Wu v Li

Case [2015] FCAFC 109

FEDERAL COURT OF AUSTRALIA

Wu v Li [2015] FCAFC 109

Citation: Wu v Li [2015] FCAFC 109
Appeal from: Li v Wu [2013] FCA 1067
Parties: TAO WU v YU XIN LI; YU XIN LI v TAO WU
File number: ACD 116 of 2013
Judges: FOSTER, DAVIES AND RANGIAH JJ
Date of judgment: 17 August 2015
Catchwords:

CONTRACTS – appeal from decision of a single judge of the Federal Court of Australia – construction of contract – shareholder agreements – claim by respondent of entitlement under indemnity provisions –  meaning of “member loan” in indemnity provisions – whether primary judge erred in quantification of respondent’s entitlement – where respondent alleged misleading and deceptive conduct by appellant – whether primary judge erred in holding that respondent had not proved his loss – where respondent alleged breach of contract by appellant – whether primary judge erred in finding no contravention of shareholder agreements

EVIDENCE – when statement in an agreement or contractual document will constitute admissible evidence of an admission

COSTS – where respondent succeeded on one claim but not others – whether the primary judge erred in ordering appellant to pay respondent’s costs

Legislation: Fair Trading Act 1992 (ACT) s 46
Evidence Act 1995 (Cth) s 191
Federal Court of Australia Act 1976 (Cth) s 43
Cases cited: Lustre Hosiery Ltd v York (1935) 54 CLR 134
Australian Competition and Consumer Commission v Pratt (No 3) (2009) 175 FCR 558; [2009] FCA 407
Metwally v University of Wollongong (1985) 59 ALJR 481; [1984] HCA 28
Van Gervan v Fenton (1992) 175 CLR 327
Nudd v The Queen (2006) 80 ALJR 614; [2006] HCA 9
Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 3) [2007] FCAFC 119
Dodds Family Investments Pty Ltd (formerly Solar Tint Pty Ltd) v Lane Industries Pty Ltd (1993) 26 IPR 261
Roadshow Films Pty Ltd v iiNet Ltd (No 4) (2010) 269 ALR 606; [2010] FCA 645
Dias Aluminium Products Pty Ltd v Ullrich Aluminium Pty Ltd (No 2) (2005) 225 ALR 569; [2005] FCA 1400
Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 196 ALR 257; [2003] HCA 10
Date of hearing: 22 May 2014, 4 August 2014
Place: Melbourne (Heard in Canberra)
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 94
Counsel for the Appellant and Cross-Respondent: Mr A Sullivan QC with Mr C S Ward
Solicitor for the Appellant and Cross-Respondent: Dibbs Barker
Counsel for the Respondent and Cross-Appellant: Mr I Neil SC with Mr A K Flecknoe-Brown
Solicitor for the Respondent and Cross-Appellant: Goodman Law

IN THE FEDERAL COURT OF AUSTRALIA

AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY

GENERAL DIVISION

ACD 116 of 2013
ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA
BETWEEN:

TAO WU
Appellant

YU XIN LI
Cross-Appellant
AND:

YU XIN LI
Respondent

TAO WU
Cross-Respondent

JUDGES:

FOSTER, DAVIES AND RANGIAH JJ

DATE OF ORDER:

17 AUGUST 2015

WHERE MADE:

MELBOURNE (HEARD IN CANBERRA)

THE COURT ORDERS THAT:

1.The appeal…

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Wu v Li [2015] FCAFC 109
Case
[2015] FCAFC 109
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CaseChat Overview and Summary

In the case of Wu v Li, the appellant, Mr Wu, brought an action against the respondent, Mr Li, seeking indemnity and damages for alleged misleading and deceptive conduct and breach of contract. The dispute centered on the terms and interpretation of various shareholder agreements and the appellant's entitlement to an indemnity under these agreements. The case was heard and determined by a single judge of the Federal Court of Australia, with the appellant subsequently appealing the decision, and the respondent cross-appealing.

The primary legal issues addressed by the court were the correct interpretation of the indemnity provisions in the shareholder agreements, specifically the meaning of "member loan," and whether the primary judge erred in quantifying the appellant's entitlement to indemnity. Additionally, the court examined whether the primary judge was correct in holding that the appellant had not proved his loss due to the alleged misleading and deceptive conduct, and if there was a breach of contract by the appellant. The court also considered the admissibility of statements in the agreements as evidence of admissions and the appropriateness of the costs order made by the primary judge.

The court found that the primary judge did not err in his interpretation of the indemnity provisions or in his quantification of the appellant's entitlement. The court held that the primary judge was correct in finding that the appellant had not proved his loss due to the alleged misleading and deceptive conduct and that there was no breach of contract. The court also concluded that certain statements in the agreements could constitute admissible evidence of admissions. Finally, the court determined that the primary judge did not err in ordering the appellant to pay the respondent's costs of the appeal, but that the costs order relating to the cross appeal should be modified to reflect the partial success of the respondent.

The court's final orders were that the appellant's appeal be dismissed, the primary judge's orders be set aside and replaced with a declaration that the appellant is entitled to be indemnified by the respondent for a specific sum, and that the respondent pay interest on the judgment sum. The cross-appeal was dismissed except for the indemnity claim, for which judgment was to be entered in favor of the appellant for the revised sum. The appellant was ordered to pay the respondent's costs of the appeal, and the respondent was ordered to pay 60% of the appellant's costs of the cross appeal.

Orders

Orders of the court

1. The appeal be dismissed.

2. Paragraphs 1 to 3 of the orders of Jagot J made 6 November 2013 be set aside and in lieu thereof it be declared that:

“1. The applicant is entitled to be indemnified by the respondent for the sum of $ 1,076,767.”

and it be ordered that:

“1. There be verdict and judgment for the applicant against the respondent in the sum of $1,076,767.

2. The respondent pay the applicant interest on the judgment sum, from 14 November 2011 to 17 August 2015, calculated at the rates prescribed by

r 39.06 of the Federal Court Rules 2011 (Cth).”

3. The cross-appeal otherwise be dismissed.

4. The appellant pay the respondent’s costs of the appeal.

5. The appellant (cross respondent) pay 60% of the respondent’s (cross appellant’s) costs of the cross appeal.

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

Background

Background to the litigation

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Evidence

Evidence Before The Court

In Australian Competition and Consumer Commission v Pratt (No 3) (2009) 175 FCR 558; [2009] FCA 407 at [77] Ryan J observed that an agreement does not ordinarily constitute a representation by a contracting party. His Honour explained:One reason for that is the difficulty in attributing a particular statement in the agreement to one party or the other. It is also notorious that parties to an agreement may elect to conduct their contractual relations and, if necessary, enforce the rights arising from them on a basis which is contrary to fact. As his Honour also went on to explain, that is not to say that no statement in an agreement or contractual document can ever constitute a representation in the sense used in the definition of “admission” in the Evidence Act 1995 (Cth) (“the Evidence Act”):A recital to a deed or other written contract may, in its context, be so expressed as to warrant the conclusion that both contracting parties intended it to operate as an assertion of actual fact. In that event, the recital, in my view, would be admissible in later proceedings as an admission against either contracting party.A statement in an agreement is capable of constituting an admission for this purpose: see also Stephen Odgers, Uniform Evidence Law (9th ed, 2010) at [1.3.4740] 365. In the present case, the evidence showed that the sums referred to in the 2008 agreement had been derived as a result of a reconciliation of GEI’s and SG’s accounts conducted by Mr Li’s assistant, Mr Fu, in consultation with Mr Wu and that following that reconciliation, Mr Li and Mr Wu, as between themselves, agreed upon how much each of them had loaned to GEI and SG as recorded in the 2008 agreement. The 2008 agreement recorded, relevantly that as at 18 February 2008, the amount “invested” by Mr Li in the GEI Project was: $4,520,349.20 excluding amounts used for O’Malley, personal amounts and amounts used for the farm.“O’Malley” is a reference to the construction of Mr Li’s personal residence at O’Malley. “Personal amounts” were amounts expended on Mr Li and his family while in Australia. “Amounts used for the farm” was a reference to the amounts passed through to SG for the SG Project. The 2008 agreement also recorded, relevantly that as at 18 February 2008, the amount “invested” by Mr Li in the SG Project was $644,865.76. Further, the 2008 agreement recorded, relevantly, that “[a]s at now” (ie 18 February 2008), the amount of investment in GEI to be repaid to Mr Li was $5,421,126.61, comprising capital of $4,520,349.20 and interest of $900,777.41; and the amount of investment in SG to be repaid to Mr Li was $817,198.68, comprising capital of $644,865.76 and interest of $172,332.92. Moreover, Mr Wu, in his Defence, both admitted the fact of entering into the agreement and the material terms of the agreement, including relevantly that Mr Li and Mr Wu had agreed: (1) that Mr Li had advanced $4,520,349.20 to GEI, “excluding expenses incurred by GEI for the O’Malley property, personal expenditures and expenditures on the Harden property for [SG]”; and (2) that Mr Li’s loans to SG with interest amounted to $817,198.68.

Decision

Reasons for decision

Mr Li was given provisional leave to advance these further grounds in response to the further grounds raised by Mr Wu. There should be leave to advance these further grounds but for the reasons given in paragraphs [64] and [65] these grounds also fail.CONCLUSION Mr Wu has not succeeded on any of his grounds of appeal and the appeal should be dismissed. Mr Li has succeeded on the cross-appeal to the extent of showing that judgment ought to have been given for Mr Li on the indemnity claim in the sum of $1,076,767 plus interest from 14 November 2011 (in lieu of $976,866.80 plus interest). The cross-appeal should otherwise be dismissed. We consider that it is appropriate that Mr Wu should only bear a portion of Mr Li’s costs of the cross appeal by reason that Mr Li succeeded on only one of the several grounds of the cross appeal. We consider a discount of 40% is reasonable having regard to the number of grounds of the cross appeal on which Mr Li was unsuccessful and the time involved at the hearing of appeal in respect of those grounds.

Ratio Decidendi

Legal Principle Established

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