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Chen v Chu

Chen v Chu

Case [2024] NSWSC 1139 6 September 2024

Misleading or Deceptive Conduct

False or Misleading Representations

Compensatory Damages

Consumer Law

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Supreme Court

New South Wales

Amendment notes

Medium Neutral Citation: Chen v Chu [2024] NSWSC 1139
Hearing dates: 12, 13, 14, 15, 16, 19 and 20 August 2024
Date of orders: 6 September 2024
Decision date: 06 September 2024
Jurisdiction: Equity
Before: Hammerschlag CJ in Eq
Decision:
Judgment for the plaintiffs for $7,438,548

Catchwords:
CONSUMER LAW – Australian Consumer Law (ACL) ss 18 and 29 – Australian Securities & Investments Commission Act 2001 (Cth) (ASIC Act) ss 12DA and 12DB – Misleading or deceptive conduct, false or misleading representations in connection with the supply or possible supply of services or in connection with the promotion of the supply or use of services – Conduct in relation to financial services that is misleading or deceptive – Claim for damages against a real estate agent who made misrepresentations to the plaintiffs which induced them to purchase a series of real properties off-the-plan from a developer and to release their deposits on unsecured loan to the developer at a high interest rate for its own use – Developer was insolvent at all material times and was operating a fraudulent Ponzi scheme – Defendant denies having made the representations complained of - Defendant claims that he was acting as a mere conduit in the provision of information from the developer or its CEO – Defendant claims that he did not cause the plaintiffs’ loss because of the presence of various disclaimers in contractual and other documents seen by the plaintiffs
STATUTORY DEFENCES – Civil Liability Act s 34 – ACL s 236 – ASIC Act s 12GF – Civil Procedure Act ss 64 and 65 - Defendant raises proportionate liability defence on the basis that all of the companies in the group of which the developer was part of and their CEO were concurrent wrongdoers – Defendant claims that certain of the causes of action relied on by the plaintiffs are statue barred
HELD – Defendant engaged in conduct which was misleading or deceptive or made false or misleading representations in connection with the supply or possible supply of services or in connection with the promotion of the supply or use of services – Because of the conduct of the defendant the plaintiffs suffered loss – The presence of disclaimers did not affect their reliance or play any part in the cause of their loss – Defendant not a mere conduit – Proportionate liability defence not available, amongst others, because it does not apply to claims under ACL s 29 or ASIC Act s 12DB – Defence inadequately pleaded – The developer and related companies and CEO were not a cause of the plaintiffs’ loss – Limitations defences not available
PRACTICE AND PROCEDURE – Observations concerning the practice in NSW of deposing in affidavits to conversations using the first person

Legislation Cited:
Australian Consumer Law
Australian Securities and Investments Commission Act 2001 (Cth)
Civil Liability Act 2002 (NSW)
Civil Liability Act 2003 (Qld)
Civil Procedure Act 2005 (NSW)
Competition and Consumer Act 2010 (Cth)

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Chen v Chu

Details

AGLC: Chen v Chu [2024] NSWSC 1139
Case: [2024] NSWSC 1139
Decision Date: 06 September 2024

CaseChat Overview and Summary

In the case of Chen v Chu, the plaintiffs sought damages from the defendant, a real estate agent, for misleading or deceptive conduct and false or misleading representations. The plaintiffs claimed that the defendant's actions led them to purchase real properties off-the-plan from a developer, resulting in the release of their deposits as unsecured loans to the developer at a high interest rate. The developer was insolvent throughout and operating a fraudulent Ponzi scheme. The defendant denied making the alleged misrepresentations, asserting that he merely relayed information from the developer or its CEO and was not responsible for the plaintiffs' losses due to disclaimers in the documents they signed.

The legal issues before the court included whether the defendant's conduct amounted to misleading or deceptive conduct or false or misleading representations, whether the plaintiffs' reliance on the defendant's conduct caused their loss, and if statutory defences raised by the defendant were valid. The court examined whether the defendant was merely a conduit, whether the disclaimers negated the plaintiffs' reliance, and whether the defendant could claim proportionate liability or benefit from statutory defences such as statute of limitations.

The court held that the defendant's conduct was indeed misleading or deceptive and led to the plaintiffs' loss. The disclaimers did not mitigate the reliance on the defendant's conduct or contribute to the plaintiffs' loss. The defendant was not a mere conduit, and the proportionate liability defence was not applicable, among other reasons, because it does not extend to claims under the Australian Consumer Law (ACL) s 29 or the Australian Securities & Investments Commission Act 2001 (Cth) (ASIC Act) s 12DB. The court also found that the defendant's defences were inadequately pleaded and that the limitations defences were not available. The developer, related companies, and CEO were not causes of the plaintiffs' loss.

The court's decision concluded with observations on the practice of deposing in affidavits to conversations using the first person in New South Wales, although this did not directly impact the outcome of the case. The court's final orders were in favour of the plaintiffs, awarding them damages against the defendant for misleading or deceptive conduct and false or misleading representations.

Orders