Tang v Yu

Case [2024] FCA 297

FEDERAL COURT OF AUSTRALIA

Tang v Yu [2024] FCA 297  

File number: NSD 488 of 2020
Judgment of: STEWART J
Date of judgment: 27 March 2024
Catchwords: CONSUMER LAW – alleged misleading or deceptive conduct in relation to financial services contrary to ss 12DA and 12GF of the Australian Securities and Investments Commission Act 2001 (Cth) – whether representations were misleading – where representations were knowingly false – whether misleading representations caused loss – where misrepresentations objectively likely to induce investment – relevance of present value of investment – whether investment had no real value at the time of investment
Legislation:

Australian Securities and Investments Commission Act 2001 (Cth) ss 12BB, 12DA, 12GF

Bankruptcy Act 1966 (Cth) s 58(3)(b)

Evidence Act 1995 (Cth) s 140
Cases cited:

ABN AMRO Bank NV v Bathurst Regional Council [2014] FCAFC 65; 224 FCR 1

ACCC v Woolworths [2020] FCAFC 162; 281 FCR 108

ACCC v Woolworths Ltd [2019] FCA 1039

Blatch v Archer (1774) 1 Cowp 63; 98 ER 969

Briginshaw v Briginshaw [1938] HCA 34; 60 CLR 336

Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; 238 CLR 304

Google Inc v ACCC [2013] HCA 1; 249 CLR 435

Gould v Vaggelas [1984] HCA 68; 157 CLR 215

HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54; 217 CLR 640

Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd [2008] NSWCA 206; 73 NSWLR 653

Kizbeau Pty Ltd v WG&B Pty Ltd [1995] HCA 4; 184 CLR 281

Lord Buddha v Harpur [2013] VSCA 101; 41 VR 159

Mills v Walsh [2022] NSWCA 225

Potts v Miller [1940] HCA 43; 64 CLR 282

Self Care IP Holdings v Allergan Australia [2023] HCA 8; 408 ALR 195

Tang v Yu (evidence rulings) [2023] FCA 1541
Division: General Division
Registry: New South Wales
National Practice Area: Commercial and Corporations
Sub-area: Regulator and Consumer Protection
Number of paragraphs: 137
Date of hearing: 4‑6 December 2023, 15 February 2024
Counsel for the Applicant: D Meyerowitz-Katz
Solicitor for the Applicant: Domantay Legal Pty Ltd
Counsel for the First Respondent: Y Chen
Solicitor for the First Respondent: Ausjuris Legal Pty Ltd
Counsel for the Second Respondent: The Second Respondent did not appear.

ORDERS

NSD 488 of 2020
BETWEEN:

GUOHUA TANG

Applicant
AND:

JINYANG YU

First Respondent

OLIVER ROTHS

Second Respondent

ORDER MADE BY:

STEWART J

DATE OF ORDER:

27 MARCH 2024

THE COURT ORDERS THAT:

1.There be judgment for the applicant against the first respondent in the sum of $700,000.

2.The question of interest on the amount of $700,000 from 27 April 2018 until date of judgment under s 51A of the Federal Court of Australia Act 1976 (Cth) and the Interest on judgments (GPN-INT) practice note be reserved to be dealt with on the papers following the process set out in orders 3 to 5 below.

3.Within 7 days of these orders, the applicant file and serve…

Continue reading Tang v Yu

Sign in free to access the full text

Details
AGLC
Tang v Yu [2024] FCA 297
Case
[2024] FCA 297
Decision Date

CaseChat Overview and Summary

The Federal Court of Australia heard a case involving Mr Tang, a retired individual from Shanghai, who brought proceedings against Mr Yu, a former employee of Moshav Financial, regarding an investment opportunity that was allegedly misleading and deceptive. Mr Tang, who is not proficient in English, was induced by Mr Yu to invest $700,000 in a proposed reverse takeover or "backdoor listing" transaction involving PLC and the Hyperbuild Unit Trust. The crux of the case lay in the allegations that Mr Yu engaged in misleading or deceptive conduct in relation to financial services, contrary to sections 12DA and 12GF of the Australian Securities and Investments Commission Act 2001. The primary legal issues revolved around whether the representations made by Mr Yu were indeed misleading, whether these misrepresentations were knowingly false, and if they caused Mr Tang financial loss. Additionally, the court examined whether the misrepresentations were objectively likely to induce investment and the relevance of the present value of the investment at the time it was made.

The court found that Mr Yu's evidence was inconsistent and not always reliable, leading to a cautious approach in accepting his testimony. Mr Tang's evidence, though occasionally argumentative and challenged by reliance on an interpreter, was deemed consistent and comprehensive. The court concluded that Mr Yu knowingly made false representations regarding the investment opportunity, which were misleading and caused Mr Tang financial loss. The court emphasised the deceptive nature of Mr Yu's conduct, noting that he had lied to Mr Roths about needing time to move money out of China to sort out his commission. Consequently, the court ruled in favour of Mr Tang, awarding him the sum of $700,000 against Mr Yu.

The court's final orders included a judgment for Mr Tang against Mr Yu in the sum of $700,000, with the question of interest on this amount reserved for later determination. Mr Yu was also ordered to pay Mr Tang's costs of suit. This decision underscores the importance of truthful and transparent communication in financial dealings and the legal consequences of misleading conduct in the context of consumer law.

Orders

Orders of the court

1. There be judgment for the applicant against the first respondent in the sum of $700,000.

2. The question of interest on the amount of $700,000 from 27 April 2018 until date of judgment under s 51A of the Federal Court of Australia Act 1976 (Cth) and the Interest on judgments (GPN-INT) practice note be reserved to be dealt with on the papers following the process set out in orders 3 to 5 below.

3. Within 7 days of these orders, the applicant file and serve submissions of no more than 3 pages on the question reserved in order 2.

4. Within 7 days of service of the submissions referred to in order 3, the first respondent file and serve any submissions of no more than 3 pages in response.

5. Within 3 days of service of any submissions referred to in order 4, the applicant file and serve any submissions of no more than 1 page in reply.

6. The first respondent pay the applicant’s costs of suit.

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

Background

Background to the litigation

For the reasons that follow, Mr Tang succeeds in his claim.Factual background Mr Tang is a Chinese national who is now retired, but previously managed a fleet of motor vehicles for a property development company in Shanghai. Mr Tang’s son, Terry Tang, is a project manager in the construction industry. In 2016, Terry obtained a skilled worker visa and moved to Australia. Terry lives in Point Cook, Vic, and Mr Tang spends much of the year in Australia with his son and his family. Mr Tang does not speak English. Mr Yu is originally from China but has resided in Australia since 2008. He holds a Bachelor of Accounting from Central Queensland University and a Master’s in Applied Finance from the University of Western Sydney. Since 2014 he has worked for various finance companies in Sydney. In 2015, Mr Yu was hired by Mr Roths to work at Moshav Financial. His role included marketing financial products to Chinese-speaking investors in Australia and China. In 2018, those financial products included Moshav and non-Moshav products. In relation to the latter, Mr Yu was paid a commission by Mr Roths on successful investments. Mr Yu met Terry in around 2016 and assisted him in connection with securing his Australian visa, after which the two became friends. Mr Tang and Mr Yu were first introduced at a dinner at Terry’s home in Point Cook in May 2017. Mr Tang and Mr Yu did not otherwise have any contact until April 2018. The circumstances surrounding Mr Tang’s investment of the $700,000 in 2018 are squarely in dispute and it is necessary to examine what the parties say about those circumstances in some detail. For present purposes, the following is a summary of what I understand to be uncontentious that emerges from the pleadings and the evidence. In late March or early April 2018, Mr Roths told Mr Yu about an upcoming investment opportunity. That opportunity was a reverse takeover or “backdoor listing” transaction whereby it was proposed that investors would obtain a controlling interest in PLC, a shell company, and a majority of the units in the Hyperbuild Unit Trust. PLC would then take over the operations of Hyperbuild Pty Ltd (a construction company and the trustee for the Hyperbuild Unit Trust), generating a substantial return. Mr Roths was seeking to raise at least $1.4 million from investors to effect the backdoor listing. Mr Yu approached Terry about the investment opportunity, as well as a Ms Yinghua Gu. Ms Gu had invested in an opportunity promoted by Mr Yu in the past. Terry was not interested in investing himself, but indicated to Mr Yu that Mr Tang may be interested. On 23 April 2018, Terry forwarded emails he had received about the investment opportunity to Mr Tang and Mr Tang attempted to translate these emails into Mandarin using an online translation tool. Mr Tang and Mr Yu began exchanging WeChat messages. Those messages conveyed at least the following:(1)There was an opportunity which stemmed from Mr Roths for Mr Tang to invest in a backdoor listing involving the Hyperbuild Unit Trust and PLC;(2)The operation of the Hyperbuild Unit Trust was worth around $60 million; (3)A Unit Subscription Agreement was prepared bearing Mr Yu’s name; and(4)If the acquisition was unsuccessful, Mr Tang’s money could be refunded.

Evidence

Evidence Before The Court

Mr Tang gave oral evidence with the assistance of an interpreter. Mr Tang presented as someone with a keen sense of the justness of his case, which may have influenced his evidence. Mr Tang was occasionally argumentative and, even allowing for the challenges involved in relying on an interpreter to tell one’s story to the Court, sometimes failed to give concise and direct responses to the particular question he was being asked. Those deficiencies notwithstanding, Mr Tang gave a comprehensive and consistent account of his dealings with Mr Yu in the relevant period. As a general proposition, I accept his evidence.Mr Yu’s evidence in the witness box Mr Yu’s evidence was at times inconsistent and difficult to reconcile with the documentary evidence. By way of example, Mr Yu pleads at [25(a)] of his defence to the amended statement of claim that he personally invested $700,000 into the backdoor listing opportunity and that it was later decided that Mr Yu’s aunt in China would be the investor and so his investment was novated into his aunt’s name. However, in the witness box, Mr Yu agreed that his defence is wrong insofar as it pleads that he personally invested $700,000, he could not recall why his defence said that he had invested $700,000 and he accepted that his story had changed between the time that his defence was filed on 25 May 2023 and the time that his affidavit was prepared in September 2023 (T232-233). On another occasion, Mr Yu eventually accepted that what he had told Mr Tang in a WeChat message about Mr Roths having allocated 10% of the investment to him to attract investors was wrong – the correct figure was 20% (T186.26-187.31). Mr Yu’s evidence was at points difficult to follow. In cross-examination, Mr Yu gave evidence that he did not know how many PLC shares he received in May 2018. He suggested that he may have signed an “empty form” and only later understood that he had acquired 3.5 million shares. In any event, Mr Yu was unable to explain why he said to Mr Tang on 25 May 2018 that it was “correct” that he (Mr Yu) had acquired 3 million PLC shares (T230-232). My overall impression of Mr Yu is that he had a tendency to give answers which he thought would best support his case and that he could not always be relied upon to give truthful evidence of his recollections. I am fortified in my characterisation of Mr Yu’s evidence by the justifiably frank admission by his counsel in closing submissions that he was deliberately deceitful in discussing the investment opportunity the subject of this proceeding with Mr Roths: “Mr Yu lied to Mr Roths” about needing time to move money out of China “because he wanted to sort out his commission”. Counsel for Mr Tang submits that Mr Yu’s evidence should not be accepted unless it is corroborated by reliable evidence or it is adverse to his interest. Counsel for Mr Yu in closing submissions does not dispute that real issues of credit arise with respect to Mr Yu’s evidence per se. Rather, it is put on behalf of Mr Yu that the approach urged by Mr Tang’s counsel is “too harsh” and that “[t]o the extent there is nothing to contradict Mr Yu’s evidence, the Court should not automatically reject Mr Yu’s version.” In my view, the circumstances addressed above justify that I approach Mr Yu’s evidence with caution and in particular look to see whether it is consistent with other evidence and with the overall probabilities and human experience.The pleaded representations

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.