Richards v Han

Case [2022] FCA 1539

FEDERAL COURT OF AUSTRALIA

Richards v Han [2022] FCA 1539

File number(s): ACD 71 of 2019
ACD 89 of 2019
Judgment of: HALLEY J
Date of judgment: 19 December 2022
Catchwords:

CONTRACT – where contractual claims advanced by applicant in Proceedings ACD 89 of 2019 (Shareholding Proceedings) turn on alleged oral contract with express term to the effect that applicant would receive a 3% equity share in a company to be listed on a stock exchange to operate a business described as an “e-commerce and retail business” (Shareholding Contract) – whether there was any agreement that applicant would receive a 3% share of any other e-commerce and retail business – whether Shareholding Contract extended to the listing of any company on any stock exchange other than the ASX – whether there was any variation to the Shareholding Contract – whether there was a repudiation of the Shareholding Contract by first respondent – where no repudiation nor breach established and Shareholding Contract found to be abandoned or discharged by agreement

CONSUMER LAW – where applicant alleges that first respondent engaged in conduct that was misleading or deceptive in contravention of s 18 of Australian Consumer Law (ACL) or unconscionable conduct in contravention of ss 21 and 22 of ACL by allowing applicant to waive payments due to Web and Software Angels Pty Ltd, perform services for no charge and pay expenses in return for receiving a 3% share of company to be listed on a stock exchange (Stock Exchange Listing) in circumstances where first respondent had no intention of allocating a 3% share to applicant – where question of whether applicant has suffered loss or damage by reason of his ACL claims does not arise – where ACL claims dismissed

RESTITUTION – where applicant presses a quantum meruit claim in the Shareholding Proceedings for work he performed in relation to the Stock Exchange Listing – where applicant presses a quantum meruit claim in Proceedings ACD 71 of 2019 (Lindeman Island Proceedings) for work that he undertook at request of first respondent in relation to the development by second respondent of three tourist resorts on Lindeman Island – where applicant established an entitlement to be paid an amount by way of a quantum meruit in the Lindeman Island Proceedings but only for his work as a project manager of the Lindeman Island development
Legislation:

Competition and Consumer Act2010 (Cth) Schedule 2 (Australian Consumer Law) ss 18, 21, 22, 236

Corporations Act 2001 (Cth) ss 131

Trade Practices Act 1974 (Cth) s 82

Legal Profession (Barristers) Rules 2021 (ACT)
Cases cited:

Abadeen Group Pty Ltd v Bluestone Property Services Pty Ltd [2009] NSWCA 386; (2009) 14 BPR 27

ACN 070 037 599 Pty Ltd v Larvik Pty Ltd [2008] QCA 416

Arcaba v K&K Real Estate Pty Limited [2016] NSWSC 1793

Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640; [2013] HCA 54

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AGLC
Richards v Han [2022] FCA 1539
Case
[2022] FCA 1539
Decision Date

CaseChat Overview and Summary

In the Federal Court of Australia, Mr Richards, a barrister and senior lecturer in law, brought claims against Mr Han, a director and shareholder of several companies under the White Horse Group, in relation to alleged contractual and statutory breaches. Mr Richards claimed he had an oral agreement with Mr Han that he would receive a 3% equity share in a company to be listed on a stock exchange, to operate an e-commerce and retail business. He also claimed that Mr Han's conduct was misleading or deceptive, and unconscionable, in contravention of the Australian Consumer Law. Additionally, Mr Richards sought a quantum meruit claim for work performed for Mr Han and the White Horse Group companies. Mr Han denied all claims and counterclaimed for costs. The court had to determine the validity of the alleged oral contract, whether there was any breach or repudiation of the contract, and whether Mr Han engaged in misleading or unconscionable conduct. The court also needed to assess Mr Richards' quantum meruit claims.

The court found that the alleged oral contract between Mr Richards and Mr Han did not exist as claimed, and no evidence supported the existence of such a contract. The court concluded that Mr Han did not repudiate the contract or breach it, and therefore, the contract was either abandoned or discharged by agreement. The court further found that Mr Han's conduct did not contravene the Australian Consumer Law as there was no evidence that Mr Han had no intention of allocating a 3% share to Mr Richards. The court dismissed all claims brought by Mr Richards. Regarding the quantum meruit claims, the court found that Mr Richards was entitled to be paid for his work as a project manager of the Lindeman Island development but denied his claim for work performed in relation to the Stock Exchange Listing. The court ordered the parties to provide agreed draft orders or, in default, to file written submissions, draft orders, and affidavit evidence.

The court ordered that the parties provide agreed draft orders, including as to costs, to give effect to the reasons for judgment. In the absence of any request for an oral hearing, any dispute as to the orders to be made would be determined on the papers. The parties were to file and serve written submissions, draft orders, and any affidavit evidence in support of those orders on or before 4.00pm on Friday, 23 December 2022.

Orders

Orders of the court

2. The parties provide agreed draft orders, including as to costs, to give effect to the reasons for judgment delivered today and, in default of agreement, each party file and serve written submissions (limited to 5 pages), draft orders, including as to costs, they propose should be made, and any affidavit evidence in support of those orders on or before 4.00pm on Friday, 23 December 2022.

3. In the absence of any request for an oral hearing, any dispute as to the orders to be made to give effect to these reasons for judgment will be determined on the papers.

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

Background

Background to the litigation

For the reasons that follow, I have concluded that: (a)Mr Richards has established an entitlement to be paid an amount by way of a quantum meruit in the Lindeman Island Proceedings but only for his work as a project manager of the Lindeman Island development; and(b)all the claims advanced by Mr Richards in the Shareholding Proceedings must fail. BACKGROUNDIntroduction The necessary facts are set out below. They have been taken from contemporaneous business records, uncontested evidence given by Mr Richards and Mr Han that is consistent with the apparent logic of events and from admissions against interest made by Mr Richards or Mr Han in their affidavit evidence and in the course of their respective cross examinations. Mr Richards Mr Richards is the applicant in both the Shareholding Proceedings and the Lindeman Island Proceedings (together, the Proceedings). He is a barrister practising in Canberra and a senior lecturer in law at the Australian National University. At all material times he was a director of WSA. Mr Richards was a director of White Horse Global, the second respondent in the Shareholding Proceedings, between 30 June 2016 and 16 October 2019. In the period from approximately 25 October 2017 to 16 October 2019, Mr Richards was a director of the third to the eighth, tenth and eleventh respondents in the Shareholding Proceedings (White Horse Australian Companies). He had also alleged that he was a director of the ninth respondent but this was denied by the respondents. The company search in evidence for the ninth respondent did not identify Mr Richards as a present nor former director of the company. I have therefore proceeded on the basis that Mr Richards’ contentions do not extend to the ninth respondent and as indicated above “White Horse Australian Companies”, does not include the ninth respondent. Mr Richards was a director of WHAL, the second respondent in the Lindeman Island Proceedings, in the period between 25 October 2017 and 8 October 2019.Mr Han Mr Han is the first respondent in both Proceedings. At all material times he has been a director and shareholder of White Horse Global and each of the White Horse Australian Companies. Mr Han is also a director and shareholder of WHAL. Mr Han is a company director and a resident of Guangzhou, China. He is involved with numerous projects and business ventures operated by various entities under the umbrella description of “White Horse” and the “White Horse Group”. White Horse was originally established as an “advertising agency” in 1986 and later grew into a full service advertising agency before developing in its second phase into a “media company”. It presently has interests in advertising, a golf television channel, a shopping television channel and several real estate projects. It has approximately 2,300 employees. Initial meetings between Mr Richards and Mr Han Mr Richards first met Mr Han on or about 22 June 2015 whilst on a trade mission in China. In late June 2015, Mr Richards emailed Mr Han expressing his interest in establishing a business relationship whereby he and Mr Dawn could source Australian products for inclusion on the White Horse website (V.com) in China. At that time, V.com existed as an extension of a shopping channel business conducted by Mr Han. The website did not have any discrete tangible revenue stream.Initial Stock Exchange Listing proposals

Evidence

Evidence Before The Court

Mr Han gave evidence that he does not intend to float any e-commerce and retail business type company because he no longer considers that it would be viable. He stated that this was due to the poor performance of the “importing” business and significantly changed geo-political circumstances since early 2020.EVIDENCEMr Richards’ witnessesMr Richards Mr Richards affirmed eight affidavits in the proceedings. He was extensively cross-examined in person on those affidavits and related issues. Mr Richards was not an impressive witness. His contemporaneous email communications raised significant credit issues. His ready concessions in cross-examination when confronted with implausible claims that he had advanced in his email communications with Mr Han and others only raised even greater concerns about how the false representations could have been advanced in the first place. His affidavit evidence required careful scrutiny. He gave evidence that he had developed properties profitably and incurred extensive travel costs but ultimately conceded the properties were all developed at a loss and someone else had paid for the travel, either directly or with frequent flyer points. His claims in cross-examination that material parts of his emails and affidavits on which he was challenged were “badly worded”, might be plausible with respect to his emails but given his experience as a barrister and law lecturer they are difficult to accept with his affidavit evidence. This was demonstrated by his claim in his affidavit affirmed on 24 February 2021 that on the first occasion that he met Mr Han, on 22 June 2015, they had reached an agreement in principle to continue discussions with the view to him having an interest in the E-Commerce and Retail Business. When cross-examined on this claim, Mr Richards stated that this was intended to be a reference to a contract to supply goods from Australia into China and the affidavit was “[b]adly worded”. Three matters were particularly concerning. First, Mr Richards’ advanced claims, which were subsequently abandoned on Day 5 of the Hearing, that he had undertaken significant amounts of legal work for Mr Han and acted as an in-house counsel for companies within the White Horse Group. Mr Richards claimed that he had provided legal services as valuable consideration to support his contractual claims and in the alternative that he had a quantum meruit claim in respect of the legal services he provided to Mr Han and the companies within the White Horse Group. These claims were advanced notwithstanding that his practising certificate was governed by the Legal Profession (Barristers) Rules 2021 (ACT) and did not appear, or at least was not submitted by Mr Richards, to permit him to provide such legal services. Second, the decision by Mr Richards, after his commercial relationship with Mr Han soured in October 2019, to send Mr Han two letters of demand on his letterhead as a barrister. In his first letter, Mr Richards alleged breaches of contract by Mr Han, claimed that the value in 2019 of his 3% shareholding interest in the company proposed to be floated was estimated at $140 million, foreshadowed an application for freezing orders over Mr Han’s assets in Australia and stated that if he did not receive a “reasonable response” to the letter within 14 days he intended to commence proceedings in the Supreme Court of the Australian Capital Territory.

Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

On 27 June 2016, Mr Richards sent an email to Stephenson Wong in Hong Kong in which he explained that the “Other Shareholders” were receiving in aggregate a 6% share of the company to be floated because they had given up:a contractual right, through a wholly owned entity, to receive 3% of the wholesale FOB price (the commission) of all products sold by White Horse for products sourced from Australia and New Zealand for a period of 3 years from 22 October 2015, and with commission payable for 8 years for any product introduced during the period of the contract. Incorporation of White Horse Global On 30 June 2016, White Horse Global was incorporated and both Mr Richards and Mr Han were appointed as directors. Telephone conversation between Mr Richards and Mr Han on 22 July 2017 On 22 July 2017, Mr Richards and Mr Han had a telephone conversation in which it is common ground that Mr Han and Mr Richards agreed that Mr Richards would take over responsibility for progressing the Lindeman Island from Mr Paul Nyholt, the then current project manager of the development. The contents of this conversation are otherwise substantially in dispute. I address the evidence and make findings as to what was said below in addressing the alleged variation to the Shareholding Contract and the quantum meruit claim in the Lindeman Island Proceedings.Meeting in Guangzhou on 23 September 2017 On 23 September 2017, Mr Richards attended a meeting in Guangzhou with Mr Han and Mr Dawn. Mr Richards gave the following affidavit evidence concerning what was discussed in the course of that meeting:Mr Richards: William, Lindeman is taking a lot more time that I thought it would. I have given up lots of Barrister work. And, it’s costing me a lot in expenses for travel for Lindeman on flights and hotels. Lindeman is a long way from Canberra and there are a lot of meetings in Queensland with Government. William, also Mr Mao should pay. I don’t even know him. William, I need something every month to get by.Mr Dawn: William, how about David gets an expense payment each month.Mr Richards: Steve and I have talked about it William and Steve agrees. Mr Han:How much do you think Steve.Mr Dawn:William, if David gets $10,000 a month for expenses, sometimes he will win and sometimes he will lose.Mr Han:Okay, David you take $10,000 a month. Mr Richards: Thanks William, that will make life easier for me.Mr Han: We will make a lot of money together on Lindeman. In the period between 27 November 2017 and 1 May 2019, Mr Richards submitted monthly invoices for $10,000 (plus GST) for travel expenses to Ms Anne Dawn. Ms Dawn was WHAL’s bookkeeper and paid WHAL’s accounts. In the period from May 2019 to September 2019, Mr Richards submitted monthly invoices to Mr Dale, after Ms Dawn ceased to be WHAL’s bookkeeper in May 2019. Shanghai Stock Exchange proposed listing In mid-2018, some preliminary work was done on advancing the possibility of a listing of a White Horse Group company on the Shanghai Stock Exchange. The preliminary work included the preparation of a document entitled “Basic Data List Task Allocation” (Shanghai Task Allocation Document) where various tasks were allocated to different individuals, including Mr Richards. There was no evidence, however, that any meaningful steps were taken to advance any listing in this period of any White Horse Group company on the Shanghai Stock Exchange (or at any later time).White Horse Cash & Carry China