Gan v Xie

The appeal in *Gan v Xie* concerned a dispute over an alleged pyramid scheme. The appellant, Mr. Gan, alleged that the respondent, Ms. Xie, made a series of misrepresentations to induce him and others to invest in a virtual platform involving the exchange of legitimate currency for "variety credits." The core of the dispute revolved around whether this platform constituted a pyramid scheme under the Australian Consumer Law and whether evidence from other investors recruited by Ms. Xie should have been admitted at trial. The matter was heard in the Court of Appeal of New South Wales.

The legal issues before the Court of Appeal were twofold. Firstly, the court had to determine whether the virtual platform, which required new members to purchase from existing members and conferred bonuses through member recruitment, met the statutory characteristics of a pyramid scheme as defined in section 45(1) of the Australian Consumer Law. Secondly, the court considered whether the primary judge erred in ruling inadmissible certain tendency evidence from other investors, which Mr. Gan sought to lead to demonstrate Ms. Xie's alleged pattern of making similar misrepresentations about the scheme's legitimacy, profitability, and safety.

The Court of Appeal held that the scheme did indeed bear the statutory characteristics of a pyramid scheme. Regarding the admissibility of the tendency evidence, the court found that the primary judge erred in excluding it. The court reasoned that the lack of a tendency notice should not have automatically led to the rejection of the evidence, and that the evidence from other investors possessed significant probative value in establishing the alleged pattern of conduct. Furthermore, the court found that the primary judge's credit findings were based on an insufficient assessment of the witnesses' ability to recall conversations from years prior, leading to an inference of error in the treatment of evidence.

Consequently, the Court of Appeal allowed the appeal, set aside the District Court's orders and judgment, and remitted the proceedings to the District Court for a new trial before a differently constituted judge. The respondent was ordered to pay the appellant's costs of the appeal, with the costs of the District Court proceedings to be reserved.