Federal Court of Australia

Xuan v Xu [2022] FCA 508

ORDERS

THE COURT ORDERS THAT:

1.    Judgment be entered in favour of the applicant in the amount of $208,316.80, plus pre-judgment interest, pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth), in the amount of $47,709.15.

2.    The respondent pay the applicant’s costs of and incidental to the proceedings, as taxed or agreed.

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

REASONS FOR JUDGMENT

HALLEY J:

Introduction

1    In this matter the applicant seeks to recover damages from the respondent for the losses that she suffered from making investments in a failed complex and unregulated investment scheme that was generally referred to as “the MFC Platform”.

2    The applicant brings a claim for misleading and deceptive conduct pursuant to s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act), or alternatively, s 18 of the Australian Consumer Law (ACL) contained in Schedule 2 of the Competition and Consumer Act 2010 (Cth). Further, and in the alternative, a claim is brought for false or misleading representations pursuant to s 12DB of the ASIC Act.

3    The applicant alleges that she invested an aggregate amount of $223,543.49 on the MFC Platform in reliance on representations made by the respondent about the operation of the MFC Platform, and the profits that she could expect to receive if she made investments on the platform.

4    The respondent denies that he made the representations alleged by the applicant, and contends that his connection to the MFC Platform was limited to being an investor in the platform and making his warehouse available for presentations on the platform to potential investors, including members of a WeChat group of which he was a member.

5    The respondent contends that the applicant was relatively financially sophisticated and she had invested in the MFC Platform because she was attracted by the high returns offered, not because of anything he might have said or done. He maintains that he had made no representations to induce her to invest, he had little knowledge of how the MFC Platform operated and, like her, had lost the money he had invested on the MFC Platform.

6    I am satisfied for the reasons that follow that the MFC Platform was a sham investment scheme that preyed on vulnerable and unsophisticated investors seduced by the promise of extraordinary returns and beguiled by the complex explanations of the allegedly risk free returns and benefits it could provide, and the methods by which it was promoted and marketed to invited guests.

7    I am also satisfied that the respondent was instrumental in introducing the applicant to the MFC Platform, facilitated each of her investments on the platform, made representations to her that were objectively misleading or deceptive and that materially contributed to her decisions to make investments on the MFC Platform, and that as a result of those representations she has suffered loss and damage.

8    The respondent was a self-represented litigant throughout the hearing of the proceedings. At the time he filed his defence and affidavit evidence he was legally represented in the proceedings, but his legal representatives withdrew prior to the commencement of the hearing.

9    The applicant’s legal representatives, Mr Widjaja of counsel and his instructing solicitors, withdrew shortly prior to the delivery of oral closing submissions. Mr Widjaja appeared for the applicant until the close of evidence and prepared written closing submissions and reply submissions that were relied upon by the applicant. The applicant also independently of Mr Widjaja prepared further reply submissions to the respondent’s written closing submissions.

10    The hearing was conducted exclusively on Microsoft Teams through NAATI (National Accreditation Authority for Translators and Interpreters) certified Mandarin interpreters as neither the applicant nor the respondent can speak English.

The Witnesses

The applicant’s witnesses

11    The applicant relied on affidavits from the following witnesses.

12    The applicant, herself, affirmed an affidavit in chief on 12 February 2020 in which she explained the circumstances in which she came to make investments on the MFC Platform, including the seminars and meetings that she attended at the respondent’s warehouse. She also swore an affidavit on 16 October 2020 in reply to the respondent’s affidavit affirmed 25 June 2020.

13    Ms Rui Chen is the applicant’s daughter. She was present for, and involved with, many of the events concerning her mother’s investment in the MFC Platform. She swore an affidavit in chief on 7 January 2020 addressing her mother’s involvement in the MFC Platform. She also affirmed an affidavit on 16 October 2020 in reply to the respondent’s 25 June 2020 affidavit, and affirmed an affidavit on 16 December 2020, which exhibited audio recordings of conversations in Mandarin that had taken place during two meetings that she had attended with the applicant at the respondent’s warehouse, and transcripts of English translations of those recordings that she had arranged to be prepared. Ms Chen was cross-examined.

14    Ms Ping Zhang is a friend of the applicant. She attended two seminars with the applicant to learn about the MFC Platform at the respondent’s warehouse. Ms Zhang is sometimes referred to as Wendy. Ms Zhang affirmed an affidavit on 16 January 2020, giving evidence that the respondent encouraged her and her husband to invest in the MFC Platform. She was cross-examined.

15    Ms Bong Siaw Yin is a friend of the applicant. She attended a number of seminars at the respondent’s warehouse to learn about the MFC Platform where the applicant was also present. She gave evidence that the respondent encouraged her to invest in the platform, and she invested USD100,000. She swore an affidavit on 14 January 2020. Ms Yin was cross-examined.

16    Ms Hongmei Pan was involved in WeChat messages under the name “Eagle Team” in which the respondent discussed the MFC Platform. Ms Pan invested in the MFC Platform. She affirmed an affidavit on 16 December 2020. Ms Pan was cross-examined.

17    Mr Nan Xia is a solicitor employed by Zhang Shijing Lawyers. He affirmed an affidavit on 26 July 2021 giving evidence of Australian Dollar to Chinese Yen exchange rates as at 28 August 2017 and 11 September 2017, and that as at 26 July 2021 the MFC website could not be accessed. He was not required for cross-examination.

The respondent’s witnesses

18    The respondent relied on the following affidavit and statements.

19    The respondent affirmed an affidavit in these proceedings on 25 June 2020. He seeks to explain the limited involvement he had with the MFC Platform and denies much of the content of the conversations that the applicant and Ms Chen alleged they had with him in the periods leading up to the applicant making her investments on the MFC Platform. He is sometimes referred to as Michael. He was cross-examined.

20    Ms Meng Ding is an MFC investor and provided a statement in these proceedings dated 24 July 2021. She is sometimes referred to as Dream Shirley Ding. She was cross-examined.

21    Ms Fengying Yao is an MFC investor who organised a tour with the respondent in Malaysia to do “training”. She gave evidence that she joined the MFC platform voluntarily and that with high returns, there must be high risks. She provided a statement dated 24 July 2021, and was cross-examined.

NAATI translators

22    Ana Zhao, Ling Li and Qiang Ma are all NAATI certified translators for Mandarin, and swore/affirmed affidavits dated 26 July 2021 attesting to their certifications. Each provided translations of various documents in these proceedings. None was required for cross-examination.

Admissibility of audio recordings and transcripts

23    The respondent opposed the admissibility of two audio recordings and the transcripts of those recordings that were exhibited to the 16 December 2020 affidavit of Ms Chen on the basis that he had not consented to, nor or otherwise authorised the making of, them.

24    After taking evidence on the voir dire I provisionally admitted into evidence the two audio recordings of conversations conducted in Mandarin (Audio Recordings), and the transcripts of those recordings translated into English (Transcripts). The first recording was of a presentation about the MFC Platform given by the respondent and Mr An, usually referred to as Professor An by the respondent, on 15 July 2017 at the respondent’s warehouse (15 July Recording). The second recording was a conversation between the applicant, Ms Chen and the respondent in an office at the respondent’s warehouse on 16 July 2017 (16 July Recording).

Sequence of events

25    In her 16 December 2020 affidavit Ms Chen gave evidence that the 16 July Recording had been made “so we can recall how to check the MFC platform as my mother wanted to understand and learn the MFC platform” and that the respondent had known and consented to the recording being made. In relation to the 15 July Recording, Ms Chen gave evidence that she had made the recording of the presentation, but she did not state whether the respondent had known the recording was being made.

26    As such, the applicant conceded that the 15 July Recording may have given rise to a contravention of the criminal law, namely the provisions of the Surveillance Devices Act 2007 (NSW) (SD Act), and asked that I give a certificate pursuant to s 128 of the Evidence Act 1995 (Cth) (Evidence Act).

27    I proceeded on the basis that objection had been taken by the respondent to the evidence and stated that I would provide certificates pursuant to s 128(3) of the Evidence Act (s 128 Certificates). I was satisfied that there had been a potential contravention of the criminal law, and was obliged to warn the applicant and Ms Chen that they may be making admissions as to a criminal offence if they gave further evidence as to the circumstances in which the 15 July Recording was made.

28    It was at this stage that the respondent submitted that he had also not given his consent to the 16 July Recording. The s 128 Certificates were extended to include the 16 July Recording. I deferred consideration of whether the recordings should be admitted into evidence in order to provide the respondent with an opportunity to read and respond to the applicant’s submissions on the admissibility of the Audio Recordings and the Transcripts, and decided that evidence would be given on the voir dire, after which I would make a determination.

29    The voir dire took place at the commencement of the third day of the hearing on 28 July 2021. The respondent had provided written submissions to the effect that both recordings were made without his consent. The applicant then clarified that it was not conceded that the applicant nor Ms Chen had contravened the SD Act.

30    I considered it to be desirable for the parties to lead whatever further evidence they wished in support of their position with respect to s 138 of the Evidence Act, which provides a discretion to admit improperly or illegally obtained evidence. I proposed that I would then admit the Audio Recordings and Transcripts into evidence provisionally, subject to the s 128 Certificates, with the intention that they would not be in evidence on a final basis until I considered the matter in the course of writing these reasons, the two considerations being:

(a)    were the Audio Recordings made in contravention of s 7 of the SD Act?; and

(b)    if they were so made, should I nevertheless exercise a discretion pursuant to s 138 of the Evidence Act to admit the Transcripts into evidence?

31    The purpose of this method was to ensure that should the respondent, as a self-represented litigant, wish to give evidence on the voir dire consistent with his submissions that he had not given his consent, and if Ms Chen gave evidence consistent with her affidavit, I would not have to make a credit finding prior to the final judgment. This would be undesirable in circumstances in which the respondent is self-represented and had not yet given evidence. In those circumstances a risk of apprehended bias may well have arisen.

Evidence on the voir dire

32    The respondent gave evidence on the voir dire that he did not know that the recordings were being made, and at no time had the applicant nor Ms Chen asked his permission to make any recordings of any of the meetings that they attended with him. The respondent stated that he told the applicant and Ms Chen that they were not allowed to make any recordings of any of the meetings they had had with him “quite a long time ago” when they first came to the warehouse, by saying: “Don’t take photos. Don’t record.” In the course of his cross-examination, the respondent gave evidence that the 16 July Recording was made when he was giving a “very basic outline” of the MFC platform, but repeated that Ms Chen had not asked permission to make the recording.

33    Ms Chen gave evidence on the voir dire that she had made the 15 July Recording on her mobile phone to assist her mother, as she and her mother couldn’t “take notes all the time” due to having to assist her father to the bathroom multiple times during the meeting. She stated that she didn’t share the Audio Recordings with anyone other than her mother. Ms Chen gave evidence that her mobile phone was approximately 15 cm away from the respondent when recording, and that she did not think it was obscured in any way.

34    Further, Ms Chen stated that the respondent had encouraged people at the meetings to take photographs, and that he said:

Take a photo so you can, you know, look at it later and study hard, because MFC is really good platform and post the photos to the WeChat Eagle Team so let other members know how good our team is.

35    In relation to the 16 July Recording, Ms Chen gave evidence that the respondent was showing her and the applicant the MFC website, and that she said:

Maybe I should record it so that my mother can understand later, because she’s not so computer, you know, literate.

36    She stated that respondent replied “Yes, of course, no problem”, or something to that effect.

37    Ms Chen gave evidence that the recording was made on her mobile phone while it was placed first in her hand, then on the table. When asked why she made the recording, Ms Chen stated that she thought it was better to make the recording so that her mother would know how to navigate the MFC website in the future.

38    In cross-examination, the respondent challenged Ms Chen’s evidence that her mother was not computer literate by stating that the applicant had been a “senior engineer”. Ms Chen responded that the applicant had ceased being an engineer and had retired between 15 and 17 years ago, and that the applicant used a laptop computer that used to belong to Ms Chen to watch Chinese programs on YouTube and to check her emails with the assistance of Ms Chen. Ms Chen stated that she was not aware of her mother using the laptop for any other purposes. Ms Chen stated that it was possible that she had asked a couple of questions during the meeting the subject of the 15 July Recording, but would not have made any substantive comments.

39    Ms Chen confirmed that the words attributed to “Female 1” in the transcript of the 16 July Recording were spoken by the applicant and those words attributed in the transcript to “Female 2” were spoken by her.

Submissions

Applicant’s submissions

40    The applicant submits that the respondent’s evidence given on the voir dire that he told attendees at the meeting on 15 July 2017 that they could not record the meeting is “plainly self-serving” and he had never previously contended, prior to becoming aware of the existence of the Audio Recordings, that he had directed that no photographs or recordings were to be made;. The applicant also submits that it is inherently improbable that the respondent had sufficiently turned his mind to the issue to expressly state that no recording should take place, in circumstances where the meeting was informal and held in the back of his warehouse.

41    In respect of the 16 July Recording, the applicant submits that there is no reason to doubt Ms Chen’s evidence, and it is consistent with the fact that Ms Chen and the applicant had first learned about MFC the day before; the MFC Platform is complicated (consistent with the respondent’s position that it took him some time to learn about it); and the applicant is technologically dependent on Ms Chen.

42    If those arguments are not accepted and the recordings are found to be obtained in contravention of s 7 of the SD Act, then, the applicant submits, the Court should exercise its discretion to admit the evidence pursuant to s 138(1) of the Evidence Act.

Respondent’s submissions

43    The respondent submits that the Audio Recordings were recorded intentionally in order to “use this type of material to harm or abuse the context of the material against me”.

44    The respondent submits that the Audio Recordings were made in private, without his acknowledgement or consent. He contends that he had no knowledge that the Audio Recordings had been made until he saw reference to them in the Court Book.

45    The respondent further submits that the explanation given by the applicant, being that Ms Chen made the Audio Recordings to assist her mother to understand the MFC Platform and refer back to them later, did not accord with the fact that neither the applicant nor Ms Chen asked for any of the reading materials or online training.

Principles

Prohibition of use of listening devices

46    Section 7 of the SD Act relevantly provides:

7 Prohibition on installation, use and maintenance of listening devices

(1)    A person must not knowingly install, use or cause to be used or maintain a listening device—

(a)     to overhear, record, monitor or listen to a private conversation to which the person is not a party, or

(b)     to record a private conversation to which the person is a party.

Maximum penalty—500 penalty units (in the case of a corporation) or 100 penalty units or 5 years imprisonment, or both (in any other case).

…

(3)     Subsection (1)(b) does not apply to the use of a listening device by a party to a private conversation if—

(a)     all of the principal parties to the conversation consent, expressly or impliedly, to the listening device being so used, or

(b)     a principal party to the conversation consents to the listening device being so used and the recording of the conversation—

(i)     is reasonably necessary for the protection of the lawful interests of that principal party, or

(ii)     is not made for the purpose of communicating or publishing the conversation, or a report of the conversation, to persons who are not parties to the conversation.

47    Section 4 of the SD Act clarifies the definition of “listening device”:

listening device means any device capable of being used to overhear, record, monitor or listen to a conversation or words spoken to or by any person in conversation, but does not include a hearing aid or similar device used by a person with impaired hearing to overcome the impairment and permit that person to hear only sounds ordinarily audible to the human ear.

48    The relevant section of the SD Act is s 7(1)(b), as Ms Chen was a party to the conversations of which the recordings were made. The applicant submits that s 7(1)(b) of the SD Act does not apply due to the operation of s 3(b)(ii).

49    The purpose for making the recording should be determined by considering objectively the intention of the maker at the time the recording is made: see RRG Nominees Pty Ltd v Visible Temporary Fencing Australia Pty Ltd (No 3) [2018] FCA 404 at [32] (White J); Gawley & Bass (2016) 313 FLR 346; [2016] FCCA 1955 at [46]-[47] (Judge Baker).

Discretion to admit improperly obtained evidence

50    The Court has a discretion pursuant to s 138(1) of the Evidence Act to admit evidence that has been obtained improperly or in contravention of an Australian law. The discretion is not engaged “unless the desirability of admitting the evidence outweighs the undesirability of admitting evidence that has been obtained in the way in which the evidence was obtained”. It is a balancing test of factors and includes (but is not limited to) the matters stated in s 138(3) of the Evidence Act:

(a)     the probative value of the evidence; and

(b)     the importance of the evidence in the proceeding; and

(c)     the nature of the relevant offence, cause of action or defence and the nature of the subject‑matter of the proceeding; and

(d)     the gravity of the impropriety or contravention; and

(e)     whether the impropriety or contravention was deliberate or reckless; and

(f)     whether the impropriety or contravention was contrary to or inconsistent with a right of a person recognised by the International Covenant on Civil and Political Rights; and

(g)     whether any other proceeding (whether or not in a court) has been or is likely to be taken in relation to the impropriety or contravention; and

(h)     the difficulty (if any) of obtaining the evidence without impropriety or contravention of an Australian law.

51    The High Court in Kadir v R (2020) 267 CLR 109; [2020] HCA 1 (Kiefel CJ, Bell, Keane, Nettle and Edelman JJ), stated:

(a)    the desirability of admitting evidence recognises the public interest in all relevant evidence being put before the decision maker, and the undesirability of admitting evidence recognises the public interest in not giving curial approval to illegally or improperly obtaining evidence, at [13];

(b)    the significance of some factors in s 138(3) will vary depending on whether the court is determining admissibility in civil or criminal proceedings, or where the impropriety or illegality does not involve law enforcement officers, at [15];

(c)    the availability of alternatives to the exclusion of evidence, such as civil actions, criminal prosecutions and internal and external disciplinary procedures, should be an important factor in the exercise of the discretion, and the application of this consideration in relation to private misconduct is less apparent, at [16]; and

(d)    whether the evidence could have been obtained in another way is a neutral consideration where the impropriety or illegality was neither deliberate nor reckless, at [20].

52    In Kanjian Holdings No 1 Pty Ltd v Kanjian; Kanjian v Kanjian (No 3) (2020) 155 ACSR 230; [2021] NSWSC 839 at [498]-[502], Henry J stated that the Court should not be too ready to find that the desirability of admitting secret recordings of private conversations outweighs the undesirability of receiving it, but in that case found that due to the seriousness of the dispute, the best evidence of what occurred should be admitted.

Consideration

53    I am satisfied that the Audio Recordings and the Transcripts fall within the exception in s 7(3)(b) of the SD Act because:

(a)    the applicant was a principal party to the conversations the subject of the Audio Recordings and she had provided her consent to the use of Ms Chen’s mobile phone to make the Audio Recordings;

(b)    the making of the Audio Recordings was reasonably necessary for the protection of the lawful interests of the applicant, namely her understanding of the MFC Platform which was a potential investment opportunity that was being promoted to her by the respondent; and

(c)    neither of the Audio Recordings was published and I accept Ms Chen’s evidence that she only intended to only share them with the applicant, who was in attendance at both meetings, and neither Ms Chen nor the applicant was considering bringing proceedings. Rather, the applicant was considering whether she should invest in MFC, and did so two days later.

54    In respect of the 15 July Recording, given that Ms Chen and the applicant had to assist the applicant’s husband to the bathroom due to his disabilities, and therefore they were not able to be present for the whole of the presentation, I am satisfied that the recording was consistent with protecting their lawful interests in seeking to understand the nature of the investment opportunity that was being promoted to them in the course of the 15 July Seminar.

55    Further, I am satisfied that the 16 July Recording and the transcript of that recording fall within the exception in s 7(3)(a) of the SD Act.

56    The only persons present and the principal parties to the conversations recorded in the 16 July Recording were the applicant, Ms Chen and the respondent.

57    I accept Ms Chen’s evidence that she asked for and was given permission by the respondent to record the conversations at the meeting on 16 July 2017; it is inherently plausible, given the novelty of the MFC Platform, the complexity of the explanations being provided by the respondent and the express purpose of the meeting to explain the MFC Platform, that such a request was made and that it was agreed to by the respondent. Further, given the meeting was only between the respondent, the applicant and Ms Chen, it is inherently implausible that the respondent was not aware that Ms Chen was recording the conversations on her mobile phone.

58    I am satisfied that each of the applicant, Ms Chen and the respondent expressly or impliedly consented to Ms Chen using her mobile phone to record their conversations during the meeting on 16 July 2017.

59    In any event, I am satisfied that even if, contrary to my finding above, the Audio Recordings did not fall within the exceptions in s 7(3)(a) or (b) of the SD Act, the desirability of admitting the Audio Recordings and the Transcripts outweighs the undesirability of not receiving them because:

(a)    the probative value of the evidence is “very high”, as the Recordings and the certified English translations in the Transcripts are an objective record of oral communications involving the applicant, Ms Chen, the respondent and others prior to the applicant’s decision to invest in the MFC Platform;

(b)    the evidence is “significantly important” to the proceedings as the admissions made in the recordings are largely conclusive of whether the representations denied by the respondent were made and the role of the respondent in the applicant’s decision to invest in the MFC Platform;

(c)    the causes of action are primarily concerned with oral representations made by the respondent that are alleged to have materially contributed to her decision to invest in the MFC Platform;

(d)    the gravity of the contravention of Ms Chen (if any) was not significant as no covert actions were taken to obtain the evidence and the recordings were made in plain sight of the respondent on a mobile phone in situ during meetings in which complicated information was being given to those in the meeting;

(e)    the contravention (if any) was not deliberate nor reckless, and should be a neutral consideration because at the time that Ms Chen made the recordings, she could not have contemplated the need for evidence for legal proceedings;

(f)    the recordings do not constitute an infringement of the respondent’s rights under art 17 of the International Covenant on Civil and Political Rights, opened for signature on 16 December 1966, 999 UNTS 171 (entered into force 23 March 1976);

(g)    no proceeding is likely to be taken in relation to the alleged contravention, which should therefore be a neutral consideration; and

(h)    where the contravention is neither deliberate nor reckless, the difficulty of obtaining the evidence without a contravention of the law is a neutral consideration.

Other evidentiary issues

Affidavit of Professor An

60    The respondent also sought to rely on an affidavit from Professor An that he had filed in the proceedings as part of his evidence in chief. Counsel for the applicant notified the respondent that he required Professor An to be made available for cross examination if the respondent sought to rely on his affidavit.

61    On the evening before Professor An was scheduled to give evidence, the respondent advised the Court that he had been unable to make contact with Professor An to arrange for him to be present for cross examination.

62    I informed the respondent that if he wanted to make an application to rely on Professor An’s evidence without making him available for cross examination then I would need evidence of what steps the respondent had taken to try and secure his attendance at the hearing for cross examination. On the following day, the respondent sought to rely on five WeChat message sequences in Mandarin as evidence of the steps he had taken to secure his attendance.

63    The applicant maintained her objection to any admission of the affidavit of Professor An on the basis that the only evidence that the respondent had sought to rely upon to establish that all reasonable steps had been taken to secure Professor An’s attendance were text messages in Mandarin with time stamps on them that indicated they had only been sent in the last few days.

64    No application had been made by the respondent to secure Professor An’s attendance at the hearing by serving a subpoena on him to attend.

65    In the circumstances, I was not able to conclude that all reasonable steps had been taken to secure Professor An’s attendance for cross examination, given the respondent was on notice of the need to produce evidence of the steps that he had taken and was only able to produce very recent untranslated WeChat messages on the last day of the hearing (other than final oral closing submissions).

Supplementary evidence

66    In his written closing submissions the respondent sought to introduce into evidence copies of alleged extracts from documents described as “MFC Notifications & News”, an “MFC Booklet”, an “MFC Training System Booklet” and “Vouchers for LR Consumptions” (together Extracts).

67    The Extracts were sought to be relied upon by the respondent to demonstrate that the MFC Platform set the rules for its operation, that it was “just a loyalty membership management System” and “all information and promotion were regulated by the company of MFC Platform”.

68    The authenticity and provenance of the Extracts were asserted but not established by any evidence. Nor was any explanation provided for the belated attempt to rely on the Extracts after the respondent had closed his case.

69    I did not give the respondent leave to reopen his case to rely on the Extracts, given:

(a)    the absence of evidence as to the authenticity or provenance of the Extracts;

(b)    the absence of any explanation for the respondent’s delay in seeking to rely on the Extracts; and

(c)    the risk of prejudice to the applicant if the material were admitted into evidence, not least the difficulty of making any assessment of the probative value of selective extracts from documents purporting to explain aspects of the MFC Platform, in circumstances where there was no evidence that the applicant had ever been provided with the Extracts before she had made any of her investments on the MFC Platform.

Credit findings

70    The principal witnesses in these proceedings were the applicant, her daughter Ms Chen and the respondent. Other witnesses were cross examined but none was seriously challenged on their evidence and in most cases the evidence they gave in their affidavits was only contextual rather than determinative to the principal issues in the proceedings.

The applicant

71    The applicant was at times defensive and argumentative in giving evidence. She had a tendency to act as an advocate and engage in a debate with the respondent rather than answering directly questions put to her in cross examination.

72    The following extracts from the transcript are indicative of her approach to some aspects of her cross examination:

THE INTERPRETER (RESPONDENT): All right, I will be answering these questions later on. Here’s a new question. I would like to ask the applicant how many registered points did you have in the total of number at MFC account?

THE INTERPRETER (WITNESS): It’s already contained in our evidence submitted.

and:

THE INTERPRETER (RESPONDENT): Applicant, I, the respondent, have ever – have ever forced you to take your own money to register – to register that account at MFC?

THE INTERPRETER (WITNESS): This question was asked yesterday.

HIS HONOUR: It has been asked, but the cross-examiner is permitted to test you on your answer. So provided it does not become too repetitive he’s entitled to ask again. So can you please answer his question.

THE INTERPRETER (WITNESS): No.

73    Nevertheless, on the whole I was satisfied that for the most part the applicant was giving credible evidence of her conversations with the respondent. I have concluded that much of the difficulty she faced in cross examination was attributable to the manner in which the respondent conducted his cross examination of her, in particular his tendency to disagree with her answers and make submissions in the course of her cross examination as to whether I should accept her evidence, rather than to focus on asking her questions and challenging specific aspects of her affidavit evidence.

74    In all the circumstances, I have approached the oral and affidavit evidence of the applicant with some caution. Where it is supported by evidence of other witnesses or the Transcripts of the Audio Recordings I have been more confident in accepting her evidence when it conflicts with that of the respondent.

Ms Chen

75    Ms Chen was an impressive witness. She listened carefully to the questions or propositions that were put to her by the respondent in the course of her cross examination and answered them directly and persuasively. She was prepared to make concessions where appropriate and did not appear to exaggerate or tailor her evidence to support her mother’s case against the respondent.

The respondent

76    I have no doubt that the respondent found answering questions put to him in cross examination through an interpreter over Microsoft Teams a very challenging exercise. Further, he found it difficult to distinguish between answering questions and making submissions.

77    Nevertheless, after taking all those difficulties into account, my firm impression of the respondent was that he was acting as an advocate rather than attempting to answer questions truthfully to the best of his recollection. Further, he was evasive and his evidence was tailored to meet what he perceived to be the merits as he saw it of his position. It was readily apparent that he had a firm conviction that he was being unfairly targeted by the applicant as being responsible for her misfortune in making investments on the MFC Platform.

78    The following examples are typical of the respondent’s approach to giving evidence in the course of his cross examination:

MR WIDJAJA: And you were – withdraw that. You thought it was such a good investment opportunity that you invited other people to join.

THE INTERPRETER (WITNESS): At the time I don’t think so. At the time I didn’t think so. Because I only – because I also had my logistic business to deal with. Therefore, I was rather busy and I only spent a small amount of time on MFC.

MR WIDJAJA: To be clear, in July 2017, you did not invite other people to join MFC; is that correct?

THE INTERPRETER (WITNESS): No, no. The – no. The respondent..... I was incorrect. The – the applicant, Gongxiang Xuan – she started to learn about – about it on 15 July, and joined on 18 July, who is also your client.

HIS HONOUR: Mr Xu, did you invite anybody to join the MFC platform?

THE INTERPRETER (WITNESS): Invited?

HIS HONOUR: Yes. Did you invite anybody to join the MFC platform?

THE INTERPRETER (WITNESS): It was their requirement 1: get to know about MFC. Therefore, they made the time with me to come to my warehouse to learn about it.

HIS HONOUR: But, Mr Xu, did you invite them to come to your warehouse to learn about the MFC platform?

THE INTERPRETER (WITNESS): I didn’t invite them. It was them – actively had that demand – requirement. This can be demonstrated by the WeChat.

and:

MR WIDJAJA: Thank you. And in early September you told Ms Xuan that she needed to buy more accounts to increase her distribution.

THE INTERPRETER (WITNESS): I asked – no, I asked – could you show me the WeChat record?

HIS HONOUR: No. You’ve been asked a question. Please answer the question.

THE INTERPRETER (WITNESS): From what – from the concept I have got, this information can be gained all – all around the world. Because during the learning process the applicant had been learn – had been learnt in a very active way. She wanted to make more profit. She asked me – she asked Professor Anh, other team members and myself, and, of course, the more accounts – the more accounts you have and the more profit you would gain.

HIS HONOUR: The question that was asked was did you tell Ms Xuan, in early September, that she needed to buy more accounts in order to increase her distributions.

THE INTERPRETER (WITNESS): According to my memory, it seemed that I didn’t tell her to force her to a sale.

HIS HONOUR: No. That was not the question, Mr Xu. Please answer the question, which is now being put to you for the third time. In early September 2017, did you tell Ms Xuan that she needed to buy more accounts in order to increase her distribution?

THE INTERPRETER (WITNESS): I really can’t recall.

79    Important aspects of the respondent’s evidence were inconsistent with the statements attributed to him in the Transcripts and the evidence of the applicant, Ms Chen and the other witnesses relied upon by the applicant. It was only corroborated to a relatively minor extent by his own witnesses.

80    The respondent also sought to support his evidence by relying on a series of WeChat messages that he had with the applicant and Ms Chen. Ultimately I could attribute little weight to these messages. They were an incomplete record of the WeChat messages passing between the respondent, the applicant and Ms Chen. Absent an understanding of the specific context in which individual messages were sent, many were inherently ambiguous. By way of example, messages stating that the applicant wanted to make an investment on the MFC Platform might evidence a decision to invest independently of any representation by the respondent or might equally evidence a response to encouragement from the respondent that she should invest. The problem is magnified by the tone and informal content of the messages and nuances in language that may have been lost in the translation of the WeChat messages to English.

81    Most troubling were the respondent’s attempts to characterise his Eagle Team as merely a WeChat group, his claims that his involvement in the “seminars” conducted at his warehouse were limited to providing a location and catering to his fellow WeChat members, and his denials that he promoted the MFC Platform to the applicant and encouraged her to make significant investments to it in order to make substantial returns.

82    Had it not been for the transcript of the 16 July Recording I might have been prepared to place some reliance on the respondent’s evidence and have been more prepared to discount the evidence from the applicant and Ms Chen where it conflicted with his evidence. The transcript of the 16 July Recording, however, makes the respondent’s denials of any substantive involvement in the applicant’s investments in the MFC Platform untenable.

83    The transcript of the 16 July Recording provides considerable corroborative support for the applicant’s evidence that the respondent made the representations pleaded in the statement of claim. I have reproduced extracts from the transcript later in these reasons in addressing whether the representations alleged by the applicant have been established. For present purposes it is sufficient to note the following statements that the respondent is recorded as making to the applicant and Ms Chen:

[Respondent]:     Last year. I focused on team building. After almost a year to now. I have more than 100 fans. Those 100 plus fans are not those who only buy 100 or 200. They all bought 21 points if they could. Some were forced by me as they only trust me. Those who bought 21 points, I took them to Malaysia immediately. I forced them to go. I also force you to go. Some really had no time. I waited for him, I go there once a month. I take them to classes. After the class, sister, they changed completely.

…

[Respondent]:     I’m telling you: first, for this project, I can personally guarantee you that you will not lose money. Secondly, I also personally guarantee that you will be worry free in my team. Thirdly, the money you will make this time will surpass what you could imagine in your past few decades of life so far. …

Factual Background

The MFC Platform

84    Neither the respondent nor any other witness was able to provide a coherent explanation of how the MFC Platform was intended to operate in a manner that would provide any tangible or meaningful returns to investors.

85    The respondent described the MFC Platform as a “loyalty reward system” and claimed that it was an “emerging business” based on:

Fans economy, Internet +, integrated O2O (Online to Offline), Online :Similar to Uber, Airbnb, Alibaba. Offline: restaurant, beauty club, health & fitness, transport /logistics, Asia Culture, etc…

86    The following description of the purported operation of the MFC Platform is taken from the respondent’s evidence and submissions. It is unfortunately largely incomprehensible. It was apparent in the course of the respondent’s evidence and submissions that he was not able to describe or explain important aspects of the alleged operation of the MFC Platform, in particular how the platform generated revenue and how investors could obtain returns on their investment.

Alleged operation of the MFC Platform

87    The respondent claimed that an investor would purchase what was described as an “advertising package”, but usually referred to as “Advertising Points” or “AP”, which would give the investor credit to advertise on “MMall” or “MFace”.

88    The respondent gave evidence that, by way of example, if a sum of USD5,000 was invested, an investor would receive 2000 AP. The investor would also receive what were described as “trading points” or Game Redemption Credits (GRC). The respondent referred to these trading points as GRC1 and GRC2. He claimed that the investor would receive USD1,000 of GRC1 and USD2,000 of GRC2.

89    After 30 days the value of GRC1 would increase from USD1,000 to USD3,000, although the respondent could not explain why or how this occurred. Once the value increased, 10% of GRC1 would be deducted as a service fee, and the investor would be left with USD4,700 of GRC1 and GRC2 (being USD2,700 GRC1 and the original USD2,000 GRC2) and presumably the Advertising Points originally purchased, which were never intended to be used by investors.

90    GRC1 and GRC2 were alleged to be convertible to Company Game Redemption Credits (Company GRC). The respondent stated that the conversion rate was between 0.2 and 0.4; for example, 4,700 divided by 0.2 is 23,500 Company GRC. The conversion rate would increase incrementally by 1/100 and was dependent on the number of sales of GRC available at that level. This number could only increase and therefore at the high end an investor would receive less Company GRC for their GRC1 and GRC2; for example, 4,700 divided by 0.4 is 11,750 Company GRC. The respondent submits that the fact that the number could only increase was not an undertaking made by the company, but rather was simply a result of the system in place.

91    The respondent claimed that a biannual distribution would be calculated on a multiplier of not less than 1.5. An investor could then sell their trading points to other investors or back to the MFC Platform. Once sold, an investor could withdraw 55% of the GRC as cash, and then had to reinvest 30% of the GRC back into the platform, 10% of the GRC would be deducted as an administration fee, and the remaining 5% would convert to loyalty reward points (which allegedly could be traded for leisure and entertainment services), the purpose of which the respondent describes as “to perpetuate the mutually beneficial relationship between all components of the ecosystem”.

Involvement of the respondent in the MFC Platform

92    The respondent claimed that he was a “relatively new and lower level MFC fan at the time” and he did not have the education or capacity to understand the MFC Platform. He stated that MFC borrowed his warehouse for their “parties/seminars/classes” to save money, and that he was not paid by MFC. He further gave evidence that he was not asked to make a speech or presentation, and only prepared chairs and tables and bought drinks and snacks for the attendees because he “like[s] people and like[s] to socialise”.

93    Critical to an assessment of the respondent’s involvement in the MFC Platform was his role in what he described as the “Eagle Team”.

94    In his oral opening submissions, the respondent stated that he organised a group named “Eagle Group” on WeChat, but denied that this made him a representative of MFC, and claimed in response to a suggestion that he had arranged for Professor An to transfer the points that the applicant had acquired to his account so that the applicant would be in the respondent’s “team”:

THE INTERPRETER (WITNESS): I wanted to – I couldn’t emphasise more on that. Eagle Team is one of the group – is the name of my WeChat group. It is not the team from – it’s not the name of MFCs team.

95    Ms Ding gave evidence that there was no “manager” of the Eagle Team. She stated that the Eagle Team was a name like any other group name on WeChat and with respect to what was discussed by the team explained:

Many of the topics were related to MFC. However, there were other topics related with our life and eating or – having fun. This is quite common with any other WeChat group.

96    Ms Yao also gave evidence that the respondent was not the manager of the Eagle Team or the group leader, rather all team members were the owners of the Eagle Team group chat and “the group was for – to discuss eating or drinking or any other things”.

97    Ms Yao gave this evidence in response to the proposition that the Eagle Team was an investment team for the MFC Platform:

No. It was, like, you can – you can share the concept and information of the company at that Eagle Team or group.

98    Other witnesses, however, gave evidence that the respondent was the “leader” of the Eagle Team:

(a)    the applicant referred to him as the leader of “our” team;

(b)    Ms Chen gave evidence that the respondent “dragged [her] to the eagle team”;

(c)    Ms Zhang gave evidence that “Michael is the leader of our team” and that:

Michael is the person said to me he is very happy with MFC. He is leading the team happily to do the MFC, showing various photos to me. He also invited me to his group team chat called Yingdui. Maybe in English it’s the team of the eagle.

(d)    Ms Yin gave evidence that “The most important thing is I trust my leader – my team leader, which is Mr Xu”.

99    In the course of his cross examination, the respondent described the Eagle Team as his team, as can be seen in the following transcript extracts:

THE INTERPRETER (RESPONDENT): … you and your mum were willing to study, so you attended that Xi Zhu team to learn rather than to attend my Eagle Team to learn?

…

THE INTERPRETER (WITNESS): According to the ..... from our Chinese, when I was asked what specific business that MFC had been dealing with, my response was “come to my company in the afternoon to attend the lecture, to listen”. And then I said “then don’t need to do, I can – I can invite you to join my team, you can have a listen first”.

…

HIS HONOUR: So you arranged for Mr Wu to come and speak to the members of your Eagle Team about MFC.

THE INTERPRETER (WITNESS): Yes …

…

THE INTERPRETER [WITNESS]: One moment ..... [translating WeChat messages] hi, aunty, thank you for your trust. I just said to your baby I would like the world to see us. I would guarantee you without any regret to join my team. If you need me – if you need me any time, you can contact me.

[Emphasis added.]

100    Further, as outlined in Ms Pan’s affidavit, which contains English translations of WeChat messages in Mandarin, the respondent sent the following messages:

Michael:    This time I take ten people to Tianjin … My team … I help them all.

…

Michael:     I am the team leader … Big boss … Listen to team leader me.

…

Michael:    Wherever you are, your team leader will care about you.

…

Michael:     There are not many members in my team.

…

Michael:     I am your leader.

101    In the course of his cross examination the respondent was taken to the following photograph that was annexed to the applicant’s first affidavit:

102    The respondent gave evidence that this photograph was taken after an MFC “class”, that it was a photograph of himself, the applicant, the applicant’s husband and Ms Chen, and that he had given permission for the photograph to be taken. To the far left and right of the photograph is Ms Yin and her husband, Mr Li, standing next to the respondent (third from the right). When asked about the black jacket with a green zip that the majority of the occupants of the photograph are wearing, and the emblem on the chest, the respondent gave evidence that the emblem was that of the Eagle Team. The respondent gave evidence that one of his team members had designed it, and the respondent had given the jackets to the people in the photograph.

103    I am satisfied that the respondent was the leader of the Eagle Team and that the respondent used the Eagle Team as a means to promote the MFC Platform to potential investors and arrange for them to make investments on the MFC Platform. The discussion of other topics on WeChat or in person did not relevantly detract from the use that the respondent made of the Eagle Team, rather it enhanced its effectiveness by building trust and friendship between the respondent and group members.

The applicant’s introduction to the MFC Platform

104    The applicant, her husband, and her daughter, Ms Chen, met the respondent while they were on a family trip to Shanghai in or about June 2017. At the end of the trip, they exchanged contact details with the respondent.

105    On or about 12 July 2017, the respondent and Ms Chen exchanged WeChat messages (according to the respondent) or a telephone call (according to Ms Chen) in the course of which Ms Chen asked the respondent what he did for work. The respondent explained that he was involved with an investment opportunity that he referred to as “MBI” or the “MFC Platform”. The respondent then invited Ms Chen and her parents to attend a seminar on 15 July 2017 to learn about the investment opportunity.

15 July 2017 seminar

106    On 15 July 2017, the applicant together with her husband and her daughter, Ms Chen, attended a presentation given by the respondent and Professor An in a section of the respondent’s warehouse that had been furnished into a conference room (15 July Seminar). There were between 10 and 20 persons present during the 15 July Seminar. Ms Zhang also attended the seminar.

107    The respondent described the meeting as a “party” or “gathering”, in which the applicant, her husband and Ms Chen met other MFC “fans”:

such as Mr & Mrs Lai, Ms Nancy, Ms Ling, Mr & Mrs Ping Zhang (Wendy). Mr. Heping An (aka Professor An) and Mr Xin WU talked about their experience as MFC fans.

108    The respondent gave evidence that the meetings would usually go for two to three hours, and that on 15 July, Professor An spoke for 30 minutes to an hour after which the respondent gave a speech, albeit in a conversational manner. The 15 July Recording only records the introduction given by the respondent and the explanations provided by Professor An during his presentation at the 15 July Seminar.

109    The applicant claims that the respondent made a number of representations during the 15 July Seminar that caused her to invest in the MFC Platform. I return to these alleged representations later in these reasons.

16 July 2017 meeting

110    On 16 July 2017, the applicant and Ms Chen attended the respondent’s warehouse to discuss the operation of the MFC Platform (16 July Meeting). As explained above, the discussions that took place during the 16 July Meeting are the subject of the 16 July Recording.

18 July 2017 meeting

111    On 18 July 2017, the applicant and Ms Chen met with the respondent and Professor An at the respondent’s warehouse. On arrival, they paid AUD60,000 in cash to the respondent for an investment on the MFC Platform (First Investment). Ms Chen took a photograph of the cash paid to the respondent as her mother’s proof of payment.

112    At the request of the applicant and Ms Chen, the respondent counted the money.

113    While the respondent was counting the money, Ms Chen gave evidence that Professor An logged in to the MFC Platform and:

opened the accounts on the MFC Platform, and asked us to fill in some information like name and bank accounts’ details, identification number. He then registered and set up the accounts. He then provided my mother and I with the user id and passwords for the accounts. He said words to the effect of “Here are your user IDs and passwords for the accounts. You can change the password later.”

114    The respondent provided the following explanation of the steps that Professor An took at the meeting:

Professor An went online, using his own account purchased 8 (AP) and transferred the 8 (APs) into my account first, I then transferred the same from my account to [the applicant’s] MFC account. As the platform only trades in US dollars, the AU$60,000 was converted into US$40,000 and into 8 (AP).

115    The two explanations are not inconsistent and I accept that the events described by both Ms Chen and the respondent occurred.

22 July 2017 seminar

116    On 22 July 2017, the applicant and Ms Chen attended another seminar at the respondent’s warehouse (22 July Seminar). There were approximately 20 people present. Ms Yin also attended the seminar.

117    The respondent introduced a “successful investor”, named Xing Wu. He stated that Mr Wu was “that friend who invested USD190,000 three years ago, and whose investment is worth USD10,000,000 now”.

118    The applicant made handwritten notes during the 22 July Seminar.

26 July 2017 MFC M Academy presentation

119    On 26 July 2017, the applicant attended the first day of a two day presentation given by what the respondent described as the MFC M Academy (MFC M Academy Presentation).

120    The respondent gave evidence that the academy was part of the “MBI promotional scheme” and that at the conclusion of the MFC M Academy Presentation the applicant “passed at this conference to become an M Academy cadet instructor”.

121    The applicant gave evidence that she only attended the MFC M Academy Presentation because she was urged to do so by the respondent in order to learn about how to make more money from her investment on the MFC Platform, she was told by the respondent that she had to wear a black suit and a white shirt at the presentation, and she paid $80 for a ticket and $20 for a yellow scarf that was sold at a merchandise stand.

29 July 2017 seminar

122    On 29 July 2017, the applicant, together with her husband and Ms Chen, attended a further seminar at the respondent’s warehouse (29 July Seminar). Ms Yin also attended the seminar. The applicant gave evidence that there were “a lot of people at the seminar”. The respondent claimed that there were “approximately 200 Australian MFC fans” who attended this gathering.

123    The applicant and Ms Chen gave evidence that in the course of the seminar, the respondent introduced a woman whom he addressed as “Ee Choo”, and whom he claimed to be “a founding member of the MFC Platform” and a “high-ranking personnel within the MFC Platform”. He further claimed that she had “made a fortune from investing on MFC Platform”. The respondent gave evidence that Ms Eechoo Khoo was the “leader for MBI Australia”.

5 August 2017 seminar

124    On 5 August 2017 the applicant, her husband and Ms Chen attended a further seminar at the respondent’s warehouse (5 August Seminar). Ms Yin also attended the seminar.

12 August 2017 seminar

125    On 12 August 2017, the applicant, her husband and Ms Chen attended a further seminar at the respondent’s warehouse (12 August Seminar). The applicant took handwritten notes during the 12 August Seminar. Ms Yin and Ms Zhang also attended the seminar.

The applicant’s second investment on the MFC Platform

126    On or about 28 August 2017, the applicant transferred RMB455,000 (approximately $86,000) into a Chinese bank account of the respondent for the purpose of making a further investment in the MFC Platform (Second Investment). I note that although the WeChat messages below refer to a transfer of 450,000 RMB, it was ultimately common ground that the actual amount transferred was 455,000 RMB.

127    On 11 August 2017, the respondent gave evidence that the applicant had earlier contacted the respondent via WeChat, stating:

I have prepared 735,000RMB ready to transfer to your account (currency) into your Chinese account to open 13 account which total to 21 AP (Advertising Package). Once I come back from Shanghai.

128    On 27 August 2017, the applicant again contacted the respondent by WeChat, stating:

I have transferred RMB into your account to open 13 accounts and I want Professor An to come again to show me how to register a new account in future I will be able to operate myself.

129    On 28 August 2017, the applicant sent a WeChat message to the respondent stating:

I have transferred you 450k RMB and ask have you rec’d the money in your account.

130    The respondent replied:

Yes I did rec’d & have transferred 450k RMB to Eechoo Khoo’s Chinese account.

131    The respondent gave evidence that later that day, he received 65,000 RWP (Register Wallet Point) credits from Ms Khoo into his MFC account, equalling 13 Advertising Points.

132    The respondent gave evidence that on 29 August 2017, he made seven transactions and transferred the 65,000 RWP credits to the applicant’s MFC account. The applicant then phoned him to confirm that she had received the credits.

The applicant’s third investment on the MFC Platform

133    The applicant gave evidence that on or about 6 September 2017, the respondent called her and he said in Mandarin words to the following effect:

I have some good news for you, MFC Platform will be starting the biannual distribution at the end of this month, and the payout multiplier is 1.9, which is considered to be very high. I am holding my next seminar about how to withdraw your profits from your MFC Platform account at the same time this Saturday (9 September 2017), make sure you attend.

134    On or about 11 September 2017, the applicant gave evidence that she transferred RMB325,000 (approximately $62,000) into the respondent’s bank account for the purpose of making a further investment in the MFC Platform (Third Investment).

135    The applicant gave evidence that since this last payment, the respondent stopped inviting her to seminars and told her that she no longer needed to attend any seminars.

136    The respondent gave evidence that on 10 September 2017, the applicant wrote to him on WeChat, saying that she had transferred RMB350,000 into his bank account but he only initially received RMB320,000, and sometime in November 2017 she transferred him the balance of RMB5,000.

137    The respondent also gave evidence that after the initial transfer of RMB320,000, he transferred different portions to other MFC “fans” (Zhang Xue Ling, Li Xing and another person) in order for them to assist him to exchange the RMB for 10 RWP credits, as he did not have enough “stock” in his MFC Platform account. The RWP credits were then transferred to the applicant’s alleged MFC Platform account.

Subsequent events

138    The following evidence of the applicant was not disputed by the respondent and I accept it.

139    The applicant gave evidence that the biannual distribution that was to happen at the end of September did not occur and that when she contacted the respondent in or around early October 2017, he told her she might have to wait until the end of the year and to be patient.

140    The applicant gave evidence that in or around December 2017, the respondent told her that she may have to wait until January 2018. When the applicant stated that there was supposed to be two distributions per year, she contends that the respondent told her that the MFC platform would make up for the September distribution in January 2018.

141    The applicant then asked about the distribution in January 2018, and the respondent allegedly told her that it had been rescheduled to February 2018.

142    The applicant gave evidence that in or around early February 2018, she asked the respondent how to withdraw her money from the MFC Platform. The respondent told her that she could not withdraw any money as MFC was “dealing with some issues”. She received the same response, that she could not withdraw any money, when she asked again in or around late February 2018.

143    It was common ground that the applicant’s alleged “GRC” remained in her various MFC Platform accounts as at 3 February 2020.

15 July Seminar Representations

Overview

144    The applicant pleads that the respondent made five representations in the course of the 15 July Seminar to the applicant.

145    Each of the applicant, Ms Chen, Ms Yin and the respondent gave evidence as to what occurred in the course of the 15 July Seminar. In addition, as noted above, the translated transcript of the 15 July Recording was admitted into evidence.

146    The transcript, however, does not appear to be a record of the entirety of the conversations that took place during the 15 July Seminar. The respondent gave evidence that the “seminars” would usually go for two or three hours. The respondent also gave evidence that the presentation given by Professor An at the 15 July Seminar took approximately 30 minutes to an hour, after he himself had given an introductory speech for about five minutes. The tape recording itself goes for 40 minutes and 52 seconds, with the respondent talking initially and Professor An speaking for the majority of the remainder of the recording. In the absence of any evidence that the recording purported to be a record of the entirety of the discussions that took place during the 15 July Seminar I am not prepared to draw any inference to that effect.

Million Dollar Representation

147    First, the applicant pleads that in the course of the 15 July Seminar, the respondent orally represented that:

The respondent had invested in the [MFC Platform] since in or around March 2016, in the value of USD$250,000 and the respondent had since received one million US dollar [sic] in dividend payment from his aforementioned investment (Million Dollar Representation);

148    The applicant submits that the Court should find that the respondent made the Million Dollar Representation during the 15 July Seminar by reason of the following matters:

(a)    the respondent referred to making an investment of USD$250,000 during his introductory speech;

(b)    the respondent further engaged with the audience after Professor An’s presentation;

(c)    the applicant asked the respondent about the representation during the meeting of 16 July 2017 and the respondent did not attempt to correct her;

(d)    the applicant’s evidence of what the respondent said on that occasion, corroborated not only by Ms Chen, but also Ms Yin; and

(e)    the respondent told the attendees that they could withdraw their GRC as cash.

149    The respondent denies that he made the representation.

150    The applicant gave evidence that during the 15 July Seminar, the respondent said words to the effect of:

In March 2016 I invested USD250,000, and in a year’s time my investment is worth USD1,000,000.

151    Ms Chen gave evidence that:

Michael then proceeded to inform us that MFC Platform is a very lucrative investment scheme, and that he invested USD250,000 in 2016, and had now made a profit of more than USD1,000,000.

152    In cross-examination of the applicant by the respondent, when asked what had led her to join the MFC Platform, the applicant stated:

… in the lecture, you told us that in 2016 you invested US250,000, and now it is – after one year and three months, you’ve already acquired $1 million – US dollars – $1 million …

153    When the respondent contended that he had meant 1 million GRC, not US dollars, the applicant denied that he had mentioned GRC.

154    In her affidavit Ms Yin stated that the respondent had said during the 15 July Seminar that he had invested USD250,000 in MFC in March 2016 and had made a profit of USD1,000,000.

155    The respondent denied in his affidavit evidence that he had said that he invested USD250,000 in March 2016 and subsequently made a profit of about USD1,000,000. He further denied in his affidavit that the alleged investment had occurred.

156    In cross-examination, however, the respondent conceded that he had given an introductory speech, for about five minutes, before Professor An’s speech, in which he stated that he had invested US250,000 in MFC:

MR WIDJAJA: And during that introduction, you spoke about the financial freedom you got from joining MFC; is that correct?

THE INTERPRETER (WITNESS): It depends – sorry – it depends on how you defined. I actually – I had financial freedom.

MR WIDJAJA: Okay. I will put it this way. You told the audience that you had invested US$250,000 in MFC: is that correct?

THE INTERPRETER (WITNESS): Correct.

157    Both Ms Chen and Ms Yin gave evidence the respondent had said at the 15 July Seminar that he had invested USD250,000 in March 2016 (just 2016 in the case of Ms Chen) and had made a profit of USD1,000,000. No precise time was given, rather, the evidence was that the representation was made at some time during the seminar.

158    In cross-examination, both the applicant and Ms Yin gave evidence that the respondent had referred to US dollars, and not GRC as contended by the respondent.

159    The transcript of the 15 July Recording records the respondent as stating:

Then I joined the platform in March last year … I have invested a total of 250 ,000 U.S. dollars, 250,000 U.S. dollars. After one year and three months, now I can say that I was a little bit financially free, and now I am freer.

160    There is no mention in the transcript of the respondent gaining a profit of USD1,000,000 on his USD250,000 investment.

161    The transcript of the 16 July Recording, however, records the following exchange between the applicant (Female 1), Ms Chen (Female 2) and the respondent (Male):

[Respondent]:    No, you can’t withdraw money of the barter points now. Since you have opted in, why would you?

[Ms Chen]:    The barter points are like…

[Respondent]:    It is equivalent to killing the chicken. You need to raise the chicken. Raise it well at the beginning!

[Applicant]:    You paid 250,000 to get in, now it’s 1.25 million. But you still cannot withdraw the money, can you?

[Respondent]:    I can. But I withdraw …

162    There was no record in the transcript of the 16 July Recording of the respondent disputing that the “250,000” he had invested in the MFC Platform was now “1.25 million”. It is implausible that the source of the applicant’s knowledge of this alleged increase in the value of the respondent’s initial investment of $250,000 was anyone other than the respondent.

163    I am satisfied that the respondent made the Million Dollar Representation in the course of the 15 July Seminar. The applicant’s evidence that the representation was made is corroborated not only by the evidence of Ms Chen and Ms Yin, but also by the extract from the transcript of the 16 July Recording reproduced above.

Ten Million Dollar Representation

164    Second, the applicant pleads that in the course of the 15 July Seminar the respondent orally represented that:

The respondent’s friend had invested approximately USD190,000 in the [MFC Platform] and had received approximately ten million US dollar [sic] in dividend payment (Ten Million Dollar Representation);

165    The applicant gave evidence that during the 15 July Seminar, the respondent said that he had “a friend” who had invested USD190,000 three years prior, being 2014, and that his investment was now worth USD10,000,000.

166    The respondent’s friend the subject of the Ten Million Dollar Representation is not identified in the representation. The respondent variously referred to a “Xing Wu” and a “Michael Shen” in his evidence in response to the Ten Million Dollar Representation.

167    In his affidavit evidence the respondent denied that he introduced Xing Wu and denied that he stated that Xing Wu had invested USD190,000 three years ago and is now worth USD10,000,000.

168    In cross-examination, the respondent gave the following evidence with respect to “Michael Shen”:

MR WIDJAJA: During your introduction speech on 15 July, you referred to a person named Michael Shen; do you recall that?

THE INTERPRETER (WITNESS): Yes. His name is Michael Shen.

MR WIDJAJA: Yes, and you said that Michael Shen had invested US$190,000 in MFC; is that correct?

THE INTERPRETER (WITNESS): Initially, I said it – initially, I said US$150,000. Then I – after I talked to Professor Anh, then I said 190 – US190,000.

MR WIDJAJA: And you told that to people that were at the seminar.

THE INTERPRETER (WITNESS): Yes. I shared.

MR WIDJAJA: And you also told the people at the seminar that, after two years of investing, Mr Shen’s net worth was the tens of millions.

THE INTERPRETER (WITNESS): How would you define that ten – tens of millions? What I referred to that was tens of millions GRC.

MR WIDJAJA: But you didn’t say “GRC”, did you, Mr Xu?

THE INTERPRETER (WITNESS): Correct.

169    The respondent gave the following evidence in cross-examination with respect to “Xing Wu”:

MR WIDJAJA: I put it to you that you told the attendees that Mr Wu had invested $190,000 in MFC.

THE INTERPRETER (WITNESS): Yes, I did say so.

MR WIDJAJA: And you told the audience that two years later ..... again. You told the audience on that occasion that, two years later, Mr Wu was worth $10 million; is that correct?

THE INTERPRETER (WITNESS): I was referring to GRC, even I didn’t mention that specifically. Everybody as – everybody knew at the GFC all the values would be calculated based on the GRC, rather than the US dollars.

MR WIDJAJA: But it was common for you to refer to US dollars; is that correct?

THE INTERPRETER (WITNESS): 10 million GRC. At the time, our measure or our standard is one GRC equals US$1.

MR WIDJAJA: But you would refer to GRC as US dollars; is that correct?

THE INTERPRETER (WITNESS): That was something – that was – that was something to do – the mechanics system of the company. It was well known. Not only I did know it.

170    The transcript of the 15 July Recording records the following conversation between the respondent and Professor An:

(05:03)     [Michael] … I had a friend two years ago, a truck driver called Michael SHEN. He used to deliver newspapers with me. Two years ago, he invested 125,000 on this platform, 125,000, right? Professor An?

 Professor An:     Yes!

 Michael:    Is it 150,000? That Michael invested 150,000, about 150,000, right?

 Professor An:     It’s 190,000.

Michael:     With an investment of 190,000, two years later, his net worth today is tens of millions.

171    In his closing submissions the respondent appeared to admit that he had made the Ten Million Dollar Representation. I have reproduced the submission within its surrounding context (without alteration of spelling or grammar):

On the 15th of July 2017 the applicant, Ms Chen and the applicant husband attended my warehouse. During this seminar Mr An spoke for about an hr or so, I spoke for the first part of about 3-5 mins approx. to introduce Mr An to the attendees on that day …

A.     I mentioned to my knowledge I had invested USD$250,000 but never mentioned that it was year later was worth $1,000,000USD

B.     A friend had invested USD$190,000 in MFC and the investment worth $10,000,000USD

During this meeting I couldn’t recall back than whether this was being said, as I couldn’t remember what was being said back in 2017, this was why my affidavit dated on the (26/02/2020 CB 226) had made those denied statements. But I didn’t know until when the recording was included with the CB this was how I knew that those voice recording was made or said on that day.

[Emphasis added.]

172    In light of all of the above, I am satisfied that although in the 15 July Recording the respondent does not make specific mention of US dollars, it would have been understood by those to whom he was speaking that he was referring to US190,000 and “tens of millions” of US dollars. The respondent’s friend could plausibly only have been investing monetary amounts, not quantities of GRC, and to describe an investment as now “worth a larger amount” it would be expected that the unit of measurement was the same or equivalent. In any event, in this case the respondent was representing more generally that the exchange rate between GRC and USD was one GRC for one US dollar.

173    Further, it is not fatal that the pleaded representation refers to USD10,000,000 while the transcript of the 15 July Recording records the respondent saying “tens of millions” — the import of the language is the same. The imputation conveyed by the representation, as recorded in the transcript of the 15 July Recording, was that an investment of only USD190,000 had led to a very significant return in the order of a multiple of tens of millions of dollars. In context, making a representation to potential investors about such disproportionate returns on a sum that had been invested, whether it was a multiple of one or a greater multiple of tens of millions of dollars is not material.

174    I am satisfied that the respondent made the Ten Million Dollar Representation in the course of the 15 July Seminar.

Advertising Points Representation

175    Third, the applicant pleads that in the course of the 15 July Seminar the respondent orally represented that:

Individuals could invest in the [MFC Platform] by purchasing Advertising Points (AP). Each point is priced at USD5,000, and can be traded on the MFC platform at a variable rate (Advertising Points Representation);

176    The Advertising Points Representation had two elements. First, Advertising Points could be purchased for USD5,000. Second, the Advertising Points could be traded on the MFC Platform. Although the representation as pleaded refers to Advertising Points being traded on the MFC Platform, both the evidence before the Court revealed and the case proceeded on the basis that it was the GRC associated with the Advertising Points that were alleged to be traded on the MFC Platform.

177    In his affidavit, the respondent denied that he had made the Advertising Points Representation.

178    The applicant gave evidence that during the 15 July Seminar, the respondent said words to the following effect:

The mechanism of the investment scheme is as following: each AP can be purchased for USD5,000 and upon purchase you are entitled to receive 5,000 GRC. The GRC can be traded on MFC Platform at a variable rate between 0.27 to 0.38, and you can make a profit from the difference traded. During the biannual distribution, MFC Platform will announce a payout multiplier, which is between 1.5 to 1.9.

179    Further, the applicant gave evidence that the respondent called Ms Chen on 17 July 2017 on speaker phone and said:

Every AP costs USD5,000, but you will have to pay USD6,000.

180    Ms Chen gave evidence that after the 15 July Seminar the respondent urged her family to purchase AP in order to start investing.

181    The transcript of the 15 July Recording relevantly records the following:

Professor An:     … if you invest 5,000 US dollars today, you will receive two things, one is an advertising spot worth 5,000 US dollars …

…    In other words, you will do these two things today. The first is 5000 dollars of advertising, and the second is that you are given points and you are on the platform.

…

(35:08)    [Professor An] … You can put the trading points of 5,000 US dollars on the platform … Instead, you put 5,000 US dollars of virtual currency on this platform.

…

(37:23)    [Professor An] … You put 5,000 US dollars of trading points on this platform, and you do not touch it, and you do not need to manage anything, it will generate several times more.

182    The 15 July Recording does not include any statement by the respondent to the effect of the Advertising Points Representation. It is apparent from the 15 July Recording, however, that Professor An made the Advertising Points Representation at the 15 July Seminar.

183    The transcript of the 16 July Recording, records the following dialogue between the applicant and the respondent in relation to Advertising Points:

[Applicant]:     35,000… A point is six thousand US dollars, right?

[Respondent]:     US dollars. It’s 6000 US dollars. Yes.

[Applicant]:     Pay six thousand dollars here.

[Respondent]:     Yes, need to pay six thousand dollars here.

[Applicant]:     But it will count as five thousand dollars, right?

[Respondent]:     Yes, it will be regarded as five thousand dollars …

…

[Ms Chen]:     7 points per account?

[Respondent]:     Yes, 7 per account …

184    The transcript of the 16 July Recording also includes multiple references to selling “barter points” and records the following exchange between the applicant, Ms Chen and the respondent:

[Respondent]:    Once the floating barter points move across the middle grid and join your total barter points, you can list a sale order.

[Applicant]:    How to sell?

[Ms Chen]:    Is the listing similar to trading shares? If you want to sell them at 0.28, do you have to wait as it is 0.27 at the moment?

[Respondent]:    Now it is lockdown period, even it gets to 0.38, you still cannot sell them. I think even when it releases all your 400,000 barter points, you still cannot sell. Because you have to wait until next round of bonus distribution at 0.38. You have to wait until the next period of 0,38 delivery. Your 388,800 multiplied by 1.52. When it reaches 0.38, I think it will happen at about the end of September this year or the beginning of October, you will have 590,000 barter points. Amazing, isn’t it! I am not joking.

185    I am satisfied that in context, the references to “barter points” in the transcript are references to the “trading points” referred to by Professor An in the course of the 15 July Seminar. It is also significant that the respondent is recorded as referring to sales of “barter points” between “0.27” and “0.38” which is the range referred to by the applicant in her affidavit evidence for the trading of “GRC”.

186    I accept the evidence of the applicant that the respondent made the Advertising Points Representation, but that he made it in the course of the 16 July Meeting and not during the 15 July Seminar. It is corroborated by Ms Chen and the transcript of the 16 July Recording in the context of the earlier statements attributed to Professor An in the transcript of the 15 July Recording.

187    The case, however, was conducted by the applicant on the basis that the Advertising Representation was made in the course of the 15 July Seminar. The applicant, who had legal representation until shortly prior to oral closing submissions, did not seek to contend that the Advertising Points Representation was made in the course of the 16 July Meeting or seek to amend her statement of claim to make such a contention. Further, bearing in mind that the respondent was throughout the hearing unrepresented I consider that as a matter of procedural fairness the applicant should be held to the case as pleaded.

188    I am not satisfied that the Advertising Points Representation was made by the respondent in the course of the 15 July Seminar, not least because the transcript of the 15 July Recording demonstrates that it was made by Professor An.

Rewards Representation

189    Fourth, the applicant pleads that in the course of the 15 July Seminar the respondent orally represented that:

Purchasing different numbers of AP will entitle the purchaser to a various type of account, i.e. 3 AP will entitle the purchaser to a gold account, and 7 AP will entitle the purchaser to a platinum account and each account will pay out dividends to account holders (Rewards Representation).

190    The applicant submits that in circumstances where “by reason of the respondent’s defence says that a gold package is worth USD$15,000 (i.e., USD$5000 x 3) and a platinum package is worth $35,000 (i.e., $5000 x 7)”, and where the applicant’s evidence should be accepted over the denials of the respondent, the Court should find that the respondent made the Rewards Representation.

191    The applicant gave evidence that towards the end of the 15 July Seminar the respondent summarised the discussion and said words to the effect of:

If you buy 3 AP you are entitled to upgrade your account to Gold Account, and if you buy seven AP you can upgrade to Platinum Account.

192    The translation of the applicant’s handwritten notes that she made at the 15 July Seminar do not refer to Gold and Platinum Accounts but her handwritten notes of the discussions at the 22 July Seminar include a diagram that has three circles next to “Gold” and seven circles next to “Platinum”, with an intermediate entry of four circles next to “Platinum” that I infer was a reference to the acquisition of four more Advertising Points to the three acquired for a Gold Account to reach the seven Advertising Points necessary for a Platinum Account.

193    The applicant gave evidence that during the 22 July Seminar, the respondent stated words to the effect of:

I know of all you present had invested in the MFC Platform, good for you! But in order for you to make even more money, you need to invest more money, to increase your GRC and upgrade your account to gold account and platinum account. If you hold a platinum account you will make much more than if you are only holding a gold account.

194    Ms Chen gave evidence that at the 22 July Seminar the respondent “re-emphasised” several matters including that “The more we invest, the more profit we will make”, and that at the 29 July Seminar, the respondent stated that in order to maximise the return on their individual investment, they should each purchase at least 21 AP, which would entitle them to receive three platinum accounts.

195    In his affidavit evidence, the respondent denied that he had made the Rewards Representation.

196    The transcript of the 16 July Recording discloses the respondent making a number of statements to the applicant concerning platinum accounts, including the following statements:

This account has 11 platinum.

…

Yes, one point one account. My accounts are platinum accounts, and one point is 35,000 yuan. I will open this to show you then it’ll be convincing for everyone! You see, this morning someone added 7 points. It was the person who we ate together yesterday.

…

Let me explain to you one by one. Rewards point accumulation account, it means all bonuses, whether it’s the bonus from the team you have made, or if you form a team there will be bonus too, including after you list the sale orders, all money needs to go back to the Rewards point accumulation account first.

…

A platinum order can sell 35,000 points at a time.

…

When you want to register you will be giving it to me. Say, for example, these seven points equal one platinum point, right? The platinum is now 265,000, it’s 262,500.

…

Don’t cash out, I hope you don’t cash out and continue to do it again three times OK? You will have 46,215, if you add a platinum order, you will have four platinum orders, that is to say, you originally invested 21 points, after you go through the 0.38 distribution, within one month, you make 46,215 US dollars. I hope you don’t cash out the money, and invest all of it again, earn compound interest, and do the three-in-three-out again. Think about it, after the next distribution, you will have seven platinum orders, great!

197    The evidence of the applicant that the respondent made the Rewards Representation during the 15 July Seminar is not corroborated by Ms Chen or the transcript of the 15 July Seminar.

198    The extract of the transcript of the 16 July Seminar, quoted above is broadly consistent with, but not in the terms of, the Rewards Representation.

199    I am satisfied that the applicant’s handwritten notes of the 22 July Seminar, in the context of the applicant’s evidence of the statements made by the respondent at that seminar, and more generally Ms Chen’s evidence and the manner in which the respondent discussed platinum accounts as recorded in the transcript of the 16 July Seminar, establish that the Rewards Representation was made by the respondent in the course of the 22 July Seminar.

200    The Rewards Representation, however, was pleaded as having been made in the course of the 15 July Seminar. As I have indicated above in the context of the Advertising Points Representation, the applicant had legal representation until shortly prior to oral closing submissions. The applicant did not seek to contend that the Rewards Representation was made at some date after the 15 July Seminar or seek to amend to make such a contention. Further, again bearing in mind that the respondent was throughout the hearing unrepresented I consider that as a matter of procedural fairness the applicant should be held to the case as pleaded.

201    I am not satisfied that the Rewards Representation was made by the respondent in the course of the 15 July Seminar.

Promotion Representation

202    Fifth, the applicant pleads that in the course of the 15 July Seminar the respondent orally represented that:

At the time of the seminar, the MFC Platform is holding a promotion where purchasing 4 AP will entitle the purchaser to one Commitment Card and a complimentary 11 gram of World Crypto Gold (WCG) (Promotion Representation).

203    The applicant gave evidence that towards the end of the 15 July Seminar, the respondent summarised the content of the seminar and said words in Mandarin to the following effect:

By the way, there is a promotion right now. If you buy 4 AP, you will receive a complimentary Commitment Card, and with each Commitment Card, you will received 11grams of World Crypto Gold (WCG), which is the same as actual gold, that will appreciate in value overtime.

204    Ms Chen gave evidence that after the 15 July Seminar, the respondent told her that there was a promotion going on and that if the applicant purchased 8 AP she would receive two complimentary commitment cards issued by the MFC platform which would entitle her to receive 22 grams of WCG.

205    This evidence is supported by the transcript of the 16 July Recording in which the following is recorded:

 [Applicant]:        The issue is: tomorrow is 17th. For the commitment award,

 [Ms Chen]:         Do we have to add by the 18th?

 [Respondent]:         Don’t worry about the 18th

 [Applicant]:         We cannot add after the 18th, right?

[Respondent]:     Yes, you can add, and the commitment card is already ready. All is ready. Don’t be afraid. Commit first, add the order later. If you have the commitment card, you will get the maximum benefits.

206    Further, translated messages between the applicant and the respondent record that on 17 July 2017, at 11.29 pm, the applicant sent:

But if I need commitment card, which means WCG, tomorrow is 18 already, what should I do if one commitment card can’t get 11g WCG after tomorrow (7.18)?

207    The respondent gave evidence that it was the applicant who first informed him of:

certain promotions and when they were to expire,

and he

also received information from others and the applicant as to what was happening on a regular basis.

208    I am satisfied that the Promotion Representation was made by the respondent. The 15 July Recording does not purport to record all discussions at the 15 July Seminar. The evidence of the applicant is corroborated by both the evidence of Ms Chen and the transcript of the 16 July Recording. I consider that the respondent’s evidence that the applicant became aware of the alleged promotion constituted by the “commitment card” independently of the respondent is implausible and I do not accept it.

Post 15 July 2017 Seminar Representations

209    The applicant alleges that the respondent made further representations to her after the 15 July Seminar that also induced her to invest in the MFC Platform.

Expiry Representation

210    The applicant pleads that the respondent made the following representation to her:

On or about 16 July 2017, the respondent represented to the applicant that the promotion as pleaded at [5(e)] above [the Promotion Representation] would end on 18 July 2017 (Expiry Representation).

211    The applicant gave evidence that on 17 July 2017, the respondent called Ms Chen, who put the phone on speaker so that the applicant could participate in the conversation. She states that during the phone call, the respondent said words in Mandarin to the effect that:

The promotion is ending tomorrow. If you buy 8 AP now I can apply for 2 Commitment Card for you immediately. In addition, you will get Platinum Account and 22 grams of WCG.

212    Ms Chen gave evidence that on 16 July 2017, the respondent called her and told her that:

The promotion is ending on 18 July 2017! Based on my calculation you should purchase 8 AP to maximise your profit. If you want to seize the opportunity you can pay me USD48,000, or the equivalent of AUD60,000 to me to secure the promotional offer.

213    As outlined at [207] above, the respondent gave evidence that the applicant told him about promotions and their expiry. He further gave evidence that on 17 July 2017, the applicant wrote to him on WeChat, stating:

I want the company promotion which expires on the 18th of July, If you are unable to purchase the promised card which means I will lose 11gram WCG (World Crypto Gold) it was a gold promotion at the time.

214    This appears to be a reference to the message sent by the applicant as reproduced above at [206].

215    There is less specificity than the previous representations surrounding the date on which the Expiry Representation was made — it states “on or about 16 July 2017”.

216    The evidence of the applicant is corroborated by her 17 July 2017 WeChat messages in which she expressly refers to an expiry of the WCG promotion. The transcript of the 15 July Recording records both the respondent and Professor An referring to “World Crypto Gold” but there is no reference to any “expiry” of any WCG promotion. I am satisfied given the content of the 17 July 2017 WeChat messages and the relationship that the applicant had with the respondent that the applicant learnt about the “expiry” of the WCG promotion from the respondent shortly prior to sending the 17 July 2017 WeChat messages.

217    The excerpt from the 16 July Recording produced above at [205] also corroborates the applicant’s evidence that the respondent made the Expiry Representation. The transcript records that when the applicant asked whether she could “add” after the 18th (the alleged date of the expiry of the promotion), the respondent replied: “Yes, you can add”. Importantly, however, the transcript goes on to record the respondent stating “Commit first, add the order later. If you have commitment card, you will get the maximum benefits”.

218    The respondent was thereby representing that the applicant could “add later” but still needed to commit to do so now. This is consistent rather than inconsistent with the Expiry Representation.

219    I am satisfied that the Expiry Representation was made by the respondent on or about 16 July 2017.

Commission Representation

220    The applicant pleads that the following representation was also made by the applicant:

On or about 18 July 2017 the respondent further represented to the applicant that she needs to pay an additional USD1,000 per AP to the applicant as his commission for introducing the respondent to the [MFC Platform] (Commission Representation).

221    In context it is clear that the reference to “the applicant” being paid USD1,000 per AP is an error, and that it should be “the respondent”.

222    The applicant gave evidence that on 17 July 2017, the respondent called Ms Chen, with the phone on speaker, and told the applicant:

 [Respondent]:     Every AP costs USD5,000, but you will have to pay USD6,000.

 [Applicant]:     Why is that?

[Respondent]:    this is how it works. I am your referrer and as your referrer I will benefit from the extra USD1,000. If you are paying in AUD its AUD7,500 per AP.

223    I note the pleaded representation refers to “on or about 18 July 2017”.

224    The respondent expressly denied making this representation. He gave evidence that to his knowledge there was no referral fee, but every person who joins MFC was required to have a member to introduce them to the scheme. This involves providing the existing member’s number as part of the application process, and the existing member receiving 500 Credit Points, which could then be traded on the MFC Platform. The respondent gave evidence that the existing member does not receive any money and is unable to withdraw the Credit Points in cash, but can use them to spend on purchases.

225    The respondent’s denial of the receipt of any referral fee is contradicted by the following exchange recorded in the transcript of the 16 July Recording:

[Applicant]:    You also talked about the sharing?

[Ms Chen]:    That is the reward for sharing, right?

[Respondent]:    Yes, listen to me. You now have 21 points. From the first point I take 500 dollars. I can take because you are under me. When you pay for the first account, I will get 500 dollars from it. This is inevitable. It is impossible that I don’t make any money. Your following accounts will be added by yourself. For the account below, that is to say, you take all the money yourself. Do you know what I mean?

[Applicant]:    Um. So out of my 21 points, you make 500 dollars per point, right?

[Respondent]:    No, only the first point.

226    The Commission Representation as pleaded, however, was to the effect that the applicant had to pay an additional $1,000 by way of commission to the respondent for each Advertising Point that she purchased. The extract from the transcript of the 16 July Recording referred to above records an explanation from the respondent that a “reward sharing” was only payable on the first Advertising Point purchased and only in an amount of $500. The transcript extract might reflect poorly on the respondent’s credit but it does not establish that the Commission Representation was made or otherwise corroborate the applicant’s evidence.

227    In the absence of any evidence that corroborates the evidence of the applicant, including most notably from Ms Chen given her alleged presence on the conference call, the absence of any evidence that there had been any deduction to reflect a commission from the amounts paid by the applicant to the respondent for the investments she made in the MFC Platform, and the respondent’s express denials, I am not satisfied that the Commission Representation was made.

Dividend Representation

228    The applicant pleads that the following representation was made by the respondent shortly prior to her Second Investment on 28 August 2017:

On or about 26 August 2017 the respondent represented to the applicant that the applicant could maximize her dividend payment by purchasing a further 13 AP in addition to the 8 AP held in her account (Dividend Representation).

229    The respondent denies in his defence that he made the Dividend Representation but does not otherwise address the Dividend Representation in his evidence.

230    The applicant gave evidence that in the course of a telephone call with the respondent on or about 20 August 2017 she had a conversation with him in the course of which he said words to the following effect:

Mr and Mrs Lai had purchased a total of 21 AP now. Wendy and Richard did the same thing. You have 8 AP now, buy another 13 more AP and you will have a total of 21 AP.

231    The applicant then gave evidence that after this telephone call and prior to her decision to make a further investment in the MFC Platform on 28 August 2017 she had further telephone conversations with the respondent in the course of which he said words to the following effect:

I guarantee you will make a fortune and you will no longer have to work.

Your principal investment will be repaid within a year.

You can invest with RMB, just deposit your RMB into my Chinese bank account. You can purchase one AP per RMB35,000.

Just buy another 13 AP and you will have 21 AP, and 3 platinum accounts.

232    Both the applicant and Ms Chen also give evidence of representations made between 29 July 2017 and 12 August 2017 by the applicant to similar effect to the Dividend Representation.

233    The applicant gave evidence that at the end of the 29 July Seminar the respondent told the applicant:

You now have 8 AP, which entitles you to one platinum account. I can make arrangements for you to get two more platinum account, all you need to do is purchase 13 more AP.

234    The applicant also gave evidence that the respondent said at the 5 August Seminar:

Based on my calculation, all of you need to invest at least 21 AP to receive three platinum account.

235    The applicant gave evidence that at the 12 August Seminar the respondent continued to urge her to invest in at least 21 AP to receive three platinum accounts, “which will maximise your profit”.

236    Ms Chen gave evidence that:

(a)    at the 29 July Seminar, the respondent stated that in order to maximise the return on the applicant’s investment in the MFC Platform the applicant should purchase at least 21 AP;

(b)    at the 5 August Seminar, the respondent:

urged my mother to invest more money into the investment scheme and purchase more AP until she have [sic] reached 21 AP, so that she can maximise her return at the biannual distribution

(c)    at the12 August Seminar, the respondent

again urged my mother to invest more into our accounts, in order to reach 21 AP and maximise our profit.

237    Ms Zhang gave evidence that she attended the 12 August Seminar with her husband, in which the respondent told them that the biannual distribution was scheduled for September, and that they should:

add our investment to 21 AP as soon as possible in order to maximize our return.

238    The transcript of the 16 July Recording also records the respondent making similar representations to the Dividend Representation, including the following statement in response to a query from the applicant as to the difference between buying 8 AP and 21 AP:

Of course, it’s about the speed, the rate of generating returns. That’s for sure, investing 100 is a totally different kind of thing as oppose to investing 5000 or investing 21 points. They are totally different kind of things. Understand?

239    The transcript also records the following exchange between the respondent and the applicant:

[Respondent]:    Why do I request you to buy 21 points? I know you are capable, because you can get bonus distribution twice in a year. After 30% increase: one is 15%, plus another 15 to 20%. I round it up to say 30% in sums, you will be able to exceed one million barter points. Boss Zhang once said: real wealth freedom and freedom of life start from one million barter points. If you reach one million barter points, one cent increase per point will earn you ten thousand dollars.

[Applicant]:    Um

[Respondent]:    You do nothing for a year, and do not introduce people. OK! You just do three exits and three entries in your three accounts: you can earn 600,000 U.S. dollars a year, that includes your our own bonus and matching bonus, etc., if you do dynamically, just like me, build a team, your bonus is at least 300,000 US dollars.

240    I am satisfied that the respondent made the Dividend Representation in the course of a telephone call with the applicant in the period between 20 and 28 August 2017. I accept the evidence of the applicant that the representation was made by the respondent to her in the course of a telephone call in the period between 20 and 28 August 2017. The probability of him making the Dividend Representation in that period is supported by her making the Second Investment on 28 August 2017 together with the statements that the respondent made to the effect of the Dividend Representation that are recorded in the transcript of the 16 July Recording, the applicant’s evidence of the respondent making earlier representations to similar effect at seminars conducted at his warehouse in the period leading up to 20 August 2017, and the corroborating evidence from Ms Chen and Ms Zhang that such a representation was made by the respondent.

Doubling Investment Representation

241    The final representation relied upon by the applicant is pleaded as follows:

On or about 9 September 2017, applicant attended the respondent’s seminar the respondent orally represented to the applicant that:

a.    The applicant’s current Revenue and Distribution payment, based on her investment, is approximately USD500,000.

b.     The applicant could double her dividend payment if she purchases a further 10 AP before the dividend payment at the end of September (Doubling Investment Representation).

242    The applicant gave evidence that on or about 9 September 2017, Ms Chen dropped the applicant and her husband at the respondent’s warehouse to attend a seminar (9 September 2017 Seminar), at the end of which the respondent told the applicant and her husband:

The payout multiplier is very high, and you can withdraw your profit in case after the distribution. It is worthwhile for you to purchase more AP to maximize the amount of the payout you will receive from the annual distribution.

and

I am not lying to you, now is the best opportunity to invest more into MFC Platform. MFC Platform is literally given out money to you for free. Based on my calculation, you can receive one million dollars if you purchase another 10 AP.

You have 530,000 GRC at the moment, if you purchase another 10 AP you will received a million USD from the distribution in a few day time, isn’t this giving out money to you for free?

243    The translation of the applicant’s handwritten notes of the 9 September Seminar includes the following note– “GRC [arrow pointing to the left] 530 K [arrow pointing to the right] 1.9 times delivery 1 million”.

244    The applicant also gave evidence that after 9 September 2017 the respondent called her multiple times to persuade her to buy another 10 AP:

in order to receive, from upcoming biannual distribution, a total of one million USD.

245    The respondent denied making the Doubling Investment Representation in his defence but did not otherwise respond to the applicant’s evidence concerning the representations that she alleges were made in the course of or shortly after the 9 September 2017 Seminar.

246    I am satisfied that the Doubling Investment Representation was made by the respondent in the course of the 9 September Seminar. The applicant’s evidence is corroborated by her handwritten notes of the seminar and the fact that she purchased a further 10 Advertising Points on 11 September 2017 pursuant to the Third Investment. Her handwritten note refers to “GRC” but as indicated above I am satisfied that “GRC” were represented by the respondent to have a “one to one” correlation with dollars and in context would have been understood to have an underlying monetary value, representing a tangible financial return on an investment, not simply the acquisition of nebulous “GRC”.

Legal Principles

247    The applicant’s statement of claim relevantly alleges that the respondent made representations as to present and future matters that were misleading and deceptive pursuant to s 12DA of the ASIC Act or alternatively s 18 of the ACL.

248    It is convenient to address first s 18 of the ACL, the successor to s 52 of the former Trade Practices Act 1974 (Cth) (TPA).

Section 18 of the ACL

249    Section 18 of the ACL provides that:

(1)    A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

(2)    Nothing in Part 3‑1 (which is about unfair practices) limits by implication subsection (1).

250    In the expression, “in trade or commerce”, both “trade” and “commerce” have been construed to be of the widest import: Re Ku-Ring-Gai Co-Operative Building Society (No 12) Ltd (1978) 22 ALR 621 at 648-9 (Deane J). The conduct in question need not be undertaken with a dominant objective of profit making, but need only bear a trading or commercial character: Australian Securities and Investments Commission v Westpac Banking Corporation (No 2) (2018) 266 FCR 147; [2018] FCA 751 (ASIC v Westpac) at [2169] (Beach J).

251    Further, as the Full Court explained in Taylor v Crossman (No 2) (2012) 199 FCR 363; [2012] FCAFC 11 at [44] (Cowdrey and Flick JJ, Lander J agreeing at [7]):

the person who makes the representation need not be engaged in trade or commerce at the actual time when the representations are made. Rather the inquiry is whether the representations were made in such context and in such circumstances as to render them statements having a commercial character.

252    Whether or not conduct is misleading or deceptive, or is likely to mislead or deceive, is to be determined by having regard to the respondent’s conduct as a whole, viewed in the context of all relevant facts and circumstances at the time the conduct takes place: see Google Inc v Australian Competition and Consumer Commission (2013) 249 CLR 435; [2013] HCA 1 at [6]-[15] (French CJ, Crennan and Kiefel JJ); Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd (2014) 317 ALR 73; [2014] FCA 634 (Coles) at [38] (Allsop CJ); Unilever Australia Ltd v Beiersdorf Australia Ltd [2018] FCA 2076 at [16] (Wigney J); Australian Competition and Consumer Commission v Employsure Pty Ltd (2021) 394 LR 205; [2021] FCAFC 142 at [92] (Rares, Murphy and Abraham JJ); Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 (Taco Bell) at 202 (Deane and Fitzgerald JJ).

253    The phrase “likely to mislead or deceive”, does not require proof that anyone was actually misled or deceived — the test is objective: Hornsby Building Information Centre Proprietary Limited v Sydney Building Information Centre Limited (1978) 140 CLR 216 at 228 (Stephen J, with whom Barwick CJ and Jacobs J agreed) and 234 (Murphy J); Parkdale Custom Built Furniture Proprietary Limited v Puxu Proprietary Limited (1982) 149 CLR 191; [1982] HCA 44 (Puxu) at 198 (Gibbs CJ); Taco Bell at 202 (Deane and Fitzgerald JJ).

254    Conduct is likely to mislead or deceive if there is a real or not remote possibility of a person being misled: Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 at 87 (Bowen CJ, Lockhart and Fitzgerald JJ); Domain Names Australia Pty Ltd v .au Domain Administration Ltd (2004) 139 FCR 215; [2004] FCAFC 247 at [17] (Wilcox, Heerey and RD Nicholson JJ). It is not sufficient if the conduct merely causes confusion: Puxu at 198 (Gibbs CJ) and 209-10 (Mason J); Taco Bell at 202 (Deane and Fitzgerald JJ); Campomar Sociedad, Limitada v Nike International Ltd (2000) 202 CLR 45; [2000] HCA 12 at [106] (Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ).

255    When considering “misleading and deceptive” conduct, the central question is whether the impugned conduct, viewed as a whole, has a sufficient tendency to lead a person exposed to the conduct into error. That is, to form an erroneous assumption or conclusion about some fact or matter: Australian Securities and Investments Commission v Dover Financial Advisers Pty Ltd (2019) 140 ACSR 561; [2019] FCA 1932 (Dover) at [98] (O’Bryan J).

256    Where it is an individual who alleges misleading and deceptive conduct, that conduct should be assessed in respect of that individual, including the factual circumstances surrounding the conduct: Butcher v Lachlan Elder Realty Pty Limited (2004) 218 CLR 592; [2004] HCA 60 (Butcher) at [37] (Gleeson CJ, Hayne and Heydon JJ).

257    The ACL also provides:

4 Misleading representation with respect to future matters

 (1)    If:

(a)     a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act); and

(b)    the person does not have reasonable grounds for making the representation;

the representation is taken, for the purposes of this Schedule, to be misleading.

(2)    For the purposes of applying subsection (1) in relation to a proceeding concerning a representation made with respect to a future matter by:

   (a)    a party to the proceeding; or

   (b)     any other person;

    the party or other person is taken not to have had reasonable grounds for making the representation, unless evidence is adduced to the contrary.

(3)     To avoid doubt, subsection (2) does not:

(a)     have the effect that, merely because such evidence to the contrary is adduced, the person who made the representation is taken to have had reasonable grounds for making the representation; or

(b)     have the effect of placing on any person an onus of proving that the person who made the representation had reasonable grounds for making the representation.

(4)    Subsection (1) does not limit by implication the meaning of a reference in this Schedule to:

   (a)     a misleading representation; or

   (b)     a representation that is misleading in a material particular; or

   (c)    conduct that is misleading or is likely or liable to mislead;

    and, in particular, does not imply that a representation that a person makes with respect to any future matter is not misleading merely because the person has reasonable grounds for making the representation.

258    In relation to damages, s 236 of the ACL states that:

(1)     If:

(a)     a person (the claimant) suffers loss or damage because of the conduct of another person; and

(b)    the conduct contravene a provision of Chapter 2 or 3;

the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention.

(2)     An action under subsection (1) may be commenced at any time within 6 years after the day on which the cause of action that relates to the conduct accrued.

Section 12DA – Misleading or deceptive conduct

259    Section 12DA of the ASIC Act relevantly provides that:

(1)    A person must not, in trade or commerce, engage in conduct in relation to financial services that is misleading or deceptive or is likely to mislead or deceive.

…

(2)     Nothing in sections 12DB to 12DN limits by implication the generality of subsection (1).

260    In addition to using the language of “in trade or commerce”, s 12DA also includes the expressions “in relation to” and “financial services”.

261    An equivalent expression is found in s 1041H of the Corporations Act 2001 (Cth) (Corporations Act), namely “in relation to a financial product or a financial service”.

262    The expression in relation to financial services in s 12DA has been stated to be “extremely wide” and an indirect or less than substantial connection may be sufficient: ASIC v Westpac at [2216] (Beach J).

263    The following statements, notwithstanding the breadth of “in relation”, that have been made in the context of s 1041H of the Corporations Act are equally applicable to s 12DA of the ASIC Act. There must be some ostensible connection or relationship on the face of the conduct: Australian Securities and Investments Commission v Citrofresh International Ltd (2007) 164 FCR 333; [2007] FCA 1873 at [73] (Goldberg J). To “engage in conduct”, there must be some act on the part of the relevant person. This may include the act of an agent or the act of a person which should, as a matter of law, be attributed to the person: Australian Securities and Investments Commission v Narain (2008) 169 FCR 211; [2008] FCAFC 120 at [19] (Finkelstein J).

264    For the purposes of s 12DA of the ASIC Act, the concept of engaging in conduct in relation to financial services is broad.

265    Section 12BAB of the ASIC Act, applicable to the entirety of Pt 2, Div 2 of the ASIC Act, relevantly provides a definition of “financial service”:

12BAB Meaning of financial service

When does a person provide a financial service?

(1)     For the purposes of this Division, subject to paragraph (2)(b), a person provides a financial service if they:

(a)     provide financial product advice (see subsection (5)); or

(b)     deal in a financial product (see subsection (7)); or

…

(1AA)    Without limiting subsection (1), for the purposes of this Divisions, a financial product is a financial service.

…

Meaning of financial product advice

(5)     For the purposes of this section, financial product advice means a recommendation or a statement of opinion, or a report of either of those things, that:

(a)     is intended to influence a person or persons in making a decision in relation to a particular financial product or class of financial products, or an interest in a particular financial product or class of financial products; or

(b)    could reasonably be regarded as being intended to have such an influence;

…

Meaning of dealing

(7)     For the purposes of this section, the following conduct constitutes dealing in a financial product:

(a)     applying for or acquiring a financial product;

(b)     issuing a financial product;

(c)     in relation to securities or interests in managed investment schemes—underwriting the securities or interests;

(d)     varying a financial product;

(e)     disposing of a financial product.

…

(8)     Arranging for a person to engage in conduct referred to in subsection (7) is also dealing in a financial product, unless the actions concerned amount to providing financial product advice.

(9)    A person is taken not to deal in a financial product if the person deals in the product on their own behalf, unless:

(a)     the person is an issuer of financial products; and

(b)     the dealing is in relation to one or more of those products.

266    A “financial product” is defined in s 12BAA of the ASIC Act in the following terms:

12BAA Definition of financial product

General definition of financial product

(1)     Subject to subsection (8), for the purposes of this Division, a financial product is a facility through which, or through the acquisition of which, a person does one or more of the following:

(a)     makes a financial investment (see subsection (4));

  …

Meaning of makes a financial investment

(4)     For the purposes of this section, a person (the investor) makes a financial investment if:

(a)     the investor gives money or money’s worth (the contribution) to another person and any of the following apply:

(i)     the other person uses the contribution to generate a financial return, or other benefit, for the investor;

(ii)     the investor intends that the other person will use the contribution to generate a financial return, or other benefit, for the investor (even if no return or benefit is in fact generated);

(iii)    the other person intends that the contribution will be used to generate a financial return, or other benefit, for the investor; and

(b)     the investor has no day‑to‑day control over the use of the contribution to generate the return or benefit.

267    By reason of s 12BB of the ASIC Act, s 12DA also applies to representations with respect to future matters.

268    Section 12BB of the ASIC Act provides:

(1) If:

(a)     a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act); and

(b)     the person does not have reasonable grounds for making the representation;

the representation is taken, for the purposes of Subdivision D (sections 12DA to 12DN), to be misleading.

(2)     For the purposes of applying subsection (1) in relation to a proceeding concerning a representation made with respect to a future matter by:

  (a)     a party to the proceeding; or

  (b)     any other person;

the party or other person is taken not to have had reasonable grounds for making the representation, unless evidence is adduced to the contrary.

(3)     To avoid doubt, subsection (2) does not:

(a)     have the effect that, merely because such evidence to the contrary is adduced, the person who made the representation is taken to have had reasonable grounds for making the representation; or

(b)     have the effect of placing on any person an onus of proving that the person who made the representation had reasonable grounds for making the representation.

(4)     Subsection (1) does not by implication limit the meaning of a reference in this Division to:

(a)     a misleading representation; or

(b)     a representation that is misleading in a material particular; or

(c)     conduct that is misleading or is likely or liable to mislead;

and, in particular, does not imply that a representation that a person makes with respect to any future matter is not misleading merely because the person has reasonable grounds for making the representation.

269    Section 12GF of the ASIC Act provides, in relation to damages:

(1)     A person who suffers loss or damage by conduct of another person that contravenes a provision of Subdivision C (sections 12CA to 12CC), Subdivision D (sections 12DA to 12DN) or Subdivision DA (sections 12DO to 12DZA) may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.

(1A)     Subsection (1) has effect subject to section 12GNA

…

(1B)    Despite subsection (1), if:

(a)    a person (the claimant) makes a claim under subsection (1) in relation to:

  (i)    economic loss; or

  (ii)    damage to property;

caused by conduct of another person (the defendant) that was done in contravention of section 12DA; and

(b)    the claimant suffered the loss or damage:

(i)    as a result partly of the claimant’s failure to take reasonable care; and

(ii)    as a result partly of the conduct referred to in paragraph (a); and

(c)    the defendant:

  (i)    did not intend to cause the loss or damage; and

  (ii)    did not fraudulently cause the loss or damage;

the damages that the claimant may recover in relation to the loss or damage are to be reduced to the extent to which the court thinks just and equitable having regard to the claimant’s share in the responsibility for the loss or damage.

…

(2)    An action under subsection (1) may be commenced within 6 years after the day on which the cause of action that relates to the conduct accrued.

Section 12DB – False or misleading representations

270    Section 12DB of the ASIC Act relevantly provides:

(1)     A person must not, in trade or commerce, in connection with the supply or possible supply of financial services, or in connection with the promotion by any means of the supply or use of financial services:

(a)     make a false or misleading representation that services are of a particular standard, quality, value or grade; or

(b)     make a false or misleading representation that a particular person has agreed to acquire services; or

…

(e)     make a false or misleading representation that services have sponsorship, approval, performance characteristics, uses or benefits;…

   …

Note:    Failure to comply with this subsection is an offence (see section 12GB).

271    The expression “financial services” in s 12DB carries the same meaning as discussed above in relation to s 12DA (at [264]): see Australian Securities and Investments Commissions v MLC Nominees Pty Ltd [2020] FCA 1306 (ASIC v MLC Nominees) at [46] (Yates J).

272    It can be seen that s 12DA prohibits conduct that is misleading or deceptive or likely to mislead or deceive, whereas s 12DB prohibits the making of a false or misleading representation. Conduct that contravenes s 12DA may involve, but need not involve, the making of a false or misleading representation: Dover at [94] (O’Bryan J), citing Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] 73 ASCR 1 at [102] (Gummow, Hayne, Heydon and Kiefel JJ) (in respect of analogous provisions in the TPA) and referring with approval to Butcher at [103] (McHugh J).

273    Moreover, although ss 12DA and 12DB are different in form, the prohibitions are similar in nature. It has been said that there is no material difference in the expressions “false or misleading” and “misleading and deceptive” in terms of their legal application: Dover at [95], citing Australian Competition and Consumer Commission v Dukemaster Pty Ltd [2009] FCA 682 at [14] (Gordon J) (with respect to analogous provisions of the TPA); Coles at [40] (Allsop CJ) and Comité Interprofessionnel du Vin de Champagne v Powell (2015) 330 ALR 67; [2015] FCA 1110 at [170] (Beach J); see also ASIC v MLC Nominees at [47] (Yates J).

274    As explained above at [255], a claim for misleading or deceptive conduct under s 12DA essentially involves an enquiry into whether the conduct had a tendency to lead a person into error. Section 12DB narrows the scope of s 12DA by specifying a kind of misleading or deceptive conduct which involves a pecuniary penalty (whereas penalties cannot be imposed for a contravention of s 12DA).

275    It is not apparent why the s 12DB claim was pleaded in the alternative to s 12DA, given that if the applicant does not establish a claim under s 12DA, then she cannot succeed under s 12DB.

276    I pause to note here that at [31] of the statement of claim, in respect of the claim under s 12DB, the applicant states that:

In providing financial product advice to the Investment Scheme, the Respondent was providing a financial service within the meaning of s766A(1)(a) of the Corporations Act 2001 (CTH).

277    Section 766A(1)(a) of the Corporations Act provides a definition of financial services, and subsequently of financial product advice, that is largely similar to s 12BAB in the ASIC Act, albeit that s 766B defines financial product advice, inter alia, as either personal advice or general advice, which is not present in s 12BAB.

278    Section 5 of the ASIC Act specifically states that “financial service”:

(a)     in Division 2 of Part 2—has the meaning given by section 12BAB; and

(b)     in the other provisions of this Act—has the same meaning as it has in Chapter 7 of the Corporations Act.

279    Both ss 12DA and 12DB fall within Division 2 of Part 2 of the ASIC Act. It is therefore clear that s 766A of the Corporations Act is not relevant to the claims brought in these proceedings, and that the relevant definition is that stated in s 12BAB, as discussed above.

Issues for determination

280    Having found that each of the pleaded representations (other than the Advertising Points Representation, the Rewards Representation and the Commission Representation) was made by the respondent on the dates alleged (Representations) it is then necessary to address the following issues, with respect to the causes of action indicated in brackets after each issue, in order to determine whether the applicant has succeeded in the causes of action that she advances against the respondent:

(a)    were the Representations made in trade or commerce (s 12DA, s12DB, s 18)?

(b)    was the MFC Platform a financial product (s 12DA, s12DB)?

(c)    was the making of the Representations conduct in relation to the provision of financial services (s 12DA, s12DB)?

(d)    were the Representations misleading or deceptive (s 12DA, s 18)?

(e)    were the Representations false or misleading representations that the MFC Platform was of a particular standard, quality, value or grade or that it had sponsorship, approval, performance characteristics, uses or benefits (s 12DB)?

(f)    did the Representations materially contribute to the loss suffered by the applicant (s 12DA, s12DB, s 18)?

Were the Representations made in trade or commerce?

281    I am satisfied that for the purposes of s 12DA of the ASIC Act and s 18 of the ACL each of the Representations was made in trade or commerce. Each of the Representations was made in relation to a financial trading platform into which money was invested, and the context was such to render them as having a commercial character.

282    The MFC Platform was represented to be a trading platform that provided investors with the opportunity to obtain significant financial returns and benefits. The applicant made the investments on the MFC Platform with the intention of generating significant profits for herself.

Was the MFC Platform a financial product?

283    I am satisfied that the MFC Platform was a financial product for the purpose of s 12BAA of the ASIC Act.

284    The MFC Platform was a facility through which persons, including the applicant, gave money to the respondent by transferring money into his bank account, for the purpose of acquiring what were variously represented to be Advertising Points, trading points described as GRC1 and GRC2 (Company GRC), World Crypto Gold and RWP Credits.

285    The applicant and other investors intended that the respondent, as a person promoting and offering investment opportunities on the MFC Platform, would use the money to generate a financial return and other benefits for them.

286    At the same time, I am satisfied that the respondent believed, mistakenly, that he was using the contributions he received to generate a financial return and other benefits for the applicant and other persons by using the money to purchase “Advertising Points” on behalf of the applicant and other members of his Eagle Team.

Was the making of the Representations conduct in relation to financial services?

287    I am satisfied that the conduct of the respondent in making the Representations was conduct that amounted to the provision of financial product advice and thereby constituted the provision of a financial service for the purposes of s 12BAB(1)(a) of the ASIC Act.

288    Given the context in which the respondent made each of the Representations to the applicant and their content I am satisfied that each was made for the purpose of encouraging her to make substantial investments on the MFC Platform. The Representations can therefore be characterised as recommendations or statements of opinion that were intended to influence the applicant to make a decision in relation to a particular financial product, namely an investment on the MFC Platform, or could reasonably be regarded as being intended to have such an influence.

289    I am also satisfied that the conduct of the respondent amounted to a dealing in a financial product falling within s 12BAB(1)(b) of the ASIC Act. By his conduct in receiving money from the applicant into his own personal bank accounts and then transferring those funds to make investments on the MFC Platform by acquiring Advertising Points and transferring RWP credits to her account he was arranging for a person to apply for or acquire a financial product, being an investment on the MFC Platform.

Were the Representations misleading or deceptive?

290    Any assessment of whether the Representations were misleading and deceptive needs to have due regard to the context in which they were made and all the surrounding facts and circumstances. Most importantly, it is necessary to have regard to the fact that the Representations concerned the alleged operation and returns that could be achieved from making investments on the MFC Platform.

291    I am satisfied that there was never any plausible or credible basis to expect that any investment that was made on the MFC Platform would produce any material tangible returns or benefits.

292    The respondent may well have been seduced into believing that the MFC Platform was a legitimate investment scheme at the time that he made each of the Representations; the enthusiasm with which he promoted its benefits, most notably in the transcript of the 16 July Recording, would otherwise be difficult to explain.

293    The impossibility of obtaining any returns on the MFC Platform, however, was finally recognised by the respondent, on his own admission, by the end of 2018, as the following extract from the transcript of his evidence starkly demonstrates:

HIS HONOUR: Yes. But you’re turning $1000 into $3000 in 30 days. Where did the money come from to enable that to happen, Mr Xu, as you understood it?

THE INTERPRETER (WITNESS): I – I really don’t know how they worked or how they calculated, but that was the internal system operated by the members of the company and which the operation of the company started from 2009 to now.

HIS HONOUR: It’s not operating anymore, is it, Mr Xu?

THE INTERPRETER (WITNESS): It has been operating.

HIS HONOUR: So you are still referring people to MFC, are you, Mr Xu?

THE INTERPRETER (WITNESS): No.

HIS HONOUR: Why not?

THE INTERPRETER (WITNESS): I even lost my own money. How – how they – how can I refer to the others?

HIS HONOUR: So when did you realise that it didn’t work as you understood it worked, Mr Xu?

THE INTERPRETER (WITNESS): It was at the end of 2018. You cannot – you cannot cash out within the system, and all the members globally cannot cash out.

294    Equally poignant were the following acknowledgements made by the respondent at the conclusion of his written closing submissions:

Thru this investment I also lost a large sum of money, lost my friends and most importantly I lost my own freight forwarding business which myself and partner had worked hard for thru those years. This had led me to great depression.

I, like the applicant are in the same boat, I also invested a large amount of money into this platform, I, like the applicant only follow the instructions Rules & Policy from the company thru there notification and news update. All information and promotion were regulated by the company of MFC Platform.

When the distribution had generated I, like the applicant learned that the more accounts we had the more profits and benefits we get. I speaking personally I guess thru greed , that when we had the opportunity to withdraw cash I didn’t take that step to do so, but instead I created more accounts as well based on the understanding, learning & sharing of companies information.

295    It is next necessary to turn to the particular circumstances in which the Representations were made by the respondent.

296    The Representations were made in a series of seminars and meetings conducted and organised by the respondent for members of his Eagle Team to which he invited the applicant and other potential investors. He actively promoted a sense of camaraderie and exclusivity to the applicant through her membership of his Eagle Team. She understandably became principally dependent on him and made her investments on the MFC Platform directly with him by giving him cash or transferring funds into his personal bank accounts. She may have at times relied on the alleged technical expertise of Professor An in establishing accounts on the MFC Platform and listened to presentations given about the MFC Platform by other people, but it was to the respondent that she turned for making her investment decisions.

297    The Representations fall into two categories.

298    First, representations as to matters that were alleged to have occurred. The Million Dollar Representation and the Ten Million Dollar Representation fall into this category.

299    The respondent acknowledged that he did not receive a $1,000,000 return on his investment of $250,000 on the MFC Platform and the claim that a friend of the respondent had invested US$190,000 and received US$10 million in dividend payments was fanciful. As the respondent submitted “it won’t make any sense” to suggest that someone could invest $190,000 and gain US$10 million.

300    It is therefore evident that that both the Million Dollar Representation and the Ten Million Dollar Representation were false and, therefore, by making them the respondent engaged in conduct that was misleading or deceptive.

301    Second, representations in respect of matters that have not yet occurred. Each of the Representations, other than the Million Dollar Representation and the Ten Million Dollar Representation fall into this category (Future Representations).

302    Each of the Future Representations concerned various aspects of the alleged operation of the MFC Platform and the rewards, benefits or returns that could be obtained from investments placed on the platform.

303    The respondent did not adduce any evidence from which any rational inference could be drawn that he had reasonable grounds to make each of the Dividend Representation (maximising dividend payments) and the Doubling Investment Representation (doubling dividend payments). There was simply no probative evidence adduced in the proceedings that at the time that the representations were made, any investor in the MFC Platform had received dividend payments, let alone any maximising or doubling of dividend payments by purchasing additional Advertising Points.

304    Nor did the respondent adduce any evidence from which any rational inference could be drawn that he had reasonable grounds to make either the Promotion Representation (complimentary 11 grams of World Crypto Gold) or the Expiry Representation. There was no probative evidence adduced in the proceedings that at the time that the representations were made, any investor had received 11 grams of any “World Crypto Gold” product or that any alleged opportunity to make an investment on the MFC Platform was subject to any time constraint.

Were the Representations false or misleading?

305    I am satisfied for the reasons outlined above in relation to whether the Representations were misleading or deceptive that each of the Representations was also a false or misleading representation as to at least one or more of the quality, value, performance characteristics, uses and benefits of the MFC Platform.

Did the Representations materially contribute to the loss suffered by the applicant?

306    The applicant gave evidence that she made the decision to invest “based on his representations” at the 15 July Seminar, and due to the upcoming promotion the subject of the Promotion Representation, she made the Second and Third Investments because in the light of his “guarantees and promises” she was “persuaded by Michael” to do so.

307    The respondent submits that his conduct could not relevantly have contributed to any loss suffered by the applicant because his Eagle Team was in substance only a WeChat message group, he had little knowledge of the MFC Platform because he was new to the platform and he was only a fellow investor like the applicant. As noted above, I do not accept these submissions.

308    The respondent also variously submits that the applicant did not rely on the Representations in making her investments on the MFC Platform but rather relied on the technical assistance of Professor An, her own financial knowledge and the information given in presentations about the MFC Platform by Ms Khoo Eechoo, Professor An and others at his warehouse, as well as the MFC M Academy Presentation, in making her decisions to invest on the MFC Platform.

309    I acknowledge that the information that the applicant received on the operation of the MFC Platform was not limited to representations made to her by the respondent but I am satisfied, given the content of the transcript of the 16 July Recording, that the relatively large number of seminars and meetings she was invited to by the respondent, the novelty and complexity of the MFC Platform, her membership of and the manner in which the respondent operated his Eagle Team, her provision of funds directly to the respondent for investment on the MFC Platform, her relative financial naivety as evident, not least, from the questions that she asked that are recorded in the transcript of the 16 July Meeting and her affidavit evidence, that she principally relied on the respondent, and in particular, the Representations, in making her investments on the MFC Platform.

310    More specifically I find that:

(a)    each of the 15 July Seminar Representations (other than the Advertising Points Representation and the Rewards Representation) and the Promotion Representation materially contributed to the applicant’s decision to make the First Investment;

(b)    each of the 15 July Seminar Representations (other than the Advertising Points Representation and the Rewards Representation), the Promotions Representation and the Expiry Representation materially contributed to the applicant’s decision to make the Second Investment; and

(c)    each of the Representations materially contributed to the applicant’s decision to make the Third Investment.

Conclusion

311    I am satisfied that the applicant has established that in making each of the Representations the respondent, in trade or commerce:

(a)    engaged in conduct in relation to financial services that was misleading or deceptive or was likely to mislead or deceive in contravention of s 12DA of the ASIC Act and the applicant has suffered loss or damage by reason of that conduct of the respondent and the applicant is thereby entitled to damages pursuant to s 12GF of the ASIC Act;

(b)    made false or misleading representations that financial services were of a particular quality or value and had particular performance characteristics and benefits in contravention of s 12DB of the ASIC Act and the applicant has suffered loss or damage by reason of the respondent making those representations, and the applicant is thereby entitled to damages pursuant to s 12GF of the ASIC Act; and

(c)    engaged in conduct that is misleading or deceptive or is likely to mislead or deceive in contravention of s 18 of the ACL and the applicant has suffered loss or damage because of the conduct of the respondent and the applicant is thereby entitled to damages pursuant to s 236 of the ACL.

Damages

312    The applicant seeks damages for the loss of her investments on the MFC Platform, together with interest.

313    The First Investment was in an amount of $60,000. The Australian dollar equivalent of the RMB amounts transferred by the applicant into the respondent’s bank account, using the exchange rates at the dates of the respective investments identified in the affidavit of Mr Xia, were $86,303.37 for the Second Investment (RMB455,000/5.2721) and $62,013.43 for the Third Investment (RMB325,000/5.2408). The Australian dollar equivalent therefore of the total investments made by the applicant, calculated as at the date of each investment, was $208,316.80.

314    Section 51A of the Federal Court of Australia Act 1976 (Cth) relevantly provides that the Court shall on the application of a party in proceedings for the recovery of damages, unless good cause is shown to the contrary, include in the sum for which damages is awarded a sum for interest at the rates prescribed in the Federal Court Rules 2011 (Cth) if it thinks fit for the whole or any part of the period between the date when the cause of action arose and the date on which judgment is entered.

315    The timing and nature of ascertaining loss and damage is necessarily a fact-specific inquiry: Harvard Nominees Pty Ltd v Tiller and Others (2020) 282 FCR 530; [2020] FCAFC 229 at [73] (Lee, Anastassiou and Stewart JJ). As their Honours explained at [73]-[76], in reconciling the statements of principle in Wardley Australia Ltd v The State of Western Australia (1992) 175 CLR 514 at 527-32 (Mason CJ, Dawson, Gaudron and McHugh JJ) and Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 42-5 (Gummow J, with whom Black CJ and Cooper J agreed), a person who in is induced by a misrepresentation to enter into an agreement to his or her disadvantage suffers detriment but this “does not inevitably mean” that they have suffered loss or damage at that stage. If loss or damage is dependent on the fulfilment of a contingency then no loss or damage is suffered until the contingency has arisen, but if no contingency is relied upon loss or damage may be suffered upon entry into an agreement.

316    I am satisfied that the applicant suffered damage at the time she made each of her investments on the MFC Platform. She agreed to provide funds to the respondent on each occasion to invest on the MFC Platform, and by transferring those funds to the respondent by banknotes or electronic transfer to an investment platform with no plausible prospect of any recovery or return she immediately suffered loss and damage.

317    In the present case there was no relevant contingency. The MFC Platform was not a credible or legitimate investment scheme that failed because of speculative investments or adverse and unexpected events. Once the money had been provided to the respondent for investment on the MFC Platform it had, for all practical purposes, been lost.

318    It follows that the causes of action advanced by the applicant arose on the date on which she made each of her investments on the MFC Platform.

319    I am satisfied that the applicant made clear in her originating application, statement of claim and submissions that she sought interest on the amounts she sought by way of damages. I am also satisfied that she should be compensated by award of interest for the loss of her ability to use the funds that she invested in the MFC Platform between the dates of each investment and the date of entry of judgment and it has not been shown that there is any good cause to the contrary.

320    Given that both parties are now self-represented litigants I have calculated the pre-judgment interest to be included in the judgment by reference to the rates agreed upon from time to time by the Discount and Interest Rate Harmonisation Committee as established by the Council of Chief Justices of Australia and New Zealand, as explained in the Interest on Judgments Practice Note (GPN-INT) dated 18 September 2017. Using those rates, as varied during each period, the pre-judgment interest payable on each of the three investments made by the applicant from the date of each investment to the entry of judgment is $47,709.15 (comprising $14,042.64 for the First Investment, $19,666.59 for the Second Investment and $13,999.92 for the Third Investment).

Disposition

321    The respondent is to pay damages to the applicant in the amount of $208,316.80 together with pre-judgment interest of $47,709.15.

322    The respondent is also to pay the applicant’s costs of the proceedings, as taxed or agreed.

Associate:    

Dated:    6 May 2022