Yu v Wei

Case •

[2020] NSWDC 647

•

23 October 2020

No judgment structure available for this case.

District Court


New South Wales

Medium Neutral Citation: Yu v Wei [2020] NSWDC 647
Hearing dates: 26, 27, 28, 29 August; 4, 5 December 2019 and 19 June 2020 (written submissions)
Date of orders: 23 October 2020
Decision date: 23 October 2020
Jurisdiction:Civil
Before: P Taylor SC DCJ
Decision:

(1)   Judgment for the plaintiff against the second defendant in the sum of $246,153.68 inclusive of interest.

(2)   Second defendant to pay the plaintiff’s costs.

(3)   Liberty to the parties to apply within 14 days by email to my associate for a costs order in respect of the first defendant.

(4)   Claim against first defendant dismissed.

Catchwords:

PAYMENT OF MONEYS – intended as contribution to investment – not for purchase of antiques – kept by recipient for own purposes – whether recipient was payee on cheque – restitution – unjust enrichment – receipt of agent - whether loss necessary – relevance of passing on of loss – deeds of release – rule of construction of releases – whether applicable to payment – damages - costs

Legislation Cited:

District Court Act 1973, s 134

Uniform Civil Procedure Rules 2005, r 14.27

Cases Cited:

Australia & New Zealand Banking Group Ltd v Westpac Banking Corp (1988) 164 CLR 662; [1988] HCA 17

Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560; [2014] HCA 14

Baltic Shipping Co v Dillon (The Ship Mikhail Lermontov) (1993) 176 CLR 344; [1993] HCA 4

Citigroup Pty Ltd v National Australia Bank Ltd (2012) 82 NSWLR 391

Commissioner of State Revenue (Vict) v Royal Insurance Australia Ltd (1994) 182 CLR 51

David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353, 379; [1992] HCA 353

Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112

Kleinwort Sons & Co v Dunlop Rubber Co (1907) 97 LT 263

Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221, 256-257; [1987] HCA 5

Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516; [2001] HCA 68

Watson v Foxman (1995) 49 NSWLR 315

Category:Principal judgment
Parties: Guo Jun Yu (plaintiff)
Park Zuliang Wei (first defendant)
Top Pacific Group Pty Ltd (second defendant)
Representation:

Counsel:
Mr A J Macauley (plaintiff)
Mr F Santisi (26 to 29 August 2019); Mr D L Cook SC (4 to 5 December 2019) (defendants)

Solicitors:
Zhang Shijing Lawyers (plaintiff)
GOH Lawyers (defendants)
File Number(s): 2018/179714
Publication restriction: None

Judgment

A. Introduction

  1. Guo Jun (“Charlie”) Yu sued Park Zuliang Wei and his company, Top Pacific Group Pty Ltd, in respect of a $200,000 cheque payable to Top Pacific Group. Mr Yu provided the cheque to Mr Wei in October 2013 in the belief that it would become part of Mr Yu’s investment in a development project with Mr Wei. [1] Mr Wei and Top Pacific Group retained the cheque for their own purposes.

    1. T385/48-50; T386/10-12.

B. Issues

  1. Was the cheque paid for Mr Wei’s antique furniture or as part payment of an investment in the development property?

  2. Did Mr Wei agree to pay the $200,000 into the development company that purchased the property?

  3. Was Mr Wei or Top Pacific Group unjustly enriched by the payment from Mr Yu, and liable in restitution to refund the amount?

  4. Was Mr Yu entitled to claim damages from Mr Wei for any breach of a October 2013 agreement?

  5. Is Mr Wei liable in damages for breach of the Shareholders/Unitholders Agreement of 11 February 2014 by under-investing by $200,000?

  6. Did the releases in deeds executed by Mr Wei, Mr Yu, Top Pacific Group and others extinguish any liability of Mr Wei or Top Pacific Group?

C. Background

  1. Mr Wei is a property developer and Mr Yu is a businessman. From about July 2013, they were on friendly terms. They shared an interest in antiques and purchased some items together.

  2. Mr Wei and Mr Yu proposed doing a development project together. In about September 2013, Mr Wei became interested in a property in Burwood. On 9 September 2013 he incorporated a company known as Top Burwood Pty Ltd, and Mr Yu was listed as owning 25% of the 100 shares of Top Burwood. [2]

    2. Exhibit A, tab 9, p 52.

  3. The Burwood project did not proceed, but another property in Bankstown was purchased by Top Burwood. Mr Wei, by his company, Top Pacific Group, paid a deposit of $700,000 on 9 September 2013. [3] Top Pacific Group operates a real estate agency.

    3. Exhibit A, tab 10, p 54.

  4. Conversations between Mr Yu and Mr Wei were in Chinese. Mr Yu asserted conversations whereby he was invited to invest in the Bankstown property by reimbursing Top Pacific Group $200,000 of the deposit. On 23 October 2013, Mr Yu provided Mr Wei with a cheque payable to Top Pacific Group for $200,000. While Mr Yu asserted that this cheque was for the investment, Mr Wei gave evidence that the cheque was payment for antiques. On the same day, 23 October 2013, Mr Yu gave Top Pacific Group six cheques totalling $291,500 for six units in the proposed development. [4]

    4. Exhibit A, tab 13, pp 58-63.

  5. Other investors were invited to participate in the Bankstown project. In February 2014, agreements dated 2 February and 11 February 2014 were entered between Mr Wei, Mr Yu, Top Pacific Group and others.

  6. The “Cooperation Agreement” between the investors dated 3 February 2014, provided that Top Pacific Group would be the exclusive sales agent and receive commission of 3% plus GST on sales. Mr Wei was to be the project manager and receive 20% of the profit before tax as his management fee. [5]

    5. Exhibit A, tab 14, p 69.

  7. The Shareholders Agreement (executed as a deed and so referred to in the evidence) of the same date provided that the funds provided were to be regarded as loans, [6] and specified the level of shareholding or unitholding of each investor. Under this agreement, Mr Yu was to invest $4,000,000 for 35.5555% of the “shares/units in company” and Mr Wei would invest $2,750,040. The total investment by all the investors was $11,250,120 in the unit trust, of which Top Burwood was the trustee.

    6. Exhibit A, tab 15, p 80 at cl 5.3.

  8. On 6 and 7 February 2014, by four bank cheques and one personal cheque, Mr Yu paid $3,800,000 to Top Burwood in respect of his investment. Mr Wei conceded in submissions that Mr Yu believed that this amount, together with the $200,000 Mr Yu had paid to Top Pacific Group in October 2013, constituted his investment of $4,000,000. [7]

    7. T385/48-50; T386/10-12; T411/25-29; T418/36-40; T435/10-15.

  9. A second Shareholders Agreement (also executed and referred to in the evidence as a deed) was entered on 11 February 2014, to prevail over the earlier agreements to the extent of any inconsistency. [8] Mr Yu and Ms Li Mei Hu were appointed directors of Top Burwood, [9] and Mr Wei was appointed “in charge of the management and construction of the whole project”. [10] According to this Agreement, the Top Burwood bank account required the signature of the two directors. [11] Again, the $11,250,000 shareholder funds were provided as a loan at $112,500 per unit, [12] to be repaid after meeting the project’s expenses and bank loans [13] with Mr Wei then to receive his 20% of the net profit as a management fee. Profit would thereafter be distributed according to unit holdings. One change provided for in the 11 February Agreement was that Mr Wei’s investment was increased to $3,050,040 of the $11,250,120 total. [14]

    8. Exhibit A, tab 18, p 145 at cl 2.6.

    9. Exhibit A, tab 18, p 145 at cl 3.2.

    10. Exhibit A, tab 18, p 146 at cl 3.5.

    11. Exhibit A, tab 18, p 148 at cl 5.5.

    12. Exhibit A, tab 18, p 147 at cll 5.2, 5.3.

    13. Exhibit A, tab 18, p 147 at cl 5.4].

    14. Exhibit A, tab 18, pp 152-153.

  10. There is one other curious anomaly. Another deed called the “Deed of Variation of Shareholders and Unitholders Agreement” was also in evidence. [15] This document was undated save for a reference to “2014” and was not otherwise referred to by the parties in evidence or in submissions, but was stated in the Court Book Index to also have been made on 11 February 2014. The same index indicated it was Annexure C to Mr Yu’s affidavit of 12 April 2019, but that could not be verified as the affidavit was filed electronically without annexures, and the description in Mr Yu’s affidavit applied equally well to the second Shareholders Agreement.

    15. Exhibit A, tab 19, pp 156-163.

  11. This Deed of Variation was said to be between Top Burwood and “THE PARTIES LISTED IN SCHEDULE 1”. Mr Wei was not listed in Schedule 1, or in Schedules 1A, 1B or 1C. [16] However, Mr Wei did sign the document, importantly perhaps because he is not listed as being a shareholder or unitholder, and the investment of $3,050,000 was held by Bao Hong Zhang, [17] the wife of Mr Wei. [18] Ms Zhang was by the deed appointed as a third director.

    16. Exhibit A, tab 19, p 161.

    17. Exhibit A, tab 19, p 161, Sch 1C.

    18. Bao Hong Zhang affidavit, 8/7/19 at [1].

  12. The possible change of shareholder from Mr Wei to Ms Zhang effected by the Deed of Variation might impact on the relief claimed in the proceedings. The inconsistency between the deeds might be resolved by which was executed last. But no party placed any importance on this deed. As I mentioned, it was not referred to in any way by other evidence or in submissions, orally or in writing, but passed into evidence unnoticed, and thus no significance was attributed to it. In those circumstances, I have also paid it no significance and in particular, disregarded the significance of the shareholding possibly being held not by Mr Wei but by his wife.

  13. In February 2014, Mr Wei provided an account of expenses he had paid in connection with the project, totalling $3,502,763.50. This amount was treated as including his investment contribution of $3,050,000 (the additional $40 apparently being ignored), leaving an excess. Mr Wei received a repayment of this excess of $452,763.50. The bank statements of Top Burwood show that this amount was withdrawn on 11 February 2014, the same day as the second Shareholders Agreement.

  14. The account of expenses supplied by Mr Wei [19] included an amount of $700,000 for the deposit, and $1,494,000 for marketing fees paid to Mr Wei’s companies, including $715,000 paid to Top Pacific Group. A further amount of $7,042,892.08 was recorded, [20] closely corresponding with the sum of $7,048.541.17 withdrawn on 14 February 2014, presumably as payment for the land, and other costs. [21]

    19. Exhibit A, tab 16, p 89.

    20. Exhibit A, tab 16, p 90.

    21. See also Exhibit A, tab 22, p 187.

  15. On 10 March 2014 Mr Wei signed a Statement which provided in its totality:

“Statement

After deducting the costs, the net profits of the 20% share held by Charlie in the Bankstown project will be transferred to Charlie after the project completes. It is under supervision by everyone and certain part will be donated to charities, and the rest will be arranged by Charlie.

The 20% of Charlie’s entitlement should deduct 30% and returns to Park. Everyone agreed that Charlie is not allowed to spend one cent of it privately. No one has the right to ask about the distribution ratio.” [22]

22. Exhibit A, tab 24, p 191.

  1. It was common ground that this Statement related to a benefit Mr Yu claimed, by reason of his early payment of the amount of $200,000. As the land was originally purchased by Top Burwood for $7,000,000, but valued in the investment project at $8,250,000, 20% of $1,250,000 uplift would be $250,000, and $175,000 after a deduction of 30%.

  2. Although Mr Wei’s account for his expenditure included the $700,000 deposit by Top Pacific Group, Mr Yu claims his payment of $200,000 was part of the investment in the project, as a refund of part of that deposit. If Mr Yu’s claim is correct, it follows that Mr Wei, by his company, Top Pacific Group, paid only $500,000 of the deposit. In that event, Mr Wei would have received a refund of $200,000 more than that to which he was entitled, and his investment contribution after the refund he received was only $2.85 million, or $200,000 less than he agreed to contribute.

  3. By February 2015, Mr Yu and Mr Wei were no longer on friendly terms. In negotiations about Mr Wei’s withdrawal, a letter from Mr Yu and others to Mr Wei about 19 February 2015 asserted that the amount of “$175,000 you owing to Mr Guo Jun Yu (refer to agreement made at 10th March 2014) will be deducted from the payment”. [23] Mr Wei’s response on 20 February 2015 rejected this, stating:

“(iv) The purported sum of $175,000 owing to Guo Jun Yu is not agreed to and all rights waived with respect thereof. This form part and parcel of the money owing to me under the Project management agreement which shall be treated as an offset.” [24]

It appears Mr Yu accepted this on about 25 February 2015. [25]

23. Exhibit A, tab 25, pp 192-193.

24. Exhibit A, tab 26, p 196.

25. Exhibit A, tab 27, p 198.

  1. Mr Wei and others connected with him agreed to exit the project and two deeds involving all relevant parties were executed, which provided releases to Mr Wei and his wife, Ms Zhang, as well as other parties.

  2. In March 2015, about one month thereafter, Ms Hu, an accountant and the other director of Top Burwood (besides Mr Yu and Ms Zhang), discovered that the accounts of Top Burwood showed a $200,000 shortfall. She wrote to Mr Wei about it. [26] It appears she then may have spoken to Mr Yu, because she wrote a further letter the next day referring to the $200,000 paid by Mr Yu to Mr Wei in October 2013, and asked that it be refunded to Top Burwood. [27]

    26. Exhibit A, tab 31, p 235.

    27. Exhibit A, tab 32, p 236.

  3. No response was received. Colleen Hosking, an auditor of Top Burwood Unit Trust, wrote to Mr Wei in similar terms in April 2016. [28] After a further request by Ms Hosking for a response, on 11 May 2016 Mr Wei said the “$200,000 was the sale of antiques from me to Mr Yu and in no way related to the deposit”. [29]

    28. Exhibit A, tab 35, p 244.

    29. Exhibit A, tab 35, p 243.

  4. By this stage, Mr Yu had invested a further $700,000 in the project. He received $4.5 million as the return of his investment. Subsequently, after some further correspondence, he commenced these proceedings in 2018.

D. The cheque: for antiques or investment?

  1. There was no issue that Mr Yu provided to Mr Wei a cheque for $200,000 made payable to Top Pacific Group. Mr Yu’s affidavit deposed to conversations in September 2013 with Mr Wei about the price of the land being $7 million, and an investment interest for Mr Yu of 20% to 30%. He affirmed that Mr Wei told him in effect, “My company TOP PACIFIC has paid the deposit. You can pay TOP PACIFIC later to reimburse it once your share is decided”. [30]

    30. Guo Jun Yu affidavit, 23/11/18 at [36]; Court Book 1 (“CB1”) p 27.

  2. Mr Yu deposed that on about 23 October 2013 Mr Wei told him:

“You can invest $200,000 out of the total $700,000. My Company Top Pacific has paid the deposit of $700,000. You need to pay $200,000 to Top Pacific to reimburse Top Pacific”. [31]

31. Guo Jun Yu affidavit, 23/11/18 at [40]; CB1 p 27.

  1. Mr Yu thereupon provided Mr Wei with the $200,000 cheque made payable to Top Pacific Group, and also cheques for the six apartments Mr Yu bought. He thought he was “simply reimbursing Top Pacific because it already had paid the deposit”. [32]

    32. T180/46-48.

  2. Mr Wei’s account is different. Mr Wei affirmed in his affidavit that in the middle of 2013 he had purchased jointly with Mr Yu some antique items and that Mr Yu was seeking to sell them. At Mr Yu’s request, Mr Wei provided another 20 items in August and early September 2013, and soon thereafter Mr Yu said “I will buy the 20 antiques that you have given to me. I will give you $200,000 and that includes the profit share for the 11 items we [bought] jointly”. [33]

    33. Park Zuliang Wei affidavit, 28/2/19 at [18], CB1 p 43.

  3. Mr Wei says that at some stage he asked that the cheque be made out to his company, and in October 2013, Mr Yu gave him the cheque for $200,000.

  4. Mr Yu submitted several reasons why the payment was for an investment in the project and not for antiques. These reasons, and my views on them, are as follows.

  5. First, it was submitted that there was no evidence to indicate that the value of the antiques was anything like $200,000. There was no appraisal or valuation, the antiques were not readily selling, and 17 of the 20 items had been purchased for $17,916.32 in the months before October 2013. There was no evidence indicating the value of the other three items. Together with Mr Wei’s share in the 11 antiques that Mr Yu and Mr Wei had purchased together, which cost $14,594.54, the payment of $200,000 was for items which appeared to cost less than $35,000. There was evidence that Mr Yu wrote cheques to Mr Wei in May and November 2015 representing the distribution of proceeds from the sale of some of the antiques they had purchased together, [34] and other evidence of cash payments. [35]

    34. Exhibit A, tab 34, p 242.

    35. Exhibit A, tab 11, p 55; Guo Jun Yu affidavit, 23/11/18 at [5]-[26].

  6. In my view, the apparently limited value of the antiques provides some limited support for Mr Yu’s account. Mr Yu wanted to be involved in the project and, as Mr Wei submitted, Mr Yu may have been prepared to pay over the value for the antiques to ensure involvement in the project. But the significant disparity lessens the likelihood of that possibility, and there is also an absence of evidence suggesting a connection between the payment for antiques and involvement in the project. The significance of the later payment by Mr Yu might be lessened by its timing, after the dispute had arisen.

  7. Secondly, it was submitted that Mr Yu was made an inaugural shareholder of Top Burwood on 9 September 2013, indicating that by this time, Mr Yu had been invited, and had agreed, to invest in the Bankstown property. Top Burwood was the entity purchasing that property. When Mr Wei altered the shareholding of Top Burwood on 16 October 2013 to remove Mian Qiu as a shareholder, Mr Yu remained on the register. There was evidence that the property was worth about $10 million, which is consistent with Mr Yu paying $200,000 as a 20% share of a $1 million deposit.

  8. In my view, that Mr Yu was given a shareholding of the trustee company is some evidence in support of Mr Yu and Mr Wei agreeing by 9 September 2013 that Mr Yu would be an investor in the project. However, the purported methodology for deriving a 20% share is not supported by Mr Yu having a 25% interest on the share register. There was no evidence that the property was worth $10 million as at 23 October 2013, or at 9 September 2013 when Mr Yu was granted the 25% shareholding. At that stage, the level of investment contribution from Mr Yu had not been finalised.

  9. Thirdly, on 23 October 2013 Mr Yu purchased six of the units to be constructed on the Bankstown property off-the-plan. Mr Yu did this by six cheques payable to Top Pacific Group, the same entity to which the $200,000 was addressed. It was said to be unlikely that on 23 October 2013, Mr Yu would pay $200,000 to Top Pacific Group for antiques but also provide Top Pacific Group another six cheques aggregating to $291,500 for the purchase of six units to be constructed on the Bankstown property.

  10. I do not find it especially unlikely that Mr Yu would pay for antiques and for units at the same time. The circumstance that Top Pacific Group was the payee on the cheques provides some support to Mr Yu even if, as was not disputed, Mr Wei nominated the payee, and Mr Yu followed those instructions. There was no evidence that Top Pacific Group had any interest in the antiques.

  11. Fourthly, on 6 and 7 February 2014, Mr Yu only transferred $3.8 million to Top Burwood, whereas the executed agreements required a contribution from Mr Yu of $4 million. This, it was submitted, indicated that Mr Yu considered the $200,000 paid on 23 October 2013 to be a contribution towards the Bankstown project and not in exchange for antiques.

  1. I accept the force of this submission. It is strengthened by Mr Wei’s repeated concession in submissions that Mr Yu believed in February 2014 that his payment of $200,000 was a partial payment of his investment contribution, and was the reason why Mr Yu only paid another $3.8 million. [36]

    36. T385/48-50; T386/10-12.

  2. Fifthly, the signed statement dated 10 March 2014 whereby Mr Yu was to receive a share of the profits based on his 20% share in the project is said to support a conclusion that the $200,000 payment was an early investment contribution to the project. This 20% share, less 30% of the 20% as referred to in the 10 March 2014 Statement, [37] was subsequently referred to in correspondence in February 2015 as being the sum of $175,000. As the property was purchased for $7 million and transferred to the investors at $8,250,000, [38] 20% of this $1,250,000 uplift in value equates to $250,000, and a reduction of 30% of $250,000 is $75,000, leaving the sum of $175,000. This connects the 20% in the March 2014 agreement to the reference to $175,000 in the February 2015 correspondence. The reference to “profits” in March 2014 was not the profits at the end of the project (which were hardly certain at that stage), but to the profit of $1.25 million on the transfer into the investment vehicle due to an increased value in the land as at February 2014.

    37. Exhibit A, tab 24, p 191.

    38. Exhibit A, tab 15, p 88, Sch 2.

  3. I accept that these figures and the documents support the payment of $200,000 being related to Mr Yu’s investment contribution to the project, as does the correspondence quoted at [19] above. Also, on 25 February 2015 an email to Maggie Hu, a director of Top Burwood, read:

“1. Charlie Yu is being asked to release Park from his claim for $179,000 of his share of the commission. Please ask Charlie to provide me with a copy of the relevant documents for this release as Clause 6.3 is incomplete”. [39]

The assertion in submissions that the “claim for $179,000” was a reference to $175,000 was not disputed. [40]

39. Exhibit A, tab 27, p 198.

40. T424/33-35.

  1. Sixthly, it is said that the settlement deeds confirm this arrangement arising from Mr Yu paying $200,000 towards the project. Clause 6.3 in the “Deed of Sale of Units and Shares”, [41] quoted at [98] below, provided Mr Wei with an express release from this claim.

    41. Exhibit A, tab 28, pp 201-218.

  2. I accept that this clause supports the claim that Mr Yu acquired an interest in the project prior to the other investors, and corroborates the March 2014 Statement. Until the execution of the 2015 settlement deeds, Mr Yu had the benefit of an agreement with Mr Wei that he would receive $175,000 from Mr Wei’s share of the profit as a result of Mr Yu’s contribution of $200,000. The payment of $200,000 towards the investment explains both the amount of $3.8 million being Mr Yu’s further investment contribution, and his entitlement to further profit under the March 2014 agreement. Clause 6.3 and the signed Statement tend to disprove the alternative assertion by Mr Wei that the $200,000 was paid in respect of antiques.

  3. Mr Wei offered no contrary explanation of cl 6.3, the signed Statement, or the claim for “share of the commission”. Mr Yu’s evidence was corroborated by Mr Yao, an independent witness, who gave evidence of the meeting on 10 March 2014. He deposed to a conversation at the meeting as follows:

“Guo Jun Yu: Park, I invested $200,000 to the deposit of the Bankstown Property, which reduced the money you contributed from $700,000 to $500,000. Since the property has been revalued upwards, what is my share of the profits from re-assessing the Bankstown Property?

Park Wei: You can have 20% of the profit we made from the Bankstown Property. However, I will require 30% out of your 20% profit made from the Bankstown Property.

Guo Jun Yu: Why? That is not fair. You never mentioned this to me before. I invested $200,000 out of the $700,000 paid towards the deposit. I should have that proportion, namely 2/7ths, of the profits from the re-assessment.

Park Wei: I run this project and I deserve the money for my labour.

Guo Jun Yu: All right. I will take only 20% of the profit made from re-valuation. I understand you will transfer the $200,000 I paid in relation to the deposit for the Bankstown Property into the account of Top Burwood so as to complete my $4,000,000 investment in the Bankstown Property project. I agree you can have 30% out of my profit. The amount will be $175,000, being 20% of $1,250,000 ($250,000) and deducting 30% ($75,000).

Jiqing Liu: [to Guo Jun Yu, in a joking manner] you make so much money so easy, you should use some of the money to do something good for the society.

Guo Jun Yu: All right, I will use some of the money to donate to charity. But Park, when will you pay me my profit?

Park Wei: After the project has finished. I will pay you what I promised. The $175,000.”[42]

42. Dong Yao affidavit, 24/4/19 at [6].

  1. In cross-examination, Mr Yao gave the following evidence:

“Q. I asked you point to where the 200 or 700,000 is referred to?

A. INTERPRETER: Well, at the - the, the end document, doesn’t have those references, however, the discussion at the meeting was about the $200,000 and $700,000, and the profit that, that was made when the, when the property was sold.” [43]

43. 28/8/19, T211/12-16.

  1. I found this oral evidence of Mr Yao to be believable and cogent. However, it is unlikely that Mr Yao’s detailed recollection of the conversation as recorded in his affidavit is accurate, given the lapse of time and the difficulty of accurately remembering conversations, especially when Mr Yao had no financial interest in the outcome. I think much of it is an attempt to reconstruct what was said. But the general tenor of the conversation and that the signed statement resulted from the $200,000 invested by Mr Yu is likely to be recalled, and I accept it.

  2. Once it is accepted (as Mr Wei conceded [44] ) that Mr Yu believed in 2013 and 2014 that his $200,000 payment was for an investment in the project, for which he was entitled to credit, it is difficult to see how Mr Yu could at the same time believe the $200,000 was paid for antiques. And if Mr Yu did not believe he was paying for antiques then it is difficult to see how he nevertheless was in fact paying for antiques. Although Mr Yu’s belief is not conclusive on the objective purpose of the payment, I think his belief that the purpose of the payment was for investment as repayment of part of the deposit was the only purpose reasonably open on the evidence. The concession about Mr Yu’s belief supports Mr Yu’s evidence on the question of the purpose of the payment, and also means that there was no discussion between Mr Wei and Mr Yu that, expressly or impliedly, conveyed that the $200,000 was paid for antiques.

    44. T385/48-50; T386/10-12.

  3. Seventhly, the financial statements for 30 June 2014 for the Top Burwood Unit Trust recorded Mr Yu as having contributed $4.0m, even though he only paid $3.8m directly to Top Burwood, and this was said to support Mr Yu’s account.

  4. In my view, this business record is less compelling than it might first appear. Although the financial statements relate to the year ended 30 June 2014, they were prepared around 14 April 2015, [45] which was about a week after the issue about the $200,000 was first identified. [46] The accounts reflect Mr Yu’s instructions of his payment of $200,000 and his later payment of $3.8 million as investment contributions.

    45. See Exhibit A, tab 20, p 171.

    46. See Exhibit A, tab 31, p 235 and tab 32, p 236.

  5. Eighthly, Ms Hu’s emails of 7 and 8 April 2015 to Mr Wei were not the subject of response. Those emails stated, first:

“Hi Park,

I am preparing Top Burwood Unit Trust financial statement, I am notable to reconcile the initial $11,250,000 investment.

Based on your excel summary which you gave to me on 06/03/2015, you paid $3,502,763.50 during 09/09/2013 to 11/02/2014, and you withdraw $452,763,50 at 11/02/2014, which make up the investment of $3,050,000. During 11/02/2014 to 14/02/2014, you also deposited $8,001,902.69 into company account, assuming $1,902.69 were interest income, the investment were $8,000,000; therefore, the total investment were $11,050,000.

Do you know where were the difference $200,000? Attached CBA bank statement & your excel summary for your reference.

Calculation summary:

Pre-Feb 14

Payment by Park

3,502,763.50

11/02/2014

withdraw by Park

- 150,243.00

11/02/2014

withdraw by Park

- 302,520.50

3,050.000.00

11/02/2014

deposit by Park

500,000.00

14/02/2014

deposit by Park

500,176.77

14/02/2014

deposit by Park

2,920,720.00

14/02/2014

deposit by Park

4,081,005.92

Interest received

-1920.69

8,000,000.00

Regards,

Maggie Hu”. [47]

And secondly:

“Hi Park,

After investigation, the $200,000 shortfall is from your lack of contribution. Charlie gave you a $200,000 cheque on 23/10/2013, you did not deposit this amount back to Top burwood account. We request you deposit this amount back to Top Burwood account within 7 days, if you have any queries, please contact me or Charlie.

47. Exhibit A, tab 31, p 235.

Regards,

Maggie Hu”. [48]

48. Exhibit A, tab 32, p 236.

  1. I think the absence of any response from Mr Wei to the assertion that Mr Yu paid $200,000 on 23 October 2013 is some support for Mr Yu’s position. Mr Wei offered no explanation as to why he did not send a response identifying the $200,000 payment as related to antiques.

  2. In respect of the payment for antiques, Mr Wei submitted, perhaps less than forcefully, [49] that Mr Yu was eager to endear himself to the first defendant so as to become involved in his property ventures, and that a payment of $200,000 was seen by the first defendant as “a sweetener” [50] to get involved in the opportunity, clothed as the payment for antiques which may not have been worth that sum. That explanation, and the suggestion that it may be supported by the failure of Mr Yu to commence proceedings expeditiously, may be of some value if it was the only circumstance, but it leaves unexplained the signed Statement of March 2014 and the other evidence to which I have referred: the acknowledgment that Mr Yu thought he was paying as a contribution to the investment, the circumstance that Mr Yu otherwise paid only $3.8 million for his $4 million interest, and the correspondence about Mr Yu’s profit when the deeds of settlement were being prepared in 2015.

    49. See T386.

    50. T405/18; T406/22.

  3. Nor did Mr Wei impress as a witness. Mr Yu seemed willing to answer questions that were put to him, rather than be argumentative as Mr Wei was prone to do. [51] I am not inclined to put great weight on demeanour especially with persons for whom English is a second language. But it was a matter that did not assist Mr Wei.

    51. See 29/8/19, T254/35-47, T256/04-257/13, T302/26-46.

  4. Taking into account all these matters, I am convinced that Mr Yu’s $200,000 payment to Top Pacific Group in October 2014 was a contribution to the investment, and not a repayment of or payment for antiques. The March 2014 statement signed by Mr Wei, the subsequent references in settlement negotiations and deeds to Mr Yu’s entitlement arising from that statement, the circumstances and payee of the payment, and Mr Wei’s silence when initially asked about the payment all favour this conclusion. So does Mr Yu’s belief, conceded by Mr Wei. I am not persuaded that Mr Wei ever believed that the payment was for antiques, and his evidence to the contrary by affidavit and in the witness box does not assist his credit.

E. The agreement and destination of the payment

  1. There was no evidence that the $200,000 paid by Mr Yu to Top Pacific Group was paid over to the development company, Top Burwood.

  2. Mr Yu deposed that the payment was a reimbursement of the deposit paid by Top Pacific Group. The relevant parts of Mr Yu’s affidavit on this issue are quoted at [24] to [26] above.

  3. Mr Wei’s Senior Counsel submitted that this component of Mr Yu’s account should be accepted, that the Court “would infer that the 200,000 was intended to be, at least as far as the plaintiff is concerned, a reimbursement of his share of the deposit”. [52]

    52. T386/22-24.

  4. I accept this. Once it is accepted that Mr Yu’s payment in October 2013 was a reimbursement of part of the deposit paid by Top Pacific Group, the funds then became the money of Top Pacific Group to do with as it pleased. The payment was not intended to be a further payment of the deposit that needed to be forwarded to Top Burwood.

  5. However, Mr Yu contends that subsequently Mr Wei agreed to transfer the funds to Top Burwood. He deposes that Mr Wei said:

“Wei: ‘We have now on-sold the land. For both of our convenience, I will transfer the $200,000 you paid as initial deposit into trust account of TOP BURWOOD as your investment. You only need to pay $3,800,000 balance for your investment contribution.’

Yu: ‘Ok. Fair enough. I have already paid $200,000 for the deposit which was hold [sic] by your company Top Pacific.’”[53]

53. Guo Jun Yu affidavit, 23/11/18 at [51].

  1. An assertion that a further $200,000 transferred to Top Burwood as part of the deposit in addition to the $700,000 is difficult to accept. The $200,000 payment, on Mr Yu’s account, was to reimburse Top Pacific Group for part of the deposit, not a further payment to Top Burwood. And there was no “on [sale]” of the land, as the buyer, Top Burwood, remained the legal owner of the property. This is not to controvert my finding that the $200,000 was regarded as part of Mr Yu’s contribution.

  2. Mr Yu then paid $3,800,000 to Top Burwood on 6 and 7 February 2013. He deposed to a further conversation occurring in March 2014:

“Yu: ‘Park, what about my share of the profits from re-assessing the Bankstown Property? I have contributed $200,000 to the deposit of the Bankstown Property. I understand that you will transfer the $200,000 deposit I paid into the account of Top Burwood as part of my $4,000,000 investment of the Bankstown Project. What about my share of the profit from the re-valuation of the Bankstown Property?’

Park: ‘You will share 20% of the profit we made from the Bankstown Property. But I require 30% of the profits as rewards.’

Yu: ‘it is unfair. I invested $200,000 out of the $700,000, my share should be 20/70. And why you charge 30% as rewards?’

Park: ‘Because I run this project.’”[54]

“YU: ‘Ok. I agree. I will only have 20% of the profit from revaluation, and you can have 30% out of my profit. The amount will be $175,000, being 20% of $125,000,000 [sic] and deducting 30%’

Jiqing LIU (one of the investors): Can you donate some money? I think that you earned the money too easy. You should use part of these investment gain to do something good to the society.’

Yu: OK. I would like to donate some of the money to charity.

54. Guo Jun Yu affidavit, 23/11/18 at [64].

Wei: It's up to you. I will give you whatever I promised.

YU: OK. But you need to promise that you will pay me and you need to write it down. We have to write it down.’

Wei: OK”. [55]

55. Guo Jun Yu affidavit, 23/11/18 at [67].

  1. The words “I understand that you will transfer the $200,000 deposit I paid into the account of Top Burwood” are problematic, at least if it is asserting more than a “notional transfer”, an interpretation that might be indicated by the words “as part of my $4,000,000 investment”. In any event, this conversation, again like Mr Yao’s account, is unlikely to be accurate. [56] The difficulty of recalling accurately conversations, especially those long ago, is exacerbated by the need for translation, and perhaps the uncertainty of Mr Yu as to how his payment was going to be treated. So while I do not accept this detail of Mr Yu’s evidence of the conversation, I do not think it reflects adversely on his credit more generally.

    56. Watson v Foxman (1995) 49 NSWLR 315 at 318-319.

  2. I accept that a conversation that led to the March agreement occurred. I am not satisfied that there was any agreement that the $200,000 would be physically transferred to Top Burwood as distinct from notionally regarded as part of Mr Yu’s contribution. Thus, I do not find that there was any obligation in Top Pacific Group or Mr Wei to pay those funds to Top Burwood. The funds were a reimbursement of the deposit paid by Top Pacific Group and thus became money of Top Pacific Group. Thereafter, Mr Yu was properly to be regarded as having contributed $200,000 to the deposit of $700,000 paid by Top Pacific Group.

  3. The conversations affirmed by Mr Yu, the retention of the funds by Mr Wei or his company, the deposit amount of $700,000, being 10% of the $7 million purchase price, and the concession by Mr Wei’s counsel, support the conclusion that the payment was a refund of part of Top Pacific Group’s payment of the deposit, and thus a refund of part of Mr Wei’s contribution. That Mr Yu was willing to hand over the $200,000 without a written document reflects that Mr Yu was keen to be involved in the project and trusted Mr Wei in respect of the funds.

F. Unjust enrichment

  1. The law of Australia regards unjust enrichment not as a definitive legal principle, but as a unifying legal concept. [57] The concept serves to unify the actions for money paid under a mistake,[58] money had and received,[59] and quantum meruit. [60] The list of such actions is not closed. In restitutionary relief, the enquiry is who should bear the loss, and why. [61]

    57. Australian Financial Services and Leasing Pty Ltd v Hills Industries Ltd (2014) 253 CLR 560; [2014] HCA 14 at [78], [105].

    58. David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353, 379; [1992] HCA 353.

    59. Australia & New Zealand Banking Group Ltd v Westpac Banking Corp (1988) 164 CLR 662; [1988] HCA 17.

    60. Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221, 256-257; [1987] HCA 5.

    61. Australian Financial Services and Leasing Pty Ltd at [78].

  2. The current action bears no similarity with money paid under a mistake, since there was no mistake, and no similarity with quantum meruit, since there was no work done. But it does align with a claim for money had and received. Mr Yu paid the $200,000, a part of his contribution to an investment. If he never received any credit for that contribution, the purpose of the payment has wholly failed. There has thus been a total failure of consideration,[62] which gives rise to a prima facie obligation to make restitution. [63] In such a claim, matters of substance prevail over matters of form. [64]

    62. Baltic Shipping Co v Dillon (The Ship Mikhail Lermontov) (1993) 176 CLR 344; [1993] HCA 4.

    63. Australian Financial Services and Leasing Pty Ltd at [137].

    64. Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516 at [92] per Gummow J, Baltic Shipping Co v Dillon (1993) 176 CLR 344 at 376 per Deane and Dawson JJ.

  3. I have found that Mr Yu’s payment of $200,000 was a contribution to his ultimate investment. He subsequently agreed to contribute $4 million. He paid $3.8 million, thereby under-contributing if the $200,000 payment is not credited to his account.

  4. But Mr Yu, so far as the evidence reveals, was, at least up until the repayment of investors, treated by Top Burwood as having paid his full contribution. The 2015 accounts record his contribution as $4 million, and the subsequent correspondence does not imply any deficiency. Rather, Mr Wei is recorded in the accounts as having under-contributed by $200,000, and the later correspondence seeks to recover that from him.

  5. How the under-contribution by Mr Wei occurred is plain enough, but is worth restating. In early February 2014, Mr Wei provided accounts showing contributions of approximately $3.5 million. As his agreed investment was only $3.05m, he was refunded $450,000 on 14 February 2014. But his accounts claimed an amount of $700,000 for the deposit. While Mr Wei did pay that amount, Mr Yu’s payment of $200,000 refunded part of that deposit, so that Mr Wei’s net payment in respect of the deposit was only $500,000. He was refunded $200,000 more than was appropriate.

  1. Thus, although there was no mistake in Mr Yu’s payment, there was a mistake by Top Burwood in paying a refund to Mr Wei without discounting the amount paid by Mr Yu. This mistake appears to have gone unnoticed by the parties until after the 2015 Deeds were signed. The accountant, Maggie Hu, first corresponded with Mr Wei in April 2015 about the missing $200,000.

  2. So was it Mr Yu or Top Burwood that lost the $200,000? Who is entitled to recovery? Was it Mr Wei or Top Pacific Group who was unjustly enriched?

  3. Top Burwood is not a party to these proceedings; I was informed it has been wound up and deregistered.

  4. Mr Yu submits that Top Pacific Group was unjustly enriched by receiving the payment of $200,000 at the expense of Mr Yu. Mr Yu asserts he received nothing for his $200,000, that there was a total failure of consideration, and that no change of position defence is pleaded or established.

  5. Mr Wei submits that Mr Yu received 20% of the shares in Top Burwood so there was no total failure of consideration. He also submits that Top Pacific Group was not enriched since it neither requested the payment nor had an investment interest in the project.

  6. As indicated earlier, unjust enrichment looks at the substance not the form. In regard to whether there was a total failure of consideration, the 20% shareholding in Top Burwood is immaterial. That interest, created prior to the payment, was not the purpose of Mr Yu’s payment, for an interest in the shareholding of the trustee contained no beneficial ownership rights in the project.

  7. But Mr Yu did receive units equivalent to a $4 million contribution. There was no evidence that he paid a further $200,000, nor of a request or demand from Top Burwood for such an amount to be paid by him, nor any document directly indicating that his share in the project was diluted because of his failure to pay this sum.

  8. To establish his loss, Mr Yu relies upon the circumstance that the investors were to receive repayment of their initial investment as a loan, [65] before any profits were paid. He gave evidence that this repayment was $200,000 less than his investment contribution. By about 2015 Mr Yu had acquired an additional $700,000 of units so he was entitled to repayment of $4,700,000. He deposed:

“In 24 June 2016, I received two cheques as the refund of my investment, being 2.5M and 2M and totalling 4.5M.”[66]

This statement was not challenged. The cheques were annexed. I accept that he received $200,000 less than he invested.

65. Exhibit A, tab 15, p 80, cl 5.3.

66. Guo Jun Yu affidavit, 23/11/18 at [94].

  1. It may be, as Mr Yu argues, that this underpayment of $200,000 in the refund of Mr Yu’s investment reflects the circumstance that he was notionally deprived of the $200,000 payment Mr Wei retained and failed to bring to account. But the evidence on that matter is thin. Although the Shareholders/Unitholders Agreement provides that the funds contributed by unitholders were treated as loans, [67] which were to be repaid prior to any distribution of profits, [68] there was no evidence of the reason for the underpayment. Without evidence that the project produced a profit or a loss, the Court cannot be certain whether Mr Yu received $200,000 less than his investment because the project made a loss, or because he was debited with the $200,000 which Mr Wei received in February 2014, or for some other reason undisclosed. No other person from or connected with Top Burwood, including the accountant, Maggie Hu, gave evidence. The circumstance that the underpayment equates exactly with the disputed $200,000 suggests a connection because a loss would be unlikely to produce a return exactly equal to the underpayment. But whether that connection was because Mr Yu was treated as an investor of $200,000 less than was specified in the Shareholders Agreement (contrary to the 2014 accounts prepared on 14 April 2015) or because of some other arrangement that occurred once the missing $200,000 was revealed, is a matter on which the evidence is silent. That Mr Yu was underpaid because he was treated as under-contributing seems the more likely alternative. Yet he was the person who could have given evidence about this and did not, a matter that causes me concern. By the barest of margins, I am satisfied that Mr Yu was underpaid because of the missing $200,000. In this I am influenced by the absence of any challenge to Mr Yu’s evidence of only receiving a “refund of [his] investment…totalling 4.5M”. [69]

    67. See e.g. Shareholders/Unitholders Agreement, 3/2/14 at Exhibit A, tab 15, p 80, cl 5.3.

    68. See cl 5.4(c).

    69. Guo Jun Yu affidavit, 23/11/18 at [94].

  2. But whether Mr Yu suffered a loss in this case seems not to matter.

  3. Mr Yu referred to Roxborough v Rothmans of Pall Mall Australia Ltd (2001) 208 CLR 516; [2001] HCA 68 where the High Court dealt with a claim by tobacco retailers for a refund of a tobacco excise that was held to be invalid. The plurality of Gleeson CJ, Gaudron and Hayne JJ stated:

“The parties made no agreement, express or implied, about what was to happen if the tax was held to be invalid. If there is here a right to enforce repayment upon the basis of a failure of consideration, it is because, in the circumstances, the law imposes upon the respondent an obligation to make just restitution for a benefit derived at the expense of the appellants. If there had been a total failure of consideration, because, for example, there had been a prepayment for goods which were never delivered, the respondent's duty to make restitution would have been clear. But there are two questions. The first is whether there has been a failure of a severable part of the consideration. The second is whether, in the absence of restitution, the respondent will retain money at the expense of the appellants. The second problem arises because the appellants have passed on the burden of the tax. According to the respondent, if the respondent has been enriched, then that has been at the expense, not of the appellants, but of the customers of the appellants, and justice does not require it to make restitution to the appellants.”[70]

70. At [20].

  1. In considering the impact of the tax having been passed on to customers, the plurality said that there is “a distinct and severable part of the consideration…made by the appellants to the respondent” and that “the respondent has no right to retain the amounts in question”. [71] Reference was made to the decision in Commissioner of State Revenue (Vict) v Royal Insurance Australia Ltd,[72] where an insurer was entitled to recover stamp duty overpaid by mistake, even though the amounts had been passed on to the insurer’s policyholders.

    71. At [24].

    72. (1994) 182 CLR 51.

  2. In the Royal Insurance decision, Mason CJ said:

“Restitutionary relief, as it has developed to this point in our law, does not seek to provide compensation for loss. Instead, it operates to restore to the plaintiff what has been transferred from the plaintiff to the defendant whereby the defendant has been unjustly enriched. As in the action for money had and received, the defendant comes under an obligation to account to the plaintiff for money which the defendant has received for the use of the plaintiff. The subtraction from the plaintiff's wealth enables one to say that the defendant's unjust enrichment has been 'at the expense of the plaintiff', notwithstanding that the plaintiff may recoup the outgoing by means of transactions with third parties.” [73]

73. Roxborough at [26], Royal Insurance at 75.

  1. The plurality in Roxborough [74] referred to Mason CJ deciding that the defendant “having no title to retain the moneys, the plaintiff had the superior claim”. [75]

    74. At [27].

    75. Roxborough at [27].

  2. The plurality in Roxborough [76] also referred to the judgment of Brennan J in the Royal Insurance case, with whom Toohey J and McHugh J agreed:

“The fact that Royal had passed on to its policy holders the burden of the payments made to the Commissioner does not mean that Royal did not pay its own money to the Commissioner. The passing on of the burden of the payments made does not affect the situation that, as between the Commissioner and Royal, the former was enriched at the expense of the latter. It may be that, if Royal recovers the overpayments it made, the policy holders will be entitled themselves to claim a refund from Royal ... However that may be, no defence of 'passing on' is available to defeat a claim for moneys paid by A acting on his own behalf to B where B has been unjustly enriched by the payment and the moneys paid had been A's moneys.”

76. At [28].

  1. Thus, as Mason CJ stated in Royal Insurance, restitutionary relief does not strictly “provide compensation for loss”. [77] It restores to the transferor transfers which have unjustly enriched the defendant. This principle operates in favour of Mr Yu. By the $200,000 he transferred to Top Pacific Group, it was unjustly enriched. It provided none of the agreed consideration, namely a $200,000 share in the deposit paid by Top Pacific Group. Whether and to what extent Mr Yu has recovered that payment from, or passed on the loss to, Top Burwood is unclear, but it is immaterial. Mr Yu having made the payment has a superior claim on the moneys. Top Pacific Group “has no title to retain the moneys”. As there is “no defence of ‘passing on’”, the circumstance that Top Burwood may have a claim on Mr Yu is no defence to Mr Yu’s unjust enrichment claim.

    77. Royal Insurance at p 75.

  2. As to who was unjustly enriched, Top Pacific Group was the payee on the cheque and received the funds. Mr Wei submitted that Top Pacific Group remained out of pocket $500,000 since it received no interest in the project. I do not accept this as a reason why it was not enriched. The defendants gave no evidence of how Top Pacific Group’s payment of the deposit was treated in the accounts. It was his company and his failure to give any evidence about it militates against any favourable inference being drawn. In the absence of evidence, I am satisfied that Top Pacific Group was enriched by the payment, not having provided any consideration for it, and it remains liable to restore it. Further, Mr Wei, Top Pacific Group and Mr Yu submit that if there was a benefit, it was received by Top Pacific Group. [78]

    78. Defendants’ submissions, 19/6/20 at [10]-[16].

  3. Top Pacific Group received the $200,000 at Mr Wei’s direction. There was no evidence that this sum was paid over to Mr Wei, thus there is no change of position or other reason why Top Pacific Group should not be regarded as having received the benefit. [79]

    79. Cf Australia & New Zealand Banking Group Ltd v Westpac Banking Corp (1988) 164 CLR 662 at 673-674, 681-682; Kleinwort Sons & Co v Dunlop Rubber Co (1907) 97 LT 263 at 265; Citigroup Pty Ltd v National Australia Bank Ltd (2012) 82 NSWLR 391 at [109], [113]-[114].

  4. Were Top Pacific Group the agent of Mr Wei for the receipt, Mr Yu would seem also entitled to claim the funds from Mr Wei as principal, [80] he being liable for the unjust enrichment of his agent. Mr Wei submits that this claim is not raised by the pleadings. [81] Paragraph 14 of the Amended Statement of Claim indicates an amendment to assert that Top Pacific Group, rather than the defendants, was unjustly enriched, but this does not deal directly with the principal’s liability for his agent. Paragraph 15 [82] arguably asserts a liability in Mr Wei as well as Top Pacific Group for restitution, and the facts pleaded [83] (and established) concerning the payment of the cheque might prove agency in respect of the receipt, Top Pacific having received the funds in partial repayment of its payment of the deposit on behalf of Mr Wei. Although the plaintiff’s submissions contemplate such a finding,[84] liability of Mr Wei for unjust enrichment was not pressed by Mr Yu.

    80. See cases in footnote 79.

    81. Defendants’ submissions, 19/6/20; Amended Statement of Claim at [14].

    82. See Amended Statement of Claim at [13]-[21].

    83. Amended Statement of Claim at [4]-[6].

    84. Plaintiff’s submissions, 19/6/20 at [10].

  5. Rather, while there were passing references to Top Pacific Group being the agent of Mr Wei, this assertion was not pressed by either party. Just as Mr Yu did not maintain that Mr Wei as principal was liable for the unjust enrichment of Top Pacific Group, so also Mr Wei did not submit that Top Pacific Group as agent was the beneficiary of any release granted to Mr Wei.

  6. Accordingly, Top Pacific Group was unjustly enriched by the $200,000 payment and is obliged to repay it to Mr Yu.

G. Damages and breach of contract

  1. Mr Yu’s claim against Mr Wei is two-fold:

  1. A breach by Mr Wei of the oral agreement in October 2013, in “failing to cause Top Pacific Group to transfer the $200,000 to Top Burwood”; [85] and

  2. A breach by Mr Wei of the Shareholders/Unitholders Agreement in failing to contribute the $3.05 million promised, because Mr Wei only contributed $2.85 million.

    85. Plaintiff’s closing submissions, 11/10/19 at [2(a)].

  1. I have held that there was no obligation on Top Pacific Group to pay $200,000 to Top Burwood. The payment was a refund of the deposit paid by Top Pacific Group. It follows from its character as a refund that the failure to transfer the $200,000 to Top Burwood did not contravene any obligation of Top Pacific Group and is not a breach of the oral agreement.

  2. As to the Shareholders/Unitholders Agreement, the failure of Mr Wei to meet his full contribution obligation follows from my finding that Mr Yu paid the $200,000 for the purpose of investment in the Bankstown project. Mr Wei was not entitled to treat his payment of the deposit (via Top Pacific Group) as his contribution alone, when part of that deposit was paid (or refunded) by Mr Yu.

  3. Mr Wei initially resisted this conclusion on the basis that Mr Yu’s payment was in respect of antiques. I have rejected that submission. But Mr Wei raised further arguments against any claim by Mr Yu under the Shareholders/Unitholders Agreement.

  4. First, Mr Wei submitted that Top Burwood alone but not Mr Yu had standing to sue. But Mr Yu was a party to the Shareholders/Unitholders Agreement, and his right to sue depended on suffering damages for breach. I have found that Mr Yu did suffer loss by reason of Mr Wei’s under-contribution. No cogent reason was advanced as to why he could not sue for this loss resulting from the breach of an agreement to which he was a party.

  5. A second argument was on the basis of the releases in the 2015 Deeds, a matter to which I will come.

  6. Thirdly, Mr Wei submitted that the alleged breach was not by reason of his under-contribution, but was a consequence of him being given an excessive refund. However, Mr Wei’s refund was a consequence of his false claim that he paid a deposit of $700,000. Once Mr Wei had claimed and received the excessive refund, he was in breach of his contribution obligation.

  7. Finally, Mr Wei disputed that Mr Yu suffered a loss, a matter which has also been dealt with above.

  8. It follows that recovery from Mr Wei depends on whether the terms of the releases preclude a claim against him for failing to fulfil his investment obligations.

H. The 2015 Deeds and the Releases

  1. On 6 March 2015 the relevant parties, including Mr Yu, Top Burwood, Top Pacific Group and Mr Wei entered a Deed of Sale of Units and Shares whereby Mr Wei sold his interest in the project. Clause 6.1 of the Deed provided in respect of Mr Wei and his wife:

“6.1 On Completion each of Zhang and Park:

(a)   is deemed to have been released absolutely from all of their respective liabilities and obligations arising from or in connection with the SU Agreement and the Co-operation Agreement; and

(b)   is deemed to have released each other Party absolutely from all rights, claims and entitlements that either Park and/or Zhang has or may have arising from or in connection with the SU Agreement, the Co-operation Agreement or any other agreement to which Park and/or Zhang is party including without limitation:

(i) all rights, claims and entitlements that Park has or may have to or for any fees, remuneration or compensation payable for or in connection with his management of the Company and/or the Project or otherwise acting as project manager for the Project and

(ii) all rights, claims and entitlements that Park has or may have to or for any fees, remuneration or compensation payable for or in connection with Zhang's position as a director of the Company”. [86]

And cl 6.3 provided:

“6.3 On Completion:

(a) Yu is deemed to have released Park absolutely from all claims that Yu has or may have for a share of the profit or capital gain earned by the Company when new investors acquired an interest in the Project in February 2014 when Park and Yu were the only shareholders in the Company”. [87]

86. Exhibit A, tab 28, pp 208-209.

87. Exhibit A, tab 28, pp 209-210.

  1. Further, in a Deed of Settlement of the same date between Top Burwood and each investor, the recitals note an end to the relationship with Mr Wei:

“E. Yu, Hu, Liu and Yao wish to end their relationship with Park, Zhang, Yin and Wang in relation to the SU Agreement, the Co-operation Agreement, the Trust, the Company and the Project on and subject to the terms of this deed.” [88]

88. Exhibit A, tab 29, p 222.

  1. Clauses 2.1(a) and 2.3(a) therein provided:

“2.1 On Completion each of Park, Zhang, Yin and Wang:

(a) is released absolutely from all of their respective liabilities and obligations arising from or in connection with the SU Agreement, the Co-operation Agreement and the Trust Deed…

2.3 On Completion Park

(a) is released absolutely from all of his liabilities and obligations arising from or in connection with his management of the Project, and his engagement as project manager of the Project and his assumption of all other positions relating to the Project is terminated…” [89]

89. Exhibit A, tab 29, pp 222-223.

  1. Clause 6.1(a) of the Deed of Sale of Units and Shares, and cl 2.1 of the Deed of Settlement were relied upon. Mr Wei is the releasor in cl 6.1(b), and cl 6.3(a) appears to apply to the $175,000 earlier claimed by Mr Yu under the Statement signed on 14 March 2014.

  2. Top Pacific Group is not the beneficiary of any release, by Mr Yu, Top Burwood or otherwise, under either Deed. There is no basis to construe the releases as extending to Top Pacific Group, and it remains liable for unjust enrichment.

  3. This issue thus concerns whether either release operates to protect Mr Wei in respect of Mr Yu’s claim. The text of each release is the primary determinant of its ambit. Liabilities arising under the Shareholders/Unitholders Agreement and the Cooperation Agreement are expressly subject to the release clauses. This would appear to preclude Mr Wei remaining liable to Top Burwood for an underpaid contribution obligation which arises under the Shareholders/Unitholders Agreement. Any liability of Mr Wei for the unjust enrichment of Top Pacific Group might be different, since it is separate from the 2014 agreements, but that claim was not maintained.

  4. In Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112 at 130, the plurality stated:

“The facts stated in the third replication if true would show that the plaintiff company did not know of the defendant's liability it now seeks to enforce, did not intend to release it as part of the transaction and did not know of any intention on the part of the defendant that it should be released. The allegation that the defendant knew of the obligation but did not inform the plaintiff company may be introduced as bearing upon the unconscientiousness of the defendant's reliance upon the general words of the release, but it does not seem to be essential to the application of the governing principle of equity. Doubtless it was not meant as an allegation of non-disclosure where a duty of disclosure existed. It is not the avoidance of the transaction for non-disclosure that the plaintiff wants, but the limitation of the operation of the general words so as to exclude the causes of action sued upon. It was argued for the defendant that at best the facts pleaded gave rise to an equity to have the contract contained in the deed rescinded. To put it in another way, that to restrict the operation of the release so as to exclude the claim in the action on the grounds disclosed by the pleadings would be to alter the contract to the prejudice of one party and that it must therefore either stand or be wholly set aside so that the parties might be remitted to their former position; and for this contention reliance was placed upon Urquhart v Macpherson [1]. It may at once be conceded that there may be cases where the reasons for precluding the defendants from relying upon the release go to validity of the contract or where it would not be in accordance with the principles of equity to deny to the defendant his legal right under the release except as part of a rescission of the whole transaction. But they are cases depending on mistake, failure in a duty of disclosure, misrepresentation or other ground of avoidance. They are not cases depending on the equity to have the general words of a release confined to the true purpose of the transaction ascertained from the scope of the instrument and the external circumstances. It is under that principle that the facts alleged in the third replication bring the case. This does not necessarily mean that the equitable consequences flowing from those facts cannot be qualified or affected by additional matter; for equities are not the products of completely rigid categories. But standing alone as the allegations do they afford an equitable answer to the plea of release?”

  1. If the words of the releases are to be confined to the “true purpose of the transaction”, then the express mention of liabilities and obligations under the Shareholders Agreement and Cooperation Agreement seem to me to be contemplated, even if those obligations are unknown.

  2. An earlier passage in Grant [90] contemplated the possibility of a clause removing “all conceivable grounds of further disputes or claims” whether of matters disclosed or undisclosed, within a party’s knowledge or outside of it. The Court stated that such an intention “would not be presumed in equity”, [91] and:

“a releasee must not use the general words of a release as a means of escaping the fulfilment of obligations falling outside the true purpose of the transaction as ascertained from the nature of the instrument and the surrounding circumstances including the state of knowledge of the respective parties concerning the existence, character and extent of the liability in question and the actual intention of the releasor.” [92]

90. At 129.

91. At 129.

92. At 129-130.

  1. Mr Wei resisted the application of this principle in Grant on three bases. First, it is claimed that there is no pleading of this issue in a reply. But the application of the releases in the deeds must depend upon the proper construction of their terms, and there is no admission by Mr Yu of the applicability of the releases. Although the equitable construction of deeds was raised in a replication in Grant, before the fusion of law and equity, there is no requirement in Grant, less still under the current law of pleading, that a party must plead that on its proper construction a release in a deed does not apply in order to resist a defence based on the release. In the absence of a reply, all matters in the defence are in issue, for there is an implied joinder of issue. [93]

    93. See r 14.27(2) and (5) of the Uniform Civil Procedure Rules 2005.

  2. Secondly, Mr Wei alleges that it would not be open to seek equitable relief in this Court because of the jurisdictional limitations “under s 134” (presumably s 134 of the District Court Act 1973). This assertion was not developed. In any event, Mr Yu is not seeking equitable relief in respect of the Deed (such as a claim for rectification). Any equitable claim for money is, in any event, within the jurisdiction granted by s 134(h) of the District Court Act 1973.

  3. Thirdly, Mr Wei asserts that the deeds contemplate that the release operates against uncertain demands, and refers to Grant at p 129. Grant upholds the ordinary equitable rule that a release will not be read more broadly than the words compel. The reference in Grant to “the state of knowledge of the respective parties concerning the existence, character and extent of the liability in question and the actual intention of the releaser” [94] being material to the ascertainment of the purpose of the release, does not assist Mr Wei.

    94. Grant at 130.

  4. Yet the deeds here did use general words or “expansive language”[95] in respect of obligations under or connected with the two specified agreements. There was no reference to uncertain demands, the absence of knowledge of the parties, or the fact that new matters might be discovered. And everyone (apart perhaps from Mr Wei) assumed Mr Wei had given full credit for Mr Yu’s payment to him. Nevertheless, I am persuaded that a release of “all liabilities and obligations arising from or in connection with” an agreement must be read as embracing a breach of that agreement, even if the parties are unaware of the breach.

    95. Defendants’ submissions, 19/6/20 at [9].

  5. I am satisfied that Mr Wei is protected by the releases insofar as any claim by Top Burwood for underpaid contribution is made against him. That is a claim under the Shareholders/Unitholders Agreement to which the releases expressly refer. And Mr Wei committed no breach of the agreement made in October 2013, because that agreement did not require the $200,000 to be forwarded to Top Burwood. [96] So no release was necessary in respect of that claim.

    96. See [53]-[62] above.

I. Conclusion

  1. It follows that Top Pacific Group is liable for $200,000 for unjust enrichment. Mr Wei is not liable under either cause of action claimed against him.

J. Interest

  1. In my view, Mr Yu should not receive interest until the time for repayment of his contribution, but interest should run from that date of 24 June 2016. [97] Interest on $200,000 from 24 June 2016 to date is $46,153.68.

    97. Guo Jun Yu affidavit, 23/11/18 at [94].

K. Costs

  1. Mr Yu is entitled to his costs by reason of his success against Top Pacific Group. I will hear the parties as to costs in respect of Mr Wei.

L. Orders

  1. The orders of the Court are:

  1. Judgment for the plaintiff against the second defendant in the sum of $246,153.68 inclusive of interest.

  2. Second defendant to pay the plaintiff’s costs.

  3. Liberty to the parties to apply within 14 days by email to my associate for a costs order in respect of the first defendant.

  4. Claim against first defendant dismissed.

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Endnotes

Decision last updated: 28 October 2020

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Yu v Wei (No 3) [2021] NSWDC 818
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Yu v Wei (No 3) [2021] NSWDC 818