Gang v You
[2024] ACTCA 37
•19 December 2024
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
COURT OF APPEAL
Case Title: | Gang v You |
Citation: | [2024] ACTCA 37 |
Hearing Date: | 15 May 2023 |
Decision Date: | 19 December 2024 |
Before: | McCallum CJ, Loukas-Karlsson and O’Sullivan JJ |
Decision: | (1) Dismiss the appeal. (2) Order the appellant to pay the respondent’s costs. (3) Discharge the first respondent from his undertakings given to the Court on 6 August 2018. |
Catchwords: | APPEAL – CIVIL – CONTRACT – where appellant claimed to have entered into merger agreement with respondent – oral agreement – whether primary judge erred in not accepting appellant’s evidence APPEAL – EQUITY – where solicitor retained by respondent to act on conveyance – whether solicitor also acted for appellant – whether primary judge erred in factual findings concerning sale of house |
Legislation Cited: | Court Procedure Act 2006 (ACT) s 5A Court Procedure Rules 2006 (ACT) r 5403 Evidence Act 2011 (ACT) s 136 Supreme Court Act 1933 (ACT) ss 37E, 37O |
Cases Cited: | Australian Capital Territory v Crowley [2012] ACTCA 52; 7 ACTLR 142 Fox v Percy [2003] HCA 22; 214 CLR 118 Ryan v Bunnings Group Ltd [2020] ACTSC 353 Watson v Foxman (1995) 49 NSWLR 315 |
Texts Cited: | Practice Direction 1 of 2016, ACT Supreme Court |
Parties: | Yeong Suk Gang ( Appellant) Jin Ho You ( First Respondent) Colquhoun Murphy Pty Ltd Trading as Colquhoun Murphy Lawyers (Second Respondent) |
Representation: | Counsel Mr T Crispin ( Appellant) Mr B Buckland ( First Respondent) Mr A Muller (Second Respondent) |
| Solicitors Jacobs Legal ( Appellant) Mills Oakley ( First Respondent) Moray & Agnew (Second Respondent) | |
File Number: | ACTCA 63 of 2021 |
Decision Under Appeal: | Court: ACT Supreme Court Before: Crowe AJ Date of Decision: 15 December 2021 Case Title: Gang v You (No 3) Citation: [2021] ACTSC 318 Court File Number: SC 430 of 2018 |
THE COURT:
Introduction
1․Yeong Suk Gang brought proceedings in the Supreme Court arising out of his dealings with Jin Ho You. Both men are Korean. Mr Gang is a tiler by trade. His company, CU Tiling Pty Ltd, had performed contract work for Mr You’s construction company, JY Contractors Pty Ltd, since about 2015. Mr Gang contends that, in February or March 2017, Mr You approached him with a suggestion that the two companies should join. He says that proposal was discussed a few times before agreement on terms was reached at a business dinner in a Chinese Restaurant in late March 2017. There is no written record or evidence of the agreement.
2․Mr You gives a very different account of those dealings. In 2016, Mr You became aware through complaints from tilers working for Mr Gang’s company about not being paid and that the company appeared to be in financial difficulty. He was aware that those employees included workers sponsored on s 457 “skilled migrant” visas (meaning their entitlement to remain in Australia and achieve permanent residency depended on their continued employment). On Mr You’s version, his dealings with Mr Gang in early March 2017 began when Mr Gang and CU Tiling’s general manager, Mr Kim brought him a proposal they had identified for acquiring cheap stone and tiles from China. Mr You says that, at that meeting, apart from discussing the proposal, Mr Gang and Mr Kim also requested a loan from Mr You for $100,000. The China stone and tile deal did not ultimately go ahead. However, Mr You says he agreed to lend funds to CU Tiling to pay its debts on the condition that Mr Gang agreed to repay the loans personally. He denies the existence of any merger or joint venture agreement.
3․Mr Gang contends that he later sold his house to Mr You on terms that were to include an option to repurchase it within 3 years, when in fact the contract included no such term. He further contends he was tricked by Mr You into directing the solicitors acting on the conveyance to release the proceeds of sale (just over $335,000) from their trust account to JY Contractors when Mr Gang should have received those proceeds himself. Mr Gang further contends that the solicitors breached a fiduciary duty to protect him from that outcome.
4․Again, Mr You gives a very different account. He contends that the sale of the house was agreed to by Mr Gang as a means of repaying Mr You or his company for debts paid on behalf of Mr Gang or his company.
5․The primary judge (Crowe AJ) found against Mr Gang on all aspects of his claim and entered judgment in favour of both defendants (Mr You and the solicitors, Colquhoun Murphy Lawyers): Gang v You (No 3) [2021] ACTSC 318. His Honour also found in favour of Mr You on a counterclaim against Mr Gang for the payment of outstanding licence fees and expenses for remaining in possession of the house after completion of the sale. Mr Gang appeals from all his Honour’s orders.
Nature and scope of the appeal
6․The appeal invokes this Court’s jurisdiction under s 37E of the Supreme Court Act 1933 (ACT). The powers of the Court in relation to the orders appealed from are set out in s 37O of the Act.
7․An appeal under s 37E is in the nature of a rehearing, albeit that error must still be shown. The Court is obliged to conduct “a real review of the trial” and the judge’s reasons and give “the judgment which in its opinion ought to have been given in the first instance”: Australian Capital Territory v Crowley [2012] ACTCA 52; 7 ACTLR 142 at [5].
8․Mr Gang’s amended notice of appeal specifies 61 grounds of appeal, not including multiple sub-grounds. Counsel who settled the notice of appeal (not counsel who appeared at the hearing of the appeal) contended in written submissions that this was necessary because the primary judge “erred upon almost all of the matters and issues before him”. Leave was sought (and granted) to put on 30 pages of written submissions (where the usual limit is 20 pages in accordance with Practice Direction 1 of 2016, cl 27) to address the supposed complexity of the appeal.
9․Upon analysis, the numerous grounds reflect a wholesale failure to distil the real issues for this Court’s determination. Mr Crispin, who appeared for the appellant at the hearing of the appeal, was understandably anxious to explain that he did not prepare the notice of appeal and played only a small role in the preparation of the written submissions. He maintained that all grounds were pressed. However, it was not clear whether that was based on an analysis of the grounds he inherited or simply an unwillingness to concede any point. At one point, asked whether he pressed a particular ground, Mr Crispin responded only that he did not have instructions to abandon it. In our respectful opinion, it is within the scope of counsel’s authority, based on their forensic judgment, to abandon a point during oral submissions. Counsel is under no obligation to maintain a weak argument for want of instructions.
10․Rule 5403(1)(f) of the Court Procedures Rules 2006 (ACT) provides that the notice of appeal in an appeal to this Court must state “briefly, but specifically, the grounds relied on in support of the appeal, including, in particular, any grounds on which it is claimed that there is an error of law in the order”. The grounds of appeal specified by Mr Gang do not meet the requirement of brevity. Section 5A of the Court Procedures Act 2004 (ACT) imposes a statutory duty on parties to a civil proceeding to help the court to achieve the objectives of facilitating the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible. It is the role of counsel to assist their client to fulfill that duty.
11․Consideration of the appeal was further complicated by the poor state of the appeal books. Inexplicably, documents even including transcript were reproduced in extremely small print and in a small number of instances were illegible. The material was poorly organised, poorly indexed and included duplicates of some material. While the appeal was premised on a wholesale attack on the primary judge’s analysis of the evidence, the appeal books were largely ignored in the appellant’s oral submissions, leaving the Court to grapple with that material unassisted.
12․Without abandoning any of the grounds of appeal, Mr Crispin in oral submissions responded to the Court’s concern as to the number of grounds by grouping them into distilled categories. Unfortunately, those groupings were inconsistent with the groupings adopted in the written submissions which, although mostly written by his predecessor, Mr Crispin also expressly relied upon. Doing the best we can with those inconsistent approaches, the approach we have adopted is to address the grounds by reference to the central submissions on appeal as developed in the appellant’s written submissions. For completeness, at the end of this judgment, we have then checked our conclusions against the grounds specified in the notice of appeal.
Two irreconcilable accounts
13․As the foregoing short summary reveals, the primary judge was faced with two irreconcilable versions of events, both as to the alleged merger agreement and as to the sale of Mr Gang’s property. It was accordingly necessary for the primary judge to make an assessment of the credibility of the evidence of the critical witnesses. His Honour set out his conclusions as to reliability and credibility at [118]-[136] of the judgment. However, he prefaced that discussion at [111]-[117] with a careful analysis of the limited usefulness of demeanour in such assessments, citing the discussion of the authorities by Loukas-Karlsson J in Ryan v Bunnings Group Ltd [2020] ACTSC 353 at [21]-[25].
14․After then referring to the remarks of McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 319 concerning the fallibility of human memory of what was said in a conversation, the primary judge said at [113]:
In my view, the testimony of all of the lay witnesses, and especially those of the plaintiff and first defendant and their immediate supporters, must be carefully assessed by reference to the contemporaneous records (such as they are), the objective facts, the motives of the witnesses (so far as they are discernible) and what Hallen J, in Evans v Braddock [2015] NSWSC 249 at [73], referred to as the “overall probabilities”.
15․Making an assessment of irreconcilable accounts of historical conversations in that way is orthodox. However, Mr Gang’s submissions did not engage with that approach. The overall submission concerning the findings of fact simply invited the Court to prefer Mr Gang’s evidence to Mr You’s. It was submitted that the primary judge “failed properly to assess [Mr Gang’s evidence] and its strong weight” and that there was “no proper basis to doubt [Mr Gang’s] solemnly affirmed evidence” and that evidence accepted by the primary judge was “inherently improbable and glaringly so”. As submitted by the respondents, many of those submissions amounted to assertion, sometimes with references to parts of the affidavit or oral evidence of witnesses, sometimes not, mostly without any explanation as to what was said to be improbable about Mr You’s evidence or, conversely, what gave any particular aspect of Mr Gang’s evidence “strong weight”. The submissions were virtually silent as to the contemporaneous records and the objective facts.
16․Developing those submissions in oral argument, Mr Crispin invoked the principles stated in Fox v Percy [2003] HCA 22; 214 CLR 118, particularly the following passage in the judgment of the plurality (Gleeson CJ, Gummow and Kirby JJ) at [29] (footnotes omitted):
In some, quite rare, cases, although the facts fall short of being “incontrovertible”, an appellate conclusion may be reached that the decision at trial is “glaringly improbable” or “contrary to compelling inferences” in the case. In such circumstances, the appellate court is not relieved of its statutory functions by the fact that the trial judge has, expressly or implicitly, reached a conclusion influenced by an opinion concerning the credibility of witnesses. In such a case, making all due allowances for the advantages available to the trial judge, the appellate court must “not shrink from giving effect to” its own conclusion. Finality in litigation is highly desirable. Litigation beyond a trial is costly and usually upsetting. But in every appeal by way of rehearing, a judgment of the appellate court is required both on the facts and the law. It is not forbidden (nor in the face of the statutory requirement could it be) by ritual incantation about witness credibility, nor by judicial reference to the desirability of finality in litigation or reminders of the general advantages of the trial over the appellate process.
17․The respondents submitted that this is not a Fox v Percy appeal, for the reason acknowledged by the primary judge in the remarks set out at [14] above. The respondents submitted that the primary judge did not give undue weight to Mr You’s evidence because he did not need to. Instead, faced with irreconcilable versions of the critical conversations in the evidence of the witnesses, his Honour relied on emails, letters and “the inherent unlikeliness” of Mr Gang’s version of events.
18․Those competing contentions are assessed in the discussion that follows.
The value of CU Tiling
19․A central premise of Mr Gang’s account is that, at the time he says he was approached by Mr You with an offer to join the two companies, CU Tiling was a valuable asset. However, his evidence did not establish that premise. In his primary affidavit dated 28 May 2019, he said:
My company was a valuable asset. In 2014, when I took over the company from my step-son, the business employed a team of eight tilers. From 2014 to 2017, I gradually expanded the team until there were 16 or 17 tilers.
My company’s gross income from doing tiling work in the year ended 30 June 2015 was $1,571,777.00 and, in the year ended 30 June 2016 was $1,671,586.00, and it paid my wages.
20․Of course, neither the number of employees nor gross income is, of itself, a reliable measure of the value of a company or a business. Doubling the number of employees in the space of 3 years meant double the wage, superannuation and taxation liabilities. Gross income is meaningless without knowing expenses and other liabilities.
21․Mr Gang led evidence from a forensic accountant, Mr Green, but that evidence did not address the value of the company as at March 2017. Mr Green’s report was directed primarily to untangling the financial statements in the period after 1 April 2017 on the premise instructed by Mr Gang, that Mr You took over management of the company on that date. Mr Gang relied on that report to support his contention that a merger took place. Mr Green found features of the financial records after 1 April 2017 that were unusual or irregular. He noted that, as at “April 2017”, by reference to a summary prepared by Mr Kim, amounts owing by CU Tiling totalled $294,146 including $92,000 owed to the ATO and approximately $82,000 owing to trade creditors (other evidence suggests the liability to the ATO at that time was over $123,000). Other liabilities included “various taxes, finance lease and other employee liabilities such as superannuation payable and provisions for employee entitlements”. Mr Green expressed the opinion that CU Tiling’s financial position “appears to have deteriorated” during the period from 1 April 2017 (the date Mr Gang says the merger took effect) and 30 November 2017 (the date CU Tiling was placed under administration). However, as already noted, he did not express an opinion as to the value of CU Tiling or its business before 1 April 2017, or whether the deterioration he detected had commenced before then.
22․Mr You led evidence from Mr Senatore, an accountant and liquidator. The appeal books included only the executive summary of Mr Senatore’s report. The primary judge set out Mr Senatore’s opinion at [145] of the judgment as follows:
The issue of CUT’s financial position as at March 2017 was examined in detail by Mr Senatore. By reference to the indicia discussed in paragraph 8.39 of his report, Mr Senatore concluded that CUT was insolvent from March 2016, most definitely insolvent from September 2016 and as at March 2017. He also said that he was unable to attribute any value to the shares in CUT as at 30 June 2016 or 30 March 2017 by reason of the following:
1. Lack of integrity of CUT’s financial records
2. Unstable financial position
3. No positive net maintainable earnings trend
4. Poor working capital position
5. Low barriers to entry
6. No differentiator as to service offerings.
23․The primary judge discussed that evidence at [146]-[151] of the judgment. His Honour concluded at [151]:
I accepted Mr Senatore’s analysis and his opinions as to the insolvency of CUT as at March 2017 (and earlier) and as to its lack of value.
24․There is no challenge to that finding. CU Tiling’s insolvency as at March 2017 and for at least 6 months before that time is a significant factor in the assessment of the competing probabilities of the two versions of events with which the primary judge was presented.
The alleged joint venture agreement (grounds 2 and 3)
25․Mr Gang’s case was that the merger agreement was an oral agreement. The relevant conversations between Mr Gang and Mr You were in the Korean language. Accordingly, on this issue at least, no question arises as to Mr Gang’s capacity to understand what was said to him.
26․The evidence was mostly given on affidavit and the witnesses were cross-examined.
27․In his primary affidavit dated 28 May 2019, Mr Gang stated that, in about February or March 2017, Mr You said to him words in the Korean language meaning:
Your company does tiling work as a subcontractor of my company. Why don’t you join your company’s tiling business with my building company? If we join the two companies, I will manage both the building and tiling work. You could work on the sites doing tiling and waterproofing and managing the tiling workers on the sites.
28․Mr Gang stated that he responded in words in the Korean language meaning:
CU Tiling has debts that include debts to the Australian Taxation Office, debts to tilers for wages and debts to suppliers for materials. But CU Tiling is owed money by customers for work that has been done and invoices that have been sent to customers.
29․According to Mr Gang, Mr You responded (in Korean):
I will pay CU Tiling’s existing debts from my own money. That will be part of the price that I will pay you for your business if you agree to join your tiling business and customers with my building company.
30․Mr Gang said there were further discussions. However, he did not set them out in his affidavit. He said they agreed to have a business dinner at the end of March 2017 at which he (Mr Gang) said to Mr You:
I accept your offer for me to join my tiling business to your building company. You have agreed to pay my company’s existing debts from your own money. I have agreed to let you have the income that is owed to CU Tiling by customers for work that we have already done. The invoices have been sent to them. Your agreement to pay existing debts from your own money is part of the payment that you are to make to me for buying my business.
31․According to this version of events, there was no discussion of the value of the business of CU Tiling, no discussion of the quantum of the outstanding debts (which apparently included a company tax debt, trade debts and outstanding wages) and no discussion of the quantum of the outstanding income owed to CU Tiling. It is highly improbable that Mr You would have agreed to a merger of the two companies without such information.
32․On Mr Gang’s version, there was not even any discussion of the fact that CU Tiling was financially constrained at that time. There is objective evidence to support a finding that it was, and that Mr You was aware of some of the difficulties. Had there been negotiations for a merger at that time, it is highly improbable that Mr You would not have raised what he knew and carried out some form of due diligence.
33․Mr You provided his version of the conversations leading up to the business dinner in his affidavit dated 8 July 2019. He stated that he was aware CU Tiling sponsored the s 457 visas of some of its employees. He said that, at first, there were no issues with Mr Gang but that, throughout 2016, he became aware of issues including a disorganised system with failure to pay wages, employees refusing to return to work and the commencement of legal action by the ATO over a taxation debt. The primary judge recorded at [90] and [91] the evidence of two witnesses, Mr Kwak and Mr Yoon, who said they had sometimes been paid late by CU Tiling during the period leading up to the alleged merger. Their evidence was not included in the appeal books, but the primary judge recorded at [133] that he accepted them as truthful witnesses and there is no challenge to that finding. The late payment of wages is a clear indication of financial difficulty.
34․The appeal books do not include the whole of the court book that was before the primary judge. His Honour at [143]-[144] recorded evidence concerning the company’s tax liability:
I also take note of the letter written by the plaintiff to the ATO on 19 April 2017 seeking a repayment schedule in relation to a CUT tax debt of $123,321.19 (see CB 1418). When he was first asked (by Mr Muller) about the debt to the ATO, the plaintiff said that it was not that big. He said it was about $92,000. It was then put to him that it was over $123,000. The plaintiff agreed. Mr Muller asked the plaintiff whether he had written to the ATO on 19 April 2017 about a plan to pay off the debt. The plaintiff responded that it was after the merger and therefore a matter for the first defendant. He confirmed that the signature on the letter was his. However, he maintained that the letter was the work of the first defendant, Mr Kim and Mr Kong, and that he only just signed it.
I should say that I found the plaintiff’s denial that he knew about the plan to pay off the ATO debt unconvincing. The plaintiff’s reference to the tax debt being $92,000 is illuminating. In fact, that is the amount which was shown as owing to the ATO in the debtor/creditor schedule prepared by Mr Kim on or about 30 April 2017. I cannot accept that the plaintiff was uninformed about the CUT tax debt at that time, and the proposal to pay it by instalments. That is particularly so given the plaintiff’s awareness of the threat of legal action against him personally for the sum of over $63,000 in respect of a “Director Penalty”.
35․We were not taken to the evidence of the company liability during the argument of the appeal. However, within the material that was put before this Court, there is evidence of the director penalty. On 5 April 2017 the ATO sent notice of legal action to Mr Gang at his home address concerning a director penalty in the sum of $63,835. On 6 September 2017, he received written notice that a garnishee notice had been issued to the Commonwealth Bank in respect of that debt. The evidence referred to by the primary judge concerning the company’s liability combined with the evidence of the director penalty is compelling objective evidence that CU Tiling’s financial position was constrained before the date of the alleged merger on 1 April 2017. Mr Gang’s standard response to questions in cross-examination on the issue of the tax liability was that Mr You was responsible for all debts after that 1 April 2017. What his case fails to grapple with is the unlikelihood that Mr You would make an unqualified offer to buy into such a mess. As will be explained, the more likely version is that told by Mr You.
36․Mr You stated that, in early 2017, he was approached by CU Tiling employees complaining of not being paid and not having enough money for food and rent. As noted above, this was corroborated by the evidence of Mr Kwak and Mr Yoon.
37․Mr You states that, in early 2017, Mr Gang and Mr Kim approached him and said words to the following effect:
We cannot operate the business any longer as CUT has too much debt and can’t pay it back. Can you help by loaning money to CUT so CUT can get through these financial difficulties?
38․In his affidavit in reply, Mr Gang denied saying that CU Tiling could not operate any longer or that it had too much debt. He stated that he asked for a loan of $30,000 to pay subcontractors and that this was repaid by being debited from the amount payable to CU Tiling at the completion of the job in question. He stated that, during the discussion of the China tile proposal, Mr Kim asked for a loan of $100,000 to pay tax, wages and debts to suppliers but that neither the tile deal nor the loan proceeded.
39․In cross-examination, Mr Gang initially stated that CU Tiling never borrowed money from Mr You’s company in 2017. He was quite sure about that. He was then shown his affidavit and agreed that CU Tiling had received an advance of $30,000 on 15 February 2017. He initially took issue with the suggestion that a $100,000 loan had also been sought. When shown an email dated 2 March 2017 from Mr Kim to Mr You confirming a request to borrow that sum (“if you lend minimum $100,000 we can bear until employee’s visa grants”), Mr Gang’s response (as interpreted) was, “I don’t know about this content”. He denied asking Mr Kim to send that email (“No. I don’t know about that”). When pressed on that topic, he seemed to be drawing a distinction between borrowing and seeking an advance. Then, when reminded of a part of his affidavit where he said that, as part of the discussions about the China tile proposal, Mr Kim asked Mr You for a loan of $100,000 to pay “tax, wages and debts to suppliers”, he said “the loan of $100,000 is written in there, it’s not me”.
40․That part of the cross-examination is difficult to follow, partly as a result of being conducted through an interpreter, with all the difficulties that entails, but mainly because Mr Gang did not directly answer questions asked of him. It is clear from his affidavit that he was aware Mr Kim (who ran the financial side of the business of CU Tiling) had requested for a loan of $100,000 from Mr You to pay tax, wages and debts to suppliers. However, he simply would not accept that in cross-examination. A reading of the cross-examination on this issue confirms the impression recorded by the primary judge at [118] that Mr Gang was “well aware of the crucial issues in his case, and that he was careful to provide answers which he saw as assisting that case”. Even on Mr Gang’s affidavit version, the fact that there was a request by Mr Kim for a loan of $100,000 to pay tax, wages and debts to suppliers indicates that the company was struggling to meet its operating costs and statutory liabilities at that time. It is highly improbable in those circumstances that Mr You would have made an unqualified offer to take on personal liability for the company’s debts without further information.
41․On Mr You’s version, there was no discussion of merging the businesses. In his affidavit, he stated that, in late 2016 or early 2017, Mr Gang and Mr Kim approached him with a proposal regarding the purchase of stone and tiles from China. Mr Gang and Mr Kim suggested they could obtain $1 million worth of tiles and stone from China for $100,000 for use by Mr You’s company. Mr You stated, “the price for introducing this opportunity to JYC was that I advance [CU Tiling] a loan of $100,000. I was very interested in this opportunity as it would have represented a significant cash flow benefit to JYC”.
42․Mr You stated that he met with Mr Gang and Mr Kim on 1 March 2017 to discuss this proposal. He stated that, during the course of that meeting, both Mr Kim and Mr Gang repeatedly requested that he lend $100,000 to CU Tiling.
43․Mr You stated that, in the course of the discussions regarding the China tile and stone proposal, there was the following conversation:
Kim:The total debt of CUT is $100,000 comprising tax, wages and debts to suppliers.
You: I agree to offer a loan to pay these debts.
Gang:I personally guarantee the loan and will make sure you can get the supply deal with the Chinese factory. The owner of the factory is also Korean and he and I are like brothers. Make sure you send the required tiles and stone samples to the Chinese factory.
44․The next day, Mr You received an email from Mr Kim in the Korean language translated into English as follows:
When you send the tile and stone samples please mention it’s from Don Kim.
Send me the trading number.
Also as mentioned yesterday if you lend minimum $100,000 we can bear until employee’s visa grants.
45․The email from Mr Kim is significant as it contains a representation that a request was made of Mr You to lend CU Tiling $100,000 which would enable the company to “bear”, presumably meaning cope or manage, long enough to protect the position of the s 457 visa workers. There is no suggestion that the use to be made of that evidence was limited : cf s 136 of the Evidence Act 2011 (ACT). It may be taken to have been admitted as a business record of CU Tiling containing that representation. The representation is consistent with Mr You’s version of events and inconsistent with Mr Gang’s.
46․In cross-examination, Mr Gang denied any knowledge of the content of the email. However, he does not appear to deny that the words recorded in the email were said in a meeting the previous day at which he was present. In his affidavit in reply, Mr Gang said:
At the same time as the discussions with Mr JH You about importing tiles from China, Mr DH Kim also asked Mr JH You for a loan of $100,000 to pay tax, wages and debts to suppliers. However, neither the proposal to import tiles from China or the loan of $100,000 from Mr DH You went ahead. Mr DH You proposed that instead of a loan to pay CUT’s debts there should be a merger of CU Tiling’s business and JH Contractor’s painting business.
47․Mr Gang said in cross-examination that the reason he did not mention those loan discussions in his first affidavit is that they took place before the merger. In our assessment, the omission of any mention of financial difficulties or a need for loans to pay “tax, wages and debts to suppliers” reflects poorly on Mr Gang’s credibility. Mr Gang’s first affidavit reads as though he had a valuable business in which everything was going swimmingly and that Mr You spontaneously approached Mr Gang seeking a share of his success. The contemporaneous records are sparse, as hinted by the primary judge (“such as they are”) but those that exist support Mr You’s version of events rather than Mr Gang’s.
48․Mr Gang’s evidence was that the merger agreement was sealed at a dinner at a Chinese Restaurant at Forde in late March 2017. Present at the dinner were Mr Gang, Mr Kim, Mr You and Mr Kong (Mr You’s cousin and employee).
49․According to Mr Gang’s evidence in his affidavit, he and Mr You had a conversation (in Korean) to the following effect:
Gang:I accept your offer for me to join my tiling business to your building company. You have agreed to pay my company’s existing debts from your own money. I have agreed to let you have the income that is owed to CU Tiling by customers for work that we have already done. The invoices have been sent to them. Your agreement to pay my company’s existing debts from your own money is part of the payment that you are to make to me for buying my business.
You:I agree. Your tiling business will join my building business. As part of the price that I pay you for your business, I will pay CU Tiling’s debts with my own money.
Gang:CU Tiling will keep doing tiling and waterproofing works, but the income will be paid to the combined company, which you will manage. The combined company will pay me and my staff wages and will pay all of the operating expenses.
You:I will also give you 20% of the shares in the company, and 20% of the profit from my company.
50․Mr Kim’s affidavit gives an account of the dinner conversation in similar terms to Mr Gang.
51․Mr Gang said that, after this, he asked Mr Kim to prepare a list of CU Tiling’s debtors and creditors. This suggests that, on Mr Gang’s version, at the time of the dinner, he did not even know the quantum of the company’s debt, let alone provide that information to Mr You.
52․The primary judge recorded at [155]:
Subsequently, the plaintiff asked Mr Kim to prepare a list of CUT’s debtors and creditors. That document was prepared partly in Korean. A translated copy appears at p 301 of the CB. It covers entries up to 30 April 2017, suggesting that it was prepared on or after that day. It shows that CUT’s debts to be a little over $294,000. The trade creditors were said to be around $153,000.
53․The list of debtors and creditors was not included in the appeal books but we do have a document showing trade creditors as at “April 30” of $153,631.55. As noted by the primary judge at [155] in the passage cited above, this suggests that it was prepared on or after that day (not prior to 1 April 2017, as would be expected if the merger was to take effect on 1 April 2017).
54․Mr You’s version of the dinner is very different and is irreconcilable with Mr Gang’s and Mr Kim’s. He recalled a dinner but did not recall Mr Gang saying the things Mr Gang claims he said. Mr You denied agreeing to a merger “or anything like it”. He said they mostly discussed the Chinese tile proposal. He said Mr Gang and Mr Kim “begged” him to lend $100,000 to CU Tiling and that Mr Gang said he would personally guarantee the loan. Mr You said Mr Gang also made him feel sorry for the s 457 visa holders “as they could miss out on the opportunity for permanent residency”.
55․Mr You said that he had never seen the list of accounts receivable put in evidence by Mr Gang.
56․Mr You said that, following the discussions in April 2017, he agreed to lend funds to CU Tiling to meet its debts on condition that Mr Gang agreed to repay those debts personally. Mr You explained in his evidence that, at that time, he was still investigating the Chinese tile proposal and so wanted to maintain a good working relationship with CU Tiling. He believed that, even if the loan was not repaid for some time, the profit to be made on the Chinese tile deal would more than cover the funds advanced.
57․Mr You said there was no discussion of “channelling” CU Tiling’s income to JY Contractors and that he did not ask for that, nor did he ask for the company’s contracts to be assigned.
58․Mr You said he did not agree to pay all of CU Tiling’s liabilities. He said, “the funds to be provided were to be provided as loans, and I would not obtain shares in CUT or an interest in its business as a result of these loans”.
59․It was common ground that the Chinese tile proposal did not proceed. Mr You said the relationship between CU Tiling and JY Contractors remained one of contractor and subcontractor until October 2017, when CU Tiling was placed under administration.
60․As to the suggestion that he offered the plaintiff a 20% share in JY Contractors, Mr You said:
In the course of causing CUT to provide these services, I advised Mr Gang as to JYC’s budgets for certain projects. I had an agreement with Mr Gang, as with the directors of other subcontractors, that if CUT completed the works for less than the amount budgeted by JYC to pay for those works, Mr Gang would get 20% of the difference between the amount budgeted and the actual cost. This was not an offer of shares in JYC, but rather an incentive for Mr Gang to get work done quickly and cheaply.
61․In his affidavit in reply to Mr You, Mr Gang said there was no discussion at the dinner of the previous request for a $100,000 loan as that request had been overtaken by Mr You’s proposal for a merger. He said the merger was the main topic of conversation at the dinner.
62․Mr Kong remembered having dinner with Mr You, Mr Kim and Mr Gang in March 2017. He disputed Mr Gang’s version of the conversation at the dinner. He said they were talking about the China tile proposal and the $100,000 loan. He said there was no mention of Mr Gang selling the company. He said Mr You asked no questions about CU Tiling’s debts; rather, Mr Gang and Mr Kim were talking about CU Tiling struggling with finance but didn’t go into details as to how the debts arose, as it was a friendly atmosphere. He said Mr Gang and Mr You had what appeared to be a good relationship and were “committed to helping each other”, but that they did not ask questions about each other’s business. He said there was no discussion of combining businesses or a transfer of shares in any company or a sharing of profit.
63․As noted by the primary judge at [166], none of the witnesses as to those events retreated from his evidence-in-chief under cross-examination.
64․The appellant’s submissions addressed this issue largely by reference to the demeanour of the witnesses. It was submitted that there was “no proper basis to doubt the appellant’s solemnly affirmed evidence as to those agreed arrangements”. The submission is rhetorical. Mr You’s evidence was also “solemnly affirmed”.
65․It was further submitted that the appellant’s evidence was “adamant” about the details of the merger arrangement, while Mr You’s evidence was said to have been “guarded, unconvincing and evasive”. If this issue fell to be determined by reference to such considerations of demeanour, we would defer to the assessment of the primary judge, who at [129] rejected a similar submission. However, as submitted by the respondents, the primary judge did not determine this issue by reference to demeanour because he recognised the limitations of that approach and because he did not need to. Instead, his Honour assessed the competing versions of events in the orthodox way, by considering such contemporaneous and objective material as was available and testing the two accounts against the overall probabilities. His Honour explained his assessment of the competing versions at [167] as follows:
However, there is a high degree of improbability in the account for which the plaintiff contends. Accepting, as I do, that the first defendant is and was in 2017 an astute businessman, it would make no sense that he would make an agreement to pay the debts of a company which he knew to be in financial trouble without undertaking a close investigation of those debts. It would make even less sense that he would undertake to pay them without even knowing what they were in a broad way.
66․After considering inconsistencies in Mr Gang’s evidence as to when Mr You received the document setting out CU Tiling’s debts, the primary judge noted at [168] that Mr Gang had volunteered for the first time in cross-examination that he had provided that information to Mr You verbally. His Honour did not accept that evidence. That is unsurprising, given the way in which it came out. The primary judge also considered it “most unlikely” that Mr You would have agreed to pay CU Tiling’s debts based on a verbal representation by the plaintiff as to the quantum of those debts. We agree and, in any event, his Honour did not accept Mr Gang’s evidence on that issue.
67․The primary judge recorded his conclusion on the merger or joint venture agreement as follows at [169]:
I find, having regard to the evidence of the first defendant and Mr Kong, and the inherent probabilities, that while there was some discussion about the first defendant or JYC lending money to CUT to keep it going at the dinner the first defendant did not agree or undertake to pay CUT’s debts in consideration of CUT merging with JYC. Moreover, I do not accept that the first defendant agreed to transfer 20 per cent of his shareholding in JYC to the plaintiff, and to pay him 20 per cent of the company’s profit, in consideration of that merger.
68․In the light of those findings, his Honour rejected the claim that there was a joint venture agreement: at [170].
69․We are not persuaded that there is any basis for interfering with that finding. One further piece of objective evidence before the primary judge which was explored in cross-examination is a text message dated 14 August 2017 from Mr Lee, a Site Supervisor employed by CU Tiling, to Mr You in which Mr Lee raised his concerns about money owing to him by CU Tiling including 4 weeks of wages (the text message is in Korean but the evidence includes an English translation). Mr Gang noted in his affidavit of 18 December 2020 that this was after the merger and contended that Mr You was responsible for paying employees at that time. It may be noted in that context that the text is framed as a request for help in circumstances where the author acknowledges Mr You was not responsible for the money owed. The text states “I am getting very anxious so I have spoken with Mr Gang however he does not want to know about it”. It may be accepted that the existence or otherwise of a merger agreement is not to be determined according to the understanding of the author of the text message. However, Mr Gang did not dispute the suggestion that, when approached for payment of outstanding wages, he did “not want to know about it”. On the contrary, he defended that stance in his evidence by reference to his contention that, at that point, Mr You was responsible for wages. But on his version, the two men were by then engaged in a joint venture (albeit one in which management was the responsibility of Mr You). His cavalier response to the financial needs of his men is more consistent with his having abandoned responsibility for his debts, which is consistent with Mr You’s version of events.
70․Probably the most powerful objective support for Mr You’s version of events is the fact that, on Mr Gang’s account, Mr You opened the topic of merger on terms that included accepting personal responsibility for all of the debts of CU Tiling without seeing a single piece of paper to inform him of the quantum of those debts. In that context, Mr Gang’s omission of any reference to discussion of debt before the merger (other than what he said for the first time in cross-examination) is telling.
71․The primary judge recognised the significance of CU Tilings’ financial position in the assessment of the evidence concerning the alleged merger or joint venture agreement. His Honour began his analysis of the evidence with a discussion of that issue: [137]-[151] of the primary judgment. Importantly, that evidence included the expert evidence of Mr Senatore considered above.
72․Having regard to the matters discussed above, there is no merit in the appellant’s central complaint that the primary judge’s findings concerning the merger agreement were against the weight of the evidence or glaringly improbable. On the contrary, Mr Gang’s contention that there was a merger agreement was glaringly improbable having regard to the contemporaneous and objective material and the overall probabilities.
73․For those reasons, we reject grounds 2 and 3 of the appeal.
Alleged loans and guarantee (grounds 4-8)
74․The next topic addressed in the appellant’s written submissions is Mr You’s contention that payments made by him to meet the debts of CU Tiling were by way of loan to CU Tiling and that Mr Gang undertook personally to repay those loans.
75․The primary judge undertook a detailed analysis of the evidence relied upon by the parties as to the management of CU Tiling after the date of the alleged merger. In short, Mr Gang contended that the physical and financial arrangements of the two businesses in fact merged from 1 April 2017, lending weight to his contention as to the agreement reached. Conversely, Mr You contended that the reason CU Tiling moved its office into JY Contractors’ premises was because CU Tiling had failed to pay the rent due on its own premises, resulting in termination of the lease. It was common ground that JY Contractors in fact paid $10,000 towards CU Tiling’s overdue rent at around that time. Mr You said he allowed CU Tiling to move into spare space at JY Contractors’ offices because he was keen to maintain a good working relationship with CU Tiling at that time and was still hopeful as to the prospects of the China stone and tile proposal. Mr You said he agreed in April 2017 to lend funds to CU Tiling to cover debts and operating expenses for the same reason.
76․According to Mr You, the loans were made in three ways: by direct payment by JY Contractors to CU Tiling and another company controlled by Mr Gang, Project Control (recorded in invoices as loans); by payment by JY Contractors to CU Tiling’s creditors and by payments made by Mr You from his own resources to CU Tiling’s creditors. The sum of the loans was said to be $343,783.39.
77․The appellant addressed this point by reference to grounds 4 to 8 in the amended notice of appeal. He submitted that Mr You’s position regarding the loans is “inherently improbable and glaringly so” because there was “no proper reason to doubt the veracity of [Mr Gang’s] affirmed evidence that he did not guarantee, nor did he take on any liability for, any such alleged ‘loans’”.
78․The submission continued:
[Mr You’s] assertions in this regard were simply not credible ones; otherwise, [Mr Gang] might well be perhaps the first person in history, in such circumstances, to readily thus agree to take on liabilities for company debts which, as a matter of law and as a matter of fact, simply were not his liabilities, nor his debts. The whole tenor of [Mr Gang’s] evidence told against any such assertion, which is an incredible and highly and inherently improbable assertion [emphasis in original].
79․The submission did not engage with the proposition that, on Mr Gang’s version, Mr You agreed to take on personal liability for the same debts, sight unseen and with no information from which he could judge the value of the business of CU Tiling. Nor does it grapple with the moral question of the fate of the s 457 visa holders, whose entitlement to remain in Australia had been put in jeopardy by Mr Gang’s poor financial management of his company. Once the competing case theories are considered in the broader context of the evidence considered above, it can be seen that there is nothing improbable in Mr You’s account. Contrary to the submission set out in the preceding paragraph, it is not uncommon for a director who is the principal of a company to give a personal guarantee when seeking to obtain a loan for the company.
80․In addressing the issues of the alleged loans and guarantee, the appellant repeated the rhetorical submission that “there was no proper reason for the trial judge to have preferred the first respondent’s assertions in this regard to the clear and adamant denials of the appellant in his solemnly affirmed affidavit evidence”. As already noted, the evidence of both parties was solemnly affirmed. The primary judge’s approach to the assessment of their evidence was disciplined, thorough and orthodox.
81․The appellant referred in this context to the evidence of Mr Green, which he submitted “tells strongly against such loans”. It was submitted that the primary judge “misdirected/misled himself by giving undue credence to [Mr You’s] assertions and paying insufficient attention to that expert evidence”.
82․In fact, the primary judge accepted the evidence of Mr Green concerning the state of the financial records, finding at [203]:
There is no doubt that the intermingling of the affairs of CUT and Project Control on the one hand and JYC on the other has created a complex and somewhat confusing picture. There is some force in the view expressed by Mr Green at paragraph 2.1.7 of his report.
83․However, the primary judge did not accept that there was “a true merger of CUT (or Project Control) with JYC”. He gave a thorough explanation of his six reasons for that conclusion. In short, his Honour:
(a)accepted Mr You’s and Mr Kong’s evidence as to the reasons CU Tiling moved into JY Contractors’ premises in April 2017, being CU Tiling’s insolvency at that time and the termination of its lease;
(b)accepted that Mr You wished to maintain good relations with CU Tiling at that time because of the China tile proposal and the need for good tilers to do contract work;
(c)concluded for those reasons that Mr You did agree to lend funds to CU Tiling (either personally or through JYC) to keep the company afloat, at least for long enough to meet the needs of its subclass 457 visa workers, and not think Mr You would have agreed to advance those funds without a personal guarantee from Mr Gang;
(d)considered that a further reason for Mr You permitting CU Tiling to share his office space was to keep a close eye on the financial operation of the companies to ensure that the monies to be loaned to Mr Gang’s interests were used for the purposes intended by Mr You (that is, payment of debts);
(e)considered Mr Gang’s reasons for setting up Project Control (his Honour did not use the phrase “phoenix company”, but that is the suggestion).
84․In light of the strident criticism made by the appellant of the primary judge’s reasons, it is appropriate to set out the sixth reason in full:
Mr Green was correct to conclude that the records of JYC, CUT and Project Control did not suggest that the monies characterised as loans were consistent with money being lent to the plaintiff. In fact, the money was lent to either CUT or perhaps, Project Control. Mr Green’s conclusion, however, does not address the effect of the guarantee given by the plaintiff. In that context, it seems to me that the plaintiff gave that guarantee at a time when he thought that he might be able to transfer the business of CUT to Project Control. It is likely that he did not appreciate the risk that the loans from CUT and the first defendant might escalate to over $340,000, as they did by the end of 2017.
85․The appellant made no attempt to engage with that reasoning.
86․The appellant further submitted that the primary judge was “wrongly influenced” on this issue by assertions made in the proceedings concerning the extent of Mr Gang’s knowledge of English, which he submits wrongly influenced the primary judge in assessing this issue. However, Mr You’s evidence was that the conversation concerning the guarantee was in Korean (in March 2017).
87․In our assessment, the primary judge’s reasoning on this issue is thorough, cogent and without error.
88․For those reasons, we reject grounds 4 to 8.
The decision to sell the house
89․The next topic addressed in the appellant’s written submissions is the position of the solicitors, Colquhoun Murphy. To put that issue in context, it will be helpful to explain the circumstances in which Mr Gang decided to sell his house. The primary judge reviewed the evidence on that issue at [206]-[218] of the judgment. For present purposes, it is enough to record that Mr Gang says Mr You persuaded him to sell his house to Mr You to put it beyond the reach of creditors, whereas Mr You says that, after he decided not to pursue the China stone and tile deal, he started demanding repayment of JY Contractors’ loans to CU Tiling and that Mr Gang said he would sell his house to pay the money. There are many further differences in those respective accounts but the critical difference is that Mr Gang says he was to keep the proceeds of sale after payment of the mortgage (some $350,000) whereas Mr You says the proceeds were to be used to repay JY Contractors.
90․The primary judge referred at [208] to an email dated 27 July 2017 sent by Mr Kim to Mr You. The email was in Korean. The agreed translation is:
Agreed yesterday that loans from CU will be solved by selling the house.
Hope he will not change his mind now (laugh).
91․When confronted with that email in cross-examination, Mr Gang said, “I never borrow the money”. The cross-examination continued:
Counsel:It is not saying that you borrowed money, sir. It is saying that CU borrowed money?
Gang: Why CU need to borrow?
Counsel:Well, we will get to that, sir, but you say you do not – what do you say that that sentence says? Mr – what do you say that sentence says, Mr Gang?
Gang:I never said this. CU didn’t borrow any money. CU – what do you mean by CU borrowed money? From where?
92․Based just on a reading of the transcript, those answers appear to have been disingenuous. The issue whether CU Tiling had borrowed money from JY Contractors was front and centre in the proceedings and had been the subject of extensive cross-examination.
93․Mr Kim was cross-examined about the email. He agreed that it referred to a conversation about selling the house to pay money CU Tiling had borrowed. Taking that evidence in context, he can only have been referring to a conversation with Mr Gang.
94․On the strength of that evidence, the primary judge found at [217]:
Having regard to the email of 27 July 2017, and the evidence of Mr Kim under cross-examination on that email, I am satisfied that the plaintiff did indicate to the first defendant prior to 27 July 2017 his willingness to sell his house to clear the debts of CUT, which, in context, included the amounts borrowed from JYC and the first defendant. I do not accept the plaintiff’s evidence on this issue.
95․That finding followed logically from the primary judge’s conclusion that there was no merger agreement and the objective evidence of CU Tiling’s deteriorating financial position throughout 2017, in particular, its inability to pay wages, tax and trade suppliers. The finding that Mr Gang reached a point where he accepted he would have to sell his house to pay company debts sits coherently with the objective evidence and the overall probabilities. Conversely, it is improbable that Mr You would have agreed to buy Mr Gang’s house to assist him to defeat the interests of creditors and on the basis that Mr Gang would retain the proceeds of around $350,000 for his own use at a time when his company was failing; putting its employees at risk of losing their visas; and borrowing money from Mr You’s company.
The position of the solicitors (grounds 9-17; 24-33; 38-45; 47-48 and 55 and 58)
96․Consideration of the course the conveyance took is informed by that context. As with other submissions, the appellant opened his submissions on this issue with strident assertion and only selective reference to the evidence. He submitted:
The appellant’s evidence is clear and adamant as to his interaction with the second respondent, a solicitor’s firm; and that he attended Colquhoun’s office on the one occasion and met there with one lady, who was not Ms Fogarty.
The trial judge has wrongly preferred the assertions of Ms Russell and Ms Fogarty in this regard, it seems because they are solicitors.
97․The suggestion that the judge preferred the evidence of the solicitors because they are solicitors was inappropriate and should not have been made. A consideration of the judgment reveals that there is no proper foundation for that suggestion.
98․The argument proceeds to attack the “piecemeal nature” of the primary judge’s approach to the issue whether the solicitors were acting for both parties. The argument contends (and proceeds on the premise) that his Honour’s approach to that issue is expressed in paragraphs [370]-[378] of the reasons for judgment. In fact, the primary judge’s analysis of the evidence concerning the conveyance begins earlier in the judgment and runs for over 100 paragraphs, from [219]-[325]. In addition to setting out the evidence of each witness in detail, that analysis includes his Honour’s page-by-page examination of the conveyancing file, including Ms Fogarty’s hand-written notes of a meeting Mr Gang denies she attended.
99․Mr Gang said in his first affidavit:
Mr You said to me in Korean language words meaning: “I will arrange for my lawyers to prepare the Contract. You will not need to arrange for a lawyer because that would be a waste of money. By having just one lawyer, that will avoid the cost of having two lawyers.”
100․Mr You denied telling Mr Gang not to obtain his own legal advice in relation to the conveyance. He also denied telling Mr Gang that Colquhoun Murphy would act for him. Mr You’s evidence was that he retained Colquhoun Murphy to draft the contract for sale of the property. He said he received the draft contract by email, printed it and gave it to Mr Gang, saying:
This is the contract for the sale of [the Giralang property]. It has all the agreed terms and conditions in it. Please go and get your own legal advice and get back to me.
101․The primary judge assessed that evidence at [311]-[313] of the judgment as follows:
As with much in this case, there was a stark difference in the accounts of the plaintiff and first defendant. I should say that I did not find the first defendant’s denial that he and the plaintiff discussed saving legal fees by having only one solicitor convincing. Nor do I accept that the plaintiff required to be persuaded not to retain his own lawyer.
I accept that there was a discussion about whether the plaintiff should obtain his own legal advice, and that the first defendant probably did say something to the effect that by using his lawyer the costs of the conveyance would be reduced. This was in the context that at that time (probably some time in August 2017):
(1) The plaintiff and first defendant were still on good terms;
(2)The plaintiff wished to sell the house to clear the debts of CUT, including what was owed to the first defendant and JYC, and to avoid complications with the ATO; and
(3)The first defendant wished to assist the plaintiff by buying the house. It was also in his interests to ensure that he and JYC would be repaid in relation to the loans to CUT. The decision to allow the plaintiff to remain in occupation at a fee equal to the first defendant’s mortgage payments (plus rates), combined with the plaintiff having the option to repurchase the property for $750,000, suggests that the first defendant was not attempting to take commercial advantage of the plaintiff at that time.
At that time, it is likely neither party foresaw the possibility that they might come into dispute. They were thus more motivated by the prospect of saving some legal fees than each protecting his own interests. On balance, I consider it unlikely that the first defendant told the plaintiff that the second defendant would act as the plaintiff’s solicitor. It is more likely that the first defendant merely referred to having his lawyer attend to the conveyancing work. It is also consistent with the first defendant having told Ms Fogarty on 28 August 2017, and again on 19 September 2017, that the plaintiff was unrepresented. (In relation to the latter I read the letters “O/S” in the file note extract at [297] as referring to “other side”. That is, the plaintiff, he being the other party to the transaction.).
102․The primary judge rejected Mr You’s evidence that he suggested Mr Gang obtain his own legal advice, finding it “improbable” in light of his finding that Mr Gang and Mr You had decided that it was not necessary for Mr Gang to do so: at [314].
103․Grounds 9 and 10 challenge the finding at [313] that it is unlikely that Mr You told Mr Gang that Colquhoun Murphy would act as Mr Gang’s solicitor. Apart from the contention that the primary judge’s analysis was “piecemeal”, the central focus of those grounds was the fact that the solicitor’s conveyancing file contained a settlement instruction sheet that bore the words “WE ACT FOR BOTH BUYER AND SELLER”. The appellant relies on that evidence as “incontrovertible” evidence that they did.
104․It may be accepted that that document was an important piece of evidence. The primary judge gave careful consideration to its significance, not in a piecemeal way as contended by the appellant but in the context of his comprehensive consideration of the whole of the evidence. His Honour recorded Ms Fogarty’s explanation at [244] of the judgment:
Long after the conveyance, when the dispute which is the subject of these proceedings arose, I identified that we had made an error in the settlement statement. The settlement statement was prepared using the seller precedent, and allowed for payment of our fees from the purchase without an adjustment in favour of the seller. This was an administrative error.
105․Ms Russell’s evidence recorded at [248] of the judgment was to like effect. She explained that the error was hers; she used the wrong precedent because she was inexperienced at that time, having only been working for Ms Fogarty for a short time.
106․There is nothing implausible about those explanations. The primary judge was right to determine the issue of Colquhoun Murphy’s role, not by reference only to the precedent selected by an inexperienced solicitor but having regard to the evidence as a whole, including his earlier conclusions against Mr Gang.
107․Returning to the events of the conveyance, after providing the draft contract to Mr You, Colquhoun Murphy prepared the final contract and sought to provide a copy to both Mr Gang and Mr You under cover of separate letters each dated 20 September 2017.
108․Ms Fogarty signed both letters. One attached a counterpart of the contract for sale to Mr You. The other attached a counterpart of the contract together with a memorandum of transfer to Mr Gang. Ms Fogarty said Mr You collected both letters from Colquhoun Murphy’s reception area.
109․The letter to Mr You said:
As the Seller is self-acting, we ask that you encourage him to seek legal advice prior to entering into the Contract of Sale to ensure the seller understands the ongoing obligations under this Contract of Sale.
110․The letter to Mr Gang said:
We refer to the above matter and note that you are self-acting. We note that the Contract for Sale includes your occupation rights after the sale is completed, and we do recommend that you get independent legal advice so that you understand these obligations.
111․The letter then specified information and documents Mr Gang needed to provide for the purposes of completion of the sale.
112․A substantial issue in the proceedings was whether Mr You gave Mr Gang the letter addressed to him. Mr Gang denied having received it. However, the information sought in the letter was in due course provided to Colquhoun Murphy, via Mr Kim. There is no suggestion that Mr Kim was in on Mr You’s alleged trickery. Mr Gang trusted Mr Kim and relied on him for financial dealings.
113․The primary judge considered the issue of the letter at [316]-[318] as follows:
I have no hesitation in finding that the first defendant did collect the two 20 September 2017 letters and their attachments from the second defendant’s office. The more difficult issue is whether the first defendant gave the plaintiff the letter addressed to him [the plaintiff] with the contract and transfer before the contracts were signed at the JYC office on 21 September 2017. The first defendant’s evidence was somewhat confusing on this issue. In his affidavit, he referred to receiving the draft contract on 13 September 2017, but not the contract in final form on or about 20 September. Under cross-examination, he did not recall picking it up, or whether he read it to the plaintiff. The plaintiff said that he did not receive the letter.
Dr Hassall submitted that I should find that the first defendant set out to deceive and trick the plaintiff all along. As is clear from my findings in relation to the merger and loan issues, I do not accept that submission. In that context, the probabilities are that after the first defendant collected the two letters from the second defendant’s office at 09:30 on either 20 or 21 September 2017 (I read the reference in the first line of the extract from Ms Fogarty’s file note of 19 September 2017 (see [297] above) to a conversation in which the first defendant said that he would collect the contracts at that time) he would have returned to the JYC office with them. I can see no reason why he would not have given the plaintiff’s letter to him, if he was there, or perhaps to Mr Kim, if the plaintiff was out on site. I do not accept that the first defendant deliberately kept the letter from the plaintiff, as was implicit in Dr Hassall’s submissions.
In any event, it is apparent that by the morning of 21 September 2017, Mr Kim had applied, presumably on behalf of the plaintiff, for both the Seller Verification Code, and for the Capital Gains Clearance (see [299]-[300] above). It is likely therefore that the 20 September 2017 letter to the plaintiff, which requested those documents, was brought to the attention of Mr Kim, and probably the plaintiff, some time before 09:58 on 21 September 2017. It follows that at that time the plaintiff was aware that the second defendant was not, in any formal sense, acting as his solicitor in the conveyance. It also follows that he chose not to seek his own legal advice in relation to the transaction.
114․As stated by the primary judge at [317], his findings on the issue of the letter of 20 September 2017 were informed by his Honour’s rejection of the appellant’s case that Mr You set out to trick and deceive Mr Gang. Having regard to the evidence concerning CU Tiling’s financial position discussed at the outset of this judgment, that was an ambitious case. The appellant’s submissions failed to grapple with the impact of the objective financial evidence on his case theory. When that evidence is taken into account, the proposition was reduced to a complaint that Mr You tricked Mr Gang into bearing responsibility for the debts of his own company and the interests of his own employees. Understood in that context, it was not a compelling case.
115․We are not persuaded that there is any error in the findings of the primary judge on the issue of the letter of 20 September 2017.
116․On the strength of his comprehensive discussion of the evidence, the primary judge made the following findings at [326] concerning the conveyance:
(1)The plaintiff did attend the offices of the second defendant in relation to the conveyance on two occasions: on 27 October 2017 and 3 November 2017.
(2)On the first occasion, the plaintiff attended with the first defendant. He met with Ms Fogarty and Ms Russell in an upstairs meeting room at the second defendant’s offices in Braddon.
(3)Ms Fogarty conducted the meeting. She spoke to the plaintiff in English, and the first defendant translated what she said into Korean.
(4)By reference to the file note, Ms Fogarty probably told the plaintiff that the settlement of the sale had been booked in for 1 November (that booking having been made on 26 October).
(5)Ms Fogarty then asked the plaintiff for his driver’s licence. That request was translated by the first defendant. The plaintiff produced his licence, and Ms Russell then left the room to photocopy it. She returned with the photocopy on an A4 page which was otherwise blank. Ms Fogarty then hand wrote the words which appear on the page, apart from the plaintiff’s signature.
(6)Ms Fogarty explained that, by signing the page, the plaintiff would authorise the second defendant to complete the settlement of the sale, and direct that the net proceeds be paid to him. The first defendant translated that explanation to the plaintiff, who signed the page above his name.
(7)Ms Fogarty then referred to the loan arrangement in favour of CUT, noting that the loan amounts had not been repaid. Having regard to the last paragraph of the 2 November 2017 letter to the plaintiff, it is probable that there was some discussion about the net proceeds of the sale being paid to JYC at some stage after the settlement, and the plaintiff indicated agreement with that course. I find that the conversation was translated by the first defendant.
(8)There was then some discussion of the terms of the occupation agreement. The rent was to equal the amount of the first defendant’s loan repayments (on the money he was borrowing to finance the purchase) plus 1/12 of annual rates, and water and sewerage charges. That was translated to the plaintiff.
(9)Ms Fogarty explained that the adjustments to be made at settlement would be set out on the settlement statement, a copy of which would be emailed to him. Again, that was translated to the plaintiff.
(10)The plaintiff was asked if he wanted a lawyer to act on his behalf at the settlement. He declined. It is probable that this was translated.
(11)Ms Fogarty asked the plaintiff for his email address. He provided the “henrykang” address without the assistance of the first defendant.
(12) Ms Russell thereafter attended to the preparation of the settlement documents. Due to her inexperience, she used the internal checklist precedent relating to the situation where the firm was acting for both buyer and seller. By error, she included in the cheque details of the proceeds of sale the amount due for the conveyancing fees charged by the second defendant to the first defendant in the tax invoice dated 31 October 2017.
(13) The settlement occurred on the afternoon of 1 November 2017.
(14)After the settlement, the first defendant instructed Ms Fogarty that he wished to have the net proceeds paid to JYC to cover the debts owed by CUT.
(15) Ms Fogarty caused the 2 November 2017 letter together with the authorities to ANZ and the second defendant to be emailed to the plaintiff’s “henrykang” address.
(16)The plaintiff received the letter and authorities. He then attended upon Ms Russell at the second defendant’s offices on 3 November 2017.
(17)Ms Russell explained each authority in English to the plaintiff, who indicated to her that he understood what she was saying. He then signed each authority in her presence. He understood by signing the authorities that the net proceeds of the sale would be paid into the second defendant’s trust account, and thence to JYC.
(18)In the course of both the 27 October and 3 November meetings, the plaintiff did use simple English for the purposes of greetings and to respond to straight-forward questions. In particular, he did indicate by the use of the word “yes” that he understood what was said to him on occasion by Ms Fogarty and Ms Russell. The responses of the plaintiff were not such as to suggest to either Ms Fogarty or Ms Russell that he did not understand what he was signing.
(19)Insofar as the first defendant said words to the plaintiff to the effect that it was necessary for the plaintiff to sign a document to enable the sale of the house to happen, such a statement was made in the course of the 27 October meeting in relation to the authorisation contained in the photocopy licence document. The first defendant did not in the course of translating at the 27 October meeting mislead or deceive the plaintiff.
117․The appellant’s criticism of the primary judge’s reasoning for its “piecemeal” approach selects an isolated section of the judgment. That section of the judgment cannot be divorced from the earlier consideration of all of the circumstances of the conveyance, including the conveyancing file, and the primary judge’s findings set out above.
118․The primary judge recorded the appellant’s submission concerning the position of Colquhoun Murphy at [364]:
The plaintiff maintains the claim that the second defendant acted for him in the conveyance of the Giralang property. It was submitted on his behalf that the following circumstances supported that conclusion:
(1) The second defendant drew the contract of sale;
(2) The second defendant charged the plaintiff fees for acting in the matter; and
(3)The internal settlement checklist which stated that the second defendant was acting for “both Buyer and Seller”.
119․The primary judge noted that it was clear that there was no express contract of retainer between Mr Gang and Colquhoun Murphy. The appellant does not contend that there was. His Honour then proceeded to address “whether, in all the circumstances, there was a de facto relationship of solicitor and client between the plaintiff and the second defendant.
120․In that part of the reasons, at [370]-[371], the primary judgment listed factors for and against that conclusion. The appellant submits that, “in attempting to break down and explain away various factors”, the primary judge has “looked past the unpleasant reality of the interactions” between Mr Gang and the solicitors. The submission is unfair. The appellant’s submissions address only those isolated paragraphs, as if they reflected the universe of his Honour’s reasoning on the issue whether the solicitors acted for Mr Gang or owed him a fiduciary duty. When the judgment is read fairly, as a whole, the appellant’s complaints about his Honour’s reasoning may be seen to be without merit.
121․The primary judge concluded at [372]:
Having regard to the competing circumstances as summarised above, it seems to me that the evidence falls short of establishing that there was a tacit understanding or agreement that the second defendant would act as the plaintiff’s solicitor in the conveyance generally, or indeed, in relation to the settlement.
122․No error in that conclusion has been demonstrated. The central complaint, that the primary judge adopted a “piecemeal” approach and failed to consider all the evidence, is entirely without foundation.
The appellant’s ability to understand English (Grounds 33(j)-(n); 37; 46, 47, 48, 49, 51, 52)
123․A central contention in the appeal is that Mr Gang did not understand the English language well enough to appreciate the effect of the documents he signed authorising payment of the proceeds of sale of his house to JY Contractors. Grounds 51 and 52 are addressed to this issue. Those grounds contend that the primary judge erred by assessing the extent of Mr Gang’s ability to understand English as at late 2017 (when he signed the direction to pay) by reference to events occurring some four or five years later (during the hearing) and that His Honour erred by failing to find that Mr Gang did not understand the English language beyond some limited words used in his trade work and did not understand documents or explanations given in English and, in particular, that he did not understand the true nature and effect of the direction to pay when he signed it.
124․Mr Gang gave his evidence through an interpreter. The primary judge cautioned himself at [66] of the judgment about the difficulty in assessing the credibility of a witness in that circumstance, stating:
The interposition of the interpreter made it very difficult to assess the degree to which the plaintiff was attempting to answer questions in a straightforward way, or in contrast, attempting to give answers that assisted his case. I will return to the issue of credibility and the demeanour of witnesses below.
125․Mr Gang submits that the primary judge “lost sight of that caution” when he came to assess the evidence. His Honour set out his assessment of Mr Gang’s capacity to understand English, and his reasons for that assessment, at [118]-[124] of the judgment, as follows:
The first witness was the plaintiff. As noted at [66] above, the fact that the plaintiff gave evidence through an interpreter made it difficult to assess him as a witness. Nevertheless, I did form the impression that he was well aware of the crucial issues in his case, and that he was careful to provide answers which he saw as assisting that case. In particular, it seemed to me that he was exaggerating the extent to which he did not understand English. At one point, the plaintiff insisted upon producing his licence to check if the address of the Giralang property (where he has lived since 2007) was accurate. It is most unlikely, in my view, that the plaintiff would not have become familiar with the English characters of his address having regard to the period in which he has lived at the Giralang property.
There were also a number of occasions when the plaintiff responded to a question before it was translated to him. It seems to me that it would be most unlikely that a man could live and work in this country, again, operating his own business (albeit with assistance), without picking up some basic English. The plaintiff’s responses in that regard supported the assertion of the first defendant that the plaintiff did in fact understand some English, and that he was able to communicate with English speakers on building sites.
It was also notable that at one point the plaintiff was asked by Mr Buckland to look at the copy document at p 2337 of the Court Book (CB). That document was an ASIC “Application for voluntary deregistration of a company” form apparently signed by the plaintiff and dated 16 May 2018. The contents of the document had not yet been translated into Korean, however, after having looked at the document the plaintiff volunteered:
[Mr Kong] approached me where I work and told me this company need to be closed.
When he was challenged about his understanding of the document, the plaintiff said that he had taken a photo of it. He said that Mr Kong had brought him a copy of the document during the proceedings.
I do not accept this explanation. It seemed to me that the plaintiff was able to understand the words on the document sufficiently well to conclude that it related to the closing down of Project Control.
There were also a number of occasions when the plaintiff maintained answers that were just not credible. For example, he was asked, in cross-examination by Mr Buckland, about the proposal for a $100,000 loan from the first defendant in February/March 2017. In response, he denied that he had given instructions for such a loan. At one point, he even denied that the reference to that loan proposal in his own affidavit was his evidence. Overall, his evidence about that issue was evasive and unsatisfactory. I do not accept that he did not understand the questions he was being asked.
Having regard to these reservations, I approach the plaintiff’s testimony with some caution.
126․As already noted, all of the direct dealings between Mr Gang and Mr You were in Korean. The factual issue on which this aspect of the appeal has the most significance is the meeting at Colquhoun Murphy on 3 November 2017. That was an important meeting because that was when Mr Gang signed the authorities necessary to allow payment to JY Contractors of the proceeds of sale he says were to be paid to him. It may be accepted for that reason that careful attention must be paid to the evidence concerning his understanding of that meeting.
127․The appellant submitted that his evidence was clear that, at all relevant times, he lacked understanding of any English beyond some limited words used in his trade as a tiler. He submitted, in familiar terms, that there was “no proper basis” for any finding to the contrary.
19.His Honour erred in and by failing to find that the First Defendant on the occasion referred in Ground 18 above, said words to the effect that he would pay the debts of CUT from his own money.
20.His Honour erred in and by finding: “I do not accept that the First Defendant would have specified the figure of $350,000 at that stage”.
21.His Honour erred in and by failing to find that the First Defendant did specify or refer to, the figure of $350,000 at the said stage referred to in Ground 20 above.
22.His Honour erred in and by finding: “it is likely that the Plaintiff said the words attributed to him by the First Defendant in the latter's Affidavit at paragraph 83 (extracted at [228] above).”
23.His Honour erred in and by failing to find that the Plaintiff did not say the words attributed to him as referred to in Ground 22 above.
166․These grounds address the primary judge’s findings at [319]-[320] as follows:
In the light of my finding as to the loan agreement in relation to the CUT debts, I reject the evidence of the plaintiff that, in the lead up to the drawing of the contracts, the first defendant said words to the effect that he would pay the debts of CUT "...from (his) own money".
The evidence of the plaintiff and first defendant as to what was said when the parties signed the contract at the JYC offices on 21 September 2017 is not entirely inconsistent. The first defendant might well have said, in substance, the words as recounted by the plaintiff at paragraphs 60-62 of his first affidavit (see [220] above], although I do not accept that the first defendant would have specified the figure of $350,000 at that stage. Given my finding as to the loan agreement between the first defendant and JYC, and the plaintiff and CUT, it is likely that the plaintiff said the words attributed to him by the first defendant in the latter's affidavit at paragraph 83 (extracted at [228] above). As at 21 September 2017, the amount advanced by the first defendant and JYC to or on behalf of CUT would have been substantially less than the final total of about $343,000 (see Appendix 20 to the report of Mr Green and Exhibit "JHY" 14 to the first defendant's affidavit). It is probable, therefore, that both the plaintiff and the first defendant expected at that stage that a significant part of the net proceeds of the sale would go to the plaintiff.
167․As with many of the appellant’s submissions, the complaints concerning those findings resort to bare assertion that the primary judge should have accepted Mr Gang’s evidence and rejected Mr You’s evidence. The submissions fail to grapple with the primary judge’s careful analysis of the evidence by reference to the objective material and his cogent explanation for reaching the conclusions he reached. Those matters are addressed at length in the substantive discussion of the grounds of appeal above.
168․Grounds 24 to 33 return to the issue of the role of Colquhoun Murphy. Those grounds are:
24.His Honour erred in and by finding: “given that the Plaintiff did not have his own solicitor, I see the specification of the second defendant as the stakeholder of the deposit as unremarkable.”
25.His Honour erred in and by failing to find that the specification of the Second Defendant as Stakeholder was unusual, as the Second Defendant was in fact and in substance, acting as Solicitor for both Parties to the sale, on the whole of the evidence and the circumstances, indicated before the Court below.
26.His Honour erred in and by finding: “I also do not see the fact that the Second Defendant drew the contract as evidence that the firm was acting on behalf of the Plaintiff.”
27.His Honour erred in and by failing to find that the Second Defendant drawing the contract was, along with the other facts and circumstances evidenced before the Court below, evidence that the Second Defendant was in fact acting on behalf of the Plaintiff and acting as Solicitor for both the Parties to the sale and in respect of the money directions documents.
28.His Honour erred in and by finding that the Second Defendant was not placed in a position where it was required to cease acting.
29.His Honour erred in and by failing to find that the Second Defendant was placed in a position where it was indeed required to cease acting.
30.His Honour erred in and by finding: “I do not accept the evidence of the Plaintiff that he only attended one meeting [at the Colquhuon Murphy Office]”.
31.His Honour erred by failing to find:
(a)the Plaintiff only attended one meeting at the Second Defendant's Office; and
(b)the Plaintiff never met Ms Fogarty.
32.His Honour erred in and by making the findings stated in sub-paragraphs 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 15, 16, 17, 18 and 19 of paragraph R326: particularly in finding at sub-paragraph 10 “it is probable [sic] this was translated.
33.His Honour erred in and by failing to make findings that:
(a)the Plaintiff attended Colquhoun Murphy's offices only once;
(b)the Plaintiff never met with Ms Fogarty at that office or at all;
(c)the writing on behalf of the Second Defendant, of the words appearing above the Plaintiff's signature on the page bearing the photocopy of his driver licence, were a request by the Second Defendant for the Plaintiff to give the Second Defendant instructions as the Plaintiff’s Solicitor;
(d)even if any representative of the Second Defendant gave some explanation of the effect of the Plaintiff signing that page, it was neither appropriate nor sufficient, for the only "translator" of any such explanation into Korean to be the First Defendant who was the other and adverse party to the transaction;
(e)even if any representative of Second Defendant had "discussion" with the First Defendant and the Plaintiff about the alleged "loan" arrangement, it was neither appropriate nor sufficient, for the only "translator" in that regard to be the First Defendant, who was the other and adverse party to the transaction and who stood to benefit by any of the net balance being diverted from the Plaintiff on account of any such alleged "loan" arrangement;
(f)the Plaintiff was not asked if he wanted an independent lawyer to act on his behalf at Settlement or if he was asked that, it was neither appropriate nor sufficient for the only "translator" in that regard to be the First Defendant, who was the other and adverse party to the transaction and who stood to benefit by any of the net balance being diverted from the Plaintiff at any stage;
(g)the Plaintiff did not provide the Second Defendant with the email address "henrykang";
(h)the email address "henrykang" referred to at R326(11) was not one to which the Plaintiff had access and if and when the Second Defendant purported to send the Plaintiff any email letter and authorities to that email address, the Plaintiff did not receive any such email;
(i)the Second Defendant paid itself from monies of the Plaintiff for its fees upon and in and about the sale and conveyance;
(j)the Plaintiff did not understand any "explanation'' if given to him in English by Ms Russell [see R326(17)] and the Plaintiff did not indicate to her that he "understood" any such explanation;
(k)the Plaintiff did not understand the true nature and effect of the money directions/authority documents when he signed them;
(l)the Second Defendant was aware that the Plaintiff did not understand the true nature and effect of what he was signing when he signed when he signed the money directions/authority- documents;
(m)the First Defendant told the Plaintiff that he needed to sign the money directions/authority documents to enable the sale and conveyance to be completed and the First Defendant thereby tricked and misled the Plaintiff;
(n)even if the First Defendant purported to "translate'' matters into Korean in the Plaintiffs presence on any relevant occasion, that is not evidence any such translation was accurate, or that the Plaintiff understood what, if anything, was "translated" to him.
169․Grounds 24 to 33 simply gainsay individual findings of the primary judge concerning the position of Colquhoun Murphy on the premise that the appellant should have been believed and the respondents disbelieved. The position of Colquhoun Murphy is considered at [96]-[122] above. As to grounds 30 and 31, the submissions fail to grapple with the contemporaneous records contained in the solicitor’s file.
170․Ground 34 to 37 concern the allegation that Mr You tricked Mr Gang. Those grounds are:
34.His Honour erred in and by finding that the Plaintiff was not tricked by the First Defendant into signing the money directions/authority documents which diverted the net balance on sale away from the Plaintiff to the First Defendant's company JYC.
35.His Honour erred in and by failing to find that the Plaintiff was tricked by the First Defendant into signing the money directions/authority documents.
36.His Honour erred in and by finding that the First Defendant was not liable for acting Unconscionably by diverting the said net balance away from the Plaintiff to the First Defendant's company JYC.
37.His Honour erred in and by failing to find that the First Defendant acted unconscionably by taking unfair and unconscionable advantage of the Plaintiff’s Special Disadvantage well known to the First Defendant (namely, that Plaintiff understood only limited words in English mainly pertaining to his trade and could not understand documents in English) in the circumstances, which included the fact that the First Defendant had superior business and commercial knowledge to that of the Plaintiff.
171․Those grounds are addressed at [138]-[140] above.
172․Grounds 38 to 45 return to the issue of the role of Colquhoun Murphy. Those grounds are:
38.His Honour erred in and by failing to find that the Second Defendant breached its Fiduciary Duty and its duties as Trustee of Plaintiff's funds, by not affording to the Plaintiff, in respect of the money directions/authority documents proffered to him:
(a)an independent Translator from English to Korean; and/or
(b)proper opportunity for independent legal advice about the nature and effect of those documents, before the Plaintiff signed those documents. [R370]
39.His Honour erred in and by making the findings stated at [R342-343], since the evidence indicates the Plaintiff had been demanding the First Defendant pay the Plaintiff the net balance of the proceeds of sale ever since the time of Settlement.
40.His Honour erred in finding [at R348] that the Plaintiff did not expect to receive the net sale proceeds of $335,000 after the Settlement.
41.His Honour erred in and by the fact that His Honour's finding as referred to in Ground 40 above, is inconsistent with His Honour's finding [at R320] that "It is probable therefore, that both the Plaintiff and the First Defendant expected at that stage [21 September 2017] that a significant part of the net proceeds of the sale would go to the Plaintiff”.
42.His Honour erred in and by finding that the Second Defendant did not act on the property sale (and as to the money directions/authority documents) as both Solicitor for the Plaintiff and also as Solicitor for the First Defendant, when the Second Defendant's conveyancing file contains the Second Defendant's settlement instructions which expressly states: "ACT SALE AND PURCHASE SETTLEMENT INSTRUCTIONS WE ACT FOR BOTH BUYER AND SELLER" JR306) and particularly in the context when all of the other facts and circumstances in evidence, taken together, indicated that the Second Defendant acted for both Parties to the Sale, both in and about the sale and the conveyance and also in regard to the money directions documents.
43.His Honour erred by failing to find that the Second Defendant's settlement instructions expressly stated and thereby confirmed that the Second Defendant was (and indeed regarded itself as) acting as solicitor for both the Plaintiff and the First Defendant, being both of the Parties to the Sale, particularly in the context of all of the facts and circumstances indicating that the Second Defendant acted for both of those Parties both in and about the sale and the conveyance and also in regard to the money directions documents.
44.His Honour erred by failing [at R306-307] to find that the Second Defendant's fees in the sum of $3,214.62 were not only recorded by the Second Defendant as to come from the Plaintiff's monies, but the Second Defendant in fact paid itself those fees from the Plaintiffs monies, being further evidence that the Second Defendant as solicitor for the Plaintiff in the transaction.
45.His Honour erred by failing to find that the Second Defendant's fees were not only documented by the Second Defendant as payable from the Plaintiff's funds, but were paid from the Plaintiffs funds, and that this was cogent, indeed strong, evidence of the Second Defendant acting as Solicitor for the Plaintiff in and about the sale of the said property. [cf. R 307, which skates over this particular aspect.]
173․As with grounds 24 to 33, these grounds simply gainsay individual findings of the primary judge concerning the position of Colquhoun Murphy on the premise that the appellant should have been believed and the respondents disbelieved. The position of Colquhoun Murphy is considered at [96]-[122] above.
174․Ground 46 is:
46.His Honour erred in and by not taking any or any proper account of the principles enunciated by the High Court of Australia in Blomley v Ryan (1956) 99 CLR 362 and particularly by Kitto J at page 415. Namely, that the reach of Equity's relief against a Defendant (such as the First Defendant here) who takes advantage of a Plaintiff who was at a Special Disadvantage, arises in a wide variety of cases and instances. In particular, His Honour erred in not treating the present case as within those principles and to be governed and decided in accordance with those principles, in favour of the Plaintiff, who was undoubtedly at a Special Disadvantage by reason of his very limited knowledge of the English language and hence his inability to understand the nature and effect of the money directions documents proffered to him and his inability for the same reasons to understand any purported "explanation" thereof given to him in English. Further, the Court below wrongly concluded that it sufficed for the only "translator" afforded to the Plaintiff at the Second Defendant's office to be the First Defendant, who was the adverse party taking the benefit and advantage of the monies, through his company JYC. In this regard, Blomley v Ryan was cited to the Court, both at the Hearing and also it was again referred to in Plaintiffs Written Submissions. The Court below referred to the Amadio Case, but only as to what the Court termed "special disability", when the true principle is a much broader one and as to "special disadvantage" the categories of which, as held in Blomley v Ryan, are not closed, nor are limited only to "disability". Further, as the Court below erred in finding that the First Defendant did not trick or deceive the Plaintiff (see Grounds 29 to 32 above), the Court's findings and holdings at R381 are accordingly not sustainable.
175․Once again, this ground simply gainsays the findings of the primary judge in which his Honour did not accept Mr You engaged in unconscionable conduct and did not accept that the second Defendant breached its fiduciary duties. We repeat our remarks at [173] above.
176․Grounds 47 and 48 return to the issue of the role of Colquhoun Murphy. Those grounds are:
47.His Honour erred in and by finding that Ms Fogarty and Ms Russell were "not aware of anything unfair or unjust about the transaction": when the evidence and the weight of the evidence, is that either or both of them were well aware:
(a)that the money directions documents would have the effect of taking away from the Plaintiff’s net proceeds on sale;
(b)that the Plaintiff had insufficient English to understand the nature and effect of the money direction documents themselves and also insufficient English to understand any "explanation" allegedly given to him in English by Ms Russell about them;
(c)they were already fully aware that the Plaintiff had such insufficient English that fairness and justice required that he have an independent Translator and not just a purported "translation" by the interested Adverse Party namely, the First Defendant; and
(d)that they were thus aware that the money directions transaction was unfair and unjust to the Plaintiff, he being then under a special disadvantage. [cf R381]
48.His Honour erred in and by failing to find that Ms Fogarty and Ms Russell were well aware of the said transaction being unfair or unjust and particularly being well aware of the matters stated in items (a), (b), (c) and (d) of Ground 47 above.
177․We repeat our remarks at [173] above.
178․Ground 49 is:
49.His Honour also erred in and by treating the Plaintiff's case upon Special Disadvantage as if it were limited to the claims against the Second Defendant when the Plaintiff had made it very clear that the Plaintiff’s claim against the First Defendant was also based on the First Defendant's having taken unconscionable advantage of the Plaintiff's Special Disadvantage (a matter clearly well known to the First Defendant both already and by reason of the fact he was called on to "translate"). The Court below has ignored and failed to deal with this aspect of the Plaintiffs case against the First Defendant and has thus fallen into error. Further in this regard too, the Court below has erred by not applying its mind to the principles enunciated by the High Court of Australia in Blomley v Ryan (referred to in ground 46 above).
179․The primary judge did not fail to deal with this aspect of the appellant’s claim. His Honour recorded his conclusion (which in turn was based on lengthy reasoning throughout the judgment) at [381] of the judgment.
180․Ground 50 is:
50.As to the judgment and orders on the Counterclaim, in light of the errors set out herein, the Court below erred in granting that relief, as that aspect of the matter should be deferred until such time as the First Defendant and/or Second Defendant are ordered to duly compensate the Plaintiff for the net balance of the proceeds of sale, wrongly diverted away from the Plaintiff.
181․This ground is concerned with the counterclaim and is premised on the success of the appeal on the primary claim. In light of our conclusions in the primary claim, it is not necessary to address this ground.
182․Grounds 51 and 52 concern the appellant’s ability to understand English. Those grounds are:
51.His Honour erred in and by assessing the extent of the Plaintiff’s ability to understand English at the time of the property sale and the time of signing the money directions documents in late 2017, by reference to matters, and particularly at the trial, some four to five years after the relevant events pertaining to the case during 2016 to 2017. [R118-122]
52.His Honour erred in and by failing to find that the Plaintiff at all relevant times did not understand the English language beyond some limited words used in his trade work and did not understand documents written in English, nor any explanations given in English of documents and in particular, that the Plaintiff did not understand the true nature and effect of the said money directions/authority documents when he signed them.
183․Those grounds are addressed at [123]-[137] above.
184․Grounds 53 and 54 were not pressed.
185․Ground 55 returns to the issue of the role of Colquhoun Murphy. That ground is:
55.His Honour erred in and by finding that the Second Defendant did not act as solicitor for both parties to the sale and conveyance, when the Second Defendant's conveyancing file in evidence contained an express and incontrovertible statement by the Second Defendant that it acted as solicitor for both parties, viz "WE ACT FOR BOTH BUYER AND SELLER": and further when the evidence indicated the Second Defendant acted as solicitor for the Plaintiff/Seller at all stages of the transaction including:
(a)prepared the Contract of Sale, which is the responsibility of the solicitor for the Seller;
(b)acted as Stakeholder for holding the Deposit paid by the Buyer to the Seller (Plaintiff), which is the responsibility of the solicitor for the seller (Plaintiff);
(c)sought and obtained the Seller’s (Plaintiff's) express written authority to act for the Seller (Plaintiff) in the Settlement of the sale;
(d)booked Settlement with the Seller's (Plaintiff’s) Mortgagee for discharge of the Seller's Mortgage, which is the responsibility of the solicitor for the Seller (Plaintiff);
(d)[there are two (d)s] prepared the Seller's (Plaintiff's), Settlement Statement which set out the Seller's (Plaintiffs), Cheque Directions, which is the responsibility of the solicitor for the Seller;
(e)received on behalf of the Seller (Plaintiff), the cheques provided by the Buyer at settlement, which is the responsibility of the solicitor for the Seller;
(f)received payment from monies payable to the Seller (Plaintiff), for the Second Defendant's fees;
(g)held the net proceeds of sale in its Trust Account as Trustee and Fiduciary for the Seller (Plaintiff), which is the responsibility of the solicitor for the Seller;
(h)purported to prepare money directions/authorities for signature by the Seller (Plaintiff) concerning disbursement of the net proceeds of sale, which is the responsibility of the solicitor for the Seller;
(i)obtained the Seller's (Plaintiff's) signature on the money directions/authorities (without providing the Seller (Plaintiff) with either an independent translator into Korean and/or the opportunity of independent legal advice).
186․These grounds are repetitive of others concerning the solicitors. We repeat our remarks at [173] above.
187․Ground 56 is:
56.His Honour erred in finding that the First Defendant was not an evasive witness [R128-130] when the First Defendant persistently provided evasive answers as to facts relating to the merger, including the facts that:
(a)from about 1 April 2017 CUT's former business manager became an employee of the merged businesses of CUT, Project Control and JYC, and worked at a work station right beside the work stations of the First Defendant's and his business manager, Mr DJ Kong;
(b)the First Defendant had control of the business and financial records of CUT and Project Control at all relevant times from April 2017;
(c)the evidence of the Plaintiff's forensic accounting expert was that the business and financial records including tax invoices for CUT, Project Control and JYC were consistent with them operating as a group;
(d)the evidence of the Plaintiff’s forensic accounting expert was that the fact that CUT and Project Control invoices submitted to JYC did not have mark-ups and were more consistent with them operating as a group rather than in a subcontractor relationship;
(e)the operation by the First Defendant's business manager of EFT payments from the bank accounts of CUT and Project Control was an indicator that the First Defendant was in control of CUT and Project Control as part of a merged business with JYC; and
(f)the treatment by the Liquidator of instructions by the First Defendant as to the accounts receivable of CUT and liquidation of CUT indicated that the First Defendant was in control of CUT.
188․The issues raised by these grounds are addressed at [25]-[73] above.
189․Ground 57 is:
57.His Honour erred in finding that the First Defendant's witness Mr DJ Kong was not evasive [Rl31-132J] having regard to Mr Kong's evasive answers as to the matters referred to in Ground 56 above.
190․In light of the primary judge’s conclusions concerning the evidence of Mr Gang and Mr You, the substantive issues addressed at [25]-[73] above and our conclusions concerning those issues, this ground takes the issues no further.
191․Grounds 58, 58A, 58B and 58C are:
58.His Honour erred in finding that the Second Defendant's solicitors, Ms Fogarty and Ms Russell were reliable witnesses [R 135-136] when:
(a)Ms Fogarty's denials that the First Defendant acted as solicitors for the Plaintiff and the First Defendant were inconsistent with incontrovertible documentary evidence before His Honour to the contrary as particularised in Ground 55 above; and
(b)Ms Russell's denials to similar effect were likewise inconsistent with incontrovertible documentary evidence before His Honour to the contrary as particularised in Ground 55 above; and
(c)His Honour had before him multiple items of evidence pointing to the Second Defendant in fact acting for both parties to the sale, including the Second Defendant's Settlement Instructions which expressly stated, in respect of the Second Defendant “WE ACT FOR BOTH BUYER AND SELLER” and ticked off all cheques received in the Settlement including the cheque for conveyancing fees paid from the Plaintiffs monies to the Second Defendant.
58AHis Honour erred in finding [see R 377-378] that the Fiduciary Duty owed to the Plaintiff by the Second Defendant when the Plaintiff’s signature was being procured upon the money directions/authorities was of a limited nature or scope; and in particular: (a) that there was no requirement for the Second Defendant to arrange for an independent Korean translator in that regard; (b) and his Honour erred in not finding that independent legal advice for the Plaintiff was also required in that regard.
58B.His Honour erred in failing to find that the Fiduciary Duty owed to the Plaintiff by the Second Defendant when the Plaintiff’s signature was being procured upon the money directions/authorities was such that the Second Defendant had an obligation to ensure: (i) that the Plaintiff was afforded proper and independent legal advice about the nature and effect of the money directions/authorities; and/or (ii) that the Plaintiff was afforded a proper and independent Translation in the Korean language as to the nature and effect of the money directions/authorities.
58C.His Honour erred (and in light of all of the errors stated above) in declining [see at R 382-384] to grant the Plaintiff’s Application for orders extending the Plaintiff’s right or option to buy back or “repurchase” the subject property for the sum of $750,000 (as the Plaintiff had applied for when the Court below invited the Parties to make submissions on that matter) when it was just and equitable in the circumstances, that such right or option should be extended as sought by the Plaintiff in his written submissions to the Court, which the Court itself had invited after the Hearing at Trial.
192․These issues have been addressed or else assume premises that have been rejected. We repeat our remarks at [173] above.
193․Ground 58D is:
58D.His Honour erred in making his Decision, Judgment and Orders upon the basis of findings that various things were merely “probable”, “likely/unlikely” or “probably” the case, when the proper standard of proof to be applied in a civil matter is on the balance or preponderance of probabilities, that is to say, whether a thing was more likely than not to have been the case, and not merely just “probable”, “likely” or “probably” the case. Particular instances of errors thus are: (a) at R313 line 3: “unlikely” and at line 5 “more likely”; (b) at R320 line 7: “likely”; (c) at R320 line 12: “probable”; (d) at R321 line 7: “probably”; (e) at R326 (4) line 1: “probably told”; (f) at R326(10) line 2: “probable”; (g) at R342 line 7: “likely”; (h) at R343 line 1 “the probability; (i) at R169 line 3: “most unlikely”; (j) at R203(5) line 14 “the probability”; (k) at R203(6) line 7: “likely”.
194․This ground is addressed at [148] above.
195․Ground 59 is:
59.His Honour's errors in the Court below are accordingly of such a nature that a Miscarriage of Justice has occurred in the Court below and which require this Honourable Court of Appeal's intervention and correction, by setting aside the Judgment and Orders below and entering in their stead Judgment for the Plaintiff upon his claims in terms of the relief sought by the Plaintiff in the Court below and also as follows herein.
196․This ground is in the nature of a conclusory submission and need not be addressed separately.
Conclusion and orders
197․None of the grounds of appeal is made out. Accordingly, we make the following orders:
(1)Dismiss the appeal.
(2)Order the appellant to pay the respondent’s costs.
(3)Discharge the first respondent from his undertakings given to the Court on 6 August 2018.
| I certify that the preceding one hundred and ninety-seven [197] numbered paragraphs are a true copy of the Reasons for Judgment of the Court. Associate: Date: 19 December 2024 |
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