Zheng v Sui [2010] NSWSC 687 (18 June 2010)

Last Updated: 22 July 2010

NEW SOUTH WALES SUPREME COURT

CITATION:
Zheng v Sui [2010] NSWSC 687


JURISDICTION:
Equity Division

FILE NUMBER(S):
2008/282035

HEARING DATE(S):
1-5 February, 13-14 and 16 April 2010

JUDGMENT DATE:
18 June 2010

PARTIES:
Tong Da Zheng (plaintiff)
Jun Sui (first defendant)
Australian Migration and Education Group Pty Limited (second defendant)
Jing Yang (third defendant)
Vision Investments Holding Pty Limited (fourth defendant)

JUDGMENT OF:
Rein J

LOWER COURT JURISDICTION:
Not Applicable

LOWER COURT FILE NUMBER(S):
Not Applicable

LOWER COURT JUDICIAL OFFICER:
Not Applicable



COUNSEL:
P D Doyle Gray (plaintiff)
First defendant in person
R J Moyle (third defendant)

SOLICITORS:
Atkinson Vinden (plaintiff)
Neil Lyon (third defendant)


CATCHWORDS:
CONTRACTS - general contractual principles - claim for repayment of plaintiff's money under share agreements - harsh and unconscionable contracts and statutory remedies - alternative claim under Contracts Review Act 1980 (NSW) - where alleged repudiation of share agreements by plaintiff - where alleged lack of clean hands on the part of plaintiff - where guarantee by first defendant to repay money not repaid by third defendant

LEGISLATION CITED:
Contracts Review Act 1980 (NSW)
Migration Act 1958 (Cth)

CATEGORY:
Principal judgment

CASES CITED:
Collins v Parker [1984] NSW ConvR 55-212
Coombs v Bahama Palm Trading Pty Ltd [1991] ASC 56-097
DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423
Esanda Ltd v Burgess [1984] 2 NSWLR 139
Sharrment Pty Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 49

TEXTS CITED:
J W Carter, Breach of Contract (2nd ed., 1991), Law Book Company, Sydney
R P Megher, W M C Gummow and M J Leeming, Equity: Doctrines and Remedies (4th ed, 2002), LexisNexis Butterworths, Sydney

DECISION:
1. Declare that upon provision by the plaintiff of the executed share transfers of all of the plaintiff's shares in the fourth defendant, together with all of his share certificates issued by the fourth defendant, to the solicitor for the third defendant, the third defendant is to pay to the plaintiff the sum of $216,666.00 within 7 days, failing which judgment to be entered forthwith for the plaintiff:
(a) against the third defendant for $216,666.00; and
(b) against the first defendant for $200,000.00
2. First and third defendants to pay the plaintiff's costs as agreed or assessed on the
indemnity basis.
3. A copy of the reasons for judgment, the transcript, the affidavit of Mr Sui dated 16 July 2009 and the orders made today are to be forwarded by the Registrar in Equity to the Chief Executive Officer of the Migration Agents Registration Authority (MARA).
4. Exhibits to be retained for 12 months and thereafter returned to the parties.



JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION


Rein J


Date of Hearing: 1-5 February, 13-14 and 16 April 2010
Date of Judgment: 18 June 2010

2008/282035 Tong Da Zheng v Jun Sui and ors

JUDGMENT

REIN J:

Introduction

1 Mr Zheng, the plaintiff, is a Chinese national who wished to migrate to Australia. The first defendant, Mr Sui (and/or the second defendant, Australian Migration and Education Group Pty Limited (“AMEG”), a company controlled by Mr Sui), was appointed as a migration agent for the purpose of Mr Zheng obtaining permanent residency. This was to be achieved by Mr Zheng and his family first obtaining what is known as a “163 visa” and then an “892 visa”, the latter being available to migrants with business interests.

2 On 16 May 2008, Mr Zheng entered into a written agreement with the third defendant, Ms Yang, in respect of shares in the fourth defendant, Vision Investments Holding Pty Limited (“Vision”), which at that point in time Ms Yang controlled as the sole shareholder, sole director and secretary. Pursuant to that agreement (“the first share agreement”), Ms Yang agreed to Mr Zheng receiving 49 per cent of the shares in Vision in return for a payment of $200,000 and a promise that he would pay for certain expenses of the company. Subsequently, a further oral agreement (“the second share agreement”) was reached whereby Mr Zheng would receive a further two per cent of the shares, so that he held 51 per cent of the shares in Vision, for a further payment of $16,666. Vision owned and operated a petrol station business at 338 Princes Highway, Blakehurst, operated as “Blakehurst United” (“the petrol station”), which Mr Zheng had been shown by Mr Sui and about which Ms Yang had given Mr Zheng some information.

3 There is no dispute that the total amount due under the contract from Mr Zheng, viz $216,666, was paid by Mr Zheng on or within a short time of the share agreements having been entered into. The Australian Securities and Investments Commission (“ASIC”) search of Vision shows that 104 Class A shares were issued to Mr Zheng in July 2008 and that Ms Yang owned 100 ordinary shares. The Class A shares gave Mr Zheng no voting rights: see Exhibit RB-4 at page 17 of Mr Rodney Berry’s affidavit sworn 6 May 2009.

4 It was a term of the first share agreement that

“Party A [defined as Ms Yang] will buy back 96 shares and Party B [Mr Zheng] will sell 96 shares to Party A without any additional conditions; with the buyback completed within 10 days including the share transfer procedures with ASIC” (see Exhibit B, Tab 4, page 58.6).

5 Mr Sui, by a document dated 19 May 2008 (in Chinese at Exhibit B, Tab 4, page 65, translated into English at page 67), guaranteed

“that Mr ZHENG, Tongda’s investment into Vision Investments Holdings Pty Ltd (Blakehurst Automotive Petrol Station and Dupa Car Wash, which is located inside the Petrol Station), which made up of 49% of the shareholding of Vision Investments Holdings Pty Ltd, and amounted to AUD200,000, will be refunded to him in May 2010 (after approval of visa 892 application).”

6 When the matter was called on 1 February 2010, Mr Doyle Gray of counsel announced his appearance for the plaintiff. Mr Sui appeared in person for himself and for his company, the second defendant. Mr Moyle of counsel announced his appearance for Ms Yang, but not for the fourth defendant. The fourth defendant, although under the control of Ms Yang, therefore has chosen not to take part in these proceedings.

7 The plaintiff’s case was originally framed as a claim under the Contracts Review Act 1980 (NSW) (“the Act”), and alternatively for unconscionable conduct, that the contracts entered into by him should be set aside. Mr Zheng’s evidence was directed to seeking to establish that Mr Sui had encouraged him to enter into the agreements with Vision, that Mr Sui had said that Ms Yang was a girlfriend of Mr Sui’s, and that Mr Sui had said that he was a shareholder in the business and subsequently that he had a silent interest.

8 On the second last day of the hearing, Mr Zheng sought to amend the relief sought by making relief under the Act alternative relief and putting as the primary relief sought a declaration that Ms Yang was required to repay the $216,666 on or after 31 May 2010, an order that she was required to pay that money, but stayed until after 1 June 2010, and a declaration that Mr Sui was obliged to repay the money as guarantor. I allowed the amendment over the objections of Ms Yang and Mr Sui, and this led to an application by the plaintiff, which is dealt with in a separate ex tempore judgment.

9 I gave leave to the parties to provide written submissions, and these submissions were received by the Court on 11 May 2010.

The plaintiff’s version of events
10 I shall set out here the plaintiff’s version of events:

(1) The plaintiff worked for a construction business in China, but also had his own construction business. His own business had a substantial number of employees, and he had extensive experience in project construction. He does not speak English and he had never worked in Australia before coming here in 2008.

(2) The plaintiff had a friend, Mr Shao Ying Chen (whom he referred to as “Teacher Chen”). Mr Chen helped Mr Zheng to find a migration agent in Australia – Mr Sui – who, it turned out, operated through his company, AMEG. Mr Zheng paid $33,000 to AMEG for its assistance in obtaining for him (and his family) a 163 visa. Nothing turns on the distinction between Mr Sui and AMEG. Mr Zheng met Mr Sui at a trade fair in China. Mr Sui told him that he was a migration agent and had studied law and “I understand all these things” (see the affidavit of Tong Da Zheng affirmed 30 April 2009 (“the Zheng affidavit”) at paragraph 15).

(3) In February or March 2006, on his first visit to Australia, Mr Zheng met Mr Sui and Mr Sui explained the difference between a 163 visa and an 892 visa, saying, inter alia, “within two years of coming to Australia you will have to invest in a business and be involved in that business for at least 12 months” (see the Zheng affidavit at paragraph 18).

Mr Zheng gave instructions to Mr Sui to apply for a 163 visa for Mr Zheng and his family, with a view to applying later to obtain an 892 visa, and then obtaining permanent residency in Australia.

(4) Mr Zheng obtained a 163 visa. He had two children studying in New Zealand. He thought that a supermarket business would be a good investment and that his children could assist him in running it. To this end, he had, with Mr Chen’s involvement, located a supermarket business at Belmore Road, Riverwood, for $300,000 plus trading stock. Mr Zheng told Mr Sui about this, and Mr Sui told him that it was not so easy to run a business in Australia, saying:

“You would be better off to find a business, such as a petrol station and invest $AUD200,000.00 to buy the business shares so that other people run the business for you. You can use the information on the business performance of other people’s companies to apply for Visas, sub-class 892. When the Visas, sub-class 892, are granted you can withdraw your shares. If you purchase a business now, you may not be able to sell it in the future” (see the Zheng affidavit at paragraph 28).

Mr Sui then said, “If you have courage to spend the money, it would be easier for me to handle” (see the Zheng affidavit at paragraph 29).

(5) Mr Zheng asked Mr Sui to come and look at the supermarket and said, “I need to know whether it would meet the requirements for the Department of Immigration with a view to obtaining an 892 Visa” (see the Zheng affidavit at paragraph 30).

(6) Mr Sui did accompany Mr Zheng and his daughter and son to the supermarket. After the visit, Mr Sui said:

“The price of this supermarket is too high. It is not worth $300,000.00. At the most it is worth about $200,000.00. It is old and dilapidated and not worth buying at all. Why bother to buy any business? You should simply invest $200,000.00 in someone else’s business. That will do to apply for an 892 Visa” (see the Zheng affidavit at paragraph 32).

(7) Having left the supermarket and taken Min Ling (Mr Zheng’s daughter) to the airport, Mr Sui said to Mr Zheng:

“My girlfriend has a petrol station located in the vicinity of the airport. She just happens to be in the petrol station. I am taking you there now to look at it” (see the Zheng affidavit at paragraph 33).

Mr Sui also said:

“We bought this petrol station last year. I am a migration agent. For the sake of my clients, I bought this petrol station. Our petrol station sells environmentally friendly petrol called Envirofuel. We also intend to open a car wash shop inside the petrol station. We will steam clean cars to save water. This has the support of the State and Local Government. With these merits, there is definitely no problem for you to apply for a Visa, sub-class 892” (see the Zheng affidavit at paragraph 34).

In addition, Mr Sui said words to the effect:

“I help set up the car wash section of this business.”

“I invited Chinese politicians to the opening of the petrol station.”

“I have massive involvement in this business.”

(see the Zheng affidavit at paragraph 34)

Mr Zheng then said to Mr Sui, “Do you have any shares in the petrol station?” Mr Sui replied, “I hold 40% of the shares” (see the Zheng affidavit at paragraph 35).

(8) Mr Sui drove Mr Zheng to the petrol station and introduced him to Ms Yang. Ms Yang said:

“The petrol station is quite good. The turnover is absolutely fine. The annual turnover exceeds $3 million. With that level of turnover, it would be possible to sponsor three entire families for 892 Visas” (see the Zheng affidavit at paragraph 36).

Mr Sui said, “The business definitely has that level of turnover and we can give you financial statements later” (see the Zheng affidavit at paragraph 36).

(9) On or about 17 March 2008, Mr Sui took Mr Zheng to the ASIC office in Sydney, telling him that if he was to buy a business or invest in a business in Australia, he would need to have his own company and that “If you want to go ahead and invest in my girlfriend’s business you will need to use a company for this purpose” (see the Zheng affidavit at paragraph 39). Mr Sui helped Mr Zheng to set up a company called Changhe Australia Pty Ltd (“Changhe”). Mr Sui told Mr Zheng that he would not charge him any fee for arranging the registration.

(10) Mr Zheng returned to China. Mr Sui rang him there and recounted that he had received a call from Mr Chen complaining about Mr Sui introducing the petrol station business to Mr Zheng.

(11) On 9 May 2008, Mr Zheng returned to Sydney. Mr Sui said to Mr Zheng:

“After discussing the matter between my girlfriend and I, my girlfriend has agreed to let you buy shares in the petrol station business. Please rest for two days before coming to my office” (see the Zheng affidavit at paragraph 45).

(12) On 12 May 2008, Mr Sui drove Mr Zheng and his eldest son Jo to the petrol station, and Mr Zheng had another conversation with Mr Sui and Jo present in which Ms Yang said, “My business is so good” and “The business is doing a good trade” (see the Zheng affidavit at paragraph 47) and Mr Sui said:

“The business is really good. We are waiting for RTA approval to start up a Supa Dupa Car Wash which will be operated from this same location. It will be supported by the Local and State Government because it uses steam wash rather than liquid water such as would normally be used in a normal car wash” (see the Zheng affidavit at paragraph 48).

During this conversation, Mr Sui also said to Mr Zheng:

“Remember Teacher Chen’s visit to my office? I think it would be a good idea for you to use another migration agent for your 892 Visa. I am happy to assist you behind the scenes.”

and

“I am worried that when you go ahead and invest in this petrol station business that Teacher Chen will find out and he will do something to harm my migration business and might get me into trouble” (see the Zheng affidavit at paragraph 49).

Mr Zheng asked if Mr Sui thought that ABC Migration & Education Centre (“ABC”) would be “okay” as his migration agent, and Mr Sui said that it would be.

After leaving the petrol station, Mr Zheng said to Mr Sui:

“I have no knowledge about how to run a petrol station business. I do not know how to start and how to proceed with purchasing such a business. I do not know any lawyers. Can you please guide me?”

Mr Sui replied:

“Why bother to employ a lawyer? I will give you assistance and be your guarantor at the time. After two years, I am responsible for the refund of the money. I will also be responsible for collecting all the relevant financial records so that you can acquire a share in the business and for the lodgement of Tax Returns” (see the Zheng affidavit at paragraph 50).

Mr Zheng says that he discovered during this conversation that Mr Sui did not, in fact, own any shares in the petrol station business. Mr Sui said, “I am actually a silent partner in the business” (see the Zheng affidavit at paragraph 50).

Mr Zheng then authorised Mr Sui to arrange for the contract documents to be drawn up.

(13) On 13 May 2008, Mr Zheng entered into an arrangement with ABC, appointing it as his migration agent for the purpose of his obtaining an 892 visa. Mr Zheng appears to have accepted Mr Sui’s concern that Mr Chen might cause trouble for Mr Sui because he was acting as Mr Zheng’s migration agent but also had an interest in the business in which Mr Zheng was to invest. Mr Zheng says (at paragraph 55 of the Zheng affidavit) that he still looked to Mr Sui for advice or suggestions in relation to the 892 visa.

(14) On 14 May 2008, Mr Zheng asked Mr Sui for financial statements relating to the petrol station business. Mr Sui replied:

“Company statements must not be seen by random outsiders. You need to confirm your intention of buying shares of the business first. After signing the Agreement, you may see the statements” (see the Zheng affidavit at paragraph 56).

Mr Sui also said to him:

“You will need to make up your mind quickly about this. I have some other clients waiting for this sort of arrangement. If you do not make up your mind now, I will give this business to someone else” (see the Zheng affidavit at paragraph 57).

(15) Mr Sui arranged for execution of the share agreement and told Mr Zheng that these documents would need to be signed at a lawyer’s office and that Ms Yang would be coming to sign.

(16) Mr Zheng says that he placed trust in Mr Sui and relied on what he had said about he success of the petrol station and that it was a suitable investment in order for him to apply for an 892 visa. He also placed great weight on Mr Sui’s promise to guarantee the repayment of the $200,000.

(17) Mr Sui said to Mr Zheng, “I am the guarantor. I will guarantee it. This business is very secure. I will guarantee that you will get your money back” and “I guarantee whatever you will invest you will not even lose one cent” (see the Zheng affidavit at paragraph 61).

Mr Sui showed Mr Zheng a draft of the agreement, but it did not include any guarantee. Mr Zheng raised this with Mr Sui, and Mr Sui said, “We can’t do that. It is a secret” (see the Zheng affidavit at paragraph 62).

(18) On 16 May 2008, Mr Zheng (with his wife and Jo) attended at Mr Sui’s office. Mr Zheng had understood that they would proceed to a solicitor’s office. Mr Sui, however, indicated that there had been a change in plan and that the solicitor would come to Mr Sui’s office. Mr Sui said of the solicitor, “Mr Kramrakha”: “He is a very smart person. He is a solicitor. Because Yang cannot now come, Mr Kramrakha will come and sign for her” (see the Zheng affidavit at paragraph 65).

A conversation then took place. Mr Zheng said, “Why isn’t Jing Yang able to come and sign herself? Is something wrong?” Mr Sui said, “It is okay. The solicitor is Yang’s representative. Once he signs it, it is already legal. Yang doesn’t have to sign it” (see the Zheng affidavit at paragraph 65).

(19) A solicitor did attend, and he witnessed Mr Zheng’s signature on four documents. Mr Zheng recognised the Chinese version of the share agreement as the document he had seen in draft the day before. This agreement is in Chinese at Exhibit TZ-10 to the Zheng affidavit, translated into English at Exhibit TZ-11.

(20) On 19 May 2008, Mr Sui provided to Mr Zheng the “Letter of Guarantor” (sic), which is in Chinese at Exhibit TZ-14 to the Zheng affidavit. An English translation obtained later is now Exhibit TZ-15.

(21) The guarantee required Mr Zheng to pay $4,750 to Mr Sui, and Mr Zheng paid over the first instalment of $2,000 on 19 May 2008.

(22) On 19 May 2008, Mr Zheng wanted to see financial records of the petrol station before paying over money to Ms Yang. He went to the petrol station and asked for financial records of the business. Ms Yang handed him a document (Exhibit TZ-16 to the Zheng affidavit) and said, “This shows the amounts collected for each day so far this month and how much profit has been made each day” (see the Zheng affidavit at paragraph 80) and, “Just look at this column (pointing to the “amount” column second from the left). You do not need to know the profit” (see the Zheng affidavit at paragraph 81).

Ms Yang told Mr Zheng that she would not give him any other documents until after he had paid the money required under the share agreement.

(23) Mr Zheng then obtained a bank cheque for $200,000 made payable to Vision and delivered it to Mr Sui.

(24) On 22 May 2008, Mr Sui handed to Mr Zheng a share certificate and a company extract for Vision. With the assistance of Jo and a translation of the share certificate provided by Mr Sui, Mr Zheng learned that the 96 shares transferred to him were “A” shares, but that Ms Yang held 100 ordinary shares. Mr Sui explained:

“There was no problem. As long as you have at least 10% of the shares of the company, you meet the requirement stipulated by the Department of Immigration & Citizenship. Now you have 96 shares, which is equal to 49% of the company’s shares so, there is not any problem. As for “A” shares and ordinary shares, they are the same. There is not really any difference between them” (see the Zheng affidavit at paragraph 89).

(25) Mr Zheng was in China from 25 May to 25 June 2008. On 2 July, he attended an immigration forum. A delegate from the New South Wales Government advised that, “Applicants for 892 Visas should own 51% of the company’s shares to have a controlling interest in the business and to demonstrate their rights of management in the company” (see the Zheng affidavit at paragraph 93).

(26) Following the forum, Mr Zheng spoke to Mr Sui and told him, “I would like to acquire a further 2% of Vision Investment shares to comply with the new law.” Mr Sui said, “I will have to check with Jing Yang and get back to you” (see the Zheng affidavit at paragraph 96).

(27) On 8 July 2008, Mr Sui told Mr Zheng that Ms Yang had agreed that Mr Zheng could acquire a further two per cent of the shares in Vision. Mr Sui said he would charge Mr Zheng $2,500 to arrange this as well as the ASIC cost. Mr Zheng then paid $2,500 to Mr Sui, but was not issued a receipt. Mr Zheng delivered a cheque for $8,333 to Ms Yang on 10 July, but Ms Yang said that it was not enough and that she needed another $8,333, which Mr Zheng organised on 11 July.

(28) Mr Zheng visited the petrol station regularly from 19 May to 25 May, and then on his return from China. He found it difficult to speak with Ms Yang and he made enquiries concerning the business in Mandarin of a Chinese employee, who said that he should speak to Ms Yang.

(29) On 23 July, Mr Zheng was advised by an accountant that he should consult a solicitor as it “looks like you have been cheated” (see the Zheng affidavit at paragraph 103). He rang Mr Sui and said that he wanted to become the director or secretary of Vision, but Mr Sui said that this was not possible.

(30) Mr Sui told Mr Zheng, “If you don’t like it, you can withdraw the shares” (see the Zheng affidavit at paragraph 105).

Mr Zheng asked Mr Sui to tell Ms Yang that he wanted to withdraw from the business. As for the return of his money, Mr Sui said, “No problems! I will tell Ms Yang. Between Yang and I we should be able to pay you back the full $200,000.00 from our credit cards” (see the Zheng affidavit at paragraph 105).

On 26 July, Mr Sui said to Mr Zheng, “The matter of withdrawing your shares from the business is okay with Ms Yang but she is facing some financial difficulties at the moment.” Mr Zheng replied, “What sort of financial difficulties?” Mr Sui replied, “My girlfriend has put the $200,000.00 into a term deposit account. She said that she would still pay you back the money from the daily trading which is about $5,000.00 to $6,000.00 a day” (see the Zheng affidavit at paragraph 106).

(31) On 28 July, Mr Sui said, “My girlfriend has actually used that $200,000.00 to invest in a fund. She cannot return the money to you. However, she has agreed to find a way to repay your money” (see the Zheng affidavit at paragraph 107).

(32) Subsequently, Mr Sui said, “Yang has actually used your money to repay a bank loan. She cannot repay you at the moment” (see the Zheng affidavit at paragraph 108).

(33) On 30 July, Mr Zheng rang Mr Sui and said, “Can you please nominate a date for repaying my money.” Mr Sui replied, “I will discuss this with my girlfriend” (see the Zheng affidavit at paragraph 109).

Other key matters

11 The petrol station business closed in September 2008. There are some further matters relevant to that, namely:

(1) Vision had a one-year lease from August 2007 to 3 or 4 August 2008 with, according to Ms Yang, an option for a five-year renewal.

(2) Ms Yang did not want to exercise the option to renew the lease.

(3) Vision, according to Ms Yang, had spent money in 2008 installing on the premises a car wash operating as the Supa Dupa Car Wash Blakehurst. Ms Yang said at T422.32-34 that she thought the car wash would make the business “go into profit”. In April, Ms Yang had been told by the local council that the car wash could not operate without the approval of the Council (see T406.20-21), which would require a development application and approval, which process could take six months: see T406-407. On Mr Zheng’s evidence, Ms Yang never told Mr Zheng about the problems with council approval, or even discussed the car wash at the petrol station or another car wash at Carlingford, which Vision was, on her evidence, setting up (and which by November 2008 had also failed). Nor did Ms Yang tell Mr Zheng what she revealed to the Court – that the Council, having learned that the premises were being used as a petrol station, had increased the rates significantly: see T395.40-41 and paragraph 47(a) of Ms Yang’s affidavit affirmed 24 June 2009.

(4) The business was operating at a loss. The only financial statement available for the year ending 30 June 2008 shows that Vision was operating at a $165,000 loss. Ms Yang did not reveal to Mr Zheng that this was the position.

(5) The petrol sales for April 2008 and May 2008 were the highest sales achieved at the petrol station: see T423.40. So what Ms Yang showed Mr Zheng does not appear to be indicative of the overall position of the petrol station’s trading. August 2007 to 30 June 2008 yielded Vision only $1.686 million in sales from all sources (see Exhibit H and Exhibit J), and as I have noted, Ms Yang was willing to close the business rather than pay an increase in rent.

12 Ms Yang described what she says were the terms of the option for the petrol station lease (see paragraphs 46-47 of her affidavit affirmed 24 June 2009), but the lease was not tendered in evidence.

13 Tendered in evidence (Exhibit F) is the Migration Agents Registration Authority (“MARA”) Code of Conduct. It contains the following clauses (relevantly):

“2.1A A registered migration agent must not accept a person as a client if the agent would have any of the following conflicts of interest: ...

(c) the agent is, or intends to be, involved with the person in a business activity that is relevant to the assessment of a visa application or cancellation review application;

(d) there is any other interest of the agent that would affect the legitimate interest of the client.

2.1B If it becomes apparent that a registered migration agent has a conflict of interest mentioned in clause 2.1A in relation to a client, the agent must, as soon as practicable taking into account the needs of the client, but in any case within 14 days:

(a) tell the client about the conflict of interest; and

(b) advise the client that, under the Code, the agent can no longer act for the client; and

(c) advise the client about appointing another registered migration agent; and

(d) cease to deal with the client in the agent’s capacity as registered migration agent.”

14 Mr Zheng’s son, Jo, kept a diary in Chinese (Exhibit C), and it and translations of relevant pages are in evidence (Exhibit ZZ-2 to the affidavit of Zeng Xin Zheng affirmed 4 May 2009). No challenge was made by way of cross-examination to the authenticity of the notes made by Jo, although a vigorous attack on the notes was launched in written submissions on behalf of Ms Yang dated 30 April 2010. I agree with the submission that the contents of the diary do not inspire confidence that they were contemporaneous, but given the absence of cross-examination of Jo, I shall limit my remarks to that and indicate that I place no reliance on those notes.

The credibility of the witnesses

15 The cross-examination of Mr Zheng did not impugn his credibility. Mr Zheng’s evidence in his affidavit and under cross-examination appeared to be cogent and persuasive. The short cross-examination of Mr Jo Zheng did not demonstrate that he was an unreliable witness.

16 The submissions on behalf of Ms Yang dated 30 April 2010, in addition to pointing out that Mr Zheng was an experienced businessman who knew what he wanted, that he could have had access to solicitors and accountants if he had wanted, spoke Mandarin with Ms Yang and Mr Sui, and had the agreement written in Chinese, launched an attack on Mr Zheng’s credit, principally on matters which were never put to Mr Zheng – namely that he had invented the use by Mr Sui of the “girlfriend” tag and that because he had said that he observed that the first draft of the first share agreement did not contain a right to management, he therefore must have appreciated that it did not give him voting rights. No passage of Mr Zheng’s evidence in which he said that he did not know that the share agreement gave him no voting rights is referred to.

17 It is asserted in those submissions that Mr Zheng’s evidence is inconsistent with the document which he gave in support of his sub-class 163 visa application, but no questions were put to Mr Zheng along these lines and the submissions do not make clear what the inconsistency is. Mr Zheng did not deny that he had substantial business experience in China.

18 Mr Zheng, on his evidence, was never offered a directorship, and when he did ask for one, it was refused. That he did seek such an appointment in July and that it was then refused is not in dispute. Ms Yang offered no explanation as to why, on her evidence, having offered Mr Zheng a directorship in March before he had committed his money and he having refused it, she decided that such an appointment was not acceptable after he had committed his money. Notwithstanding Ms Yang’s evidence that she did offer Mr Zheng a directorship in March and the submissions’ reference to that evidence, the same submissions assert that if Ms Yang had believed in March to July 2008 that Vision

“was going upon a pathway to insolvency she would not, if she was disreputable and dishonourable, have refused any request from Mr Zheng to become a director. Furthermore in that month she would have in fact invited and encouraged him to become a director (so that he could share responsibility with her for any ‘insolvent trading’ activities in the future.”

19 Returning to the attack on Mr Zheng’s credibility, pages 61-63 of the submissions on behalf of Ms Yang handed up in Court on 14 April 2010 set out a number of matters. A number of them involve acceptance of the evidence of Mr Sui and Ms Yang in order to determine Mr Zheng’s credibility. This is not an appropriate way of assessing Mr Zheng’s credibility, not only logically, but for the view I have reached of the credibility of Mr Sui and Ms Yang, which I deal with below. That removes points 6, 8, 10 and 12. Points 13, 14, 15 and 16 are not submissions on credibility and are really an assertion that: (a) Mr Zheng agreed to a course that had its risks; and (b) Mr Zheng repudiated the agreement, which I shall deal with later. The first point made by Ms Yang is that Mr Zheng “claimed to be under a ‘special disability’ but his evidence did not indicate that was true.” Mr Moyle’s cross-examination of Mr Zheng, having elicited Mr Zheng’s agreement that he was a “senior manager”, did not tax the plaintiff with any cross-examination concerning the absence of detail in his affidavit. There is a similar problem with points 2 to 4. So far as point 5, which notes that Mr Zheng said that he was “required” to sign the share agreement by Mr Sui, is concerned, I did not understand Mr Zheng to assert that he was pressured to sign by Mr Sui, only that in order to enter into the agreement, his signature was required on the documents.

20 Mr Sui gave evidence. He was cross-examined at length, for most of the time with the assistance of an accredited interpreter, Mr Stephen Lee, who was retained by Mr Zheng’s solicitors for the purpose of Mr Zheng’s evidence. Mr Sui’s English, whilst not perfect, is of quite a reasonable standard, and he appeared to understand most of the questions asked of him without interpretation. He was able to make submissions in English, and he cross-examined Mr Zheng and Ms Yang in English, albeit briefly.

21 Mr Sui was shown to be a most unreliable witness. On the fourth day of the case, he admitted having told lies in a number of respects (see T249 and T265-270). I should say that even had he not made the admission, I would not have accepted him as a truthful witness, and not only on the matters which he admitted were false. His explanation for having lied was that he was concerned that if he told the truth, he would be in trouble with MARA, who had already asked him for explanations following a complaint from Mr Zheng: see Exhibit 1D1. This at least is plausible, but I would not accept any evidence of Mr Sui that was not an admission against interest or corroborated by an impartial witness. His explanation for giving a guarantee of Ms Yang’s obligation to repurchase the shares in Vision, his evidence concerning his failure to ensure that Ms Yang signed the share agreement, and his explanation for why the guarantee was in a separate document were not credible. Mr Sui’s evidence relating to Mr Ramrakha is a further reason for doubting his honesty, and there are other examples of cross-examination demonstrating that his affidavit and earlier oral evidence were not reliable: see, for example, T169-170.43 and T298-299. His evidence about his lack of business involvement with Ms Yang apart from the petrol station was unconvincing – there is material which objectively points to them being involved together in other businesses, although they say that none of those businesses traded. Mr Sui offered no convincing explanation as to why he did not tell Mr Zheng that he did not need to increase his shareholding in Vision from 49 per cent to 51 per cent, or even why he encouraged Mr Zheng to invest $216,666 in Vision when, on his case, only a 10 per cent shareholding was required. Although it is not evidence as such, his assertion at T455.18 that Mr Zheng could not obtain a visa in any event because it would breach s 501 (of the Migration Act 1958 (Cth)) and that he had only that day realised its illegality is another example of Mr Sui’s willingness to say anything that could avoid liability.

22 Ms Yang obtained a Bachelor of Commerce degree and a Master’s degree in commerce from Sydney University. She is a Certified Practising Accountant and operates her own accounting firm. Ms Yang’s credibility was also impugned, and although it was not damaged in as obvious a way as Mr Sui’s, I have difficulty accepting her evidence as truthful. I will give examples of her lack of credibility:

(1) There are matters which she did not mention in her affidavit but which she volunteered in cross-examination (see, for example, T329, T335-337, T396, T398-400 and T406-407), some of which were inconsistent with her affidavit and none of which were put to Mr Zheng in cross-examination by her counsel.

(2) There was a surprising absence of documents in areas of importance. For example, she produced no evidence that supported her claim that her ex-husband had loaned $170,000 to Vision: see T427-428. Further, she did not produce the lease in respect of the premises. She produced no evidence of income earned by Vision, except Exhibit JY1 to her affidavit sworn 24 June 2009 (which is the same as Exhibit TZ-16 to the Zheng affidavit), which relates only to two weeks in May 2008.

(3) She attached to her affidavit a bundle of documents that she described as establishing expenditure by Vision. Cross-examination (see T331-332) highlighted the unreliability of that material.

(4) To explain the absence of documents that might support her case, she asserted that she had given or offered to give documents to her former solicitors: see, for example, T428-429, Exhibit K and T431.37-433.7.

(5) She gave unresponsive answers to questions asked of her: see, for example, T326, T391-392, T398 and T429-430.

(6) She knew that the Council had effectively closed the car wash down for at least six months (see T405-407), but in her affidavit evidence as to her discussions with Mr Zheng, she made no reference to that.

(7) Her attempt to present herself as the victim of Mr Zheng as an investor and as having done him a favour by receiving his investment had a hollow ring to it.

(8) She attempted to distance herself from Mr Sui by saying that although they had been involved in a number of businesses, those businesses had never traded. She was, for a short time, the director of LV Petroleum, which had its registered office at Mr Sui’s office.

(9) On Ms Yang’s evidence, there is no explanation for Mr Sui guaranteeing Mr Zheng’s investment. That and the fact that Mr Sui was willing to encourage Mr Zheng to part with his money without Ms Yang actually having signed the agreement points to Mr Sui being keen for the investment to proceed and suggests that Mr Sui, for reasons known to him and not revealed, wanted to help Ms Yang. The fact that Ms Yang did not sign the agreement herself, coupled with the evidence relating to Mr Ramrakha, to which I refer below, undermines Ms Yang’s assertion that she had nothing to do with Mr Sui’s actions, which to a large degree were in her interest, either personally or as the sole shareholder of Vision.

(10) Ms Yang sought to excuse her failure to supply documents as required by the share agreements on the basis that Mr Zheng had not specified what he wanted. This assertion had not been made in her affidavit. The first share agreement specified that petrol station business management information and yearly accounting financial statements would be provided.

(11) The notion that Mr Sui turned up at the petrol station with Mr Zheng without any prior discussion between Ms Yang and Mr Sui is of itself most unlikely.

23 I have referred to the fact that a solicitor attended on the execution of the first share agreement and witnessed Mr Zheng’s signature. The solicitor who attended, it is accepted, was in fact Mr Kiran Ramrakha, then an associate at Hunt & Hunt, a firm of solicitors. An affidavit from Mr Ramrakha was served on behalf of Mr Zheng and relied on in his case in reply. Mr Ramrakha says that he cannot explain why he signed documents which had the name “Kramrakha” on them: see paragraph 14 of his affidavit affirmed 9 April 2010.

24 On its face, the use of the name “Kiran Kramrakha” might seem to be a mere typographical error on the part of Mr Sui. There are some aspects of the matter which point in a different direction:

(1) Mr Sui maintained through his affidavit and in cross-examination, until the contrary was put to him, that the solicitor’s name was Mr Kramrakha. Ms Yang also described the solicitor as Mr Kramrakha. Yet both Mr Sui and Ms Yang knew Mr Ramrakha, and indeed, Mr Ramrakha had acted for Mr Sui in a personal injury claim. Mr Sui claimed that Ms Yang had drafted the share agreement and that she had asked him for details of the solicitor’s address to insert in the agreement (see T213.3-11) and that he had contacted Mr Ramrakha to arranged for him to attend: see T214.

(2) Mr Sui had Mr Ramrakha’s business card: see Exhibit E and see T198-202.

(3) The evidence of Mr Zheng that Mr Sui said that “Mr Kramrakha” was Ms Yang’s solicitor, if accepted, has Mr Sui involved in a significant deception, because neither Mr Ramrakha nor the fictional “Mr Kramrakha” did act for Ms Yang, and neither, on Mr Sui’s case and Ms Yang’s case, signed as Ms Yang’s agent, although it is quite understandable that Mr Zheng would have believed what he was told by Mr Sui about “Mr Kramrakha” signing as Ms Yang’s agent.

(4) If Mr Ramrakha, as “Mr Kramrakha”, purported to sign as Ms Yang’s agent, then Mr Sui was privy to a deception of Mr Zheng. If Mr Ramrakha, whether as himself or as “Mr Kramrakha”, was purporting only to witness Mr Zheng’s signature, then Mr Sui did not ensure that Ms Yang had signed the share agreement. Indeed, on Mr Sui’s evidence, he never did bother to obtain Ms Yang’s signature, and in fact it was never signed by her or by anyone on her behalf. On Mr Sui’s evidence, Ms Yang did not sign the share agreement because she said she was caught in traffic, and yet neither Mr Sui nor Ms Yang ever followed this up. The submissions on behalf of Ms Yang dated 30 April 2010 assert that Mr Zheng never required Ms Yang to sign the agreement. That is true, but it is consistent with Mr Zheng’s belief that Ms Yang’s solicitor had signed on her behalf, and Mr Zheng was not cross-examined on the topic.

(5) Mr Sui never warned Mr Zheng not to hand over money to Ms Yang because she had not executed the share agreement.

(6) There was no need for a solicitor to witness Mr Zheng’s or Ms Yang’s signature to the agreement. Mr Sui never adequately explained why he had gone to the lengths he did to have a solicitor witness the signatures (on his case), and having failed to have it witnessed by Ms Yang, did nothing about it.

25 When regard is had to these matters and the fact that Mr Zheng says that he was told that “the solicitor” was signing on behalf of Ms Yang and not told that Ms Yang was caught in traffic, it would appear that Mr Sui might have had a reason for not wanting Mr Ramrakha’s real name on the document, but the odd circumstances, the cross-examination of Mr Sui on this topic (see T196-198), and the matters to which I have referred lead me to the conclusion that Mr Zheng’s version of these matters is truthful and that Mr Sui’s is not. That conclusion only reinforces my conclusion as to the credibility of Mr Sui and is a matter to be taken into account in assessing Ms Yang’s credibility, since she wanted Mr Ramrakha to be involved in the documentation and yet she did not attend at the time of execution or ever sign the document: see paragraphs 24-33 of her affidavit sworn 24 June 2009, where she deals with the preparation of the agreement and its execution by Mr Zheng. She does not say anything about how Mr Ramrakha came to be involved and she does not offer any explanation as to why she never signed the document following her failure to attend, as she says she planned to do.

26 I have referred to Mr Zheng’s attempt to obtain financial information concerning Vision. Such material as has been produced (Exhibit H and Exhibit J, which are draft accounts) not only is confusing, but Exhibit J refers to a $165,548.56 loss (before income tax) at the end of the 2008 financial year, and Ms Yang agreed that that was the financial position of Vision. The statement by Ms Yang that the business had a turnover of $3,000,000 has been demonstrated to be false, even on the draft accounts and Ms Yang’s oral evidence: see T415.18-21. Once it is appreciated that the petrol station was operating at a loss of $165,000 for the 2007-2008 financial year, it is not surprising that Ms Yang did not want Mr Zheng to see the accounting records or financial statements for Vision. The unwillingness of Ms Yang and Mr Sui to provide Mr Zheng with relevant information tends to confirm the impression that they knew very well that Vision was not an appropriate company in which to invest money. Submissions made by Mr Lyon on behalf of Ms Yang make reference to Exhibit K, which is a letter from Mr Lyon to the plaintiff’s solicitors. The letter was tendered by the plaintiff at T431.27-433.7 and was a limited tender. Although the letter stated that the documents attached would be tendered by the third defendant, they were not.

27 I regard it as of considerable significance that Ms Yang did not consult Mr Zheng in relation to her decision to give up the petrol station lease. She agreed that she had described him to others as her “business partner”, but the failure to tell him that she was contemplating (or had decided) not to continue with the lease is remarkable given his recent investment of $216,666. Her solicitor’s submission that she could not contact Mr Zheng because he was in China is not supported by any evidence by her: see paragraph 38 of her affidavit sworn 24 June 2009. There is no evidence from Mr Sui that Ms Yang asked him to contact Mr Zheng or have Mr Zheng contact her, or that Mr Zheng could not be contacted.

28 Further, Ms Yang’s failure to advise Mr Zheng that the Supa Dupa Car Wash had been prevented from operating due to the absence of council approval and of the prospect of a six month delay for approval, particularly in a climate of positive statements about the car wash from Mr Sui, the failure to mention at any time problems with the rates, and positive statements about the business, are of significance.

29 I accept Mr Zheng’s evidence whenever it is in conflict with that of Mr Sui and Ms Yang, and therefore accept the narration which I have set out at [10] above. Mr Sui’s assertion to Mr Zheng that he and Ms Yang had been in a romantic relationship may have been false, but I accept Mr Zheng’s evidence that that is what he was told by Mr Sui, and I find that Mr Sui and Ms Yang worked in concert to obtain an investment of $200,000 from Mr Zheng. I think that the most likely interpretation of events is that Ms Yang was short of funds, that she communicated that need to Mr Sui, and that Mr Zheng was identified by Mr Sui, with Ms Yang’s connivance, as the person to provide her with those funds. Mr Sui took advantage of Mr Zheng’s relationship with him as a migration agent and friend, and steered him to an investment that was extremely unwise. I find that Mr Sui told Mr Zheng that “Mr Kramrakha” was Ms Yang’s agent, which he clearly was not, and that Mr Sui led Mr Zheng to believe that Ms Yang had, by an agent, signed the agreement, which in fact she had not. I find that Mr Sui told Mr Zheng that he was a silent partner in the business, which Mr Sui has not established (or endeavoured to establish) was true. I find that Ms Yang represented that the petrol station had a turnover of $3 million when it did not, and that she and Mr Sui presented a false picture of the petrol station as being a good business, when it was either not a good business or was at a stage where its business prospects were very uncertain: see (7), (8) and (12) of [10] above.

30 Mr Moyle accepted that the case was really one founded on a contest of credibility. The written submissions handed up on behalf of Ms Yang on 14 April 2010 proceed largely upon the assumption of a complete acceptance of Ms Yang and Mr Sui’s evidence. Accepting Mr Zheng’s evidence as I do, and preferring his evidence wherever it is in conflict with Mr Sui’s and Ms Yang’s, most of the case of the defendants falls away.

The Contracts Review Act claim

31 The Contracts Review Act provides:

“7 Principal relief

(1) Where the Court finds a contract or a provision of a contract to have been unjust in the circumstances relating to the contract at the time it was made, the Court may, if it considers it just to do so, and for the purpose of avoiding as far as practicable an unjust consequence or result, do any one or more of the following:

(a) it may decide to refuse to enforce any or all of the provisions of the contract,

(b) it may make an order declaring the contract void, in whole or in part,

(c) it may make an order varying, in whole or in part, any provision of the contract,

(d) it may, in relation to a land instrument, make an order for or with respect to requiring the execution of an instrument that:

(i) varies, or has the effect of varying, the provisions of the land instrument, or

(ii) terminates or otherwise affects, or has the effect of terminating or otherwise affecting, the operation or effect of the land instrument.

(2) Where the Court makes an order under subsection (1) (b) or (c), the declaration or variation shall have effect as from the time when the contract was made or (as to the whole or any part or parts of the contract) from some other time or times as specified in the order.

(3) The operation of this section is subject to the provisions of section 19.

9 Matters to be considered by Court

(1) In determining whether a contract or a provision of a contract is unjust in the circumstances relating to the contract at the time it was made, the Court shall have regard to the public interest and to all the circumstances of the case, including such consequences or results as those arising in the event of:

(a) compliance with any or all of the provisions of the contract, or

(b) non-compliance with, or contravention of, any or all of the provisions of the contract.

(2) Without in any way affecting the generality of subsection (1), the matters to which the Court shall have regard shall, to the extent that they are relevant to the circumstances, include the following:

(a) whether or not there was any material inequality in bargaining power between the parties to the contract,

(b) whether or not prior to or at the time the contract was made its provisions were the subject of negotiation,

(c) whether or not it was reasonably practicable for the party seeking relief under this Act to negotiate for the alteration of or to reject any of the provisions of the contract,

(d) whether or not any provisions of the contract impose conditions which are unreasonably difficult to comply with or not reasonably necessary for the protection of the legitimate interests of any party to the contract,

(e) whether or not:

(i) any party to the contract (other than a corporation) was not reasonably able to protect his or her interests, or

(ii) any person who represented any of the parties to the contract was not reasonably able to protect the interests of any party whom he or she represented,

because of his or her age or the state of his or her physical or mental capacity,

(f) the relative economic circumstances, educational background and literacy of:

(i) the parties to the contract (other than a corporation), and

(ii) any person who represented any of the parties to the contract,

(g) where the contract is wholly or partly in writing, the physical form of the contract, and the intelligibility of the language in which it is expressed,

(h) whether or not and when independent legal or other expert advice was obtained by the party seeking relief under this Act,

(i) the extent (if any) to which the provisions of the contract and their legal and practical effect were accurately explained by any person to the party seeking relief under this Act, and whether or not that party understood the provisions and their effect,

(j) whether any undue influence, unfair pressure or unfair tactics were exerted on or used against the party seeking relief under this Act:

(i) by any other party to the contract,

(ii) by any person acting or appearing or purporting to act for or on behalf of any other party to the contract, or

(iii) by any person to the knowledge (at the time the contract was made) of any other party to the contract or of any person acting or appearing or purporting to act for or on behalf of any other party to the contract,

(k) the conduct of the parties to the proceedings in relation to similar contracts or courses of dealing to which any of them has been a party, and

(l) the commercial or other setting, purpose and effect of the contract.

(3) For the purposes of subsection (2), a person shall be deemed to have represented a party to a contract if the person represented the party, or assisted the party to a significant degree, in negotiations prior to or at the time the contract was made.

(4) In determining whether a contract or a provision of a contract is unjust, the Court shall not have regard to any injustice arising from circumstances that were not reasonably foreseeable at the time the contract was made.

(5) In determining whether it is just to grant relief in respect of a contract or a provision of a contract that is found to be unjust, the Court may have regard to the conduct of the parties to the proceedings in relation to the performance of the contract since it was made.”

32 Section 6 of the Contracts Review Act provides:

“6 Certain restrictions on grant of relief

(1) The Crown, a public or local authority or a corporation may not be granted relief under this Act.

(2) A person may not be granted relief under this Act in relation to a contract so far as the contract was entered into in the course of or for the purpose of a trade, business or profession carried on by the person or proposed to be carried on by the person, other than a farming undertaking (including, but not limited to, an agricultural, pastoral, horticultural, orcharding or viticultural undertaking) carried on by the person or proposed to be carried on by the person wholly or principally in New South Wales.

The operation of s 6 of the Act is a matter of importance: see Collins v Parker [1984] NSW ConvR 55-212 at 57,469 per Lee J and Coombs v Bahama Palm Trading Pty Ltd [1991] ASC 56-097 per Young J (as his Honour then was) at 57,025, but no issue as to the applicability of the Act was raised by the defendants.

33 In my opinion, s 9(2)(a), (h) and (j) and s 9(5) are relevant in support of the claim, on the basis that the Act is not precluded.

34 There are a number of points made in resistance to the claim for Contracts Review Act relief which do not depend on acceptance of Ms Yang and Mr Sui’s evidence, and these are:

(1) that Mr Zheng was an experienced businessman, that he spoke Mandarin and wrote Chinese, and that he understood the terms of the share agreement because he was given the document in Chinese;

(2) that Mr Zheng was keen to enter into the share agreement because he perceived it as assisting him to obtain an 892 visa;

(3) that Mr Zheng obtained a guarantee from Mr Sui and was entitled to the return of his money on obtaining an 892 visa or in May 2010, whichever was the earlier;

(4) Ms Yang asserts that Mr Sui told her that Mr Zheng had threatened him that he would kill Mr Sui and her; and

(5) the second share agreement was pursued after Mr Zheng had obtained independent advice.

35 I accept that Mr Zheng was a man of some business sophistication, but he had no such business experience in Australia. I accept that he wanted to enter into the share agreement because he believed that it would assist him to obtain an 892 visa. He believed that because Mr Sui told him that was the case. The giving of a guarantee by Mr Sui is a relevant matter, but it may turn out to be worthless, since one of Mr Sui’s arguments in resisting the guarantee is that Mr Zheng made no enquiry of Mr Sui as to how he would be able to repay the $200,000 if Ms Yang did not, with the implication that he will not be able to meet such an amount.

36 So far as the threats are concerned, it may be that Mr Sui told Ms Yang that Mr Zheng had threatened him and her (I make no finding to that effect), but the only evidence from Ms Yang as to what she heard Mr Zheng say was her evidence (see paragraphs 11-27 of her affidavit affirmed 17 January 2010) that she overheard Mr Zheng say to Mr Sui:

“Xiao Sui, I have been in business so many years, I have seen this type of things a lot! I never saw this type of woman in the past. If that woman doesn’t give back my money, I won’t let her rest properly. I don’t feel comfortable. I am losing my face!” (see the affidavit of Jing Yang affirmed 17 January 2010 at paragraph 16).

37 Even if that threat was made, it is a threat made by Mr Zheng to Ms Yang indirectly, it is not a death threat, and it came, accepting the evidence of Mr Zheng, after Ms Yang had refused to allow him a role in the management of the petrol station and her failure to repay money after Mr Sui said that she would. By the second half of July, Ms Yang had realised that there was a problem with the petrol station business continuing, by August it had not renewed the lease, and by then or by September it had closed down.

38 It is not established that Mr Zheng obtained legal advice when he asked for additional shares. On his evidence, which I accept, on 23 July he was advised by an accountant to see a solicitor (see (29) of [10] above), but there is no evidence of him having done so.

39 I think it is of considerable importance in the case that Mr Sui knew that Mr Zheng had no knowledge of the local laws or practices, and in the context of acting as his migration agent, encouraged him to enter into an investment that was most improvident, since it gave him shares that had no value. Mr Sui’s connection with the business was opaque, but it is clear that he was not simply an advisor to Mr Zheng and that he had an interest in Mr Zheng entering into the investment, demonstrated not only by his encouragement of Mr Zheng to invest, but his willingness to provide a guarantee. Were it not for the view that I take on the plaintiff’s principal claim for relief (on the assumption that s 6 of the Act did not present an obstacle to relief being granted), I would regard it as appropriate to set aside the first share agreement and the second share agreement.

Repayment of the plaintiff’s money under the share agreements

40 The first share agreement required Ms Yang to repay the $200,000 on Mr Zheng obtaining an 892 visa or after May 2010, whichever was the earlier. None of the parties contended that Mr Zheng would obtain an 892 visa before the end of May 2010, thus on 1 June 2010, Ms Yang was required to buy back the shares in Vision that were sold to Mr Zheng in 2008. There is no explicit provision that she should buy back the further two per cent of the shares for $16,666, but she accepted in her Defence that there was a term to that effect, and I think it is clear that is what was intended: see paragraph 37 of her Defence. Paragraph 51 of her affidavit sworn 24 June 2009, although not read in her case, made an admission that she was obligated to repay that amount. I do not accept that she meant to say only that she was morally obligated: see T320.46-T321.23. In this context, I should note that Ms Yang advanced the contention that it was Vision and not her which was required to repay the $216,666. That argument was not advanced in her Defence, and when an application was made prior to the hearing to withdraw the admission and amend the Defence, the application to amend was refused by McDougall J. An attempt was made before me to reventilate that issue, but I did not allow it: see T4 and T15-17.

41 Ms Yang having admitted that it was a term of the share agreements (inferentially including the second share agreement) that she repay the $216,666 at the end of May 2010, the only question is whether there is any impediment to that obligation crystallising on 1 June 2010 (assuming that Mr Zheng re-conveys the shares to Ms Yang).

42 Mr Moyle resisted the entitlement to judgment on a number of grounds:

(1) that the share agreement had been repudiated by Mr Zheng and that the plaintiff had no right to enforce an agreement that had come to an end;

(2) that the plaintiff did not have clean hands because: (a) he had made threats against Ms Yang after the payment by him of the $216,666; and (b) the share agreement was a sham designed to mislead the Commonwealth Government and New South Wales Government into believing that Mr Zheng had control over the Vision business and had invested money in it;

(3) that the money was not payable until the 892 visa was obtained; and

(4) that the declaration should refer to the 892 visa.

Repudiation

43 The submissions on behalf of Ms Yang focus on the “threats” to which I have referred and to demands made by Mr Zheng for the return of his money “made to her directly and to her indirectly through Mr Sui, and his threats to her safety and to Mr Sui’s safety were conduct which demonstrated his unwillingness or lack of readiness to perform his obligations pursuant to the same Agreements”: see Exhibit 3D7. By that letter dated 19 January 2010, Ms Yang purported to accept Mr Zheng’s alleged repudiation of the agreements.

44 There is no dispute that Mr Zheng wanted the return of his money. He was encouraged by Mr Sui to think that Ms Yang and Mr Sui would refund the money at an early stage (see the Zheng affidavit at paragraph 105). Mr Zheng did not refuse to perform any aspect of the agreement. There is no evidence of any aspect of the contract that he was required to perform and did not. There was no anticipatory breach.

45 More importantly, by July 2008 Ms Yang was in breach of the contract because she had refused to permit Mr Zheng to take any role in the management of the business and work, and did not appraise Mr Zheng of the need to negotiate a new lease, Vision’s difficulties in meeting the landlord’s demands and the expected delays with the car wash that led to Vision, again without any notice to Mr Zheng, abandoning the lease of the premises and in effect closing the petrol station. By August, or at the latest September 2009, she had closed the petrol station, and if it were relevant, by November 2009, the Carlingford car wash.

46 There are a number of ways of interpreting what occurred:

(1) That Ms Yang repudiated the share agreement and Mr Zheng accepted that repudiation by his conduct.

(2) That Ms Yang and Mr Zheng treated the agreement as at an end, that is, a mutual abandonment: see DTR Nominees Pty Ltd v Mona Homes Pty Ltd [1978] HCA 12; (1978) 138 CLR 423.

(3) That Ms Yang repudiated the agreement, but Mr Zheng has not accepted that repudiation.

(4) That Mr Zheng’s request for the return of his money amounted to a repudiation capable of acceptance.

(5) That Mr Zheng’s request for the return of his money did not amount to a repudiation, or if it did, it was not accepted as such by Ms Yang.

47 Mr Zheng has not pleaded a case of repudiation by Ms Yang and acceptance of it by him. Ms Yang has asserted repudiation by Mr Zheng. I do not think that a party in breach of contract, at least where the breach relates to a significant matter, can treat the other side’s response to that breach as itself a repudiation capable of being acted on: see the discussion at [10.35] of J W Carter, Breach of Contract (2nd ed., 1991), Law Book Company, Sydney.

48 I think that there is force in Mr Doyle Gray’s argument that making a demand for return of the money is not a repudiation of the agreement, but even if it could in theory be so, in this case I do not view it as such because of the bizarre circumstances, Mr Sui’s encouragement of Mr Zheng that he would receive his money back immediately, the conduct of Ms Yang, and the collapse of the petrol station business.

49 I conclude that there was no repudiation by Mr Zheng and that as at 1 June 2010 and subject to what follows, he is entitled to the return of his money in exchange for the shares in Vision.

Lack of clean hands

50 Mr Moyle contended that the share agreement was a “sham”. Ms Yang’s Defence does not raise such a contention and Mr Moyle did not mention that point when I asked him to outline the issues: see T4-7. Mr Doyle Gray contends that it is not open to Ms Yang (or Mr Sui) to run such an argument.

51 “Sham”, illegality and lack of clean hands are actually three distinct concepts: see, on the difference between illegality and lack of clean hands, R P Megher, W M C Gummow and M J Leeming, Equity: Doctrines and Remedies (4th ed, 2002), LexisNexis Butterworths, Sydney at [3.110] and footnote 15. I think that a party which seeks to contend that an agreement entered into by it is a sham must plead such a case. As Mr Doyle Gray accepted, the Court may come to such a view itself, but he contended that it is not open to a party to make such a case without it being pleaded. I accept that contention. I was troubled initially that the share agreement was drafted as an attempt to deceive the immigration authorities, but the share agreement carries on its face the agreement reached – namely that the shares were to be repurchased on the 892 visa being obtained and that the shares Mr Zheng was buying gave him no control of the company: see, on the requirements for a sham transaction, Sharrment Pty Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 49 and Esanda Ltd v Burgess [1984] 2 NSWLR 139 at 144D, 146G and 153C-G. So far as a lack of clean hands is concerned, Mr Sui encouraged Mr Zheng to believe that the agreement would enable him to obtain an 892 visa and did not tell him that there was anything illegal or improper about it. I think it is clear that Mr Zheng wanted a role in the day-to-day management of Vision, except during the period he spent in China (the terms of the first share agreement and his conduct reflect this), which role was not granted to him. If there was any intended deception of the authorities, it was one conceived by Mr Sui in connection with a plan that was to the benefit of Ms Yang, and I do not think that this is a case in which the Court should withhold relief from the plaintiff on the alternative basis of a lack of clean hands, even had it been pleaded.

52 So far as the other argument concerning threats is concerned, Mr Zheng was entitled to be angry by virtue of the conduct of Mr Sui and Ms Yang. A threat against another person’s life would amount to serious criminal conduct, and to be persuaded that such a threat was made, far more credible evidence than has been presented in this case would be required.

53 The argument that a declaration should not be made without reference to the 892 visa is a technical one. Everyone agreed that an 892 visa would not be issued before 1 June 2010. There is no point in referring to a qualification favourable to the plaintiff that the plaintiff does not seek. In any event, the time has now passed for the crystallisation of the obligation.

Mr Sui

54 The guarantee is signed by Mr Sui, and on its face, it guarantees that the $200,000 will be refunded (implicitly by Ms Yang) to Mr Zheng. Mr Sui raised a number of arguments against his liability in his oral submissions. First, he said that Mr Zheng was the author of the guarantee. Secondly, he said that Mr Zheng never asked him what assets he had or how Mr Sui would be able to provide the funds to meet Ms Yang’s obligations if she did not make the payment. Thirdly, he argued that the share agreement was illegal under s 505 of the Migration Act. On 16 April, he mentioned s 501 of the Migration Act, which does not benefit him either.

55 I find that Mr Sui was the author of the guarantee, but it would not matter if Mr Zheng was. So far as the failure of Mr Zheng to request information about Mr Sui’s ability to meet his obligations, that is completely irrelevant. So far as illegality is concerned, it was never pleaded by Mr Sui and cannot be raised in closing submissions (and in any event, s 505 of the Migration Act merely empowers the making of regulations to prescribe a criterion for visas). Further, given Mr Sui’s encouragement of the investment in Vision, I very much doubt that it is open to Mr Sui to assert illegality.

56 My conclusion is that:

(1) Subject to and upon the re-transfer to Ms Yang of all of the Class A shares in Vision held by Mr Zheng, Ms Yang is liable to repay to Mr Zheng the amount of $216,666.

(2) Mr Sui is, pursuant to the guarantee given by him, liable to pay the amount of $200,000 to Mr Zheng in the event that all of the Class A shares in Vision are re-transferred by Mr Zheng to Ms Yang and the money is not repaid by Ms Yang to Mr Zheng.

Orders and costs

57 I will hear the parties on the precise form of orders that should be made. I will also hear the parties on the question of costs.

Mr Sui’s answers to MARA

58 As I have mentioned, MARA, the authority that licenses and regulates migration agents, has previously sought answers from Mr Sui concerning his conduct. It is apparent that a number of Mr Sui’s answers to MARA (see Exhibit 1D1) are false. I should note in relation to Exhibit 1D1 that it contains, in addition to Mr Sui’s answers to MARA, other material of which no mention was made at the time it was marked as MFI 6 and as an exhibit: see T131, T132-135 and T185-186. That other material includes a latter addressed to “The Presiding Judge” in the form of a testimonial from the Deputy Mayor of Burwood Council, Ernest Wong, and a statement of Mr Sui, both of which I have disregarded.

59 I direct that a copy of these reasons, together with the transcript of evidence of Mr Sui and his affidavit of 16 July 2009, be forwarded by the Registrar in Equity of this Court to the Chief Executive Officer of MARA.

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LAST UPDATED:
20 July 2010