Xia v Pacific Shoji Pty Ltd

[2017] NSWDC 161

District Court

New South Wales

Medium Neutral Citation:	Xia v Pacific Shoji Pty Ltd [2017] NSWDC 161
Hearing dates:	16, 17, 18, 21, 22 November 2016; 19 December 2016; 7 and 22 February 2017; 1 March 2017 (written submissions)
Date of orders:	30 June 2017
Decision date:	30 June 2017
Jurisdiction:	Civil
Before:	Gibson DCJ
Decision:	(1) Judgment for the plaintiff. (2) Liberty to the parties to bring in Short Minutes of Order reflecting the mathematically agreed total for the plaintiff’s judgment sum. (3) Judgment for the defendant/cross-claimant on the cross-claim in the sum of $7,195.27 plus interest to be calculated. (4) Defendant/cross-claimant pay plaintiff/cross-defendant’s costs of the proceedings. (5) Liberty to apply in relation to interest and costs. (6) Exhibits retained until further order.
Catchwords:	CONTRACT – claim by former employee for short payment of salary, holiday leave, commission, profit share and reimbursement of expenses from employer – cross claim for breach of contract and breach of fiduciary duty – long personal and professional relationship between plaintiff and the managing director of the company – credit issues – quantum
Legislation Cited:	Competition and Consumer Act 2010 (Cth), Sch 2, Australian Consumer Law (Cth), s 18 Corporations Act 2001 (Cth) Fair Work Act 2009 (Cth), ss 26, 27, 90, 548 Superannuation Guarantee (Administration) Act 1992 (Cth) Superannuation Guarantee Charge Act 1992 (Cth)
Cases Cited:	Akmeemana v Murray [2009] NSWSC 979 Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 Bebonis v Angelos (2003) 56 NSWLR 127 Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 Carlson & Fluvium [2012] FAMCA 32 Chahal Group Pty Ltd & Anor v 7-Eleven Stores Pty Ltd [2017] NSWSC 532 Christmas v Nicol Bros Pty Ltd (1941) 41 NSWSR 317 Commonwealth Bank of Australia v Barker (2014) 253 CLR 169 Commonwealth Bank of Australia v Barker [2013] FCAFC 83 Cubillo v Commonwealth of Australia (No 2) (2000) 103 FCR 1 Dhaildeal v Pade [2003] NSWCA 16 Fox v Percy (2003) 214 CLR 118 Harpham v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia [2016] FCA 1473 Hodgson v Amcor Ltd [2012] VSC 94; (2012) 264 FLR 1 Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Market Ltd (2008) 73 NSWLR 653 Marsden v Amalgamated Television Services Pty Ltd [2000] NSWSC 570 McGlen-McLeod v Galloway [2012] NSWCA 368 Moneywood Pty Ltd v Salamon Nominees Pty Ltd (2001) 202 CLR 351 O’Halloran v R T Thomas & Family Pty Ltd (1998) 45 NSWLR 262 Pilkington v Wood [1953] Ch 770 at 777 Ramsey v Annesley College [2013] SASC 72 Russell v The Trustees of the Roman Catholic Church (2008) 72 NSWLR 559 Saler v Danell [2017] FAMCA 161 Shaeffer v Jacobs [2011] FAMFC 119 State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in liq) (1999) 160 ALR 588 Thornton v Telegraph Media Group Ltd [2011] EWHC 1884 (QB) Walker v Citigroup Global Markets Australia Pty Limited [2006] FCAFC 101 Watson v Foxman (1995) 49 NSWLR 315
Texts Cited:	Ipp, “Problems with Fact-Finding”, (2006) 80 Australian Law Journal 667 Spigelman CJ , In “Truth and the Law” (The 2011 Sir Maurice Byers Lecture, 26 May 2011)
Category:	Principal judgment
Parties:	Plaintiff/Cross-Defendant: Helen Rong Xia Defendant/Cross-Claimant: Pacific Shoji Pty Ltd
Representation:	Counsel: Plaintiff/Cross-Defendant: Mr S Sher (solicitor) Defendant/Cross-Claimant: Mr G Johnson   Solicitors: Plaintiff/Cross-Defendant: Drayton Sher Lawyers Defendant/Cross-Claimant: Macedone Legal
File Number(s):	2014/183557
Publication restriction:	None

Judgment

1. The plaintiff entered into an employment contract with the defendant on 1 August 2007 in New South Wales. She had previously been employed by the defendant in its Taren Point premises between early 2003 and April 2005. Pursuant to the August 2007 employment contract, she filled the position of “China manager” for the defendant’s seafood business activities by carrying out her duties in mainland China. She remained in that position until her employment was terminated on 25 October 2013.

2. The plaintiff brings a series of claims arising out of her employment by the defendant. In her statement of claim filed on 24 April 2014 in the Parramatta registry of this court, the plaintiff identified the following heads of damages:

1. Short payment of salary (paragraph 7 of the statement of claim). The plaintiff’s salary was halved in July 2012 on the representation that the defendant was in financial difficulties requiring all employees to take a salary cut. It was briefly reinstated for a period and then cut again. The plaintiff’s understanding was that she would be reimbursed later. The total sought in the statement of claim was $29,265. In the defence (paragraph 7), the defendant admits that its director Mr Spurrier informed the plaintiff that the company was “suffering financially” and that as a result, in two conversations in July 2012 and March 2013, the plaintiff agreed to the salary cut as a variation of her employment contract. The defendant acknowledges saying that the shortfall would be reimbursed but says that this was conditional upon its establishment of a new seafood venture in Myanmar, which was “not profitable” prior to the plaintiff’s termination of employment (paragraph 7(e)).

2. Holiday leave entitlements (paragraph 8 of the statement of claim). The plaintiff claims that, in breach of her statutory and contractual entitlements, she was never given holiday leave, even on official Chinese holiday dates, because of the demands of her employment. The defendant does not admit this claim (paragraph 8 of the defence).

3. Commissions due for the sales of non-live seafood products (paragraph 9 of the statement of claim). The defendant initially denied this claim (paragraph 9 of the defence) but now concedes that the agreed sum the plaintiff seeks for unpaid commission ($8,775.60.) is owing.

4. Profit share on sales concluded at the factory/shop in Guangzhou (paragraph 10 of the statement of claim). The plaintiff claims 25% of these profits. In paragraph 10 of the defence, the defendant states that this plea is embarrassing, and does not plead to it.

5. Reimbursement for payment for factory cooling system and rent paid for by the plaintiff (paragraph 11 of the statement of claim). A new factory cooling system was installed in the defendant’s Melbourne premises and the plaintiff claims that she was never reimbursed for this equipment, which was shipped from China. In paragraph 11 of the defence, the defendant admits that under the contract of employment the plaintiff was entitled under certain circumstances to be reimbursed by the defendant for “certain expenses” but states that this claim is “embarrassing” and does not plead to it.

6. Commission for finding buyer for Dover factory (paragraphs 3 and 12 of the statement of claim). The plaintiff claims she was offered a commission if she could find a buyer for a factory in Tasmania from which the defendant conducted business. The plaintiff had, during a previous period of employment for the defendant between 2003 and 2005, similarly negotiated the sale of business assets on behalf of the defendant, for which she had been paid $10,000 commission. The defendant denied owning the factory or that the plaintiff had acted as anything other than the translator for the sale of the factory (defence, paragraph 3), a claim the defendant similarly made in relation to the sale of the Taren Point business for which the plaintiff was paid $10,000.

7. Payments made to the defendant as advances for sales receipts (paragraph 13 of the statement of claim). Although this claim has been abandoned, paragraph 13 of the defence sets out that “in accordance with her employment duties, the plaintiff was permitted to receive funds from the defendant’s China-based customer [sic] by the defendant, and was required to remit those funds in full to the defendant” and goes on to state that to “avoid delays associated with transferring money internationally, the defendant adopted a policy whereby its China-based customers would pay the invoiced amounts directly to the plaintiff in China” (paragraph 7(a)(iv)). The circumstances in which the defendant arranged for China customers to redirect payments by international transfer to the plaintiff’s personal bank account in China, from which she would transfer monies to Australia, play an important role in the tangled web of financial arrangements set up by the defendant, which arrangements the defendant’s director, Mr Spurrier, told the court were “bad management” but which the plaintiff claimed were to avoid the vigilance of the Chinese customs officers and secure favourable customs duty rates.

8. Money loaned to the defendant (paragraph 14 of the statement of claim). The plaintiff claimed that she loaned money to the defendant after being told the company was in dire circumstances. The defendant denies such loans occurred.

9. Damages for unfair termination of employment (paragraph 15 of the statement of claim). This claim has been abandoned.

10. Relocation costs (paragraph 16 of the statement of claim). This claim has been abandoned.

3. As noted above, three of these claims (items in (7), (9) and (10) in the above list) were dropped and one was the subject of compromise during closing submissions.

4. The defendant cross-claims against the plaintiff.

The cross-claim

5. The cross-claim was also the subject of an agreement in relation to one of the two sums claimed. The plaintiff/cross-defendant concedes liability for an amount owed in relation to the Beijing Grit invoice ($7,195.27). The remaining claim arises from two invoices for amounts owing for two shipments sent on 17 January 2012 (“invoice 5146”) and 20 January 2012 (“invoice 5153”), which the plaintiff told Mr Spurrier had been sent to one customer (Mr Tony Chen) when in fact these two shipments were sent to another, Mr Tim Wang.

6. The evidence in support of this claim includes the evidence of Mr Min Wen Li (also known as Mr Henry Li), who was consulted by Mr Spurrier about his company’s problems in recovering these debts. Despite knowing nothing about the seafood business, the company’s customers, business in China, the Chinese legal system or having any legal qualifications, Mr Li was retained by the defendant, Pacific Shoji Pty Ltd, in January 2012 to advise on any or all of these issues.

7. The basis upon which the claim is made is that the contract for employment contained implied terms of duty and fidelity (paragraphs 4, 35, 36 and 37) and that, in breach of these obligations, the plaintiff lied to the defendant by saying she had entered into a transaction with Mr Tony Chen’s company when she had in fact entered into a transaction with Mr Tim Wang’s company. Both were long-term customers of the defendant/cross-claimant, but Mr Tim Wang and his company were considered risky as they owed “substantial debts” (paragraph 25 of the cross-claim), so the cross-claimant had decided to “limit and monitor closely and had told the plaintiff not to give him more than a certain number of shipments without authorisation.

8. The cross-claim asserts that, in breach of her duties, the plaintiff not only sent these consignments to Mr Wang’s company but lied to the defendant’s servants or agents about this until October 2013, when she confessed and was summarily dismissed. Part of the sum owing had in fact been recovered by the plaintiff from Mr Wang, but she further lied to the defendant in that she represented this payment as having come from Mr Chen (paragraph 32(a)(v)).

9. Although the sum claimed is put in terms of “equitable compensation or an account of profits” as a result of the plaintiff’s breach of fiduciary duty (paragraph 38), the principal basis upon which the cross-claim was presented was as breach of contract (as to which see paragraph 40 of the cross-claim). However, Mr Johnson provided further submissions dated 1 March 2017 dealing with breach of fiduciary duty as well as causation.

The evidence

10. The plaintiff/cross-defendant relied upon the following affidavits:

1. Affidavit of Helen Rong Xia, 22 October 2015 (in chief, Xia Claim);

2. Affidavit of Helen Rong Xia, 24 March 2016 (Cross-Claim).

11. The defendant/cross-claimant relied upon the following affidavits:

1. Affidavit of Min Wen Li (Henry Li), 18 September 2015 (in chief, Cross-Claim);

2. Affidavit of Chris Spurrier, 5 October 2015 (in chief, Cross-Claim);

3. Affidavit of Sonia Klaric, 5 October 2015 (in chief, Cross-Claim);

4. Affidavit of Chris Spurrier, 23 December 2015 (Xia Claim);

5. Affidavit of Greig Williams, 23 December 2015 (Xia Claim);

6. Affidavit of Marion Spurrier, 23 December 2015 (Xia Claim);

7. The defendant also relied upon the affidavits of Chris Spurrier, 20 April 2016 (in reply, Cross-Claim) and of Sonia Klaric, 20 April 2016 (in reply, Cross-Claim).

12. Pacific Shoji only ever had a small number of employees, according to Mr Spurrier, and was at all stages a family business. The principal testimony for the company comes from Mr Spurrier and Ms Klaric (Mr Spurrier’s wife), who had commenced employment at Pacific Shoji in 2002 and remains employed there as an administrative and accounts employee to this day.

13. The sole witness for the plaintiff was herself. For a comparatively brief time between 2003 and late 2004, she was Mr Spurrier’s girlfriend. She also worked for Pacific Shoji from 2003 until 2005. She was invited by Mr Spurrier and his father to return to work for Pacific Shoji again in 2007, and worked in the company’s China office until her dismissal in 2013.

14. This degree of personal connection between these three persons may explain some of the bitterness between them, but not the significant credit issues which arose in relation to both sides in relation to almost all the evidence, which has made the task of determining the factual issues so difficult. This includes acknowledgements by both Mr Spurrier and the plaintiff of having lied to each other at various stages of their professional relationship and of employing business methods which are less than satisfactory as well as, in some instances, amounting to contravention of the law.

15. However, any difficulties I had in the resolution of the complex factual background or the mountain of documentation do not have any relationship with the conduct of the litigation by the parties’ legal representatives, which was of the highest standard (particularly since, in Mr Sher’s case, he had come into the proceedings with no time for preparation in circumstances where his client’s application for an adjournment was rejected).

16. There have been case management difficulties arising from inadequacies in the production of documents which, combined with court availability problems, resulted in the proceedings having to be stood over part-heard and for further submissions to be provided after the hearing was concluded in February 2017. These problems are not to be sheeted home to the parties, as there is no Commercial List in this court to assist the parties in early identification of the issues and ensure that other interlocutory steps, such as discovery or pleadings issues, are considered before (rather than during) the hearing.

17. There have also been delays between the commencement of proceedings in April 2014 and the dates of hearing in 2016 and 2017, but these are, again, the result of lack of case management rather than default by the parties. The proceedings were simply stood over several times in the Parramatta registry for a year after they were commenced, then transferred to the Sydney registry on 20 July 2015 by orders made in chambers, the parties being informed of this later. The delay during 2016 is similarly explained, in that the only case management the Sydney registry provided (apart from making a mediation order) was two court-endorsed consent orders and, on 18 April 2016, the allocation of a date for hearing on 16 November 2016.

18. The lack of case management of the kind that is available in the Supreme Court has required a degree of flexibility from the parties as well as on my part. For example, the defendant has been permitted to defend certain claims where, in the pleadings, it had failed to plead to these (on the basis that the claims were asserted to be “embarrassing”, and to produce fresh documentation during the hearing. However, for the reasons noted later in this judgment, I did not permit the plaintiff leave to amend to plead misleading and deceptive conduct under s 18 Australian Consumer Law (Cth), as contained in Sch 2 of the Competition and Consumer Act 2010 (Cth), or a claim for deceit at common law.

19. I also note that the plaintiff had difficulties with translation while giving her evidence, which resulted in her dispensing with the interpreter part way during the trial. Although the plaintiff’s English was at times ungrammatical, I am satisfied that she understood and accurately responded to the questions, and that dispensing with the interpreter was reasonable in the circumstances.

A short description of the parties

20. As noted above, all the claims the subject of these proceedings arise out of the circumstances of employment by the defendant/cross claimant (hereafter “Pacific Shoji”) of Helen Rong Xia (hereafter “the plaintiff”).

21. Pacific Shoji is an Australian company operating since 1979 (Exhibit 1, paragraph 8). A family business, it was founded by Mr Barry Spurrier, the father of Mr Chris Spurrier (hereafter “Mr Spurrier”). It is Mr Spurrier who now manages the company with administrative assistance from Ms Sonia Klaric, who has been a company employee since 2002). Its shareholders are Mr Spurrier, his father, Barry, and his mother, Marion (T 185, lines 47 – 48). Mr Spurrier has been the managing director of the defendant for more than a decade (T 183).

22. Another company, Trans World Chemicals (Australia) Pty Ltd (“TWC”), has conducted a similar business in Tasmania. Its shareholding is the same, except that Mr Spurrier’s brother is also a shareholder (T 185 – 186). Mr Spurrier has been the director of TWC for the past 5 years (T 185). I accept Mr Sher’s submissions that these are clearly related entities as defined in the Corporations Act2001 (Cth), which is of relevance in relation to the plaintiff’s claim for commission for the sale of the company’s factory in Dover, Tasmania.

23. Pacific Shoji’s business is the import and export of frozen and live seafood produce, principally to China. The company is situated in Sydney but has a Melbourne office and, at one stage, had an association, either on its own account or through other corporations such as TWC, with the seafood industry in Tasmania.

24. Although only briefly touched upon in the affidavits and evidence (particularly in the case of the witnesses called by Pacific Shoji), a major contributing factor to the circumstances of this case is the personal and, at one stage, romantic relationship between the plaintiff and Mr Spurrier, who took over management of the company from his father in about 2005.

The plaintiff’s relationship with Mr Spurrier

25. The plaintiff met Mr Spurrier in about March 2003 while she was completing a postgraduate degree in information systems at the University of Wollongong. Mr Spurrier was one of the directors of Pacific Shoji, which was involved in the sale of live, frozen and parboiled Australian seafood to China.

26. In about June 2003, the plaintiff and Mr Spurrier “became closer and had a romantic relationship for about 18 months commencing around June of 2003 and ending around the end of November 2004” (plaintiff’s affidavit sworn 22 October 2015, paragraph 7). During that period the plaintiff met and associated with his parents and family as well as with other employees (plaintiff’s affidavit sworn 22 October 2015, paragraph 8). Those employees included Ms Sonia Klaric who, according to her affidavit (paragraph 12), met the plaintiff while the plaintiff was employed for what Ms Klaric described in her affidavit as a “short” period at the Taren Point factory in 2003 and who thereafter worked in China.

25. Ms Klaric’s affidavit contains two rather surprising features. The first is her acknowledged total lack of any interaction with the plaintiff over the entire period of the plaintiff’s employment by Pacific Shoji. Although Ms Klaric was one of the two full time employees of Pacific Shoji in the Sydney office (T 243) and effectively in charge of accounts (which included receiving invoices from the plaintiff: T 275), she never had any contact with the plaintiff, including the period from 2007 onwards. If she needed any information about transactions in China, she asked her husband, Mr Spurrier (paragraph 13). The second is the absence of a number of company records for leave, holiday pay, payment of certain invoices and the like for which she was the staff member responsible, an absence explained by Mr Spurrier during the hearing as being due to “bad management” (T 220, 244, 252).

The plaintiff’s employment at Pacific Shoji

28. The plaintiff’s employment at Pacific Shoji in 2003 coincided with the commencement of her relationship with Mr Spurrier. She initially obtained a job at Pacific Shoji as a packer of products at the processing plant at Taren Point but quickly progressed to more responsible work, becoming a sales manager selling live and frozen seafood to Asian countries and earning a salary of around $2,000 per month. She continued in this position after her romantic relationship with Mr Spurrier ended in about November 2004. As the affidavit of Marion Spurrier (Mr Spurrier’s mother) confirms (affidavit sworn 23 December 2015, paragraphs 11 – 14), the plaintiff remained on good terms with his parents up until the termination of her services in the circumstances the subject of these proceedings. She stayed in their home on occasion and (much later in the events the subject of these proceedings) they visited her in China.

29. The plaintiff agreed to work for $2,000 a month because “the Spurriers” promised “to increase her salary to a benchmark of market rates after a three-month probationary period” (affidavit sworn 22 October 2015, paragraph 19). This did not happen and when, in March 2005, Mr Spurrier told her “I think I can maintain the customer relationship by myself now” (affidavit sworn 22 October 2015, paragraph 21), she decided to leave, and did so the following month. Mr Spurrier denies this conversation and said she wanted to leave so she could live in Australia, but I note the plaintiff appears to refer to this exchange in the Skype conversation of 9 February 2012, set out at tab 11 to Mr Spurrier’s affidavit of 5 October 2015, where she says to him: “Great, run China market by yourself as u said u can do by yourself in 2004”.

30. It had also been a feature of their relationship, the plaintiff claimed (affidavit sworn 22 October, paragraph 17), that Mr Spurrier upset her with his dismissive attitude and what she called “racial generalisation” (I note that this is denied by Mrs Spurrier in her affidavit). Whether or not that is the case, the plaintiff did take with her, when she left in 2005, an employment reference in very glowing terms as to her capacity for work and reliability (Exhibit 1 to her affidavit) and, as noted above, she continued to stay in touch with Mr Spurrier and his family.

31. The following paragraphs from the plaintiff’s affidavit describe her ongoing association with Mr Spurrier from that period on, which led to her returning to work for Pacific Shoji:

“24. Following this, I worked for Dell Computers as the Australia and New Zealand Project Co-ordinator between 2005 – 2006 and then I worked for Industrial Scientific as a Sales Support Manager between 2006 – 2007.

25. Throughout this time, even though I was upset with Chris Spurrier, I still had feelings for him. Despite the fact that he was in a relationship with Sonia Klaric, he continued to come back to me and was contacting me regularly by telephone. Chris Spurrier knew that I still had feelings for him. That was the reason for the contact. In the second half of 2006, I recall Chris Spurrier saying the following to me on at least two occasions:

CS: There is a big age difference between me and Sonia. I can’t see it working out between us. My father and my best friend, Siggy, agree that Sonia and I don’t really have a future. You never know what might happen in the future, Helen.

HX: I don’t think it’s a good idea [keeping in contact].

26. I travelled to Melbourne on many occasions during this time for work. I would often stay with the Spurriers, like I was part of the family.

27. I worked casually for Shoji throughout this period of time between May of 2005 and the start of 2007, because Chris Spurrier kept asking me to do so. This work included working on a procedural manual for Shoji’s seafood factories to meet AQIS’ requirements, for which I was paid at an hourly rate, and also selling their Taren Point business and factory to a Chinese contact referred by me, for which I was paid a 20% commission on the sale price.”

32. This is a very different picture to that painted by Mr Spurrier’s first affidavit (affirmed 5 October 2015). I summarise the relevant differences as follows:

1. He makes no reference to their romantic relationship or to her association with his family during that period and/or afterwards;

2. He makes no reference to his relationship to Ms Klaric (whose affidavit similarly does not refer to any of these matters);

3. He makes no reference to the plaintiff continuing to work casually for Pacific Shoji between May 2005 and early 2007. No wage records are produced by either party for this period, but the plaintiff, in Exhibit 2 to her affidavit of 16 March 2016, provides significant documentation in relation to her activities for the sale on commission of the Taren Point factory business. She also produces company documentation confirming that her employment was as a Sales Manager, not as an inspector of abalone products (See Exhibit 2 to her affidavit).

33. In his version of Pacific Shoji’s employment of the plaintiff in this early period, Mr Spurrier describes the plaintiff as someone employed as a casual factory worker with “limited English” who needed to be shown what to do by him (paragraphs 18 – 20). The reason for her sudden promotion is explained by Mr Spurrier as follows:

“25. I offered Helen the job because Pacific Shoji had for some time been receiving abnormally high mortality claims from its China-based customers. As a live abalone exporter, customers were not required to pay the full invoice amount if the abalone consignment received had mortality over 5% or weight losses over 3%.

26. Prior to offering the job to Helen, I suspected that Pacific Shoji’s China-based customers may have been making false mortality claims against the company. Pacific Shoji would often send multiple shipments of the same stock on the same flight to China-cased [sic] customers and non-China-based customers. Although the produce was the same and had been on the same flight, the mortality reports received from customers based in China varied dramatically with reports received from customers not based in China. I felt this would continue to occur in future unless the [sic] Pacific Shoji had someone in China to inspect the produce with the customers when it arrived at their facilities. I needed to employ an honest and trustworthy person and I thought Helen was the right person for the job.

27. In or around December 2004, Helen commenced her position as Pacific Shoji’s Inspector in Yantian. The role was considered to be full-time, and Helen was paid a full-time wage, however the hours of the role were neither regular nor extensive. Typically, shipments would arrive in the middle of the night, or early hours of the morning, but sometimes no shipments would arrive for days. Typically, the role involved time spent at the port waiting for a shipment to be made available for inspection.

28. Part of Helen’s responsibilities in the role of Inspector was to inspect shipments with the customers present and check the weight of the shipment as well as the mortality of the produce. During the inspections Helen would prepare a claim form, if required. Where a claim form was required to be completed, the details of the inspection (date/time) were recorded on the claim form as well as the weight of the shipment and the mortality of the produce. If a weight or mortality claim could be substantiated, Helen recalculated, at a reduced rate, the amount owing by the customer for the shipment, signed the claim form and submitted it to Pacific Shoji. The customer was also given a copy of the claim form.”

34. However, the documents attached by the plaintiff at Exhibit 2 to her affidavit of 5 October 2015 confirm that the plaintiff was not a shipment inspector but a sales manager. I am satisfied that her role was a substantially larger one than that conceded by Mr Spurrier, and that this included her activities in arranging the sale of the Taren Point business (discussed in more detail below). I am also satisfied that, contrary to his evidence, they did remain in touch during the period of time that she was not working for Pacific Shoji, and that she continued to assist him with work-related activities such as the sale of the Taren Point business.

The plaintiff’s role in selling Pacific Shoji’s Taren Point business to Haifa

35. In addition to the inconsistencies concerning the plaintiff’s actual role, this time period for the plaintiff’s increased role in the company coincided with Pacific Shoji closing its Taren Point factory and selling the plant and equipment to a person Mr Spurrier referred to in his affidavit as “an existing domestic customer”. This is the factory where the plaintiff, according to Mr Spurrier is a casual employee packing abalone, but she played a role in this sale despite this.

36. The parties’ differing versions of this transaction, for which the plaintiff claims she was paid commission, have considerable significance in that they are not dissimilar to the claim brought by the plaintiff in these proceedings for commission for the Dover factory in Tasmania.

37. According to Mr Spurrer’s affidavit, the plaintiff’s assistance with this sale was essentially as a translator (a surprising claim if her English was “limited” in 2003, as stated in paragraph 20 of Mr Spurrier’s affidavit), for which she was paid $10,000.

38. According to the plaintiff, her role was far greater. Her evidence is that she placed advertisements in the Australian Chinese language newspapers for the business sale, to which she received a reply from a Mr Charlie Chen, director of a company named Haifa, whom she says was “not an existing customer” (affidavit 24 March 2016). Nor was he the only person who replied; the plaintiff states that she spent a lot of time on both negotiating with Mr Chen and others and on this transaction “because I was to be paid 20% commission on the sale price” (affidavit 24 March 2016, paragraph 11). She goes on to say:

“13. On 22 December 2005 Chris Spurrier emailed a copy of the Agreement for Sale of Equipment for this transaction, so that I could calculate the commission that was payable to me on the sale of the factory. This would not have been necessary if I was just an interpreter.

14. At Exhibit HX-2 behind Tab 1 is a copy of emails between me and Chris Spurrier dated around 16 June 2005 and which demonstrate that my role was to sell the factory, not just act as an interpreter, as well as a copy of the email of 22 December 2005 and the Agreement for Sale of Equipment.”

39. These emails show that the plaintiff was indeed offered what Mr Spurrier called “a nice commission” in his email to the plaintiff (Exhibit 2 to the plaintiff’s affidavit) if she could sell the factory, that the plaintiff continued to work to sell the factory after she ceased working for Pacific Shoji (see the plaintiff’s email of 16 June 2005), and that Mr Spurrier did indeed send her a copy of the contract for sale as well as arrange for Pacific Shoji to pay her commission (he acknowledges the latter in paragraph 22 of his own affidavit).

40. These events are similar to the circumstances of the sale of the Dover factory in Tasmania. In both cases, the plaintiff was asked to sell a part of the business and promised a commission. In both cases, the plaintiff played a very significant, if not decisive, role in the sale. In both cases, the sale was completed after she had ceased being an employee of Pacific Shoji. These events are of relevance when deciding which party’s evidence to accept in relation to the sale of the Dover factory in Tasmania.

The plaintiff ceases work for Pacific Shoji in early 2005

41. Returning to the events in early 2005 which led to the plaintiff leaving the company before the Taren Point transaction and commission were completed, I note that Mr Spurrier sets out in his affidavit the reasons for the plaintiff leaving Pacific Shoji were different to those deposed to by the plaintiff. He states that the plaintiff was unhappy about working in China and that, four months after starting in the job described, she started complaining that she wanted to return to Australia. She did so in May 2005, after finding and training a replacement (named Bing Bing) who was dismissed shortly after her return (paragraphs 33 – 41, affidavit sworn 5 October 2015) and thereafter he remained only in “occasional” contact with her (affidavit, paragraph 42).

42. This evidence is in contradiction to the contemporaneous emails attached to the plaintiff’s affidavit and to her evidence that she assisted not only with the sale of the Taren Point business but with quite significant tasks such as the preparation of a booklet or brochure for staff explaining the Australian quarantine regulations and the workings of Australian Quarantine Inspection Service (“AQIS”).

The plaintiff returns to work for Pacific Shoji in mid-2007

43. In his affidavit of 5 October 2015 (Exhibit 1), Mr Spurrier set out (under the heading “Events from mid-2007”) how the plaintiff became first an employee and then the sole representative of the defendant’s operation in China. He states at paragraph 43 that he “contacted Helen with a view to convincing her to work again for Pacific Shoji as its China manager” because she had previously “performed well” and “was trustworthy”:

44. The plaintiff’s version of these events is that not only Mr Spurrier but also his father, Mr Barry Spurrier, had been asking the plaintiff for some time to return to Pacific Shoji on a salary of $60,000 plus commission and superannuation. The plaintiff resisted these offers until July 2007, by which time she had graduated from the University of Wollongong with a further tertiary qualification.

45. The plaintiff’s understanding of the terms of her contract, salary and commission entitlements are set out at paragraphs 75 – 89 of her affidavit of 22 October 2015. The circumstances in which her salary was reduced in July 2012 are set out at paragraphs 90 – 92 and following in this affidavit.

46. The plaintiff continued to work for Pacific Shoji in China from that date until the date of her dismissal on 25 October, 2013. I am satisfied from her evidence (including photographs of a very informal kind of Mr Spurrier living in her home, lying in bed and at a social function) that her relationship with Mr Spurrier continued to be close. According to paragraph 58 of her affidavit of 22 October 2015, Mr Spurrier visited China often and would stay for two to three months at a time, usually to collect cash from customers. At paragraph 59 she records one stay of almost nine months off and on:

“59. Between 2010 and 2011 Chris Spurrier spent almost 9 months on and off living in China, usually at my home in Guangzhou without paying any rent. He did this with the purpose of collecting cash and also for express purpose of building a warehouse with a cooling system in Guangzhou for Shoji. I paid for all rent and costs for this warehouse and cooling system. Chris Spurrier always promised to pay these amounts back to me, but has never done so.”

47. Although Mr Spurrier denies that these visits were so long or so frequent, he does not deny that he stayed in the plaintiff’s home. He agreed that his role on these earlier visits was to do deals and pursue creditors. During this time the plaintiff was never allowed to issue any documents or paperwork. A significant part of her work involved socialising and developing relationships with clients. She described her work as follows:

“60. The clients which I managed and assisted in China became well known and they trusted me implicitly. On one or two occasions they became friends and acquaintances.”

48. In about March 2009 this extended to using her bank account for receiving payments from customers:

“74. I recall around March of 2009, having the following conversation with Chris Spurrier about the practice of receiving payments from customers:

CS: Helen, the way things work with Chinese customers is that they often delay payments, but we cannot wait for these delays because that is not how it works in Australia. The bank doesn’t wait for this, the electricity company doesn’t wait for this, no-one waits for this in Australia. How about this? If you are very sure that customers are going to pay, and you have enough personal funds in your personal account, you pay the invoice and then you are re-imbursed by the customer when they finally pay it to you.

HX: Chris, I am not comfortable with that. It sounds very messy.

CS: Helen that is the only way that the whole business will work here because Chinese payments are too slow otherwise. If you don’t do this, the business will fail and you will not have a job anymore. I need you to do this for me as a favour.

HX: It sounds like I don’t have a choice then about this.”

…

94. Initially, I was reluctant to offer Shoji access to my bank account in order to receive funds. It was not something that I thought was a good idea. However, I was willing to listen to Chris Spurrier’s explanation. He wanted me to help him and Shoji and made me feel that I was obligated to do this favour for him. I didn’t want to lose my job.”

49. Prior to this, Mr Spurrier had travelled to China to collect payment in cash (affidavit, paragraphs 98 – 100). His evidence was that he continued to do so up until early 2011, and only discovered earlier transactions using the plaintiff’s bank account when he was preparing his affidavit material. I prefer the plaintiff’s explanation that this occurred in 2009 and that the plaintiff was reluctant to participate but did so because she did not have a choice.

Shoji Pacific’s business in China

50. The plaintiff described her new job as follows:

“35. The nature of the Shoji business was like no other I had known. I had been a packer and a helper in the past. The different aspects made it a very complicated business. From my perspective selling prized seafood to the Chinese was not so difficult. However, the other aspects were more complicated. It was a business which continually lay on the edge of legal and illegal; [sic] importations, and cash payments.

36. The live seafood industry is heavily regulated by the Australian Quarantine Inspection Service (AQIS). It is my understanding the AQIS always know the [sic] there was smuggling of live seafood into China, part of which was carried out, supported and carried out by Shoji and its customers, always with Chris Spurrier’s knowledge.

37. Shoji’s China operation was a hard business to be introduced to at first. I recall in about later 2004 I went with Chris Spurrier to China for the purpose of introductions to the seafood market and the actual clients in China.”

51. Although this was contested by Pacific Shoji, the plaintiff claims that another major contributing factor to the claims the subject of these proceedings was the way in which Pacific Shoji’s business was conducted. She described these issues as follows in her affidavit of 22 October 2015:

“40. I learned quickly from my early days in China that there was another dimension and by this I mean, the illegal smuggling of seafood into China. Chris informed me of this on many occasions.

41. I was led to believe that I would never be asked to do anything illegal. Whilst I was employed at Shoji as manager of China business, I was never knowingly involved in the smuggling of seafood live or frozen into China.

42. Around October of 2004, Chris Spurrier introduced me to the two aspects of operation in the live and frozen seafood market.

43. The first aspect was, as Chris Spurrier put it, to be the fully illegal aspect. This involved the delivery of seafood to Hong Kong or Vietnam, with such shipments then being smuggled into China in order to avoid the payment of duties. Chris Spurrier would always accept for the inspection of products to be carried out on mainland China and payments would then be made to Shoji after the customer has received and inspected the good.

44. All the shipments involved in invoices numbered 5146, 5079, 5152 and 5153 were on credit and were fully smuggled shipments into China. This was something I could deduce from the circumstances. Chris Spurrier was evasive and had told me at various times never to speak too much about any one shipment as he thought some of our conversations by telephone or social media were being tracked by authorities, for example, AQIS. Several misunderstandings arose from these directions given to me by him.

45. The second aspect was, as Chris Spurrier put it, to be the semi illegal aspect. This involved the delivery of seafood directly into main land China, to cities such as Shanghai, Beijing, Xiamen and Guangzhou. Chris Spurrier would either provide a dummy invoice to customers with a fake goods value or change the origin of products, with both ways aiming to assist customers to partially avoid import duties.

46. This second aspect was explained to me by Chris Spurrier but I was never required to prepare any of the paperwork or invoices. In fact, I did not have the software to prepare any of the invoices.

47. AQIS was aware of the illegal channels of seafood exportation into China. This is a highly regulated industry.

48. Around October of 2004, Chris Spurrier said to me:

CS: Helen, we need to be careful how we carry out these sales because AQIS is always watching us.

HX: What do you mean?

CS: Well, there are three things that AQIS have said not to do. The first is for Shoji not to retain ownership of any of the shipments that go between Hong Kong or Vietnam into main land China, because this is the time and place in the business supply chain where smuggling occurs. The second is to never issue any dummy invoices. The third is not to change the origin of goods on purpose. AQIS takes these things very seriously, but don’t worry about any of this, because I will take care of all the paperwork. You won’t need to do any of the paperwork or the invoicing. You just concentrate all your strength on the customers. Charm the customer, get the sales.

HX: Well, as long as I don’t have to do anything by preparing the paperwork or the invoices.

CS: Helen, I will take care of all that.

49. I was constantly aware that, the commercial risk in this business of Shoji was that a client would just disappear and not pay. Customers never gave their real names and businesses were not registered using their real names. Before I started my role as China Manager, Shoji addressed invoices to nicknames of customers. I found it extraordinary that this business could work as well as it did. Chris Spurrier did not ask me to get the real details or to ask customers to complete any credit forms. That was far too formal for these circumstances. No customers disappeared when I was the China Manager. It did happen on one occasion however, that was because a different set of circumstances occurred which I depose to below in another section.”

52. These claims were explained by Mr Spurrier on behalf of the defendant as follows:

“Q.  So nothing imposed in Australia for export of any of your products into Asia?

A.  No.  That's correct.

Q.  So it's only Asian customers that would receive assistance in the sense that‑‑

A.  That's correct.

Q.  ‑‑the duties would be lower for them?

A.  That's correct, yes.

Q.  When you present these dummy invoices, are they presented to the local customs authorities to Australia?

A.  No.  The official invoice is declared to the local customs.

Q.  How does the dummy invoice get across to the client?  Is it emailed or‑‑

A.  I email it to Ms Xia, both documents, along with the airway bill, the packing list.  All documents would go to Ms Xia and the invoice ‑ both invoices to Ms Xia.  Then she would pass whatever documents necessary on to the customers.

Q.  You acknowledge, of course, that what you're doing is, of course, cheating the Chinese duty system, isn't it?

A.  That is probably true as with just about every other Australian exporter of seafood to the China market.  It's common practice and common knowledge, yes.

Q.  And you're happy to do that?  You're happy to assist Chinese clients‑‑

A.  I would prefer if that wasn't the case, but that is the case.

Q.  You acknowledge this isn't a legal practice?

A.  It may be.  I don't know.

Q.  Well, you're assisting an individual‑‑

A.  I don't know.

Q.  Let me finish.

A.  Sure.

Q.  You're assisting a company or an individual in China in paying less than they should by way of importation duties, or duties of some nature.

A.  No.  I raised a [sic] invoice at a lower value because that was requested by the customers.  What the customers chose to do with that invoice afterwards was up to them.

Q.  You know what they do with the invoices.  You've just told us.

A.  Yes.

Q.  They use it to present it to Chinese customs to pay less duties.

A.  Yes.  Yes.  That's correct.

Q.  And you're happy to assist them in that.  You're assisting them in an illegal endeavour; isn't that so?

A.  They request it.  We gave them a dummy invoice, and, yes, I provided them with one and that's common practice, as I mentioned.” (T 271 – 3)

53. Mr Spurrier went on to explain:

“Q.  You knowingly are assisting those people in carrying out an illegal practice; isn't that so?

A.  Well, I knowingly provided them with an invoice of a lower value.

Q.  And you're happy to do so?  I mean, you've stated in front of a court‑‑

A.  I would prefer not to.  I would prefer it wasn't, but that's the way, unfortunately that the seafood business operates to China and has done for many years, and all our competitors do it as well.” (T 273)

The circumstances leading to the transactions the subject of this claim

54. I have set out below the evidence of both parties in relation to the transactions the subject of these proceedings. Before considering those factual issues, I first set out general observations on the issue of credit, which are a central feature in the determination of disputed issues of fact.

The credit of the witnesses

55. Each of the parties raised credit issues relating to the evidence of the other party. As the issue of credit is such a vital one, I shall briefly note the relevant principles.

1. A judge must act reasonably and not perversely or capriciously in relation to accepting or rejecting a witness’s testimony: Christmas v Nicol Bros Pty Ltd (1941) 41 NSWSR 317 at 322 per Jordan CJ; State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in liq) (1999) 160 ALR 588 at 617 per Kirby J.

2. The impact of the passage of time upon recollection can mean that an otherwise honest witness may make a genuine mistake: Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 at 551; Watson v Foxman (1995) 49 NSWLR 315 at 319. In “Truth and the Law” (The 2011 Sir Maurice Byers Lecture, 26 May 2011) Spigelman CJ observed that “witnesses can, without any dissimulation or propensity to lie, confidently assert the truth of conversations, observations and events which did not happen. The plasticity of memory impedes the truth finding process. This is not an uncommon phenomenon.”

3. Courts dealing with parties involved in personal relationships frequently take into account that witnesses may be motivated by self-justification or personal emotions (Carlson & Fluvium [2012] FAMCA 32 at [165]), a factor of particular relevance in these proceedings, given the longstanding personal relationship between the plaintiff and Mr Spurrier. Decisions concerning credit of witnesses in the Family Court invariably take these factors into account. I particularly acknowledge the need for caution in such circumstances where the findings of a trial judge are difficult to challenge on appeal, and the observations of a number of decisions of the Full Court of the Family Court to this effect, such as Shaeffer v Jacobs [2011] FAMFC 119 at [54] – [57].

4. Where a witness admits to having lied, whether that occurred out of frankness or because the witness had no alternative, the degree of materiality of that lie to the proceedings before the court needs to be taken into account. The best example of this is the admission by the plaintiff in Marsden v Amalgamated Television Services Pty Ltd [2000] NSWSC 570 that some decades before, when arrested for homosexual conduct (that being an offence at the time) the plaintiff gave a false name because the arrest would have destroyed his legal career. Levine J considered that the lie had little relevance to the issues before the court, even though those sexual conduct in the criminal charge was argued to be of relevance to the proceedings before the court. One of the questions addressed by Levine J was why a witness would lie. In the present case, as I have set out in the evidence, the plaintiff did not obtain any personal benefit from lying about who took the shipment; her concerns appear to have been to sell as much Pacific Shoji produce as possible.

5. Where the witness does not admit to a lie but the evidence is inconsistent with contemporaneous documentary evidence in the manner identified by Lord Bingham (Saler v Danell [2017] FAMCA 161 at [87], citing a test now generally applied in such circumstances), a finding may be made that the witness is lying.

6. Where both parties, or their relevant witnesses, are lying, as is the case here, the court should exercise even greater caution than usual. The general rule that primary deference should instead be given to contemporaneous documents (Fox v Percy (2003) 214 CLR 118 at [30] – [31]) is all the more important. In those circumstances, the contents of documents (as well as the absence of documents which a party would be expected to have, or to have produced to the court at the outset) are of particular significance.

56. I set out my observations as to the credit issues for Pacific Shoji, Mr Spurrier and Ms Klaric.

Credit issues concerning the defendant

57. These may be summarised as follows:

1. Failure to comply with obligations under the Fair Work Act 2009 (Cth): Although working principally in China, the plaintiff’s contract of employment is acknowledged to be governed by Australian legislation including the Fair Work Act 2009 (Cth). The plaintiff’s claims involve serious and obvious breaches of this legislation in relation to the plaintiff’s salary being reduced, no holiday leave and oppressive work conditions as well as failure to keep proper employment records (T 186, 220). She was owed commission on sales in accordance with her contract. I also note Mr Spurrier’s evidence as to the informality of record-keeping in relation to invoices provided to Ms Klaric by the plaintiff (T 273). Mr Spurrier dismissed these as “bad management” (T 244), but they are contraventions of the legislation, and the circumstances in which he admitted lying (T 188 – 189) to the plaintiff about why her salary was reduced are not to his credit.

2. Dishonest record-keeping: It is not in dispute that Mr Spurrier wrote letters to the Myanmar and Singapore embassies containing false information (T 190 – 192), issued dummy invoices to clients to help them evade import duties in China despite knowing this to be illegal (T 271 – 273) and expected the plaintiff to use her personal account to process payments to assist in these endeavours (T 240, 244).

3. Concessions in cross-examination: Mr Spurrier’s verified defence (on behalf of Pacific Shoji) and three affidavits about the Dover factory failed to disclose Pacific Shoji’s connection with it and he claimed neither he nor Pacific Shoji was involved with the factory sale. The documents he eventually produced in court demonstrated not only that Pacific Shoji was a company in which he and his family had shareholdings and carried out similar business, but that the sale price was not as stated. Despite initial indignation, he eventually conceded that Mr Li had been retained by him as a debt collector (T 262) although his evidence was that he had paid him $5,000 for “translation”. These concessions were wrung from him reluctantly.

4. Evidence inconsistent with contemporaneous documentation: Where a witness’ evidence is inconsistent with contemporaneous documents, that is a significant factor in relation to credit, for the reasons explained by Ipp J in Ipp, “Problems with Fact-Finding”, (2006) 80 Australian Law Journal 667. I also note the observations of Tugendhat J in Thornton v Telegraph Media Group Ltd [2011] EWHC 1884 (QB) at [73] – [74], as approved by Tobias AJA in McGlen-McLeod v Galloway [2012] NSWCA 368. Mr Spurrier’s evidence is inconsistent with many of the contemporaneous records. These range from relatively minor inconsistencies, such as his statements concerning the nature and extent of his relationship with the plaintiff between 2005 and 2007, when it is clear from the documents attached to her affidavit that not only Mr Spurrier but Mr Spurrier’s family remained in contact with her over this period and she was paid a substantial amount of commission for her activities in relation to the Taren Point business sale. More serious inconsistencies include the two letters Mr Spurrier wrote for the plaintiff concerning her salary, one of which was a letter to an embassy where the requirement for honesty and frankness is of particular importance (T 190 – 192) and issuing dummy invoices to help his client avoid import duties in China (T 271 0 273). Also of relevance are Mr Spurrier’s verification of matters in the defence in relation to the Dover factory which are clearly untrue (and must have been known to him to be untrue, such as the denial of offer of commission) and the revelation that Mr Li had been paid a commission on the sale of that factory in the sum of $5,000 for “translation” services.

5. Omissions in Mr Spurrier’s evidence: The failure to produce the documentation in relation to the Dover factory sale is of concern. The misdescription of this sale follows a similar pattern in relation to the Taren Point business sale. The plaintiff was not cross-examined about the statement in her affidavit that Mr Chen was not “an existing customer” or concerning the amount of work she had performed on this transaction. The absence of documentation relating to the plaintiff’s employment, in circumstances where there are statutory requirements for the keeping of such claims is also a matter for concern.

6. Implausibility: Where a witness’ evidence is inherently implausible, such as Mr Spurrier’s evidence about asking Mr Li to carry out market research and/or provide sales assistance without being paid, that may be a relevant factor to credit.

58. The submissions made on behalf of Pacific Shoji (defendant’s submissions, paragraph 13) praise Mr Spurrier for being “prepared to make concessions under cross-examination that did not reflect well on him as a manager” but that “a dishonest witness would not have frankly admitted to lying to an employee about salary cuts for instance” and that his admissions about what are called “bad management” are “to his credit as a genuine witness”. Admissions about what are called “shoddy” business practices are submitted to be “separate questions” which do not detract from Mr Spurrier’s overall credit.

59. One aspect of Pacific Shoji’s submissions on credit require careful analysis. This is that I should not accept any submission that any of Pacific Shoji’s conduct is in contravention of any Australian law (or “illegal”, to use the words of Pacific Shoji’s submissions in reply at paragraph 2.1) without the benefit of expert evidence, particularly as “Mr Spurrier has not been charged with (let alone convicted of) any offence”, citing Cubillo v Commonwealth of Australia (No 2) (2000) 103 FCR 1 at [118] and [121]. However, this decision stands for the principle that a trial judge is not restricted in his or her assessment of a witness, in that he or she is not bound to accept all or any of that which the witness attests to; for a recent discussion of the application of these principles where fraudulent conduct is alleged, see Chahal Group Pty Ltd & Anor v 7-Eleven Stores Pty Ltd [2017] NSWSC 532 at [18] – [25].

60. No expert evidence is required for there to be findings that the plaintiff is entitled to unpaid wages, holiday leave or superannuation.

Conclusions concerning the credit of Mr Spurrier, Mr Li and Ms Klaric

61. The failure of Mr Spurrier and Ms Klaric to keep proper employment and/or business records would not, by itself, be a significant issue. The difficulty is that the explanation for many transactions not being documented, or documented by dummy receipts, is the furtive way that Pacific Shoji carried on business in order to assist its clients’ activities. Mr Spurrier told the court that his business practices were widespread in the seafood business, apparently by reason of the vigilance of Chinese customs officials (who, given their pursuit of Mr Wang and others, and apparent immunity to bribery, emerge rather well from these accounts by Mr Spurrier of widespread business practices to avoid their attention). While I acknowledge Mr Johnson’s submissions that I should be cautious in the degree of weight to be given to such matters in terms of credit findings, I consider that they cannot be ignored. Similarly, Mr Spurrier’s admission that he lied to the plaintiff about reducing her salary, swearing to a defence containing material he must have known was untrue and not providing documents to the court about the Dover factory sale until the last day of the hearing are not matters that the court should take lightly.

62. Where, however, I see credit being most significantly undermined comes from the obvious hatred and hostility between these three persons, arising out of the plaintiff’s former relationship with Mr Spurrier. Mr Spurrier’s email to the plaintiff (annexed to Exhibit 1) warning her that Ms Klaric was now aware the plaintiff had lied about these shipments and planned to go to the police is instructive in this regard, as is the fact that Ms Klaric never once contacted the plaintiff about any of the financial transactions in the course of the business, leaving this to Mr Spurrier to do.

63. This sort of anger and hatred can result in even an honest witness being unable to tell the truth. It is for that reason that I have consulted and followed a number of decisions of the Family Court of Australia in relation to the approach to take as to credit in such circumstances. Mr Li’s lack of credit is dealt with elsewhere in this judgment.

Credit issues concerning the plaintiff

64. These may be summarised as follows:

1. The plaintiff’s “confession”: It is not in dispute that the plaintiff lied in relation to which of Pacific Shoji’s customers took the shipments, and that she continued to lie for a lengthy period to cover up those actions, including representing repayments from Mr Wang as being from Mr Chen. These were substantial and serious lies aimed at covering up the fact that she had acted contrary to Mr Spurrier’s instructions, and probably motivated by the fear that if he found out she would be dismissed.

2. The plaintiff’s personal animosities and feelings concerning Mr Spurrier: The same concerns I have about the evidence of Mr Spurrier and Ms Klaric apply to the plaintiff. However, unlike their evidence, the plaintiff’s evidence is largely consistent with contemporaneous records.

1. The plaintiff’s role in effecting transactions which were designed to defeat customs inquiry: Although the plaintiff said she was reluctant to use her bank account or to process dummy receipts, she certainly did so for a very long time. However, I am satisfied that her reasons for doing so were that she would do anything to please Mr Spurrier, with whom she has remained infatuated, rather than in pursuit of illegal activities of her own. Although there appeared to be some evidence of the plaintiff having her own transactions for the sale of seafood, no submissions were put to me concerning this issue by Pacific Shoji. I also note that there is no submission that the plaintiff stole from the company, despite having many large financial transactions going through her personal bank account.

Conclusions concerning credit

65. Having noted all of the above, I am satisfied that I should regard both Mr Spurrier and Ms Klaric as persons whose evidence should not be accepted unless it is adverse to their interests, and whose evidence should not otherwise be accepted unless corroborated.

66. The plaintiff’s lies to Mr Spurrier about the identity of the person who ordered the two shipments are a significant blow to her credit. It is, however, the only blow of substance. The plaintiff’s evidence is largely consistent with contemporaneous documents. For example, her claim that she had never been given annual leave was not only confirmed by the absence of documents granting her such leave, but one of the documents attached to Mr Spurrier’s affidavit of 5 October 2012 (Exhibit 1) confirms his unwillingness to grant her annual leave. Her claim that she was offered commission on the Dover factory sale is not only confirmed by the Skype conversation recording, but by evidence of an earlier commission sale of Pacific Shoji’s Taren Point business. While the plaintiff’s evidence needs to be considered with care where it is not supported by such documentation, I am satisfied that she should not be dismissed as a witness whose evidence should not be accepted without such corroboration.

67. This brings me to a consideration of the plaintiff’s claims.

Short-paid salary

68. The defendant requested the plaintiff to agree to reduce her salary by half for the periods August to November 2012, and again from March 2013 to October 2013. When she was requested to agree to the reduction she was informed that all staff would be taking such a reduction. Mr Spurrier, in his capacity as the managing director of the defendant, informed her that the shortfall would be refunded to her in the future.

69. Mr Spurrier at first sought to say that this was not a pay cut, but a reduction in circumstances where he was not happy with the plaintiff’s performance:

“Q. Now, there was a point at which it's common ground between the parties that it was requested that Ms Xia take a reduction in salary?

A. Yes.

Q. The dispute there is Ms Xia says that the undertaking was to pay her back whatever she wasn't receiving, and as I understand your case is that was never the case ‑ it was just a simple reduction in salary ‑ is that right?

A. It was a simple reduction in salary.

Q. Yes, and this occurred because of tough financial times the company was going through?

A. Yes, the business was going through a difficult time particularly with the China side of business but Helen wasn't getting a hell of a lot of sales, to be honest, and I wasn't particularly happy with her performance.” (T 187)

70. Mr Spurrier then sought to justify his conduct by saying the company had made pay cuts on a prior occasion:

“Q. Now, was it the case that all employees took a reduced salary?

A. There has been a point in the past where that's occurred but on this occasion Helen was the only employee to get a reduction in salary.

HER HONOUR

Q. You said there was a point in the past ‑ when was that?

A. A number of years ago ‑ a long time ago.

Q. How many years ago?

A. And it might not have been all ‑ it was maybe several staff ‑ I don't know.

Q. You don't know?

A. 10 ‑ 7 years ago?

Q. 10 or 7 years ago some staff were asked to take a reduction?

A. Yeah, I took a pay cut myself.

Q. You took a pay cut and who else?

A. I'm not sure to be honest, your Honour.

Q. And this was 7 or 10 years ago?

A. I believe Helen might have taken a pay cut. Yeah, Helen took a pay cut as well.” (T 187)

71. This had nothing to do with the present situation, and no question was put to the plaintiff about her prior willingness to take pay cuts. She does not appear to have been the subject of earlier pay cuts in any event.

72. When the plaintiff’s pay was cut, nothing was said to her about this being because her performance was unsatisfactory, and no other staff member (including Ms Klaric, Mr Spurrier’s wife) took a reduction. Mr Spurrier at first denied this but eventually admitted lying to the plaintiff:

“Q. Did you not inform Helen at the time that she was asked to take this reduction in salary that everyone was taking a pay cut?

A. No, I didn't. I didn't inform her of that. Sorry, could you repeat the question?

Q. Yes, so, at the time that you asked Helen to take the reduction in salary, is it not so you informed her that all the staff were taking one?

A. That's correct.

Q. You did?

A. I did.

Q. But that never occurred?

A. No.

Q. Why was that?

A. Because I knew if I said that to her that she was the only one who was going to get a pay cut, she would have been very upset and to be honest she would have ended up in tears and it would have become a big quiver.

Q. Yes, she would have said, "No, why me?"  Isn't that so?

A. Possibly, possibly, but the fact‑‑

Q. I suggest to you that's why you‑‑

A. The fact is I wasn't happy with her performance and she wasn't getting the sales.

Q. Yes, so you falsely informed‑‑

A. Everyone else in the company was doing their job and doing it well. Ms Xia was not performing well.

Q. So you falsely informed her that everyone in the company was taking a pay cut so that you would have a means of getting her to agree to the pay cut?

A. She was under no obligation to agree.

HER HONOUR

Q. No, the thing is what is being put to you is you falsely informed her that everyone was taking a pay cut in order to influence her to agreeing to taking a pay cut. That was the question.

A. That's fair enough, yes.

SHER

Q. You agree with that?” (T 187)

73. Mr Spurrier agreed (at T 188) that it was “a lie”.

74. This was not the only lie that Mr Spurrier was prepared to tell about the plaintiff’s salary:

Q. That is a letter drafted by you to the Singapore Embassy, is that so?

A. Yes.

Q. That's dated 5 September 2011?

A. Yes.

Q. In the first paragraph of that letter you state that Helen's salary is $80,000 per annum, do you see that?

A. Yep.

Q. Was that in fact her salary at the time?

A. Her salary was 70,000 plus super, so it was close to 80,000.

Q. How is that close to 80,000?

A. 77,000.

Q. Yes, plus super gives us‑‑

A. No, 70,000 and 7,000.

Q. You are taking as 10%‑‑

A. Yeah.

Q. Well, it's slightly less than that but let's work on that figure.

A. Okay.

Q. 77,600?

A. Helen's salary was not 80,000; it was 70,000 plus super.

Q. So, that letter there is not accurate ‑ the 80,000 per annum that you've placed there?

A. That's correct.

Q. Why did you draft such a letter with inaccurate information?

A. I don't recall exactly why I put 80,000.

Q. You don't recall why?

A. No.

Q. Is it ‑ to ask you outright, Mr Spurrier ‑ is it your common practice to state inaccuracies and falsehoods in documents?

A. No.

Q. And you don't even recall why you did this one?

A. Well, that wasn't her salary, no. I don't recall why I wrote 80,000.

Q. If you turn the page over to‑‑

A. It was closer to 77.

Q. Two pages over, rather, to page 8, we see a further letter from you and that's now in September 2013, and this one is now to the Myanmar Embassy‑‑

A. Sorry, did you say page 8?

Q. Yes, page 8. That's a letter there by you to the Myanmar Embassy on this occasion in September 2013, do you see that?

A. Yep.

Q. And, again, you state there that Helen's salary is $80,000 per annum at that point ‑ do you see that?

A. Yes.

Q. Again, at that point in fact her salary wasn't $80,000 per annum, was it?

A. No.

Q. Can you say why in this instance you stated an inaccurate figure to the embassy?

A. To assist Helen with her application for a successful visa to Myanmar.

Q. Why was Helen looking for a visa to Myanmar?

A. At the time it was trying to set up a new business ‑ a seafood business ‑ in Yangon.” (T 190 – 191)

75. There were a number of misstatements in this evidence, the most significant of which was that the plaintiff’s actual salary had been reduced 50% from this figure at the time (T 191).

76. Mr Spurrier was asked why it was necessary to give such a high salary for the plaintiff if the purpose was for her to set up company business with third parties:

“Q. So, what did we agree her salary was before ‑ before it was halved?

A. 70,000.

Q. It was 70,000?

A. Plus super.

Q. So, she was in fact on 35,000, is that right?

A. That may be correct, yes.

Q. And this letter says $80,000, and this was so that she could get a visa to go to Myanmar to look into business opportunities for your company?

A. That's correct. Helen was going to do the sales for the company.

Q. But why ‑ what was the relevance of her having an $80,000 salary?  I mean, inn Myanmar $35,000 is probably a fortune.

A. I don't know.

Q. Why did you need to say she had 80,000?

A. (No verbal reply).

Q. Mr Spurrier?

A. I'm not sure.

Q. Well, could it have been that this was part of your telling her ‑ you are wanting her to believe that her salary would be increased again?

A. No, not at all. Not at all.” (T 191 - 192)

77. In the absence of other explanation, I propose to regard these letters as attempts to mislead the plaintiff into believing that her salary reduction was only temporary and that her salary would be restored to its previous level as well as repaid. This puts the plaintiff in a stronger position than the plaintiff in Harpham v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia [2016] FCA 1473, where a worker had to accept a “fait accompli” of a reduction of salary (at [77] – [88]).

78. In addition, it was inaccurate to claim that the company was doing poorly financially when the only difficulty Mr Spurrier could point to was unpaid invoices:

“Q. So, in this instance ‑ the previous occasion, you've told us that you were quite close in your stating it was 80,000 because in fact it was with superannuation 76,000 or so. But in this instance you are very far off the mark, aren't you, Mr Spurrier?

A. I am.

Q. It was in fact less than half of what you've stated in this?

A. Yes.

Q. Now, you also stated that as we've established, the reason that you stated to Helen that she should be on a reduced salary is because the company was not doing well financially at that point. Do you agree with that?

A. Yes.

Q. Would you state that the company was doing ‑ would you agree that the company was doing just fine at that point financially?

A. No, I wouldn't say we were doing just fine. Business was difficult. Particularly when there's unpaid invoices for products supplied. It makes it very difficult.

Q. Well, every business faces that, don't they, Mr Spurrier?

A. I'm sorry?

Q. Every business faces the issue of trying to collect payments on invoices ‑ almost every?

A. Well, I'm not sure. I can't speak for other businesses.” (T 192)

79. This conduct confirms the plaintiff’s understanding, from the Skype conversation she and Mr Spurrier had on 5 October 2013 that, although her salary was to be reduced, she would later be paid back. Mr Johnson submits (written submissions B1 [4]) that this conversation took place eight months after the agreement and cannot form part of the contract or any variation, and that any promise to restore the plaintiff’s salary was qualified by the performance of the business in China doing better, when the evidence showed that it was performing poorly.

80. I do not accept these submissions, or that the company’s business in China was in fact doing poorly as claimed, or that this was the correct basis for the reduction. Mr Spurrier told the wrong lie; he told the plaintiff other employees taking a cut, inferentially because of company business generally, and not that the plaintiff was being singled out because of problems in China. I also note Mr Spurrier’s acknowledgement in cross-examination that the company’s problems essentially related to creditors not paying; this was not a company suffering from problems other seafood traders in China were having, with their businesses being investigated or their employees arrested. The company was in fact doing better than it deserved to; Mr Spurrier acknowledged that Pacific Shoji was saving money by representing its seafood products came from places which benefited from free trade agreements: T 275 – 277.

81. Nor is it the answer to say that the plaintiff accepted the reduction of salary and could not now be heard to object. A similar situation occurred in Harpham v Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia, where an employee’s salary was reduced and that employee continued to work for the reduced sum. Tracey J stated:

“… [77] The CEPU further argued that any variation to Mr Harpham’s contract of employment had occurred with his consent. This was, it was said, demonstrated by his having “elected” to continue in employment after he had been notified of his reduced salary. The CEPU also argued that subsequent changes to Mr Harpham’s salary — on 23 November 2010 and 1 July 2012 — were accepted by Mr Harpham and gave rise, effectively, to renewed consensus as to the terms of his employment, thereby limiting his damages.

[78] Insofar as the salary component of Mr Harpham’s remuneration package is concerned nothing turns on whether the Rules were or were not contractually binding on the CEPU. The CEPU did not deny (nor reasonably could it have) that there existed an employment contract as between it and Mr Harpham, pursuant to which he was entitled to a “remuneration package” of $90,724.23. That term could be varied (under clause 4) “if agreed to in writing between [Mr Harpham] and the ETU”.

[79] The CEPU appeared to submit, in a heading above paragraphs [133]–[137] of its written submissions, that Mr Harpham had “[c]onsent[ed] to [the new] terms of employment”. It later submitted that he “elected to continue in employment and made no claim until after the termination of his employment.”

[80] There was, in 2009, no consensual variation of Mr Harpham’s terms of employment. Mr Harpham was presented with a fait accompli: he was told what his new salary would be, not asked whether he consented to variation of his terms of employment. He protested verbally to no avail.

[81] Nothing in the evidence suggested that any “agreement” to the variation was recorded in writing.

[82] It may be accepted that the CEPU repudiated Mr Harpham’s contract of employment when it substantially reduced his remuneration package in 2009: see Cantor Fitzgerald International v Callaghan [1999] 2 All ER 411 at 420–1. Moreover, after 1 July 2009, the CEPU breached Mr Harpham’s employment contract by paying him less than the sum that had been contractually agreed in September 2008.

[83] The CEPU, dealing evidently with the eventuality that its breach was repudiatory, submitted that Mr Harpham “elected to continue in employment”. I would accept that submission. At the point of repudiatory breach, Mr Harpham could have elected to terminate the contract: see Romero v Farstad Shipping (Indian Pacific) Pty Ltd (2014) 231 FCR 403 at 435–6. He did not, however, do so. He chose to remain in his position as an organiser for over three years. During this period further variations to his remuneration occurred and were not objected to by him. While an immediate decision was not required on 1 July 2009 (cf Rigby v Ferodo Ltd [1988] ICR 29) his protracted on-going employment was consistent only with his having elected to affirm the contract: cf Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 656; Khoury v Government Insurance Office (NSW) (1984) 165 CLR 622 at 633; and Galafassi v Kelly (2014) 87 NSWLR 119 at [88].

[84] An election to affirm the contract does not, however, affect Mr Harpham’s right to contractual damages for breach. Nor does the fact that he continued in his employment for at least a time (and I will return to this) gainsay the proposition that the CEPU was in breach of its contractual obligations. The CEPU did not submit that Mr Harpham was estopped from insisting upon the relevant contractual entitlement. Nor did it submit or plead that any provision of the Limitation Act 1974 (Tas) precluded Mr Harpham’s action. On its face it was brought within the relevant period: see s 4. Accordingly, the position seems to me to be similar, if not identical, to that considered in Rigby v Ferodo Ltd [1988] ICR 29, the result in which is accurately captured in the headnote to the report as follows:

[I]n the absence of the employer seeking to terminate the contract of service it had with the employee, the employer had sought to compel the employee to accept a wage that was less than he was entitled to under the contract; that the employee in continuing to work and receiving a reduced payment under protest had not accepted a variation in the terms of the contract and, therefore, he was entitled to recover the difference between his contractual entitlement and the amount paid by the employer either in damages for breach of the contract or in debt).

[85] In my judgment, the outcome must be the same in this case, at least in respect of the period between 1 July 2009 and 23 November 2010.”

82. The same is the case here. The plaintiff was faced with a request for reduction of her salary imposed without negotiation, but with the offer of reimbursement later, which was confirmed by the two letters Mr Spurrier later provided to her, putting her salary at around $80,000. She is not only entitled to sue upon her original salary for the reasons explained by Tracey J, but on the promise Mr Spurrier gave her, as there is no evidence Pacific Shoji is in financial trouble.

83. This brings me to the determination of the quantum. According to the payslip produced by the defendant for the 2012 tax year (Exhibit 6, Tab 10) the plaintiff’s net annual pay was $53,931.96. Her net monthly pay was thus $4,494.33.

84. As half of this ($2,247.17) was held back for 12 months (totalling $26,965.98) Mr Sher submits that this is the sum which should be reimbursed to the plaintiff. I have not received any submissions to the contrary as to the mathematics of the claim.

85. I also note that, in the course of closing submissions Mr Sher sought leave to amend to claim these amounts by adding a claim under s 18 Australian Consumer Law (Cth), as contained in Sch 2 of the Competition and Consumer Act 2010 (Cth), as well as a claim for deceit at common law. I rejected that application, by reason of its lateness: Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175. As I have found in favour of the plaintiff I shall not set out those reasons more fully.

86. However, if I had granted leave, I would not have accepted Mr Johnson’s submission that the Australian Consumer Law claim could not succeed (written submissions B [6]). Mr Spurrier admitted he had informed the plaintiff that she would, at a later date, be refunded all amounts not paid due to the reduction (T 222 – 223). Although the plaintiff said she had “a suspicion” that Mr Spurrier had tricked her (paragraph 92 of her affidavit) I am satisfied that she genuinely believed she would be reimbursed, particularly in light of the letters Mr Spurrier gave her about her salary.

Leave entitlements

87. There can be no doubt the plaintiff asked Mr Spurrier for annual leave. In the Skype conversation of 9 February 2012 which is attached to Mr Spurrier’s affidavit of 5 October 2015 (Exhibit 1, tab 14), she is recorded as saying:

A. I send ‑ I send the full amount in the ‑ in the form. Shoji use it. I didn't say I send 200K back to Shoji Australia account. I send 200K as Chris instructed. He give me the Myanmar details, or later he says that's the account I want you to send, to back‑up Shoji Myanmar branch and it's ‑ Chris send me the registration of Myanmar company.

Q. Well, that is different from what you said earlier, but if that's your answer, I will accept that's what you're telling me.

A. Yeah, I appreciate that.” (T 143)

220. This just adds another layer of uncertainty as to what money is owing, if any, to Pacific Shoji, although I note the crossover of this sum with money the plaintiff says she loaned to Pacific Shoji.

221. However, the principal reasons for my rejecting Pacific Shoji’s cross-claims are that I accept the plaintiff’s evidence with regard to her work and duties in China, namely that all that Pacific Shoji and Mr Spurrier wanted from her was sales and “good news”, and that how she obtained these sales was entirely left to her discretion. Mr Spurrier did not care how the sales were done, as long as they were “good news” resulting in company profit (T 83), and that this included arranging for the plaintiff to use her own bank account to help screen these transactions from inquisitive customs officials. This is confirmed by the extreme generality of the plaintiff’s contract of employment. Mr Spurrier conceded that the duties and prohibitions that are referred to in his affidavit and in the cross-claim did not appear in any document sent to the plaintiff (T 249 – 250).

222. The plaintiff’s explanation that she had redirected the sales originally made to Mr Chen to Tim Wang as she believed she was entitled to do is consistent with her pattern of dealings with both customers. The most likely reason for her changing the names is that she had been told by Mr Spurrier not to have more than one or two sales a month to Mr Wang to reduce the company’s liability if he became a non-payer. When he wanted to buy two shipments, she processed the transactions as being for Mr Chen. When Mr Wang was arrested and did not pay for the shipment (T 104), she knew she was in trouble and lied to Mr Spurrier.

223. However, this was not the lie of the employee who has stolen money, but the life of the employee who has been trying to make sales for the company to a boss who was her former boyfriend and who was only interested in hearing “good news”. The plaintiff ultimately confessed that she should have told the defendant about this earlier, but this was not a confession to any wrongdoing in redirecting the sales, but to the fact that the plaintiff should have informed the defendant about this earlier.

224. The plaintiff explained that she had not informed Mr Spurrier of this earlier out of fear of what he would do to her. She said she feared violence (T 94), but she probably also feared being replaced. Both fears were, in my view, well founded as Mr Spurrier was clearly talking to Mr Li about the inadequacies of his “sales girl” (as he disparagingly referred to the plaintiff) and the only explanation for his engaging someone as hopelessly unqualified as Mr Li (whom I am satisfied did threaten the plaintiff with violence) was that he believed, from the experience of Mr Li’s activities in relation to the lint roller factor, that Mr Li had experience as a man with those sorts of qualifications.

Conclusions concerning the breach of contract of employment claim in relation to the two shipments

225. The plaintiff’s conduct does not amount to breach of contract. I accept the plaintiff’s evidence (T 83) that all Mr Spurrier wanted was the “good news” of sales and that this was what she was trying to do. She was under enormous pressure to make more and more sales, and given total discretion how to do so, including insalubrious methods such as using her own bank account to channel large amounts of money, processing dummy orders which she knew were intended to avoid Chinese customs inspections, purchasing materials at her own expense and working very long hours without holiday leave.

226. Under pressure to make sales, and not for her own personal financial gain, the plaintiff used the name of one customer for goods ordered by another. This is not a debt of the plaintiff personally, but a company transaction.

227. The plaintiff was an employee who cut corners under pressure from a difficult employer whose anger she appears to have been frequently subjected to (see, for example, the 9 February 2012 conversation recorded in Tab 14 to Exhibit 1). There is no evidence that the plaintiff was motivated by anything other than a desire to make sales for her employer. An employee whose error or unwise decision costs an employer money (as opposed to some deliberate wrongdoing such as stealing from an employer) cannot be liable in breach of contract to that employer for that loss, even where the employee lies about having committed that error. I was not directed to any authority in relation to such a proposition.

228. There is a degree of unreality in relation to the level of distress expressed by Mr Spurrier about these events. These were only two of what appear to have been many shipments being sent by Pacific Shoji in the course of its business that year. Mr Wang commenced paying the money back and has acknowleged the debt. This brings me to the real problem for the cross-claim, namely that the plaintiff’s conduct has not led to any loss, in that there is no evidence that the money is unrecoverable from Mr Wang, who has signed a statement acknowledging his indebtedness.

Causation and Mr Henry Li

229. Mr Sher also submits, in relation to causation, that there has been no loss, in that there is a legal system in China and Mr Wang (who is still in business) admits his company received the goods the subject of the two shipments (English translation of Exhibit 1, Tab 47). The simple answer was always to commence proceedings in China to recover these sums, and Mr Li’s evidence is relevant here, since it was to him (and not to the Chinese legal system) that Pacific Shoji turned for help.

230. According to Mr Li’s affidavit affirmed 18 September 2015 (Exhibit 3), he is “a business owner and business consultant, based primarily in Shanghai, China” and his business activities “required regular travel to Australia”. Mr Li sets out the circumstances in which he met Mr Spurrier in this affidavit in paragraphs 9 and 10:

“9. I was first introduced to Chris by a mutual friend, Matthew Doyle, approximately three to four years ago. At the time of introduction to Chris, Mr Doyle said to me words to the following effect:

Chris has business interests in China relating to the export of seafood and he might need assistance from you with his business.

10. Chris first contacted me by telephone in or around early January 2012, I had a conversation with Chris where he described to me in particular some difficulties he was having with his employee, based in China, whose name was Helen Rong. We had a conversation in words to the following effect

Me: I hear you are having some problems at the moment with your business in China.

Chris: Business has been slow but the market in China is huge. I don’t think my employee, Helen, is performing. Can you help me find more sales?

Me: I’m not in this field myself. Let me try and find a few people that might be able to help you.”

231. It is clear from this evidence that Mr Spurrier’s inquiries must well predate the problems he would have in relation to the 17 and 20 January 2012 shipments and that he was not brought in specially to help recover the money from the two missing shipments.

232. The assistance Mr Li provided to Pacific Shoji could not have been more general. His email of 29 January 2012 was to the following effect:

“Hi Chris,

As per our phone conversation the other day, i [sic] made few [sic] phone calls to my friends in China, they will talk to the right people and get some ideas of the Lobster & Abalone market in shanghai [sic] then provide me those information, due to chinese [sic] public holiday, i [sic] should have those information in the next few days then will pass on to you.

Regards

Henry Li

[Mobile telephone number]”

233. Despite promising to have information for Mr Spurrier “in the next few days”, Mr Li did nothing. Although his affidavit says he “found some people and introduced them to Chris” (Exhibit 3, paragraph 15), the plaintiff was not cross-examined about any such assistance being provided to her. Nor was there evidence of any new accounts coming in to the business as a result of Mr Li’s efforts, but that is not relevant to Mr Li’s investigation activities.

234. Mr Spurrier’s evidence was of no assistance in determining what Mr Li had been retained to do. At one stage he said that he consulted Mr Li about sales:

”Q.  So, you wanted Mr Li to assist you with sales?

A.  Yes.

Q.  Again, I would ask how does a person who assisted with the recovery of moulds ‑ how do you get from that to wanting someone to assist you with sales?

A.  Matt explained that Henry is Chinese, he knows the culture well, and he may be able to assist you finding some new buyers doing some market research ‑ that sort of thing.  I didn't know Henry's background.  It was just a friend being introduced to a friend ‑ a friend introducing someone.” (T 254)

235. Then he said that he wanted Mr Li to do market research, although Mr Li had no qualifications or knowledge beyond “people love seafood in China”:

“Q.  Did he explain to you what his experience was in market research?

A.  No.  No, he just said, "I have some friends in China."  He said, "I can ask some questions."  He said, "People love seafood in China.  Let me look into it."

Q.  Why didn't you, if you were looking to engage a market researcher, why not go to ‑ approach a company in China that was known for being market researchers?

A.  Maybe I should have.” (T 255)

236. However, Mr Spurrier became indignant with Mr Sher when Mr Sher asked if Mr Li was a debt collector:

“Q.  Now, you were present in court when Mr Li gave his evidence and it was ‑ his evidence was, on the affidavits, replete with him chasing money on behalf of Pacific Shoji.  You were present when I cross examined him on that?

A.  Yes.

Q.  Wasn't that really what Mr Li was there to do?

A.  No.

Q.  He was a debt collector?

A.  No.” (T 255)

237. His response, when asked if Mr Li was hired as a standover man, was cautious:

“Q.  He was a standover man?

A.  I hadn't asked Henry for any assistance in trying to retrieve funds from customers until a later stage.”

238. Mr Li told the court that he was not paid for any of this work and that was initially Mr Spurrier’s evidence as well:

“Q.  Did you discuss a fee with Mr Li regarding this?

A.  No.

Q.  Why not?

A.  It was a friend helping a friend.  He said he'd ask some of his friends and see what he could find out ‑ that's all.”

Q.  You may have since developed a friendship but I'm speaking about the first occasion.  Did you not discuss with Mr Li "If you help me do the market research or obtain further customers for sales, your fee will be whatever it is"?

A.  No.

Q.  You never had that discussion?

A.  No, never.

Q.  I must say, Mr Spurrier, I find that to be extremely strange that you would be engaging a person to assist with your business yet there was no requirements that you pay him any fee?

A.  No, Matt said, "Have a chat with my friend Henry."  I had a chat and he said, "Look, seafood, big market.  Yeah.  I'll talk to my friends."

Q.  I'll talk to my friends.  Now, later on when you said that you did want him to assist you with collecting of debts, did you discuss a fee with him then?

A.  No.

Q.  You've never paid Mr Li any money?

A.  I've never paid Mr Li any money for collecting of debts. (T 256)

239. The reason for this qualification became clear from the subsequent admission of a payment of $5,000 for “translation” for the Dover Factory purchaser, Mr Cai,

“Q.  Well, have you paid Mr Li any money for anything?

A.  Mr Li received a commission for the sale of the Dover factory.

Q.  The Dover factory?

A.  Yep.”(T 257)

240. This payment was not referred to in either Mr Li’s or Mr Spurrier’s affidavits (T 257 – 258). Mr Spurrier agreed that Mr Cai had his own translator and that this translator had done most of the work:

Q.  "Many of the negotiations were done through Si's friend Bruce who acted as the translator."  Who is Bruce?

A.  Bruce is a friend and also I believe a client of Mr Si.

Q.  So, is Bruce Chinese?

A.  Yes.

Q.  So, Bruce was Mr Si's translator?

A.  Yeah, Bruce is who I did all the negotiations of the terms of the sale of the factor with which went on for months and months and months ‑ there were many changes ‑ it was on, it was off, terms needed to be added, and eventually after a lot of grief it got across the line.

Q.  All right, but Henry Li's role was to assist you, not to assist Mr Si, is that right?

A.  Well, he assisted me and Si by translating for Mr Si.

Q.  Well, you've got here in your affidavit "Many of the negotiations were done through Si's friend Bruce who acted as an interpreter"‑‑

A.  Yeah, not—.” (T 259)

241. Mr Spurrier also had access to a Sydney translator, Pauline, but said she was not available to travel interstate as she was “based in Sydney”, and that this was why he had used Mr Li’s services.

242. Mr Spurrier’s willingness to pay $5,000 to Mr Li for translation services in relation to the Dover factory sale (which was concluded after the plaintiff was dismissed) seems surprising given Mr Li’s complete lack of action between January 2012, when they had the meeting at which Mr Li said he would get back to Mr Spurrier in a couple of days, and the next recorded encounter with them a year later. During that time Mr Li had not carried out any market research. Nor did he contact the plaintiff to make any inquiries about the business in China. If he did pass on any new customers to Pacific Shoji, the identities of these new customers, and any subsequent increase in Pacific Shoji’s business, was not information either Mr Spurrier or Mr Li divulged to the court.

243. According to Mr Li’s affidavit (at paragraph 16), this conversation, which seems to have occurred out of the blue, and in or about January 2013, was about Pacific Shoji’s “serious debts with two or three entities in China”:

“Chris: Pacific Shoji has some serious debts with two or three entities in China, and the debts just aren’t being paid, and it is putting significant financial pressure on the company. The two major debts are with Tony Chen and Tim Wang.

Also Henry, I need you to speak with Helen. I just don’t know what is going over there [in China]. I need to find out what is going on.

Me: I will give Helen a call. It may be that there is some language or cultural confusion or misunderstanding between you and Helen. I can speak to her and find out what is going on.”

244. Following this, Mr Li had a conversation with the plaintiff who, on Wednesday 23 January 2013, sent him Mr Wang’s home phone number. I note that this email was not only sent to Mr Li but also to Mr Spurrier.

245. However, once again, Mr Li did nothing. He says that although he managed to discover Mr Wang’s residential address, he was asked by Mr Spurrier to take no further action, as Mr Wang had started to pay his debts off.

246. On 20 October 2013, the plaintiff sent a list of debts owed by Mr Wang (Exhibit 3, tab 5). Mr Li said he was suspicious of the information provided by the plaintiff and, in particular, information about what she claimed to be owed by Mr Wang.

247. On 20 October 2013, Mr Li had a conversation with Mr Spurrier, who disclosed that “Helen confessed she has been lying to me for 2 years” (Exhibit 3, paragraph 27) and that the two shipments he thought had gone to Mr Chen had gone to Mr Wang. Mr Li’s states in his affidavit at paragraph 28 that he tried to contact the plaintiff by telephone and email and that she did not answer his phone calls.

248. After being provided with Mr Chen’s telephone number by Mr Spurrier, Mr Li telephoned Mr Chen who said “I never rejected Pacific Shoji shipments. I pay Pacific Shoji for all shipments” (Exhibit 3, paragraph 34). Given the list of shipments for which Mr Chen had not paid as at the dates that these shipments were sent, which actually exceeded the amount Mr Wang owed at the time the two shipments in question was sent, this was not an accurate statement of facts at the relevant time. In addition, Mr Wang had paid some of the moneys he owed for the outstanding shipments; this had been acknowledged by Mr Spurrier as the reason for calling off Mr Li earlier in the year.

249. There was a meeting between Mr Chen, Mr Spurrier, Mr Li and Ms Klaric in December 2013. According to Mr Li, Mr Chen said he did not owe any money to Pacific Shoji and he never rejected shipments. He also said that he had never been in jail.

250. In May 2014, Mr Li was informed that Mr Spurrier had arranged to meet with Mr Wang in Shanghai. Mr Li said, “Sorry I can’t make it. I’m in Australia. Make sure you give me a call during the meeting and I will have some words with Tim myself” (Exhibit 3, paragraph 48).

251. At this meeting, Mr Li was telephoned in Australia to speak to Mr Wang. Mr Wang was asked to put down in writing that he owed money for five shipments, two of which were for the shipments which were purportedly sent to Mr Chen, namely invoices 5146 and 5153.

252. Mr Li notes that Mr Wang acknowledged his debt to Pacific Shoji for all five shipments and says that Mr Wang said:

“Tim: My business went down, I went to gaol as a result. However, I can do a payment plan and pay back the debt over several years, however I will not be able to pay more than 200,000 RMB per year. I refuse to pay any interest on those outstanding payments.

Tim: I did want to contact Chris about this, but Helen refused to give me your contact details. Helen told me that the shipments for invoices 5146 and 5143 were meant for CCQ [Tony Chen] but that Tony had rejected the shipments which was why Helen offered those shipments to me.

I heard from Helen that you went to visit her family and that you beat them up in order to get money out of them. Helen told me that you took money from her family.

Me: That is entirely untrue. I have never met Helen before, and I have not visited her family.

Chris: That accusation is completely untrue Tim. This is just more of Helen’s lies.

Tim: I was forced to pay back my debts to Helen, because she threatened me and arranged for some people to come to my house and kidnap me. Then they stole my car and sold it. Subsequently I was threatened to sell my apartment so that I could pay off the debt I owed her, which I did. I don’t owe any money to Helen now.

I had significant debts from Helen in relation to a number of different suppliers of seafood produce, like mud crabs, from New Zealand, and other places. I bought a significant amount of [sic] her, but was not able in the end to afford to pay.

In early January [2015] I will start to make payment to Pacific Shoji.” (Exhibit 3, paragraph 52)

253. While no objection was taken to the retailing of this hearsay evidence, the credit of Mr Wang, like that of Mr Li and Mr Spurrier, is such that I would not accept his evidence in relation to any of these allegations unless they were corroborated.

254. Although Mr Li denied it (T 166) he was clearly a debt collector of some kind, if not an enforcer, and in this regard I accept the evidence of the plaintiff that he harassed her family and a friend (T 94) and said he would chop off one of Mr Wang’s toes if he did not pay (T 96). The nature of his business interests in either Australia or China was unclear, and his inability to identify any business entity in either country that he had contacted to help Pacific Shoji sell seafood was unimpressive (he volunteered the name Rong Xin but could provide no further information capable of establishing what this company or person did or where it was). I would not be prepared to accept his evidence unless it was corroborated.

Conclusions concerning causation

255. There are significant causation problems in relation to the claim brought against the plaintiff.

256. Mr Spurrier was unable to explain why Pacific Shoji had not commenced proceedings in China for the recovery of these sums. While a plaintiff is not under any duty to bring risky litigation to mitigate his loss and damage (see Pilkington v Wood [1953] Ch 770 at 777; Dhaildeal v Pade [2003] NSWCA 16; Bebonis v Angelos (2003) 56 NSWLR 127), a plaintiff who failed to commence proceedings against a defendant who has given a signed statement stating that he and his company owe the sums sought cannot escape an argument that there has not only been a failure to mitigate but a break in the chain of causation. There is no evidence that the court system in China is anything other than ready, willing and able to hear what would be a simple commercial debt claim.

257. In his submissions of 1 March 2017, Mr Johnson answers the issue of causation only in an equitable context, arguing that the recoverable losses resulting from the plaintiff’s conduct as a fiduciary, for which equitable compensation will be payable, which are to be determined by reference to the losses. This means that ‘on a common sense view of causation, were caused by the breach (O’Halloran v R T Thomas & Family Pty Ltd (1998) 45 NSWLR 262 at 273). This test is similar to the ‘but for’ test (Hodgson v Amcor Ltd [2012] VSC 94; (2012) 264 FLR 1 at [1654]-[1657]).

258. Mr Johnson submits that it is therefore not relevant to the question of the quantum of the cross-claimant’s loss what the cross-claimant might have done had, for instance, the cross-defendant not failed to tell it that she had diverted two shipments for Mr Chen to Mr Wang. It is submitted that, if the plaintiff had not deceived Pacific Shoji and arranged for the two shipments of the cross-claimant’s produce to be sent without authorisation to a customer, in respect of whom Mr Spurrier gave evidence he told the plaintiff that he was concerned about his capacity to pay his debts, then the two shipments would never have been shipped, and the produce could have been shipped elsewhere to a paying customer.

259. I do not accept this submission. There is no evidence there was any pattern of prior consultation. I accept the plaintiff’s evidence that Mr Spurrier was only interested in good results and making sales. Caught between the need to make those good sales and her instructions in relation to Mr Wang, she took the course she did. There is no evidence that some other customer was ready and willing to take those sales.

260. As is set out below, I have rejected Pacific Shoji’s submissions on breach of fiduciary duty. These submissions are not, in any event, an answer to the issue of causation arising from Pacific Shoji’s failure to commence proceedings against Mr Wang and his company, in circumstances where he has not only acknowledged the debit but also a willingness to pay.

261. Accordingly I am satisfied that, if I have erred in relation to my findings as to the cross-claim in relation to breach of contract (set out above) and breach of fiduciary duty (set out below), the cross-claimant would nevertheless fail because causation has not been established.

Breach of fiduciary duty

262. In submissions dated 1 March 2017, Pacific Shoji submits that the plaintiff’s conduct (as summarised at paragraphs 10 - 21 of its submissions of 6 December 2016), breached implied terms in her contract of employment, including of good faith and fidelity, and breached her fiduciary obligations to her employer, the defendant, for which she was employed as a senior employee with substantial responsibilities and autonomy.

263. Employment contracts should be construed as a whole, ensuring that the agreement of the parties to their respective roles will be given efficacy: Walker v Citigroup Global Markets Australia Pty Limited [2006] FCAFC 101 at [77]. This is in part due to the history and special nature of the employment contract, which is founded upon an open-ended agreement to provide labour or services (Ramsey v Annesley College [2013] SASC 72 at [390]).

264. The degree to which the courts will imply terms into an employment contract such as “duties” (cross-claim, paragraph 4(a)), “faithful and loyal service” (cross-claim, paragraph 4(b)), “the utmost good faith and loyalty” (cross-claim, paragraph 4(c)) or other varieties of trust and confidence (mutual or otherwise) has been the subject of consideration by the NSW Court of Appeal in Russell v The Trustees of the Roman Catholic Church (2008) 72 NSWLR 559, by the Full Court of the Federal Court in Commonwealth Bank of Australia v Barker [2013] FCAFC 83 and by the High Court in Commonwealth Bank of Australia v Barker (2014) 253 CLR 169. The assertion that these terms are capable of being inferred and that liability arises from their breach sits uncomfortably with the special nature of the employment contract.

265. The plaintiff’s answer to these claims in her defence to the cross-claim (paragraph 3) is that the contract is constituted by the written document which is the employment contract and that the asserted implied terms do not form part of that contract. As a statement of the law, as well as one of fact in this case, I accept that is the case here.

266. The short answers to Pacific Shoji’s submissions are firstly my findings of fact as set out above (which would not support any allegations of breaches of such duties) and secondly the matters raised in the defence to the cross-claim, which set out in some detail the facts, matters and circumstances relied upon by the plaintiff to rebut the specific allegations. I particularly note, in the defence to the cross-claim, the business methods forced on the plaintiff, including having to deal with companies using credit in circumstances where both Mr Chen’s company and Mr Wang’s company, while remaining good customers of Pacific Shoji, were using Pacific Shoji’s credit system with the result that both owed substantial sums (paragraphs 25 and 26 of the defence to the cross-claim) and that the furtive nature of this cash-based smuggling customer base made the conduct of her duties. This was made all the more difficult for the plaintiff by the bullying she received from Mr Spurrier to sell more and more seafood and the company’s failure to give her annual leave for the whole of the period of her employ.

267. The findings of fact I have made in relation to the conduct of Pacific Shoji (including those identified in the defence to the cross-claim) would be sufficient to entitle the plaintiff, in her defence to the cross-claim, to rely upon the doctrine of unclean hands. While the findings of fact I have made in relation to Pacific Shoji’s breach of its contractual (and statutory) obligations to the plaintiff in terms of salary reduction and refusal of holiday leave may not of themselves support such a finding, they may, when added to any consideration of this issue, be of comfort in the making of this finding.

268. The cross-claimant’s claim of breach of fiduciary duty therefore fails.

Conclusions concerning the cross-claim

269. All of the bases upon which the cross-claim is put (save for the amount acknowledged to be owing in the Beijing Grit claim) have failed.

270. Pacific Shoji as cross-claimant is entitled to $7,195.27 for the Beijing Grit claim, which should be offset against the amount payable as the judgment sum for the plaintiff. I will leave it to the parties to bring in Short Minutes of Order in relation to that claim, and this is an adjustment to which the parties should agree in mathematical terms.

Summary of amounts due and owing to the plaintiff on her claim and Pacific Shoji on the cross-claim

271. The plaintiff is entitled to the following:

1. Short-paid salary: $26,965.98;

2. Leave entitlements: $25,026.15;

3. Commission: $8,775.60;

4. Profit share on sales concluded at the factory/shop in Guangzhou: Nil;

5. Reimbursement for payment for factory cooling system and rent paid for by the plaintiff: Nil;

6. Personal loan: RMB 300,000 (the parties are to determine a mathematically agreed figure for this sum);

7. Commission for finding buyer for Dover factory: As noted above, I was not addressed by Pacific Shoji as to the quantum for this claim. The sum claimed in the plaintiff’s submissions of 6 December 2016 was $150,000, but that was at a time when the sale price was asserted to be $1.5 million, not $1.55 million. I have directed the parties to bring in Short Minutes of Order reflecting the total judgment sum and if this cannot be agreed, the parties have liberty to apply.

272. Pacific Shoji is entitled to the following:

1. Beijing Grit invoice: $7,195.27

2. Reimbursement: Nil.

273. Costs should follow the event. The plaintiff has been almost entirely successful. I have made orders for the defendant/cross-claimant Pacific Shoji to pay the plaintiff’s costs of the proceedings.

274. I have granted the parties liberty to bring in Short Minutes of Order reflecting the mathematically agreed sum of damages for the plaintiff as well as liberty to apply on interest and costs.

Orders

1. Judgment for the plaintiff.

2. Liberty to the parties to bring in Short Minutes of Order reflecting the mathematically agreed total for the plaintiff’s judgment sum.

3. Judgment for the defendant/cross-claimant on the cross-claim in the sum of $7,195.27 plus interest to be calculated.

4. Defendant/cross-claimant pay plaintiff/cross-defendant’s costs of the proceedings.

5. Liberty to apply in relation to interest and costs.

6. Exhibits retained until further order.

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Decision last updated: 16 May 2018