Supreme Court
New South Wales
Medium Neutral Citation: Sino Synergy Investment Company Limited v Maygood Australia Pty Limited; Limei Wang Lee v Yehan Koo; Yi-Fawn Lee v Yehan Koo [2012] NSWSC 92 Hearing dates: 21, 22, 23, 25, 28 February 2011, 1 & 2 March 2011. Decision date: 20 February 2012 Jurisdiction: Equity Division Before: Slattery J Decision: Amount of $1,000,000 advanced to the defendant, Maygood Australia, is a loan. $300,000 advanced to Maygood Australia and other defendants is not a loan. Directions made for submissions on issues of costs.
Catchwords: CONTRACT - advance of $1.3 million in two amounts of $1,000,000 (in December 2006) and $300,000 (in July 2007) - whether gift or loan - TRADE PRACTICES - whether misleading or deceptive conduct at the time of alleged loan transactions - CROSS-CLAIMS - whether miscellaneous sums claimed by the defendant/cross-claimant were applied for the benefit of the plaintiff/cross-defendant or otherwise. Legislation Cited: Environmental Planning and Assessment Act 1979 (NSW), s 56A
Fair Trading Act 1987 (NSW), s 42
Family Law Act, 1975 (Cth), s 31
Trade Practices Act 1974 (Cth), s 52Cases Cited: Masters v Cameron (1954) 91 CLR 353 Category: Principal judgment Parties: Plaintiffs- Sino Synergy Investment Company Limited, Limei Wang Lee, Yi-Fawn Lee
Defendants- Maygood Australia Pty Limited, Yehan KooRepresentation: Plaintiffs-A. Spencer
Defendants-M.Aldridge SC, F.Sinclair
Plaintiffs-H.McNair, Holding Redich
Defendants-K.Steele, DC Balog & Associates
File Number(s): (2009/287922); (2010/64562); (2010/64176) Publication restriction: No
Judgment
Mr Yehan Koo and Ms Yi-Fawn Lee lived together as husband and wife between April 2005 and July 2008. They have one child Ang-Ya born in July 2007. Mr Koo and Ms Lee separated in July 2008 and were divorced in September 2009. During their marriage, members of the Lee family, mainly through a family company, transferred $1.3 million mainly to a Koo family company or members of the Koo family in three tranches, (1) $1,000,000 in December 2006, (2) $100,000 in July 2007, and (3) $200,000 in July 2007. The Lee family say these funds transfers were a loan and they seek its recovery in this action. The Koo family say that the $1.3 million was not advanced as a loan but was in part either (1) a gift or (2) constituted the reimbursement of money that Mr Yehan Koo already owned or (3) constituted the repatriation of Yehan and Yi-Fawn's own joint money and their engagement gifts. Deciding whether the Lee family interests have established on the balance of probabilities that the advances were a loan as pleaded requires analysis of some subtle family relationships.
There are three sets of proceedings before the court. The plaintiffs in all proceedings are members of the Lee family and the Lee family company, Sino Synergy Investment Company Limited ("Sino"). The defendants in all proceedings are members of the Koo family and their family company, Maygood Australia Pty Limited ("Maygood Australia").
Ms Yi-Fawn Lee's parents, her father, Mr Tsung-Te Lee ("Tsung-Te") and her mother, Mrs Limei Wang Lee ("Limei") are the directors of and control Sino, a company registered in Mauritius in October 2001. Mr Yehan Koo and his parents, Mr Hock Yeow Koo ("Harry") and Mrs Ngai Geen Koo ("Geen") each hold one of the three issued shares in Maygood Australia and are its directors. Maygood Australia was registered in Australia in May 2005.
The three sets of proceedings were started at different times. Two proceedings were commenced in the District Court of NSW on 25 September 2008 and the other one in this Court on 16 March 2009. The parties have conveniently labelled the two District Court proceedings by the first names of their respective plaintiffs, Ms Yi-Fawn Lee and her mother, Mrs Limei Wang Lee. One set of District Court proceedings were commenced by Ms Yi-Fawn Lee ("the Yi-Fawn proceedings") and were brought for the recovery of $100,000 that Ms Yi-Fawn Lee alleged she loaned in July 2007 to Maygood Australia and members of the Koo family. Mrs Limei Wang Lee brought the other District Court proceedings ("the Limei proceedings") claiming $200,000 she alleges she loaned to Maygood Australia and members of the Koo family in July 2007.
Sino commenced proceedings ("the Sino proceedings") in this Court on 16 March 2009, alleging that Sino had loaned $1,000,000 to Maygood Australia in December 2006. The plaintiffs allege in all proceedings that the sums advanced have not been repaid.
The District Court proceedings were transferred to the Supreme Court on 24 February 2010. Since then all proceedings have travelled together in directions hearings, duty lists, and in interlocutory applications. In March 2010 the plaintiffs applied to have all the proceedings transferred to the commercial list of this Court but that application failed. Costs were reserved. The plaintiffs also sought further discovery against the defendants and in April 2010 Biscoe AJ ordered further discovery and costs against the defendants. On 2 February 2011, this Court ordered that all proceedings be heard together, and for evidence in one to be evidence in the other.
Analysis of the Three Proceedings
The action in the three proceedings takes place in two main time periods: in the Sino proceedings the transfer of the contentious $1 million occurs in December 2006 and the conversations that precede it occur from October to December 2006; and, in the Yi-Fawn and Limei proceedings the transfers totalling $300,000 occur in July 2007. It is convenient in these reasons to analyse both the history of the parties' dealings and their pleaded causes of action with special focus on these two main time periods. But first a wider overview of the parties' dealings is needed. This is followed by more detailed findings about each of the time periods that are important for the Sino proceedings and the Yi-Fawn and Limei proceedings. Finally, these reasons also consider certain cross-claims the Koo family bring in both the Yi-Fawn and Limei proceedings.
(1) Overview of the Proceedings
The Sino Proceedings - Events of October - December 2006
Sino and the Lee family allege in the Sino proceedings that in several conversations between Mr Tsung-Te Lee and Mr Yehan Koo during October, November and December 2006 that Sino orally agreed to lend $1 million to the Koo family company, Maygood Australia, on the following terms. These terms were: (1) Sino would lend Maygood Australia $1 million; (2) Maygood Australia would only use the advance to purchase and develop certain properties in Devonshire Street, Chatswood ("the Chatswood properties") and for no other purpose; (3) Maygood Australia would pay interest at 10 per cent calculated on an annual compounding basis and capitalised for the life of the loan; (4) the principal sum and interest accrued would be paid on the happening of the earliest of several events, (if Maygood Australia chose not to purchase the Chatswood properties, on completion of the development of the Chatswood properties or on Maygood Australia's sale of the Chatswood properties) and within two years if Maygood Australia did not commence building, but certainly within 5 years of the advance; (5) Maygood Australia would provide Sino with quarterly statements in respect of the advance; (6) the Chatswood properties would not be used as security for any of Maygood Australia's borrowings other than for the acquisition of the Chatswood properties and for their development; and (7) that the parties would reduce their oral agreement to writing.
Sino transferred $1 million to Maygood Australia in December 2006, in two tranches that were paid into Maygood Australia's account with St George Bank: $700,000 on 13 December 2006 and $300,000 on 18 December 2006.
The parties did not dispute that in December 2006 Mr Yehan Koo created a form of written agreement entitled, "Loan Agreement between Sino Synergy Investment Co Ltd and Maygood Australia Pty Limited" (which document will be referred to in these reasons as "the Loan Agreement"), which both he and Mr Tsung-Te Lee executed in Shanghai on 20 December 2006, shortly after Sino had paid the second of the two tranches to Maygood Australia.
Sino contends that this Loan Agreement confirms its case that the $1 million advance was a loan. But there was a strong contest between Mr Yehan Koo and Mr Tsung-Te Lee about what was said at the time the Loan Agreement was executed on 20 December 2006. Mr Yehan Koo and Maygood Australia contend that these conversations show that the Loan Agreement did not have effect according to its terms. Sino denies that contention. That contest is resolved later in these reasons.
After 20 December 2006 within both the Lee family and the Koo family, actions were initiated which, according to the plaintiffs at least were consistent with the making of the Loan Agreement on 20 December 2006, Mr Yehan Koo created two loan statements in 2007 and both parties finalised financial corporate statements, Sino recording the loan as an asset and Maygood Australia recording it as a liability. But the circumstances in which even these actions occurred were also the subject of contest.
In March 2007 Mr Yehan Koo prepared a document entitled, "Loan Account" and which calculated interest for a three-month period up to 20 March 2007. He created a second "Loan Account" document in December 2007, calculating interest for a twelve-month period on a similar basis. Mr Yehan Koo's version of events was that these were fictitious documents that he created to appease his wife, Yi-Fawn, and that they did not reflect any action under the Loan Agreement.
The Lee family also rely on both Sino and Maygood Australia's accounts to support their case. Maygood Australia's financial statements show a liability to Sino of $1 million in the 2006-2007 financial year and again in the 2007-2008 financial year. Interest was also accrued on the loan in the second of these statements. The loan was also recorded as an asset in the accounts of Sino for the years 2006-2007, 2007-2008 and 2008-2009 financial years.
At the time of $1 million advance in December 2006 Yehan Koo and Yi-Fawn Lee's marital relationship was harmonious but in July 2008 about 12 months after the birth of Ang-Ya, Yi-Fawn left Australia to work permanently in Hong Kong, leaving Ang-Ya behind. On 13 August 2008 Mr Yehan Koo commenced custody proceedings for Ang-Ya in the Family Court of Australia and was awarded custody. The first request for payment of the $1 million December 2006 advance (and indeed the first request for the other advances) was a Holman Webb Lawyers letter of demand dated 22 August 2008, sent when the parties had just separated and Mr Yehan Koo's custody proceedings were already on foot.
Sino puts its claim for recovery of the December 2006 advance several ways: in contract; under the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1987 (NSW); in mistake; and in estoppel. Sino's contract case is based on both the alleged oral contract and on the Loan Agreement of 20 December 2006. Sino says an oral agreement made in the conversations between Mr Yehan Koo and Mr Tsung-Te Lee constituted in itself a complete agreement to loan the December 2006 advance, although the parties contemplated that the agreement would be reduced to writing: an agreement falling within the first class in Masters v Cameron (1954) 91 CLR 353.
Alternatively, Sino alleges that the written Loan Agreement is binding between Sino and Maygood Australia. Sino contends there are only minor differences between the alleged oral agreement and the Loan Agreement. Sino claims recovery in contract on several bases: the oral agreement includes a term that the advance is repayable within two years if Maygood Australia did not commence building on the Chatswood properties ("the Chatswood development") within that time and it is common ground that Maygood Australia did not commence building within that time. Moreover, Sino asserts that Maygood Australia has repudiated the oral agreement and the written agreement by denying their existence from 18 June 2009 when defences were filed in these proceedings. Sino purported to accept that repudiation on 22 June 2010 by letter and terminated the loan contract; it now claims damages for that repudiation.
But Sino also puts its case other ways. It further alleges that in the course of the October - December 2006 conversations, Mr Yehan Koo made representations about how the $1 million transferred by Sino would be expended. It is said that the moneys were actually applied for other purposes, which indicate Yehan Koo's and Maygood Australia's indifference at the time of the representations to the purposes for which the money would be applied, making the representations misleading and deceptive when they were made and that as a result, Maygood Australia has contravened Trade Practices Act, s 52 and Mr Yehan Koo has contravened Fair Trading Act, s 42.
Furthermore to the extent that the written Loan Agreement does not fully reflect the terms of the oral agreement, Sino alleges under doctrines of unilateral mistake and estoppel that, it is entitled to rescission of the written agreement and the return of its money, and that Maygood Australia is estopped from denying that the written Loan Agreement conforms to the oral agreement.
The Yi-Fawn and Limei Proceedings - Events of July 2007
Yi-Fawn Lee alleges in the proceedings bearing her name that on about 3 July 2007 her husband asked her to lend him and his parents $100,000 for one or two months to address a temporary cash shortage. Yi-Fawn Lee alleges that the Koo family were indeed suffering a temporary cash shortage at this time, an allegation, which is strongly contested by the Koo interests. It is not in contest that Ms Lee paid a cheque for $10,000 to Yehan on 6 July 2007. Nor is it in contest that Yi-Fawn drew a further for $90,000, which was deposited into Maygood Australia's account on or about 18 July 2007.
Limei Lee alleges in the proceedings which bear her name that on about 21 July 2007, her son-in-law asked her to lend him and Mr and Mrs Koo $200,000 for one or two months, also to address a temporary cash shortage. It is not contested that on 25 July 2007 Mrs Lee did transfer $200,000 from her account to an account that Maygood Australia maintained with St George Bank.
Both of these payments from Yi-Fawn Lee and from her mother, Limei Lee, are recorded as loans in the December 2007 Loan Account document Mr Yehan Koo gave to Mr Lee.
The Koo's case is that the payment of this $300,000 was a response by Yi-Fawn and other members of the Lee family to a proposal by Yehan Koo to raise funds by selling some shares that he owned in Lehman Brothers, an investment bank where he had once worked. The Koo's case is: that the Lee's did not want Yehan to sell these shares, which were then thought by Mr Lee to be a good long-term investment; that the $300,000 the Lees transferred were sourced from other offshore funds that could be used instead of selling the Lehman shares, being monies which already belonged to Yehan or the couple and were then being repatriated to Australia; and that no arrangements were made in July 2007 for Yi-Fawn or Limei Lee to lend $300,000 to the Koo's. The essential contest in these two proceedings is whether there was a loan and the funds are repayable or whether transaction is consistent with Yehan and Yi-Fawn managing their own funds.
Yi-Fawn, Yehan and the Two Families
The events of these proceedings take place within wider family relationships and dealings that must be recounted to give context to the contested facts.
Yi-Fawn and Yehan
Yi-Fawn Lee and Yehan Koo met in Hong Kong in 2001. She was then studying for an MBA at Fudan University in Shanghai, China. They commenced a relationship in March 2004, when they were both living in Shanghai. Yehan had recently left employment in Hong Kong with Lehman Brothers, an investment bank. He lived in an apartment that he owned in Shanghai. Yi-Fawn also lived in a Shanghai apartment owned by her father. Once their relationship commenced, Yehan moved into the apartment Yi-Fawn occupied and his apartment was rented out. Shortly afterwards Yehan proposed marriage to Yi-Fawn.
Yi-Fawn and her father, Tsung-Te Lee met Yehan's parents in April 2004 when they came to Shanghai. Engagement and marriage plans were discussed. It was agreed that there would be an engagement party in Taiwan in October 2004, paid for by the Lee family, and a wedding ceremony in Australia in April 2005, paid for by the Koo family. Subject to some residual disputes about the level of expenses borne by each family for the engagement and the wedding, which the court does not have to resolve, this is largely what happened.
On 30 October 2004 the couple celebrated their engagement with a ceremony and reception in the Lee's home city of Taichung, which is situated on the west coast of Taiwan. The engagement ceremony was elaborate. Both sides agree that the principal engagement ceremony, generally conformed with the traditions of a Chinese tea ceremony appropriate for nuptials. Aspects of this ceremony are a matter of dispute in relation to cross-claims in the Limei and Yi-Fawn proceedings. Members of the Lee family and their friends together with a small contingent of Koo family members from Sydney attended the engagement.
The couple were married in Sydney in two ceremonies on 13 and 16 April 2005. The first ceremony for close family and friends took place at the Koo's home at Berowra Waters. The second ceremony for a wider group of acquaintances was held at Vaucluse House followed by a reception.
After the wedding on 6 May 2005 Yi-Fawn Lee returned to Shanghai to finish her MBA degree. Yehan remained in Sydney to look for property development opportunities after which he joined Yi-Fawn in Shanghai. They both moved back to Sydney on 30 June 2005 and commenced to reside in an independent wing of the residents of Mr Harry and Mrs Geen Koo in St Ives, Sydney.
From the very earliest conversations to which both Yi-Fawn and Yehan depose, it is evident that each preferred to live after marriage in the long term in the country of his or her birth. This ambivalence was reflected from the beginning of their married life. It was an issue that was never resolved between them. Although the couple lived in St Ives from June 2005 until July 2008, Yi-Fawn regularly expressed unhappiness about being so far away from her parents and increasingly so in late 2007 in early 2008. Both before and after the birth of the couple's daughter in July 2007, Yi-Fawn travelled often, to Taiwan, Hong Kong, Hawaii and especially Shanghai.
During their marriage Yehan and Yi-Fawn travelled together to Shanghai or Taichung, where Mr Tsung-Te Lee continued to maintain an apartment, for a family visit each Christmas vacation. They visited Shanghai in December 2006 - January 2007 and Taichung in December 2007 - January 2008. Yi-Fawn also visited Taiwan or Shanghai in August 2005, October 2005, April 2006 (with Yehan), July 2006, September 2007 and April and May 2008 (both via Hong Kong).
Mr and Mrs Lee travelled to Australia at the time of Ang-Ya's birth, when they stayed with the Koo's in St Ives. Mr or Mrs Lee also visited Sydney in August 2006 and in March 2007.
Despite these visits, by December 2007 Yi-Fawn was expressing dissatisfaction with the restrictions of life looking after a child in Australia so far away from her parents. By March 2008 a publishing firm in Hong Kong had offered her employment. Her publicly expressed intention to take this position in Hong Kong, leaving Yehan and Ang-Ya behind in Australia, caused predictable friction within the marriage.
Yi-Fawn and Yehan separated on 6 July 2008, when Yi-Fawn finally left Australia to take up the Hong Kong publishing position that had been offered to her. There was an immediate contest over the custody of Ang-Ya. On 13 August 2008 Yehan commenced custody proceedings in the Family Court of Australia, among other things to prevent Ang-Ya being taken to Taiwan. Yi-Fawn and Limei arrived in Sydney on 20 August 2008 to contest the custody proceedings and to have some access to Ang-Ya.
On 22 August 2008, in the middle of the contest about the custody of Ang -Ya, the plaintiff's then solicitors, Mssrs Holman Webb, sent a letter demanding the $300,000 the subject of the Yi - Fawn and Limei proceedings. Holman Webb did not issue a demand for the $1 million claimed in the Sino proceedings until 22 December 2008.
On 26 September 2008 Yehan the Family Court of Australia granted interim custody of Ang-Ya to Yehan. The Family Court appointed the final custody hearing on 27 March 2009, but Yi-Fawn did not appear to contest the orders sought. Ang-Ya has resided with Yehan since then.
The Koo and Lee Families
The background and business experience of each of the Koo and Lee families has been a relevant factor in determining the contests of fact in these proceedings. Both Mr and Mrs Lee and Mr and Mrs Koo are commercially astute and are interested in business and investment matters.
The wealth of both the Koo and Lee families was the subject of cross-examination and was described on both sides of the litigation with accomplished modesty. Koo family assets and liabilities are examined later in these reasons. The Koo family balance sheet and cash flow in 2007 are relevant to the probability or otherwise of the making of the loans alleged. The fate of the approximately $1.3 million in issue in these proceedings, though clearly important to the parties, did not appear to the Court to cause either Mr Lee or Mr Koo any greater anxiety than the potential public dishonour of being disbelieved about these transactions.
Mr and Mrs Lee. The Lee's family company, Sino, is the corporate entity through which Mr and Mrs Lee carried out investment activities outside Taiwan since shortly after it was incorporated in October 2001. Sino's business activities principally relate to making financial investments on behalf of the Lee family including investments in real estate and on the stock market.
Mr Tsung-Te Lee's native tongue is Mandarin. It became evident in part from the specialist Mandarin interpreters required in the proceedings that the dialect of Mandarin that Mr and Mrs Lee speak, and which is commonly spoken in Taiwan, is the Hokkien dialect. I accept Mr Lee's evidence that he can recognise some English words but has difficulty in conducting a full conversation in English.
Mrs Limei Lee has been co-director of Sino with her husband since it was incorporated in 2001. Her native tongue is also the Hokkien dialect of Mandarin. I accept that she cannot conduct conversations in English other than for basic ordering in restaurants or shopping. She says and I accept that all dialogues held between herself and her family and with Yehan Koo were conducted in Mandarin. I accept her evidence that in her opinion Yehan Koo can speak reasonable Mandarin. His capacity to speak the Hokkien dialect with Mr Lee was one of the issues in the proceedings. Mrs Lee was generally a credible witness, except with respect to some of the conversations she alleges that she had with Yehan Koo in July 2007. I accept her assessment of her then son-in-law's capacity to communicate in Mandarin with her and her husband throughout 2004-2008.
Mr and Mrs Koo . Both Mr Harry and Mrs Geen Koo are fluent in Mandarin and Cantonese. Mr Koo qualified as an architect in 1964 and applied his architectural skills to further his interests in a family construction business that he and his wife commenced in 1975. From that time he and Geen took on property development projects of increasing complexity through a family company Maygood Australia Pty Ltd ("Maygood"), in which they had a joint shareholding. Their joint enterprise culminated in the completion in about 2001 of a large residential and retail development in Penshurst Street, Willoughby.
Mrs Geen Koo partnered her husband in his property development business. She graduated in economics in 1966 with an accounting major. After working as a chartered accountant at Peat Marwick Mitchell, then a major accounting practice, she decided to join her husband in the family construction business in 1975. Together they established Maygood Australia in 1980.
Mr and Mrs Koo had effectively retired from property development activity after the completion of the Penshurst Street project in about 2001. But Maygood Australia Pty Ltd continued to act as an investment vehicle holding much of the property that they had acquired or developed over the years. After Yehan was married and he and Yi-Fawn returned to Australia in mid 2005, Mr and Mrs Koo renewed their interest in property development to assist their son and his new wife. With this idea in mind they incorporated Maygood Australia on 31 May 2005. Harry and Geen Koo became the two directors of Maygood Australia and Harry, Geen and Yehan each held one of its three issued shares. All their continuing involvement in property development in the 2005 - 2009 period with their son Yehan was conducted through Maygood Australia, rather than Maygood Australia.
Although the Koo and Lee families' business experience was acquired in different countries and in different fields of investment, it is not contested that a common topic of discussion between the two families, especially when the Lee's were in Australia, was property development and investment.
Koo Family Developments 2005-2008
Between 2005 and 2008 Maygood Australia became involved in two major property development projects in suburban Sydney, one in Liverpool Street, Darlinghurst ("the Darlinghurst property") and the other in Devonshire Street, Chatswood ("the Chatswood properties"). Sino and the Lee's claim that the commercial requirements of these two projects and the financial stresses that they placed upon the Koo family largely account for the Koo's request for, and acceptance of, the alleged loans in December 2006 in July 2007. The Koo's strongly contest this contention. This section of these reasons contains a short outline of the important milestones in those two developments in Darlinghurst and in Chatswood.
The Darlinghurst Property. The Koo family's investigation of the Darlinghurst property as the site of a possible development project was well advanced by the time Yi-Fawn and Yehan Koo settled down in Sydney in late June 2005. Maygood Australia submitted a tender bid for the Darlinghurst property in June 2005. By 5 August 2005 Maygood was informed that its bid was successful. The Darlinghurst property was then acquired with an existing development application approval for $6,450,000 million. On 2 August 2005, St George Bank offered to lend Maygood Australia $8,245,000 to assist with the acquisition of the Darlinghurst property. But Mr Harry Koo thought he could increase Maygood Australia's site yield (the number of apartments to be constructed on the site) by putting in an amended development application. In fact, it took over 2 and three quarter years from 5 August 2005 until 12 March 2008, during which period the Koo's lodged three amended DA's and conducted proceedings before the Land and Environment Court and the Court of Appeal, before a final DA acceptable to them was approved. Each of their amended DA's was an attempt to make the development of the Darlinghurst property more profitable. But the Koo's say, and I accept, that they always believed in a worst case scenario they could fall back on the existing approved DA that applied to the purchased Darlinghurst property. In early August 2005 Maygood Australia applied for and was granted financial accommodation for the Darlinghurst development from St George Bank. The details of its various applications are considered later in these reasons.
Maygood Australia lodged three class one applications under the Environmental Planning and Assessment Act 1979 (NSW) to re-design the existing Darlinghurst DA to add additional apartments to the development. Maygood Australia lodged its first amended DA with the City of Sydney Council on 5 August 2005, the day it settled its purchase of the Darlinghurst property. The pursuit of this first amended DA occupied most of the 2005-2006 financial year. The Land and Environment Court heard Maygood Australia's appeal against the Council's refusal of this DA in the first week of July 2006 and dismissed that appeal on 14 July 2006.
By 30 August 2006 Maygood Australia lodged a second amended DA with the Council for the further development of the Darlinghurst property. As will be explained below whilst that second amended DA was awaiting determination by Council, the Chatswood properties first came to Yehan Koo's attention and were then rapidly acquired in addition to the Darlinghurst development.
The second amended DA took much of the 2006 - 2007 financial year to finalise. The DA for the Darlinghurst property was not granted and was deemed refused, from which Maygood Australia appealed to the Land and Environment Court, where an appeal was heard on 19 and 20 February 2007 and dismissed on 29 March 2007. Maygood Australia then lodged an appeal under the Environmental Planning and Assessment Act , s 56A which was in turn dismissed on 27 June 2007.
Maygood Australia spent much of the 2007-2008 financial year dealing with the third amended DA, which was ultimately approved by the Land and Environment Court on 10 April 2008. Maygood Australia lodged its further amended DA in the second half of 2007 which was then deemed refused. Maygood Australia appealed to the Land and Environment Court, where it was heard on 18 and 19 February 2008 and approved on 10 April 2008. This brought to an end Maygood Australia's various attempts to obtain more favourable development ratios for the Darlinghurst site.
The Chatswood properties. Maygood Australia's acquisition and development decisions about the Chatswood properties occurred within a much shorter time frame than the Darlinghurst project, only spanning the period October 2006 to March 2007.
Mr Yehan Koo's encounter with the Chatswood properties almost precisely coincides with the commencement of the time period during which it is alleged he and Mr Tsung-Te Lee discussed the $1 million loan ultimately made in December 2006. Mr Yehan Koo made enquiries with the agent selling the Chatswood property on 13 October 2006. Mr Yehan Koo discovered the property himself and in my view was keen to advance its development himself as it was one for which he could claim responsibility and credit for his success. On 1 November 2006 Maygood Australia submitted an offer for $6,133,000 to the purchase of the Chatswood properties, revised its tender price to $1,900,000 on November 2006. On 13 November 2006 St George Bank offered a loan facility to Maygood Australia to pay the 10 per cent deposit on the Chatswood properties. In the second half of November 2006 Yehan Koo was informed that Maygood Australia's prospects of winning the tender for the Chatswood properties would increase if it included an offer to purchase an adjoining property in Claude Street, Chatswood, adjoining the Devonshire Street properties, which Maygood Australia agreed to do, offering $1.3 million for this property on 23 November 2006.
On 28 November 2006 the Willoughby City Council resolved to sell all the Chatswood properties, the Devonshire Street properties and the Claude Street property to Maygood Australia and on 12 December 2006 Maygood Australia was advised it was the successful bidder for the combined Chatswood properties.
Sino paid the $700,000 to Maygood Australia's St George account on 13 December 2006 and the balance of $300,000 into the same account on 19 December 2006. After Yehan and Yi-Fawn left Sydney for Shanghai on 19 December 2006, on 20 December 2006, Maygood Australia exchanged contracts for the Devonshire Street property for the Chatswood properties. On 8 March 2007 St George Bank provided details of a facility offer for the acquisition of the Chatswood properties. On 19 March 2007, Maygood Australia settled on the purchase of the Chatswood properties and entered into an option to purchase the adjoining Claude Street property. Yehan Koo set in train preparation of plans for the development of the Chatswood properties. These were in a sufficiently complete state that I accept that Yehan and Yi-Fawn were able to show them to Mr Lee during the couple's visit to Tai Chung in December 2007 - January 2008.
Other Matters
Both sides contended this was a case where the credibility of witnesses was of decisive importance. I have made sufficient findings about the credit of individual witnesses in the course of deciding the contested issues, so it is not necessary to set out general credibility observations about them.
The parties put in contest a very substantial number of conversations and facts. In order to decide the essential facts in issue and to determine the pleaded causes of action within a judgment of reasonable length, it has been neither necessary nor desirable for the court to determine all of these factual contests.
Mr A Spencer of counsel represented the plaintiffs/cross-defendants in these proceedings. Mr Aldridge SC and Ms F Sinclair represented the defendants/cross-claimants. Neither side was wholly successful in the allegations made. But that was not for want of diligence on the part of any legal representatives, in what was a very well prepared and presented case on both sides.
A number of the corporate documents tendered on the Lee side of the proceedings were dated in accordance with the Taiwanese (Minguo) calendar, which operates with a different structure to the conventional Western (or Gregorian) calendar. For easier reference I have reproduced dates that appear in accordance with the Taiwanese calendar, so that they conform in this judgment to the conventional Western calendar. The difference may be shortly explained. The Taiwanese calendar only commences in 1912 after the end of the Qing Dynasty and upon the election of Dr Sun Yat Sen in the first year of the Republic of China. Thus, to obtain the Minguo year, one subtracts 1911 from the Gregorian year. So 2012 is the 101 st year of the Republic of China (2012 minus 1911) in the Minguo calendar.
(2) The Sino Proceedings - The $1,000,000 Transfer
In relation to the Sino proceedings it is necessary to make findings about the conversations that took place between the parties during October to December 2006, about the signing of the written Loan Agreement in Shanghai on 20 December 2006, about Maygood Australia and Sino's financial accounts after December 2006 and finally about loan statements Mr Yehan Koo gave to Mr Tsung-Te Le in 2007. This section then deals with the effect of those findings on the causes of action which Sino has pleaded.
The October 2006 Conversations
Sino's contention is that conversations between members of the Koo family and the Lee family in October to December 2006 resulted in an agreement to make a loan advance of $1 million to Maygood Australia. But assessing the merits of Sino's contention is complicated by the fact that there are actually three streams of conversations to be assessed in this period. First there are conversations between Yehan Koo and Mr Tsung-Te Lee that Sino says constitute a binding oral agreement for the loan advance. There is strong conflict between these two versions. Next there are conversations between Mr Harry and Mrs Geen Koo and their son Yehan. This stream essentially supports the Koo family's version of events. The Court's findings in this section are that this stream of conversations may be partly accurate but they are impossible to reconcile with the Koo family's conduct with respect to Maygood's accounts and for that reason I discount them. Finally there is a stream of conversations between Yehan Koo and Yi-Fawn Lee. It is necessary to make some credit findings in respect of all of these conversations to make sense of what happened during this period.
The Yehan Koo - Tsung-Te Lee Conversations
The first key issue in the Sino proceedings are conversations between Mr Tsung-Te Lee and Mr Yehan Koo in October 2006. Mr Lee and Mr Koo recall these conversations very differently. Mr Lee's version supports an oral loan agreement between Sino and Maygood Australia. Mr Koo's version suggests the making of preparations for a $1,000,000 gift in December 2006 to the couple. Whilst there are problems with both versions I prefer Mr Lee's version.
Mr Lee says that he had the following conversations with Mr Koo:-
"Further Conversation with Yehan
25.A few days after the telephone conversation I have spoken out above, I was telephoned again by Yehan from Sydney. We had the following conversation:
Yehan: 'There is now an investment opportunity in Chatswood. A Council Car park and the house next door to it are up for sale. It is on Devonshire Street, Chatswood. We would like to buy it and build multi-storey apartments on the land. Chinese people like to live in apartments. The government is expanding this area, and the area also needs more apartments. They are building a new train station and train line nearby. The apartments we want to build are very close to the train station. It is only a few minutes walking distance away. Living in these apartments we are going to build here will be very convenient.'
Me: 'This sounds like a good project'.
Yehan: 'Would you be interested in this project? My company would like to borrow money from you to buy the land'.
Me: 'How much is the land for sale? How much do you need to borrow?'
Yehan: 'There is no sale price, it out to tender. But we think it will cost over $6 million. I only need to borrow about one million dollars. My father and mother will put up the rest.'
Me: 'That is a lot of money. When will you repay it?'
Yehan: 'The longest it will be is 5 years but I think we can finish building very quickly. Once it is built, I will return you the money straight away. If we don't build within 5 years or sell the land, I will also return you the money'.
Me: 'One million dollars is a lot of money. How will your father and mother put up the rest of the money?'
Yehan: 'We will use this land as security for the loan from a bank. My father and mother also have their own property, they can use as extra security.'
Me: 'Let me think about it'.
Further Conversation with Yehan
25.A few days after this telephone conversation in mid October 2006, I was telephoned again by Yehan from Sydney. We had the following conversation:
Yehan: 'Have you considered lending me money to buy the land'.
Me: 'Yes. I have thought about it. I think 5 years is too long.'
Yehan: 'I think we can finish building the apartments and sell them within 2 years. If we end up not buying the land at Chatswood, I will return the money to you.'
Me: 'Are you sure it will be that quick? What happens if you run into problems and don't start construction?'
Yehan: 'How about if we don't start construction within two years, I will return the money to you with interest'
Me: 'How will you fund the construction?'
Yehan: 'We will sell these apartments off-the-plan and use the proceeds to fund the construction'.
Me: 'What about security, can you give me any security for the loan?'
Yehan: 'I don't have anything to give you to secure the loan. You have to trust me. My father and mother are helping me, and they have a lot of property. There won't be a problem. Maygood Australia Australian is only me and my parents. Also, I will pay you 10% interest a year.'
Me: 'Give me a few more days to think about it'.
Further Conversation with Yehan
25.A few days after the conversation set out above, I was telephoned again by Yehan from Sydney. We had the following conversation:
Yehan: 'Will you be lending us money to buy the land in Chatswood? It is a very good opportunity for us, and I will pay you 10% annual interest, this is a good investment for you too.'
Me: 'Ok, I will help you. I will lend you the money for two years. The annual interest is 10%. After that, unless we agree to an extension you must repay me. The loan is unsecured and is very risky for me. I am helping you only because my daughter has married you and you have said you are doing the project with your father and mother.'
Me: 'I want you to pay me interest monthly. It is necessary for young people to realise the importance of money and have the pressure to perform.'
Yehan: 'Money will be tight. I cannot afford to pay you interest monthly. The loans we have had here in the past have had interest capitalised by the banks.'
Me: 'You should really pay me interest monthly'.
Yehan: 'This is a very good opportunity for me. My father and mother have been in property development for a long time. They are doing this project with me'.
Me: 'If you are not giving me security, this land cannot be used to secure any other debt'.
Yehan: 'Yes, it will not be'.
Me: 'I will lend to you through Sino Synergy Synergy. You don't need to pay me monthly interest. You can pay me all of the interest together with the one million dollars but you will need to provide the company quarterly statements of the outstanding balance. If Maygood Australia doesn't buy the land or it doesn't start construction within two years it has to pay the money straight back'.
Yehan: 'Thank you, I will work hard. Please don't worry; the money can be repayable earlier upon either one's request. I will write this in a contract. I will be seeing you in a few days in Shaghai over Christmas and will put everything we discussed and agreed to into a contract for you to sign then. But can you transfer at least $700,000 to me as soon as possible? I am taking a long time off over Christmas and would like to have the money in place first before I leave'.
Me: 'Okay. I will transfer $700,000 as soon as I can. Make sure all of the conditions we have agreed are in the contract'."
Yehan Koo's account of this period is quite different from that of his father-in-law. According to him there is no direct telephone or other contact between the two on the subject of the $1 million advance until 12 December 2006, the day that Laing & Simmons, real estate agents advised Maygood Australia that it was the preferred tenderer for the Chatswood properties. According to Yehan, Yi-Fawn told him in mid October 2006 of her parents' interest in the Chatswood property after she had told them about it. He says that Yi-Fawn made clear that the money would be gifted to them as a couple. These conversations between Yi-Fawn and Yehan are set out later in these reasons. According to Yehan, apart from further conversations he had with his parents and Yi-Fawn about the subject, he did not have any communication whatsoever with Mr Tsung-Te Lee about this subject until 12 December 2006, the date that Laing & Simmons told Maygood Australia that it was the preferred tenderer for the Chatswood properties.
Throughout his evidence Yehan maintained his denial of any communication about this subject with his father-in-law until 12 December 2006. According to Yehan all the communications between himself and Mr Lee preceding the funds transfer occur on that day and the following day. A condensed version of his evidence about the events of 12 and 13 December 2006 follows in this and the next two paragraphs. When Yehan tells Yi-Fawn of the successful tender she volunteers "I will call my father and have him send over the money he promised us" to which he again insists "we don't need the money and if we are going to use it for Chatswood we don't need it until settlement", but Yi-Fawn persists. The next day Yi-Fawn says to him, as they are planning to go to Shanghai, "my father wants to transfer the money to us now before we go away". She expresses concern about such a large amount going to their joint account as a couple, and about "tax issues" and says "it would be better if I had the money transferred straight into your company account". Yehan discusses this altered proposal with his mother who again expresses resistance to the idea but ultimately acquiesces and gives Yehan the account details, which he passes on to Yi-Fawn, which she subsequently then sends on to her father.
There is no doubt that Maygood Australia's bank account details were communicated to Sino on 13 December. Yi-Fawn sends a somewhat terse email that morning to Yehan suggesting he turn on the family printer to print out these details, no doubt so they could be sent to Sino. About 3 pm on 13 December Yehan is informed by facsimile from Taiwan that $700,000 had been transferred from Sino to Maygood Australia. Mrs Koo inquires of Yehan later that day who the "Sino something" is, from whom Maygood Australia has just received the $700,000, to which Yehan responds, "I don't know. That probably is the money Yi-Fawn's parents are giving us. I will check with Yi-Fawn". His wife indeed confirms later that evening that it is the money Sino had sent and she then suggests that Yehan had "better thank my parents for it". She organises Yehan to call her parents with her on Skype saying to him, to anticipate his poor Mandarin, "Do you need me to tell you how to say it in Mandarin?" The Skype call then takes place. Yehan Koo said to his father-in-law over Skype, "Ba, thank you, thank you". Then Mr Tsung-Te Lee says: "Eh, congratulations to you. This opportunity is a good one for you guys. This place at Chatswood is a good one. Next year will be a good one for you with the little one coming, approval on Darlinghurst and this one as well " . The conversation then moves to Mrs Lee, who Yehan thanks. Then Mrs Lee says:-
"Don't say that. If we can't help our daughter and son-in-law, who are we going to help? I have friends who gave their son-in-law some money to do business and the son-in-law made a lot of money out of it for his family. We might as well give it to you guys since it is not getting much in terms of interest in Hong Kong. We hope that you make use of the money and earn plenty of money for your family, now that the baby is coming."
The conversation then concludes. Yehan was insistent that there was no mention of the money being loaned at any stage during this meeting and that there were no conditions attached to the transfer of the monies and no requirement that the money be repaid.
A number of aspects of Yehan Koo's account are inherently improbable. Yehan Koo's version includes Yi-Fawn's statement "I am a bit worried about a large amount coming into our account and any potential tax issues", apparently to explain why the money was transferred to Maygood Australia, when it had originally been, destined for him and Yi-Fawn. This is improbable. Yi-Fawn did not appear to the Court to be a person who would: (1) too readily put money her parents were giving to her and her husband into the name of Maygood Australia; or (2) be worried about receiving a large sum of money into her and Yehan's bank account. She denied any such conversation with Yehan and I accept her evidence as to this. Moreover, Yehan was unable to articulate what these "tax issues" were that his wife had in mind.
But it is also improbable that for a period of two months, from mid October to mid December 2006, Yi-Fawn would have been the sole line of communication to her father about the Chatswood project and yet be able to convey sufficient information of material interest to him that her father was prepared to decide to advance the precise sum of $1 million to the couple for the project without further consultation with his son-in-law. Just how and why Mr Lee came up with that precise sum on Yehan Koo's version is unexplained. Yehan knew considerably more about the project than his wife. He was negotiating with all the project stakeholders. Mr Lee seemed to be a prudent man. Despite his affection for his daughter I find it unlikely that he would have decided to make a gift of such a sum which would complement a larger investment that was so obviously controlled by his son-in-law's family, without first having some very clear conversations with his son-in-law. I accept Mr Lee's evidence. He did not simply invent the conversations he says that he had with his son-in-law about what he was proposing. The conversations of which he gives an account are entirely within character and just what would be expected of him.
The Attack on Mr Lee's Version . Mr Aldridge SC and Ms Sinclair, counsel for Mr Koo, attacked Mr Lee's version on the basis of what was said to be its improbable aspects. There were indeed several but despite these criticisms I accept Mr Lee's version as recorded above.
First, on Mr Lee's version, as Mr Aldridge SC pointed out, there was no discussion of the earlier Darlinghurst development. It was suggested to Mr Lee that this was absurd. It was said, that if Mr Lee was interested in investing in the Chatswood development he would have wished to know how the previous Darlinghurst development had progressed under the control of the Koo interests. But Mr Lee answered the point directly and without shifting position in evidence which I accept. He maintained the position set out in his affidavit that, there was no discussion about the Darlinghurst development. To the cynical observer Mr Lee's explanation for this, "because at that time Yehan Koo ask for $1 million just for Chatswood project, so that is why I didn't ask him other projects" might seem simplistic. But Mr Lee was quite insistent that he did not ask Mr Koo about other projects. Mr Lee was further confronted with the lack of commercial wisdom of not inquiring about the previous development and it was put to him that there was a risk that Yehan Koo was "a very bad property developer and he had lost millions at Darlinghurst". But Mr Lee replied to his questioner, "so there is a term, was a condition in the loan agreement that once they use the $1 million to purchase the Chatswood land they can't use this land as the security for other lands purchased and also they have to pay me 10% as the interest". I accept that this was Mr Lee's genuine reason for not inquiring further about the Darlinghurst development. Mr Lee smiled when Mr Aldridge SC asked him whether he liked to "lose money". He agreed that he did not. He also agreed that he did not like "to take unnecessary risks of losing money". But despite this admission he was adamant that he did not see the need to ask about the Darlinghurst development because, as he explained: "$1 million would be just for the Chatswood project"; and Mr Koo "would not use this amount of money as a security for other loans". I accept that he did not ask about the Darlinghurst project and these were his genuine reasons for doing so.
Secondly, Mr Lee was challenged as to why if he was making a genuine commercial investment, he was not interested in the budgets or plans for the Chatswood development. But in my view, Mr Lee's desire to receive only limited information about the Chatswood development is not entirely surprising for both commercial and family reasons. Mr Lee had what he regarded as sufficient background information. He had a general idea of the location of the Chatswood development north of the Sydney CBD. He was aware at that time that Chatswood was an expanding transport hub and that many people of Chinese descent already lived in the area. He had recently stayed himself in a serviced apartment in Chatswood. Next, Mr Lee knew from Yehan Koo that the rest of the $5 million in capital to be invested in the $6 million Chatswood development was coming from the Koo family. He was content with the assurances that he had received from Mr Yehan Koo that his risk on the project was limited, in part because his interest was only one sixth of the total. The Koo interests were at greater risk of capital loss on the project than he was and therefore had a greater incentive to avoid a loss. In addition, Mr Lee's risk was also contained because he accepted Mr Yehan Koo's assurance that the Koo's could not use the property as security for any other project. I will return to this reason shortly. Finally, to the extent there was any residual risk for Mr Lee, he thought he would be compensated for that risk by a premium interest rate of 10%. The best interest rate he could derive on his capital in Taiwan was 3%-4% and up to perhaps 5%, if the investment was made in Australian dollars. Mr Lee gave every indication of prudent commercial habits and in my view his failure to inquire about these other details was not accidental.
Thirdly, Mr Lee was crititcised for discussing the advance of and then advancing the $1,000,000 with inadequate security, indeed he only had the written Loan Agreement, which was never checked by lawyers. Mr Lee dealt with this issue of security with a calculated indirectness that, to the Court's observation, penetrated clearly through the translation of his Mandarin dialect into English. Mr Lee explained "At the beginning I ask for the - at the beginning I ask Yehan Koo to give me something like securities because this land has been sold by a kind of auction, but tender auction" [emphasis added]. His answer revealed that part of his security for the loan advance was knowing that the value of the property being developed had resulted from a public tender process. But Mr Lee asked Mr Koo for what he, Mr Lee, described as "something like" a formal security. This glancing reference to formal security is what would be expected in this family situation. His relationship with the Koo family was still developing. Ensuring a steady pace of development of family trust was an understandable objective. But Mr Lee's natural caution prompted the idea that a formal token of security should be given. Thus, the written Loan Agreement came into existence. This background explains some of the unusual characteristics of the written loan agreement, which did not conform perfectly with the oral Loan Agreement, an issue to which the Court will return. But this attitude also reveals more about Mr Lee's wider outlook on these discussions with his son-in-law.
Mr Lee's Outlook on these Negotiations . This investment went beyond the purely commercial for Mr Lee, who faced diplomatic limits on what he could ask in an investment within the family. He did want to show commitment to the young couple's future by making the investment when he was asked. But an important part of his outlook was that he could not ask for too much formal security, or do anything that would have tended to indicate a loss of trust in his son-in-law. But he still wanted some protection. That is why in my view he asked for a written Loan Agreement and took part in the arrangements for its execution. Mr Lee struck the Court as a man of honour who felt it was important to comply with the request that his son-in-law had made despite the risk involved. The situation created subtle tension between honour and risk for him. Mr Lee chose the honourable if slightly risky course and decided to advance the money with a not very adequate loan agreement. So he obtained a commitment that the money would only be used on the Chatswood project. Obtaining this commitment from Mr Koo was his way of reducing risk.
Mr Lee's neglect in October 2006 of the detail of the oral loan agreement (and later the written Loan Agreement) was in my view quite deliberate and was part of this outlook. It was not inconsistent with Mr Lee's version that he had made a genuine loan agreement. This finding also blunts counsel's other attacks on Mr Lee's approach to the Loan Agreement. For example, Mr Lee said that he was told that Mr Koo's "parents will sort it out" in relation to the other $5 million. Mr Aldridge SC and Ms Sinclair made what would otherwise be quite telling points about this statement. Were the Koo's to put in their own capital without giving a mortgage over the property to a financial institution? Were they to arrange borrowings from a bank, which would take security over the property? Mr Lee did not seem to know. Either way he saw his capital as fairly safe; safe enough to accept the slight risk of its loss as the price of not disturbing the growing rapprochement with the Koo family.
Mr Lee's general outlook on these negotiations also explains why he did not ask for budgets, floor plans, or photographs of the proposed development. Mr Lee's direct experience of the Chatswood area was enough to guide his commercial instincts. He explained that he did some research and said "In order to know more about the land I used the Google map to research through the internet and also I used to live in the serviced apartment in Chatswood and I was told his was next to". In my view he gained a general appreciation of the property from this level of research, which was sufficient for his purposes.
Mr Lee's outlook also explains his naïve sounding assumptions about what would happen if the land were to drop in value.
"Q. If, unfortunately, the land dropped in value, what was going to happen if Mr Koo's parents advanced 5 million and you advanced 1 million and there wasn't enough money to pay everyone back, who was going to get paid first?
A. INTERPRETER: I think they should pay me first.
Q. Did you just assume that that's what would happen, or was that discussed, or what?
A. INTERPRETER: Because this is kind of business behaviour, so we need, we do have a loan agreement between us. That's why I am sitting here today."
These answers really indicate, in my view, that Mr Lee just did not know how the loss would be shared, if the land dropped in value. He only had a general expectation that the Koo's would bear the loss in value but that the loan agreement would nevertheless be honoured.
Mr Lee's outlook further explains why he did not ask how much the Chatswood development would cost to build. It was suggested to him that the reason he did not ask was that he knew the advances were a gift. But in my view, from his limited inquiries, he expected the development to be profitable. Not inquiring about such detail was indirectly an expression of his confidence in his son-in-law and the Koo family.
The Ngai Geen Koo - Yehan Koo Conversations
Mr Yehan Koo's account of the conversations he says he had with his mother and father were different in tone and content to those that Mr Lee says that Yehan Koo held with him. The conversational narrative between Mr Yehan Koo and his parents on the subject of money from the Lee family for developing the Chatswood properties starts in mid October 2006. The early part of this narrative can in my view be accepted. But the closer events come to December 2006 the more distorted Yehan's version becomes.
Mr Yehan Koo gives an account of his father being interested in the Chatswood properties as a development site but that Mrs Koo was colder on the idea. Mr Yehan Koo was also keen he says. Mr Harry Koo had looked at the site, applied his architectural and building skills and worked out a way to increase the development density of the site. According to Mrs Geen Koo both Yehan and Yi-Fawn approached the question of funding with the Koo's one evening at the dinner table, in a conversation that I accept took place:-
"Yehan: 'Mum since Dad can see the potential of this site, can you arrange for us to meet with Llew (Llew Leeming our Bank Manager at St George) and also Tony ( Tony Mizzi our former St George Bank Manager who now works for Capital Finance) so that we can discuss finance for the site if we decide to bid.'
Yi-Fawn: 'Yehan is very keen to get another project. With the baby coming Yehan is willing to work hard for us. He does not have much to do lately, just waiting for approval for the Darlinghurst DA.'
Harry: This is not a bad site. I think I can increase the FSR over the 1.5 to close to 2.
Geen Koo: 'Since everyone is so keen what can I say? We can contact Llew and Tony to-morrow'."
Much of this in my view can be accepted.
The next day Yi-Fawn discussed the development with her mother-in-law, according to Mrs Geen Koo. Mrs Koo says that her conversation with Yi- Fawn Lee was in the following terms:-
"Geen Koo: 'Yes, you are right. I really don't want to put in a bid.'
Yi-Fawn: 'Why?'
Geen Koo: 'I think the timing is wrong. Darlinghurst is not approved yet. You and Yehan are still young, you have plenty of time to find a good site. Besides with the baby coming, I want to spend more time with the grandchild.'
Yi-Fawn: 'Yehan is very enthusiastic about it and it sounds like a good opportunity. He wants to work hard now that the baby is coming.'
Geen Koo: 'Let's give it more thought'."
This conversation can also be accepted as taking place, in my view.
There the matter rested for approximately a week, when according to Mrs Geen Koo, her son revealed for the first time that Mr and Mrs Lee were proposing to advance money to help fund the Chatswood project. Mrs Koo explains, on her version, which in my view can be accepted, that her son, Yehan then described the Lees' proposal to his parents and he received their clear reaction to the idea:-
"Yehan: 'I have not mentioned this before, Yi-Fawn's parents are keen to give us about a million dollars to put into Chatswood.'
Geen Koo: 'We already have the finance from St George and Tony is also keen to give us the money. We are OK with the funding. We don't need the Lees' to put in money. It could become complicated because we are in-laws and we don't want any relationship foul-up. With the bank we know where we stand. I would rather not do the project than have the Lees put money in.'
Harry: 'You are right, remember the time we had some equity partners? It was so complicated that we ended up in court. We don't ever want equity partners again.'
Yehan: 'No, Yi-Fawn's parents are keen to give Yi-Fawn and I the money since the baby is coming. We will be the ones putting the money into the project.'
Geen Koo:- 'It is up to you but best for you to think about it since we don't need the money and we don't need equity partners.'"
But this version is very different from the loan, which I have found Yehan and Mr Lee were discussing. How is this difference to be reconciled? Yehan Koo knew how his parents would react to this idea. But he softened it and presented it in more general terms as a gift. Perhaps he thought it might make the idea more palatable to his parents. I do not think he was misleading his parents because at this point the idea between he and Mr Lee was still inchoate.
According to Mrs Geen Koo, at this stage neither she nor her husband committed one way or the other to putting money into the Chatswood project. Moreover they, like Yehan, say there was no further conversation on the topic of the Lee family supplying funds to the Chatswood project, until after the bid was accepted on 12 December 2006.
But before 12 December there was discussion between Harry and Geen Koo about what they thought Yehan and Yi-Fawn were proposing. Mr Harry Koo expressed doubts about whether the money would be coming at all. Mrs Geen Koo expressed reservations about whether the Lees' money should even be accepted as a gift for Yi-Fawn and Yehan because "it could become complicated". Mrs Geen Koo says that her husband overcame her reservations by reminding her about the Lees' perspective on the relationship of the young couple. She recalls her husband saying to her the following:-
"Harry: Do you think what Yehan said about the money
coming from Yi-Fawn's family is true?'
Me: 'How do I know. We don't need the money - Llew and Tony have both agreed to finance Chatswood even though Darlinghurst is yet to be developed. We would not proceed to tender unless we had an agreement from the bank to finance the whole purchase price. I do not want the Lee's money even if it is a gift for Yi-Fawn and Yehan. It could become complicated'.
Harry: 'The Lees always like to impress on us that they are very wealthy. We know they love Yi-Fawn very much and now with the baby coming they may want to do something for the young couple to help in their future'.
Me: 'Still getting this money can be troublesome.'
Harry: 'I think they really like Chatswood and may want to have an apartment to live there when they come to Sydney. We have to give them face. You know people from Asia, face is very important. We have done so much for Yehan and Yi-Fawn paying for everything and they have not done anything so far. Every time we saw them they kept telling us about their friend who helped their son-in-law with some money and it is better to give to the next generation while they are still alive.'"
Mr Harry Koo's advocacy seems to have persuaded his wife at least to be open to the idea that money from the Lees should be accepted in some form. When it finally emerged that the money was about to be received Mrs Geen Koo did not seem to resist its receipt as she had before. But by then Yehan had committed herself to a loan transaction with Mr Lee.
Thus, if these two versions are each to be accepted, within two parental households, the Lee's in Taiwan and the Koo's in Sydney, very different views had developed about the $1 million advance. In Taiwan the Lees thought that they were lending money for a development conducted by the young couple. In Sydney the Koos thought that the Lees were giving the money to the young couple for them to use at their discretion in the Chatswood project. Neither Mr Harry Koo or Mrs Geen Koo appeared to the Court to be consciously distorting their evidence to this point as to what Yehan and Yi-Fawn said. But their version is inconsistent with the Maygood Australia's financial accounts for subsequent years, which show the $1 million as a liability to Sino. Moreover, subsequent aspects of Yehan's conversations with his parents, on both his version and their versions, seem inherently improbable.
There is surprisingly little said in the evidence of Mrs Geen Koo and Mr Yehan Koo about their exchanges in November and December 2006 concerning the money from the Lee family. Mr Harry Koo adds almost nothing. What they do say about this period is unsatisfactory. According to Yehan Koo the subject comes up again between himself and his mother the day that the money comes in from Sino, 13 December 2006. He says that he asks his mother for Maygood Australia's account details because, "Yi-Fawn's parents want to transfer the money they are giving us and we think it best the money goes direct to the company account". His mother is said to protest that there is "no need for the money" because there are bank funds and "if you both want the money in that account why so early? It will be a long time until settlement". Mrs Koo apparently then acquiesces in her son's explanation, "Yi-Fawn wants it done now before we go away". Mrs Geen Koo's version is very similar.
I do not accept this is what happened. It does not make sense at several levels. I do not accept that in this family that Mrs Geen Koo would have simply given way to what Yi-Fawn wanted, in spite of her doubts. Mrs Koo did not strike the Court as someone who would comply with her daughter-in-law's demands for instant action. Geen Koo was a commercially astute independent minded person. In my view, about this time Yehan Koo did explain to his parents that the funds were coming from the Lee family, were being loaned on fairly favourable terms, and that Mr and Mrs Koo did acquiesce in that because it was commercially advantageous and because Yi-Fawn and the Lee family were keen to offer it.
Mrs Koo says that later that day, when Sino communicates the $700,000 as being sent to Maygood Australia, she says to her son, "who is Sino?" to which he replies, "I don't know. No idea. This must be the money that Yi-Fawn's parents are giving us to put into the Chatswood project". I do not accept that Yehan Koo said this or that Mrs Koo recollected that he did. By then Yehan Koo knew exactly what Sino was. Yehan was proud of his entrepreneurial skills. In my view would not have given such a clueless and disorganised response to his mother. Even on his own version he had communicated the Maygood Australia account details to Sino and would have been sure that this was the amount. Moreover, Yehan does not give an account of how he later confirmed with his mother that the money was indeed from Sino. If their version is correct there must have been further conversations showing how they verified that the sum was what was anticipated. No adequate account of these other conversations is given.
Finally, Mrs Koo says that on 18 December 2006, just before Yehan and Yi-Fawn left to go to Shanghai, the balance of the funds came in and Yehan said to her, "since the money has arrived from Yi-Fawn's parents, just use it for the deposit for Chatswood. It is a gift from Yi-Fawn's parents and we would like to use it for Chatswood". Mrs Koo does not record a response to this. This is extraordinary given that the amount of $1 million by then received, which her son was asking her to apply to the deposit to the Chatswood project, represented a conflict with all her principles about going into investments with partners. According to her, the matter had really been left up to Yehan. All Yehan now said to her was "we would like to use it for Chatswood". This statement suggests that the couple would be lending it to the project. Mrs Koo does not seem to enquire any further. I do not accept that is what happened. In my view, Geen Koo was reluctant to take on partners in the Chatswood development. Further I find at about this time Yehan Koo did give to his parents an explanation of the real nature of the transaction. The terms of that explanation are not entirely clear because both sides deny that the conversation occurred. That such a communication occurred is the probable explanation for Maygood Australia's subsequent accounts recording a loan from Sino as a liability.
The last stream of conversations that need to be examined in this period are those between Yehan and Yi-Fawn.
Conversations between Husband and Wife
The versions advanced by Yi-Fawn Lee and Yehan Koo are as different from one another as those of their respective families. Perhaps this is to be expected after a bitter separation and divorce. I mostly prefer Yi-Fawn's version of what passed between them.
Yehan's account is that he became aware of the Chatswood development site and discussed it with Yi-Fawn. His first discussion with his spouse revealed several recurrent themes that appeared throughout the conversations between them: the Lees wanted to advance a $1 million to support the young couple and were pressing the money on them; Yehan Koo was reluctant for the Lees to put money into the project because he knows of his parents' reservations; and, Yi-Fawn reassures him that the money will be given to them both and they will be the ones who will invest it rather than the Lees. The first conversation was said to have taken place on 14 and 15 October 2006 and was to the following effect:-
"Yehan:" 'I think that the site at Chatswood is a good opportunity but I am unsure whether we should proceed. It is very close to the centre of Chatswood and the train and bus interchange'.
Yi-Fawn: 'If you like it, you should bid on it'.
Yehan: 'The site is good but we still need to finalise the Darlinghurst DA. I am also hesitant because while we can afford it, it is not really fair on my parents to increase their support professionally, financially and time-wise. They came out of retirement to support and teach me about property development. Remember, they were already retired before we came back to Sydney.
Yi-Fawn: 'My parents also want to help us - they have converted money and have one million Australian dollars ready to give us for our future. The money is sitting in term deposits in Hong Kong earning hardly any interest, less than 3 per cent. Your parents have already done a lot. I told my father about the Chatswood site and he really likes the area and thinks it has good potential. This is exactly the sort of thing that my parents have been wanting to help us with. They have told me that the money will be ours whenever we want. Anyway, better that we get it from them now rather than having to wait for it to come as inheritance. I will ask them for the money and then we can put it into the project'.
Yehan: 'I don't think that I want your parents putting any money in'.
Yi-Fawn: Don't worry, the money is ours so we will put it in".'
Yehan Koo then gives an account of the conversations he says he held with his father and mother. The tenor of these conversations as Yehan recounts them is consistent with Harry and Geen Koo's versions. On Yehan's account he presses upon his parents his continuing interest in the Chatswood project but they express repeated reluctance to come out of retirement and take on another project.
Yehan Koo says that he then took his parents' doubts back to his wife and they confront together the problem of the Lees wishing to advance money to the couple. He recalls a conversation taking place with Yi-Fawn on 18 October 2006 to the following effect:-
"Yi-Fawn: 'How did you go with the property at Chatswood and talking to your parents?'
Yehan: 'My parents are not that keen on bidding on the property at Chatswood. They are concerned that Darlinghurst has not yet been approved.'
Yi-Fawn: 'Your research and work has shown that it is a good opportunity. Did you tell them about the money that we will put in? My parents are keen to support us, They want to help us as they have seen all that your parents have done. They are so excited that the baby is on its way.'
Yehan: 'I haven't yet told my parents about the money but they don't want or need any money. They have had issues with equity partners before. They don't want anyone having any say in their projects'.
Yi-Fawn: 'Sure, whatever. The money is being given to us anyway, and we will be the ones putting it in, not my parents. I want to encourage you to work hard for our family, especially because we will have a little baby soon. Isn't this exciting? You need to go and make a lot of money for me and the baby!'
Yehan: 'OK, let me do some more work on the feasibility and talk to my parents further. Let's not get too excited, ok? Let's see if I can get a bid in'."
By 24 October 2006 Yehan Koo and the Koo family appeared to have in principle support from St George Bank, for proceeding on the development. It was then, 25 October 2006, Yehan recalls another conversation with his wife in which he explained to her that he has spoken to his mother. He recollects Yi-Fawn saying "my parents are still keen to give us the money so I will get the money over. Even if the bid is not successful there will be other good sites". Yehan says that he re-iterated that the money from the Lees is not needed because the financing is available for the Chatswood project.
It is evident from Yehan's version of the conversation with his wife on 18 October 2006 he had not yet told his parents about the monies the Lees were offering. On his own version he was reluctant to do this. Consistently with his parents' account he says that he first raised the matter with his parents on 25 October 2006 when the following conversation took place:-
"Yehan: 'Yi-Fawn's parents want to give Yi-Fawn and I some money to put into the Chatswood project. I think that it will be about one million Aussie dollars'.
Geen Koo: 'We don't need it. You know I am against making the bid abut since you put the 'I would be an investment banking MD now' argument to me, I will support you. We have had partners in the past and it has always ended badly. We don't want any future problems with the in-laws. I would rather not do the project than have them put money in'.
Harry: 'We have had problems with partners in the past and don't want any partners in future projects. We also don't want to borrow from Yi-Fawn's parents. That could be troublesome.'
Yehan: 'No, the money will be given to Yi-Fawn and I and we will put it into the project.'
Geen Koo: 'It is up to you but we don't want any partners and we don't need the money'."
The end of this conversation was, in my view, an important turning point. According to Yehan Koo once he represented to his parents that the money would be given to Yi-Fawn and to him, for them to decide to put into the project as their own funds, Mrs Geen Koo then left it up to Yehan to decide what to do; as she said to her son "It is up to you". But she gave him the general admonition that he should remember that "we don't want any partners" and that the Koo family did not need the money; and, that borrowings could be "troublesome". This far, in my view, Yehan Koo's evidence can be accepted as to what he and Yi-Fawn discussed. But once the narrative gets to November and December 2006, Yi-Fawn's account makes more sense.
Yi-Fawn's version also had its problems. She says that once the Chatswood project came to her attention in October 2006, that her husband raised with her the possibility of Mr Lee lending Maygood Australia about $1 million. She says that she was reluctant for this to happen but invited him to speak to her father. I do not think she was as reluctant as she says. In my view, she regarded her father as a man of substantial wealth and she welcomed a contribution from her family to the couple's expected material success. But on her account, which in my view is in this respect correct, Yehan does take up the invitation to speak to her father. I accept her version that by about late October Yehan reported to her that her father had agreed to lend Maygood Australia $1 million. This is a course that she encouraged in my view, although she denies that. But Yehan remembers none of the conversations that Yi-Fawn says took place about the transferring of the funds in December. On that I accept her evidence.
The clear impression gained from Yehan Koo's version of these conversations is that as between him and his wife and between him and his parents it was clear that the Lee family was giving the $1 million to the couple and that the couple were advancing it to Maygood Australia. It was only being transferred direct into Maygood Australia's account as a matter of convenience and to overcome Yi-Fawn's fears about tax issues.
Yi-Fawn's version of these conversations is to be preferred for a number of reasons. On Yehan's version transferring the money into Maygood Australia's account was a temporary fix that Yi-Fawn proposed to avoid taxation issues with the receipt. If Yi-Fawn did have those concerns one would expect her to have regularised the position not long after the couple returned from Shanghai. The transfer from Sino direct to Maygood Australia on Yehan's version was only ever a temporary convenience. Yi-Fawn was commercially sophisticated enough to have sought to set the financial record straight when she returned to Australia. On Yehan's version Maygood Australia still owed the money to him and to Yi-Fawn. If his version is right, one would have expected Yi-Fawn to raise with him and his mother the creation of some documentation that would record an advance from the couple to Maygood Australia. There would have been no obvious obstacle to this if Yehan is to be accepted. But that did not happen, because Yehan's version is wrong. Moreover, Yi-Fawn's lack of understanding of the so called tax reasons for Sino transferring the funds direct to Maygood Australia rather than to her and her husband did not seem to the Court to be feigned.
Before Yehan Koo and Tsung-Te Lee met to sign the written Loan Agreement Sino's corporate minutes record that it held a Board Meeting to approve the lending of the money to Maygood Australia, a meeting that Maygood Australia and the Koo's said did not take place.
The December 2006 Sino Board Meeting
Mr Lee waited until 12 December 2006 to call a board meeting to authorise Sino to send the money. Mr Lee was challenged that the remission of the $700,000 on 13 December 2006, was a long time after the conversation with Mr Koo in late October, discussing the proposal to remit the money to Mr Koo. But in my view the delay is not unusual in circumstances where Mr Yehan Koo was not coming to Shanghai until December 2006. Mr Lee said that he did not think it was necessary to call a board meeting in late October, even though he had agreed to send the money "as soon as possible". There was no difficulty in Mr and Mrs Lee, the Sino directors, calling a board meeting to authorise the transfer before 13 December. But they did not. I accept Mr Lee's explanation that he thought that the money needed to be paid before the family met together on about 20 December for a family holiday. I find that although Mr Lee felt bound by his word and the loan agreement to transfer the $1 million in funds, he was not especially anxious to make the transfer. It was an investment in part prompted by a family duty.
But in summary the fundamental issues was that Mr Lee was not minded to make a deduction for the July 2007 funds, because they were a gift.
The Koo's Need for Money and the December 2007 Loan Statement
The Lee interests strongly contended that in July 2007 Maygood Australia and the Koo family were in need of money. But the truth was the Koo family had substantial unencumbered assets. Whilst it is true that their cash flow position looked tight, and the Lee contentions did establish this, that partly explains why Mr Yehan Koo was thinking about selling the Lehman Brothers shares. It was not just for the purposes of looking after his own family but injecting some funds into Maygood Australia.
But I simply cannot accept that the Koo family, with the pride in their success that they had, would, as the Lee's would have it, have asked their in-laws for money rather than go to a bank and seek further accommodation. Their assets were so substantial that such an approach would not have been at all difficult.
Finally there is the question of the December 2007 Loan Statement. It clearly includes within it most of the July 2007 funds. The Lee's submit that this is inexplicable, if it was not part of a loan transaction.
In my view, the answer to this contention is quite simple. This is not a precise version of either Yehan or Yi-Fawn propounds in evidence but it is in my view what happened. Yi-Fawn insisted that a reference to the July 2007 funds be added into the December 2007 Loan Statement. There is quite strong evidence of marital discord by late 2007 early 2008. In my view, Yi-Fawn insisted that the July 2007 funds be added into this Loan Statement, because she did not know how the marriage was going to work out. In fact it failed within six months. I am conscious that this is not a theory that has been advanced by either side in these proceedings but from the various contentions and looking at the circumstances it is in my view what happened. The December 2007 Loan Statement was a legal document. She simply persuaded her husband to add to an otherwise legal document between Sino and Maygood Australia, other inter family gifts.
Mr Lee's Evidence
Mr Lee gave other evidence about how he reacted to the Koo's request for money, when he arrived in Sydney. Mr Lee was told the Koo's needed the money and that it had been paid. Mrs Lee regarded it as very unusual for Chinese families to ask their in-laws for money. Mrs Lee told Mr Lee she was unhappy about providing the money and Mr Lee was unhappy that it had been provided. I do not fully accept Mr Lee's evidence about this. In my view he had only received a confused account of what happened from his wife and his daughter and that there had already been some misunderstanding.
Mr Koo's Evidence
The Lee interests strongly submitted that Yehan Koo's evidence about the $300,000 advances was unsatisfactory, partly because he was prepared to mislead the St George Bank on the subject. When the decision was made to pay some accruing interest to St George Bank, with the $300,000 funds received from the Lee family, rather than to keep capitalising interest, he wrote to the bank and said "these overseas funds have been generated by my personal capacity as a corporate financial advisor". This was not strictly true of the transfer of $199,985 received from the Lees on 26 July 2007 that it was generated "as a corporate financial advisor". Mr Koo claims it was a gift from Mrs Lee and I accept that it was. But he accepted in evidence that to say what he did to the Bank was "a bit misleading". He was asked about his representing to the Bank that this payment was the proceeds of a commercial transaction and not, as he now says, a family gift and why he put it that way. His unsatisfactory response was " I don't remember". I accept that this was an honest answer. But although he did not articulate the explanation himself in evidence, in my view, given the Court's findings, his statements were not as misleading as the Lee's now suggest. In Mr Koo's mind at the time, the $300,000 was a substitute for the sale of the 4,600 Lehman Brothers shares. The fund for which the $300,000 was a substitute was in a loose sense "generated in [his] personal capacity as a corporate financial adviser [with Lehman Brothers]".
(4) The Cross-Claims - for jewellery and other funds
The remaining issues in these proceedings arise from the cross-claims in the Limei and Yi-Fawn proceedings. These cross-claims concern two groups of assets: gifts made at the engagement ceremony for the couple in Taichung on 30 October 2004 (the cross-claim in the Limei proceedings); and certain funds transfers that Yi-Fawn is alleged to have initiated in mid-2007 (the cross-claims in the Limei and Yi-Fawn proceedings). It is convenient in this section to deal with the claim in respect of the gifts made at the engagement ceremony and then the claims in respect of Yi-Fawn's 2007 funds transfers.
The Engagement Ceremony
In his cross-claim in the Limei proceedings Yehan Koo claims against Mrs Limei Lee (the second cross-defendant) the return of jewellery worth A$150,000 and cash to a value of USD$70,000, given to the couple on the 30 October 2004 at the engagement ceremony and allegedly wrongfully retained by Mrs Lee. This part of the cross-claim is not brought against Yi-Fawn, just against her mother. Determination of this part of the cross-claim requires a short account of the events of the engagement ceremony and the disputes about what was said and done at that ceremony.
The parties were readily able to identify the jewellery and cash that was gifted at the engagement ceremony. Mrs Limei Lee still had the jewellery within her possession at the time of the hearing. She took photographs of the jewellery (Exhibit C) shortly before the proceedings commenced. The jewellery is arranged in the photographs in front of a copy of the New York Times for Saturday 5 February 2011 with a banner headline reporting the early events of the 2011 Arab spring, "Egypt Officials Seek to Ease Mubarak Out". I accept the authenticity of these photographs and that Mrs Limei took them on the date indicated and that she still has the jewellery.
The jewels, said to have been contained in boxes, were described in detail in the cross-claim. The pleaded description generally corresponded with the photographs in Exhibit C. The parties did not argue about the precise identification of the jewellery, the approximate value of which was $150,000. The cross-claim identifies the jewellery by type and specifies, in most cases, a minimum number of jewels of that type. An abbreviated description of the jewellery follows: (1) one set of expensive green jade earrings and pendant/chain set in diamonds and white gold; (2) one set of green jade pendant/chain with matching jade/gold bracelet; (3) two separate jade pendants; (4) a two strand pearl necklace; (5) a one strand red Taiwanese coral necklace; (6) at least seven rings set in diamonds or pearls or red Taiwanese coral or other precious stones; (7) at least six sets of earrings set in diamonds and precious stones or red Taiwanese coral; (8) at least 10 gold chains some with diamonds/jade pendants; and (9) at least five white gold and gold bracelets some with diamonds.
The engagement ceremony in Taichung was an elaborate affair structured around the traditional Chinese tea ceremony adapted for such occasions. The critical differences in the two families' accounts of the handling of the jewellery at this ceremony are: the Koos say that the jewellery was given to the couple but the Lees say that it was the bride's jewellery, which was being put on display for a particular purpose at the ceremony and remained hers afterwards. In relation to the cash, Yehan Koo says that it was given in part (as to USD$20,000) to him and the rest (USD$50,000) to the couple. The Lees agree with him as to the USD$20,000 but say that the USD$50,000 was Yi-Fawn's.
I have reached the view that the Lee family witnesses gave a more reliable account of what happened at this engagement ceremony for several reasons. The Lee family were far more closely involved in organising the engagement ceremony and presented to the court a deeper understanding of its local Taiwanese cultural nuances, an understanding that did not seem to be shared by the Koos. In contest about what happened at the ceremony, Mr and Mrs Lee gave clearer and more credible evidence. Mr and Mrs Lee's version has also a greater inherent probability to it, particularly in relation to the jewellery. It seems to the Court quite improbable that Mr and Mrs Lee would before the wedding give to the couple jewellery that I accept had been accumulated for Yi-Fawn over many years. Yehan Koo had no obvious personal use for the particular jewellery depicted in Exhibit C. The Lee's version is also supported by the text of Exhibit B, an independent translation from the Hokkien dialect of the relevant part of a DVD video recording taken at the engagement ceremony. I accept Mrs Limei Lee's description of the engagement ceremony.
Mrs Limei Lee explains in evidence that in Taiwanese custom there is a formal presentation of gifts to the engaged couple by the intended bride's and groom's families. In addition there is presentation by the intended bride's family of items that the intended bride owned prior to marriage. The ceremony involves a presentation of gifts to the intended bride and groom by the respective families and a presentation of money or objects that belonged to the intended bride. Mr and Mrs Lee organised a family friend, Mr Zhang Zhiming, to be the master of ceremonies to introduce all the guests and to oversee the progress of the whole ceremony.
The occasion commenced with a traditional tea ceremony during which Yi-Fawn, accompanied by a friend of her mother's presented small cups of tea to members of the Koo family. All of the guests receiving tea, put inside the teacups a red packet containing a small amount of cash.
After the tea ceremony the master of ceremonies said that Mr and Mrs Lee had provided USD $20,000 for Yehan, which Mrs Limei Lee unwrapped from a red cloth packet and gave to Yehan. The master of ceremonies then announced that there was USD $50,000 which "Mr and Mrs Lee have prepared for Yi-Fawn". He also announced that Mr and Mrs Lee "have prepared jewellery for Yi-Fawn which they have collected since Yi-Fawn was a little girl". I accept Mrs Limei Lee's evidence: she had indeed acquired this jewellery as Yi-Fawn grew up and had collected it to be given to Yi-Fawn when she was an adult and possibly at her wedding. Mrs Lee says the jewellery had been taken from the Lee's house before the ceremony and was returned to the house afterwards for safekeeping then to a place that the daughter and mother identify in their evidence.
As to the USD $70,000 cash, Mrs Lee says that Yehan Koo took away the USD$20,000 with him back to the hotel at which he and the Koos were staying in Taichung. As to the remaining USD $50,000 Mrs Lee says that it remained on a table in their home for a period and then either she or her husband consigned it for safekeeping to a place which Mrs Lee identifies in her evidence. I accept the correctness of this account.
Mrs Limei Lee concludes her description of the engagement ceremony by explaining that the small red envelopes containing cash presented to Yi-Fawn by the other guests during a tea ceremony were left at the Lee's home after the engagement party.
Mrs Lee's account is supported by Exhibit B, a translation of the engagement ceremony recorded on DVD. The same independent NAATI registered interpreter, who interpreted the evidence of Mr and Mrs Lee in the proceedings, Ms Ana Zhao, undertook the translation. At the time of trial there was a shortage of Hokkien dialect interpreters in New South Wales. Ms Zhao was a Mandarin specialist but with somewhat less specialised knowledge of the Hokkien dialect. But I was well satisfied from my observations of the interactions between Mr and Mrs Lee and Ms Zhao that she could deliver a sound interpretation to the court of the Lee's evidence in the Hokkien dialect. There is another translation of the DVD from Dimo Galiungi and Associates, which is not different in substance from Exhibit B, but to the extent there are any differences I prefer Exhibit B because of the opportunity that the Court has had to see the work of Ms Zhao.
Ms Zhao's translation (Exhibit B) of the engagement ceremony DVD records the USD$20,000 being described by the master of ceremonies as "...a gift to Yehan Koo", about which Mrs Lee then says to her future son-in-law "Buy whatever you like". To this Yehan responds "thank you mum".
Exhibit B then treats the jewellery and the USD$50,000 in cash quite differently to the USD$20,000 for Yehan. According to Exhibit B the master of ceremonies announces, "Mr and Mrs Lee also prepares some jewelleries [sic] and USD50,000 for Yi-Fawn Lee. The USD50,000 for Yi-Fawn Lee to buy what she likes. They prepare a lot of jewelleries [sic]". Mrs Lee then says "Since she was very young", supporting Mrs Lee's narrative that the jewellery had been collected for Yi-Fawn over a long period, commencing in her early childhood. Then the master of ceremonies says, "This is for Miss Yi-Fawn Lee", again supporting Mrs Lee's narrative of the making of gifts to Yi-Fawn alone. An important omission from the events surrounding the giving of the jewellery and the USD$50,000, is any clear "thank you" from Yehan, yet another indicator that he did not perceive that he was receiving a gift of these items in the way that the USD$20,000 was undoubtedly a gift to him.
I do not accept Yehan Koo's evidence that the USD$50,000 and jewellery were gifts to himself and Yi-Fawn. I do not accept that Limei said to him in relation to the jewellery, "This jewellery...is being given to you both in celebration of your engagement." Nor do I accept that Limei Lee gave him any other indication that he was entitled jointly with Yi-Fawn to the jewellery or the USD$50,000. Yehan also says that Yi-Fawn said to him on the day of the engagement ceremony of the USD$50,000 "The money can be deposited and we can transfer it over when we need it." This may have been said, but if it was, Yehan Koo misunderstood its meaning. In this statement Yi-Fawn was referring to the money that she believed that she owned and controlled but which she would make available for the couple's joint purposes when it was needed at her discretion.
Mr and Mrs Koo support their son's version of what happened at the engagement ceremony. But for the reasons given, I also do not accept their evidence on this subject which is inconsistent with Mrs Limei Lee's evidence.
Thus Yehan's cross-claim in the Limei proceedings for the value of the jewellery (A$150,000) and the USD$50,000 fails. To the extent that he claims the USD $20,000 I find that he took that away with him and used it for his own purposes. This USD$20,000 was never left with Yi-Fawn or any other member of the Lee family.
Yi-Fawn's 2007 funds transfers
The parties are at issue about three funds transfers that Yi-Fawn initiated in mid-2007. There was no dispute that Yi-Fawn caused these funds transfers to take place. The contest is whether Yehan Koo, the relevant cross-claimant in respect of these funds in both the Limei and the Yi-Fawn proceedings, has any legal entitlement to recover the funds transferred pursuant to these cross-claims. The funds in issue are amounts of (1) A$62,000, (2) A$75,700 and (3) RMB 84,581.91.
St George Bank A$62,000 - the Limei proceedings
Yehan Koo claims against Yi-Fawn as a cross-defendant in the Limei proceedings the return of a sum of A$62,000 withdrawn by Yi-Fawn between 3 May 2007 and 3 August 2007 from either a St George Bank Direct Saver account (account number X107) or a St George Bank Freedom account (account number X982), which accounts were held in the joint names of Yehan and Yi-Fawn.
Yehan Koo's case is that when he and Yi-Fawn were married in the Australian ceremony in April 2005, that Mr and Mrs Koo and family friends gave them a number of presents including generous amounts of cash. These included a cheque for A$26,888 (a lucky number in Chinese tradition) from Mr and Mrs Koo and other amounts of cash from wedding guests (given in red packets in Chinese tradition) totalling A$12,516. Yehan says that after the wedding he and Yi-Fawn had a conversation in which they jointly decided that they could not take all this cash with them back to Shanghai. They agreed to open a joint bank account at the St Ives branch of St George Bank (Freedom Account X982). The sum of $41,126 was deposited to this account in late April 2005 within days of its opening. This amount deposited was slightly more than enough to account for moneys that Yehan Koo says were sourced from cash given to the couple at the wedding, and in my view it should be accepted it came from this source. From Freedom Account X982 the sum of $35,000 was quickly transferred to a higher interest-bearing account at the same branch of St George bank (Direct Saver account X107). After these deposits were made Yi-Fawn returned to Shanghai and Yehan focused on the Darlinghurst property.
Yehan Koo says that other monies were deposited to the Direct Saver Account X107, including A$8,000 that Mrs Limei Lee gave him in cash when he was in Taiwan with Yi-Fawn in April 2006. This is correct.
But Yehan says that there were a large number of transfers out of the couple's joint St George accounts between April and June 2007, with $64,000 being paid from the joint Direct Saver account X107 into the joint Freedom account X982 from which $59,000 was then transferred to accounts controlled by Yi-Fawn between 21 May 2007 and 3 August 2007. He says he was unaware that these transactions were taking place and that he would not have agreed to the transfer of joint account moneys into Yi-Fawn's own personal account, had he been aware of them.
Yi-Fawn admits her payment of this $59,000 between 21 May 2007 and 3 August 2007 to a number of accounts that she held in her own name. She says that between 29 April 2005 and 28 June 2007 she regularly received large amounts of cash from her parents totalling $89,923.62, which she banked into the Freedom account X982, an amount that significantly outweighs any contribution to the account by Mr and Mrs Koo.
I am not prepared to infer that these transfers were unauthorised or that Yi-Fawn was attempting to conceal them from her husband. Some of the moneys so withdrawn (about $23,000) Yi-Fawn redeployed (as Exhibit 10 demonstrates) to fund the $90,000 cheque she paid to Maygood Australia, and the subject of Yi-Fawn's claim for $100,000. No apparent motive is demonstrated for concealing payments from Yehan that resulted in funds being returned to his family.
Nor am I prepared to infer that Yehan Koo was unaware of them. Nor am I prepared to infer that even if he was unaware of them that he would not have authorised them had he been made aware of them. The timing of these transfers must be remembered. They coincide almost exactly with the period of turmoil and evidentiary confusion surrounding the birth of Ang-Ya, which I have already described. This was a time when Mrs Limei Lee was making a gift of $200,000 to the couple. It was also a time of considerable joy and generosity between the couple and their families. It is highly improbable in my view for Yehan now to say in the face of such generosity from the Lee family, that he would not have authorised these payments.
This part of Yehan Koo's cross-claim in the Limei proceedings also fails.
HSBC Account X833 - The claim for $75,700 in the Yi-Fawn proceedings
Yehan Koo claims in the Yi-Fawn proceedings the return of moneys that he claims were in accounts with HSBC that he owned and operated in Hong Kong and Shanghai before he and Yi-Fawn became engaged. He says that after his and Yi-Fawn's engagement that they both visited the Hong Kong and Shanghai branches where these accounts were maintained and he signed authorities giving her access to these accounts. Thereafter she assumed day-to-day control of these two accounts. I accept his account of this part of these events. Yi-Fawn Lee appeared to be a fiancée and then a wife who wished to exert some control over her husband's financial affairs. The dispute between the couple arises out of what she did with his control.
Yehan claims that Yi-Fawn withdrew A$75,700 between 14 May 2007 and 28 June 2007 from a Hong Kong HSBC Power Vantage Premier account (account number X833), by then held in the joint names of Yi-Fawn and Yehan. This total sum of A$75,700 was withdrawn in the following amounts on the following dates: $7500 on 14 May 2007, $9600 on 25 May 2007, $9800 on 29 May 2007, $9800 on 31 May 2007, $9900 on 4 June 2007, $9500 on 26 June 2007, $9800 on 27 June 2007 and $9800 on 28 June 2007. Yehan says that his wife was not entitled to withdraw these monies.
But in a curious twist of Yehan Koo's pleaded case, he also submits in his defence to Yi-Fawn's claim for the repayment of $100,000, that in making this payment to him she was only using his own money and that she is therefore not now entitled to its repayment. This court has found that the $100,000 claimed in the Yi-Fawn proceedings was not a loan by Yi-Fawn to Yehan. So it has become unnecessary for Yehan to field that defence to Yi-Fawn's claim. But all the same the money was actually paid. In my view Yehan Koo has successfully established through Exhibit 10 (a complex money trail diagram advanced in his Yi-Fawn proceedings defence) that the withdrawal of A$75,700 from the joint HSBC Hong Kong account X833 did fund, to that amount, the $10,000 and $90,000 cheques Yi-Fawn paid to her husband in July 2007. If the court had found these payments were a loan, then Yehan would have had a good defence at least to this extent. But I do not see how, in these circumstances, Yehan can now sue in his cross claim in the Yi-Fawn proceedings for the return of the sum of A$75,700, when he has demonstrated that he has received it.
In my view Yehan Koo's claim for repayment of the alleged unauthorised transfer by Yi-Fawn of A$75,700 from the HSBC Hong Kong account X833 fails.
HSBC Shanghai, Customer Account X404 - the claim for RMB 84,581.91 in the Yi-Fawn proceedings
Yehan Koo also claims in the Yi-Fawn proceedings the return of RMB 84,581.91 that Yi-Fawn withdrew in September or October 2007 from an HSBC Shanghai HSBC account (customer X404) held in Yehan's name. Yehan also alleges that Yi-Fawn has retained the benefit of this sum, which she was not entitled to do. The facts in contest about this withdrawal may be briefly stated.
Yehan Koo's HSBC Shanghai account X404 was closed on 27 September 2007. Its entire contents were transferred to another HSBC Shanghai account (customer number X986) solely conducted in Yi-Fawn's name. He says of this transfer "I was unaware that this was occurring." His case of unauthorised closure is answered by Yi-Fawn, who says that closure of the account and the transfer of the RMB 84,581.91 to her was discussed between them.
I accept Yi-Fawn's version of this discussion with her husband, who appears not to have remembered this marital discussion when he launched this part of the cross claim in the Yi-Fawn proceedings. Yi-Fawn commences her narrative, in December 2006, about nine months before the account closure. She says that her husband was concerned that his balance within this account was too low to maintain the account's "Premier" HSBC status and that he asked for a loan of RMB 100,000 " to park in my account so I can reach the minimum". She agreed to ask her father to transfer that amount from her account at HSBC Shanghai X986. Her father, who visits Shanghai and has property there, was authorised to operate his daughter's account. Mr Lee transferred the RMB100,000 to Yehan Koo's HSBC account X404. This seems a natural arrangement, as it coincides in time with Mr Lee readily authorising Sino to advance the $1 million to Maygood Australia.
Yi-Fawn Lee's narrative then continues with another conversation with her husband in September 2007 about closure of his HSBC Shanghai account. According to her he says to his wife that he wants to close this account in Shanghai "because I don't really use it". There is an inherent probability in this as Yehan Koo was juggling two developments in Sydney and looked less and less likely to be going back to Hong Kong. And I accept her evidence about it. I find they did ascertain together that there was about RMB84,000 left in the account at that time.
At this point the evidence becomes hotly contested. Yi-Fawn says she then reminds her husband, "Remember you still owe me RMB100,000." and Yehan Koo agrees to transfer the remaining balance to her. He says that is wrong because her father has already been repaid by deducting that amount before he remits the proceeds of sale of the Shanghai apartment to Yehan. Mr Lee did agree that the RMB100,000 had been deducted, but Mr Lee was quite insistent that it was agent's commission and not repayment of a loan. Yi-Fawn's evidence contradicted her father on this subject, as she seemed to think that the moneys withheld were to reimburse her father the RMB100,000. I prefer Mr Lee's evidence on this. The time of closure of the Shanghai HSBC account Yehan Koo still owed his wife RMB100,000 with which she would repay her father. In any event, I find that at his wife's request Yehan Koo ultimately signs the account X404 closure form on 27 September 2007.
Yehan Koo's case on the Yi-Fawn cross-claim that the closure of his HSBC Shanghai account X404 and that the transfer of this sum of RMB84,584.91 was unauthorised, also fails.
Conclusion and Orders
Accordingly, the Court has found for Sino in the Sino proceedings and for the defendants in the Yi-Fawn and the Limei proceedings. And the defendant/cross-claimants, the Koo interests fail on their cross-claims in the Yi-Fawn and Limei the proceedings. In the result each party has had a degree of success, which is likely to raise issues about the ultimate burden of costs. One or other party may seek a special costs order. The parties will have an opportunity to make submissions about such costs issues.
Accordingly the Court directs that by 4 pm on Monday, 12 March 2012 each party shall:
(a) file submissions in relation to costs and any other issues that these reasons require to be addressed;
(b) file the short minutes of order that each party proposes be made to give effect to these reasons, unless there is agreement before that time as to the form of such orders the appropriate orders and declarations.
The proceedings are adjourned for mention only to Tuesday, 13 March 2012 at 9:30am with a view to fixing the proceedings for any further oral argument in relation to costs and other outstanding matters at 9:30am one morning during March 2012.
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- AGLC
- Sino Synergy Investment Company Limited v Maygood Australia Pty Limited; Limei Wang Lee v Yehan Koo; Yi-Fawn Lee v Yehan Koo [2012] NSWSC 92
- Case
- [2012] NSWSC 92
- Decision Date
CaseChat Overview and Summary
The court was required to determine the nature of the payments made by the plaintiffs to the defendants, whether they constituted gifts or loans, and whether the defendants engaged in misleading or deceptive conduct under the Australian Consumer Law. The court also needed to resolve the cross-claims and determine if the sums claimed by the defendants were for the benefit of the plaintiffs or otherwise.
The court found that the payments were loans rather than gifts, and there was no evidence of misleading or deceptive conduct by the defendants. The court rejected the cross-claims, finding that the sums claimed by the defendants were not applied for the benefit of the plaintiffs.
The court dismissed all claims and cross-claims, with each party bearing their own costs.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
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