Quantum Investments (Aust) Pty Ltd v Zhi Wei Lin trading as Jack Lin (No 2)

[2022] NSWSC 1558

Supreme Court

New South Wales

Medium Neutral Citation:

Quantum Investments (Aust) Pty Ltd & Ors v Zhi Wei Lin trading as Jack Lin (No 2) [2022] NSWSC 1558

Hearing dates:

Last submissions 4 November 2022

Date of orders:

15 November 2022

Decision date:

15 November 2022

Jurisdiction:

Equity - Commercial List

Before:

Black J

Decision:

(i) Judgment and an order for costs in favour of the Second, Fourth, Fifth and Sixth, and Ninth Plaintiffs against the Defendant.

(ii) Statement of Claim is dismissed in respect of the relief sought on behalf of the Third Plaintiff.

(iii) Third Plaintiff to pay the Defendant’s costs of and incidental to his claim in the proceedings.

Catchwords:

CONSUMER LAW — Misleading or deceptive conduct — Quantification of loss.

COSTS — Party/Party — General rule that costs follow the event

Cases Cited:

- Australian Receivables Ltd v Tekitu Pty Ltd [2011] NSWSC 1425

- Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304

- Commonwealth of Australia v Gretton [2008] NSWCA 117

- Heath v Greenacre Business Park Pty Ltd [2016] NSWCA 34

- Mobis Parts Australia Pty Ltd v XL Insurance Company SE (No 2) [2019] NSWCA 19

- Oikos Constructions Pty Ltd (t/as Lars Fischer Construction) v Ostin (No 2) [2021] NSWCA 98

- Quantum Investments (Aust) Pty Ltd & Ors v Zhi Wei Lin trading as Jack Lin [2022] NSWSC 1387

- Sultan Holdings Pty Ltd v John Fuglsang Developments Pty Ltd [2017] TASFC 14

Category:

Principal judgment

Parties:

Jinbiao Zheng (Second Plaintiff)
Qihua Shen (Third Plaintiff)
Xiaochu Luo (Fourth Plaintiff)
Wi Yang (Fifth Plaintiff)
Xiaofeng Qian (Sixth Plaintiff)
Moral Success Developments Ltd (Ninth Plaintiff)
Zhi Wei Lin aka Jack Lin (Defendant)

Representation:

Counsel:
A Katsoulas (Second-Sixth and Ninth Plaintiffs)
J Mitchell/N Seow (Defendant)

Solicitors:
KWL Lawyers (Second-Sixth and Ninth Plaintiffs)
Luminous Lawyers (Defendant)

File Number(s):

2020/207318

Judgment

Nature of the application

1. The Second Plaintiff (Mr Zheng), the Third Plaintiff (Mr Shen), the Fourth Plaintiff (Ms Luo), the Fifth and Sixth Plaintiffs (Mr Wang and Ms Qian), and the Ninth Plaintiff (Moral Success Developments Ltd (“MSD”)) (together, “Lenders”) each claimed damages or compensation and consequential orders against the Defendant, Mr Lin. In my judgment delivered on 14 October 2022 (Quantum Investments (Aust) Pty Ltd & Ors v Zhi Wei Lin trading as Jack Lin [2022] NSWSC 1387) (“Principal Judgment”), I held that several Plaintiffs, namely Mr Zheng, Ms Luo, Mr Wang and Ms Qian, and MSD had established representational claims and had established the basis of their claim to damages on a “no transaction” basis.

2. I noted an issue as to the quantification of those claims, which I summarised as follows (at [130]-[131]):

“[The Defendant] Mr Lin relies, in defence, on a claim that companies associated with Mr He have received certain funds; Mr Shen, Mr Zheng and Mr He have received certain funds; and those funds were paid to them out of money owed by Quantum [Investments (Aust) Pty Ltd (“Quantum”)] to Ms Luo as a result of advances made to Quantum by Ms Luo, Mr Shen and Mr Zheng. The Lenders belatedly admitted (SFACLS [26]) that, on 29 April 2020, Quantum repaid them $480,184.88 which was distributed between them, together with several Plaintiffs who no longer press their claims, and that admission is expanded in a document headed “Admissions by the Plaintiffs” (Ex P1). It is not necessary to address amounts received by those Lenders which have not established their claims. Of those Plaintiffs who would otherwise succeed, Mr Zheng admits he received $131,257.83, Ms Luo admits she received $109,381.52, Mr Wang and Ms Qian admit they received $54,690.76, and MSD admits that it also received $54,690.76. Where these are admissions and Mr Lin did not accept they could be treated as agreed facts, they establish the minimum amounts by which judgment in favour of Mr Zheng, Ms Luo, Mr Wang and Ms Qian, and MSD for the amounts they lent to Quantum should be reduced, but do not presently allow the amount of the judgment in their favour to be determined.

It will be consistent with s 56 of the Civil Procedure Act 2005 (NSW) and the just resolution of the proceedings to allow Mr Zheng, Ms Luo, Mr Wang and Ms Qian and MSD a brief opportunity to establish that these are also the maximum amounts they received, and hence the maximum amounts to be deducted from their judgments, although this may need no more than documentary evidence and affidavits verifying the calculations. I will hear the parties as to the orders to be made to deal with that matter, and defer the question of costs until it is resolved.” (emphasis in original)

3. I subsequently made orders providing for further submissions and evidence as to this issue.

Affidavit evidence

4. First, the Plaintiffs rely on Mr Shen’s affidavit dated 19 September 2022 in respect of this issue. Mr Shen’s evidence is that Quantum was successful in recovering some funds from MV Golden Destiny Development (Turramurra) Pty Ltd (“MVGD”), from which it paid its solicitors and then distributed amounts to its creditors including the Plaintiffs. His evidence is that, in May 2020, he received from Quantum the sum of $469,804.77 on behalf of all creditors, which included all of the Plaintiffs in these proceedings; distributed a portion of that recovery in agreed shares; and retained an amount of that recovery also in agreed shares.

5. The Plaintiffs also filed and rely on several additional affidavits in respect of the question of quantification. By his affidavit dated 21 October 2022, Mr Zheng referred to Quantum’s engagement of solicitors to seek to recover monies owed to it from Mr Victor Fong and MVGD. He referred to the amount of $683,039.20 recovered by Quantum in the course of the retainer, of which $469,804.88 was paid to the Mr Shen and then distributed, inter alia, to Mr Zheng. Mr Zheng states that he received a total of $131,257.83 from Quantum, made up of $23,709.41 received on 6 May 2020 and $107,548.42 payable to him, but retained by Mr Shen (implicitly, with his agreement) and he had received no other amounts from Quantum. That figure is consistent with the amount referred to in paragraph 130 of the Principal Judgment.

6. By his affidavit dated 21 October 2022, Mr He, who is the husband of the Fourth Plaintiff, Ms Luo, referred to the payment of $94,837.66 to Ms Luo and Mr Shen’s retention of $14,543.86 on her behalf, totalling $109,381.52, and confirms that he and Ms Luo had received no other amounts from Quantum in reduction of amounts owing to her. Mr He also refers to the receipt of $100,000 by Green Ever Trading Pty Ltd (“Green Ever”), a company associated with him, on 26 August 2019 and, in evidence that is likely inadmissible, indicates that this was a repayment of an amount of legal fees that he had advanced in 2015. It is not necessary to address that matter further, because there is nothing to suggest that the amount paid to Green Ever, a separate legal entity to Ms Luo, was made at her direction or from monies due to her and a payment to that company does not, in itself, reduce her loss. The amount acknowledged by Mr He is consistent with the amount referred to in paragraph 130 of the Principal Judgment.

7. By his affidavit dated 21 October 2022, Mr Wang refers to his receipt of the amount of $54,690.76 from Quantum, made up of an amount of $47,372.69 received on 7 May 2020 and the amount of $7,318.07 retained by Mr Shen, and his evidence is that he and his wife, Ms Qian, have received no other amounts from Quantum. That amount claimed is again consistent with that set out in paragraph 130 of the Principal Judgment. By his affidavit dated 21 October 2022, Mr Xu, who is the sole director of MSD, refers to the receipt of $54,690.76 from Quantum, made up of $39,515.69 received on 3 May 2020 and $15,175.07 retained by Mr Shen, and indicates that MSD has received no other amounts from Quantum. That figure is again consistent with paragraph 130 of the Principal Judgment.

Quantification

8. Mr Katsoulas, who appears for the Plaintiffs, submits that the successful Plaintiffs are entitled to their original advance, less recoveries made, together with pre-judgment interest. He points out that:

1. Mr Zheng advanced $300,000 to Quantum and his evidence, as noted above, is that he received repayment of $131,257.83; the principal amount advanced to Quantum outstanding at judgment is $168,742.17; pre-judgment interest from the date of advance is $116,558.13; and Mr Zheng is therefore entitled to judgment in the sum of $285,300.30;

2. Ms Luo advanced $1,000,000 to Quantum and Mr He’s evidence, noted above, is that he (on her behalf) has received a total of $109,381.52; the principal amount advanced to Quantum outstanding at judgment is $890,618.48; pre-judgment interest from the date of the respective advances is $425,615.22; and Ms Luo is therefore entitled to judgment in the sum of $1,316,233.70;

3. Mr Wang and Ms Qian advanced $500,000 to Quantum and Mr Wang’s evidence, as noted above, is that he and Ms Qian received from Quantum a total of $54,690.76; the principal amount advanced to Quantum outstanding is $445,309.24; pre-judgment interest from the date of the respective advances is $212,068.58; and Mr Wang and Ms Qian are therefore entitled to judgment in the sum of $657,377.82; and

4. MSD advanced $500,000 to Quantum and Mr Xu’s evidence, noted above, is that MSD has received a total of $54,690.76; the principal amount advanced to Quantum outstanding at the date of judgment is $445,309.24; pre-judgment interest from the date of the advance is $212,086.39; and MSD is therefore entitled to judgment in the sum of $657,395.63.

   9. I accept that, subject to addressing Mr Lin’s submissions, those findings follow from the Principal Judgment and the Plaintiffs’ further evidence.

   10. By his submissions in response filed on 4 November 2022, Mr Lin draws attention to receipts recorded in the trust statement issued by the Plaintiffs’ solicitor in respect of the claim against Quantum and submits there is no explanation of the difference between the amounts recorded in that document and the amount paid by the solicitors to Mr Shen. Fairly, Mr Lin acknowledges the obvious inference that the difference between those figures related to legal fees and disbursements in respect of the proceedings. Mr Lin submits that amounts applied to pay those legal fees should be accounted for as a recovery made by the Plaintiffs and deducted from the amount recoverable against Mr Lin. I do not accept that submission. The amounts paid in legal fees are a cost incurred by Quantum in obtaining the relevant recovery, before it made repayment from its net recovery to the Plaintiffs, and only the amounts paid by Quantum to the Plaintiffs reduce the Plaintiffs’ loss recoverable in their claim against Mr Lin.

   11. Mr Lin also refers to an amount of $100,000 paid to Olympic Gold Holdings Pty Ltd, an entity associated with Mr He, described in the solicitors’ trust statement as a “return to client” and submits that the Court should infer that it has the same character as the other payments to the Plaintiffs. It is not clear whether this is the same payment referred to in Mr He’s evidence. I cannot draw the inference for which Mr Lin contends, where there is nothing to suggest that the amount paid to that entity, again a separate legal entity to Ms Luo, was made at her direction or from monies due to her and a payment to a separate entity does not, in itself, reduce her loss. Mr Lin also refers to a payment of $73,217.43 on 23 July 2020 to Mr Shen and Mr He, and submits that it may be inferred that that amount represents a recovery in respect of the Plaintiffs’ losses from their loans to quantum. Mr Lin again establishes no evidentiary basis for that submission, and I cannot not draw that inference. Mr Lin submits that some or all of these additional amounts should be deducted from the judgments awarded to the successful Plaintiffs. I do not accept that submission.

   12. For these reasons, the several successful Plaintiffs have established their entitlement to recover the amounts claimed and pre-judgment interest on them.

Costs

13. Mr Lin draws fairly acknowledges the usual rule that costs follow the event. Rule 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) provides that, subject to Pt 42, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs. In Commonwealth of Australia v Gretton [2008] NSWCA 117, Hodgson JA with whom Mason P agreed observed (at [121]) that:

“In my opinion, underlying both the general rule that costs follow the event, and the qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs. Costs follow the event generally because, if a plaintiff wins, the incurring of costs was the defendant’s responsibility because the plaintiff was caused to incur costs by the defendant’s failure otherwise to accord to the plaintiff that to which the plaintiff was entitled; while if a defendant wins, the defendant was caused to incur costs in resisting a claim for something to which the plaintiff was not entitled … Departures from the general rule that costs follow the event are broadly based on a similar approach.” [Citations omitted]

14. That observation was cited, with apparent approval, by the Court of Appeal in Heath v Greenacre Business Park Pty Ltd [2016] NSWCA 34 at [98]. The exercise of the Court’s discretion requires an assessment of what is fair in all the circumstances: Australian Receivables Ltd v Tekitu Pty Ltd [2011] NSWSC 1425 at [60] .

15. Mr Lin points to the possibility that different costs orders may be made in respect of different results on separate events or issues, unless the Court considers that some other order is more appropriate, and refers to the decision of the Full Court of the Supreme Court of Tasmania in Sultan Holdings Pty Ltd v John Fuglsang Developments Pty Ltd [2017] TASFC 14 in that regard. I accept that there are circumstances in which, in the exercise of the Court’s discretion, a successful party may be deprived of part of its costs or ordered to pay costs of discrete issues: Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38]; Mobis Parts Australia Pty Ltd v XL Insurance Company SE (No 2) [2019] NSWCA 19 at [5]; Oikos Constructions Pty Ltd (t/as Lars Fischer Construction) v Ostin (No 2) [2021] NSWCA 98 at [15]–[16].

16. Mr Lin draws attention to the several statements on which the Plaintiffs rely which gave rise to several pleaded financing representations, and to the fact that the Plaintiffs did not pursue all of the issues raised in their initial pleading at trial and, in particular, did not press a claim based on directors’ duties and that, by the conclusion of the hearing, their case had been limited to the claims for misleading and deceptive conduct which I addressed in the Primary Judgment. Mr Lin also points out a table of representations served by the Plaintiffs on 29 September 2022 narrowed the number of representations on which they relied; that they did not press their case based on representations contained in written loan documents and on two of the representations; and they did not succeed on several other representations.

17. Mr Lin submits that the abandonment of “the majority of”, or I interpolate, of significant parts of the Plaintiffs’ case reflected a “scatter gun approach” to the conduct of the proceedings and that the Plaintiffs’ conduct caused both parties to incur unnecessary costs. I do not accept that submission. The affidavit evidence led by both parties was directed to providing a history of the Plaintiffs’ dealings with Mr Lin and identifying relevant documents and oral communications, and the cross-examination of the Plaintiffs as to their affidavit evidence was directed to impugning their account of events generally. It seems to me that the pursuit of the wider range of representations added little to the costs of the proceedings, and it is likely that much the same evidence and much the same cross-examination would have occurred in respect of the narrower range of representations. While there was a degree of duplication in the pleading of the Plaintiffs’ case, I am not persuaded that I should limit costs recoverable by the successful Plaintiffs, on an issue by issue basis, less to make the order for which Mr Lin contends, that there should be order as to costs in favour of the successful Plaintiffs are concerned, or that the successful Plaintiffs should only have their costs from 15 September 2022, when they narrowed their case. The unfairness of the latter order is obvious, where the Plaintiffs’ success on the narrower range of representations would not have been achieved without the steps taken in preparing the matter for hearing, including the preparation of affidavit evidence that occurred prior to that date. I will order that Mr Lin pay the successful Plaintiffs’ costs of the proceedings.

18. Mr Lin submits that he is entitled to costs against Mr Shen, who was not successful in his claim against Mr Lin. I accept that submission.

Orders

19. For these reasons, I make the following orders:

1. Judgment for the Second Plaintiff against the Defendant in the sum of $285,300.30.

2. Judgment for the Fourth Plaintiff against the Defendant in the sum of $1,316,233.70.

3. Judgment for the Fifth and Sixth Plaintiffs against the Defendant in the sum of $657,377.82.

4. Judgment for the Ninth Plaintiff against the Defendant in the sum of $657,395.63.

5. The Defendant pay the Second, Fourth, Fifth, Sixth and Ninth Plaintiffs’ costs of and incidental to their claims in the proceedings, as agreed or as assessed.

6. The Third Plaintiff’s claim be dismissed.

7. The Third Plaintiff pay the Defendant’s costs of and incidental to his claim in the proceedings, as agreed or as assessed.

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Decision last updated: 20 November 2022