Bullseye Mining Limited v Cheng as trustee of the Neza Trust
[2024] WASCA 120
•2 OCTOBER 2024
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: BULLSEYE MINING LIMITED -v- CHENG AS TRUSTEE OF THE NEZA TRUST [2024] WASCA 120
CORAM: BUSS P
VAUGHAN JA
TOTTLE J
HEARD: 2 APRIL 2024
DELIVERED : 2 OCTOBER 2024
FILE NO/S: CACV 69 of 2023
BETWEEN: BULLSEYE MINING LIMITED
Appellant
AND
NAM CHENG AS TRUSTEE OF THE NEZA TRUST
First Respondent
SAM CHENG AS TRUSTEE OF THE NEZA TRUST
Second Respondent
ON APPEAL FROM:
Jurisdiction : DISTRICT COURT OF WESTERN AUSTRALIA
Coram: STAVRIANOU DCJ
Citation: CHENG v BULLSEYE MINING LTD [2023] WADC 57
File Number : CIV 1989 OF 2020
Catchwords:
Appeal - Whether the trial judge erred in finding payments made were loans and not payments in discharge of commissions due - Where no error revealed - Turns on own facts
Legislation:
Nil
Result:
Appeal dismissed
Category: B
Representation:
Counsel:
| Appellant | : | AP Hershowitz |
| First Respondent | : | ML Bennett and AJ Tharby |
| Second Respondent | : | ML Bennett and AJ Tharby |
Solicitors:
| Appellant | : | Murcia Pestell Hillard |
| First Respondent | : | Bennett |
| Second Respondent | : | Bennett |
Cases referred to in decision:
Black Box Control Pty Ltd v TerraVision Pty Ltd [2016] WASCA 219
Cheng v Bullseye Mining Ltd [2023] WADC 57
Introduction
On 31 July 2012 the appellant and the respondents entered an agreement (the Service Agreement) under which the respondents agreed to procure investors to provide capital to the appellant. It was a term of the Service Agreement that the appellant would pay the respondents a 6% success fee on any capital received by the appellant from an investor introduced by the respondents. The appellant challenges the trial judge's conclusion that it is indebted to the respondents in the sum of $120,000 in respect of $2,000,000 invested in the appellant by Hong Kong Xinhe International Investment Company Pty Ltd (Xinhe) in 2015 as a result of an introduction effected by the respondents.[1] Taking into account other amounts due by the appellant to the respondents and interest, judgment was entered in the respondents' favour in the sum of $518,113.32.
[1] Cheng vBullseye Mining Ltd [2023] WADC 57 (primary reasons).
At trial the appellant raised several defences to the respondents' claims and by counterclaim sought recovery of amounts that it contended had been paid to the respondents pursuant to the Service Agreement in the mistaken belief that such amounts were due and payable. On appeal the issue was confined to the question of whether the trial judge erred in fact in finding that payments of $60,000 made on 20 August 2015 and on 15 October 2015 to a third party at the direction of the respondents were made pursuant to the terms of loan agreements between the appellant and the respondents and not in discharge of the amounts due by the appellant to the respondents under the Service Agreement.
The appellant contended the trial judge's conclusion was not supported by the contemporaneous documents and further was contrary to the evidence of the second respondent (Mr Sam Cheng). The appellant contended the trial judge should have found that the payments of $60,000 made in August and October 2015 were in satisfaction of the debts due by the appellant to the respondents under the terms of the Service Agreement. These contentions were expressed in four grounds of appeal reproduced later in these reasons.
For the reasons given below the appellant has not established any error on the part of the trial judge and the appeal must be dismissed.
Factual background
Given the confined nature of the issue raised by the appeal the following summary is sufficient to provide an understanding of the relevant factual context.
The appellant is an unlisted public company involved in gold exploration and gold and iron ore mining. In 2011 and 2012 it required operating funds and sought funds from investors. The appellant's directors were Mr Peter Joseph Burns (Mr Burns Snr), his son, Peter Gerard Burns (Mr Burns Jnr) and Ms Dariena Mullan.
Clause 4.1 of the Service Agreement relevantly provided:[2]
[2] GAB 4.
For the performance of the Services pursuant to the Engagement, the Company agrees to pay the Service Provider a 6% success fee (Capital Raising Fee) on any capital received by the Company from an investor introduced by the Services Provider (including their Related Body Corporate and Associate) during the Term of this Agreement which is payable by the Company on receipt of funds sourced by the Service Provider (Capital Raising Funds).
. . .
(b)The Capital Raising Fee is payable:
(i)in immediately available funds to the Service Provider by electronic funds transfer to the account nominated in writing by the Service Provider at least 2 Business Days prior to the date required for payment;
(ii)subject to the mutual agreement in writing of the Parties, by:
(A)the issue and allotment of the equivalent number of Shares at an issue price equal to the volume weighted average price at which Shares were traded on the ASX over the 10 trading days up to and including the date of receipt of the Capital Raising Funds by the Company, or equivalent price to its most recent capital raising); or
(B)a combination of immediately available funds and Shares in accordance with paragraphs 4.1(b)(i) and 4.1(b)(ii)(A) respectively.
. . .
On 23 April 2015 Xinhe invested $1,000,000.00 in the appellant. It is no longer in dispute that this investment entitled the respondents to a Capital Raising Fee, or to use the parties' term a 'commission', of $60,000.00.
On 20 August 2015 Mr Burns Jnr sent a letter to Mr Sam Cheng about the commission payable as a result of the 23 April 2015 investment by Xinhe in the following terms:[3]
[3] GAB 13.
Re: Confirmation of Commission Payable and Loan & Share Re‑purchase Agreement
As per the Services Agreement entered into between NEZA Trust (NEZA) and Bullseye Mining Limited (Bullseye), dated 31st July 2012, it was agreed that Bullseye will pay a commission of 6% on investment funds successfully introduced by NEZA and received by Bullseye. Under the terms of the Services Agreement, NEZA has the option to receive payment of the 6% commission either by way of a cash payment, or by the issue of shares in Bullseye to an equivalent value of the commission amount - with shares to be issued with a face value equivalent to the last capital raised by Bullseye.
Bullseye acknowledges receipt of A$1,000,000 funds received into Bullseye's Bank of China account on 23rd April 2015 by investors introduced by NEZA and agrees to pay commission of 6% (A$60,000).
As discussed with you recently, Bullseye is agreeable to settle the outstanding commission payable by making a cash payment of A$60,000 to you (or your nominee), which will be treated as an non-interest bearing loan. It has been agreed that you will repay the loan progressively over a period of 12 months. As Bullseye receives the loan repayments, the funds will be attributed to subscribing for Bullseye shares with a face value fixed at $0.16 per share. Bullseye will progressively issue shares with a face value of $0.16 per share, as loan repayment funds are received, up to the value of A$60,000 - total of 375,000 Bullseye shares. Upon the issue of 375,000 Bullseye shares to you (or your nominee), the outstanding commission payable amount of A$60,000 will be deemed to be settled in full.
We thank you for your fund raising efforts and ongoing commitment to Bullseye.
Kind regards,
[signature]
Peter G Burns
Executive Director
Bullseye Mining Limited
I, Sam Cheng, agree that the current outstanding commission payable amount of A$60,000 will be settled via a loan and share repurchase agreement as outlined in this letter.
Signed: [signature] Date: [handwritten: 20/8/15]
On 20 August 2015 Mr Burns Jnr sent an email to Aspen Corporate Pty Ltd that was copied to the appellant's other directors.[4] Aspen Corporate was an accountancy practice that appears to have been involved in administering the appellant's finances. Mr Burns Jnr attached a copy of the letter dated 20 August 2015 to Mr Sam Cheng to his email to Aspen Corporate describing it as 'NEZA Commission Payable Letter Agreement - 200815.pdf'. The email was in the following terms:
[4] GAB 15.
Hi Lee,
We need to make a payment of A$60,000 as follows, in relation to a capital raising commission payment, as per the agreement attached:
Amount of Transfer: A$60,000
Account Name: Hai Shan Li
Bank: NAB
BSB: XXX XXX
Account #: XX XXX XXXX
This amount is to be treated as a loan which will be progressively repaid over the coming 12 months. As the loan repayment funds are received they will be progressively utilised to subscribe for Bullseye shares which will ultimately settle the outstanding commission amount payable.
I will advise you as loan repayment funds are received and as shares are issued to progressively reduce the principal of the loan.
Feel free to contact me if you have any queries.
Thanks and best regards,
Peter
On 20 August 2015 the appellant made a payment of $60,000 into the account in the name of Mr Hai Shan Li nominated in the email to Aspen Corporate.[5]
[5] GAB 16, 18.
On 25 September 2015 Xinhe invested a further $1,000,000 in the appellant. It is no longer in dispute that this investment entitled the respondents to a commission of $60,000.00.
On 13 October 2015 Mr Burns Jnr sent a letter to Mr Sam Cheng about the commission payable as a result of the 25 September 2015 investment by Xinhe in the following terms:[6]
[6] GAB 20.
Re: Confirmation of Commission Payable and Loan & Share Re-purchase Agreement
As per the Services Agreement entered into between NEZA Trust (NEZA) and Bullseye Mining Limited (Bullseye), dated 31st July 2012, it was agreed that Bullseye will pay a commission of 6% on investment funds successfully introduced by NEZA and received by Bullseye. Under the terms of the Services Agreement, NEZA has the option to receive payment of the 6% commission either by way of a cash payment, or by the issue of shares in Bullseye to an equivalent value of the commission amount - with shares to be issued with a face value equivalent to the last capital raised by Bullseye.
Bullseye acknowledges receipt of a further A$1,000,000 funds received into Bullseye's Bank of China account on 25th September 2015 by investors introduced by NEZA and agrees to pay commission of 6% (A$60,000).
As discussed with you recently, Bullseye is agreeable to settle the outstanding commission payable by making a cash payment of A$60,000 to you (or your nominee), which will be treated as an non-interest bearing loan. It has been agreed that you will repay the loan progressively over a period of 12 months. As Bullseye receives the loan repayments, the funds will be attributed to subscribing for Bullseye shares with a face value fixed at $0.16 per share. Bullseye will progressively issue shares with a face value of $0.16 per share, as loan repayment funds are received, up to the value of A$60,000 - total of 375,000 Bullseye shares. Upon the issue of 375,000 Bullseye shares to you (or your nominee), the outstanding commission payable amount of A$60,000 will be deemed to be settled in full.
We thank you for your fund raising efforts and ongoing commitment to Bullseye.
Kind regards,
[signature]
Peter G Burns
Executive Director
Bullseye Mining Limited
I, Sam Cheng, agree that the current outstanding commission payable amount of A$60,000 will be settled via a loan and share repurchase agreement as outlined in this letter.
Signed: [signature] Date: [handwritten: 13th October 2015]
On 14 October 2015 Mr Burns Jnr sent an email to Aspen Corporate by which he forwarded his email to Aspen Corporate of 20 August 2015 and gave directions for the payment of a further $60,000 to Mr Li. Mr Burns Jnr attached a further copy of his letter dated 20 August 2015 to Mr Sam Cheng to the email.[7] Omitting Mr Li's account details, the email was in the following terms:
We need to make a further commission payment for investment funds recently received by Bullseye Mining Limited into our Bank of China account - same as the last payment made in August (see email below).
. . .
. . .
This amount is to be treated as a loan which will be progressively repaid over the coming 12 months. As the loan repayment funds are received they will be progressively utilised to subscribe for Bullseye shares which will ultimately settle the outstanding commission amount payable.
I will advise you as loan repayment funds are received and as shares are issued to progressively reduce the principal of the loan.
Feel free to contact me if you have any queries.
Thanks and best regards,
Peter
[7] GAB 22.
On 15 October 2015 the appellant made a further payment of $60,000 into Mr Li's account.[8]
[8] GAB 19, 24.
On 29 November 2018 the respondents' solicitors sent a letter of demand accompanied by an invoice to the appellant in respect of outstanding commission due under the Service Agreement.[9] The letter and accompanying invoice demanded payment of $270,600 and did not refer to any commission due by reason of the investments made by Xinhe on 23 April and 25 September 2015. It appears, however, that the respondents rendered an invoice for $120,000 on 6 March 2019 in respect of Xinhe's investment of $2,000,000. In response to the demand for payment of this invoice the appellant, through its solicitors, maintained that the invoice had been settled by the two payments of $60,000 made on 20 August and 15 October 2015.[10]
[9] GAB 25.
[10] GAB 27.
The pleaded issues
The respondents' pleaded case was straightforward.[11] They pleaded the Service Agreement and the term contained in cl 4. They pleaded they introduced (relevantly) Xinhe to the appellant and that it had invested $2,000,000 in equal tranches on 23 April and 25 September 2015. They pleaded they were entitled to capital raising fees of $120,000 in respect of those investments along with other sums in respect of investments made by another party.
[11] BAB 112.
The appellant's amended defence and counterclaim was more involved.[12] In response to the respondents' plea that it had failed to pay capital raising fees in respect of funds received from Xinhe the appellant pleaded:
[12] BAB 118.
16.1in relation to the investment by Xinhe in Bullseye, on or about 25 April 2015, pleaded in paragraph 8 of the Statement of Claim, it paid the sum of $60,000, on the direction of Sam Cheng, to Hai Shan Li, on or about 20 August 2015;
16.2the sum of $60,000 was paid by Bullseye, on the direction of Sam Cheng, to Hai Shan Li, on or about 20 August 2015, under the mistaken belief that it was obliged to pay such sum as fees under the Services Agreement;
16.3it is entitled to recover such sum of $60,000 from the plaintiffs, as more fully pleaded in the counterclaim below;
16.4in relation to the investment by Xinhe in Bullseye, on or about 24 September 2015, pleaded in paragraph 10 of the Statement of Claim, it paid the sum of $60,000, on the direction of Sam Cheng, to Hai Shan Li, on or about 15 October 2015;
16.5the sum of $60,000 was paid by Bullseye, on the direction of Sam Cheng, to Hai Shan Li, on or about 15 October 2015, under the mistaken belief that it was obliged to pay such sum as fees under the Services Agreement;
16.6it is entitled to recover such sum of $60,000 from the plaintiffs, as more fully pleaded in the counterclaim below;
16.7any amount owing by Bullseye to the plaintiffs (which is denied) is to be set off against the counterclaim of Bullseye against the plaintiffs pleaded below; and
16.8it has not paid capital raising fees in respect of the funds it received from Xinhe or Fountain, pleaded in paragraphs 12 and 14 of the Statement of Claim, respectively, but denies it is under any obligation to do so.
In its counterclaim the appellant pleaded that the payments made to Mr Li on 20 August and 15 October 2015 were made under a mistake of fact and sought relief in the form of a reimbursement by the respondents of the sum of $120,000.
At trial, as between the parties, it was accepted that the appellant alleged that the two payments of $60,000 were made in discharge of its liability under the Service Agreement.[13]
[13] Trial transcript 72; WAB 21 [4].
It may be noted the appellant did not allege in its amended defence that either of 'the loan and share repurchase agreements' described in the letters of 20 August and 15 October 2015 constituted an accord and satisfaction. Nor did the appellant allege in its counterclaim that payments made on 20 August and 15 October 2015 were loans that had not been repaid. No defence of equitable set-off in respect of amounts due under the 'loan and share purchase agreements' was pleaded.
Trial judge's reasons
The trial judge began his analysis of the aspect of the respondents' claim with which the appeal is concerned by noting that the appellant's case was that a total of $120,000 was paid at the direction of Mr Sam Cheng and had not been accounted for by the respondents.[14] His Honour referred to the pleadings and noted that the sum of $120,000 was part of the sum claimed to have been paid under a mistake of fact.[15] The trial judge then set out the evidentiary materials that are summarised earlier in these reasons.[16]
[14] Primary reasons [419].
[15] Primary reasons [420].
[16] Primary reasons [423] - [429].
The trial judge's conclusions were expressed as follows:
[430]The defendant sought to rely upon the evidence of Mr Burns Jnr in relation to the alleged repayment of $120,000. His evidence on this issue was vague and difficult to follow. I am not prepared to act upon it. His evidence in relation to the letters he wrote to Mr Sam Cheng on 20 August 2015 and 13 October 2015 was confused. In all the circumstances I am not prepared to act upon it. The contemporaneous documentary evidence together with the evidence of Mr Sam Cheng establishes that the payment of $120,000 has not been made in reduction of the outstanding fees.
[431]The letters of 20 August 2015 and 13 October 2015 establish an entitlement to commission. The payments totalling $120,000 are in effect characterised as a loan. Each letter provides 'Upon the issue of 375,000 Bullseye shares to you (or your nominee), the outstanding commission payable amount of A$60,000 will be deemed to be settled in full'. There is no dispute that 375,000 shares in each case have not been issued. In the circumstances in terms of each letter the commission remains outstanding.
For completeness, reference is made to observations made by the trial judge on the appellant's attack on the credit of Mr Sam Cheng and the reliability of his evidence. As to that attack his Honour said this: [17]
The defendant's criticism of the evidence of Mr Sam Cheng needs to be considered in the light of a number of circumstances. First, the evidence was being adduced through an interpreter. Secondly, the evidence needs to be considered in the light of the questions themselves. As an example on occasions there were multiple part questions which the plaintiff did his best to answer. Thirdly, Mr Sam Cheng was being asked about events which had occurred in some cases at least 10 years before he gave his evidence. Fourthly, he was prepared to in effect accept that time had an effect upon his memory.
. . .
I had the opportunity to observe Mr Sam Cheng give evidence. On occasions he did struggle to understand the questions. I do consider he was doing his best to answer truthfully the questions put to him.
Mr Sam Cheng's evidence was generally consistent throughout. I have also considered the contemporaneous material which has been produced. There are, for example, written acknowledgments by the defendant that Mr Sam Cheng had made introductions including of Mr Wu (Fountain) and Mr Huang (Xinhe). Again, his evidence was generally consistent with the documents. Further the conduct of the defendant including payments of fees in relation to investments made is consistent with the evidence of Mr Sam Cheng.
In summary, the defendant's position in relation to the evidence of Mr Sam Cheng was that it should be rejected as evasive and deliberately so. I am not prepared to accept that to be the case.
[17] Primary reasons [159] - [163].
Grounds of appeal
The grounds of appeal were as follows:[18]
[18] WAB 5.
1.The learned trial judge erred in fact in concluding that the contemporaneous documentary evidence together with the evidence of Sam Cheng establishes that the payment of $120,000.00 has not been made in reduction of the outstanding fees and that the commission of $120,000.00 remains outstanding (PJ [430]-[431]).
2.Further and alternatively to ground 1, the learned trial judge erred in fact in failing to conclude that the two commission payments of $60,000.00 totalling $120,000.00 had been paid by the Appellant to the Respondents.
3.Further, the learned trial judge erred in fact in failing to take into account relevant documentary and oral evidence that established:
(a)the Appellant had paid the two commission payments of $60,000 each to the Respondents' nominee on 20 August 2015 and 15 October 2015 respectively;
(b)Peter Burns Jnr repaid the amount of $120,000 loaned to him personally by Sam Cheng on 11 June 2019;
in circumstances where the learned trial judge identified that the process he adopted in reaching conclusions and making findings, as far as possible, was on the basis of contemporary materials, objectively established facts and the apparent logic of events.
4.The learned trial judge erred in finding that the commission remains outstanding in that shares had not been issued by the Appellant to the Respondents (PJ [431]).
In effect, by grounds 1 and 2 the appellant says that the trial judge erred in fact in finding that the $120,000 remained outstanding - the appellant says that the trial judge should have found that the $120,000 was paid by the appellant to the respondents in discharge of the commissions. Ground 4 essentially raises the same point. Ground 3 raises a 'process error' in the trial judge's approach to the factual determination. The appellant alleges that the trial judge failed to take relevant oral and documentary evidence into account. So understood, on an appeal by way of rehearing, ground 3 adds nothing to the appeal.
Accordingly, the sole issue on appeal is whether the trial judge was in error not to hold that the $120,000 had been paid by the appellant to the respondents in discharge of the obligation to pay the commission due under the Service Agreement.
Mr Sam Cheng's evidence
It is convenient to refer to the evidence given by Mr Sam Cheng in cross-examination that is relied on by the appellant. In cross‑examination Mr Sam Cheng was shown the email sent by Mr Burns Jnr to Aspen Corporate on 20 August 2015 and his attention was directed to the sentence 'We need to make payment of $60,000 in relation to the capital raising commission payments as the agreement attached'. Mr Sam Cheng confirmed that: he was the person who provided Mr Burns Jnr with Mr Li's account details set out in the email; Mr Li was his friend; and the $60,000 was 'the commission for Xinhe's 1 million investment'.[19] The following exchange then took place:[20]
TRIAL COUNSEL FOR APPELLANT: So that commission was due to you but you wanted the commission actually to be paid to that bank account, is that correct, of your friend?---I suppose.
Yes or no? You direct debited - - -?---Yes.
[19] Trial transcript 346.
[20] Trial transcript 347.
Next, Mr Sam Cheng was shown Mr Burns Jnr's email to Aspen Corporate of 14 October 2015 and his attention was directed to the words 'We need to make a further commission payment for investment funds' and the following exchange then took place:[21]
And that commission was you say due to you?---Yes.
And you gave that - those details to pay that commission of $60,000 to [Hai Shan Li], is that correct?---Correct.
And it was paid?---Yeah.
[21] Trial transcript 347.
Immediately after Mr Sam Cheng gave this evidence there was a discussion between counsel and the trial judge about how the evidence related to the respondents' claims. At the suggestion of the trial judge, the appellant's counsel sought further explanation from Mr Sam Cheng. Mr Sam Cheng was shown Mr Burns Jnr's letter to him of 20 August 2015 and his attention was directed to the sentence that read: 'Bullseye acknowledges the receipt of $1 million into its account by investors introduced by Neza and agrees to pay a commission of 6 per cent, $60,000' and to his signature on the second page of the letter.[22] There was then the following exchange:[23]
And you on the next page you sign that as that's the commission that was payable?---Yeah.
And then over the page you direct that commission on the $1 million to be paid to [Hai Shan Li]. Is that correct?---Correct.
And that related to an introduction on 23rd of - a payment on 23 April 2015, is that correct?---Correct.
And that's the one I think paragraph 8 of the statement of claim, your Honour.
[22] Trial transcript 350.
[23] Trial transcript 350.
In response to a further request for clarification from the trial judge the appellant's counsel said that the commission related to the investment made on 23 April 2015. The cross-examination continued:[24]
Am I correct, Mr Cheng?---But this one - one thing I want to let you know. This one it's belong were pay back to the company in the 12 months.
I'm asking the questions, please?---Yeah.
[24] Trial transcript 351.
In re-examination Mr Sam Cheng's evidence was to the effect that the payments were made to Mr Li at the suggestion of Mr Burns Jnr and Mr Li lent Mr Burns Jnr the amount of the payments, that is, $120,000.[25]
[25] Trial transcript 371 - 375.
Disposition
At the hearing of the appeal the appellant's counsel accepted the nub of the appeal was whether the trial judge erred by failing to characterise the payments of $60,000 in August and October 2015 as made pursuant to or in discharge of the appellant's obligations under the Service Agreement.[26] Essentially each appeal ground is directed to this characterisation issue. Accordingly, it is not necessary to deal with the grounds individually.
[26] Appeal transcript 35.
A preliminary observation is required. Although it is implicit in the characterisation issue that the trial judge found the two payments of $60,000 had in fact been made, in oral submissions the appellant's counsel was reluctant to accept that the trial judge had made a positive finding the two payments had been made.[27] There is, however, no doubt the trial judge was satisfied the two payments of $60,000 had been made. As noted earlier the trial judge began his consideration of this aspect of the respondents' case by recording that it was the appellant's case that a total of $120,000 was paid at the direction of Mr Sam Cheng and had not been accounted for. His Honour expressly found that the appellant made a payment of $60,000 on 20 August 2015.[28] It is implicit in the final sentence of paragraph [430] of the primary reasons which reads:
The contemporaneous documentary evidence together with the evidence of Mr Sam Cheng establishes that the payment of $120,000 has not been made in reduction of the outstanding fees.
and in the second sentence of paragraph [431] of the primary reasons which reads:
The payments totalling $120,000 are in effect characterised as a loan.
that his Honour was satisfied that payments totalling $120,000 had been made and, thus necessarily was satisfied the second payment of $60,000 was made on 15 October 2015.
[27] Appeal transcript 33.
[28] Primary reasons [426].
For the following three reasons the trial judge was not in error in finding that the two payments of $60,000 were not made in reduction of commissions due under the Service Agreement.
First, the best indication of the basis on which the appellant made the two payments of $60,000 is to be found in Mr Burns Jnr's letters to Mr Sam Cheng and in his emails to Aspen Corporate. The letters and emails demonstrate beyond peradventure that the parties regarded the payments as loans. It is sufficient to refer to the 20 August 2015 correspondence (the same point arises in respect of the 15 October 2015 payment and the correspondence that preceded it). In the letter to Mr Sam Cheng of 20 August 2015, which Mr Burns Jnr characterised as 'a loan and share re-purchase agreement', he wrote:
As discussed with you recently, Bullseye is agreeable to settle the outstanding commission payable by making a cash payment of A$60,000 to you (or your nominee), which will be treated as an non-interest bearing loan. (emphasis supplied)
And in the email to Aspen Corporate sent on the same day, he wrote:
This amount is to be treated as a loan which will be progressively repaid over the coming 12 months. (emphasis supplied)
The payment to Mr Li was made shortly after Mr Burns Jnr instructed Aspen Corporate to make the payment and gave the instruction that it was to be 'treated as a loan'. The unequivocal statements about the nature of the transaction in the letter to Mr Sam Cheng and the email to Aspen Corporate provide no support for the appellant's argument that the payment was made in discharge of the obligation to pay the fee payable under the Service Agreement. Rather they constitute a fatal flaw in that argument.
Second, two points may be made about the appellant's reliance on Mr Sam Cheng's evidence.
(a)Mr Burns Jnr's letters of 20 August and 13 October 2015, each bearing the endorsement signed by Mr Sam Cheng that the outstanding commission will be settled 'via a loan and share purchase agreement as outlined in this letter', constituted agreements. The intention of the parties as to the basis upon which the payments were made fell to be determined by the application of orthodox principles of contractual construction.[29] Any subjective understanding held by Mr Sam Cheng of the basis upon which the payments were made had no part to play in that construction exercise.
(b)In any event the support provided by Mr Sam Cheng's evidence to the appellant's case was marginal at best. When taken to the email of 20 August 2015 from Mr Burns Jnr to Aspen Corporate, Mr Sam Cheng was referred to the sentence, 'We need to make a payment of $60,000 in relation to capital raising commission payment as per the agreement attached' but he was not taken to the sentence appearing under Mr Li's account details that read, 'This amount is to be treated as a loan which will be progressively repaid over the coming 12 months'. The latter statement was inconsistent with the payments being treated as a payment of commission. To elicit reliable evidence of Mr Sam Cheng's understanding of the basis on which the payments were made it would have been necessary for counsel to draw his attention to that sentence. When Mr Sam Cheng's answers to the questions put to him in relation to references to the 'commission payments' referred to in the emails to Aspen Corporate are read with his attempt in the later exchange with the appellant's counsel to clarify his evidence (see [28] ‑ [32] above) it is to be doubted that Mr Sam Cheng was agreeing to anything more than on each of the relevant dates, that is 20 August 2015 and 13 October 2015, the appellant owed the respondents a fee of $60,000 pursuant to the terms of the Service Agreement. It is far from clear that Mr Cheng was making any admission about the basis upon which payments of $60,000 were made following the letters of 20 August and 13 October 2015.
[29] See eg Black Box Control Pty Ltd v TerraVision Pty Ltd [2016] WASCA 219 [42].
Third, the appellant asserted that one of the reasons why the trial judge found that the commission remained outstanding was that he considered it necessary for the appellant to prove that the respondents had been issued with 375,000 shares in the appellant and that fact had not been established. On the basis of this assertion the appellant contended, in effect, that the claim should have failed because the respondents had not adduced evidence they had elected to take up shares and had not adduced evidence that the $120,000 was repaid progressively or at all. This contention misunderstands the legal analysis that underpins the trial judge's reasoning. The gravamen of the trial judge's reasoning was that the two payments of $60,000 were loans made under the agreements constituted by the letters dated 20 August and 13 October 2015 and not payments made in discharge of the liability to pay commissions under the Service Agreement. It was open to the appellant to plead a defence of accord and satisfaction or an equitable set-off of amounts due by the respondents to the appellant pursuant to the terms of the agreements constituted by the letters which may have made the failure to repay and the non-issue of shares relevant, but these defences were not pleaded.
Conclusion
None of the grounds of appeal have been established and the appeal will be dismissed.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CD
Associate to the Honourable Justice Tottle
2 OCTOBER 2024
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