Tran v Nguyen - [2006] SADC 41

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
TRAN v NGUYEN
Judgment of His Honour Judge Herriman
13 April 2006
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSIDERATION - FAILURE OF CONSIDERATION
Plaintiff sues for recovery of sums paid to agent for stock purchases to be made on her behalf - alleges failure of consideration. Defendant says payments made to him for his services. Counterclaim for recovery of loans allegedly made to plaintiff.

TRAN v NGUYEN
[2006] SADC 41
Introduction

The plaintiff sues for the recovery of $45,000, being moneys she says she advanced to the defendant, as her agent, to make stock purchases for her clothing shop, but for which she received no stock or other consideration.
The defendant is the plaintiff’s brother-in-law and it is not in dispute that he assisted her in a substantial way in the establishment and early operation of her clothing shop business.
For his part, the defendant says that before he provided that assistance, the plaintiff promised to pay him some recompense for his services and that after the business had been running several months, they agreed upon and she paid him that sum of $45,000 and for that purpose.
Further, the defendant counterclaims for the recovery of moneys totalling $19,000, which he says were advanced by him to the plaintiff by way of two separate loans to enable her to purchase, respectively, a motor vehicle and stock for the business.
For her part, the plaintiff denies the defendant’s assertions as to the $45,000 and otherwise denies that the defendant advanced the two sums to her for the purposes alleged or at all.
Each of the parties is a native of Vietnam and, with one exception, they and their witnesses preferred to give their evidence through an interpreter. In assessing their evidence and demeanour, I have kept that in mind.
The issue as to the claim for $45,000 is simple enough. There is no doubt that the defendant was very actively involved in assisting the plaintiff in the early days of her business and that, because of his own involvement in that type of business and a relationship he had with a clothing supplier in Melbourne, he placed her stock orders for her. It was in that context, she says, that in July and September 2003 he asked her, respectively, for two cheques in the amounts of $20,000 and $25,000. When she queried their purpose, he informed her that they were to be used for stock purchases.
It is common ground that those sums were never used to purchase stock but were retained by the defendant.
Whilst the defendant readily agrees that he had undertaken the role of making stock purchases for the plaintiff, he says that her business had, by that time, been running for over six months, that a regular and different pattern of stock purchasing was already in place and that these two transactions were no part of it; the two sums were in fact agreed between them and paid by the plaintiff in recognition of his services in helping her.
As to the counterclaim, the defendant says that he advanced $10,000 to the plaintiff in December 1999 by agreeing to loan to her the proceeds of a successful bid made by him to a Vietnamese money club, or Hui, that had been convened and operated by the plaintiff. Those proceeds were in the order of $9,600 and he had procured the balance to make the loan up to $10,000 from a friend. He did that, he said, because the plaintiff asked him for a loan of the moneys to enable her to purchase a motor vehicle. She had never repaid him that sum.
As to the balance of $9,000 comprised in the counterclaim, he says she had telephoned him in October 2002 and asked for an advance in that amount to assist her with stock purchases and he had thereupon paid that amount into her bank account.
In response to the counterclaim, the plaintiff denies the allegation concerning the defendant’s Hui bid entitlement and says that he was paid that sum in cash. Otherwise she pleads that, in July 2002, she provided the defendant with $10,000 and asked him to purchase a motor vehicle for her in Adelaide in preparation for her transfer there to operate the clothing business. Ultimately, she said, he did not procure the motor vehicle, but he then returned only $9,000 to her and that was the sum paid into her account in October of that year.
The correspondence which preceded the institution of these proceedings is of some significance in the determination of this matter and I will refer to it in due course. Before I do, however, it is appropriate that I make some general observations as to credibility, as there were starkly contrasting accounts given by the parties and their witnesses as to the alleged financial transactions and there was limited corroborating material.
Credibility
I am obliged to say that I did not find either of the parties to be highly credible. Allowing, as I must, for the difficulties of translation, I nevertheless considered that each prevaricated when faced with difficult questions in cross‑examination and, perhaps even more significantly, each admitted to saying or representing something that was false or misleading during the course of their relationship and, at least in the case of one of them, that was perpetuated in the early solicitors’ correspondence.
I will not here seek to list all of those matters which led me to those conclusions, but I will instance some of them.
As to the plaintiff:
(1)In giving her evidence, the plaintiff sought to distance herself from the dealings and discussions with the defendant which led to the establishment of the shop. She painted the picture of being absent, or at best a mute bystander, during discussions about it between her husband and the defendant and of then being called upon to travel to Adelaide to conduct the business when it was ready to start. For his part, the defendant portrayed her as the principal party with whom he dealt in those matters.
The plaintiff’s position as to this was substantially weakened by the evidence of her husband, who said that most of the discussions as to the establishment of the business were between his wife and the defendant, albeit that he participated in some of the early dealings.
(2)There was a dispute at trial as to whose idea it was that the business be established. On the plaintiff’s account, the defendant visited them in Melbourne and suggested that they start it up, albeit she conceded that once the idea had taken hold, she readily sought his assistance with respect to its establishment.
The defendant gave quite a different account and described being at a dinner in Melbourne with his father, the plaintiff and her husband when the plaintiff herself raised the question of their establishing such a business in Adelaide and asked him if he could look for a shop for them. The defendant was then already operating similar businesses here. She then said she would pay him a reasonable sum for his assistance.
The defendant’s father (he also being the plaintiff’s husband’s father) gave a similar account of that conversation.
The plaintiff’s husband appeared to me to have an imperfect memory of the events and variously said that the defendant first raised the topic with him in Adelaide and then that his wife first raised it with the defendant at an unspecified place.
I did not think he consciously sought to mislead, but I was not much assisted by his evidence on the topic. Nothing was put to him in cross-examination about the alleged dinner meeting.
Whilst the question, of whose idea it was, is not of direct relevance to the issues in the trial, I found the plaintiff’s evidence, as to it, to be unpersuasive. It was not much assisted by that of her husband and conflicted with that of the defendant and, more particularly, her father-in-law, whom I found to be a far more impressive and reliable witness and one who presented with a measure of detachment and independence.
(3)There was then the plaintiff’s acknowledgement that she lied to her father-in-law when he telephoned her in the shop and asked her whether the defendant owed her money. She denied to him that there was any debt, but she explained at trial that she did that because there were Vietnamese people in the shop at the time she received the call and she did not want to discuss the matter in their presence. That excuse, if accepted, may be understandable but it does indicate some lack of respect for the truth.
(4)In paragraph 2 of the plaintiff’s Amended Defence to Counterclaim, she pleads that $10,000 was advanced by her to the defendant to purchase a motorcar for her, but that that did not occur and he refunded only $9,000 of it. In her evidence, she purported to give an account of her husband coming to Adelaide with $19,000 in cash and advancing some of it to the defendant. I did not rely on that evidence, because it was plainly hearsay, but her husband was then asked about it and said that on a trip to Adelaide in July 2002 he took $19,000 cash with him and gave $9,000 to the defendant, and that it was for miscellaneous expenses relating to the establishment of the shop.
Whilst the plaintiff was not a party to that transaction, I was left to wonder at her pleading, which was at odds with the evidence led in her case.
(5)It was a relatively small matter, but it was then of interest that once the plaintiff sued the defendant for the $45,000, she did not seek to include in that claim the alleged deficit of $1,000 in his repayment of that advance.
As to the defendant, there are a number of matters touching upon his credibility and reliability which should be mentioned:
(1)The outstanding matter is his claim that he and the plaintiff collaborated over his provision to her of false stock invoices justifying the $45,000 payment to him.
In the first instance, whether or not there was collaboration, he plainly admitted preparing false invoices.
Secondly, the rationale he advanced for the plaintiff’s request for such invoices was an unlikely one. On his account, she sought them so she could obtain a tax benefit for the $45,000 payment made to him. That is unlikely because had the payment, to him, been for his services, as he said it was, I expect it would have been a deductible payment for her, anyway. In other words, she had no need to dress it up in the way he suggested she had sought.
Thirdly, it appears to me that, accepting for the moment the defendant’s characterisation of that payment, it represented income in his hands and there was, indeed, a distinct taxation motive for him to seek to characterise it as a payment with respect to the purchase of her stock. In the event, he conceded he did not treat the money as income, for tax purposes.
All in all, the defendant’s participation in the creation of that invoice, for whatever purpose it was done, reflected poorly indeed on his general credibility.
(2)The seriousness of his above conduct was then magnified by his sending those invoices through his solicitor to the plaintiff’s solicitors, in response to their demand for recovery of the $45,000. In the accompanying letter (P10) his solicitor asserted that the moneys were in payment of the two attached stock invoices and that the plaintiff had received that stock.
For her part, the plaintiff denied ever having previously received such an explanation for her payment of that sum or, indeed, having previously sought or received such invoices.
The defendant’s explanation for the letter, given at trial, was that, faced with her solicitors’ claim for recovery of $45,000, he persisted with the falsehood that the $45,000 received by him related to stock purchases and that he did that in order to continue assisting the plaintiff with her supposed claim for tax relief in respect of that payment.
That explanation was nonsensical, given her threat of proceedings, and it seemed to me his solicitor’s response was rather more consistent with a desire on his part to seek to justify his retention of the moneys and otherwise to protect his tax position.
At all events, it was totally inconsistent with his evidence at trial as to the reason for the $45,000 payment.
(3)There was then the defendant’s evidence about his family trust, evidence which I found to be prevaricating and unconvincing.
It was common ground that the parties fell out over that family trust. The plaintiff’s claim was that her husband had been induced to sign, and she had witnessed, a document whereby he became a trustee of that trust and that when they had raised concerns about it, the defendant had returned to her the document P8, which she said was extracted from the document they had signed, and which extract indeed bore their signatures.
For his part, the defendant denied seeking to involve the plaintiff’s husband in the trust in any manner and denied sending them the document P8. Further, in correspondence he made a fatuous denial as to involvement in an entity known as “The Minh Family Trust”, when plainly the plaintiff’s solicitors’ letter was seeking to refer to his own family trust.
His answers in cross‑examination on the trust left much to be desired and I found them unconvincing and evasive.
(4)Finally, he did not provide any cogent explanation for raising the counterclaim only at the point of the filing of his defence in November 2004. There had been previous correspondence between solicitors, yet at no stage had the alleged advances or the question of any counterclaim been raised, notwithstanding the obvious threat of proceedings made by the plaintiff’s advisers; nor, indeed, had there been any earlier, separate correspondence seeking repayment of those sums, despite the fact that the parties had fallen out in September 2003.
As a general observation, I should say I regarded the above flaws in the defendant’s credibility rather more seriously than those of the plaintiff. That is not to say that where their evidence conflicted, I necessarily preferred that of the plaintiff, because in some instances there was other corroborating material which assisted me in my findings, but where it came to a question of a direct conflict between the parties with no such material, I generally preferred the plaintiff’s position.
The Issues
I will discuss the issues which arose in the trial under the following headings:
·the arrangements which led to the establishment of the shop
·the events which followed the decision to establish the business up to the point where the shop was successfully operating
·the circumstances surrounding each of the payments of $20,000 and $25,000
·the falling out between the parties
·as to the alleged $9,000 and $10,000 loans
1. The arrangements which led to the establishment of the shop
I have already found that the idea for the establishment of the plaintiff’s clothing shop in Adelaide emanated from the plaintiff herself and was raised by her at, what I am satisfied, was a dinner in Melbourne which the parties attended along with the plaintiff’s husband and the men’s father.
Further, having regard to my findings as to the general credibility of the parties and my satisfaction with the general reliability of the father’s evidence, I am satisfied and find that the plaintiff then asked the defendant for his assistance in establishing the shop, that the defendant agreed to this and that the plaintiff then said to him that if the business became successful, she would pay him a reasonable sum of money for his work.
I am mindful that the plaintiff denies that there was such a meeting or conversation but, on this issue, I prefer the defendant’s account, supported as it is by that of his father. It is a more likely account, too, given the extent of assistance he was destined to provide.
Even so, I am not disposed to conclude that those words created an enforceable contract between the parties. The extent of the defendant’s promised assistance and the extent of any corresponding reward were too ill‑defined and vague to create a formal contractual relationship. They merely reflected a level of familial goodwill.
2. The events which followed the decision to establish the business up to the point where the shop was successfully operating
There was limited dispute at trial as to what happened after that meeting and up to the time the shop was running successfully. The parties disagreed as to the timing of some meetings and as to who was involved in discussing particular matters with the defendant but, all in all, there was a consensus that the defendant did a significant number of things to help establish the business whilst the plaintiff and her husband continued to work in Melbourne: he found the premises to be used for the shop, he negotiated at length with the landlord on the plaintiff’s behalf, he arranged for the shop premises to be fitted out, he purchased the initial stock, he arranged for the necessary plant, security and insurance services, and he even lent part of his own trading name to the business. Along with the plaintiff and her husband, he and his partner were involved in stocking the shop and he provided staff, admittedly paid by the plaintiff, to assist her in her early days of trading when she lacked experience. He mostly referred accounts directly to the plaintiff for payment, but with respect to some of the early ones, he paid them himself and was later reimbursed.
He undertook the financial control of the business in its early operating days, receiving all accounts and directing the plaintiff to prepare cheques for their payment. Initially, he was in the shop every day or every second day, but gradually over the next six months his attendance there tailed off.
I am satisfied, from the plaintiff’s evidence, that whilst accounts came to her direct, he took charge of them and had her draw cheques in payment.
It cannot be doubted that his assistance was extensive and that he contributed significantly to the successful development of the business.
3. The circumstances surrounding each of the payments of $20,000 and $25,000
The plaintiff says that it was in the context of the defendant’s role in the financial management of the business that he came to her, respectively in July and September 2003, and requested that she make out the cheques for $20,000, made payable to him, and $25,000, made payable to his family trust. He did not at first say what they were for but, on her account, she then asked him and he said they were for stock purchases. Even at that time, she said, he remained the stock buyer for her business because he was himself running the same sort of businesses elsewhere and he effectively bought in bulk, for all their businesses, from the same Melbourne supplier. He was in the habit of travelling there and taking her orders with him. In the early days he more or less decided upon all her stock, but as time went on, she took more of a role in ordering.
The plaintiff said that she trusted the defendant implicitly and that when accounts for stock came in, he took them and she would write out payment cheques as he requested. She was disinclined to challenge him because he sometimes became angry at her.
In her cross‑examination, she was challenged on the footing that the payments of $20,000 and $25,000 were extraordinary sums and different in character, amount and timing from the ordinary stock trading arrangements which had been in place up to that time. Her response was that they were not extraordinary and that she did not question them because the defendant was still, then, managing her ordering and accounts and providing her with financial and business advice, and that she simply accepted and complied with his directions.

The defendant gave a very different account concerning those payments. He said that in early July 2003 and in the presence of his partner, Julie, the plaintiff said to him, “At the moment my business is good, therefore I pay you $45,000, is it enough? And then I will pay you in twice”. He had replied, “It’s up to you” (T/S 157). She gave him the $20,000 cheque later in that month and the $25,000 cheque in September. He had asked her to make the second cheque payable to his trust, which she did. Although he did not squarely say it, the effect of his evidence was that he regarded the two payments totalling $45,000 as an appropriate sum for the services he had provided.
His evidence as to that conversation was corroborated by the evidence of his partner Julie and her account of it was that the plaintiff said “Now the shop is up and running well, you know, I will keep my promise so I will pay you an amount of money. Is $45,000 okay?”, that he had replied, “Yes whatever suit you” , that she had said, “Okay but it has to be in two lots” and he had said, “Up to you” (T/S 210).
Apart from some brief evidence as to the assistance she herself provided in setting up the shop, Julie said little else. She said she had no knowledge of the fake invoices.
I observe in passing that when the plaintiff was cross‑examined about these payments, it was put to her that in July 2003 the defendant had asked her if she could pay him some money for his help, that he had said to her that the business was now profitable and it was time for her to start repaying money. She denied that had happened, but it is of interest that the defendant, when giving evidence, did not purport to describe making any such request.
Plainly, my finding as to the circumstances in which each of those payments was made and what was said at or about that time are central to the determination of the plaintiff’s claim. In making that determination, I keep in mind that the defendant’s account was corroborated by the evidence of his partner Julie. Even so, I favour the plaintiff’s explanation as to what was said at the time of each payment and I do so for a number of reasons.
In the first place, I was not persuaded that the defendant’s partner was a detached or uninterested party and, indeed, the accounts each gave of the conversation were disconcertingly similar. I did not regard her as a reliable or independent witness.
Rather more significantly, it is the defendant’s solicitor’s later correspondence which, I consider, totally discredits his account of the alleged conversation of July 2003. If indeed the plaintiff had said what he alleges she said about paying him the $45,000, there can have been no plausible explanation for what he sought to convey in his solicitor’s letter of 6 January 2004 (P10). By that time, a letter of demand for the $45,000 (P9) had been sent, he was facing the threat of legal proceedings and he cannot have had any credible reason for wanting to protect her from what, he wanted to contend, was her own stratagem to avoid tax. He need merely have said that the payments were in satisfaction of a previously agreed amount for his services.
The more obvious explanation for what is written in P10 is that, consistently with her own evidence in the proceedings, the plaintiff’s solicitors had, in P9, sought proof that the $45,000 had been expended for stock purchases and that the defendant had then sought to respond in terms which would provide that proof by producing false and largely unverifiable invoices.
I have already commented upon the defendant’s evidence as to his alleged collaboration with the plaintiff over the production of the invoices attached to P10. The plaintiff denied that anything like that happened, the alleged rationale for her seeking such invoices does not hold water and I am persuaded that the defendant falsely brought it forward at trial in an attempt to allay the damage to his case presented by the contents of the document P10.
I have been asked to infer that the wording of the final paragraph of that letter P10 in some manner corroborates the defendant’s claim that the plaintiff had herself proposed the creation of the false invoice as a stratagem to avoid tax. I am not prepared to so infer, any more than I am prepared to infer that a solicitor, fully acquainted with the defendant’s account of the true background relating to those invoices, would likely write a letter in those terms.
Interestingly, too, I would have expected that, had the defendant’s explanation for the letter been a credible one, it might have referred to his claim, made at trial, that copies of the relevant invoices had been provided to the plaintiff at an earlier time. It says nothing of the sort.
Further, as I have already observed, the plaintiff would have had no need to seek the defendant’s cooperation in the proposed tax arrangement as, on his case, she already had a deductible claim.
Finally, as I have noted, the defendant has not treated the $45,000 as income, anyway.
On this central issue, I am satisfied and find that the plaintiff paid each of the sums of $20,000 and $25,000 to the defendant at his request and after being told and believing that they would be applied by him towards stock purchases for her business. They were not so applied and were instead retained by the defendant as his own moneys.
In making this finding, I am mindful of two matters:
(1)my earlier finding that the plaintiff did tell the defendant at an early stage that if the business went well she would pay him an amount, a sum never specified, for his services. I have found, however, that the plaintiff did not intend either of the payments of $20,000 or $25,000 to be that recompense, nor did she say anything to the defendant to that effect. Even so, it appears to me likely that the defendant elected, whether at the times of receipt of each of the sums of $20,000 and $25,000 or at some time afterwards, to appropriate those moneys as his reward for his efforts in assisting the plaintiff. He had no permission or consent from the plaintiff to do that and they must be refunded;
(2)the plaintiff’s acknowledgement that she told Thinh Nguyen in a telephone conversation that there was no money owed to her by the defendant. Allowing for that, I still do not consider that it tells significantly against her claim, and for two reasons. The first is her explanation, which I accept, that the telephone call came to her in her shop at a time when other Vietnamese persons were present and she was not disposed to embark on a discussion of the matter in their presence. The second reason emerged more indirectly from the evidence, namely, that it was plain neither of the brothers nor the plaintiff was in the habit of discussing their business affairs with their father. It struck me as barely surprising that the plaintiff might be reluctant to say very much to her father-in-law in all those circumstances.
4. The falling out between the parties
It is common ground that the parties fell out soon after the second of those payments was made to the defendant, but over a dispute as to his family trust. I heard little detailed evidence as to the nature of that dispute, but it is apparent from what I did hear, and indeed from the exhibit P5, that one issue was that the plaintiff’s husband apprehended that he had become a trustee of that trust and he was concerned about it. It is otherwise unnecessary to make findings as to the precise details of that dispute, other than to note my misgivings as to the defendant’s evidence about the trust generally.
It was that falling out which led to the plaintiff’s demand for an account or repayment with respect to the $45,000 and that demand was made soon afterwards. By way of contrast, the defendant’s counterclaim was not signalled until some twelve months later.
5. As to the alleged $9,000 and $10,000 loans
I have already outlined the respective positions of the parties with respect to the counterclaim.
As to the $10,000 sum said to have been advanced to the plaintiff from the defendant’s Hui entitlement, I am indeed persuaded that that advance was made. There was no documentary evidence tending to corroborate it but, again, I felt I could rely upon the evidence of Thinh Nguyen, the defendant’s father, as to his discussions with the plaintiff and the defendant at the time the moneys were loaned.
The defendant’s case might have been bolstered had he chosen to call his friend Dat Tran to corroborate the supplementation of the Hui proceeds up to the sum of $10,000, but for all that, the making of the greater part of the loan was corroborated by the evidence of the defendant’s father.
And being satisfied as to the loan in the face of the plaintiff’s absolute denial it was made, I am further satisfied it has not been repaid.
I am not, however, persuaded that the defendant also advanced the separate sum of $9,000 to the plaintiff in October 2002. There is no doubt that such a sum was paid into the plaintiff’s account but that, of itself, is not corroborative of an initial advance. Because of my serious reservations as to the defendant’s credibility and because, generally, the plaintiff’s husband impressed me as a credible witness, I prefer his evidence to the effect that it was a repayment of all but $1,000 of a $10,000 advance he had himself given to the defendant to purchase a car. The plaintiff herself purported to give evidence about that advance but, as I have said, her evidence was hearsay and I take no account of it.
The question might be raised as to why the defendant, faced with the plaintiff’s claim for $45,000, did not immediately claim to offset the $10,000 advanced to her by way of Hui funds, but in the context of my above findings, it seems probable to me that he chose not to raise that issue because he was already conscious that he had received a substantial sum from the plaintiff and he had decided to appropriate it as some form of recompense for the work he had undertaken, believing he would justify it through the false invoices.
Conclusion
It follows from the above and I find that the plaintiff succeeds on her claim for $45,000 and the defendant succeeds as to $10,000 of his counterclaim, and there will be judgment accordingly.
I will hear from the parties as to interest and any further orders sought.