereas the swimming club meeting was on 29 November 2006. A witness who accurately recalls events may be mistaken about the date on which the events occurred. Misrecalling a date need not be significant. However, the email record indicates a series of communications between Mr Chou and Daniel Tan from 30 November 2006 to 6 December 2006, discussed above. The incorrect date is capable of calling into question the reliability of Daniel Tan's recollection of the details of the communications between himself and Mr Chou.
Of greater significance is the fact that neither the pleading, nor Mr Chou's email of 11 December 2006 which is said to confirm the agreement, make any reference to the payment of AUD $2.3 million being for the discharge of Awap's liabilities to Mr Chou. There is a significant difference between an agreement to pay money for the purchase of shares, on the one hand, and an agreement to pay money for the purchase of shares and the discharge of significant liabilities, on the other hand. The fact that Daniel Tan authorised a pleading that the agreement was for the sale of shares at the specified price (rather than the sale of shares and discharge of Awap's liabilities) counts against acceptance of his evidence as to what was said about liabilities at the swimming club meeting.
However, against that is the fact that the Singapore proceedings were brought to secure a transfer of the shares to the Tans. It may be understandable that the pleadings focussed on that issue, rather than the discharge of Awap's debt to Mr Chou which was not the subject of the Tans' claim.
Pleadings in Federal Court oppression proceedings
In 2007, the Tans and Deo Silver brought proceedings in the Federal Court of Australia alleging oppressive conduct in the management of Awap. On 28 September 2007, Gilmour J granted an interlocutory injunction restraining Awap from taking any actions in respect of its affairs other than upon the written consent of Deo Silver and CN (Hong Kong) jointly.[92] On 17 December 2007, the Tans and Awap filed an amended statement of claim in the Federal Court oppression proceedings.[93] Although it pleaded various matters, including in relation to the 'rights issue' shares, the swimming club agreement was not pleaded. Daniel Tan provided the instructions on which the pleading was based.[94]
Completion of share transfer to the Tans on 17 December 2008
[92] Green AB 274 - 275.
[93] Green AB 276 - 288.
[94] Trial ts 336 - 337.
Completion of the share transfer pursuant to the consent judgment was effected on 17 December 2008. On 29 November 2008, Mr Lee wrote to Mr Chou's solicitors identifying the papers that the Tans would require before making payment.[95] This included share transfer forms, resignation of Awap's directors, Mr Chou's resignation as Awap's secretary, a statutory declaration disclosing bank account details and a resolution withdrawing CN (Hong Kong) as a co-signatory of the accounts. The letter also referred to the disputed claim by CN 2000 for the AUD $875,000 payment. It was subsequently agreed that the 25 rights issue shares would be treated as cancelled.
[95] Green AB 146 - 147.
There was a high level of acrimony and distrust between the parties, and a dispute about at least one debt (the AUD $875,000 claimed by CN 2000). Daniel Tan was clearly aware that, at some point prior to the swimming club meeting, Mr Chou was owed a significant sum by Awap. The Tans had been informed of an AUD $1.85 million loan by Mr Chou to Awap when they purchased Awap shares from Goldpex in February - March 2006.[96] The Tans had obtained an acknowledgement of discharge of debt from Goldpex when they purchased shares from that company.[97] In this context, it is surprising that the Tans did not require any signed acknowledgment of the discharge of Awap's liabilities to Mr Chou as part of the completion of the share transfer, if the payment they were making was for the discharge of those liabilities.
[96] See the correspondence at Green AB 83 - 95 and trial ts 338 - 339, 347 - 348.
[97] Green AB 114; trial ts 348 - 349.
The fact that there was no statement that the payments discharged Awap's liabilities to Mr Chou in any of the court documents in the Singapore proceedings or the documents completing the transfer of the shares does appear inconsistent with Daniel Tan's evidence that the discharge of liabilities was agreed at the swimming club meeting.
Mr Chou's email of 19 January 2009
There is, however, a countervailing consideration arising out of the completion of the transfer of Awap shares from Mr Chou to the Tans. If the discharge of Mr Chou's loan to Awap had not been a term of the agreement, it would be expected that Mr Chou would have asked for repayment of the loan at or shortly following settlement. He did not do so.
In this context, the email sent by Mr Chou to Craig Dawson of Knight Frank (the property managers of International House) on 19 January 2009 assumes significance. This email was sent marked 'Private and Confidential - strictly for your eyes only' and asked that Mr Dawson delete the email after saving the attachments on his computer.[98] The trial judge noted that Mr Chou accepted that he asked for the email to be deleted because he did not want the Tans to know invoices were being sent belatedly.[99]
[98] Green AB 186.
[99] Primary decision [26].
One of the invoices was from Mr Chou dated 17 December 2008 (the day of completion of the share transfer to the Tans). The invoice was directed to:
The Directors (just prior to resignation today)
[Awap] (emphasis added)
The invoice claimed that the AUD $1.85 million shareholder's loan had been converted to a creditor's loan and claimed payment of interest, and referred to 'the accumulated loan of A $2,511,564.46'.[100]
[100] Primary decision [119] (Green AB 214).
The above evidence indicates that Mr Chou was dishonestly attempting to create a document trail in relation to his loan to Awap which would be unknown to the Tans. The invoice was addressed to the directors of Awap prior to their resignation on 17 December 2008 (ie to the companies associated with Mr Chou). It was belatedly and secretly sent on 19 January 2009, not to Awap or its directors at that time, but to the Perth based officer of the International House property manager. If Mr Chou genuinely believed that Awap's loan to him had not been discharged by the agreement and payment from the Tans, there would have been no occasion for this secrecy. The fact that Mr Chou felt the need to hide his claim from the Tans strongly suggests that he appreciated it was not genuine.
Mr Chou's July 2009 affidavit
Awap's appeal counsel also relies on an affidavit sworn by Mr Chou in the Singapore proceedings on 24 July 2009.[101] That affidavit was sworn after a final judgment for AUD $1.35 million had been entered in favour of the Tans in those proceedings. The affidavit was sworn in support of an application to avoid execution of judgment on his property. In the affidavit, Mr Chou deposed as to the difficulty which he and the Assobuild companies had experienced in satisfying the judgment debt.
[101] Green AB 264 - 271.
The point made by Awap's appeal counsel is that, if Mr Chou genuinely considered that Awap still owed him about AUD $1.85 million at that time, Mr Chou would have sought to set off the judgment debt against that liability. This, on counsel's submission, is a fact supporting Daniel Tan's evidence that the parties had agreed to discharge Awap's liability to Mr Chou.[102]
[102] Appeal ts 117 - 118.
While there is some force to that submission, there is a difficulty in accepting it. The judgment debt was owed to the Tans whereas the loans were owed by Awap. Further, as Mr Chou's counsel pointed out, Mr Chou was never cross-examined on this issue, and was never given an opportunity to explain why he did not use the claimed debt from Awap to satisfy the judgment debt.[103] The argument was not advanced at first instance, and was not a basis on which the trial judge proceeded. In these circumstances, it does not seem to us to be appropriate to place any weight on Mr Chou's July 2009 affidavit in resolving the dispute.
Federal Court proceedings in September 2009
[103] Appeal ts 166.
On 29 September 2009, Awap and the Tans commenced proceedings in the Federal Court of Australia against Mr Chou, claiming damages for alleged breaches of various provisions of the Corporations Act 2001 (Cth).[104] In their statement of claim filed on the same day, the plaintiffs in that action pleaded the swimming club agreement in the following terms:[105]
On or around 30 November 2006 Mr Chou agreed to sell all the Chou Shares to the Tans for the sum of $2.3 million (Australian) plus $9 million (Singapore) ('November 2006 Agreement').
In breach of the November 2006 Agreement Mr Chou failed to sell the Chou Shares to the Tans until January 2009.
PARTICULARS
The Tans commenced proceedings in the High Court of Singapore on 26 April 2007 seeking specific performance of the November 2006 Agreement. The High Court of Singapore entered judgment by consent of the parties on 30 October 2008 for specific performance of the November 2006 Agreement, damages and costs ('Singapore Judgment'). Pursuant to the Singapore Judgment, the Chou Shares were transferred to the Tans in January 2009.
[104] Green AB 289 - 291.
[105] Statement of Claim in WAD 171 of 2009, pars 14 - 15 (Green AB 294).
There is again no pleading of the payment provided for by the November 2006 Agreement being for the discharge of the liabilities of Awap to Mr Chou.
Daniel Tan's June 2010 affidavit
On 12 June 2010, Daniel Tan swore an affidavit in opposition to Mr Chou's application for summary judgment in the primary proceedings. In that affidavit, Daniel Tan gave the following account of the swimming club meeting:[106]
On Wednesday afternoon, 30 November 2006, I met with Mr Chou at the Singapore Swimming Club. We discussed Mr Chou selling his entire shareholding in Awap to Richard and me. Following a discussion of various options in which either Richard and I would buy Mr Chou's shares, or Mr Chou would buy our shares in Awap, I asked Mr Chou whether he would be willing to sell his shares to Richard and me for the sum of S $9 million and A $2.3 million. Mr Chou responded that he would sell his shares for that price, and he said he would draft the written contract as soon as possible. We shook hands to confirm the deal ('December 2006 Agreement'),
[106] Par 40 of the Affidavit of Daniel Tan sworn 12 June 2010 (Green AB 315).
Later in the affidavit, Daniel Tan said:[107]
Mr Chou is now claiming that the payments made pursuant to the December 2006 Agreement did not include the (approximately) A $1.92 million claimed as a loan to Awap by Mr Chou, and monies claimed for secretary's fees.
In response to this, I say that when Mr Chou and I were negotiating the December 2006 Agreement, I said to him words to the effect that 'the payment includes all money you claim for loans and fees' and that 'once we pay you this money for the shares, that is "all in", that's it, and no other need for negotiations' and that Mr Chou accepted this as a term of the agreement.
[107] Par 49 - 50 of the Affidavit of Daniel Tan sworn 12 June 2010 (Green AB 317 - 318).
Companies legislation generally requires a person's name to be entered on the register of members of a company before the person becomes a member of the company.[121] That is the position under s 231(b) of the Corporations Act 2001 (Cth), which relevantly provides that a person is a member of a company if they 'agree to become a member of the company after its registration and their name is entered on the register of members'.
[121] Maddocks (117).
Where a company has entered into a binding contract for the issue of allotted shares, but fails to issue the shares, then the contracting purchaser may have a right to sue for damages, for rectification of the register of shares or for specific performance of the contract. Other rights may accrue prior to registration. The authors of Ford, Austin and Ramsay's Principles of Corporations Law observe:[122]
After appropriation the intending member, although not a member or a holder of a share before entry on the register of members, has against the company rights to be paid dividends as well as the right to be entered in the register of members and liability to meet calls for any part of the issued share price unpaid. Entry in the register of members completes the contract to take shares and gives the person further rights for which membership is required under the Corporations Act, the company's constitution or the terms of issue of the share. (citation omitted)
[122] RP Austin and IM Ramsay Ford, Austin and Ramsay's Principles of Corporations Law (17th edition, 2018) at [17.170].
Awap submits that, following Dixon J's analysis in Central Piggery, registration is not an invariably essential element of a share issue. Awap relies on the reference to shares being issued 'by some other step by which the title derived from the allotment may be made entire and complete'. Awap submits that resolution 2 of the general meeting held on 20 September 2007 was that the Additional Shares 'be and are hereby allotted and issued … (subject to acceptance by the relative [sic] allottee)'. Awap submits that CN 2000 accepted the allotment and, separately, the issue of the shares by making the payment for the shares on 27 September 2007.
Awap's submissions accept that the Additional Shares were not issued on 20 September 2007, when it passed the resolution in a general meeting. The problem for Awap's argument is that, on the evidence, nothing at all was done to 'issue' the Additional Shares to CN 2000 after the passing of the resolution on 20 September 2007. The only step which was taken on 27 September 2007 was payment for the shares by CN 2000, by which CN 2000 implicitly accepted the offer contained in Awap's resolution of 20 September 2007.
One of the terms of that offer was resolution 4, which stated:
That the Common Seal be affixed to the relative [sic] share certificate(s) to be issued and that details be entered in the Register of Members; and that the Registrar of International and Foreign Companies (Samoa) be notified accordingly.
The reference to the 'issue' of shares in Awap's resolution must be read in the context of resolution 4. In that context, a reasonable businessperson would understand the reference to the 'issue' of the Additional Shares as being to the respective allottees being given title to and control of the shares by the means provided in resolution 4. That understanding is consistent with the ordinary meaning of a reference to issuing allotted shares, identified by Dixon J in Central Piggery, applied to the specific terms of the contract. The reference to the 'issue' of the Additional Shares should be construed by this court accordingly.[123]
[123] Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 [35].
It is unnecessary to determine whether all of the steps referred to must be taken before shares can be said to have 'issued'. The evidence is clear that none of those steps were taken.
Even if recording the details on the Register of Members was not an invariably essential element of a share issue, no other steps were taken to complete CN 2000's title to the Additional Shares or to put CN 2000 in control of the shares allotted. No step was taken 'by which the title derived from the allotment may be made entire and complete'. CN 2000 never had any control over the Additional Shares, when it had not been registered as the holder of those shares and did not have any share certificates in respect of them. The mere fact that Awap's resolution of 20 September 2007 said that shares would be issued on acceptance did not make it so.
Therefore, on CN 2000's payment of the share price for the Additional Shares, it became entitled to have the shares 'issued' by its name being entered on Awap's share register and share certificates issued to it, or by such steps being taken as necessary to give CN 2000 title and control of the shares. While CN 2000 may have had some rights against Awap, such as to participate in a dividend, it was not the holder of the Additional Shares. The unequivocal evidence is that CN 2000's holding of the Additional Shares was never entered on the share register, no share certificates were issued and no other step was taken to give CN 2000 title to or control of the Additional Shares. Contrary to Awap's submission, the shares did not 'issue' upon CN 2000's payment. Although CN 2000 was entitled to sue for specific performance of the contract to allot and issue the shares, the act of payment alone did not provide CN 2000 with any more control over the shares than it had prior to payment. There is no suggestion that CN 2000 ever exercised any rights in relation to the allotted but unissued shares, such as receipt of a dividend or voting the shares at any meeting of Awap. The proper conclusion in these circumstances is that, as a matter of fact, the shares were never issued to CN 2000.
The legal effect of the letter from CN 2000 of 17 December 2008, and Awap's directors' resolution of the same date accepting the proposal in that letter, was to terminate the contract for the issue of Additional Shares by Awap to CN 2000.
Total failure of consideration is established
On the above facts, established by the evidence, the trial judge was correct to hold that there was a total failure of consideration for the $875,000 paid by CN 2000 to Awap.
The common law recognises a restitutionary right to the return of money paid for a consideration which is to be performed after the payment, if the consideration wholly fails making it unjust or unconscionable for the defendant to retain the benefit.[124] For this purpose, the consideration is not the defendant's promise itself, but rather is the performance of the promise. The receipt and retention by the plaintiff of any part of the bargained-for benefit will preclude recovery, unless the contract otherwise provides or the circumstances give rise to a fresh contract.[125] Failure of consideration for a payment means that the state of affairs contemplated as the basis or reason for the payment has failed to materialise or, if it did exist, has disappeared or failed to sustain itself.[126]
[124] Equuscorp Pty Ltd v Haxton [2012] HCA 7; (2012) 246 CLR 498 [29] - [34].
[125] Baltic Shipping Co Ltd v Dillon (1993) 176 CLR 344, 350 - 351, 375 - 379, 389 - 391.
[126] Baltic Shipping (389); Roxborough v Rothmans of Pall Mall [2001] HCA 68; (2001) 208 CLR 516 [16], [104]; Equuscorp [31], [134].
In the present case, the promise for which payment was made was the issue of further shares in Awap to CN 2000: ie the taking of steps which would give CN 2000 control of the Additional Shares. None of the Additional Shares were issued before the contract was terminated. Nor did CN 2000 ever obtain any benefit in respect of the promised shares. There was a complete failure by Awap to perform the promise to issue any of the shares for which the sum of $875,000 was paid by CN 2000. Nothing in the contract for the issue of the shares entitled Awap to retain the money if no shares were issued.
Nor, contrary to Awap's second ground of appeal, does the fact that the termination of the share sale contract occurred at the instigation and with the consent of CN 2000 mean that Awap was not unjustly enriched. There was no fresh contract between CN 2000 and Awap which entitled Awap to retain the money. CN 2000's proposal to treat the Additional Shares as cancelled was stated to be because 'no Share Certificates ha[d] been issued'[127] and was made so as to facilitate completion of the share transfer to the Tans under the consent judgment in the Singapore proceedings.[128] CN 2000 gained no benefit from that transaction, and did not receive any consideration for agreeing to remove a stumbling block to the completion of the transfer of shares to the Tans.[129] Further, nothing said in communications between CN 2000 and Awap suggested that Awap would have the right to retain the money that CN 2000 had paid for the shares that were to be treated as cancelled. Indeed, the consent judgment which the proposal was intended to facilitate was expressly stated to be without prejudice to CN 2000's right to claim an amount of $875,000 alleged to have been paid by CN 2000 to Awap. CN 2000's notice of contention is established.
[127] See [161] above.
[128] Trial ts 387.
[129] Senior counsel for Awap could not identify any finding by the trial judge of a benefit to CN 2000 from the transaction: appeal ts 185.
We note that a somewhat similar case was considered by the New South Wales Court of Appeal in Heckenberg v Delaforce.[130] In that case, the parties entered into a Deed under which, relevantly, one agreed to pay $100,000 in return for the other agreeing to procure the issue of share capital in a proposed company. The shares were never issued, and the Deed was terminated by subsequent agreement. Emphasising the need to examine the Deed to see what the party had bargained for in return for his $100,000, Mason P (with whom Beazley JA agreed) held that there was a total failure of consideration, or agreed return, under the relevant contractual arrangement. The Deed provided for the vesting of shares in the party, and this never occurred.[131] The conclusions we have reached in the present case are consistent with those of the Court of Appeal in Heckenberg.
Pleading issues raised by Awap
[130] Heckenberg v Delaforce [2000] NSWCA 137.
[131] Heckenberg [57] - [60].
A significant aspect of Awap's response to the proposition that no shares were ever issued is based on the pleadings. It contends that, in par 8.3 of the Statement of Claim,[132] CN 2000 pleaded that, on or about 27 September 2007, Awap 'issued the Additional Shares' to CN 2000. Par 9 of the Statement of Claim pleaded that, on or about 17 December 2008, 'the issue of the 25 Additional Shares to [CN 2000] was cancelled'. Those facts were admitted by par 8 - 9 of the Defence.[133]
[132] Blue AB 74.
[133] Blue AB 141.
Awap contends that the fact of the issue of the shares to CN 2000 is an admitted fact and precludes a conclusion that there was a total failure of consideration.
The difficulty with Awap's submission is that the evidence adduced at trial unequivocally shows that the Additional Shares were never issued to CN 2000 as the allocation of those shares was never noted on Awap's share register and no other steps were taken to give CN 2000 control of the shares. In these circumstances it is appropriate for this court to act on the evidence rather than on the pleadings.
In Damberg v Damberg,[134] Heydon JA (Spigelman CJ and Sheller JA agreeing) addressed the issue of when a court was bound to act on admissions made by the parties. In relation to admissions in pleadings, his Honour observed:[135]
A party may admit allegations made in pleadings by the opposing party, and may do so either expressly or by non-traverse. The effect of such admissions is to narrow the issues in dispute: they can thus have the effect of restricting the evidence to be tendered and can prevent evidence being called to the contrary.
[134] Damberg v Damberg [2001] NSWCA 87; (2001) 52 NSWLR 492 [157].
[135] Damberg [154].
His Honour held that the court is not bound to act on admissions made by the parties or on states of fact agreed between the parties, citing a passage from Gramophone Co Ltd v Magazine Holder Co,[136] which included the following:
It is the duty of a Court to decide cases according to the truth and fact, not according to any assumed or artificial state of facts which the parties may find it convenient to present. No doubt Courts of Law allow and indeed encourage parties to simplify litigation by making admissions and to a certain extent by waiving their rights, because, when there is a real controversy depending upon real facts, everyone ought to facilitate its authoritative settlement. But that is a very different thing from allowing people to obtain an adjudication upon the footing that something exists or has happened which in truth does not exist, or has never happened.
[136] Gramophone Co Ltd v Magazine Holder Co (1911) 48 SLR 1081; (1911) 28 RPC 221, 225.
Heydon JA went on to conclude that:[137]
In short, the courts are averse to pronouncing judgments on hypotheses which are not correct. To do so is tantamount to giving advisory opinions and to encouraging collusive litigation. On the other hand, the courts will act on admissions of or agreements about matters of fact where there is no reason to doubt their correctness. But they are reluctant to do so where there is reason to question the correctness of the facts admitted or agreed.
[137] Damberg [160].
Heydon JA's judgment in Damberg has been cited with approval on numerous occasions, including by this court in Embleton Motor Co Pty Ltd v St Kilda Beach Taxi School and Staffing Pty Ltd.[138]
[138] Embleton Motor Co Pty Ltd v St Kilda Beach Taxi School and Staffing Pty Ltd [2014] WASCA 183 [46].
Pleadings may confine the evidence which is admitted in a case, and so reduce the opportunity for evidence which shows an admitted fact to be wrong. A party may be held to its pleaded case in respect of the evidence to be adduced. However, where evidence inconsistent with a pleaded admission is received, the court may act on the evidence rather than the pleading. This point was made by Keane JA (Mackenzie AJA agreeing) in Holdway v Arcuri Lawyers:[139]
Subject to the requirements of natural justice, if evidence admitted without objection demonstrates that an admission of mixed fact and law is erroneous, then the admission will not be decisive against the party making it. Usually, of course, if an allegation has been admitted, evidence tendered to prove or disprove that allegation will be irrelevant and will, upon objection being taken, be excluded on that ground. But, in this case, evidence was admitted, both to prove and to disprove, the due distribution of the two pieces of land; and that occurred without objection. Once that occurred, the question for the learned trial judge was whether the proposition that the two pieces of real estate had been duly distributed was established or not. In deciding that question, the admission was relevant but it could no longer be decisive.
[139] Holdway v Arcuri Lawyers [2008] QCA 218; [2009] 2 Qd R 18 [65]. See also McMurdo P at [5].
Similarly, in Banque Commerciale SA v Akhil Holding Ltd,[140] Dawson J observed:
It is, of course, the purpose of pleadings to define the issues between the parties so that they may know the case which they have to meet and in order that the proceedings upon trial may be conducted in an orderly fashion by reference to those issues. The defined issues provide the basis upon which evidence may be ruled admissible or inadmissible upon the ground of relevance. But modern pleadings have never imposed so rigid a framework that if evidence which raises fresh issues is admitted without objection at trial, the case is to be decided upon a basis which does not embrace the real controversy between the parties. Special procedures apart, cases are determined on the evidence, not the pleadings.
While Dawson J was in dissent in that case, the above observations were approved by the High Court in Vale v Sutherland.[141]
[140] Banque Commerciale SA v Akhil Holding Ltd (1990) 169 CLR 279, 296 - 297.
[141] Vale v Sutherland [2009] HCA 26; (2009) 237 CLR 638 [41].
In the present case, evidence was admitted as to the state of Awap's share register, which showed that the shares were never registered as being issued to CN 2000. The evidence also indicated that nothing else was done in relation to the Additional Shares, between the payment of the $875,000 and the termination of the contract for the issue of the shares on 17 December 2008, to give control of the Additional Shares to CN 2000.
Awap also submits that there should be no departure from the pleadings as there is a possibility that it could have adduced evidence as to when shares are 'issued' as a matter of Samoan law.[142] The submissions do not indicate how the Additional Shares might be taken to have 'issued' under Samoan law. In any event, the question is not whether the shares were 'issued' under Samoan or Australian law, but whether they were 'issued' as that term was used in the contract between Awap and CN 2000. As noted above, a reference to the 'issue' of allotted shares is ordinarily to a step investing complete control of the shares. Resolution 4 provided for that control to be given by the issue of share certificates and the entry of details in Awap's Register of Members. In that context, the reference in Awap's resolution of 20 September 2007 to the 'issue' of shares was to giving CN 2000 control over the Additional Shares by means which at least included the taking of one or more of those steps. No such steps were taken, so that the basis on which CN 2000 made the payment of $875,000 failed to materialise. On the material before this court, there is no reasonable possibility that this conclusion, based on the terms of the contract, could be affected by some provision of Samoan law to which Awap speculatively refers. Awap did not make an application to this court for leave to adduce additional evidence in the appeal in relation to Samoan law.
[142] Appellant's Supplementary Submissions in CACV 121 of 2018.
Awap does not point to any other kind of evidence which could be called to cast doubt on the fact that the shares were never issued.
There is no reasonable possibility that Awap may have called additional evidence in response to the question of whether the Additional Shares were ever issued, so as to make proceeding on the basis of facts established by the evidence, as opposed to the pleaded facts, procedurally unfair. In these circumstances, the court should not proceed on the basis of a pleading which is inconsistent with the proven facts.
In expressing this view, it should be acknowledged that CN 2000 ran its case before the trial judge on the basis that the cancellation of the issue of the shares, rather than the failure to issue the shares, was the basis of the restitutionary claim.[143] Ordinarily a party should not be allowed to run a different case on appeal than that advanced at trial,[144] and CN 2000 did not attempt to do so in this appeal. However, that is not to say that this court must proceed to make its decision by reference to a factual basis which is demonstrably false.
Awap fails on the pleadings in any event
[143] See the discussion between the trial judge and counsel for CN 2000 at trial ts 376 - 384, and CN 2000's closing submissions at trial ts 502 - 503, 505 - 506.
[144] For a summary of the applicable principles, see Zerjavic v Chevron Australia Pty Ltd [2020] WASCA 40 [66] - [67].
In any event, even if the case was determined by reference to the pleadings, the outcome of the appeal would be the same. The facts asserted and admitted on the pleadings are that:
(1)On or about 27 September 2007, Awap issued the Additional Shares to CN 2000; and
(2)On or about 17 December 2008, the issue of the 25 Additional Shares to CN 2000 was cancelled.
Awap submits that, taken as a whole, its defence admitted only the prospective cancellation of the shares (rather than the cancellation of their issue).[145] We do not accept that submission, which appears to have found favour with the trial judge.[146] By par 9 of its defence, Awap 'admits each allegation in paragraph 9 of the Claim'. Paragraph 9 of the Statement of Claim pleaded that:
On or about 17 December 2008, the issue of the 25 Additional Shares to [CN 2000] was cancelled.
Awap's admission of that pleaded fact is not qualified by subsequent pleadings. If Awap seeks to sustain its appeal by holding CN 2000 to the facts pleaded at par 8 - 9 of the Statement of Claim, on the basis that those facts were admitted, then Awap must accept CN 2000's pleading in its terms.
[145] Appellant's Supplementary Submissions in CACV 121 of 2018, par 24 - 30.
[146] Primary decision [168].
Neither of the pleaded and admitted facts referred to at [195] above accord with the evidence. As noted above, the Additional Shares were never issued. Further, CN 2000's letter and Awap's resolution of 17 December 2008 did not purport to cancel the issue of the shares, and the basis on which it could validly have done so is not apparent to us. Rather, the letter and resolution proposed to treat the shares (as opposed to their issue) as cancelled.
However, on the hypothesis that the shares were issued, and the issue of the shares was cancelled (which must mean that, by agreement, the issue of the shares was, as between the parties, to be taken not to have occurred at the time when the shares were issued), then there has been a total failure of consideration. In that event, as the trial judge correctly held, the state of affairs which formed the basis of the $875,000 payment had failed to sustain itself. As at the date of trial, the rights of the parties were to be determined on the basis that the issue of the shares was void (that is, on the basis that the shares had never been issued). The cancellation of the issue of the shares left CN 2000 without any part of the benefit bargained for under the contract, namely the issue of shares. There is no pleading that CN 2000 obtained any practical benefit from the Additional Shares between the issue of the shares and the cancellation of the issue of the shares. It would be unconscionable for Awap to retain the money after the cancellation of the issue of the shares which was the basis on which CN 2000 made the payment. The trial judge was correct to so hold.
Therefore, whether the appeal is resolved by reference to the facts established by the evidence, or by reference to the fictions created by the pleadings, there was a total failure of consideration. Awap's appeal must be dismissed in either event.
Choice of law
In the above discussion, we have applied the common law of Australia to resolve CN 2000's restitutionary claim. The parties have not suggested that this court should do otherwise. However, we note that, while the position is not clear, the better view may be that the proper law of the restitutionary claim is the law of Singapore (being the law of the place where the payment was made and the enrichment occurred).[147] However, in the absence of any evidence as to the content of Singapore law, it is appropriate in the circumstances of the present case to apply the presumption that the law of restitution in Singapore is not materially different from the law in Australia.[148] On a similar basis, we have applied the common law of Australia to the construction of the contract between Awap and CN 2000 for the issue of the Additional Shares.
Application to amend pleadings
[147] See Nygh's Conflict of Laws in Australia (10th edition) par 21.5 - 21.9 (pages 551 - 554).
[148] None of the limitations on the presumption discussed by Heydon JA in Damberg [118] - [147] would preclude its application in this respect.
In supplementary submissions, which the court invited to address issues concerning the disparity between the evidence and the pleadings, CN 2000 stated that it 'sought leave' to amend its statement of claim to plead, in the alternative, that the Additional Shares had not been issued.[149] Given that Awap's appeal fails on the current pleadings, it is unnecessary to deal with this unorthodox aspect of the supplementary submissions.
[149] First Respondent's Supplementary Submissions in CACV 121 of 2018, par 21 - 23.
Orders
For the above reasons, both Mr Chou's and Awap's appeals should be dismissed.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
ZMM
Associate to the Honourable Justice Mitchell14 MAY 2020
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