Kim v Wang

Case [2023] FCAFC 115

FEDERAL COURT OF AUSTRALIA

Kim v Wang [2023] FCAFC 115

Appeal from: Kim v Hodgson Faraday Pty Limited [2022] FCA 1190
File number: NSD 972 of 2022
Judgment of: MOSHINSKY, LEE AND JACKMAN JJ
Date of judgment: 25 July 2023
Catchwords: CORPORATIONS – misleading or deceptive conduct in relation to financial services – accessorial liability – where the applicant alleged at first instance that two companies (TM Index and TMK Index) made representations to potential investors that the companies’ investments were legitimate and regulated by the Australian Securities and Investments Commission – where the real issue at first instance was whether the respondent was involved in making the representations – where the primary judge was not satisfied that the respondent had actual knowledge of the making and falsity of the representations – whether the primary judge erred in not inferring that the respondent had actual knowledge of these matters
Legislation:

Australian Securities and Investments Commission Act 2001 (Cth), ss 5, 12DA, 12GF, 12GH

Corporations Act 2001 (Cth), s 79, 761A, 911A, 912DA, 913B, 913BA, 915A

Evidence Act 1995 (Cth), s 98

Federal Court of Australia Act 1976 (Cth), ss 28, 33C, 33H, 33J, 33V, 33ZB

Trade Practices Act 1974 (Cth)

Federal Court Rules 2011, r 39.05

Cases cited:

Australian Competition and Consumer Commission v Michigan Group Pty Ltd [2002] FCA 1439

Australian Securities and Investments Commission v ActiveSuper Pty Ltd (in liq) [2015] FCA 342; 235 FCR 181

Australian Securities and Investments Commission v Hellicar [2012] HCA 17; (2012) 247 CLR 345

Axon v Axon (1937) 59 CLR 395

Blatch v Archer (1774) 1 Cowp 63

Bowler v Hilda Pty Ltd [2000] FCA 899

Compaq Computer Australia Pty Ltd v Merry [1998] FCA 968; 157 ALR 1

Cooper v The Queen [2012] HCA 50; (2012) 87 ALJR 32

Coulton v Holcombe (1986) 162 CLR 1

Edwards v The Queen (1993) 178 CLR 193

Ethicon Sàrl v Gill [2021] FCAFC 29; (2021) 288 FCR 338

Fox v Percy [2003] HCA 22; 214 CLR 118

Giorgianni v The Queen [1985] HCA 29; (1985) 156 CLR 473

Girlock (Sales) Pty Ltd v Hurrell (1982) 149 CLR 155

Jones v Dunkel (1959) 101 CLR 298

Keller v LED Technologies Pty Ltd [2010] FCAFC 55; 185 FCR 449

Kozarov v Victoria [2022] HCA 12; 273 CLR 115

Kuhl v Zurich Financial Services Australia Ltd [2011] HCA 11; (2010) 243 CLR 361

Lee v Lee [2019] HCA 28; 266 CLR 129

Marriner v Australian Super Developments Pty Ltd [2016] VSCA 141

Moriarty v London, Chatham & Dover Railway Co (1870) LR 5 QB 314

NMFM Property Pty Ltd v Citibank Ltd (No 10) (2000) 107 FCR 270

NOM v Director of Public Prosecutions [2012] VSCA 198; (2012) 38 VR 618

Oran Park Motor Sport Pty Ltd v Fleissig [2002] NSWCA 371

Pioneer Mortgage Services Pty Ltd v Columbus Capital Pty Ltd [2015] FCA 1067

Quinlivan v Australian Competition and Consumer Commission [2004] FCAFC…

Continue reading Kim v Wang

Sign in free to access the full text

Details
AGLC
Kim v Wang [2023] FCAFC 115
Case
[2023] FCAFC 115
Decision Date

CaseChat Overview and Summary

The case of Kim v Wang involves an appeal against a decision of the Federal Court of Australia. The applicant, Kim, alleged that the respondents, Wang, TM Index, and TMK Index, engaged in misleading or deceptive conduct in relation to financial services, with Wang being potentially liable as an accessorial party. The primary concern was whether Wang was involved in making representations to potential investors about the legitimacy and regulation of the companies' investments by the Australian Securities and Investments Commission.

The legal issues before the court included whether Wang had actual knowledge of the misleading representations and whether he was complicit in the contraventions of the Australian Securities and Investments Commission Act 2001 (Cth). The primary judge concluded that Wang did not have actual knowledge of the making and falsity of the representations. The court needed to determine if this conclusion was correct and whether there was sufficient evidence to infer Wang's knowledge and involvement.

The court found no error in the primary judge's decision, affirming that Wang did not have actual knowledge of the misleading representations or their falsity. The reasoning involved a detailed examination of the evidence presented, including the testimonies and actions of Wang and the companies involved. The court found that Wang, while having control over the operations of TM Index and TMK Index, did not have direct involvement in the creation or dissemination of the misleading information. This decision was based on the lack of direct evidence linking Wang to the specific representations in question.

The final orders of the court dismissed the appeal, upheld the primary judge's findings, and clarified the legal status of the parties involved. The orders also addressed the binding effect of the decision on group members and the costs associated with the proceedings. The court set aside certain previous orders and provided specific answers to common questions raised in the case, affirming that TM Index and TMK Index did not make certain representations, and that Wang was not involved in the misleading conduct to the extent claimed by the applicant.

Orders

Orders of the court

1. The appeal be allowed.

2. Orders 2 and 3 made on 7 October 2022 be set aside.

3. The following questions common to the claims of group members be answered as follows (adopting the abbreviations used in the fourth amended statement of claim):

Question 1: During the Relevant Period, did TM Index or TMK Index:

(i) conduct any business;

(ii) have available for purchase any “T”, “M” or “K” products;

(iii) use the MT4 trading platform;

(iv) use the EA system to trade on behalf of investors; or

(v) intend that any monies received from investors would be traded or invested on behalf of the investor?

Answer: No

Question 2: Did TMI Index make the:

(i) TM Trading Profit Representation;

(ii) TM Guaranteed Returns Representation;

(iii) TMK Guaranteed Returns Representation;

(iv) TM Index Legitimacy Representation?

Answer: No to questions (i), (ii) and (iii); Yes to question (iv).

Question 3: Did TMK Index make the:

(i) TM Trading Profit Representation;

(ii) TMK Guaranteed Returns Representation;

(iii) TMK Index Legitimacy Representation?

Answer: No to questions (i) and (ii); Yes to question (iii).

Question 4: By reason of the True Position, were the Representations misleading or deceptive or likely to mislead or deceive within the meaning of s 12DA of the ASIC Act?

Answer: Yes, as to the TM Index Legitimacy Representation and the TMK Index Legitimacy Representation; No as to the other Representations.

Question 5: Did TM Index contravene s 12DA(1) of the ASIC Act by engaging in the TM Index Contravention?

Answer: Yes, but only to the extent of the TM Index Legitimacy Representation.

Question 6: Did TMK Index contravene s 12DA(1) of the ASIC Act by engaging in the TMK Index Contravention?

Answer: Yes, but only to the extent of the TMK Index Legitimacy Representation.

Question 7: Was Mr Wang involved in the TM Index Contravention or TMK Index Contravention within the meaning of s 12GF(1) of the ASIC Act?

Answer: Yes, but only to the extent of the TM Index Legitimacy Representation and the TMK Index Legitimacy Representation.

4. Pursuant to s 33ZB of the Federal Court of Australia Act 1976 (Cth) (the FCA), the persons bound by the judgment of the Full Court are the group members (other than any person who opted out of the proceeding under s 33J of the FCA within the time provided), the applicant and the third respondent.

5. The respondent pay the appellant’s costs of the appeal, and of the proceedings at first instance.

6. The parties file and serve by 4pm on 27 July 2023 a submission of no more than two pages addressing the question as to what orders should be made as to the resolution of individual claims of group members and what, if any, order should be made as to the individual claim of the appellant (with the issue of any further orders being thereafter determined on the papers).

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

For the reasons that follow, I have concluded that the appeal should be dismissed. In respect of all three grounds, in my view, no error is shown in the primary judge’s conclusions. In particular, in relation to ground 1, no error is shown in the primary judge’s conclusion that it was not established that Mr Wang had knowledge of the making of, and the falsity of, the Legitimacy Representations.Background facts In order to assess the grounds of appeal, it is necessary to set out the background facts in some detail. In this section, I set out the factual findings made by the primary judge that are not challenged on appeal, together with some of the evidence referred to in the Reasons. Insofar as the evidence of Mr David Batten (Mr Batten) is set out, the primary judge stated at [35] of the Reasons that she accepted Mr Batten as a witness of truth and that his evidence was cogent and credible. Insofar as reference is made below to the evidence of Ms Jingli Wei (Ms Wei) (a cousin of Mr Wang who he called as a witness), it should be noted that the primary judge did not consider her a witness of truth (Reasons, [36]). Nevertheless, some reference to her evidence is necessary to understand the chronology of events, keeping in mind that the primary judge found that everything that Ms Wei did, she did under the control and direction of Mr Wang (Reasons, [49]). In particular, her Honour found that Mr Wang was the controlling and directing mind in relation to Ms Wei’s dealings with TM Index and TMK Index (Reasons, [49]).General matters and the period before June 2014 Mr Wang was born in China. He practised as a solicitor in New South Wales as a principal of his law firm, Wang & Associates Solicitors (Wang & Associates). In 2013, Mr Batten met Mr Wang. On 25 February 2014, Vivid Quark Technology Pty Ltd (an Australian company) was incorporated. It was de-registered on 13 April 2015. Mr Wang was the sole director. On 3 March 2014, Vivid Quark Technology (Pty) Ltd (VQ Seychelles) was incorporated in the Seychelles. Ms Wei was the sole director and Mr Wang was the sole shareholder of the company. The primary judge found that Mr Wang acted as the controlling mind of VQ Seychelles and that Ms Wei acted in accordance with his directions: Reasons, [47].Facts relating to TM Index – June 2014 to April 2015 On 5 June 2014, Mr Wang sent an email to Stella and Ma Jia, employees of Wang & Associates, as follows: “Stella please ask ma jia to do the contract. Jia I want the contract done by 1 pm today”. The primary judge inferred from this that Mr Wang directed the purchase by VQ Seychelles of Taemas Funds Ltd. On or around 11 June 2014, VQ Seychelles purchased all of the shares in Taemas Funds Ltd from National Civil Recovery Pty Ltd. The primary judge inferred that Mr Wang caused VQ Seychelles to purchase the shares. The price of the shares was $75,000. By 24 June 2014, the directors appointed by National Civil Recovery Pty Ltd had resigned, and Mr Chen and Mr Wang had been appointed as directors. A third director, Mr Shouxin Li, was also appointed. Ms Wei worked for Mr Chen while employed by a company called Forpro Group Ltd (Forpro) in the period up to October 2014. Mr Wang and Mr Chen knew each other. These appointments of directors were made by VQ Seychelles as the new owner of Taemas Funds Ltd. The primary judge inferred that the appointments occurred at Mr Wang’s direction.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

For these reasons, Ground 3 is not made out.Conclusion It follows that I consider that the appeal should be dismissed. During the appeal hearing, in response to questions from the Court, both parties accepted that orders should be made by the Full Court answering common questions and providing for the orders to bind all group members other than those who had opted out. The parties were directed to file proposed forms of orders depending on the various possible outcomes of the appeal. Subsequently, each party filed a document setting out his proposed orders. In light of the conclusion I have reached that the appeal should be dismissed, I would make the following orders (which largely reflect orders proposed by Mr Wang in the event the appeal is dismissed):(1)The appeal be dismissed.(2)The appellant pay the respondent’s costs of the appeal, as agreed or assessed.(3)Pursuant to r 39.05(h) of the Federal Court Rules 2011, in addition to the orders made by the primary judge on 7 October 2022, it be ordered that (with effect from 7 October 2022):(a)the discontinuance of the proceeding as against the first and second respondents be approved pursuant to s 33V(1) of the Federal Court of Australia Act 1976 (Cth);(b)the fourth amended statement of claim filed on 29 March 2022 be dismissed;(c)the common questions at paragraph 2 of the further amended originating application filed on 6 April 2022 be answered as follows:(i)in relation to paragraph 2(a) – unnecessary to answer in light of the answers to the further common questions below;(ii)in relation to paragraph 2(b) – TM Index Ltd did not make any of the pleaded representations;(iii)in relation to paragraph 2(c) – TMK Index Ltd did not make any of the pleaded representations;(iv)in relation to paragraph 2(d) – unnecessary to answer in light of the answers to the other common questions;(v)in relation to paragraph 2(e) – TM Index Ltd did not contravene s 12DA(1) of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act);(vi)in relation to paragraph 2(f) – TMK Index Ltd did not contravene s 12DA(1) of the ASIC Act; and(vii)in relation to paragraph 2(g) – Mr Wang was not involved in any of the pleaded contraventions within the meaning of s 12GF(1) of the ASIC Act;(d)pursuant to s 33ZB of the Federal Court of Australia Act, the dismissal of the proceeding, and the above answers to the common questions, bind all group members (other than any person who opted out of the proceeding under s 33J of the Federal Court of Australia Act within the time provided), namely, all persons who suffered loss or damage by reason of the conduct of the respondents as pleaded in the fourth amended statement of claim. The separate reasons of Moshinsky J and Jackman J set out comprehensively the issues below, how the primary judge resolved those issues and the nature of the appeal against the orders made below. I will adopt the abbreviations used elsewhere. For the reasons given by Jackman J, I agree that the Legitimacy Representations constituted conduct engaged in “on behalf” of TM Index and TMK Index and that Ground 2 is made out. I also agree that Ground 3 is not made out, for the reasons given by Moshinsky J.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.