Li v Liu

[2022] NSWCA 67

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation:

Li v Liu [2022] NSWCA 67

Hearing dates:

7 February 2022

Date of orders:

29 April 2022

Decision date:

29 April 2022

Before:

Meagher JA at [1]
White JA at [2]
Beech-Jones JA at [3]

Decision:

(1)   Appeal dismissed.

(2)   The Appellants pay the Respondents’ costs of the Appeal.

Catchwords:

RESTITUTION – illegal contract – contract involving “investment” in local company in return for employing foreign national to fulfil visa criteria – agreement rendered unlawful by Migration Act 1958 – recovery of amounts “invested” in restitution – amount paid to Director on behalf of counter party company – whether restitution permissible – whether Director can rely on “defence” of payment over to company where not expressly pleaded – whether primary judge erred in dismissing claim against Director without expressly finding had no notice of illegality – form of notice required for agent who pays funds to principal received under illegal contract – HELD: claim rejected – manner in which case conducted meant that “defence” was available – primary judge’s findings inconsistent with Director having relevant notice

AUSTRALIAN CONSUMER LAW – representation that visa “would be” granted – whether such a representation made – whether “illegality” of representation or underlying transaction meant no conduct in trade or commerce or recovery impermissible – HELD: representation not made – if it was made was in trade or commerce and recovery permissible

Legislation Cited:

Australian Consumer Law

Constitution (Cth)

Competition and Consumer Act 2010 (Cth)

Migration Act 1958 (Cth)

Migration Amendment (Charging for a Migration Outcome) Act 2015 (Cth)

Migration Amendment (Charging for a Migration Outcome) Bill 2015

Migration Regulations 1994 (Cth)

Trade Practices Act 1974 (Cth)

Uniform Civil Procedure Rules 2005

Cases Cited:

Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470

Alpha Wealth Financial Services Pty Ltd v Frankland River Olive Co Ltd (2008) 66 ACSR 594; [2008] WASCA 119

Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662

Australian Financial Services and Leasing Pty Limited v Hills Industries Ltd & Ors (2014) 253 CLR 560

Brownbill v Kenworth Truck Sales (NSW) Pty Ltd (1982) 39 ALR 191; 59 FLR 56

Citigroup Pty Ltd v National Australia BankLtd (2012) 82 NSWLR 391

Coulton v Holcombe (1986) 162 CLR 1; [1986] HCA 33

David Securities Pty Ltd v Commonwealth Bank Australia (1992) 175 CLR 353

Elconnex Pty Ltd v Gerard IndustriesPty Ltd (1991) 32 FCR 491

Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498; [2012] HCA 7

Fergusson v Stevenson (1951) 84 CLR 421

Gowers v Lloyds and National Provincial Foreign Bank, Ltd [1938] 1 All ER 766

Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548

Mansell v Beck (1956) 95 CLR 550

Nelson v Nelson (1995) 184 CLR 538

Overmyer Industrial Brokers Pty Ltd v Campbells Cash & Carry PtyLtd [2003] NSWCA 305

Perpetual Trustees Australia Ltd v Heperu Pty Ltd (2009) 76 NSWLR 195

Port of Brisbane Corporation v ANZ Securities Ltd(No 2) [2002] 2 Qd R 661; [2002] QCA 158

South Australian Cold Stores Ltd v Electricity Trust of South Australia (1965) 115 CLR 247

Valve Corporation v ACCC (2017) 258 FCR 190

Yango Pastoral Company Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 420

Texts Cited:

Mason & Carter’s Restitution Law in Australia, 4th ed

Edelman and Bant, Unjust Enrichment, 2nd edition

Category:

Principal judgment

Parties:

Kun Li (First Appellant)
Zhi Hong (Second Appellant)
Yang Liu (First Respondent)
Junyi Wang (Second Respondent)

Representation:

Counsel:
Mr S Lawrance SC; Mr DA Ward (Appellants)
Mr BC Kasep; Mr JK Raftery (Respondents)

Solicitors:
WB Legal (Appellants)
Bloomsbury Legal (Respondents)

File Number(s):

2021/183151

 Decision under appeal 

Court or tribunal:

District Court

Jurisdiction:

Civil

Date of Decision:

9 June 2021

Before:

Norton SC DCJ

File Number(s):

2019/00168403

HEADNOTE

[This headnote is not to be read as part of the judgment]

The first named appellant, Kun Li (Ms Li), and her mother, the second appellant, Zhi Hong (Ms Hong) are citizens of the People’s Republic of China. In April 2017, they transferred $500,000 AUD into the bank account of the First Respondent, Yang Liu (Ms Liu). Ms Liu was a director of, and held 99% of the shares in, T & S Investment Group Pty Ltd (“T & S”). The other director (and managing director) of T & S was the Second Respondent, Junyi Wang (Mr Wang).

During March and April 2017, T & S entered into various agreements with Ms Li. The primary judge found that these agreements constituted a “Main Contract” that had as its purpose the obtaining of a permanent visa for Ms Li and an “Investment Visa” for her parents. One aspect of these arrangements was the “investment” of $1,000,000 with T & S via two tranches of $500,000, by or on behalf of Ms Li, and the employment of Ms Li by T & S.

Ms Li failed to obtain a visa. She and Ms Hong sued Ms Liu, T & S and Mr Wang in the District Court to recover the amounts they paid. The primary judge found that the arrangements that the parties entered into were contrary to certain provisions of the Migration Act 1958 (Cth) which prevented the offering or receiving of a benefit in exchange for a “sponsorship-related event” including “employing or engaging … a person to work in an occupation or position in relation to which a sponsored visa has been granted, has been applied for or is to be applied for” and a “grant of a sponsored visa”. During the hearing the Appellants tendered a receipt issued by T & S acknowledging its receipt of the funds paid by Ms Li and Ms Hong into Ms Liu’s account. Before the primary judge, Ms Li and Ms Hong recovered from T & S on a restitutionary basis but their claims against Ms Liu and Mr Wang failed.

On appeal, Ms Li and Ms Hong contended that they should recover the funds invested from Ms Liu in restitution and against Mr Wang under ss 18 and 236 of the Australian Consumer Law (the “ACL”) (being Schedule 2 of the Competition and Consumer Act 2010 (Cth)) for his (alleged) knowing involvement in a false and misleading representation said to have been made by T & S that the Appellants “would obtain” visas in return for their “investment” (the “Representation”). Ms Liu and Mr Wang filed a notice of contention challenging several findings said to have been made by the primary judge including that the Representation was made.

The principal issues arising on the appeal were:

1. If the primary judge found that the Representation was made, whether her Honour erred in doing so;

2. If the Representation was made, whether the primary judge erred in denying recovery under the ACL based on the illegality of the Main Contract;

3. Whether the primary judge erred in concluding that the monies paid pursuant to the Main Contract and the various collateral agreements were recoverable on a restitutionary basis by the Appellants even though the Main Contract and collateral agreements were rendered illegal and unenforceable by ss 245R and 245S of the Migration Act;

4. Whether the primary judge erred in refusing to allow recovery from Ms Liu on a restitutionary basis in circumstances where she did not expressly plead that she had paid the monies over to T & S without notice of any illegality; and

5. Whether the primary judge erred in refusing to allow recovery from Ms Liu on a restitutionary basis in circumstances where her Honour did not expressly find that Ms Liu paid the funds over to T & S without notice of any illegality.

The Court held (per Beech-Jones JA, Meagher and White JJA agreeing), dismissing the appeal:

As to issue (i)

It was not shown that the Representation was made. A review of the entirety of the communications between the parties disclosed that none of the statements made by or on behalf of T & S supported a finding that a representation was made as emphatic as that which was pleaded. The parties made provision for the contingency that visas would not be granted.

Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470; and Valve Corporation v ACCC (2017) 258 FCR 190 considered.

As to issue (ii)

Had the Representation been made, then the primary judge erred in concluding that the illegality of the Main Contract precluded recovery under the ACL or meant that the Representation was not made in trade or commerce. Whether some form of illegality affecting the relevant conduct inhibits or precludes recovery under s 18 of the ACL turns upon the form of illegality in question and its relationship to the action brought by the affected party. Some types of dealings, such as buying and selling stolen goods or the sale of counterfeit currency, are “ex commercium” such that they stand outside the concept of “trade” or “commerce”. The consequences of illegality for a claim under the ACL are resolved by considering and, to the extent necessary, reconciling the ACL and the statutory provisions that create the illegality in the same or similar way that occurs with illegal contracts.

Mansell v Beck (1956) 95 CLR 550; Fergusson v Stevenson (1951) 84 CLR 421 applied.

Brownbill v Kenworth Truck Sales (NSW) Pty Ltd (1982) 39 ALR 191; (1982) 59 FLR 56; Overmyer Industrial Brokers Pty Ltd v Campbells Cash & Carry Pty Ltd [2003] NSWCA 305; Elconnex Pty Ltd v Gerard Industries Pty Ltd (1991) 32 FCR 491 considered.

As to issue (iii)

The primary judge did not err in concluding that monies paid pursuant to the Main Contract and the various collateral contracts were recoverable on a restitutionary basis. Allowing recovery in such circumstances would not result in incoherence in the law or stultify the purpose of the statutory scheme.

Yango Pastoral Company Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 420 considered. Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498; [2012] HCA 7 applied.

As to issue (iv)

Having regard to the fact that the Appellants’ restitution claim was only pleaded in a reply and the way the hearing was conducted, the primary judge did not err in refusing to allow recovery from Ms Liu on a restitutionary basis in circumstances where she did not expressly plead that she had paid the monies over to T & S without notice of any illegality.

As to issue (v)

The primary judge did not err in refusing to allow recovery from Ms Liu on a restitutionary basis in circumstances where her Honour did not expressly find that Ms Liu paid the funds over to T & S without notice of any illegality. To defeat a claim by an agent that they paid funds received over to their principal, it is not sufficient to only establish that the agent has knowledge of the facts that give rise to the illegality. The effect of the primary judge’s findings was that Ms Liu received and paid over funds to T & S because she believed it was entitled to them as part of the arrangements with the Appellants.

Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662; David Securities Pty Ltd v Commonwealth Bank Australia (1992) 175 CLR 353; Citigroup Pty Ltd v National Australia Bank Ltd (2012) 82 NSWLR 391; Perpetual Trustees Australia Ltd v Heperu Pty Ltd (2009) 76 NSWLR 195; Gowers v Lloyds and National Provincial Foreign Bank Ltd [1938] 1 All ER 766; Port of Brisbane Corporation v ANZ Securities Ltd (No 2) [2002] 2 Qd R 661; [2002] QCA 158; Alpha Wealth Financial Services Pty Ltd v Frankland River Olive Co Ltd (2008) 66 ACSR 594; [2008] WASCA 119 considered; Australian Financial Services and Leasing Pty Limited v Hills Industries Ltd & Ors (2014) 253 CLR 560 applied.

Judgment

1. MEAGHER JA: I have had the benefit of reading Beech-Jones JA's judgment in draft. For the reasons his Honour gives I agree that the appeal should be dismissed with costs.

2. WHITE JA: I agree with Beech-Jones JA.

3. BEECH-JONES JA: Both the first named appellant, Kun Li (Ms Li), and her mother, the second appellant, Zhi Hong (Ms Hong) are citizens of the People’s Republic of China. In April 2017, Ms Li transferred AUD$400,000 and Ms Hong transferred AUD$100,000 to the bank account of the First Respondent, Yang Liu (Ms Liu). This was undertaken as part of an arrangement that had, as its overall objective, the grant of visas for Ms Li, Ms Hong and Ms Hong’s husband, Xiaoning Li, including a visa that would enable Ms Li to work in Australia.

4. At the time she received the funds, Ms Liu was a director of, and held 99% of the shares in, T & S Investment Group Pty Ltd (“T & S”). T & S was the entity that entered into the arrangements with Ms Li. The other director of T & S was the Second Respondent to this appeal, Junyi Wang (Mr Wang). Mr Wang was the managing director of T & S and Ms Liu’s then husband. He had the principal dealings with Ms Li and her parents.

5. As events transpired, Ms Li failed to obtain a visa, and she sought a refund of all of the fees she paid. She and Ms Hong sued Ms Liu, T & S and Mr Wang in the District Court to recover the amounts they paid. It emerged that the arrangements they entered into were contrary to certain provisions of the Migration Act 1958 (Cth). Ultimately, Ms Li and Ms Hong recovered from T & S on a restitutionary basis but their claims against Ms Liu and Mr Wang failed.

6. On appeal, Ms Li and Ms Hong contend that they should recover the funds invested from Ms Li in restitution. They also contend that they should recover against Mr Wang under ss 18 and 236 of the Australian Consumer Law (the “ACL”) (being Schedule 2 of the Competition and Consumer Act 2010 (Cth)) for his (alleged) knowing involvement in a false and misleading statement said to have been made by T & S that induced the payments. For the reasons that follow I would reject both contentions and dismiss their appeal.

Background

7. Unless otherwise stated, the following is either common ground or taken from the findings of the primary judge.

8. Ms Li came to Australia in 2016 on a student visa. She studied at the University of Sydney and graduated in October 2018.

9. Between January 2017 and the end of March 2019, Ms Li and her parents discussed with Mr Wang the means by which they could migrate to Australia. In late February 2017, Mr Wang told Ms Li that he had prepared a “preliminary immigration plan” which he wished to discuss with her parents on the telephone. On 1 March 2017, he told her father, Mr Li, that as Ms Li was over 23 years of age she could not migrate with the rest of the family. Mr Wang suggested that he make an investment in “our business” and “then we could assist you [in] applying [for a] business investment visa.” Mr Wang said that “[w]e are looking at [a] $1 million investment.” As for Ms Li, Mr Wang told her father that “we … hope to offer a job opportunity to her once she graduates.”

10. In March 2017, the parties exchanged messages about a possible tightening of the migration criteria for skilled and sponsored labour. In one conversation Mr Wang told Ms Li that he had bought an apartment in Darling Square and it would be security for the investment.

11. The primary judge accepted that Mr Wang had the following conversation with Mr Li on 21 March 2017:

Junyi Wang:   “You will need to speak with your migration agent but you may be able to get 188A visas for your family. You would have the best opportunity to obtain those visas if you invested $1 million. If granted, both you and your two younger children could migrate together. As to Kun Li, she could immigrate with a working visa. After Kun Li has graduated, she’ll need a job. Once she settles down in Australia with a job, then we could discuss our company sponsoring her. Here are the draft documents my lawyer prepared for the arrangement.”

Xiaoning Li:    “Sure let us consider them. Could you give the documents to give to Kun Li?”

Junyi Wang:   “Of course.”

12. On 28 March 2017, Ms Li attended Mr Wang’s office and they called Ms Li’s father in China. Mr Li told Mr Wang that they would make an investment in their company for $1,000,000 with the money to be repaid within five years.

The Various Agreements and Cash Transfers

13. Despite his statements that he was preparing various versions of an immigration plan, neither Mr Wang, T & S, nor Ms Liu were registered migration agents. Thus, they were precluded from providing “immigration assistance” (Migration Act, s 280(1)). Mr Wang referred Ms Li to Mr Junguo (or Jason) Wang whom he described as “the migration agent [who] cooperated with our company”.

14. On 30 March 2017, Ms Li signed an agreement entitled “Agency Agreement of Australian Employer Sponsored Visa” with First Channel International Pty Ltd, a company associated with Jason Wang. The agreement contains a “MARA” (i.e., Migration Agents Registration Authority) register number for First Channel. Under the agreement First Channel agreed to provide “agency services” to Ms Li in respect of her application for “Australian employer sponsored visas (457 – 186 visa)”.

15. Over the course of April 2017, various documents were prepared by or on behalf of T & S as part of an arrangement it was pursuing with Ms Li and her parents to assist them to obtain visas. This included a “Deed of Investment with Security” (the “Investment Deed”) dated 3 April 2017, a “Share Sale and Purchase Agreement” (the “Share Agreement”) also dated 3 April 2017, an employment contract for Ms Li and an undertaking from Mr Wang. In her affidavit, Ms Li said that there was an exchange of these documents on 26 April 2017. Mr Wang did not address this in his affidavit and the primary judge made no finding on the topic. Nothing appears to turn on this.

16. The Investment Deed was signed by Ms Liu and Mr Wang on behalf of T & S. The front page to the Investment Deed identified the investing parties as Ms Li’s parents and T & S, although this Court was advised that it was common ground that Ms Li and Ms Hong were parties to the agreement and not Mr Li. The Investment Deed and the Sale Agreement were signed by Ms Li on 5 April 2017.

17. Under the Investment Deed, the “Investor” (i.e., Ms Li) agreed to provide an “Investment facility” to the “Investee” (i.e., T & S). The Investment Sum was defined as AUD $1,000,000 which Ms Li was obliged to advance in two tranches of $500,000, one on 1 May 2017 and the other on 1 January 2018. T & S was obliged to repay the sums invested by making a payment of AUD$500,000 “from 01/05/2020 to 01/05/2021” and another AUD$500,000 on 1 May 2022. Interest was not payable. T & S agreed to provide security for the repayment of those sums by granting a caveatable interest over a unit in Darling Drive, Sydney. As events transpired that unit was not owned by T & S but by Ms Liu. The Investment Deed included a clause entitled “Investment Special Condition” providing that, if Ms Li did not “wish” to pay the second tranche, then T & S was only obliged to refund $150,000 with the “share options” of T & S Queensland Investment Group Pty Ltd (“T & S Queensland”) “bought” back at no cost.

18. The Share Agreement involved an agreement to “sell” 30 of the 100 shares in T & S Queensland to Ms Li. The agreement is ambiguous as to whether the purchase price for the shares was AUD $30 or nothing, although the better view is that it was the latter. The agreement is also unclear as to who is the vendor in that the front page refers to T & S, T & S Queensland is described as the “Vendor”, and Schedule 1 refers to Ms Liu as the “Seller”.

19. The undertaking was signed by Mr Wang. He undertook that if Ms Li failed “to obtain [a] permanent residency visa due to change of immigration policy or change of company situation, we will refund all the fees we have received (within 30 days)” and noted that “[a]fter Kun Li has obtained [a] work visa, the second instalment of 0.5 million Australia Dollars will be invested.”

20. The primary judge found that on 26 March 2017 Mr Wang emailed the draft employment contract to Ms Li. As noted, he presented it to her in person on 5 April 2017. No signed copy was tendered. Under the draft contract, Ms Li was offered employment as a sale adviser with T & S commencing 1 May 2017 for a salary of AUD$60,000 per annum.

13. On 6 April 2017, Mr Wang advised Ms Hong that the sum of $100,000 should be transferred to Ms Liu’s account. The next day Ms Hong transferred the funds from her account in China to Ms Liu’s account. Ms Hong transferred the balance of the $400,000 from Ms Li’s account in two tranches on 25 April 2017 and 26 April 2017 respectively. The Appellants tendered a document to the primary judge on T & S’s letterhead, dated 1 May 2017. It was signed by Mr Wang and confirmed T & S’s receipt of AUD$500,000.

14. In the meantime, on or around 18 April 2017 the Federal Government announced the abolition of the class 457 visa and its replacement with a “Temporary Skill Shortage 482 Visa”. In July 2017 Mr Wang discussed this change with Ms Li suggesting that a “new position” needed to be arranged for her. There was no finding by the primary judge that Ms Li worked for T & S. However, according to Mr Wang’s affidavit, she commenced some part‑time training in August 2017. In late December 2017, Mr Wang communicated with Ms Li and her parents about amending the “plan” so that Ms Li could apply for a Class 188A visa.

15. In September 2018, Ms Li received a Temporary Graduate Visa (sub class 485) and in November 2018 Mr Wang advised that amendments “to the contract [had] been completed basically”. Despite this, in March 2019 Mr Wang advised Ms Liu that Ms Li had told him “her family might not wish to proceed with the immigration and investment anymore.”

The Appellants’ Pleaded Case

24. Ms Li and Ms Hong sued T & S for a breach of s 18 of the ACL for allegedly making certain “Visa Representations” which were said to be false and misleading. They pleaded that they were induced by those representations to invest the sums noted above and sought recovery under s 236 of the ACL. They also sought recovery from each of Ms Liu and Mr Wang on the basis that they were persons involved in T & S’s breaches of s 18 of the ACL (s 236).

25. The Visa Representations were pleaded in [5] of the Third Further Amended Statement of Claim (“TASOC”) as follows:

(a)   in return for an investment of $1,000,000 to be paid by the plaintiffs to the second defendant as directed by the second defendant, the second defendant would obtain Australian Permanent Residency Visas for the first plaintiff and the second plaintiff and the second plaintiff’s husband (“Permanent Residency Visas”);

(b)   the investment would be secured by a caveatable interest over the property at 31F/30 Darling Drive, Sydney NSW 2000 (“Security Property”) which would be purchased by the second defendant by November 2017;

(c)   if, within 5 years of the execution of the Investment Deed, for some reason the Permanent Residency Visas could not be obtained, all amounts paid by the first and second plaintiffs to the second defendant would be refunded.” (emphasis added)

26. These representations were pleaded to be false and misleading on the basis that T & S did not have reasonable grounds for making them. In the case of the first representation it was said to be incapable of being fulfilled; that is, no such visas could be obtained as the proposed investment was said to be “in breach of Reg[ulations] 2.60S(2)(c) and (d) of the Migration Regulations 1994 in force at the time, and s 245AR of the Migration Act 1958.” In their defence, the Respondents and T & S denied the Visa Representations were made and pleaded that Ms Liu received the funds as “agent for the second defendant”.

27. In relation to the restitutionary claim, the TASOC pleaded the existence of a so called “Main Contract” incorporating the various agreements noted above which was to the effect that, in return for the investment of $1,000,000, T & S would obtain permanent residency visas for the plaintiffs. It was pleaded that there was a breach of that Main Contract such that T & S was liable in damages and that there was a total failure of consideration such that Ms Liu, as the initial recipient of the funds, was liable in restitution.

28. One part of the defence pleaded that, if the Visa Representations were made, they “involved an illegal agreement pursuant to section [245AS] of the Migration Act”. The Appellants filed a reply pleading that “if the Visa Representations involved an illegal agreement,” then it was denied that the Investment Deed was an illegal agreement but “if the Investment Deed [was] an illegal agreement, and its performance is prohibited, then the Investment Deed is void” and Ms Liu “and/or” T & S were unjustly enriched.

The Primary Judgment

29. In the primary judgment, her Honour set out the chronology of events and the effect of the contractual documents noted above. Her Honour then addressed and accepted Ms Li and Ms Hong’s contention that there was a “Main Contract”, although her Honour did not make any finding as to its terms other than its “purpose … was to obtain a Permanent Visa for Ms Li and for a time the parties considered that an Investment Visa might be obtained for the rest of the family.”

30. Her Honour then addressed the relevant provisions of the Migration Act noted below and found that the “overarching agreement is … impliedly prohibited” and “that the contracts including the Main Contract and the collateral contracts are illegal, void and unenforceable.” Her Honour found that Ms Li “was aware of the nature of the Main Contract and that it was likely to be contrary to the Migration Act” (at [155]) and that “Ms Hong was also aware of the nature of the main agreement” (at [156]). Her Honour found that, so far as the illegality was concerned, neither party was “innocent” but Ms Li and Ms Hong “clearly had less experience with such applications than Mr Wang and his company [i.e., T & S].” Under the heading “[i]s restitution available” her Honour referred to South Australian Cold Stores Ltd v Electricity Trust of South Australia (1965) 115 CLR 247 and found that the “parties were not equally at fault for the illegality and the plaintiffs could claim restitution”.

31. Her Honour then addressed whether Ms Liu or T & S (or both) were liable in restitution. Given the scrutiny that this aspect of her Honour’s reasons attracted, it is necessary to set out most of her Honour’s reasoning on this aspect of the Appellants’ claim.

“Liability of Ms Liu

174   ...

175   ...

Credit of Ms Liu

176   Ms Liu in her evidence to the court repeatedly said that she trusted her husband, did not read the documents he asked her to sign and could not recall if she had seen the documents. Ms Liu did acknowledge that the signatures on the documents were hers. She claimed to have no knowledge of any agreement and to be unaware of what the funds which were paid into her account related to.

177   Ms Liu has a degree in Business and Finance from an Australian University. This suggests that she has a good command of English, especially written English, which relates to a commercial transaction. Ms Liu works in the finance industry both in Australia and China. The amount paid into her account was $500,000 and I find it hard to believe that she would not question what the money was for and given the origin of the money had no idea that it related to transactions with the plaintiffs. Ms Liu was a director, signed as a director and she must have been aware from her studies of the obligations of directors. If she chose not to act in accordance with those obligations it reflects poorly on her credit. In the circumstances I do not accept the evidence of Ms Liu unless it is corroborated by other evidence. I find on the balance of probabilities that she was aware of the Main Contract and its effect. I make that finding taking into account section 140 of the Evidence Act.

178   [Counsel for Ms Liu, T & S and Mr Wang] conceded that a court may make an order for restitution if it would be unjust for the recipient to retain the benefit. He submitted that the court would find that the plaintiffs were equally involved in the transaction and that ‘they should not be rewarded for their own illegal contract’. It is a little difficult to see how a repayment of money would qualify as a reward.

179   [Counsel for the Appellants] in his submission on unjust enrichment pointed out that Ms Liu received a benefit because she received the $500,000 into her account and the only evidence of agency is that contained in the Investment Deed and Visa Representations which if void has no effect. It is said to be immaterial that she may have transferred the money to others. Further if the money was transferred to the second defendant she owned 99% to 100% of that company.

180   It was further submitted that as Ms Liu admitted that she was aware the money related to the arrangement, justice required that she be ordered to repay it to the plaintiffs. [Counsel for the Appellants] repeated his submission that the plaintiffs were not ‘equally involved’ in the illegal transaction. I have already found that the plaintiffs were not innocent parties but they were vulnerable.

181   Ms Liu’s claim that the money was transferred out of her account is confirmed by other evidence particularly the receipt annexed to Ms Li’s affidavit. The pleadings corroborate that the plaintiffs were aware that Ms Liu received the money on behalf of [T & S] and not in her individual capacity. In the circumstances I do not find that her initial receipt of the money is sufficient to make her personally liable for its repayment. It was put to Ms Liu that she used the funds to complete her purchase of the apartment she maintained the bank provided the money. The plaintiff[s] did not produce any other evidence to suggest that Ms Liu should be personally liable.

182   Doing the best I can given the state of the evidence I find that the second defendant [i.e., T & S] received the funds and thus neither the first nor the second defendant has been directly unjustly enriched.” (emphasis added)

32. It was accepted on the appeal that her Honour’s reference to the “second defendant” in [182] was a mistake in that her Honour upheld the restitutionary claim against T & S.

33. In relation to the claims under the ACL, without elaboration, her Honour found that “the defendants, particularly Mr Wang, made false representations.” However, her Honour did not grant relief, finding:

“I find that the public policy behind the 2015 amendments would preclude the plaintiff from relying on the protections in [the] Australian Consumer Law …

The plaintiffs cannot establish a cause of action without relying on the illegal Main Contract and no part of the damages obtained is unrelated to the illegality (s 18 of the Australian Consumer Law)”.

34. The submissions on appeal treated the first of these findings as rejecting the claim on public policy grounds as well as a finding that any representation, if made, was not made in trade or commerce.

Finding of illegality and its effect

35. The relevant provisions of the Migration Act that her Honour identified as having been contravened by the “Main Contract” were ss 245AR and 245AS which relevantly provide:

245AR Prohibition on asking for or receiving a benefit in return for the occurrence of a sponsorship-related event

(1)   A person (the first person) contravenes this subsection if:

(a)   the first person asks for, or receives, a benefit from another person; and

(b)   the first person asks for, or receives, the benefit in return for the occurrence of a sponsorship-related event.

(2)   To avoid doubt, the first person contravenes subsection (1) even if the sponsorship-related event does not occur.

(3)   Subsection (1) does not apply if the benefit is a payment of a reasonable amount for a professional service that has been provided, or is to be provided, by the first person or a third person.

Note: A defendant bears an evidential burden in relation to the matter in this subsection (see subsection 13.3(3) of the Criminal Code).

Offence

(4)   A person commits an offence if the person contravenes subsection (1). The physical elements of the offence are set out in that subsection.

Penalty: Imprisonment for 2 years or 360 penalty units, or both.

Civil penalty provision

(5)   A person is liable to a civil penalty if a person contravenes subsection (1).

Civil penalty: 240 penalty units.

(6)   A person who wishes to rely on subsection (3) in proceedings for a civil penalty order bears an evidential burden in relation to the matter in that subsection.

Note: It is not necessary to prove a person’s state of mind in proceedings for a civil penalty order (see section 486ZF).

245AS Prohibition on offering to provide or providing a benefit in return for the occurrence of a sponsorship-related event

(1)   A person (the first person) contravenes this subsection if:

(a)   the first person offers to provide, or provides, a benefit to another person (the second person); and

(b)   the first person offers to provide, or provides, the benefit in return for the occurrence of a sponsorship-related event.

Civil penalty: 240 penalty units.

(2)   To avoid doubt, the first person contravenes subsection (1) even if the sponsorship-related event does not occur.

(3)   Subsection (1) does not apply if the benefit is a payment of a reasonable amount for a professional service that has been provided, or is to be provided, by the second person or a third person.

(4)   A person who wishes to rely on subsection (3) in proceedings for a civil penalty order bears an evidential burden in relation to the matter in that subsection.

Note: It is not necessary to prove a person’s state of mind in proceedings for a civil penalty order (see section 486ZF)

36. These provisions refer to a “sponsorship‑related event”. This is defined in s 245AQ and includes “a person employing or engaging …. a person to work in an occupation or position in relation to which a sponsored visa has been granted, has been applied for or is to be applied for” and a “grant of a sponsored visa”.

37. A contravention of s 245AR by a person asking for or receiving a benefit for the occurrence of a sponsorship‑related event can be either a criminal offence or render the contravenor liable to a civil penalty (or potentially both). A contravention of s 245AS by offering to provide or providing a benefit only renders the contravenor liable to a civil penalty.

38. These provisions were inserted into the Migration Act along with the balance of sub-division D of Division 12 of Part 2 with effect from 14 December 2015 by the Migration Amendment (Charging for a Migration Outcome) Act 2015 (No 161 of 2015). The explanatory memorandum explained the rationale for the changes as follows (Migration Amendment (Charging for a Migration Outcome) Bill 2015, p 1):

“The Government considers that ‘payment for visa’ activity is unacceptable because it undermines the integrity of Australia’s visa programmes. It is not acceptable for sponsors, employers or other third parties to make a personal gain from their position in a ‘payment for visas’ arrangement and it is not acceptable for a visa holder to become an Australian permanent resident by engaging in ‘payment for visas’ behaviour. Applicants who have paid for their visa are more vulnerable to exploitation and extortion by their sponsor, behaviour which endangers workers and undermines Australian workplace law.” (emphasis added)

39. Her Honour noted that it was not claimed that the $500,000 paid by the Appellants was a reasonable amount for the services offered by T &S so that neither s 245AR(3) nor s 245AS(3) could be invoked. However, beyond finding that the Main Contract was impliedly prohibited by statute, her Honour did not specify why that was so. The reference to the contract being “impliedly prohibited” appears to be a reference to the second class of illegal contract identified by Gibbs ACJ in Yango Pastoral Company Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410 at 413 (“Yango Pastoral”) as follows:

“There are four main ways in which the enforceability of a contract may be affected by a statutory provision which renders particular conduct unlawful: (1) the contract may be to do something which the statute forbids; (2) the contract may be one which the statute expressly or impliedly prohibits; (3) the contract, although lawful on its face, may be made in order to effect a purpose which the statute renders unlawful; or (4) the contract, although lawful according to its own terms, may be performed in a manner which the statute prohibits.”

40. As noted, her Honour found that the “purpose” of the Main Contract was to obtain visas (being a form of “sponsorship‑related event”). Clearly its terms included a promise to employ Ms Li for that purpose and a promise to pay a benefit in return for that outcome. Although her Honour described this as a contract that was impliedly prohibited it also involved each party contracting to do what the Migration Act forbade, that is it (also) fell within the first category identified by Gibbs ACJ in Yango Pastoral. Ultimately, nothing turns on which of these categories it falls into. In Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498; [2012] HCA 7 (“Equuscorp”) at [23(i)], French CJ, Crennan and Kiefel JJ treated one category as an example of the other.

41. The operative principle as to whether a restitutionary claim can be made for benefits received or provided under a contract rendered unenforceable for illegality was stated by their Honours in Equuscorp at [34] as follows:

“The outcome of a restitutionary claim for benefits received under a contract which is unenforceable for illegality, will depend upon whether it would be unjust for the recipient of a benefit under the contract to retain that benefit. There is no one-size-fits-all answer to the question of recoverability. As with the question of recoverability under a contract affected by illegality the outcome of the claim will depend upon the scope and purpose of the relevant statute. The central policy consideration at stake, as this Court said in Miller, is the coherence of the law. In that context it will be relevant that the statutory purpose is protective of a class of persons from whom the claimant seeks recovery. Also relevant will be the position of the claimant and whether it is an innocent party or involved in the illegality.”

42. The role of coherence and the necessity to avoid stultifying the purpose of the statute that renders the transaction illegal is illustrated by the outcome in Equuscorp where a lender was precluded from recovering in restitution a loan that was rendered illegal. Their Honours explained (at [45]):

“Recovery [of the loans] from the investors would have been recovery from persons whose protection was the object of the statutory scheme. The respondents were not in pari delicto with Rural. The failure of consideration invoked by Equuscorp was the product of Rural's own conduct in offering the loan agreements in furtherance of an illegal purpose. This is a clear case in which the coherence of the law, and the avoidance of stultification of the statutory purpose by the common law, lead to the conclusion that Rural did not have a right to claim recovery of money advanced under the loan agreements as money had and received.”

43. In this case the objective of the statutory scheme is the protection of the integrity of the migration system. The differential treatment of those who offer a benefit in return for the occurrence of a sponsorship‑related event compared with those who receive the benefit suggests that, at least to some extent, the former are sought to be protected by the statutory scheme. This is reflected in the emphasised passage from the Explanatory Memorandum set out above (at [38]). At the very least it is clear that those who offer to receive, or do receive, the benefit such as T & S are not sought to be protected by the scheme. The challenge to her Honour’s finding that the parties were not in pari delicto (or equal fault) is addressed below and rejected. Otherwise, the grant of a restitutionary remedy equivalent to the return of the funds “invested” under the Main Contract does not stultify the purpose of the statutory scheme but instead upholds it. It returns the parties to their respective positions had the illegal agreement not been entered into. Subject to considering the matters raised below, the primary judge did not err in concluding that the restitution was available to the Appellants.

Appeal: Claim Against Mr Wang Under the ACL

44. The first nine of Ms Li and Ms Hong’s eleven grounds of appeal concern the dismissal of their claim under the ACL. Ground 6 challenges the dismissal of the claim under the ACL against Ms Liu. This ground was not pressed.

45. The other eight grounds of appeal in relation to this claim concern every element of the cause of action against Mr Wang under the ACL beyond the (bare) finding that misleading representations were made (see [33]). In particular, they seek to overturn the primary judge’s finding that the illegality in the object of the Main Contract and public policy precluded any representations as having been made in trade or commerce and recovery generally (grounds 1, 3 and 4). They also contend that her Honour should have made a finding that Mr Wang was involved in T & S’s contravention (ground 7) as well as relevant findings on causation and loss (grounds 8 and 9).

46. Before those grounds can be addressed it is necessary to address those grounds of appeal and the notice of contention that concern the making of the representation(s). Ground 3 of the Amended Notice of Appeal contends:

“The learned trial judge should have found that [T & S] represented to the appellants that, in return for an investment of $1 million to be paid by the appellants to T& S, T & S would obtain Australian Permanency Residency Visas for the appellants and the second appellant’s husband”. (emphasis added)

47. Ground 1 of the amended notice of contention challenges her Honour’s findings that the Respondents made representations. Ground 2(a) contends that it was not part of the pleaded case that Ms Liu made any false representations and ground 2(b) contends that there was no evidence that either she or Mr Wang made false representations.

48. The (bare) finding that her Honour made about the making of false representations has already been noted as have the pleaded representations. Her Honour did not specify which of the three pleaded Visa Representations were established. The Appellants’ grounds of appeal, and the argument in support, reveal that the Appellants do not now make any claim for relief in respect of the second and third of those representations but only the first. During oral argument the parties debated whether her Honour’s finding meant that her Honour found that representation was made out. Given that this issue is raised by a competing ground of appeal and notice of contention this Court can address it.

49. The Appellants’ submissions noted (correctly) that a contractual promise or warranty is also capable of constituting misleading or deceptive conduct for the purposes of the ACL (citing Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 at 506). Conduct for the purposes of s 18 of the ACL can include the making of a provision of a contract (Competition and Consumer Act 2010 (Cth), s 4(2(a)). It was also submitted that whether a particular representation was made by one party to another should be considered in the context of the entirety of their communications (Valve Corporation v ACCC (2017) 258 FCR 190 at [208]).

50. The Appellants’ submissions noted that the primary judge’s finding that the parties had entered into the Main Contract and that it was pleaded that it was a term of that contract that T & S would obtain permanent residency visas for the Appellants and Mr Li. However, while that may have been pleaded that was not what was found. Instead, her Honour only found that the “purpose” of the Main Contract was to obtain such visas. That finding was sufficient to support the conclusion that the relevant benefits paid to T & S were “for, or ... in return for the occurrence of a sponsorship‑related event” including the grant of a sponsored visa for the purposes of ss 245AR(1) and 245AS(1) of the Migration Act. However that finding falls well short of a finding that the grant of visas was effectively guaranteed which is what the pleaded representation contends. (Ground 6 of the Amended Notice of Contention contends that if the primary judge found that the Main Contract included a term that T & S would obtain visas then her Honour erred. It follows that this ground does not arise.)

51. The balance of the Appellants’ submissions on this ground referred to various statements made by Mr Wang during the course of the negotiation of the various agreements noted above. However, none of the statements supported a finding that a representation was made as emphatic as that which was pleaded. Hence in the conversation on 21 March 2017 noted above (at [11]) Mr Wang said “you may be able to get 188A visas” and “[y]ou would have the best opportunity to obtain those visas if you invested $1 million” such that “[i]f granted” they could migrate together (emphasis added). All of these statements are inconsistent with a representation that they “would” obtain visas.

52. Similarly, the Appellants’ submissions referred to a statement made by Mr Wang on 5 April 2017 when he provided Ms Li with the letter of undertaking and stated:

“After both parties have signed the [Investment Deed] and within the 5 years after the first instalment of 0.5 million Australian Dollars is received, if Kun Li fails to obtain permanent residency visa due to change of immigration policy or change of company situation, we will refund all the fees we have received … After Kun Li has obtained [a] work visa, the second instalment of 0.5 million Australian dollars will be invested.”

53. This statement is similar to the written text of the undertaking noted above. Both this statement and the terms of the undertaking are inconsistent with the Appellants’ contention that the pleaded representation was made. These statements contemplate that the parties accepted, as a realistic possibility, that the visas would not be granted and made provision for that contingency by the return of the invested sums.

54. The TASOC particularised other communications as demonstrating the three pleaded Visa Representations without distinguishing between them. They include a “WeChat” conversation on 20 January 2017 when Mr Wang told Ms Li that she can leave her “professional question [about a temporary graduate visa] to me and I can provide a professional answer”, and various iterations of his immigration proposals that were provided to Ms Li. They also include communications made after the funds were invested. In terms of whether the first representation pleaded in [25](a)] above was made out, none of those communications travelled any higher than the conversations on 21 March 2017 and 5 April 2017.

55. Accordingly, I am not satisfied that the representation pleaded in sub-paragraph 5(a) of the TASOC was made out. It follows that I would reject ground 3 of the appeal and, to the extent necessary I would uphold ground 1 of the notice of contention. If it was necessary, I would also uphold ground 2(a) of the notice of contention as it was not part of the pleaded case that Ms Liu made any representation.

56. The evidence reveals that Mr Wang was generally encouraging so far as the Appellants’ (and Ms Hong’s husband’s) prospects of obtaining a visa via the scheme he conceived were concerned. It would be possible to identify some form of representation made to the Appellants by Mr Wang on behalf of T & S about that topic which was potentially misleading, perhaps because of the effect of the above provisions of the Migration Act or the contention made in the submissions on appeal that the investment proposed to be made could never have satisfied the relevant visa criteria. However, the Appellants’ case of a breach of s 18 of the ACL cannot be recast on appeal by formulating a materially different representation as that would necessitate a different inquiry as to whether it was false or misleading and causative of damage to that which occurred at first instance (Coulton v Holcombe (1986) 162 CLR 1 at 7; [1986] HCA 33).

57. In light of this conclusion, it is not necessary or even possible to resolve those grounds of appeal concerning the cause of action under s 18 of the ACL that contend the representation was misleading (ground 5), that Mr Wang was involved in T & S’s misleading conduct (ground 7) and that the Appellants suffered loss as a result (grounds 8 and 9). These grounds of appeal are all predicated on the Appellants establishing the representation pleaded in sub-[5(a)] of the TASOC set out above.

58. However, for the sake of completeness, I will address those grounds of appeal which challenge her Honour’s finding about public policy precluding the Appellants from relying on s 18 of the ACL (ground 1), that they cannot establish a cause of action without relying on the “illegal Main Contract” and no part of the damages is unrelated to that illegality (ground 2), and that the representation, if made, was not made in trade or commerce (ground 4).

59. There are some decisions that have addressed illegality in the context of s 18 of the ACL or its statutory predecessor. In Brownbill v Kenworth Truck Sales (NSW) Pty Ltd (1982) 39 ALR 191; (1982) 59 FLR 56 (“Brownbill”), the applicants acquired from the respondent a prime mover which they said was defective. They sued for damages under the Trade Practices Act 1974 (the “TPA”) and they sought recovery on the basis that they were using the vehicle for longer hours than were permitted by law. Sheppard J addressed that claims as follows (at ALR 202-3):

"My conclusion so far is that the causes of action for breaches of the [TPA] and for negligent misrepresentation are not taken away by reason of the illegal operation of the vehicle nor by admissions made by the first applicant that he intended to use the vehicle for the illegal carriage of grain. I am of opinion, however, that the amount of damages which the applicants may recover will be affected because they will not be permitted to recover loss of earnings if that loss has only come about as a result of their inability, due to the respondent's wrongful acts, to operate the vehicle unlawfully."

60. In Overmyer Industrial Brokers Pty Ltd v Campbells Cash & Carry PtyLtd [2003] NSWCA 305 (“Overmyer”) this Court indicated that it would have allowed a real estate agent to recover damages under s 52 of the TPA in respect of a misleading representation by a vendor that it would pay the agent a commission and not take advantage of a statutory provision that precluded recovery of the commission without a signed agreement if it had found that such a representation had been made. It was held that receiving an award of damages under the TPA did not involve the receipt of “remuneration” which was proscribed by the relevant statutory provisions (at [31]). In Elconnex Pty Ltd v Gerard Industries Pty Ltd (1991) 32 FCR 491 (“Elconnex”), a manufacturer of an electrical component was found to have engaged in misleading conduct by creating the impression that it complied with the relevant safety regulations (at 500) when it did not and its use in the suggested manner was illegal (at 496).

61. The question of whether some form of illegality affecting the relevant conduct inhibits or precludes recovery under s 18 of the ACL turns upon the form of illegality in question and its relationship to the action brought by the affected party. It has been held that some types of dealings, such as buying and selling stolen goods or the sale of counterfeit currency, are “ex commercium” such that they stand outside the concept of “trade” and “commerce” in s 92 of the Constitution (Cth) (Mansell v Beck (1956) 95 CLR 550, 594; Fergusson v Stevenson (1951) 84 CLR 421, 434). There is no reason why that is not applicable to the definition of “trade or commerce” in s 4(2)(a) of the Competition and Consumer Act. A misleading statement made by one participant in a conspiracy to import illegal drugs to another is not made in trade and commerce even if instruments of commerce are used to further the conspiracy.

62. Otherwise, the above cases illustrate the principle that the consequences of the illegality of some matter related to the conduct the subject of the claim under s 18 of the ACL, fall to be resolved by considering and, to the extent necessary, reconciling the ACL and the statutory provisions that create the illegality in the same or similar way that occurs with illegal contracts. In that regard, the “central policy consideration at stake … [is] the coherence of the law” (see Equuscorp at [23] and [34]; Nelson v Nelson (1995) 184 CLR 538 at 613).

63. Thus, Brownbill did not a involve a transaction or area of business that was ex commercium. Instead, Sheppard J reviewed a number of cases concerning the circumstances in which illegality affected a contract including YangoPastoral (at 201) before concluding that the action was not barred per se, although lost earnings for being unable to operate the truck unlawfully were not recoverable. One way of rationalising the outcome is that the lost opportunity to illegally carry grain in Brownbill was not in substance loss or damage for the purposes of the statutory predecessor to the ACL. Similar reasoning was applied in Overmyer.

64. In this case the making of investments and the obtaining of employment for the purpose of obtaining visas is not rendered illegal per se by the Migration Act. The making of representations about the prospects of obtaining visas is also not illegal. Instead, the method by which those things were sought to be done in this case was rendered illegal by ss 245AR and 245AS of the Migration Act. Whatever representation was made by T & S and Mr Wang to the Appellants about their prospects of obtaining visas it was certainly made in trade or commerce. This aspect of the cause of action was similar to the circumstances in Elconnex.

65. Further, unlike the loss of profits claim in Brownbill, no aspect of the damages sought, being the recovery of the investments, was predicated on anyone acting illegally. The recovery of the amounts invested does not involve any direct or indirect conferral of a benefit in return for the occurrence of a sponsorship-related event. To grant a remedy on the basis that the representation should not have been made and thus the relevant sums would not have been invested would not undermine ss 245AR or 245AS of the Migration Act.

66. If follows that, had I found that the representation pleaded in [5(a)] of the TASOC was made, I would have upheld grounds 1, 2 and 4 of the Notice of Appeal.

Restitution claim Against Ms Liu

67. The relevant parts of the primary judge’s reasoning in relation to the restitution claim against Ms Liu are set out above.

68. Ground 10(a) of the appeal contends that the primary judge erred in finding that Ms Liu was not liable to make restitution to the Appellants because no defence of payment over was pleaded. Ground 10(b) contends that the claim should have failed because “[a]t the time [Ms Liu] paid the funds … to T & S she had notice of the basis of the appellants’ claim to restitution.” Grounds 11(a) and 11(b) of the appeal contend that the primary judge erred in finding that Ms Li was aware that the Main Contract was likely to be contrary to the Migration Act and, if her Honour so found, that Ms Hong was likely to be aware of that same issue.

69. Grounds 4, 5(b) and 5(c) of the amended notice of contention contend that her Honour erred in concluding that recovery in restitution was available where the Main Contract was contrary to the above provisions of the Migration Act. It follows from the conclusion at [43] above, that I would reject those grounds.

70. Ground 3 of the amended notice of contention challenges her Honour’s finding that Ms Liu was “aware of the Main Contract”. Ground 5(a) challenges her Honour’s finding that the parties were not equally at fault.

Challenge to Factual Findings

71. To consider the grounds of appeal and the notice of contention that concern the restitution claim against Ms Liu, it is first necessary to describe how the Appellants’ restitution claim against Ms Liu and T & S was framed and pursued. The relevant pleadings are described above.

72. In his opening, counsel for the Appellants identified two bases for restitution, being a failure of consideration and the illegality of the agreements. At the time of the hearing, the Appellants and Mr Li were in China as was Mr Wang. A concern was raised that administering an oath to them in China via audio visual means might amount to a violation of Chinese sovereignty. To address that, it was agreed that parts of their affidavits would be read, and the deponents would not be cross‑examined. One of the annexures to Ms Li’s affidavit was the “receipt” issued by T & S dated 1 May 2017 acknowledging that it had received AUD$500,000 from the Appellants. After the Appellants’ case was closed, the Respondents read Mr Wang’s affidavit but announced that Ms Liu’s affidavit would not be read. Ms Liu was in Australia and able to be called. The Respondents then closed their case.

73. The proceedings were adjourned for two weeks. When they resumed the Appellants were granted leave to re-open their case and call Ms Liu in their own case. Ms Liu stated that she was aware that at some time Ms Li was offered a “position” but she said that she did not know that T & S were sponsoring her. She accepted that her signature was on some of the transaction documents but stated that she only saw the last page when her ex-husband, Mr Wang, brought them home for her to sign. She was not asked about the undertaking signed by Mr Wang. Ms Liu agreed that between 7 April 2017 and 26 April 2017 AUD$500,000 was paid into her account. She said that Mr Wang told her to “check the account and how much, like, you receive”. She said that the money was sent to her because her husband did not have a Chinese bank account and that she transferred some of the money to a “[m]oney exchange agent … to transfer to our company’s account” and the balance to her husband’s mother “because she would help us to exchange the money into Australian dollars to transfer to the company account”.

74. Ms Liu was asked:

“Q.   …What did you think the $500,000 you received in your bank account was for?

A.   My ex-husband [i.e., Mr Wang] told me it’s, like, sort of co-operation. They want do some business together or something.”

75. Earlier she had been asked:

“Q.   Ms Liu, the payment that you received in your bank account, were you aware that was for Kun Li’s visa application?

…

A.   I didn’t know.”

76. The balance of the cross‑examination of Ms Liu concerned her purchase of an apartment ‘off the plan’ in 2014 which settled in 2018. The cross‑examiner sought to establish that she used some of the Appellants’ funds to complete the purchase, but she stated that it was funded by a loan from a bank.

77. The Appellants’ written submissions before the primary judge contended that the Main Contract was illegal and that “Ms Liu was clearly intimately involved in the breaches and the illegality.” The reference to “breaches” in that context was to various breaches of the contractual arrangements. However, neither in those submissions, nor the oral submissions, was it contended that she knew or had reason to suspect that the arrangements were illegal.

78. In written submissions lodged some months after the hearing the Respondents addressed the unjust enrichment case based on the pleaded reply that the Investment Deed was an illegal agreement. They contended that the elements of the cause of action were that Ms Liu “received a benefit, at the plaintiff’s expense and there is injustice”. It was contended that she did not receive a benefit as the “uncontested evidence” was that she transferred the funds to T & S. It was also submitted that the unjust enrichment case only arose if the Investment Deed was “illegal” but she was not a party to the Investment Deed.

79. The Appellants responded to these submissions accepting the Respondents’ description of the elements of the cause of action in unjust enrichment. In relation to the “element” of a receipt of a benefit, there was no contention that at the time Ms Liu transferred the funds she was on notice of something affecting the entitlement of T & S to those funds, save for the contention that “[t]here is nothing raised by the first defendant in relation to the transfer of those moneys to [T & S] or to her mother‑in‑law that would remove the requirement for restitution by [Ms Liu] of the money she received, and … there has been no pleading of change of position”. In relation to the element of “injustice”, the Appellants’ submissions contended that “if the Investment Deed is found to be void for illegality then given [Ms Liu] was intimately involved with the breach” it would be unjust for her not be held liable. This time the reference to “breach” was a reference to her involvement in the “scheme whereby [T & S] received money for obtaining a work visa for” Ms Li.

76. At this point the various challenges to some of her Honour’s findings of fact can be considered. The Respondents challenged her Honour’s finding in [177] that Ms Liu was aware of the “Main Contract and its effect”. They pointed to the finding in [176] that asserted Ms Liu “claimed to have no knowledge of any agreement and to be unaware of what the funds which were paid into her account related to”. This latter passage incorrectly described Ms Liu’s evidence. She accepted she had a general understanding that there was some sort of business co-operation between T & S and the Appellants and said that she thought the funds related to that, although she denied being aware that it related to Ms Li obtaining a visa. Nevertheless, I do not consider that the challenge to the finding in [177] can be made out. The finding complained of in [177] was supported by Ms Liu’s signature on the various transaction documents and the primary judge’s consideration of Ms Liu’s qualifications and duties. The primary judge had the opportunity to consider those matters in the context of observing Ms Liu give evidence. I would reject ground 3 of the Amended Notice of Contention.

77. Nevertheless, it is important to identify the limits of the finding in [177] of the primary judgment. I take the primary judge’s reference to being “aware of the Main Contract and its effect” to be the same as her Honour’s acceptance that there was a Main Contract and its “purpose … was to obtain a Permanent Visa for Ms Li” and possibly an “Investment Visa ... for the rest of the family” (at [147]). Her Honour did not find that Ms Liu was aware that any aspect of the arrangements was illegal or even that she had reason to believe that the arrangements were or might be illegal. No submission to that effect was made to the primary judge and it was not put to Ms Liu when she gave evidence. The amendments to the Migration Act described above rendering it illegal were only passed with effect from December 2015 and there is no basis for suggesting that Ms Liu was aware of them.

78. Further, despite the Appellants’ submission to the contrary, her Honour did not make any findings about Ms Liu’s involvement in the various arrangements between the Appellants and T & S. This is sufficient to dispose of one part of the Appellants’ submissions which appeared to suggest that Ms Liu could not resist the claim to restitution because she “knowingly contributed to the restitution claim” and was thus to be equated with a “wrongdoer” who cannot take advantage of a change of position defence (Lipkin Gorman v Karpnale Ltd [1991] 2 AC 548 at 550; “Lipkin Gorman”). The findings made by the primary judge do not support that contention, or the contention that Ms Liu’s payment over to T & S was itself illegal (see Edelman and Bant, Unjust Enrichment, 2^nd edition at pp 350 to 352).

79. In relation to Ms Li’s knowledge of the Main Contract and its potential illegality her Honour found (at [155]):

“… that [Ms Li] was aware of the nature of the Main Contract and that it was likely to be contrary to the Migration Act as [Trial Counsel for the Appellants] pointed out such an offence under the Act does not require proof of a person’s state of mind”.

84. With respect to her Honour, there was no basis for finding that Ms Li was aware that the Main Contract was likely to be contrary to the Migration Act. No submission to that effect was ever made to the primary judge. It is not correct that an offence under s 245AR does not require proof of a person’s state of mind, that is only the case in proceedings for a civil penalty order. Even if it was the case that an offence under s 245AR does not require proof of a person’s state of mind, that is irrelevant to whether Ms Li was likely to be aware that the Main Contract was contrary to the Migration Act. Accordingly, I would uphold ground 11(a) of the Amended Notice of Appeal.

85. As for Ms Hong, her Honour found she was “also aware of the nature of the main agreement”. I do not take this to be a finding that Ms Hong was aware that it was likely to be contrary to the Migration Act. Even if it were, there was no basis for such a finding. Accordingly, ground 11(b) of the Amended Notice of Appeal does not arise.

86. Although I do not accept that it could be found that any of Ms Li, Ms Hong or Ms Liu were aware of the likelihood that the arrangements were illegal, I do not accept the Respondents’ challenge to her Honour’s finding that the parties were not equally at fault. T & S and Mr Wang promoted this scheme to the Appellants. They conceived of its structure and encouraged the Appellants to participate. Ms Liu was a Director and held 99% of the shares in T & S. Accordingly, I would reject ground 5(a) of the Amended Notice of Contention.

Payment Over Without Notice

87. The effect of the above findings is that restitution was available to the Appellants. The remaining barrier to the Appellants succeeding against Ms Liu is sought to be addressed by grounds 10(a) and 10(b) of the appeal which dispute Ms Liu’s entitlement to rely on her payment of the funds she received over to T&S to deny the claim in restitution (see [68]).

88. Senior Counsel for the Appellants, Mr Lawrance SC, relied on the following passage from Australia and New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662 at 673 to 674 (“ANZ v Westpac”):

“…both authority and principle support the conclusion that an agent who has received money on his principal's behalf will, without more, have a good defence if, before learning that the money was paid under fundamental mistake, he has "paid it to the principal or done something equivalent" thereto (see Rahimtoola v Nizam of Hyderabad [1958] AC 379, at 396, 406; Goff and Jones, The Law of Restitution, at 707). The rationale of such a general rule can be identified in terms of the law of agency and of notions of unjust enrichment. If money is paid to an agent on behalf of a principal and the agent receives it in his capacity as such and, without notice of any mistake or irregularity in the payment, applies the money for the purpose for which it was paid to him, he has applied it in accordance with the mandate of the payer who must look to the principal for recovery (see per Palles CB, Fitzpatrick v M'Glone [1897] 2 IR 542, at 551 and per Cockburn CJ, Holland v Russell (1861) 1 B & S 424, at 434; (121 ER 773, at 777)). In those circumstances, the benefit of the payment has been effectively passed on to the principal who will be prima facie liable to make restitution if the payment was made under a fundamental mistake of fact.” (emphasis added)

89. Mr Lawrance submitted that Ms Liu had the onus of demonstrating that she paid T & S “without notice of any mistake or irregularity in the payment”. He submitted that, in the absence of any finding to that effect by the primary judge, Ms Liu’s reliance on the “defence” of payment over had to fail. He otherwise submitted that it was not open to Ms Liu to rely on this defence in the absence of it being expressly pleaded. Counsel for the Respondents, Mr Kasep, submitted that it was sufficient if Ms Liu had paid the funds to T & S on the “faith of the receipt” of the funds from the Appellants (David Securities Pty Ltd v Commonwealth Bank Australia (1992) 175 CLR 353 at 385). He submitted that, when considered in light of how the trial was conducted, [181] of her Honour’s judgment involved an acceptance by the primary judge that Ms Liu did pay the funds to T & S on the faith of the receipt.

90. The above passage from ANZ v Westpac is often cited as authority for the “agent’s defence” which has sometimes been treated as separate from, but related to, the defence by a payee to a claim for moneys had and received that they changed their position in reliance on the payment sought to be recovered (see Citigroup Pty Ltd v National Australia Bank Ltd (2012) 82 NSWLR 391 at [8]; “Citigroup”; cf Mason & Carter’s Restitution Law in Australia, 4^th ed at [2408]). That said, some contend that the agent’s defence is just an example of the ‘change of position’ defence (Lipkin Gorman at 578H; Edelman and Bant p 382). One potential difference is that, unlike the change of position defence, it is not necessary for the agent or intermediary to establish detriment or overall prejudice by reason of the payment made to the principal (ANZ v Westpac at 682 to 683; Citigroup at [8]), although some treat payment over as the relevant detriment (Edelman and Bant id). Regardless, cases such as Citigroup have discussed the requirement that the party who claims that they changed their position to demonstrate good faith by reference to the requirement for an agent who makes a payment to their principal to not have notice of any mistake or irregularity in the payment made to them and vice versa. This approach is consistent with the agent’s defence being only an example of the change in position defence (Edelman and Bant id) or, at the very least, all the “defences” being informed by the “unifying legal concept of unjust enrichment” (Perpetual Trustees Australia Ltd v Heperu Pty Ltd (2009) 76 NSWLR 195 at [129] per Allsop P as his Honour then was).

91. In light of her Honour’s factual findings and the fate of the challenges to them, it is necessary to identify what the agent must have had notice of before it can be found they cannot rely on a payment they made over to their principal. One part of the Appellants’ submissions contended that it was sufficient to amount to notice that the agent who paid over only have knowledge of the facts giving rise to the entitlement to recover. It can be accepted that, in many cases, knowledge on the part of the agent of the facts giving rise to the claim for restitution may be sufficient to defeat their reliance on the payment over defence. For example, if the bank in Gowers v Lloyds and National Provincial Foreign Bank, Ltd [1938] 1 All ER 766 was on notice of the “fact” that they were making payment to a person only pretending to be the person entitled to receive a pension then that would have defeated an attempt to avoid restitution on the basis that moneys were paid over to the agent’s principal (see Citigroup at [116] to [125]).

92. However, this is not a case involving a “mistake” either in identity or authority or of some other kind. Instead, the vitiating factor in this case is illegality. The Court was not referred to any case that specifically addressed the notice requirement for an agent or intermediary who receives a payment on behalf of their principal in circumstances where the underlying transaction was illegal or said to be illegal. Nevertheless, the various formulations of the good faith requirement for the change of position defence are apposite. In Australian Financial Services and Leasing Pty Limited v Hills Industries Ltd & Ors (2014) 253 CLR 560 at [171] Gageler J referred to the defendant acting in “good faith on the assumption that the defendant was entitled to deal with the payment which the defendant received.” Translated to the present context this would involve the agent or intermediary not having notice that their principal was not entitled to the payment that the agent has received on their behalf.

93. In Port of Brisbane Corporation v ANZ Securities Ltd (No 2) [2002] 2 Qd R 661; [2002] QCA 158 at [22], McPherson JA (with whom Davies JA and Mullins J agreed) suggested that actual knowledge was required “subject of course to cases at the extreme where a person deliberately shuts his eyes to matters that he realises will invest him with actual knowledge of fraud or impropriety". This suggests that a form of wilful blindness will suffice but that is usually only a means of inferring actual knowledge. In Alpha Wealth Financial Services Pty Ltd v Frankland River Olive Co Ltd (2008) 66 ACSR 594; [2008] WASCA 119 at [202], Buss JA (with whom Steytler P agreed), observed that “a recipient will not act in good faith if the recipient knows that he or she does not have a valid claim or suspects that he or she may not have a valid claim to the amount in question.”

94. These cases suggest that the agent must only show that they did not have actual notice that their principal was not entitled to the funds or, perhaps, that that they did not suspect that their principal was not entitled to the funds. Irrespective of the precise test, I do not accept that, if the agent only has knowledge of the facts that give rise to the illegality and nothing more, then that will defeat a claim of payment over. The circumstances in which a transaction may be rendered illegal giving rise to a claim in restitution are very wide. In many cases even a full knowledge of all of the relevant facts surrounding a payment may not cause someone to know or even have reason to believe that the transaction which was the basis for it was prohibited by law. Instead, in those cases it will be sufficient for the agent or intermediary to act on the faith of the receipt of the funds and account to their principal without themselves having to determine the application of the law to those facts that they are aware of.

95. In this case, the Appellants’ complaint that no defence of payment over was pleaded by Ms Liu should be rejected. Their claim to recover for unjust enrichment based on illegality was only pleaded in reply. Ms Liu was precluded from filing any rejoinder without the leave of the Court (Uniform Civil Procedure Rules 2005 (NSW), r 14.5). The Appellants’ cause of action should have been pleaded in a statement of claim which would have then required an amended defence. Further, the evidence of Ms Liu’s knowledge at the time the payments were made to T & S was adduced by the Appellants in their case when they called her to give evidence. They did so in the knowledge that Ms Liu pleaded that she only received the funds on behalf of T & S, in circumstances where they tendered the receipt from T & S acknowledging it had received the funds and where they claimed recovery from T & S on that basis. In those circumstances they cannot complain that Ms Liu relies on her payment of the funds to T & S to defeat their claim against them. I would reject ground 10(a) of the amended notice of appeal.

96. The submission made on appeal that either Ms Liu paid over the funds with notice of the Appellants’ claim in restitution or that at the very least she did not discharge the onus cast on her to prove that she did not have notice, does not bear any resemblance to the issues raised at the hearing. Ultimately, no issue was raised before the primary judge as to whether, at the time Ms Liu transferred the funds to T & S, she was on notice of some impropriety or illegality in the transactions between T & S and her husband on the one hand and the Appellants on the other. Ms Liu gave evidence that she knew there was some sort of business arrangement between them and that because of those arrangements she received the funds and transferred them to T & S (or to her mother-in-law to transfer to T & S).

97. The effect of the finding in [181] of the primary judgment is that Her Honour accepted that, to the knowledge of all, Ms Liu received the funds on behalf of T & S and not in her individual capacity and accepted her evidence that she transferred the funds to T & S in the knowledge that the funds related to the arrangements between T & S and the Appellants. I understand that her Honour accepted Ms Liu’s evidence as being to the effect that she paid the funds to T & S because it was entitled to them as part of the arrangements with the Appellants. In the context of Ms Liu’s evidence and the absence of any contrary suggestion being raised with her in cross‑examination (or in submissions), I consider that her Honour’s findings are inconsistent with any suggestion that she was on notice of some impropriety or illegality in the transactions between T & S and the Appellants that did, or should have, raised at least a doubt that T & S was entitled to the funds that she had received. To the contrary those findings are consistent with it having been accepted that Ms Liu acted on the faith of the receipt in paying the funds to T &S.

98. Accordingly, I would reject ground 10(b) of the amended notice of appeal.

Conclusion

99. I propose the following orders:

1. Appeal dismissed.

2. The Appellants pay the Respondents’ costs of the Appeal.

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Decision last updated: 29 April 2022