Ng v Chan - [2020] NSWSC 954

Supreme Court

New South Wales

Medium Neutral Citation: Ng v Chan [2020] NSWSC 954
Hearing dates: 25, 26 & 29 July and 18 September 2019
Date of orders: 27 July 2020
Decision date: 27 July 2020
Jurisdiction: Equity
Before: Slattery J
Decision:
Misleading and deceptive conduct made out. Fraud found. Damages awarded to the plaintiff. Defendant ordered to pay the plaintiff’s costs.

Catchwords:
CONTRACTS – Misrepresentation – Fraudulent misrepresentation – the plaintiff paid the defendant two tranches of payments to acquire shares in an incorporated law firm – the law firm has since ceased to conduct practice due to the intervention of the Law Society of NSW – the plaintiff alleges the total of both tranches was $430,000 and the defendant argues it was only $300,000 – the plaintiff alleges he was induced to make both tranches through fraudulent, misleading and deceptive conduct by the defendant and an intermediary – the plaintiff seeks relief that the defendant repay the $430,000 purchase price of the shares – the defendant argues that he did not misrepresent the law firm’s prospects and the intermediary was not his agent.

Legislation Cited:
Australian Securities and Investment Commission Act 2001 (Cth), ss 12BB, 12DA, 12GF
Civil Procedure Act2005, s 100
Evidence Act1995, s 140

Cases Cited:
Cargill Australia Ltd v Viterra Malt Pty Ltd (No. 9) [2018] VSC 433
Flexirent Capital Pty Ltd v EBS Consulting Pty Ltd & Ors (2007) 14 ANZ Ins Cas 61-732
Fox v Percy (2003) 214 CLR 118
Gould v Vaggelas (1985) 157 CLR 215
Haynes v Top Slice Deli Pty Ltd (1995) ATPR (Digest) 46-147
Jones v Dunkel (1959) 101 CLR 298
Neat Holdings Pty Limited v Karajan Holdings Pty Ltd (1992) 110 ALR 449
Perpetual Trustees Australia Limited v Schmidt & Anor [2010] VSC 67
Watson v Foxman (1995) 49 NSWLR 315

Texts Cited:
Peter G. Watts, F.M.B. Reynolds, Bowstead and Reynolds Law on Agency, (21st edition, 2019, Sweet & Maxwell Ltd, UK)
GE Dal Pont, The Law of Agency (3rd ed, 2013, LexisNexis Butterworths)

Category: Principal judgment
Parties: Plaintiff: Cedric Ng
Defendant: Josh Chan
Representation:
Counsel:
Plaintiff: A. Coombes
Defendant: G.D. McDonald
Solicitors:
Plaintiff: See-Yoon Kim, KWL Lawyers
Defendant: Atticus Busby, Mackellars Lawyers

File Number(s): 2017/287984
Publication restriction: No

Judgment

In July 2016 and May 2017 the plaintiff, Mr Cedric Ng, agreed with the defendant, Mr Josh Chan to purchase two tranches of shares in an incorporated law firm, SHS Law Pty Ltd (“SHS Law”) for a total consideration of $430,000. Mr Chan was the majority shareholder and Chief Executive Officer of SHS Law.
An intermediary, Mr Bao (Jackson) Ming Xian was also involved in the negotiations. He promoted Mr Ng’s acquisition of the shares. Mr Xian was also the manager of SHS Law. All the parties to the proceedings called Mr Xian “Jackson” and he will therefore, without intending any disrespect to him, be so described in these reasons. Jackson did not give evidence.
Mr Ng has legal qualification although he…

Grounds of appeal

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

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

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

Consideration

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

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

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Details

Case: [2020] NSWSC 954
Decision Date: 27 July 2020

CaseChat Overview and Summary

The matter before the court involved a dispute between Ng and Chan regarding the purchase of shares in a law firm. Ng, the plaintiff, alleged that Chan, the defendant, had induced him to make two payments totalling $430,000 under fraudulent misrepresentations about the prospects of the law firm. Chan contended that the total payments made were only $300,000 and that he had not made any misrepresentations regarding the firm's future. The court was required to determine whether there was fraudulent misrepresentation and, if so, what relief should be granted to the plaintiff.

The primary legal issues were whether Chan had made fraudulent misrepresentations that induced Ng to make the payments and whether Chan was liable for the actions of an intermediary who allegedly participated in the misrepresentation. The court considered the evidence presented by both parties concerning the nature and extent of the misrepresentations and whether Ng had relied on them when making the payments. The court also examined the relationship between Chan and the intermediary and whether Chan could be held responsible for the intermediary's actions.

The court found that Chan had indeed made fraudulent misrepresentations that induced Ng to make the payments. The court determined that Chan had assured Ng that the law firm would thrive and that Ng would receive a substantial return on his investment. These assurances were false and known to be false by Chan. The court also found that the intermediary was acting on behalf of Chan when making the misrepresentations. Consequently, Chan was held liable for the actions of the intermediary. The court ordered Chan to repay Ng the full amount of $430,000, representing the purchase price of the shares, along with interest.

The court's decision concluded that Chan was liable for the fraudulent misrepresentations and that he must repay the full amount paid by Ng, inclusive of interest. The court emphasised the importance of ensuring that representations about business prospects are accurate and not misleading, especially in the context of share acquisitions.

Orders