Supreme Court New South Wales Medium Neutral Citation: In the matter of Atlas Advisors Australia Pty Ltd [2022] NSWSC 705 Hearing dates: 30 November; 1–3 December; 7–8 December; 10 December; 14 –16 December 2021; 18 January 2022; 28 April 2022, 4-5 May 2022. Date of orders: 30 May 2022 Decision date: 30 May 2022 Jurisdiction: Equity - Corporations List Before: Black J Decision: The First Plaintiff succeeds in respect of the Second Tredmore Investment, the Third Plaintiff succeeds in respect of the Lili Investment and the Plaintiffs collectively fail in their claim against Ms Zhuang. Parties are to bring in their agreed orders or their respective orders and submissions within 14 days. Catchwords: CORPORATIONS — Financial services — Misleading or deceptive conduct — Where claims relate to representations said to have been made as to the security or safety of investment in certain financial products — Where plaintiffs plead several representations as to safety, existence of mortgages, rate of return, existence of guarantees, and the extent and nature of the due diligence process — Whether there was a further representation that the relevant fund was "very safe" —Where representations made orally in Mandarin and in written Chinese — Whether the representations were misleading and deceptive and causative of loss suffered by the plaintiffs. CORPORATIONS — Financial services — Unconscionable conduct — Statutory unconscionability — Whether conduct of the defendants "unconscionable" in the circumstances — Where allegations of vulnerability or relationship of dependence. Legislation Cited: - Australian Securities and Investments Commission Act 2001 (Cth), ss 12DA, 12DB, 12CA, 12CB, 12GF, 12GM - Corporations Act 2001 (Cth), ss 991A, 1041E, 1041F, 1041H - Evidence Act 1995 (NSW), ss 136, 140 Cases Cited: - Armagas Ltd v Mundogas SA [1985] 1 LI R - Australian Competition and Consumer Commission (ACCC) v CG Berbatis Holdings Pty Ltd (2000) 96 FCR 491; (2000) 169 ALR 324; [2000] FCA 2 - Australian Securities & Investment Commission v Cycclone Magnetic Engines Inc (2009) 71 ACSR 1; [2009] QSC 58 - Australian Securities and Investments Commission (ASIC) v Elm Financial Services Pty Ltd (2005) 55 ACSR 544; [2005] NSWSC 1065 - Australian Securities and Investments Commission (ASIC) v GetSwift Ltd [2021] FCA 1384 - Australian Securities and Investments Commission (ASIC) v Kobelt (2019) 267 CLR 1; (2019) 368 ALR 1; [2019] HCA 18 - Australian Securities Commission v Macleod (2000) 22 WAR 255; (2000) 34 ACSR 135; [2000] WASCA 101 - Australian Securities & Investment Commission v Narain (2008) 169 FCR 211; (2008) 66 ACSR 688; [2008] FCAFC 120 - Australian Competition and Consumer Commission (ACCC) v Quantum Housing Group Pty Ltd (No 2) [2020] FCA 802 - Australian Competition and Consumer Commission (ACCC) v Quantum Housing Group Pty Ltd (2021) 388 ALR 577; (2021) 151 ACSR 98; [2021] FCAFC 40 - Australian Securities and Investments Commission (ASIC) v Wealth and Risk Management Pty Ltd (No 2) (2018) 124 ACSR 351; [2018] FCA 59 - Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34 - Broughton v B&B Group Investments Pty Ltd [2017] VSCA 227 - Browne v Dunn (1894) 6 R 67 - CH Real Estate Pty Ltd v Jainran Pty Ltd [2010] NSWCA 37 - Changizi v Rizaie [2021] NSWSC 613 - Dawson v LNG Holdings Pty Ltd [2008] NSWSC 137 - Houghton v Arms (2006) 225 CLR 553; [2006] HCA 59- Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 2) [2008] FCA 810 - Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets (No 6) (2007) 63 ACSR 1; [2007] NSWSC 124 - Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Market Ltd (2008) 73 NSWLR 653; (2008) 252 ALR 659; (2008) 68 ACSR 595; [2008] NSWCA 206 - Jagatramka v Wollongong Coal Ltd [2021] NSWCA 61 - Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; (2011) 276 ALR 375; [2011] HCA 11 - Macleod v Australian Securities and Investments Commission (2002) 211 CLR 287; (2002) 191 ALR 543; (2002) 76 ALJR 1445; (2002) 43 ACSR 1; [2002] HCA 37 - Musa v Alzreaiawi [2021] NSWCA 12 - National Companies & Securities Commission v Monarch Petroleum NL [1984] VR 733; (1984) 8 ACLR 785; (1984) 2 ACLC 256 - Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449; [1992] HCA 66 - New South Wales v Hunt (2014) 86 NSWLR 226; [2014] NSWCA 47 - R v Albuino (2001) 80 SASR 416; (2001) 165 FLR 335; [2001] SASC 397 - Re IW4U Pty Ltd (in liq) (2021) 150 ACSR 146; [2021] NSWSC 40 - Samm Property Holdings Pty Ltd v Shaye Properties Pty Ltd [2017] NSWCA 132 - SDS Corporation Ltd v Pasdonnay Pty Ltd [2004] WASC 26 - Stav Investments Pty Ltd v Taylor [2022] NSWSC 208 - Swiss Re International SE v Simpson [2018] NSWSC 233; (2018) 354 ALR 607 - Sutton v AJ Thompson Pty Ltd (in liq) (1987) 73 ALR 233 - Varma v Varma [2010] NSWSC 786 - Ventouris Enterprises Pty Ltd v Dib Group Pty Ltd [2010] NSWSC 963 - Watson v Foxman (1995) 49 NSWLR 315 - Yorke v Lucas (1985) 158 CLR 661; (1985) 61 ALR 307; [1985] HCA 65 Texts Cited: - G Golding "Underwriters' liability in Australian securities offerings" (1993) 11 C&SLJ 401 - J Harris & S Webbey, "Personal liability for corporate disclosure problems" (2011) C&SLJ 463 - S Minns & G Golding, "Prospectus Due Diligence – A Focussed Approach" (1993) 11 C&SLJ 542 Category: Principal judgment Parties: Tredmore Pty Ltd as trustee for the Xue Family Trust (First Plaintiff) Lijuan Xue (Second Plaintiff) Lili Xue (Third Plaintiff) Atlas Advisors Australia Pty Ltd (First Defendant) Wenyan Zhuang also known as Fiona Zhuang (Second Defendant) Representation: Counsel: M E Einfeld QC/E Young (Plaintiffs) P Knowles/S Danne (Defendants) Solicitors: MC Lawyers & Advisers (Plaintiffs) Watson Mangioni Lawyers (Defendants) File Number(s): 2020/71911 Judgment 1. By their Originating Process filed on 5 March 2020, Tredmore Pty Ltd ("Tredmore") as trustee for Xue Family Trust, Ms Lijuan Xue (to whom I will refer as "Ms Xue") and Ms Xue's sister, Ms Lili Xue, bring claims against Atlas Advisors Australia Pty Ltd ("Atlas") and Ms Fiona Zhuang in relation to their investment of $4.8 million into an investment fund known as the "QCAX Australian Property Income Fund II (Commercial Series)" ("Steller Fund"). They seek relief under several provisions of the Corporations Act 2001 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth) ("ASIC Act") including several declarations and an order that Atlas and Ms Zhuang pay damages or compensation to them under ss 991A and 1041I of the Corporations Act or under ss 12GF and 12GM of the ASIC Act. 2. The Second Plaintiff, Ms Xue, is the sole director and shareholder of Tredmore. Ms Xue pleads that she was born and raised in mainland China and lived and worked in mainland China until about January 2017 (FASC [6]-[7], partly admitted in Defence [6]-[7]). She pleads that, at all material times, she could speak, read, and understand only the Mandarin language and could not speak or read English and understood little or nothing of the English language (FASC [8]-[9], not admitted Defence [8]-[9]). However, her Counsel accepted in the proceedings that, at least at the time of the trial, she at least had an understanding of simple English and I am left uncertain as to the extent of that understanding and the timing at which it was obtained. It plainly does not follow that because, understandably, Ms Xue is more fluent and more comfortable in speaking and reading in her first language, that she had or has little or no understanding of English, particularly given Ms Zhuang's evidence (which I accept) as to the extent to which English is taught within the Chinese educational system. 3. Ms Xue pleads that, at all material times, she knew little or nothing about Australian culture, whether business or social (FASC [10], not admitted Defence [10]). Whether or not that was true, I will find below that it did not give rise to any relevant vulnerability of Ms Xue in business matters. As I noted above, Ms Lili Xue is Ms Lijuan Xue's sister and she resides in London. 4. The First Defendant, Atlas, held an Australian financial services licence which authorised the provision of general financial advice and not personal advice. The Second Defendant, Ms Zhuang, was one of its directors, described as an "Executive Director", and held a 20% shareholding in Atlas. Mr Guy Hedley, who is not joined as party to the proceedings and did not give evidence, was the executive chairman and chief executive officer of Atlas. Affidavit evidence 1. Before turning to the affidavit evidence, I should note that the representations on which the Plaintiffs relied in this case are partly alleged to have been made orally, although the Plaintiffs also rely on several statements made in an exchange of WeChat messages as to which a contemporaneous record is available. It is important in this context to have regard to the fallibility of human memory which increases with the passage of time, particularly where disputes or litigation intervene: Watson v Foxman (1995) 49 NSWLR 315 at 318-319; Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 2) [2008] FCA 810 at [41]; Varma v Varma [2010] NSWSC 786 at [424]-[425]. Credit issues here need to be determined in respect of particular conversations, and I have regard to the fact that objective evidence, where available, is likely to be the most reliable basis for determining them: Armagas Ltd v Mundogas SA [1985] 1 Ll R 1 at 57; State of New South Wales v Hunt (2014) 86 NSWLR 226; [2014] NSWCA 47 at [56]; Re Colorado Products Pty Ltd (in prov liq) (2014) 101 ACSR 233; [2014] NSWSC 789 at [10]. The principles applicable to assessing claims for representations in oral form were helpfully summarised by Slattery J in Ventouris Enterprises Pty Ltd v Dib Group Pty Ltd [2010] NSWSC 963 at [87] as follows: "The principal conduct of the defendants that [the plaintiff] alleges was misleading or deceptive was the speaking of words in the course of a series of conversations. Special considerations apply when assessing alleged misleading and deceptive conduct in such a context. It is necessary that the words spoken be proved with a degree of precision sufficient to enable the Court to be reasonably satisfied that they were in fact misleading in proved circumstances: Watson v Foxman & Ors (1995) 49 NSWLR 315 at 318 per McLelland CJ in Eq. In assessing whether spoken words were misleading the Court may have to examine relatively subtle nuances flowing from the use of one word, a phrase or a grammatical construction rather than another or the presence or absence of some qualifying word, phrase or condition: Watson v Foxman & Ors (1995) 49 NSWLR 315 at 31. The fallibility of human memory and the overlaying of memory with perceptions of self interest leading to sub conscious reconstruction are all hazards of ordinary human experience to which a Court must be alert in assessing whether particular spoken words are misleading or deceptive: Watson v Foxman & Ors (1995) 49 NSWLR 315 at 319. Ultimately each element of the cause of action must be proved to the reasonable satisfaction of the Court which means that the Court "must feel an actual persuasion of its occurrence or existence". Such satisfaction is "not obtained or established independently of the nature and consequences of the fact or facts to be proved", including the "seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding": Helton v Allen (1940) 63 CLR 691 at 712." 1. I also note that the allegations made by the Plaintiffs against Atlas and Ms Zhuang are plainly of a serious character. The Plaintiffs allege, inter alia, that Atlas contravened ss 1041E and 1041F of the Corporations Act, which are offence provisions, and that Ms Zhuang was a person knowingly involved in that contravention. Mr Einfeld went so far in opening as to characterise the Steller Fund as amounting to a Ponzi scheme, a form of fraudulent market conduct, and he submitted that Atlas and Ms Zhuang knowingly took advantage of Ms Xue's alleged vulnerability. In determining these allegations, I have regard to the approach identified in Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34 and its equivalent under s 140 of the Evidence Act. Where a party advances allegations of impropriety, the Court must take account of the gravity of the matters alleged in deciding whether the inference should be drawn and, although the standard of proof remains proof on the balance of probabilities, the strength of the evidence necessary to establish a given fact to the civil standard may vary according to the nature of what it is sought to be proved. In Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 110 ALR 449 at 449–450; [1992] HCA 66, the plurality observed that: "The ordinary standard of proof required of a party who bears the onus in civil litigation in this country is proof on the balance of probabilities. That remains so even where the matter to be proved involves criminal conduct or fraud. On the other hand, the strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what it is sought to prove. Thus, authoritative statements have often been made to the effect that clear or cogent or strict proof is necessary 'where so serious a matter as fraud is to be found'. Statements to that effect should not, however, be understood as directed to the standard of proof. Rather, they should be understood as merely reflecting a conventional perception that members of our society do not ordinarily engage in fraudulent or criminal conduct and a judicial approach that a court should not lightly make a finding that, on the balance of probabilities, a party to civil litigation has been guilty of such conduct." [citations omitted] Section 140 of the Evidence Act 1995 (NSW) similarly provides that, in a civil proceeding, the Court must find the case of a party proved if it is so satisfied on the balance of probabilities and that, without limiting the matters that the Court may take into account in deciding whether it is so satisfied, it is to take into account the nature of the cause of action or defence, the nature of the subject matter of the proceeding and the gravity of the matters alleged. I approach the evidence in the Plaintiffs' claim on that basis. 1. The Plaintiffs rely on Ms Xue's affidavit dated 4 March 2020. Her evidence is that she had little or no understanding of the English language (Xue 4.3.20 [16]) and that she started living in Sydney on a permanent basis from 4 January 2017 (Xue 4.3.20 [17]). She refers to having managed a transportation business while in China and invested in mainland Chinese property developments, "always making sure that such investments were safe investments, and avoiding any investments that had any significant degree or risk" (Xue 4.3.20 [20]). She goes further in emphasising her risk aversion, giving evidence that: "It was and is important to me to make sure that my assets progressively increase, and not reduce in value, and so I have always actively avoided investments that had any significant possibility of making a loss, and have always emphasised these requirements to my advisors relating to my investments. Investments that carry the significant possibility of making any loss constitute a significant risk to me." (Xue 4.3.20 [21]) It is, of course, possible for an investor to avoid investments that have any significant possibility of loss, although it is difficult to see how an investment that has no risk and no significant possibility of making a loss could generate anything more than the risk free rate of return at that time. I will return to that matter below. 1. Ms Xue also refers, in evidence admitted with a limiting order as a submission and not proof of fact under s 136 of the Evidence Act, to her reliance upon Ms Zhuang to assist her with her "day-to-day needs" including the requirements for her significant investor visa ("SIV") application, the making of SIV compliant investments, the establishment of companies and trusts and other matters, and to her having socialised with Ms Zhuang. Her evidence is that she invested approximately $15 million in various "Atlas related investment schemes" recommended by Ms Zhuang, including through Tredmore. Ms Xue initially did not explain the source of those funds, although issues in that respect arose in her cross-examination. The dispute in this matter relates to a proportion of the investments made by Tredmore and Ms Xue through Atlas. 2. Ms Xue again returns to her investment objectives in her affidavit evidence, indicating that one of her "main goals" was to purchase a home with a value of approximately $10 million once she acquired permanent residency. She repeats once more her risk aversion, observing (Xue 4.3.20 [32]) that: "Except for an $800,000 investment made by me on behalf of my younger sister, the principal and expected returns from the investments that are the subject of these proceedings were to be used for the purposes of me buying a residential property in Sydney to live in. Accordingly I only wished to invest in safe investments with little to no likelihood of loss. I explained this to [Ms Zhuang] on many occasions during my discussions with her, so often that I cannot remember precisely how many times, usually saying to her things like 'it has to be safe', 'I don't want risk', and 'I cannot lose money'. These indications to her were the same even from my first meeting with her in which I said: 'I can only have safe investments here [in Australia], I don't want to lose any money'." 1. Ms Xue also refers to several communications with Ms Zhuang, which I will address in dealing with the chronology and alleged representations below. Ms Xue also refers to her experience in China of investing in single property development projects backed by security in the form of a mortgage over the property and land (Xue 4.3.20 [38]), although it appeared from her cross-examination that she had only invested in only one such project, and had also been involved in development activities in China on a much larger scale than her evidence suggested. Ms Xue's first affidavit also seeks to establish her reliance on Ms Zhuang in respect of day-to-day activities in Australia and to Ms Zhuang's assistance with the arrangements for the enrolment of her son at a private school and to Ms Zhuang's communications with the school in respect of day-to-day issues with her son's schooling. 2. Ms Xue's first affidavit also refers to several representations said to have been made by Ms Zhuang in person and by WeChat communications, including that the Steller Fund was secured by mortgages; there were personal guarantees; the investment was "low risk", "risk free" and "very safe"; as to the level of presales and a Government requirement for presales; as to the similarity of the Steller Fund to property investments in China; and that the Steller Fund had "no risk of losing your capital" (Xue 4.3.20 [126]). I will return to that evidence in dealing with the Plaintiffs' representational case below. Ms Xue then returns to the question of the risk of the investment (Xue 4.3.20 [130]), giving evidence that: "As I explained to [Ms Zhuang] as set out above, because the money the plaintiffs were investing into the Steller Fund was going to be used for funding the purchase of my new home in Sydney, and for any balance of which I was using for my SIV, it was imperative to me that the plaintiffs' investment be the safest possible. As set out above, I had often told [Ms Zhuang] about the importance of this as part of my investment plans both generally and in relation to the Steller Fund, as it was the money I was going to use for the purchase of my first Australian home when I obtained permanent residency. Further, this loss has also affected the interest income which I have relied upon to meet my daily living expenses." That proposition leaves open, of course, the question of the level of risk attached to the "safest possible" investment generating return of 10% per annum, where Ms Xue also appears to have wished to achieve that return. 1. Ms Xue's evidence in that affidavit is also (Xue 4.3.20 [137]) that: "I've only ever wished to deal with highly reputable financial companies who operate strictly legally and in accordance with Government regulations, whether in China or in Australia." 1. By a second affidavit dated 3 June 2020, Ms Xue clarified her earlier evidence that she had first met Ms Zhuang at Sydney Airport in July 2015, by indicating that she had no "specific recollection" whether she had previously met Ms Zhuang in China in March 2015 or earlier. Little turns on that matter. 2. By a third affidavit dated 13 August 2020, Ms Xue responded to aspects of Ms Zhuang's affidavit dated 10 July 2020 and took issue (Xue 13.8.20 [5]) with any proposition that risk and return had any correlation. Her evidence is that she would not have agreed to three investments totalling $4.8 million "where the risk of losing money had not been protected against" and she there referred to having received $2.8 million from overseas sources, which she did not identify, in late May 2017 (Xue 13.8.20 [6]). She referred (Xue 13.8.20 [8]) to her first investment with Atlas, which appears to have been a relatively low risk product involving an investment through Atlas in a bank issued product. She denied that she required higher levels of return and indicated that she was "mainly concerned with preserving my capital at all times, even if it came at the expense of a lower return" (Xue 13.8.20 [9]). I pause to note that Ms Xue's evidence here implied that she recognised a linkage between the risk of an investment and its return, although she was reluctant to concede that matter at the hearing as I note below. Ms Xue also gave evidence of matters of which she had not been informed by Ms Zhuang or Atlas concerning a Mr Burstin's role with Atlas Property Investment Management Pty Limited ("APIM") and his association with Steller Group, which I address below, and to the impact those matters would have had on her decision-making, if disclosed. Ms Xue also denied that she used a translation application in order to translate documents from English to Chinese and again denied that she was provided with an information memorandum in respect of the Steller Fund (Xue 13.8.20 [22]). 3. Ms Xue there denied (Xue 13.8.20 [33]) having had a conversation with Ms Zhuang relating to her having a business that was partly or wholly a State owned enterprise in China or to her relationship to the Olympic Village in Beijing or elsewhere and claimed that: "I have never had any such relationships, dealings or associations, nor have I said anything to that effect to anyone." The evidence that emerged in Ms Xue's cross-examination indicates that that statement was either false or substantially incomplete. 1. Ms Xue's evidence in reply was also that (Xue 13.8.20 [60]): "Based on the advice received from [Ms Zhuang], I assessed the Steller Fund as being barely riskier than a bank bond or a term deposit facility given that it was backed by first mortgage's [sic] over land and buildings, and on that basis still considered investment safe and reasonable in that it could attract a return of 10%. Had I known that the Steller Fund was not secured by first mortgages over land and buildings, and that there was a real risk that I could lose part or all of my capital, the Plaintiffs would not have invested in the Steller Fund even if it offered a much higher potential investment return." Part of that evidence was admitted with a limiting order under s 136 of the Evidence Act as directed to Ms Xue's position as distinct from the other Plaintiffs' position. Ms Xue also addressed her prior investment experience in China in respect of the rates of return on investments. 1. By a further affidavit dated 12 November 2021, Ms Xue gave self-serving evidence, plainly affected by hindsight and the manner in which her legal advisers had structured the affidavit, that she would not have caused the Plaintiffs to invest with Atlas in the Steller Fund if she had known any of the several matters on which the Plaintiffs rely for their misleading and deceptive conduct case, as follows: "I refer to paragraphs 40C(c) and 41 of the Plaintiffs' Further Amended Statement of Claim. Had I known any of the following matters in April or May 2017, I would not have caused the Plaintiffs to invest any money with the First Defendant in its QCAX Australia Fund II (Steller Fund): (a) that no mortgage security was taken or given over the properties (Properties) identified in Schedule 1 of the Commercial Loan Master Facility Deed dated 2 February 2017 (Deed) made between the First Defendant and Steller Developments Pty Limited (Developments); (b) that the current valuations of the Properties were not held by Developments or the First Defendant; (c) that the Properties were not all owned by Developments, nor that contracts were not in place for their acquisition and/or development by Developments; (d) that the Properties were not in each case zoned for non-residential use as required by the Deed; (e) that in the circumstances of (d) above, Developments was in immediate default (or alternatively was arguably in immediate default) of its obligations under the Deed, whereby the First Defendant under clause 10.2 of the Deed acquired the right to rely upon such default so as to bring the loan the subject of the Deed to an immediate end; (f) that the financial position of Developments had deteriorated substantially in the months prior to April 2017, in that its net assets had fallen by approximately 76%; (g) that there was no material from which Atlas could properly determine that revenue earned by Developments from its development of the Properties would suffice to pay interest to the Plaintiffs quarterly at the rate of 10% per annum for two years and to enable repayment of the principal invested by them in the Steller Fund; (h) that the defendants had no knowledge of the terms of the personal guarantees in relation to the investments in the Steller Fund, nor of the net assets of the persons or entities providing these guarantees; and (i) that Michael Burstin was a director and had an indirect interest in one or more of the Steller group of companies." 1. By a further affidavit dated 6 December 2021, Ms Xue addressed a number of matters which have been raised in cross-examination, including her purchase of a house at Frenchs Forest. The consistent theme of Ms Xue's evidence is that she relied on Ms Zhuang in respect of all of these matters and signed documents that were in English that she could not read or understand. Ms Xue was subsequently issued a penalty notice because of her failure to comply with Foreign Investment Review Board requirements in respect of that house. Ms Xue's evidence (Xue 6.12.21 [11]) was that she did not know, at the time of buying or after she bought the Frenchs Forest house, that she was not complying with the "proper requirements", although her evidence does not indicate any real effort on her part to do so. She also addresses a document headed "Memorandum of Understanding" between her company, Tredmore Group Pty Ltd, and Beijing Olympic Village Investment Pty Ltd, which appears to have a connection with the Steller Group, since the document was signed by Mr Smedley, a director of the Steller Group. Ms Xue's evidence is that she could not read or understand that document and Ms Zhuang asked her to sign it before the Plaintiffs sent their money to invest in the Steller Fund. It is not necessary to address that document further, where the Defendants do not rely on it in answer to the Plaintiffs' case. 2. Ms Xue also there addresses the existence of litigation between a company with which she was associated and another company in China, and her evidence is that that dispute was finalised in the Chinese Courts before 2017, and her bringing $2 million to Australia to pay the Steller Fund was not connected with the disputes in that case. She also refers to property preservation orders made against her in the Chinese Courts, which she says were not made until 2020 and 2021 and related to disputes which arose after the Plaintiffs' investments in the Steller Fund in 2017. She also addresses the source of the monies paid into the Steller Fund on 4 May 2017, which it appears were transferred from a joint venture company in China to Tredmore Group Pty Ltd and then to Tredmore Pty Ltd. Ms Xue says, in evidence admitted with a limiting order under s 136 of the Evidence Act so that it is not proof of the asserted fact, that the representative of the other shareholder in the joint venture company consented to her taking the money out of the joint venture company, where Ms Xue's mother had put that money into the company. Ms Xue's affidavit annexed a financial report of Tredmore Group Pty Ltd for the year ended 30 June 2017, as to which the director's declaration had not been signed and the accountant's assurance had not been given, which it appears was recently prepared for the purposes of these proceedings. I would have given no weight to that document, if it had been necessary to rely on it in order to determine any relevant issue. 3. As I noted above, at the commencement of Ms Xue's cross-examination, Mr Einfeld indicated that she could understand and speak "a few words" of English (T82). She gave evidence through a Mandarin interpreter and was cross-examined at length. I will refer to aspects of Ms Xue's cross-examination in dealing with particular issues below. Mr Knowles submits that Ms Xue's affidavit evidence should be given little weight given the manner in which it was prepared, and the fact that it was apparent from Ms Xue's cross-examination that she did not understand significant aspects of it. Mr Knowles submitted: "Ms Xue confirmed to the Court that her affidavit evidence had been prepared by her lawyers in English, a language Ms Xue represented to the Court that she cannot read, beyond perhaps a few words. It was then translated for Ms Xue, orally, by a translator … although Ms Xue indicated that she relied upon a "Google Translate" document (T229:1-3) (which is not in evidence), before she swore the affidavits. Ultimately, the outcome of this process is reflected in the following exchange (T229:5-10): Q. So, is this fair about this affidavit, that these are not really your words, they are words prepared by a lawyer which you have then agreed with? A. INTERPRETER: Correct. Q. Is that the same for all of your affidavits in these proceedings? A. INTERPRETER: Yes. This was further illustrated by an exchange in relation to Ms Xue's evidence concerning her allegations of Mr Burstin's supposed conflict, which apparently greatly disturbed her in respect of the Relevant Investment and indeed forms a part of her pleadings (T236:39 – T237:50 and T239.12-17): Q. Did you meet [with your lawyers] to discuss this particular affidavit? A. INTERPRETER: No. Q. Can I ask you to turn to paragraph 13, which is at page 58? … They're not your words, are they, they're words that your solicitor prepared for you? … A. INTERPRETER: Yes, that's the words of the lawyer. Q. Is it right to say that you were concerned about not being informed that Mr Burstin was a director and major beneficiary of the Steller Group entities? A. INTERPRETER: Yes. Q. By the Steller Group entities, do you include Steller Developments Pty Ltd? A. INTERPRETER: I don't know. Q. What do you mean by Steller Group entities? A. INTERPRETER: I don't know. … That was a research done by my lawyers. … My lawyer told me that there was some association. There was an association of, of trade between them which I don't know about the specifics. Q. You don't know what the specifics of the association were? A. INTERPRETER: I don't need to know about that much. My lawyer told me that there was an association of trades between them. So, that's all I need to know. … Q. …Is this a fair summary of your evidence, that your concern is that Michael Burstin had a trade association with the Steller Group entities, but you're not sure of what that association [w]as and you're not sure what companies make up the Steller Group entities? A. INTERPRETER: Correct." 1. Mr Knowles also points to reversals in Ms Xue's evidence as to her understanding of the relationship between risk and return, to which I return below. He submits, and I accept, that Ms Xue was reluctant to make concessions as to matters adverse to the Plaintiffs' case, either claiming not to understand the question, notwithstanding that it had been interpreted for her and she had no difficulty with other questions of a similar character, or responding to a questions in a non-responsive manner. Mr Knowles also submits, and I accept, that Ms Xue's evidence of her reliance upon Ms Zhuang overstated that reliance and substantially understated her business experience, intelligence, and capacity to make independent judgment. It seems to me that that is significantly adverse to Ms Xue's credit, where it underpinned a significant part of her evidence. 2. Mr Einfeld defended Ms Xue's credit in closing submissions. Mr Einfeld also there drew attention to authority as to the scope of the rule in Browne v Dunn (1894) 6 R 67, and to the discussion of that rule in Broughton v B&B Group Investments Pty Ltd [2017] VSCA 227 at [110] and SAMM Property Holdings Pty Ltd v Shaye Properties Pty Ltd [2017] NSWCA 132 (at [137]) where McColl JA recognised the significance of that rule for fair trial between the parties, and the assessment of the reliability and accuracy of a witness, but also observed (at [142]) that a trial judge is not obliged to accept evidence, even if it was not subject to cross-examination, where it is inconsistent with other evidence that he or she accepted or was "inherently incredible". Mr Einfeld submitted that Mr Knowles had not challenged Ms Xue as to the content of the alleged representations and her reliance on those representations in cross-examination. It seems to me that it was always clear that that matter was in issue, where Ms Xue and Ms Zhuang gave significantly different accounts of the conversation; Mr Knowles had put Ms Zhuang's account of the conversation to Ms Xue (T205-206); and Mr Knowles had also cross-examined Ms Xue at some length as to her affidavit claiming reliance on the representations, in the form in which they were pleaded, to which I referred above (T228ff). I am satisfied that the challenge to Ms Xue's evidence was sufficiently raised by Mr Knowles' cross-examination, notwithstanding Mr Einfeld's submissions in that regard. 3. Mr Einfeld also pointed out that Ms Xue was cross-examined, among other matters, as to the circumstances in which she had removed money from a joint venture company in China, and I accept that there was plainly an implication in parts of that cross-examination that she did so to seek to avoid those assets being available in China, if judgment were given against Ms Xue in ongoing litigation between the shareholders in that company. I accept the Plaintiffs' submission, in closing, that if Ms Xue had transferred the first $2 million from the joint venture company to Tredmore and then into the Steller Fund in haste to avoid the risk of the Chinese litigation, that would not prevent finding that Ms Xue relied upon representations made by Atlas, in determining whether not to invest in the Steller Fund, although it would have undermined Ms Xue's evidence as to her motivations in that investment. I do not reach any finding adverse to Ms Xue in respect of any aspect of the removal of those funds from China, and it is not necessary to address that question further to determine these proceedings. Mr Einfeld also submits, by reference to authority, that rejection of one part of a witness' evidence does not necessarily lead to the rejection of all of that witness' evidence. I broadly accept that proposition, although it seems to me that the effect of rejection of part of a witness' evidence must depend upon the extent of the evidence that is rejected and upon whether the witness' evidence in cross-examination left the Court without confidence that his or her evidence could safely be accepted. 4. I am not persuaded that Ms Xue's evidence is reliable and it seems to me that it was, at best, reconstructed and tailored to her perception of what would assist or damage her case in cross-examination. In particular, Ms Xue resisted admitting any matter in cross-examination that she thought was adverse to that case, unless she was left with no alternative other than to do so, and on occasion maintaining denials even after they had become patently unsustainable. I will refer to examples supporting that finding, particularly in relation to her understanding of the level of risk attached to the investments, below. 5. By an affidavit dated 4 June 2020, Ms Lili Xue gave evidence that she had "authorised" Ms Xue to act on her behalf with respect to her $800,000 investment capital and in these proceedings and did not further explain her investment objectives, the rate of return she sought on that investment or level of risk tolerance. Unsurprisingly, given the somewhat perfunctory character of her evidence, Ms Lili Xue was not required for cross-examination. 6. The Plaintiffs also relied on several affidavits of Ms Lina Ma sworn 4 March 2020, 27 April 2020, 3 June 2020, 13 August 2020 and 15 November 2021 and an affidavit of Ms Linxue Hu dated 6 December 2021 relating to translation of Ms Xue's affidavits. The Plaintiffs also read a further affidavit of Dr Wang dated 6 December 2021, which relates to the translation of a document concerning a transfer of funds, apparently out of the joint venture company. 7. By an expert report dated 18 September 2021, parts of which were not read and parts of which were admitted on a limited basis, Mr Barnes addressed town planning issues in respect of several sites being developed by the Steller Group, including sites in Victoria at Station Road, Cheltenham; Hampden Street, Hampden; and Coppin Street and Swan Street, Richmond (Ex P1). 8. By an expert report dated 26 September 2021, Mr McMaster, who has substantial experience as a financial adviser and in training financial advisers, expressed his view as to aspects of the investment in the Steller Fund, including reaching conclusions as to whether that investment was a "safe" or "very safe" investment. In summary, he concludes that that investment was a high risk investment for several reasons, consistent with the matters put by the Plaintiffs to seek to falsify the pleaded representations. I address Mr McMaster's evidence as to specific issues below. Mr McMaster recognised in that report that risks associated with investment in the Steller Fund were disclosed by Atlas in the information memorandum, although he noted Ms Xue's claim not to have seen it prior to investing in the Steller Fund, and indeed he relied on Atlas' disclosure of those risks to establish that they existed and Atlas knew of them. Mr McMaster also addressed the risk profile of the Steller Fund from June 2017 to June 2019, but it is not necessary to address that matter where the Plaintiffs' claim relates to representations made at the time of the original investment in the Steller Fund and any claim in respect of any reinvestment in May 2019 was abandoned. 9. Mr Knowles refers to a significant error made by Mr McMaster in assessing the financial position of Steller Developments Pty Ltd ("Steller Developments"), which I address below, the fact that the basis of the assumptions made by Mr McMaster was unclear, and that some of those assumptions appear to reflect McMaster's own investigations and depend upon findings of fact which he rather than the Court has made. Mr Knowles also points out, and I accept, that Mr McMaster prepared his report by reference to the obligations of a financial adviser giving personal financial advice, although neither Atlas nor Ms Zhuang acted in that capacity. Mr Knowles submitted, in summary: "To be clear, the defendants do not contend that Mr McMaster was a dishonest witness. Further there are aspects of Mr McMaster's report which are not challenged and which are, frankly, statements of the obvious. It may be accepted that investment in property development carries certain inherent risks and it may also be accepted that one way of seeking to mitigate (but not eliminate) those risks is to take mortgages over real property assets ... However, in light of the above issues, little weight should be given to the report of Mr McMaster in relation to matters which are in contest." 1. It seems to me that a first difficulty with Mr McMaster's report is that he has reached his conclusions by reference to the standard of what a licensed financial adviser would do in providing personal advice to a client, as he makes clear, for example, in paragraph 36 of that report. Mr McMaster acknowledged in cross-examination that his opinions had been given on the basis that a licensed financial adviser would take into account the particular characteristics of the investor, because he or she was obliged to do so, and that he was giving evidence by reference to what a reasonably competent financial adviser would do in giving personal financial advice, and that he had approached all of the questions in his report that referred to the role of a financial adviser on that basis (T278). The difficulty with that approach, which was fundamental, was that it is common ground that Atlas was not a financial adviser providing personal advice to a client but a financial product issuer providing general advice, which is not required or permitted under Chapter 7 of the Corporations Act to take the client's personal circumstances into account. The conclusions expressed by Mr McMaster as to what a licensed adviser providing personal advice would have done are irrelevant to the matters that I have to decide. 2. A second difficulty with Mr McMaster's report is that he based his opinions on his review of the pleadings, the affidavit evidence and other documents, including documents that are not in evidence such as transcripts of public examinations into the failure of the Steller Group, rather than on identified assumptions. That significantly undermines the utility of his report, since it is impossible to know the extent to which his opinions depend on matters of fact that he has decided for himself or assumed, but not identified, which do not reflect evidence before the Court or the findings that the Court has reached. 3. A third difficulty with Mr McMaster's report is that he had a tendency to assert conclusions without identifying either the documents or facts on which they were based or any reasoning process from which those conclusions were derived: for example, in paragraph 30, as to what would have been revealed by a "proper" due diligence process. It should be well understood by experts, but I again emphasise, that a bare ipse dixit by an expert which does not identify the information on which it is based or the reasoning process supporting it, should be given little or no weight by a Court. A fourth difficulty is that Mr McMaster frankly concludes his report by observing that the opinions contained in it are "subjective" and "formed on the basis of his industry experience and observation". While an expert can properly give evidence by the application of his expertise and experience to assumed facts, that does not provide a licence for the expression of the expert's "subjective" views, as distinct from the application of expertise and accepted professional standards to proved or provable facts, in providing an expert report to the Court. I found Mr McMaster's evidence to be of limited assistance. 4. By a report dated 1 October 2021 (Ex P3) Dr Wang addressed the translation of WeChat messages relied on in the proceedings, which became an increasingly problematic issue as the hearing continued and the parties (or at least the Defendants) recognised that the Plaintiffs' pleading and the Defendants' response to representations stated in English may have neglected the subtlety of statements originally made orally in Mandarin or in written Chinese. 5. Turning now to the evidence on which the Defendants rely, by her affidavit dated 10 July 2020, Ms Zhuang set out her professional qualifications and refers to her role within the Atlas business and the nature of that business. She notes that Atlas began the process of developing products "backed by real property developments" by approaching potential developers in 2015 and 2016, and indicates the criteria which Atlas applied in identifying such developers, and refers to the identification of Steller Group through inquiries and research coordinated by Mr Burstin, who had expertise in property investment, particularly in the Melbourne region (Zhuang 10.7.20 [31]). She refers to information reviewed by APIM (which was a joint venture with Mr Burstin) in respect of the Steller Group. She also identifies the factors that made Steller Group attractive as a potential investment, including that the Steller Group focused on multiple smaller projects with higher turnover, the areas in which it was undertaking development and the nature of its customer base and the identity of Steller Group's then directors (Zhuang 10.7.20 [34]). Ms Zhuang also refers to her identification of the features that the relevant product should include, and to having satisfied herself that the several documents relating to the Steller Fund's dealings with the Steller Group satisfied those requirements (Zhuang 10.7.20 [36]-[39]). She also gave evidence (admitted with a limiting order under s 136 of the Evidence Act as her understanding) as to Mr Burstin's involvement in monitoring and reporting on Steller's development activities (Zhuang 10.7.20 [45]). Ms Zhuang also outlined her dealings with Ms Xue (Zhuang 10.7.20 [47]ff), and I address Ms Zhuang's evidence of several meetings and conversations with Ms Xue in the chronology of events below. Ms Zhuang also addressed Ms Xue's further investments in dealings with Atlas (Zhuang 10.7.20 [92]ff). It is not necessary to address those matters in order to determine these proceedings. Ms Zhuang also responded to aspects of Ms Xue's affidavit dated 4 March 2020. In particular, she provided a response to the allegation that Ms Xue was "reliant" on her, and pointed to the limited services which she provided to Ms Xue. 6. By a second affidavit dated 15 November 2021, Ms Zhuang addressed the role of APIM and Mr Burstin and noted that APIM was a joint venture arrangement between Atlas and Mr Burstin providing introductions to developers. I address that evidence in dealing with that issue below. By a further affidavit dated 6 December 2021, Ms Zhuang annexed screenshots of her mobile phone referring to communications with Ms Xue in late March, April and May 2017. By a further affidavit dated 7 December 2021, Ms Zhuang referred to an issue as to the production of legible copies of documents, and also addressed a policy of Atlas by which she was excluded from current issues relating to assistance provided by Atlas to the liquidators of Steller Developments. Ms Zhuang was cross-examined, with some effect, as to the use of the phrase "eschew any participation" in those discussions and it seems that that phrase likely originated with the solicitors drafting the affidavit rather than Ms Zhuang. This was, regrettably, not the first or most important example in these proceedings of a witness' evidence being distorted by the manner in which it was prepared or expressed. 7. Mr Einfeld submitted, in closing submissions, that Ms Zhuang: "frequently became an advocate on her own and Atlas's cause, rather than giving the product of her actual recollection." Mr Einfeld also submitted that Ms Zhuang did not limit herself to "actual recollection" in her evidence. I do not accept that is a matter for criticism of her evidence, where Ms Zhuang was frequently asked questions which could only be sensibly answered by reference to Atlas' or her usual practice, where she would not have had a specific recollection as to what was done several years ago, but an answer that she "did not recall" would not have revealed relevant evidence to what was likely to have occurred. He also handed up an aide memoire in oral closing submissions identifying suggested "contradictions" in Ms Zhuang's affidavit and oral evidence. Some of these seem to me to arise from the length of her affidavits and cross-examination, where no witness is infallible, and include corrections of her affidavit evidence; some arise from her identifying matters which were not fully addressed in her affidavit evidence because their significance was not appreciated, as often occurs in a lengthy cross-examination of an intelligent witness; and some suggest a degree of reshaping of her evidence to support Atlas' and her position, and a degree of advocacy for that position, which I recognise below. I have had regard to all of the other criticisms made of Ms Zhuang's evidence, although I do not address them individually. 1. Mr Knowles in turn defended Ms Zhuang's credit in closing submissions. He observed, fairly, that the criticisms of Ms Zhuang's evidence were made by reference to a lengthy cross-examination. He also submitted that: "Ms Zhuang is, understandably, heavily and personally invested in the outcome of these proceedings. In that context, it would be explicable if, at times, she had attempted to stray into the realms of advocacy in the course of her evidence. She did not do so. Ms Zhuang was concise and forthright in her evidence to the Court and made appropriate concessions. Her oral evidence was broadly consistent with her written evidence, noting the expansion referred to above with respect to limited translation/language issues, and her evidence should be accepted." 1. It seems to me that Ms Zhuang was a precise witness, with a strong understanding of the structure of the relevant financial products, and her answers were often more precise than the questions she was asked in cross-examination. I accept that there was a degree of advocacy in Ms Zhuang's evidence, although that is perhaps understandable given the nature of the attacks which had been advanced against Atlas and her, including an unjustified allegation of involvement in a Ponzi scheme and an allegation that Ms Zhuang was knowingly involved in misleading Ms Xue and taking advantage of her asserted vulnerability. I am left with a degree of uncertainty as to whether the precision in her approach operated, at some times, as a way of avoiding uncomfortable questions, but it is not necessary to determine that question in order to determine the proceedings. 2. It appears that Ms Zhuang was in reasonably regular communication with Mr Hedley during her cross-examination, and believed he was listening to the proceedings, although it is not apparent she discussed the particular content of her cross-examination with him (T505). That communication at least appears to have extended the steps to be taken in the proceedings, including leading any further evidence, although it is not apparent that it addressed the specific evidence that she was giving in cross-examination. An important issue also arose in cross-examination (for example T547ff) when Ms Zhuang, in the course of her cross-examination, became more cautious as to the accuracy of translation of exchanges that originally took place in Mandarin, both in computer generated translations made by WeChat, and in her own affidavit. It was understandable that Ms Zhuang should be more cautious of that issue, given the developments in her cross-examination that had placed the accuracy of translations in close focus, which I will address below. 3. Ms Zhuang explained, plausibly (T549) that, at the time she had given her affidavit, she had not understood the extent to which translation would become a significant issue in the proceedings. Ms Zhuang's evidence was also that the texts of conversations set out in her affidavit were short summaries of more detailed conversations (T551). I am inclined to accept that evidence, which likely reflects what generally occurs when witnesses give evidence of the effect of conversations that took place some years previously. Difficulties also arose to the extent that Ms Zhuang had recorded matters in her affidavit, from which she later retreated in cross-examination on the basis that she now claimed not to recall them (T574). I recognise that there were occasions on which Ms Zhuang claimed not to remember matters that had occurred, including matters that occurred relatively recently, and I am uncertain as to the accuracy of her evidence in that respect. Ultimately, little turns on the criticisms of Ms Zhuang's evidence given the findings which I reach on other grounds below, which do not depend on that evidence. 4. In closing submissions, Mr Einfeld points to several witnesses who were not called by the Defendants, namely Mr Hedley, who was Atlas' chair and was involved in its due diligence exercise; Mr Burstin, whose role I will address below; representatives of PMC Legal, a law firm which, on Ms Zhuang's evidence, was retained to assist with Atlas' due diligence in respect of the Steller Fund and the Steller Group; and an employee of Atlas, Ms Wang. Mr Einfeld relies on the rule in Jones v Dunkel, as explained in Kuhl v Zurich Financial Services Ltd (2011) 243 CLR 361; (2011) 276 ALR 375; (2011) HCA 11 and Musa v Alzreaiawi [2021] NSWCA 12 at [78], as permitting an inference that evidence would not have assisted the case of the party that did not lead that evidence, and permitting the Court to draw an inference unfavourable to the party who failed to call the witness with greater confidence, where the uncalled witness could cast light on that inference. 5. Mr Knowles responds that there was no need for the Defendants to call Mr Hedley to duplicate Ms Zhuang's evidence and the issues in respect of due diligence did not require Mr Hedley's evidence. He makes the same point in respect of Mr Burstin and submits that there is no evidence to believe that Mr Burstin is available to give evidence for the Defendants, where he was not and is not an employee of Atlas, and ceased to be a director of the joint venture company, APIM, on 17 April 2019. He submits that the issue as to due diligence did not require that evidence be led from PMC Legal, to the extent it had assisted Atlas with due diligence, and that there was no issue as to the assistance that Ms Wang had provided to Ms Xue to require her to give evidence. He submits, and I accept, that the rule in Jones v Dunkel does not permit an inference that evidence not called by a party would have been adverse to it and does not operate to fill gaps in the Plaintiffs' case: Jagatramka v Wollongong Coal Ltd [2021] NSWCA 61 at [49], [88]. 6. It seems to me that the only witness who was likely to be able to cast light on whether the oral representations alleged to have been made in April 2017 were made, Ms Zhuang, was called, and the Plaintiffs have failed to establish those representations. An inference that Mr Hedley's evidence would not assist the Defendants, in respect of the conduct of due diligence, does not assist the Plaintiffs where the relevant representation was not made. It was not established that Mr Burstin or PMC Legal are within Atlas' camp so that it would be expected to call them. There does not appear to be any factual contest as to the nature of the administrative services provided by Ms Wang to Ms Xue as to which it would be expected that Ms Wang would be called, although there is plainly an issue as to whether the provision of those services gave rise to any vulnerability on Ms Xue's part. Chronology 1. Turning now to the chronology of events, the Plaintiffs plead that, while Ms Xue was still living and working in China, she was introduced to Atlas and Ms Zhuang by the China Construction Bank ("CCB"), and Ms Xue and Ms Zhuang first spoke to each other by telephone in about early 2015 (FASC [11]-12], partly admitted Defence [11]-[12]). They plead (FASC [13.2], partly admitted Defence [13]) that Ms Zhuang advised Ms Xue in early 2015 that, inter alia: "Atlas and Ms Zhuang were able to take care of Ms Xue in relation to all aspects of Ms Xue's needs relating to Ms Xue moving to Australia, applying for a [SIV] and making SIV compliant investments in Australia." 1. Ms Zhuang's evidence is that she first met with Ms Xue on 14 March 2015 in Beijing (Zhuang 10.7.20, [50]-[54]), and she provided an information memorandum and application form for an earlier investment to Ms Xue at that meeting in March 2015, and she notes those products were in English. Her evidence is that she observed Ms Xue use software applications to translate documents from English to Chinese in the course of her later dealings with Ms Xue (Zhuang 10.7.20 [54]). However, I also recognise that Ms Xue later appears to have adopted a practice of asking Ms Zhuang to translate day-to-day correspondence for her after she arrived in Australia, and Ms Zhuang did so by using software applications. 2. On or about 1 April 2015, Ms Xue invested approximately $5,000,000 in another fund, the QCAX CCB fund, which was managed by Atlas ("CCB Investment") (Zhuang 10.7.20 [56]). The CCB Investment was a fixed income bank deposit product, based on a bank deposit bond held with CCB, which had a return of 3.6% per annum (Zhuang 10.7.20 [52]; Ex J1, 1135) for a period of four years (T101). Ms Zhuang's evidence is that she provided a brief oral outline of the product and a copy of the information memorandum to Ms Xue, about two weeks before Ms Xue emailed to Ms Zhuang the completed application form and made the investment (Zhuang 10.7.20 [50]-[56]). 3. Ms Zhuang's evidence is that Ms Xue first arrived in Australia on 20 June 2015 (Zhuang 10.7.20 [64]). The Plaintiffs in turn plead (FASC [16], denied Defence [16]) that, from about July 2015, Ms Xue was "reliant" on Ms Zhuang for advice as to numerous matters. I find below that she used Atlas, Ms Zhuang and another Atlas employee, Ms Wang, to provide services as to many of those matters, but was not in any relationship of vulnerability to them. 4. From 17 February 2017, Ms Xue made several investments totalling $1.9 million in the "Tasman" or "Epping" Fund ("Tasman Fund"), after a meeting between Ms Xue and Ms Zhuang on 14 February 2017. Ms Zhuang's evidence is that Ms Xue there said (Zhuang 10.7.20 [71]): "I have $500,000 to invest. Do you have any products? I want a high yield – it has to be close to 10% for 1 to 1.5 years." I will return to the relationship between investment return and investment risks, and Ms Zhuang's evidence as to her understanding of that matter, below. 1. Ms Zhuang's evidence is that she referred at that meeting to a product involving a loan to a Sydney property developer with a project in Epping, where a bank rather than Atlas had a mortgage and the relevant Atlas fund had personal and group guarantees, and she explained to Ms Xue why no mortgage was available as follows: "In today's market, the Bank would not let us have a mortgage, but we have tried to manage the risk with personal and group guarantees. In Australia, normally a developer purchases the land first, and the Bank as first lender will take a mortgage. The developer will then go and seek development approval and try and do pre-sales at the same time to meet the Bank's requirements for construction funding." Ms Zhuang's evidence is that Ms Xue then asked what would occur if the developer defaulted, Ms Zhuang addressed that possibility and, when Ms Xue asked why the fund took "group guarantees", Ms Zhuang responded: "Often developers will set up separate companies for different developments, in order to try and contain risk. This is why we aim to get both personal and group guarantees – so the fund's interests are aligned with the developers." That conversation, which I accept occurred in substantially these terms, makes it significantly less likely that Ms Xue ever had an understanding that a mortgage would be available over development properties and also provided a fair explanation of the structure of the Atlas property funds, and a similar structure was later adopted for the Steller Fund. 1. Ms Zhuang's evidence is that she also provided Ms Xue with a copy of the information memorandum for the Steller Fund, which indicated that that arrangement was not secured by a mortgage (Zhuang 10.7.20 [73]). Ms Xue took issue with that account in her evidence in reply and, in cross-examination, also responded that she was told there was a mortgage in relation to the Tasman Fund (T232). Ms Xue subsequently returned a copy of the signed application form in connection with that investment (Ex J1, 1353) to Atlas, which included a Mandarin translation and declared immediately prior to the signing block that: "This Application was detached from an information memorandum for the following fund" (before the Tasman Epping Investment Series is selected) and confirmed that "I/we read and understood that information memorandum". I will note below that the application form for an investment in the Steller Fund took substantially the same form. 1. Ms Zhuang's evidence is that Ms Xue relocated to Australia in January 2017 (Zhuang 10.7.20, [70]). Ms Zhuang also notes many inquiries made by Ms Xue in respect of that relocation and after she arrived in Sydney and refers to the fact that Ms Zhuang obtained assistance from Ms Wang, a client investment manager at Atlas, in order to deal with the frequency of Ms Xue's requests. Ms Zhuang's evidence (Zhuang 10.7.20 [69]) is also that, although Ms Xue made numerous requests of her to perform tasks in Australia, or to give advice, Ms Xue was capable of making independent decisions and seeking assistance from others, and Ms Zhuang gave examples where Ms Xue had done so. 2. The Plaintiffs plead (FASC [26], denied Defence [26]) that, at a meeting at Atlas' offices in January 2017, Ms Xue orally informed Ms Zhuang that: "26.1 Most of Ms Xue's investment experience in China was to invest in single property development projects where the project was backed with a security in the form of a mortgage over the property and land being developed; 26.2 The banks that Ms Xue used in China always did a lot of checking into the property developments that were seeking investment funds, and decided whether the development proceeded or not; 26.3 Ms Xue only wished to make investments that were safe; 26.4 Ms Xue only wished to make investments that had no or very little risk of loss; 26.5 Ms Xue was not prepared to lose money on investments in Australia; and 26.6 The reason that Ms Xue wanted to ensure the investments did not lose money was because both the principal and returns of such investments were to be used to buy a residential property in Sydney of approximately $10 million." 1. It is not strictly necessary to reach a finding as to whether Ms Xue made statements in those terms, given the findings that I reach below. If she had made those statements, the first of them would have been false, given the scale of her commercial activities in China; the third did not fairly reflect Ms Xue's understanding of the relationship between investment risk and investment return, which she belatedly acknowledged in cross-examination, or the fact that she required a higher rate of return on her investments; and the sixth was, at best, significantly incomplete as an explanation of the circumstances in which she removed funds from China in early 2017. 2. The Plaintiffs also plead (FASC [27], denied Defence [27]) that Ms Zhuang informed Ms Xue at that meeting that Atlas was a careful company; that Atlas would do due diligence in relation to Ms Xue's investments; and that "Ms Zhuang would make sure that all of Ms Xue's investments made by or for Ms Xue through Atlas had no risk and would be safe." I accept there were references to the safety of investments in communications between Ms Xue and Ms Zhuang, but it seems to me that Ms Xue could not have understood and did not understand a reference to "safety", as she claimed at times in cross-examination, as involving "no risk". 3. A Commercial Loan Note Master Facility Deed ("Deed") dated 2 February 2017 was executed between Atlas and Steller Developments and established the basis on which Atlas would lend funds raised from investors to Steller Developments for the acquisition and/or development of the properties identified in Schedule 1 of that Deed. A letter dated 2 February 2017 from Atlas to Steller Developments (Ex J1, 1327-1349), on the same date as the Deed was signed, noted that the Steller Fund would invest in debt-based securities issued by Steller Developments and "secured over commercial real property (as defined in Schedule 1 of the Steller Commercial Subscription Deed dated 2 February 2017) with a view to delivering investors with a preferred investment return rate" and sought a representation that Steller Developments "will hold secured investments in the properties identified in the Steller Master Subscription Deed (Schedule 1) with any Fund monies received" and would not directly invest in Australian residential real property with fund monies or make other residential real property investments with specified exclusions, which appear to have been directed to the SIV requirements. I bear in mind Mr Einfeld's submissions as to the terms of the Deed and the assurance letter of the same date (Plaintiffs' closing submissions [65]ff). 4. Ms Zhuang gives evidence of Ms Xue's subsequent investment in the Steller Fund, following communications commencing on 30 March 2017 (Zhuang 10.7.20 [75]ff). Ms Zhuang's evidence is that Ms Xue told Ms Zhuang in a conversation on that date that she was looking at making an investment in Australian or US dollars and requested options "as soon as possible"; Ms Zhuang noted that Atlas could buy USD corporate bonds for her but fairly pointed out that Ms Xue would obtain a better yield by buying USD products in Hong Kong through her private bank relationship for US dollar investment; Ms Xue then asked whether Atlas had "anything else" and Ms Zhuang responded that: "We also have a Melbourne-based property investment product. It aims for a 10% yield and it is a similar structure to the Tasman product that you invested in previously." Ms Xue there explains that the reference to the "Tasman product" was to another Atlas property fund, the "APIF 1 Epping Fund Product". Ms Xue responded by expressing her interest and noting that she was "planning to transfer more funds to Australia" (Zhuang 10.7.20 [75]). There were subsequent WeChat exchanges concerning that matter. 1. A further meeting took place between Ms Zhuang and Ms Xue at Atlas' office on 6 April 2017 regarding Atlas' Steller Fund and a microequities investment product (Zhuang 10.7.20 [77]-[80]). I will refer to Ms Xue's and Ms Zhuang's evidence of that meeting in dealing with the Plaintiffs' pleaded representational case below. 2. Another meeting took place between Ms Xue and Ms Zhuang on 4 May 2017, although the Plaintiffs do not rely on anything said at that meeting to found their representational case. Ms Xue signed an application form in respect of Tredmore's investment of $2 million in the Steller Fund at that meeting, which recorded that Ms Xue was the investor and identified Tredmore as trustee for the Xue Family Trust as the relevant company, trust, or superannuation fund. Her evidence is that that form was not completed in her handwriting, although it is common ground that she signed it. The form contains a representation, by the execution of the application form, that the investor is an eligible investor which is investing at least $500,000 at one time (excluding superannuation sourced monies), and that was the case here; that the investor understands that the Steller Fund is currently an unregistered management investment fund; that neither the repayment of capital nor the performance of the Steller Fund is guaranteed; and the investor acknowledges that the application was detached from an information memorandum for the Steller Fund and that the investor had read and understood that information memorandum and agreed to be bound by the terms of the information memorandum and the trust deed for each fund. Each of those statements is translated into Chinese text and the statement acknowledging that the investor had read and understood the information memorandum and was bound by it appears immediately above Ms Xue's signature. Ms Xue's evidence in cross-examination was that she signed the application form because she had been asked to do so and did so without "having a look" and she claims she did not read the two matters immediately above her signature before signing the document (T211). I am not persuaded that I should accept that evidence and I have held above that, in any event, Ms Zhuang had been provided with that information memorandum at the meeting in April 2017. 3. Ms Xue's evidence is that she then caused a transfer of $2 million from Tredmore to Atlas on 4 May 2017 (Xue 4.3.20 [41]) and the corresponding investment of $2 million in the Steller Fund took place on 8 May 2017 for a period of 2 years ("First Tredmore Investment"). 4. An exchange of WeChat messages then took place between Ms Xue and Ms Zhuang on 4 May 2017, after the $2 million had been transferred from Tredmore to Atlas but before it had been invested in the Steller Fund ("4 May WeChat exchange"). I will address that exchange in dealing with the second aspect of the Plaintiffs' representational case below. 5. The Plaintiffs also rely on a letter dated 8 May 2017 from Steller Property Funds Pty Ltd signed by Mr Burstin as its chief executive officer and addressed to Australian Executor Trustees Limited (which was the custodian of the Steller Fund), which attached an investments notes certificate representing a $2 million investment in the Steller Commercial Loan Notes. Again, that appears to be intended to demonstrate that Mr Burstin had an association with the Steller Group. 6. A further WeChat exchange took place on 14 May 2017, although that exchange is not relied on in respect of the Plaintiffs' representational case. Ms Xue's evidence (Xue 4.3.20 [60]) is that that communication occurred, again by WeChat, before Tredmore's second investment and Ms Lily Xue's investment, as follows: Xue: "Dear, this is very safe right? To be honest, the more money I put with you, the more worried I get. Please help me to ensure." Zhuang: "Well, I know your requirements, so I only suggest the very safe products to you. I have high yield products as well, but I didn't suggest them to you." 1. By her affidavit dated 10 July 2020 (Zhuang [130]-[131]), Ms Zhuang responds to Ms Xue's evidence in respect of that exchange which she translates as follows: Xue: "The product is safe yes? To be honest, I placed lots of funds with you (your company), the more money the more worried I am. You need to examine them closely to determine its safety." Zhuang: "Well, I know what you're asking for, so all products that are very safe will come to you. I still have high profit products, but I haven't presented them." 1. On 24 May 2017, Tredmore invested a further $2,000,000 with Atlas in the Steller Fund (Ex J1, 496) ("Second Tredmore Investment") and, also on 24 May 2017, Ms Lili Xue invested $800,000 with Atlas in the Steller Fund (Ex J1, 497) ("Lili Investment"), and those funds were transferred to the Steller Group on 26 May 2017 (Xue 4.3.20 [43]-[44]). The total investments made by Tredmore and Ms Lili Xue in the Steller Fund were by then $4.8 million (Xue 4.3.20 [47]). 2. On 1 June 2017, Tredmore also invested $1,000,000 with Atlas in the Microequities Emerging Companies Value Fund ("Microequities Fund") (Zhuang 10.7.20 [82]; Ex J1, 1706). Ms Zhuang's evidence is that, prior to Ms Xue making that investment, she had advised Ms Xue that the Microequities Fund had a historical return of over 20% and was speculative in nature, with high risk and volatility (Zhuang 10.7.20 [79]). 3. Between June 2017 and March 2019, distributions totalling $882,585.60 were paid in relation to the Plaintiffs' investments in the Steller Fund (Zhuang 10.7.20, [98]). Members of the Xue family and Tredmore subsequently made further investments in a range of Atlas products from July 2017. Ms Zhuang was also cross-examined about a meeting in March 2019, at which the Steller Group unsuccessfully sought to persuade Atlas to make a further investment of $50 million into a separate Steller line of business, concerning aged care, and her evidence was that other options were identified by the Steller Group, including the Atlas notes being paid back over a longer period. 4. A meeting between Ms Zhuang and Ms Xue took place on 22 April 2019 (Zhuang 10.7.20 [99]). The Plaintiffs' investments in the Steller Fund matured in May 2019 but were not then withdrawn from the Steller Fund. The Plaintiffs do not press part of their claim that relates to that matter. 5. A receiver and manager was appointed to Steller Developments on 1 July 2020. Ms Xue's evidence is that, on 2 July 2019 she received a phone call from Ms Zhuang who informed her of the appointment of receivers to the Steller Fund. She claims that Ms Zhuang then advised her: "Don't worry, you will get your money back within six months because Atlas is providing a guarantee for your investment in the Steller Fund. I am sorry this caused a delay to the purchase of your home." No claim is brought by the Plaintiffs by reference to that matter. On 3 July 2019, Atlas then sent an email to investors in the Steller Fund advising them of the appointment of receivers to the Steller Fund (Ex J1, 1575). An administrator was subsequently appointed to Steller Developments on 20 December 2019 and a liquidator on 6 March 2020. The April 2017 representations 1. The Plaintiffs plead (FASC [40], largely denied Defence [40]) that, at the meeting in April 2017 to which I referred above, Ms Zhuang made several oral representations to Ms Xue. Mr Einfeld rightly accepts, in closing submissions, that a central issue in the case concerns the making of representations by Atlas to Ms Xue in April and May 2017 and Ms Xue's reliance upon them in causing the Plaintiffs to invest $4.8 million into the Steller Fund. While Mr Einfeld characterises those representations as directed to the "integrity and soundness" of the Steller Fund, the case which the Plaintiffs pleaded and which I have to determine depends upon a series of specific representations made on two occasions, each of which are said to be falsified in a specific way. 2. Mr Knowles in turn rightly submits that: "In relation to each of the claims relating to misrepresentation, or otherwise in connection with misleading and deceptive conduct, the Court is obliged to first answer the "quintessential question of fact", as to whether the alleged representations were made and, if they were, were misleading or deceptive or likely to mislead or deceive. This is an objective question that is to be determined by considering the conduct of the person who made the representation as a whole viewed in the context of all relevant surrounding facts and circumstances: Butcher v Lachlan Elder Realty (2004) 218 CLR 592 at [109]; Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [102]; Australian Competition and Consumer Commission v Telstra (2004) 208 ALR 459 at [49]." 1. These representations rest on Ms Xue's and Ms Zhuang's evidence of what was said at a meeting in April 2017, although a second part of that case relies on a WeChat exchange in May 2017, which I address below, after the first $2 million had been invested in the Steller Fund by Tredmore. Ms Xue's affidavit evidence, which was in error as to the date of that meeting, was as follows (Xue 4.3.20 [36]-[37]): "A few days later in or around late April 2017 I met with [Ms Zhuang] at the Atlas offices to discuss the proposed Steller Fund investment, during which [Ms Zhuang] said the words to the following effect: [Ms Zhuang]: The development is secured by mortgages and is zero risk. The investment will pay a return of approximately 10% per annum and is a single site project with presales of 50 to 70% already in place and that construction of the project cannot start until this minimum has been met. Xue: Has Atlas done its own due diligence? [Ms Zhuang]: Atlas has its own due diligence team and has done a report on the Steller Fund, confirming that it's safe. We would not be recommending this investment to you if it was not safe. Xue: How can you do due diligence if the project is in Melbourne? [Ms Zhuang]: Atlas has arranged and sent a dedicated person to Melbourne to do on site inspections and due diligence." What Fiona told me about the Steller Fund made me feel reassured that it was a safe investment, with little or no risk of losing any money, and likely to pay about 10% interest per annum if I invested in it." 1. Ms Xue's evidence in cross-examination was that Ms Zhuang told her at that meeting that the properties were secured by mortgages in favour of the Steller Fund and Ms Xue maintained that was her "basic requirement" for investment in the Steller Fund, and that Ms Zhuang had also told her that the Steller Fund had no risk and there were 50-75% presales in each of the developments (T206). Ms Xue maintained her affidavit evidence that Ms Zhuang had told her that the Steller Fund operated on a similar basis to Chinese property developments and told her of "due diligence, mortgagee, guaranteed by directors, group guarantee" which were also Ms Xue's "basic requirements" for an investment (T207). 2. Ms Xue also sets out several other representational statements said to have been made by Ms Zhuang in paragraph 126 of that affidavit, which are not linked to any particular date or occasion or placed in the context of any evidence of the larger conversation, and which are not relied on in the Plaintiffs pleaded representational case by reference to the April and 4 May representations, as follows: "In particular, at various times throughout our interactions both in person and via WeChat communications, in addition to the WeChat communications I have referred to above regarding the Steller Fund, [Ms Zhuang] has said to me directly in person: [Ms Zhuang]: "The Steller Fund is secured by mortgages over real estate owned by the Issuer. In addition, there are personal guarantees. The Steller Fund is for a single site project. The Steller Fund is low risk. The Steller Fund is risk free. The Steller Fund is very safe. My office colleagues are investing in the Steller Fund. The Steller Fund has 50%-70% of the properties in each development subject to presales. This is required by government regulations, otherwise construction cannot not legally be commenced. The gross realisation value of each development is effectively secured, which eliminates sales risk. The holding company of the issuer of the notes to the Steller Fund, guarantees the investment. Steller Fund operates on a similar basis to large scale property investments in China that you know, where the bank does a thorough due diligence into the risk of ach development before agreeing to give funding for the projects. Steller Fund will allow you to redeem part or all of your investment by buying residential apartments at the prices which applied at the original date of your investment in the Steller Fund. In the Steller Fund there is no risk of losing your capital." 1. I am comfortably satisfied that this evidence is, at best, a reconstruction not linked to any particular recollection by Ms Xue of any particular conversation, and does not advance the Plaintiffs' representational case pleaded by reference to the April meeting and the 4 May 2017 WeChat exchange, which I address below. 2. Ms Zhuang also gave evidence of her April meeting with Ms Xue in her first affidavit, as follows: "Ms Xue then asked of other potential investment products during a conversation in words to the following effect: "Ms Xue: I am thinking of settling up a family trust. I have more money to transfer to Australia. What is the other investment that I could invest in that you mentioned: Ms Zhuang: We have a product at the moment called Steller, the developer is based in Melbourne. Ms Xue: What is the return? I am expecting the yield to be around 8-10%. The funds can be invested for 2 to 3 years. Ms Zhuang: It aims for a 10% return. Ms Xue: Do you have any other high yield products? Ms Zhuang: There is also a micro equity fund issued by Microequities. The fund has a historical return of over 20% but this investment focus is solely on micro-cap stocks listed on the ASX and it is speculative in nature. The manager has a very good record, but there is high risk and the performance is difficult to predict. The investment is highly volatile and are very easily impacted by market events. The fund is in a deep value fund, which means that the manager tries to identify stocks that have market prices much lower than their true value. The fund then buys them and looks to hold on to the stock for 3 to 5 years with the aim that those stocks will recover in value over time. The fund only accepts investments on a monthly basis, when the fund will be opened to take in capital at month-end. Ms Xue: What is the property investment like? Ms Zhuang: Steller is a property developer based in Melbourne. Steller develops smaller commercial and residential projects than other developers, but has more of them. It is well known in the Melbourne market. Ms Xue: Is it safe? Ms Zhuang: There are personal and group guarantees. The guarantors include two directors from two very well-known and wealthy Melbourne families. The issuer and the guarantors guarantee the punctual payment of interest distributions and the repayment of initial capital. Atlas has a due diligence team that has done due diligence on the developments. The projects are located in affluent areas of Melbourne. Because they are smaller and focused on people living in Melbourne, turnover is faster and there is less risk of low occupancy or problems with foreign investor restrictions. There is also less risk of development application problems because the developments are not so large. Atlas will have someone in Melbourne during the development to keep track of progress. Ms Xue: Ok, I will think about it. Ms Zhuang: No problem. These documents contain information about the products. If you decide that you wish to invest, please let me know. 1. I then handed copies of the following documents regarding the Steller fund and the micro equities fund to Ms Xue: (a) Investment Memorandum (pages 882 to 888 of the Exhibit); and (b) Application Form (a completed copy of which appears at pages 889 to 891 of the Exhibit). It is my practice to always provide a potential investor with a copy of an Information Memorandum in respect of the potential investment, before they make any such investment. Having been provided with the documents, Ms Xue then left Atlas' offices with copies of them." 1. Ms Zhuang's affidavit evidence, part of which was admitted with a limiting order under s 136 of the Evidence Act as her understanding and not proof of the fact, was in turn (Zhuang 10.7.20 [87]-[88]) that: "I considered the Steller investment to be very safe (particularly in the context of an investment with a target yield of 10%, and particularly compared to Ms Xue's decision to invest in a micro-equities fund which is speculative and volatile). I held this view on the basis of the due diligence performed by Atlas, the Steller Developments Property covenant …, the Steller Representations …, and the reasons discussed with Ms Xue on 6 April 2017 (in response to her query as to whether or not Steller was safe). Those reasons included that: (a) It was a debt product, rather than an equity style product. (b) There were personal and group guarantees. (c) It was for a fixed term with a given maturity date. (d) It provided for a fixed yield. (e) The guarantors included two directors from well-known and very wealthy Melbourne families. (f) Some of my colleagues were also investing in Steller, which gave me confidence in the product. (g) Steller's development products were located in affluent areas in Melbourne's south east corridor. Steller's projects were predominantly sold to local buyers as opposed to overseas buyers, and were smaller projects with higher turnover than over developments. Steller therefore had less exposure to risk of low occupancy or foreign investment restrictions than other developments." Ms Zhuang also refers to other officers or employees of Atlas who in fact invested significant amounts in the Steller Fund. 1. By contrast with Ms Zhuang's evidence that she handed an information memorandum and application form for the Steller Fund and the Microequities Fund to Ms Xue at the meeting on 6 April 2017, in accordance with her general practice, Ms Xue's evidence in her first affidavit was that she only received the information memorandum for the Steller Fund and the Deed Poll governing the Steller Fund on or around 8 August 2019 (Xue 4.3.20 [48]) and her evidence in cross-examination was that she did not read that information memorandum at the time of Tredmore's investment in the Steller Fund (T212). Mr Einfeld submits that the Court should not accept Ms Zhuang's evidence that she handed Ms Xue a copy of the information memorandum and application form relating to the Steller. I do not accept that submission. I am comfortably satisfied that I should prefer Ms Zhuang's evidence that she provided the information memorandum to Ms Xue on 6 April 2017 to Ms Xue's evidence to the contrary. While I recognise that Ms Zhuang's evidence likely depends on her evidence of her practice, it seems to me that that evidence is consistent with the probabilities, since an information memorandum is both a disclosure mechanism and a risk mitigation mechanism for a financial product issuer and there was nothing in the information memorandum or the nature of the Steller Fund which would then have provided any reason for Atlas not to provide that information memorandum to Ms Xue. By contrast, Ms Xue had an obvious incentive to deny receipt of the information memorandum, given the extent of the risk disclosures contained in it, and I find, given her approach to her evidence generally, that she would not have admitted receiving a document that she recognised was adverse to her case. My finding that the information memorandum was provided to Ms Xue at that time is also consistent with Ms Xue's written acknowledgment, in a document written in Chinese and signed by her, that she had received that information memorandum before she invested in the Steller Fund. I refer to the evidence as to that acknowledgement below. 2. The information memorandum for the Steller Fund (Ex J1, 1309) that I have found was provided to Ms Xue at the meeting on 6 April 2017 stated, consistently with the fact that Atlas was licensed to provide general and not personal advice, that: "The information contained in this I[nformation] M[emorandum] has been prepared without taking account of your personal objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness having regard to your objectives, financial situations and needs." 1. The information memorandum also stated, under the heading "Important Information", that Atlas and its related or associated companies, including APIM, did not guarantee the performance of the Steller Fund, the return of the investor's capital or any specific rate of return. That information memorandum noted that it could only be used by wholesale investors as defined in ss 761 or 761A of the Corporations Act, although I recognise that an investor who has a substantial amount to invest can be a wholesale investor without necessarily also being a sophisticated investor. The information memorandum disclosed Atlas' entitlement to a base management fee and a performance based management fee and outlined how those fees were payable. 2. The information memorandum then identified the investment objective and strategy of the Steller Fund as follows: "AAA's experienced investment scheme understands the Australian migration policy and is poised to capture the opportunities for investors to secure a Significant Investor Visa by offering a complying investment to provide security and reliability while maintaining a steady flow of income through investment in debt-based investments backed by real property." 1. The information memorandum also identified the suggested benefits of the Steller Fund, including: "• Capital stability & security: Steller Pty Ltd … (the "Issuer Group") is one of Melbourne's leading private developers and constructor with over A$2 billion of completed and pipeline projects since 2005. Steller Development Pty Ltd … is the issuer of the notes to the [Steller] Fund (the "Issuer'). Steller Development Pty Ltd and Steller Pty Ltd as well as its directors provide a guarantee of return of capital to the [Steller] Fund (the "Guarantor"). • Income: With regular income distribution. Interest payments as well as the investment capital on the Series investments are guaranteed by the Guarantor." 1. The information memorandum in turn disclosed that the fund invested in debt-based investments "backed by real property with a view to delivering investors with the Preferred Investment Return Rate" (as defined) and stated that the Steller Fund "benefits from a guarantee and other securities and assurances in respect of its investment in the notes". 2. The information memorandum also contained relatively extensive risk disclosure, identifying both fundamental and particular risks as follows: "About risk and return All investments are subject to varying risks and the value of an investment can decrease as well as increases. Changes in value can be significant and they can happen quickly. Investments within categories can have varying performance results. These results are dictated by the individual risk characteristics of the investment, timing and market volatility. The significant risks for the [Steller] Fund are discussed below. Not all risks can be eliminated and the risk management strategies that are adopted may not always be successful. However, the AAA Investment team follows an investment process whereby risks are considered as an integral part of the investment process. If these risks occur, distributions may be reduced or there may be none, the value of your investment call fall." 1. The information memorandum also disclosed "individual investment risk", namely that: "The Series will invest primarily in notes issued by the Issuer, and as a result, the Series performance will be based on the performance of those assets. If the value of these underlying assets falls, the value of your investment in the Series may fall as well, subject to the guarantee provided by the Guarantor." 1. The information memorandum also disclosed "credit risk" described as follows: "The Series could lose money if the Issuer is unable or unwilling to make timely principal and/or interest payments, or to otherwise honour its obligations to the [Steller] Fund. However, the [Steller] Fund enjoys the benefit of a guarantee provided by the Guarantor in respect of payment of the interest distributions and repayment of initial capital. There is a risk that the Guarantor may fail to make good on the guarantee it has provided to the [Steller] Fund. Note that guarantee is provided to the [Steller] Fund and not directly to investors. It follows that only the [Steller] Fund can enforce the guarantee, not individual investors. Further, property debt-based investments issued are subject to the risk that litigation, legislation or other political events, local business or economic conditions, or the bankruptcy of the issuer could have a significant effect on an issuer's ability to make payments of principal and/or interest." 1. In cross-examination, Ms Zhuang was not prepared to accept that Ms Xue was unable to read the information memorandum which was provided to her in English, and contended that Ms Xue reads English and writes to Ms Zhuang in English in emails. However, Ms Zhuang also accepted that Ms Xue could not speak English and was not fluent in English (T578) and the WeChat and other communications in evidence in these proceedings do not suggest that Ms Xue had sufficient understanding of English to read a relatively complex information memorandum without assistance. 2. Mr Einfeld also submits that the information memorandum was in English, closely typed and "expressed in terms that many Australian lawyers would not pretend to understand". I also do not accept that submission. The information memorandum was in English, as disclosure documents issued by Australian companies and financial product issuers would ordinarily would be, but was no more closely typed than disclosure documents generally issued by such companies and financial issuers; was drafted in plain English; and was substantially simpler than disclosure documents often issued by Australian companies, including information memorandums as to company schemes and trust schemes which are regularly approved by this and other Australian Courts for issue to Australian securityholders. Mr Einfeld submits that Ms Zhuang did not advise Ms Xue to obtain legal or accounting advice (T579), but that is not to the point where clear risk disclosure was made by the information memorandum. 3. Mr Einfeld also submits that: "It is unrealistic to suggest that Ms Xue could have any understanding of the matters contained in the [information memorandum] or that Ms Zhuang would have had the least expectation that she would do so." 1. It seems to me that that proposition does not assist the Plaintiffs. No doubt, many companies and financial products issuers issuing disclosure documents and making risk disclosure will recognise that not all the recipients of that disclosure will read or understand them, although one should be cautious of being too dismissive of investors abilities' in that regard. It seems to me that a disclosure made by an issuer must be taken into account in determining what representations it has made, even if the recipient does not read it. Mr Einfeld also submits that a defendant to a misleading or deceptive conduct claim cannot contract out of its statutory obligations and its conduct must be considered as a whole. While I accept that uncontroversial proposition, an issuer can avoid liability by making disclosure of the risks attached to an investment to the investor, and that does not require that the investor choose to read the document in which that disclosure was made. 2. The fact that the information memorandum was provided to Ms Xue, who could have used translation software or third party translation services, as she did on other occasions, to translate it for herself, cannot be ignored in determining the content of the representations made by Atlas to Ms Xue. At least in the case of an investor making a substantial investment, it seems to me that there is no reason in principle to treat an investor's failure to translate and read a disclosure that was in fact made as different from an investor's failure to read that disclosure. I will return to that matter below. The April mortgage representation 1. Mr Einfeld made clear in the Plaintiffs' opening (T17) that the Plaintiffs do not put any case that the pleaded representations were in respect of future matters and instead frame their case as that they were representations as to existing facts including that the investment in the "Fund" was safe at the time the investment was made. 2. The first pleaded representation in respect of the April meeting (FASC [40.2]) is that the Steller Fund property development was secured by mortgages. Ms Xue's evidence in her first affidavit was that the development was secured by mortgages and that Ms Zhuang and Atlas did not tell her that the Steller Fund had no mortgage security and she maintained that evidence in cross-examination. Ms Xue also maintained her evidence in cross-examination that she would not have invested in the Steller Fund if she had known it did not hold mortgages, although she accepted that she had not read the Commercial Loan Note Master Facility Agreement which identified the properties that were the subject of the Steller Fund at May 2017 and did not know what properties would be the subject of any mortgage (T231). Ms Xue initially sought to avoid engaging in cross-examination with the fact that the value of any mortgage to an investor depended on the value of the relevant properties by claiming that was a "very professional question" and she was not an expert in the area. In my view, Ms Xue's level of commercial experience was such that she would have had no difficulty in recognising that a mortgage over undeveloped properties that then had little value would be of little value, and she initially sought to avoid addressing that matter because she recognised the answer would be adverse to her case. When pressed, Ms Xue then acknowledged the obvious, namely that any benefit provided by a mortgage to an investor depended upon the value of the mortgaged property, and she did not know the identity of the relevant properties as at May 2017 (T232). Mr McMaster also acknowledged in cross-examination that, had a first mortgage been given over the properties to secure the investment, he would not have expected that a 10% return would have to be paid on the borrowing (T276). I have also referred above to Ms Zhuang's affidavit evidence of an earlier discussion of why Atlas could not obtain mortgage security in respect of the Epping project, and to her evidence of the April meeting that she referred to personal and group guarantees but not to a mortgage over the properties. 3. In closing submissions, Mr Einfeld points to Ms Xue's evidence that she was told the investment was secured by mortgages (Xue 4.3.20 [36], [126]) and to her evidence in cross-examination to the same effect (T206, T231). Mr Einfeld recognises that Ms Zhuang denies that version of the conversation (Zhuang 10.7.20 [122]) but submits that that denial should not be accepted by reason of his criticisms of Ms Zhuang's evidence as to other matters. Mr Einfeld also points out, in closing submissions, that Ms Xue maintained her evidence in cross-examination that mortgage security was important to her and, had she known of its absence, she would not have invested in the Steller Fund (T232, 321). 4. I do not accept Ms Xue's evidence as to this representation, which, it seems to me, has been shaped by hindsight. I am unable to find, on the balance of probabilities, that this representation was made, and the result is reinforced where the allegation is advanced to establish a contravention of ss 1041E and 1041F of the Corporations Act and s 140 of the Evidence Act applies. The Plaintiffs plead (FASC [40C(a)]) that this representation was false and misleading because no mortgage security was taken or given by way of security over or with respect to the properties to be developed by Steller Developments or to secure the Plaintiffs' investment. Since I am not satisfied, on the balance of probabilities, that the alleged representation was made, it is not strictly necessary to determine whether it was false or causative of any loss suffered by Ms Xue in respect of this representation. However, I will address this matter here, since the Plaintiffs also rely on it to falsify a later representation. Ms Xue held firmly in cross-examination to her evidence that the existence of mortgages was essential to her investment decision, but was unable to identify any reasoned basis for that view. It was not apparent that a mortgage over an undeveloped property would have significantly improved her position, where payments in respect of the investment in the Steller Fund would likely have been sourced from cashflow of the Steller Group generally rather than by the sale of the properties, still less their sale by the exercise of security in an undeveloped or partly developed state. Any mortgage given in favour of the custodian of the Steller Fund would also have been for the benefit of all investors in the Steller Fund and not only the three Plaintiffs, so the Plaintiffs would have received only a small proportion of any proceeds of realising the properties on a mortgagee sale. Whether the April 2017 "no risk" and "safe investment" representations were made 1. The second and third representations in respect of the April meeting (FASC [40.3]-[40.4]) are that the Steller Fund property development had "no risk of loss" and that investing in the Steller Fund "was a safe investment". As I noted above, these representations depend on Ms Xue's evidence that Ms Zhuang told her at the April meeting that the investment in the Steller Fund was "zero risk", that the due diligence report confirming that the Steller Fund was "safe" and that Ms Zhuang then stated that Atlas would not recommend the investment if it was not "safe" (Xue 4.3.20 [36]). I return below to a question as to the content of a later representation (FASC [40.18]), where the Mandarin term "anquan" was used in the exchange that gave rise to that representation. I need not address that question here, where there is an anterior question as to whether the relevant representations were made and what Ms Xue could have understood from them. 2. As I also noted above, Ms Zhuang does not accept she made statements in these terms and her evidence of the April meeting (Zhuang 10.7.20 [79]) is that Ms Xue asked whether the investment in the Steller Fund was "safe", and Ms Xue responded by reference to matters that would mitigate the risk of the investment, including personal and group guarantees and the due diligence process, rather than by a general representation of safety. Ms Zhuang also denied that Ms Xue was only interested in investments with "little or no risk" and pointed to the correlation between risk and return and the fact that bank bonds, which had little or no risk, were then returning an interest rate of 1.5% to 2% by contrast with the targeted return of the Steller Fund of 10% per annum (Zhuang 10.7.20 [132]). 3. Ms Xue was cross-examined at some length as to her claim to have understood that the investment in the Steller Fund was both risk free and "safe". Ms Xue's evidence in cross-examination was that she asked Ms Zhuang in 2017 whether the Steller Fund was "safe"; that by "safe" she meant that the investment was risk free; that she agreed that all investments had some risk; but she did not accept that no investment was risk free, because that "depends on your risk control measures" (T98). Ms Xue also agreed in further cross-examination that she understood in 2007 that all investments carry risk but, inconsistently, that she understood Ms Zhuang's advice that the Steller Fund was "safe" to mean that it was "free from risk" and that "it did not contain risk", although then accepting that she understood that the Steller Fund and her investment in it "also involved risk and that different investments have different levels of risk" (T100). While I am conscious of the possibility of translation difficulties here, it did not seem to me that they occurred here. Instead, it seemed to me that Ms Xue initially declined to accept that she recognised any risk in the investment, because she was anxious to avoid acknowledging that any representation that the Steller Fund was "safe" was qualified by a recognition that all investments have some risk. Ms Xue then accepted that she understood one of the risks with property development was that the property market may fall (T101), and that the risks of increased construction costs or falls in the property market were greater than the risks involved with a bank term deposit at a bank with an A credit rating, but, oddly, would not then accept that an investment based on a bank term deposit at a bank with an A credit rating was a "safer" investment than an investment in property development, and also would not accept that there was any contradiction in her position in that regard (T102). 4. Ms Xue then denied the proposition that there was any relationship between the risk involved with an investment and the return of that investment (T103). She did not accept that her investment experience in China had indicated that there was a relationship between the level of risk involved in the investment and its likely reward, although her affidavit evidence was that higher returns were available in China for unsecured investments than property investments with priority security such as mortgages (T104-105). She then accepted, reversing her previous position in that respect, that there was a relationship, generally speaking, between the risk of an investment and the likely reward of that investment (T105). She accepted that ordinarily the return on an investment goes up as the level of risk goes up but did not accept the apparent consequence that, to obtain an investment of little risk, an investor also has to accept that the investment will likely have lower returns (T106). I have also referred to other evidence of Ms Xue in respect of risk in dealing with her credit above. 5. Ms Xue's evidence in cross-examination was also that she believed that her investment in the Tasman Fund in 2017, prior to her investment in the Steller Fund, was "risk free" although it was an investment in property development, and she denied that Ms Zhuang had told her that Atlas could not obtain a mortgage over the relevant properties because the banks involved in financing the property developments would not accept a mortgage (T110). I do not accept Ms Xue's evidence in that respect, and it seems to me that Ms Xue's evidence there again reflected her unwillingness to make a concession that she was concerned would weaken her case. Ms Xue again maintained in cross-examination (T215) that she thought there was no risk at all to the investment in the Steller Fund. 6. Ms Zhuang was also cross-examined as to the purpose of the Tasman Fund. She accepted in cross-examination that the objective of the Tasman Fund was to provide capital stability and security for investors, although she also fairly distinguished between Atlas' purpose in developing the Tasman Fund, which was to expand its business, and the purpose of the product, which was investor-directed. She rejected the proposition that she advised investors in the Tasman Fund, where Atlas was not licensed to provide personal advice to investors in that fund (T349). There is no claim in the proceedings that Atlas provided personal advice in breach of the terms of its Australian financial licence which is a serious allegation that would have had to be squarely pleaded. Ms Zhuang also fairly accepted that, so far as the purpose of that Fund was to achieve capital stability and security, Atlas promoted those concepts to prospective investors (T351). 7. Ms Zhuang was also cross-examined as to the purpose of the Steller Fund (T351-352) and her evidence was as follows: "The purpose of the Fund was to provide investors with a set maturity day, with a set amount that they know how much they can ever get back, and it's a fixed return that is not going to be subject to any, like, market conditions and stuff. So, I can sum it up with capital stability and security, but I want to be accurate and just be, make sure that that's the word that I used, because you are referring to one IM, and then you are talking about another Fund, so that's why." 1. Ms Zhuang accepted that the objective of the Steller Fund was to provide investors with capital stability and with security, in the sense of safety, which she in turn described as being an "anticipated outcome that had relatively good confidence to deliver instead of like an equity fund" (T352). She accepted in cross-examination that, in order to ensure that money can be paid back to the Steller Fund by the relevant developer, Atlas needed to ensure "there is a reasonable chance of the developer being able to deliver the project and repay the money", reflective of the 10% return on the investment, and she would like to be as satisfied as she could of that matter (T353). She also accepted that she would wish to know that the advance to the developer was "as safe and secure as possible" and that clients were not exposed to "unnecessary risk" (T353). She identified the matters that she considered were relevant to Chinese investors who required transparency and were cautious of fraud and embezzlement, which were significant investing risks in China (T355). Ms Zhuang's evidence was that she formed the view that the Steller Fund was "safe" having regard to the fact that it was paying a 10% return (T359). I understood her evidence to recognise, rightly, the connection between risk and return and that the "safety" of an investment with a 10% return would not necessarily be judged by the same standard as the safety of a government-guaranteed bank deposit with a minimal return. I will address aspects of Ms Zhuang's evidence relating to the 4 May WeChat exchange below. 2. Ms Zhuang's evidence in cross-examination was that she considered the investment in the Steller Fund was "safe for a 10% return", drawing a linkage between the level of risk on the investment and its return (T441). She accepted that her opinion, as a result of the due diligence exercise, was that the investment was very safe in the context of an investment with a yield of 10% (T441) and she had formed that opinion in March 2017. Her evidence was that she did not herself communicate that view to her colleagues, although it was a shared view, and some of her colleagues invested in the Steller Fund (T442). Ms Zhuang acknowledged that she did not tell her clients the investment was "risky" or "unsafe" (T442-443), and that is not surprising where she did not hold that view. Mr Einfeld also cross-examined Ms Xue to the effect that she had not recommended that Ms Xue obtain the services of a solicitor or accountant to advise her about the investment, although the Steller Fund was an Atlas product (T579). There is no pleaded case that a financial product issuer is ordinarily obliged to recommend that an investor take independent legal advice or independent accounting advice as to the acquisition of a financial product. 3. I have found above that the information memorandum for the Steller Fund was provided to Ms Xue at the April meeting, in English, and that information memorandum expressly disclosed several significant risks in an investment in the Steller Fund, the relationship between risk and return and the specific risks that has now come home to the Steller Fund and the Plaintiffs, in the disclosure of "credit risk" to which I referred above, namely that: "The Series could lose money if the Issuer is unable or unwilling to make timely principal and/or interest payments, or to otherwise honour its obligations to the [Steller] Fund. However, the Fund enjoys the benefit of a guarantee provided by the Guarantor in respect of payment of the interest distributions and repayment of initial capital. There is a risk that the Guarantor may fail to make good on the guarantee it has provided to the [Steller] Fund. Note that guarantee is provided to the [Steller] Fund and not directly to investors. It follows that only the [Steller] Fund can enforce the guarantee, not individual investors. Further, property debt-based investments issued are subject to the risk that litigation, legislation or other political events, local business or economic conditions, or the bankruptcy of the issuer could have a significant effect on an issuer's ability to make payments of principal and/or interest." The information memorandum also appropriately disclosed diversification risk, arising because the Steller Fund would hold a concentrated portfolio of assets, liquidity and market risk and other risks. 1. In closing submissions, Mr Einfeld submits that the "high probability" is that Ms Xue, a "cautious investor", would not invest $4.8 million in the Steller Fund without receiving assurance from Ms Zhuang that it was "safe" for her to do so. Putting aside the fact that Tredmore and Ms Lili Xue rather than Ms Xue personally invested in the Steller Fund, that submission begs the question whether Ms Xue is a "cautious" investor, where other investments she has made with Atlas appear to have similarly high or higher levels of risk than the investment in the Steller Fund, reflecting their similarly high levels of return. Mr Einfeld also submits, and I accept, that neither Ms Xue nor Ms Zhuang have provided a full account of the conversation at the April meeting, and that is understandable given the time which has passed since that meeting. He submits, and I also accept, that both Ms Xue and Ms Zhuang accept that there was a reference to the safety of an investment in the Steller Fund at that meeting, although Ms Xue and Ms Zhuang give different accounts of how that question arose. I also recognise that a statement by Ms Zhuang that the investment was "safe", at least for an investment of the relevant kind and rate of return, would have been consistent with the view that Ms Zhuang held, although I do not accept that that is reason to prefer Ms Xue's account of how that matter arose to Ms Zhuang's account. 2. In closing oral submissions, Mr Einfeld submitted (T701-702) that there was no suggestion that Ms Xue was "recklessly extravagant and a gambler" and that she was simply looking for the "highest return" and, had she been (implicitly, a gambler) then she would have opted for the alternative investment offered by Ms Zhuang in April 2017, being the Microequities Fund offering a 20% return, which was speculative in character, rather than her investment in the Steller Fund. That submission had the difficulty that Ms Zhuang in fact invested in the Microequities Fund as well as in the Steller Fund, and that plainly this is inconsistent with an investment strategy that refuses to accept risk in order to achieve a higher return. Mr Einfeld also placed strong emphasis on Ms Xue's evidence in cross-examination that she expected risk would be addressed by risk control measures (T98, 109), although that left unexplained why an investment would pay a return well-above the risk free rate if risk control measures had eliminated substantially all investment risk in it. 3. These representational claims must fail, in short, because Ms Xue's evidence does not leave me, in the language of Slattery J in Ventouris Enterprises Pty Ltd v Dib Group Pty Ltd above, with any "actual persuasion" that Ms Zhuang told Ms Xue in this conversation that the investment in the Steller Fund was "zero risk" or that reference to the due diligence report confirming that the investment was "safe" or made any broadly corresponding statements at that time. It is sufficient to reach this finding that I have concluded, by reference to Ms Xue's evidence as a whole, that she is an unreliable witness as to these matters, whose evidence has been shaped by the manner in which it was prepared and her wish to avoid making any concessions that she believes would harm her case. That finding is reinforced where the allegation is advanced to establish a contravention of ss 1041E and 1041F of the Corporations Act, which is a criminal offence, and s 140 of the Evidence Act applies. 4. Although it is not strictly necessary to that finding, I also note that the unqualified statements attributed by Ms Xue to Ms Zhuang are inconsistent with Ms Xue's evidence as to what she said at that meeting as to the steps taken to mitigate risk in respect of investment in the Steller Fund, to which I referred above; they are inconsistent with the rate of return on the Steller Fund and the fact that a return well above the risk free rate would not be expected on a risk free investment; and they are starkly inconsistent with the risk disclosures made in the information memorandum, to which I referred above. 5. Although it is also not strictly necessary to that finding, I consider that, in determining what Atlas communicated to Tredmore or Ms Xue at the April meeting, I should also not ignore that part of that communication was made by providing the information memorandum in English. I recognise that Atlas did not offer to translate the information memorandum for Ms Xue, and Ms Xue apparently did not ask Atlas to translate it for her and did not use translation software or a third party to translate it, as she had done in respect of other matters, and her evidence is that she did not read it. As I noted above, at least in the case of a wholesale investor making a substantial investment, there is no reason to treat an investor's failure to translate and read a written disclosure that was in fact made as different from an investor's failure to read that disclosure, or as extinguishing that disclosure. To put that proposition another way, there seems to me to be no reason to treat information that was in fact provided to a company, here Tredmore, which proposed to invest $2 million (and later more than that), as not provided because it was provided in English and not translated into the language of that company's director, who had the capacity to have that information translated for himself or herself and also likely owed a duty of care and diligence to the company to do so. It is also difficult to see that the content of any representation made by Atlas should be determined, not by what it communicated (including in English), but instead by what Ms Xue chose to have translated for her or to read, so that what Atlas said would include the risk disclosures in the information memorandum only if Ms Xue chose to translate or read them. That approach would focus, wrongly, not on what Atlas represented but on what Ms Xue took steps to receive or understand. 6. I should also note, for completeness, that adopting an approach that a risk disclosure that was in fact made in English is to be treated as of no effect where the relevant officer of a recipient company has limited English and does not choose to have the disclosure translated or read would have odd and unfortunate consequences. Many disclosure documents are issued by Australian companies in English to foreign shareholders and investors, including prospectuses, takeover documents and information memoranda in respect of schemes of arrangement that are reviewed and approved by Australian courts, generally after close review of the adequacy of the risk disclosures made in them in English. It is not apparent to me why a risk disclosure made in such a document in English to a foreign shareholder or investor who reads or speaks limited English but has the capacity to translate and then read that disclosure should be treated as of no effect, unless the Australian issuer first translates it into the first language of each such shareholder or investor, or that any good public purpose would be served by permitting any shareholder or investor who reads or speaks (or claims to read or speak) limited English to choose not to translate and read such a document and then contend that it was not informed of any risks disclosed in it. The most likely consequence of taking that approach would be to restrict the availability of financial products to persons who did not have English as their first language, where suppliers of financial products would likely restrict supply (particularly to persons who spoke a language that was not widely spoken in Australia) if they could not treat risk disclosures made in English as effective. That consequence would be even more unfortunate if that approach was extended more widely, to risk disclosures in respect of food, pharmaceutical products, and other essential products. Whether the "no risk" or "safe" representations were misleading or deceptive 1. It is not strictly necessary to address the question whether a representation made at the April meeting that the Steller Fund had "no risk" or was "safe" was misleading or deceptive, when I am not satisfied that such a representation was made. However, I will address that question here and return to it in dealing with the 4 May WeChat exchange below. 2. In order to falsify these representations, the Plaintiffs rely, inter alia, on Mr McMaster's report which in turn relies on the risks that Atlas had itself disclosed in the information memorandum to establish the existence of those risks. For example, paragraph 32 of his report he says that: "The [information memorandum] for the [Steller] Fund makes it clear that an investor in the [Steller] Fund could lose money, and that investing in the [Steller] Fund involved a range of risks. Clearly [Atlas] knew of these risks because they published the [information memorandum]." 1. Mr McMaster also indicates, in paragraph 55 of his report, that his conclusion as to the safety of an investment in the Steller Fund is based on his understanding of a safe investment as being a "low risk investment" and it appears that understanding does not have regard to the possibility that an investment with a higher risk and a higher return might be a "safe investment", at least if that question is determined by reference to the nature of the investment. Applying Mr McMaster's standard, investments in government bonds would generally be a "safe investment", and investments in equity or debt instruments (other than, possibly, secured loans) will rarely or never be a "safe" investment. 2. Mr McMaster also observed in cross-examination that the proposed investments in the Steller Fund involved development construction which was subject to external risks outside the control of the Steller Fund and Steller Developments. That is plainly correct and was also a matter that was clearly disclosed in the information memorandum for the Steller Fund. Mr McMaster in turn articulated a list of the requirements which he considered would need to be met to allow the Steller Fund to be described as a reasonably "safe" investment, and that list points to the subjective character of his view. He expresses the view that an investment would not be a "reasonably safe investment if it involved lending monies for property development as distinct from completed property"; if it did not take mortgage security (preferably a first mortgage) over properties the subject of investments; and did not obtain independent valuations on the properties and only lend to properties that showed a loan to valuation ratio of no greater than 70%. Mr McMaster did not identify any industry standard that supported that view or provide any reasoned statement of the standard of "safety" or "reasonable safety" which underpinned it. 3. Each of the "no risk" and "safety" representations is sought to be falsified by the same matters (FASC [40C(c)]). The first of the falsifying matters (FASC [40C(c)(i)]) is that no mortgage security was taken or given by way of security with respect to the properties or to secure the Plaintiffs' investment. The first of the reasons for Mr McMaster's view that an investment in the Steller Fund was not a "safe" or "low risk" investment in May 2017 or any subsequent time was in turn that Atlas did not hold mortgage security over the relevant properties, particularly where the properties were not owned by Steller Developments. I have addressed this matter in paragraph 95 above. It does not seem to me that this matter, alone or together with other matters, falsifies the pleaded representations, where, as I noted above, the likelihood that investors in the Steller Fund would be repaid depended upon the financial position of the Steller Group generally and the progress of the developments that were the subject of the Steller Fund and other developments of the Steller Group, not upon the existence or non-existence of mortgage security over the particular properties that were the subject of the Steller Fund, particularly in an undeveloped or partly developed state. 4. The second matter said to falsify these representations (FASC [40C(c)(ii)]) is that valuations of the properties (either before or after development) had not been obtained. Mr Einfeld points out, in closing submissions, that Ms Xue maintained her evidence in cross-examination that valuation of the properties was important and should have been addressed as part of Atlas' due diligence (T234-235). He also submits that: "That an investment for development of properties which were not the subject of recent valuations could nevertheless be described as having any degree of safety about them is difficult to comprehend, and that Atlas and Ms Zhuang could not properly make any representation as to the safety of the investment without a valuation." 1. It seems to me that the absence of valuations of the properties in their undeveloped state was of little relevance to assessing the risk of the investment, but valuations in their developed state would have been of greater assistance, at least if combined with an assessment of the costs of development. The Plaintiffs do not take the further step of showing what the valuations that might have been obtained would have disclosed. 2. The third matter said to falsify these representations (FASC [40C(c)(iii)]) is that the properties which were to be developed by Steller Developments were not all owned by Steller Developments, nor were contracts in place for their acquisition or development by Steller Developments. Mr McMaster expresses the view the investment was not "safe" because of the level of risk introduced by the fact that the relevant properties were not owned by Steller Developments. I accept that this matter introduced real risk into the investment where it raised a real risk that, in the event of financial difficulty within the company which owned the relevant property or other companies within the Steller Group, that property would be realised for the benefit of creditors of that company and not for the benefit of investors in the Steller Fund. It seems to me that this matter, in itself, has the result that a representation that an investment in the Steller Fund was "very safe", unqualified by a reminder of the risks disclosed in the information memorandum, was misleading or deceptive. I return to that matter below. 3. The fourth matter said to falsify these representations (FASC [40C(c)(iv)]) was that the properties were not in each case zoned for non-residential use as required by the Deed. Mr McMaster expresses the same view as the Plaintiffs' in their Further Amended Statement of Claim in respect of the suggested risk because sites were zoned to permit residential development, but he does not express any view that residential development had any greater risk than commercial development. Ms Zhuang's evidence in cross-examination was that the relevant land was not zoned for residential purposes only, within the concept adopted in the Migration Act 1958 (Cth), and met the migration requirements in that it not be zoned in that manner (T400-401). 4. In closing submissions, Mr Einfeld submits that the properties referred to in Schedule 1 of the Deed were zoned contrary to the requirements of cl 2.5.1 of the Deed; that matter placed Steller Developments in default under the Deed; and "[t]he circumstance of immediate breach thus created an additional risk that made factually misleading the Defendants' representations that investing in the Steller Fund was safe". Mr Knowles responds that the evidence establishes that each property was zoned either for commercial or for mixed use, enabling its use for non-residential investment, and was therefore "zoned for non-residential use" even if not exclusively zoned for that use. Mr Knowles also addresses the matters of construction which would arise in respect of the Deed in that regard and points out that, more significantly, the Plaintiffs have shown no connection between an investment in residential property and the safety of the Steller Fund, and there is no evidence that residential property development is inherently "less safe" than commercial property development. 5. First, this matter does not falsify the "no risk" and "safe investment" representations because the compliance of the investments made by the Steller Fund with the requirements for a SIV was of no apparent significance to Ms Xue's visa status, where she had already made other investments in Australia to qualify for that visa (T236). Second, in any event, Ms Xue's evidence in cross-examination was that, contrary to the Plaintiffs' case, Ms Zhuang had told her that the Steller Fund would invest in residential property and that she knew that investment would be for residential development (T236). Third, the existence of any requirement that the properties be zoned not to permit any residential use (as distinct from zoned in a manner that did not permit only residential use) depends on a question of construction of the Deed which it is not necessary to determine, where there is no evidence that the development of properties for non-residential use involves any greater risk than the development of properties for residential use, so as to increase the risk on the investment or undermine any character of the investment as a "safe investment". While Ms Xue also pleads that the consequence of a default, if it existed, would be that Atlas acquired the right to rely upon that default to bring the loan to an immediate end, so that the Plaintiffs would not receive interest if it did so, that proposition does not establish either that the Steller Fund had any greater risk or that investment in it was any less safe, because there is no reason to think that, and the Plaintiffs did not establish that, Atlas would have made any decision whether or not to terminate the Steller Fund, by reason of any default arising from an investment in a property that was zoned to permit residential use, in a manner which was disadvantageous rather than advantageous to the risk and security of the investment. This matter does not falsify any representation as to the risk or safety of the investment in the Steller Fund. 6. The fifth matter said to falsify these representations (FASC [40C(c)(v)]) is an allegation that Steller Developments was in or arguably in immediate default of its obligations under the Deed, and Atlas had the immediate right to bring the loan to an end, such that the Plaintiffs would not receive interest at 10% per annum for two years. In closing submissions, Mr Einfeld submits that: "The departure of the Schedule 1 properties from the zoning requirements of cl. 2.5.1 of the Deed placed Steller Developments in immediate breach and therefore in default under cl. 10.1.1 of the Deed. It does not matter that Atlas did not, or might not, call up the loan to Steller Developments. Whether Atlas realised it or not, it was immediately open to Atlas to proceed in this way, in which case the Plaintiffs would be deprived of their quarterly entitlements over the two-year period of their investment. The circumstance of immediate breach thus created an additional risk that made factually misleading the Defendants' representations that investing in the Steller Fund was safe." 1. Mr Knowles responds that the proposition that Steller Developments was in default appears to depend on evidence of Mr Barnes that was not read, or was admitted with a limiting order as submission and not proof of the relevant fact, or on evidence of Mr McMaster which was admitted with a limiting order that it did not prove the asserted fact. These matters were not established. 2. The sixth matter relied on to falsify these representations (FASC [40C(c)(vi)]) is an allegation that Steller Developments' financial position had deteriorated substantially in the five months prior to the making of the representations, in that its net assets had fallen by approximately 76%. Mr McMaster expressed the view that, over the five-month period from 31 August 2016 to 28 February 2017, the net assets of Steller Developments declined by $11.8 million or 76.5% and at the same time the debt to investors increased by $25 million. That conclusion was not correct, because it was not established that the reference to "Developments" in the balance sheets of the Steller Group to which he referred, as distinct from the reference to "Steller Developments" in the same balance sheet, was a reference to that company rather than to property developments within the Steller Group excluding those within an entity known as Pittard Capital. Mr McMaster acknowledged in cross-examination that there was an error in his examination of the balance sheets in determining the net asset position of Steller Developments (T270); he accepted that the figures on which he relied to show a suggested "alarming deterioration of the net assets of Steller Developments" did not in fact show such a deterioration; and then, extraordinarily, he sought to question the accuracy of the very figures that he had previously, but erroneously, deployed to assert the existence of that "alarming deterioration" without previously suggesting they did not provide a reasonable basis for that erroneous conclusion (T270). 3. Mr Einfeld similarly opened the Plaintiffs' case by a submission as to the balance sheets for the Steller Group as at, inter alia, August 2016 and January 2017 which involved the same error in reading those balance sheets as occurred in Mr McMaster's report. Mr Knowles responds that there is no evidence that the financial position of Steller Developments had in fact deteriorated as pleaded, or that such a deterioration would falsify the safety of the investment, and refers to the error in Mr McMaster's report in that regard. 4. In closing submissions, Mr Einfeld recognised Mr McMaster's error in his expert report in identifying a deterioration in Steller Developments' financial position and sought to shift the Plaintiffs' pleaded case relying on that deterioration to an unpleaded claim of a "substantial deterioration in the net worth of the companies under review", without identifying the companies to which that new allegation referred. He submitted that, if Atlas' due diligence inquiry extended to the Steller companies more widely, then it must have been obvious to Atlas that the net asset position of other companies had fallen. Where this case is not pleaded and is obviously a matter for evidence, it cannot be pursued in circumstances where the Defendants have not had an opportunity to respond to it by evidence. Mr Knowles points in closing submissions to further difficulties with the proposition that there was a deterioration of the financial position of other entities within the Steller Group. These submissions highlight the difficulties involved in addressing an unpleaded case as to this matter and it is not necessary to address them further. I should add, in fairness to the Defendants, that it seems to me that Mr Einfeld's further submission that the unpleaded deterioration in the financial position of other companies was "either deliberately suppressed or ignored [by] Atlas' personnel" does not seem to me to be established by the evidence. The falsifying fact that Steller Developments' financial position had deteriorated substantially in the five months prior to the making of the representations, in that its net assets had fallen by approximately 76% or any other material amount, was not established. 5. For completeness, in closing oral submissions, on the 13th and 14th days of the hearing, after evidence had closed and after the Plaintiffs had maintained this claim in closing written submissions, Mr Einfeld accepted that it must fail and sought to amend the Plaintiffs' case to put a claim in respect of the financial position of some other companies in that group that were referred to in certain documents (Ex D7). I declined to permit that amendment, where it was plain that the formulated amendment did not adequately identify the new case the Defendants had to meet and the Court had to decide and the late amendment would have prevented the Defendants from making factual inquiries, including as to the different companies included in the different documents, which would not have been have been relevant or necessary while this aspect of the Plaintiffs' case was directed only to the financial position of Steller Developments. 6. The seventh matter relied upon to falsify the representations (FASC 40C(c)(vii)) is that there was no material from which Atlas could properly determine that revenue earned by Steller Developments from its development of the properties would suffice to pay interest to the Plaintiffs quarterly at the rate of 10% per annum for 2 years and to enable repayment of the principal invested by them in the Steller Fund, other than by utilising monies that were invested by investors in the Steller Fund. The Plaintiffs rely on Mr McMaster's view that there was no proper foundation for a conclusion that the proposed development would generate a sufficient return with which Atlas could pay its investors. However, he expresses this view by reference to a lack of ability to form the conclusion, rather than expressing any view that the proposed developments would not or could not generate a sufficient return at that time, as a matter of fact. This evidence does not falsify the pleaded representations, to the extent that they depend upon the fact of the ability to earn such revenue as assessed in May 2017. 7. In opening, Mr Einfeld put a submission as to Steller Developments' suggested inability to repay the Steller Fund in strong terms, as follows (T29): "It gets much worse because not only was there no basis from the financial materials, to which we are about to come, that was included in the due diligence, not only was there no basis in that material for any realisation or assumption, but the monies that Steller Developments had available to pay the quarterly interest had no basis of – the documents do not disclose any basis upon which it could be concluded that the interest could be paid back to the investors in the [Steller] Fund out of any monies, other than those borrowed from other investors. In other words this was, in effect, a classic Ponzi scheme. …" 1. That submission shifts from the proposition that the due diligence did not sufficiently demonstrate whether there was any basis for an expectation that Steller Developments could pay back the principal and quarterly interest, to an unpleaded and unproved claim that Steller Developments could not in fact pay back that principal and quarterly interest. It seems to me there was also no evidentiary basis for a suggestion that Atlas or its officers and employees expected that the investment could only be repaid from funds invested by other investors, the characteristic feature of a "Ponzi" scheme, as distinct from being repaid by Steller Developments either from profits made on the four projects referred to in the Deed or from the wider profits of the development activities of the Steller Group. 2. Mr Knowles in turn pointed out in opening that the projects undertaken by entities within the Steller Group generally were relevant to the Steller Fund, because Steller Developments was not restricted to repaying the Steller Fund, so as to allow investors to be repaid, only from the proceeds of the particular projects referred to in the Deed but could make that repayment from the returns on other development projects within the Steller Group's "pipeline" of developments which would be realised at different times, so that the availability of funds to repay would be determined by reference to all of the relevantly available assets (T49). In closing submissions, he submitted that this pleading misunderstood the structure of the Steller Fund and its financing of the Steller Group, because Steller Developments' ability to pay quarterly distribution interest and repayment of principal was not limited to revenue that it alone earned, as distinct from funds that could be made available to it by other companies within the Steller Group; even if it were so limited, the funds available within Steller Developments were not limited to revenue that it earned from the development of the specified properties; and, even if Atlas could not properly determine that that revenue earned by Steller Developments from its development of the specified properties were sufficient to meet its commitments to the Steller Fund, that was not necessary for the repayment of the Steller Fund or investors in it and does not falsify the risk and safety representations. So far as the relevant question was whether, as a matter of fact, the financial position of companies within the Steller Group was such that there was real uncertainty as to whether they could, acting collectively, pay interest quarterly or repay the principal due to the Steller Fund, the Plaintiffs did not plead or establish that those companies were not likely to be unable to do so as at April 2017, although it is plain enough that the Steller Group subsequently failed. I will address their pleaded case as to the financial position of Steller Developments below. 3. Eighth, the Plaintiffs seek to falsify these representations (FASC 40C(c)(viii)) by pleading that the Defendants had no knowledge of the terms of the personal guarantees in relation to investments in the Steller Fund nor of the net assets of persons or entities providing those guarantees. Mr Knowles responds, and I accept, that this allegation is not established since the guarantees had been made available to them and reviewed in due diligence updates (Ex J1, 511, 698-699, 898, 1361) and there was reference to them in the information memorandum for the Steller Fund (Ex J1, 1312-1313) as follows: "Steller Developments Pty Ltd and Steller Pty Ltd as well as its directors provide a guarantee of return of capital of the [Steller] Fund … Note the guarantee is provided to the [Steller] Fund and not directly to investors. It follows that only the [Steller] Fund can enforce the guarantee, not individual investors." 1. In any event, this matter would not falsify the alleged representations as to the risk or safety of the investment in the Steller Fund, because any lack of knowledge of the terms of the personal guarantees or of the assets of the persons or entities providing them does not increase the risk or reduce the security of the Plaintiffs' investment in the Steller Fund, which depends on the terms of those guarantees and the fact of those assets, not on what Atlas or Ms Zhuang knew of them. To put that proposition another way, as long as the terms of the personal guarantees were adequate and the persons providing those guarantees had sufficient assets to support them, then the Defendants' lack of personal knowledge of that matter does not increase the risk of loss or the safety of the investment is concerned. I return to an unpleaded claim relating to this matter in dealing with the specific allegation as to guarantees (FASC [40.12]) below. 2. I should add, for completeness, that the Plaintiffs sought to develop a wider and unpleaded case relating to the construction of the guarantees in the course of the hearing. Mr Knowles submits, and I accept that, had such a case been pleaded, the Defendants would have sought to meet it by evidence, including evidence of steps that have in fact been taken to enforce the guarantees since a liquidator was appointed to companies within the Steller Group. It is not open to the Plaintiffs to advance this unpleaded case, where that would deprive the Defendants of the opportunity to lead evidence in response. Had it been appropriate to determine that matter, it is not apparent to me why Atlas could have obtained an order appointing a receiver to Steller Developments in the event of default, or why that receiver could not have enforced the guarantees if a liquidator of Atlas had not done so. 3. I should add that it seems to me that there were material risks in an investment in the Steller Fund, likely reflected in the relatively high rate of return payable to the Plaintiffs in respect of that investment, arising from the uncertainty as to the future profit or loss that would be achieved from the development of the properties, of which their future valuations was a component part, and the range of potential outcomes; the fact that the relevant properties were not owned by Steller Developments, so that there was a structural risk for the Steller Fund in respect of a failure of the companies that owned them; and the recovery of principal and interest likely also depended on the future profitability of the Steller Group. However, the existence of those risks does not assist the Plaintiffs where they have not established the pleaded representations in respect of the April meeting, and not all of those matters were raised by the way the Plaintiffs put their pleaded case. I will return to that question below in respect of the May WeChat exchange. The 10% investment return 1. The next pleaded representation in respect of the April meeting (FASC [40.5]) is that investing in the Steller Fund "would result" in an investment return of 10% per annum. The Defendants admit (Defence [40.5]) that Ms Zhuang informed Ms Xue that the Steller Fund aimed to achieve a return of 10%, and the investment memorandum stated that "[t]he fund aims to provide investors with the Preferred Investment Return Rate" which is "said to be 10.0% p.a. (after all fees)" (Ex J1, 1311). That was the result which the terms of the investment contemplated, and no other facts are pleaded to falsify that representation. It is a representation as to a future matter; the Plaintiffs did not plead and did not establish that there were no reasonable grounds for it at the time it was made or rely on any statutory modification of the onus in that regard; the fact that that return did not continue for the full term of the Steller Fund does not, without more, falsify this representation; and it has not been shown to be misleading or deceptive. The gross realisation representation 1. The next pleaded representation in respect of the April meeting (FASC [40.9]) is that "[t]he gross realisation of each property in the development is effectively secured, which eliminated sales risk". That proposition is sought to be falsified (FASC [40C(d)]) by a bare assertion of the negative of it, that the gross realisation value of each of the relevant properties was not effectively secured, for the reasons relied on to contend that the Plaintiffs' investments in the Steller Fund were not safe. I am not satisfied that a representation was made in that form. I am not satisfied that the matters relied on in respect of the safety of the Steller Fund falsify this representation. No risk of loss of principal amount 1. The next pleaded representation in respect of the April meeting (FASC 40.11]) is that there was "no risk of the principal amount that Ms Xue invested into the Steller Fund being lost". I am not satisfied that a representation was made in this form for the reasons that I have set out above in dealing with the "no risk" representation. Personal guarantees 1. The next pleaded representation in respect of the April meeting (FASC 40.12]) is that there were "personal guarantees from the developers in relation to investments in the Steller Fund". Paragraph 40.12 of the Defence accepts that Ms Zhuang stated that the issuer and the guarantor guaranteed punctual payment of quarterly interest distributions and repayment of initial capital and a similar statement is made in the information memorandum for the Steller Fund. I have addressed these matters above. 2. The Plaintiffs seek to falsify this representation (FASC 40C(c)(viii)) by pleading that the Defendants had "no knowledge of the terms of the personal guarantees in relation to investments in the Steller Fund nor of the net assets of persons or entities providing those guarantees." As I noted above, Mr Knowles responds, and I accept, that this allegation is not established since the guarantees had been made available to them and reviewed in due diligence updates (Ex J1, 511, 698-699, 898, 1361). I have addressed the wider unpleaded case that the Plaintiffs sought to bring in this respect in dealing with the representations as to the risk and safety of the investment in the Steller Fund above. Due diligence representations 1. The Plaintiffs also plead several elaborate representations in respect of the April meeting as to the due diligence process (FASC [40.14]-[40.17]), to which I will return after addressing the relevant evidence. 2. I have referred to Ms Xue's evidence as to these matters above. Ms Zhuang fairly accepted that she made a somewhat narrower statement concerning the conduct of "due diligence" concerning the Steller Fund to which I have referred above. Ms Zhuang also accepted in cross-examination that the purpose of due diligence was to promote the result that "we can get the money back at the end" and that interest would be paid by the Steller Group on the investments, so as to fund distributions by the Steller Fund to investors (T440). She also accepted that she told Ms Xue that Atlas had a due diligence team that had done a due diligence exercise into the Melbourne developments of Steller (T443) and it is apparent that such an exercise, at least in the sense of a review of numerous documents relating to those developments, was undertaken. 3. Turning to documentation relating to the due diligence process, the Plaintiffs refer to an email dated 30 March 2016 from Mr Burstin to Mr Hedley of Atlas, which attached information relating to Steller (which has been omitted from the document as tendered) and observed that: "They have $723M in their current project pipeline (not including Life Style Community Projects). They also have a very strong balance sheet with $39.2M in Net Assets and $42.1M in Directors loans. The attached documents also outlines their past projects and where they have done part commercial within their residential projects. I'll arrange or us to meet with them when (if) you are in Melbourne at the end of April." 1. The Plaintiffs also refer to the minutes of a due diligence meeting between Mr Burstin and Mr Hedley on 4 July 2016 (Ex J1, 510), headed "Periodic DD [due diligence] review as requested by Investment Committee" and dated 4 July 2016, which record events between that meeting and a previous discussion, including that Mr Burstin indicated that Steller Group "is keen [sic] in obtaining long-term funding from Atlas for development projects". That meeting recorded that the period until investors were introduced "will be used to perform additional DD [due diligence] to assess Steller's ability in delivering the projects as described" and that Mr Burstin was to provide financial and project information flow for quarterly review at board meetings and that the Steller Group would assist by providing all necessary documents. The meeting recorded that Mr Burstin had been granted "regular access to their [Steller's] office" and it was agreed that that would assist in providing information requests by Atlas on the extended due diligence process. A cashflow forecast, cashflow assumptions, "EOM cashflow", consolidated balance sheet and consolidated profit and loss statement for Steller Developments were attached. The minutes identified matters that were reviewed and summarised the position as follows: "- as identified earlier, due to uniqueness of [Atlas] funding pattern will require the developer to have multiple small project across the year. Our focus should be around their ability to juggle multiple project at the same time. Next review will focus more on their ability to streamline projects. And look to assess the sale/marketing and other parts of the business. - establishment of the core facility documents in place and locked (legal review complete). We will recirculate to PMC Legal once initial investor ready to fund. - security arrangements in respect of guarantee over facility to be agreed and perfected. - initial projects for facility agreed but subject to confirmation once first investor ready to fund. - [Mr Burstin] receiving good support from [Steller Group] team in respect of access and documentation. - continue to proceed with facility arrangements." 1. The Plaintiffs refer to a further due diligence meeting between Mr Burstin and Mr Hedley on 21 December 2016 (Ex J1, 698), which recorded a "heightened concern" as to overseas buyers settlements, noting that there had been only one default to the year to date; referred to the "high number of projects and frequency of cash churn" and noted that "management interest alignment is crucial"; discussed the guarantee structure of the directors' guarantee, and considered the possibility of an alternative security package to protect investors' interests if a guarantee from the directors could not be obtained; and discussed potential additional commercial zone projects to add to the initial projects, recording an objective "to have sufficient properties to sustain an initial corporate loan facility limit of $30m and up to $100m over time". 2. The Plaintiffs also refer to a further due diligence meeting between Mr Hedley and Mr Burstin on 1 March 2017 (Ex J1, 1359) which recorded that: "1. In light of softening market conditions both in terms of sales and senior lender's appetite, the Directors have taken prudent measures to revaluate the assumptions which underpin the Group's portfolio. 2. No material changes have been made with respect to construction or any other project costs. 3. Steller Commercial Loan Note Master Facility Deed was executed by Steller in favour of AAA ATF QCAX Australian Property Income fund II on 2nd Feb. 4. Steller Security Asset Facility Agreement was executed by Steller in favour of the first investor to elect the facility on 1st Feb. 5. Representations letter confirming complying investment status of Fund invested into Steller Developments signed by Steller Development directors on 2nd Feb. 6. Corporate deed of guarantee by Steller Pty Ltd agreed. 7. First investor funded through QCAX APIF II into the facility on 6th Feb. 8. Exchange around additional security guarantee strategy (14th Feb). Outstanding matter being addressed; - (a) Director Guarantees – confirmed Deed in favour of Steller Developments but callable under Master Facility Agreement; (b) additional corporate guarantee from another Steller entity with other directors as signatory." Those minutes attached further documents including the cashflow forecast for Steller Developments and other financial documents, referred to additional facility projects and observed that "[i]t appears that the construction and project program is running on time and on budget when compared to the previous project process forecast". 1. Ms Zhuang was also cross-examined (T455ff) at length as to the document review undertaken by Atlas in the due diligence process and it was difficult to identify any underlying logic in the arrangement of those documents in the exhibit to Ms Zhuang's affidavit or the corresponding volumes of the Court Book. Her evidence was that she had no "recollection" of ascertaining the relevance of a particular company, Steller Residential Pty Ltd, for the due diligence exercise that was undertaken into the Steller Group, and that is not surprising given the passage of time, although her evidence as to Atlas' usual practice was that a document relating to that company was filed into the due diligence pack because Atlas had queried what it did (T458). Her evidence was that Atlas wanted to see the companies which were within the Steller Group and also to observe how those companies were performing over a due diligence exercise that took almost a year and that information obtained in respect of the Steller Group generally was of relevance for that purpose (T459-460). 2. Ms Zhuang was also cross-examined as to several documents provided by the Steller Group in the course of the due diligence process. I accept that the immediate relevance of some of those documents was not particularly clear, although I also accept Ms Zhuang's evidence that the review of those documents would have assisted in obtaining at least a general impression of the nature of the Steller Group's activities. Ms Zhuang was also cross-examined as to the cashflow forecast for several projects, which showed increased forecast costs and reduced forecast earnings, and I recognise that a decline in earnings from particular projects was not a favourable development for the Steller Group, although it communicated little as to the overall profit or loss of companies within the Steller Group. Ms Zhuang accepted that she did not sight valuations of the particular properties referred to in the schedule to the Deed, although she did not accept that she had not seen valuations of other properties within the Steller Group (T509-510). Ms Zhuang was also cross-examined at some length as to several cashflow documents contained in the exhibit to her affidavit, which plainly contain an error in respect of sales for particular properties, where one sales figure appears to have been carried across multiple properties (T525ff). 3. As I noted above, the first pleaded representation is that Atlas had its own due diligence team, and the Plaintiffs plead (FASC [40C(f)]) that that representation was false and misleading because Atlas' due diligence team was not its own. The Defendants admit that Ms Zhuang stated that Atlas had its own due diligence team and Mr Knowles points out that there is evidence, to which I have referred above, that Atlas in fact undertook a due diligence process involving meetings between members of that due diligence team from July 2016 to March 2017, apparently involving at least Mr Hedley, Ms Zhuang and external advisers, and with Mr Burstin's involvement which I address below. I am not satisfied that the representation as to Atlas' due diligence team was misleading and deceptive, where Atlas had a team undertaking such due diligence including at least Mr Hedley with the assistance of other Atlas staff, although it also received information from the Steller Group and from Mr Burstin. 4. The second pleaded representation is that one of the members of the due diligence team had moved to Melbourne to remain close to the development site and conduct ongoing due diligence on the Steller Fund property development project. That representation is said to be falsified because no member of Atlas' due diligence team had moved to Melbourne The Defendants admit that Ms Zhuang informed Ms Xue that a member of the due diligence team was located in Melbourne and would conduct ongoing due diligence on the Steller Fund (Defence [40.15]), referring to Mr Burstin. That proposition is supported by contemporaneous records of the due diligence process which recorded that Mr Burstin was given regular access to Steller Developments' office in Melbourne for the purposes of due diligence. 5. The third and fourth pleaded representations is that the Atlas due diligence team had done a report on the Steller Fund property development project and that report confirmed that investing in that project was a "safe investment". This representation is said to be falsified because certain matters were not disclosed by due diligence and the reports purporting to be the result of due diligence by Atlas' team did not confirm that investment in the Steller Fund and the development of the properties by Steller Developments was a "safe development" because they failed to disclose specified matters. 6. Mr Einfeld in turn opened on the basis that: "It is not conceded that based upon a review of [the due diligence] material, Atlas could have formed a view that the development of four identified properties, the properties identified, could have been a safe and sound or non-risky development. If anything, one couldn't tell. But, if there was any indication from this material it was that this group and this company was in dire straits and could not be the subject of any kind of positive recommendation, as it obviously was." 1. The first difficulty with that proposition is that Ms Xue did not invest only in the four identified properties but in the Steller Fund, and the investment risk of the Steller Fund depended not only on the performance of the four identified properties but on the performance of the Steller Group and the rights available to Atlas under the relevant guarantees, including on the appointment by Atlas of a receiver to the assets of Steller Developments, who could enforce Steller Developments' rights upon those guarantees. The second is that that material did not indicate that the Steller Group was in "dire straits" and Ms Xue's pleaded case in that respect depended upon Mr McMaster's misreading of the financial reports of the Group, which I have addressed above. 2. In closing submissions, Mr Einfeld advanced further criticisms of Atlas' due diligence into the Steller companies and Steller Developments (Plaintiffs' closing submissions [75]ff) and submitted that: "Atlas' and Ms Zhuang's due diligence was seriously defective. It was misguided, ill-directed and inadequate. It can in no sense be said that it amounted to a reliable assessment of the exposure to loss that might befall an investor whose money was contributed to the Steller Fund and paid on for the purpose of Melbourne property development." 1. Mr Einfeld also advanced submissions as to the absence of a mechanism to ensure that monies would be used to develop the nominated properties identified in Schedule 1 to the Deed. I held, in an interlocutory ruling dealing with an objection during cross-examination, that the allegation in paragraph 40C(c)(vii) of the Further Amended Statement of Claim was sufficiently wide to include an allegation that there were no material facts from which Atlas could properly determine that the invested funds would reach Steller Developments. Mr Einfeld there accepted that the Plaintiffs' case did not involve any allegation as to where the funds "ultimately ended up" (T381), as distinct from the information then available to Atlas and Ms Zhuang in respect of due diligence. It is not apparent to me that Atlas could not conclude, in a due diligence process, that this matter was properly and sufficiently addressed by the terms of the Deed. 2. I am not satisfied that the matters said not to be disclosed by due diligence, which repeat the matters relating to Mr Burstin which I address below, falsify the representation that a due diligence exercise of substance was undertaken, although it may in hindsight have failed. I have held above that no representation was made at the April meeting that the due diligence confirmed that investment in the Steller Fund or development of the properties by Steller Developments was "safe", so the question whether such a representation was misleading or deceptive does not arise. 3. The Plaintiffs also rely on several additional matters (FASC [41A]-[41B]) to falsify the elaborate pleaded representations as to due diligence, namely a connection between Mr Burstin and Steller Developments and APIM; that Mr Hedley and Ms Zhuang on behalf of Atlas had negotiated with Mr Burstin on behalf of Steller Developments for Atlas to provide monies from the Steller Fund to Steller Developments, so as to enable Steller Developments to acquire and develop the properties; that, with respect to monies passing from the Steller Fund to Steller Developments pursuant to the Deed, Mr Burstin and/or MB Commercial Pty Limited received commissions and emoluments from both Atlas and Steller Developments; and that Mr Burstin reported to Atlas the results of the said due diligence investigation. The Plaintiffs in turn plead that "[a]t the time of undertaking and reporting the results of the said due diligence investigation, Mr Burstin, to the knowledge of Atlas, had been acting in the interests of both Atlas in providing funds to [Steller Developments] and [Steller Developments] in obtaining funds from Atlas" and was in a position of conflict with respect to the conduct of Atlas' due diligence investigation. 4. Ms Xue gave affidavit evidence (Xue 13.8.20 [13]) of the importance of this matter to her and expressed concern about not being informed that Mr Burstin was a director and major beneficiary of the Steller Group entities. However, it was apparent from Ms Xue's cross-examination that this evidence did not reflect any view taken by Ms Xue at the time of the investments, but rather a matter later developed by her legal advisers, which she appears to have adopted in her evidence. Her evidence in cross-examination was that she did not know what she meant by the reference to the Steller Group entities in her evidence, and she deflected other questions in respect of her expressed concern as to this matter as resulting from research done by her lawyers and an association between Mr Burstin and the Steller Group as to which she did not know the specifics (T237). 5. Mr McMaster's evidence was in turn that he had identified a suggested "conflict" affecting the due diligence process in preparing his expert report (T272), although it was notable that neither he nor the Plaintiffs identified any principle of law or any fiduciary relationship between a product issuer or an investor or between the persons involved in a "due diligence" process which would cause the rule against conflicts of interest to apply to that process. Mr McMaster instead simply assumed, without any apparent basis to do so and outside his expertise, that an approach to conflicts of interest which he said was "front and centre in the thinking of financial planners" (T272) would also apply to a due diligence process undertaken by a financial product issuer. Mr McMaster then expressed the view that the due diligence investigation was "compromised" by the fact that it was largely undertaken by Mr Burstin, whose interests were associated with Steller Developments as well as Atlas. That view depended on a premise, which was not established, that Atlas' due diligence was largely undertaken by Mr Burstin, rather than being undertaken by Mr Hedley and other Atlas staff with Mr Burstin's assistance. That view also depended on a further premise, as to which Mr McMaster was not qualified to give evidence, that due diligence investigations must be undertaken by persons who are not associated with a company that is the subject of the investigation, although the relevant relationship is not a fiduciary one so as to give rise to the application of the "no conflict" rule and that approach would be contrary to the general practice of due diligence investigations in Australia, to which I return below. 6. By her second affidavit dated 15 November 2021, Ms Zhuang in turn addressed the role of Mr Burstin and of APIM, a company associated with Atlas and Mr Burstin, which she observed was a joint venture arrangement which provided introductions to developers. Ms Zhuang also referred to her knowledge, from around mid-2016, that Mr Burstin was setting up fund management structures to lend to or invest in Steller Group entities, and that she understood from Mr Burstin that he had invested some of his own money and money from some of his friends with Steller Group. Her evidence was that she did not understand Mr Burstin to be representing either Atlas or Steller Developments in their dealings with each other, although he was assisting both of them, including assisting Atlas in his role in the APIM joint venture (Zhuang 15.11.21 [37]). Her evidence is that, to the best of her knowledge, neither Mr Burstin nor MB Commercial Pty Limited, another company associated with Mr Burstin, had received any payment from or referable to monies invested by Atlas investors in the Steller products (Zhuang 15.11.21 [44]). 7. Ms Zhuang was cross-examined at some length as to the connections between Mr Burstin, Atlas and the Steller Group companies. I will refer to that cross-examination in detail although it is ultimately of limited significance given the conclusions I have reached on other grounds. Ms Zhuang's evidence in cross-examination was that Mr Burstin did not have an interest in the Steller Group of companies, being the Group that undertook the developments, although he had an interest in Steller Property Funds Pty Ltd, which shared the same name, and was a funds management business of a similar kind to Atlas, which managed funds for friends and families of Mr Burstin and some of Steller Group's directors (T444). She accepted that Mr Burstin described himself as a director of Steller Property Funds Pty Ltd, the funds management company, and that Mr Smedley, who was a director of companies within the Steller Group, was also a director of Steller Property Funds Pty Ltd (T445). Ms Zhuang acknowledged in cross-examination that she relied on information provided by Mr Burstin in concluding that the placement of Funds with the Steller Group was a "safe investment", but denied that she had done so without investigating Mr Burstin's role in the Steller Group, and noted that information as to Mr Burstin's role with Atlas, APIM and his relationship with his property funds had been disclosed to Atlas, and that that disclosure had been accurate (T450). 8. The pleaded falsification of the representations as to due diligence in paragraphs 41A-41B of the Plaintiffs' Further Amended Statement of Claim, which is convoluted, is primarily directed to the proposition that Mr Burstin had a connection with Steller Developments because he was a director and shareholder of MB Commercial Pty Ltd which had an interest, through several other companies, in a company through which monies were passed from the Steller Fund to Steller Developments; Atlas had negotiated with Mr Burstin on behalf of Steller Developments to provide monies from the Steller Fund; Mr Burstin received commissions and "emoluments" from Atlas and Steller Developments; Atlas had requested Mr Burstin to undertake due diligence on its behalf; and Mr Burstin had been acting in the interests of both Atlas in providing funds to Steller Developments and Steller Developments in obtaining funds from Atlas. The Plaintiffs rely on this proposition for the allegation in paragraph 41B of their Further Amended Statement of Claim that Mr Burstin was in a position of conflict with respect to the conduct of Atlas' due diligence investigation. The Plaintiffs also plead, in an equally convoluted manner, that the Defendants represented that the Atlas due diligence team was independent of and at arm's length from Steller Developments and came under a duty to disclose that the due diligence team "was constituted by Mr Burstin" who was not independent of and at arm's length from Steller Developments. 9. Mr Knowles, in submissions, addresses the details of the relationship between Mr Burstin and the Steller Group on the one hand and Atlas on the other. He points out that no statutory or fiduciary basis or a duty to avoid conflict of interest is established; that the two entities of which Mr Burstin and Mr Hedley were together directors were not in fact part of the Steller Group; and addresses several other matters relevant to any conflict, including a contractual obligation placed upon Mr Burstin by a Heads of Agreement between MB Commercial Pty Ltd and Atlas to manage relevant conflicts of interest (Ex J1, 1256). 10. I have set out the pleaded representations pleaded in respect of due diligence above and observed that I am not persuaded that Ms Zhuang made representations of that specificity to Ms Xue. I am not satisfied that any express or implied representation was made that all members of Atlas' due diligence team were "independent" of and at arm's length from Steller Developments, and there is no reason to think that would or should be case. The Plaintiffs did not contend there existed a fiduciary relationship between a product issuer or an investor or between the persons involved in a "due diligence" process which would cause the rule against conflict of interest to apply to that process, and the usual, if not invariable, practice for due diligence in respect of public issue documents in Australia is to closely involve the company which is the subject of the inquiry and its officers and employees in any due diligence inquiry: see, for example, G Golding, "Underwriters' liability in Australian securities offerings" (1993) 11 C&SLJ 401; S Minns & G Golding, "Prospectus Due Diligence – A Focussed Approach" (1993) 11 C&SLJ 542; Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets (No 6) (2007) 63 ACSR 1; [2007] NSWSC 124 at [536]ff, and on appeal as Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Market Ltd (2008) 73 NSWLR 653; (2008) 252 ALR 659; (2008) 68 ACSR 595; [2008] NSWCA 206; and the many judgments of this and other Australian Courts describing the due diligence process which is typically adopted by both the target company and the acquirer in an acquisition scheme of arrangement. Obviously enough, a company, its officers and its employees which undertake due diligence in respect of its issue of securities or a scheme of arrangement would rarely, if ever, lack an economic interest in the outcome of that transaction. A due diligence process generally stands or falls upon the adequacy of the inquiries made, not upon any "independence" of those undertaking it from the underlying transaction. 11. In any event, it is plain from the due diligence records on which the Plaintiffs rely that both Mr Burstin and Mr Hedley were involved in the due diligence process, including discussion of the implications of information conveyed by Mr Burstin, and there is no suggestion that Mr Hedley was not independent of and at arm's length from Steller Developments, or was not acting in the interests of Atlas and the Steller Fund at the relevant time. The fact that Mr Burstin may have had an association with the Steller Group does not deprive the due diligence process of independence, still less of any efficacy that it otherwise had in those circumstances. It has not been established that any representation as to the due diligence process made at the April meeting was misleading on that basis. The 4 May WeChat exchange 1. The Plaintiffs plead three further representations (FASC [40.18]-[40.20]) arising from a WeChat exchange on 4 May 2017, as follows: "40.18 The Steller Fund is very safe. 40.19 Ms Zhuang's colleagues are investing in the Steller Fund; and 40.20 Ms Xue could rest assured about the Steller Fund." 1. I will deal with each of these representations below. I note here that at least the first pleaded representation had all the difficulties which commonly arise where apparently unequivocal representations are extracted from an informal exchange without regard to its context. It also had a further difficulty that it substantially oversimplified what had been said, where the exchange from which it was derived had occurred in Mandarin and used the Mandarin word expressed in English letters as "anquan" rather than the English word "safe". It emerged in the course of the hearing that the term "anquan" has a complex range of meanings and significations, which is at least as complex as to the range of meanings and significations attached to the English word "safe", but not identical in meaning to that English word. I return to these matters below. 2. In the 4 May WeChat exchange, Ms Xue left an audio message for Ms Zhuang in Mandarin and Ms Zhuang responded by a written message in Mandarin. There are now at least three or four alternative English translations of that exchange, although they are not very different in substance, which are as follows: Ms Xue: "Fiona, OK the point is, the project has high safety measures with little risk, because I heard that some people think it's got risk. I trust you, if you say there is not, you don't have to elaborate more, you just say its very safe and I am comfortable." Ms Zhuang: "It is very safe, my colleagues invested in it as well (the same product). Don't worry." Alternatively: Ms Xue: "Fiona, can I please ask you, this project is pretty safe right?" "There isn't any risk right? Because I heard some people say there might be risk, but I trust you. If you tell me it is safe, not risky, then it will give me some peace of mind without any further explanation from you." Ms Zhuang: "Very safe, our office colleagues are investing up. Rest assured." 1. Dr Wang in turn translated the 4 May WeChat exchange (Ex P3, 213-214) as follows: Ms Xue: "Fiona, I ah, I'd like to ask you about this project, its safety factor is quite high, right?" "Because I've heard that some people think that there seems to be risk. I trust you, if you say there's no risk, you won't need to explain and say anything else to me, just say that it's safe, then okay I'll rest assured (chuckle)." Ms Zhuang: "[It's] very safe, our colleagues from the office have invested [in it]." "Rest assured." 1. Dr Wang then further amended his translation in his further report dated 25 February 2022 (Ex P7) including to change the words "safety factor" to "safety, safety factor" and to insert an additional sentence "There isn't much risk at all, right?" at the beginning of the second paragraph. Dr Wang fairly pointed out in cross-examination that the need for these amendments arose from the lack of direct English equivalents for what was said in Mandarin. The parties have now agreed as to Dr Wang's most recent translation (in their "WeChat Chronology", MFI-13), although it is plain that the process of translation here seeks to achieve the closest equivalent in English to the exchange in Chinese, which could not be and is not identical to the original. 2. Turning now to the cross-examination of Ms Xue in respect of the 4 May WeChat exchange, she accepted that she had already decided to invest her (or, more precisely, Tredmore's) money in the Steller Fund (T215) at the time of this exchange and, as I noted above, it is common ground between the parties that the first investment of $2 million by Tredmore had already been made. Ms Xue also maintained that Ms Zhuang had already told her "how safe the product was" and that she was merely "trying to confirm it from another aspect" in that question (T217). She accepted that she then knew the Steller Fund was investing in property development and that investment in property development had some risks but she denied that she knew that the investment was not a zero risk investment, while also accepting that "anything involves risks" and pointing to the need for "risk control measures" (T217-218). 3. Ms Xue's evidence, in response to a question that I asked as to that WeChat exchange also was that: "I knew this project contains no risks, so I did this. This is to confirm this belief through another aspect without undermining the trust relationship." [emphasis added] 1. I cannot accept Ms Xue's evidence in this respect. It seems to me that, at this point, Ms Xue recognised that the investment involved real risk (and, I interpolate, she was right to do so where all investments involve real risk, which should be reflected in the return payable on them) and attributed that recognition to "some people" as she explained in cross-examination and then sought reassurance as to that matter. Contrary to Ms Xue's evidence, it seems to me that that question was not asked to confirm an existing belief that the project had no risk, and Ms Xue's evidence to the contrary reflects her wider approach of generally refusing to acknowledge any recognition of any risk in the investment at any time, where she perceives that acknowledgement would be detrimental to the Plaintiffs' claims. 2. In opening, Mr Einfeld indicated the Plaintiffs do not rely on the 4 May WeChat exchange as inducing Tredmore to invest the first amount of $2 million, because it post-dated that investment. He submits that the WeChat response from Ms Zhuang corroborates earlier oral communications to which Ms Xue deposes, and I return to those communications below. Mr Knowles responds, and I accept, that the 4 May WeChat exchange does not provide corroboration of earlier oral representations alleged to have been made at the April meeting, where there is no reason to assume that the matters raised in that correspondence or exchange had been raised at any prior time, particularly where that correspondence and the 4 May WeChat exchange do not themselves suggest that they refer to any earlier discussion of the relevant matters. It is not necessary to consider whether it would have been open to the Plaintiffs to contend that they could rely on the 4 May WeChat exchange in respect of the first $2 million investment so far as it occurred after the monies were paid to the Steller Fund but before they were passed onto the Steller Group, where the Plaintiffs do not put that case. The representation pleaded in paragraph 40.18 1. The first pleaded representation arising from the 4 May WeChat exchange (FASC [40.18]) is that Ms Zhuang represented that the Steller Fund was "very safe". Plainly, the English phrase "very safe" was not used in that exchange which, as I noted above, took place in Mandarin, and it is common ground that a Mandarin term which is expressed in English letters as "anquan" was used. Mr Einfeld fairly accepted, in closing oral submissions, that the Court would need to decide a question as to the meaning of the Mandarin word "anquan", which had been used in this representation, rather than the English word "safe" which both parties now accepted was its closest translation (T699). 2. As I noted above, an issue arose in the course of the hearing, not as to the literal translation of the phrase "very safe", but as the proper interpretation to the exchange in Chinese and its implications for how the translated text is to be understood, and it is preferable that I deal with that issue first. That issue arose because Ms Zhuang denied in cross-examination that she told Ms Xue in the May WeChat exchange that the Steller Fund was "safe" or "very safe", and her evidence was that the term she used in Mandarin was "anquan", using English lettering, and that the translation of that word did not equate to an investment that has "little or no risk of losing capital" (T359). In re-examination, Ms Zhuang was asked to clarify the meaning of the term "anquan" to which she had referred in cross-examination. Her evidence was that that word could properly be translated into a single word as "safe", but that the fuller translation was that the "capital is safeguarded meaning that it's not subject to misappropriation or someone stolen the money" (T589). 3. In closing submissions, Mr Einfeld emphasises that Ms Zhuang's affidavit evidence had itself translated what she had said in the 4 May WeChat exchange as that the investment was, inter alia, "very safe" (Zhuang 10.7.20 [84]) and that a representation to that effect was admitted in the Defendants' verified Defence. Mr Einfeld also points out that Dr Wang, whose evidence was led in the Plaintiffs' case, translated the relevant passage of the WeChat message as indicating "it's very safe". This does not avoid the difficulty of translation which has now emerged. The Defendants do not seek to resile from Ms Zhuang's evidence that "very safe" is an appropriate translation in English of the term used in Mandarin in that WeChat exchange and their expert evidence is to the same effect. They instead point out that the original statement in Mandarin carries a more nuanced and specific meaning, as one of several terms available to address the concept of "safety" in Mandarin, than the corresponding English term. Plainly, the content of the representation in its English translation cannot rise beyond the content of the representation when it was made in Mandarin, and the Plaintiffs cannot succeed because a representation, as translated into English, would carry a wider meaning that it would carry when made, as it was, in Mandarin. 4. I bear in mind that, as Mr Einfeld points out in the Plaintiffs' closing submissions, Ms Zhuang did not raise this issue until her cross-examination, on the eighth day of the hearing. Mr Einfeld then submits that: "This was a brazen attempt on [Ms Zhuang's] part to alter, fundamentally, a key factual premise upon which the case had been, and was being, conducted (including on the pleadings and in her own evidence in chief)." 1. I do not accept that that criticism of Ms Zhuang is warranted. There can be no suggestion that Ms Zhuang was wrong in pointing to the difficulty arising from the translation of the Mandarin term "anquan" to English, where cogent expert evidence has now been led by the Defendants to establish that that difficulty is real and substantial. It would have been wholly undesirable for the Court to be left in ignorance of that issue, particularly where two of the provisions on which the Plaintiffs rely are offence provisions and the Briginshaw standard applies, and that difficulty was better raised late than never. Mr Knowles responds that there is no dispute as to the words that were said in Mandarin or that Dr Wang's translation is a reasonable literal English translation of what was said in Mandarin. He characterises the issue that emerged in Ms Zhuang's evidence in cross-examination as whether that literal translation properly conveyed the meaning of the words in Mandarin, in their context. 2. Both parties led further expert evidence of Dr Wang and Mr Yang in respect of this issue, by leave, after it emerged, and both experts were cross-examined. It will be convenient to deal with Dr Wang's evidence first, although Mr Yang's report was tendered first and he was cross-examined first by agreement of Counsel. Dr Wang has substantial academic qualifications and experience in interpreting, translating and, helpfully, also in linguistics. His report was detailed and based on helpful research which I address below. Mr Knowles' cross-examination of Dr Wang had an entirely different character to Mr Einfeld's cross-examination of Mr Yang to which I refer below. Mr Knowles was courteous and appropriately respectful of Dr Wang's qualifications and experience, and that cross-examination engaged with the substance of his reasoning and left me better informed as to the matters in issue. I also asked several questions of Dr Wang which he engaged with intelligently and constructively. Accordingly, I give substantial weight to Dr Wang's evidence. 3. Dr Wang was asked to assume that, in the April conversation, Ms Xue and Ms Zhuang had a conversation as to the "safety" of the Steller Fund (Ex P7, p6) and he was provided no further information as to the content of that conversation, and he relied (of necessity) on that limited assumption in addressing the context of the 4 May WeChat exchange. That assumption plainly oversimplified, and to some extent slanted, the content of the April conversation, but it did not seem to me that it ultimately affected the substance of Dr Wang's report. Dr Wang also assumed (Ex P7, p11) that Ms Xue was a "prospective investor" seeking information at the time of the 4 May WeChat exchange, and that assumption was plainly wrong where that exchange was directed to an investment that both parties knew had already been made. That error may have had more impact on the contextual aspects of his approach, and he fairly accepted in cross-examination that he was not qualified to say how matters may be affected by the fact that Ms Xue (or, more precisely, Tredmore) had already invested when this conversation occurred. 4. Dr Wang's report helpfully dealt with wider issues in translation and linguistics, including the relevance of expression, meaning and context, and the manner in which meaning "unfolds" in a conversation. He indicated (Ex P7, p8) that he adopted a "pragmatics" approach by viewing the relevant conversation as "a coherent and unfolding conversation" and he noted (Ex P7, p9) that the word "anquan" was originally used by Ms Xue in that conversation and then by Ms Zhuang in her response. His sequential review of the conversation emphasises that a range of terms were used including (on his latest translation), "anquan" by Ms Xue (which he translates as "safety" or "safety factor"), then Chinese terms by Ms Xue translated as "much risk" (although he accepted in cross-examination that the Mandarin terms did not have an exact English equivalent here), "no risk", then a further reference by Ms Xue to "anquan" and Ms Zhuang's response also adopting that term. He expressed the view (Ex P7, p10) that, in its context, Ms Xue's question should be understood as asking whether the investment was "quite high" in safety factor, had "not much risk at all", if "there is no risk" and was "safe". An obvious difficulty with that view is that, from an investment risk or legal perspective, there is a real difference between an investment that is "quite high" in safety factor (a qualified and comparative statement) or has "not much risk" and an investment (if it exists) that is risk free or has "no risk", and that difference is highlighted when a risk that was relatively unlikely comes home. The Plaintiffs and Ms Xue often treat the representation as having the latter character, as a representation that the investment was risk free, but Dr Wang's evidence treats the former, that it had limited or "not much" risk as at least equally open. I note, in passing, that the term "safe" has similar difficulties in the English language, since many would describe air travel as "safe" although it is not risk free; but I again remind myself that this issue does not depend on the meaning and signification of the English word "safe", but on that of the Mandarin word "anquan". 5. Dr Wang also helpfully addressed the value of naturalistic language data in relevant contexts derived from reputable sources, and I found his analysis particularly helpful in this respect. He criticised Mr Yang's reliance on a bilingual dictionary, although he ultimately accepted in cross-examination that that was a legitimate source of identifying the range of meanings of a Chinese word, although he preferred (and I also give substantial weight to) his wider review, which investigated the uses of the term "anquan" in, inter alia, the Chinese edition of a well-known financial newspaper. That investigation demonstrated that term was used with a range of meanings (Ex P7, p16; T679-680, T691ff), including Dr Wang's preferred meaning of indicating "confidence in an investment not being a loss-making one", and other meanings as an antonym to "risky" (Ex P7, p16 [52.2]) or to "speculative" (Ex P7, p16 [52.4], p18ff) or to "volatile" (Ex P7, p16 [52.5]), or to circumstances in which an investment was less risky because of the circumstances in which it was made (Ex P7, p16 [52.7], p23). He also gave examples of the use of that term in a manner that he described as a "general commendation" of a financial product, often by comparison with other types of financial products or other financial products. This evidence emphasises the range of usages of the term "anquan" to refer to somewhat different concepts; I recognise, although it is again not strictly relevant, that the term "safe" may have a similar range of meanings in a similar context in English, and may also include investments that are "safe" in a relative sense but not riskless, by comparison with other investments, just as air travel is safe in a relative sense but not riskless. 6. Dr Wang also referred (Ex P7, p41) to the use of the term "anquan" in a later WeChat exchange on 4 February 2018 between Ms Xue and Ms Zhuang in relation to a mortgage loan. Dr Wang did not take the view that the later exchange forms part of the context of the 4 May WeChat exchange, where it took place nearly a year later, and it does not seem to me to advance matters, since it raises the same questions which arise from the 4 May WeChat exchange as to the range of meanings of "anquan".. 7. Turning now to the areas of agreement and disagreement between Dr Wang and Mr Yang, they both agreed that the word "anquan" was appropriately translated as "safe" and I accept that evidence, although it does not assist with resolving the complex range of meaning of the term "anquan" in Mandarin or "safe" in English. Dr Wang did not agree with Mr Yang's view that the term "anquan" is not typically used by Mandarin/Chinese speakers to indicate a high level of confidence and indicated his view that the term is used to indicate "confidence in an investment not being a loss-making one" (Ex P7, p3). Dr Wang disagreed with Mr Yang's evidence that "anquan" and its nominalised form "anquan-xing" ("safety") were not typically used or understood as general commendation of a financial product (Ex P7, p4). I generally prefer Dr Wang's evidence to Mr Yang's evidence in these respects, although it will emerge below that (as Dr Wang's report makes clear) it also has a wider range of meanings than Dr Wang's preferred meaning. Dr Wang also disagreed with Mr Yang's opinion that the word "anquan" referred only to a limited class of risk, being the risk of an investment being lost due to structural illegality, misappropriation or embezzlement. I prefer Dr Wang's evidence, to the extent that word is not only or mainly used to refer to those risks, although I find below that is one of its available usages. 8. The Defendants led further evidence of Mr Yang, in his report filed on 13 January 2022, which Mr Knowles fairly summarised as follows: "a. The appropriate translation of the Chinese word "anquan" (安全) as used in the WeChat messages is "safe" (page 5) – this is consistent with Ms Zhuang's evidence and the defendants' admissions on the pleadings; b. The Chinese word "anquan" is not an exact equivalent, and does not mean safe from all risks (page 6); c. It is important to consider context, especially the fact that the conversation relates to financial products (page 8); d. Mandarin/Chinese speakers do not typically use or understand the word "safe" to indicate a high level of confidence in the investment or as a general commendation of an investment, they typically use other words (page 8); e. "Anquan" in the current context is unlikely to refer to safety from all risks associated with the investment, rather it is likely to have referred to a specific class of risk, being the risk of investment monies being lost due to structural illegality, or misappropriation or embezzlement by persons associated with the management of the investment (page 8); and f. Ms Xue herself used the word "anquan" at least three times in the two audio questions she put to Ms Zhuang immediately prior to Ms Zhuang's written response (at 05-04-2017 14:59:12 on page 3 and at 05-04-2017 14:59:40 on page 4)." 1. Mr Knowles in turn submits: "Mr Du Yang's evidence supports the evidence of Ms Zhuang. Further, it supports a construction that the context Mr Du Yang describes was first raised by Ms Xue, not imposed on the conversation by Ms Zhuang, and therefore fairly reflected the nature of Ms Xue's specific concern. Ultimately, there is no evidence at all that a concern of that nature had any foundation. Notably, it was not the first time Ms Xue had raised concerns about misappropriation or embezzlement, having asked Ms Zhuang prior to the First Investment, "How do I know you will not run away with my money?" ([Zhuang 10.7.20] at [52])." 1. Mr Yang was cross-examined, somewhat aggressively, by Mr Einfeld. His qualifications to give evidence were challenged on the basis that he was authorised by NAATI only to interpret written documents. That challenge had the difficulties that Mr Yang was sufficiently qualified to translate from Chinese to English, by his educational qualifications and experience and, in any event, the Plaintiffs' had themselves pleaded that the representation as to which he was largely cross-examined as made "in writing" (FASC [40]), and relied on the written Chinese text of that representation, and it in fact occurred partly in writing in a WeChat exchange. Mr Yang acknowledged that he had devoted limited time to his report, which was (and claimed to be) no more than his expert view as to the meaning and signification of the word "anquan" in the relevant context. At the conclusion of his cross-examination, Mr Yang accepted that his opinion was not only "kind of a limited opinion" and then also accepted an obviously unfair proposition put by Mr Einfeld that he had meant by that answer that his opinion "may or may not be correct" (T666). I have given careful consideration to the entirety of this cross-examination, although I found parts of it to be of limited assistance. 2. In closing oral submissions, Mr Einfeld advanced vigorous submissions impugning Mr Yang's evidence, both in his report and in cross-examination (T705ff). I bear those criticisms in mind, although it is not necessary to address them in detail, where it is now common ground, and I find for the reasons noted below, that Dr Wang's evidence should be preferred to Mr Yang's evidence. It is plain that Mr Yang was less qualified than Dr Wang, both by way of education and experience. I accept his evidence that the word "anquan" does have at least the meaning "safeguarded" in this context, and I find that has been used in that manner (sometimes with additional Chinese words or in a context that reinforces that meaning) in respected international publications translated into Chinese dealing with financial markets (Ex D9). I do not accept Mr Yang's view that the word "anquan" conveys only that meaning or that it refers only to a limited class of risk, being the risk of an investment being lost due to structural illegality, misappropriation or embezzlement. I prefer Dr Wang's evidence as to the wider range of meanings which that word can have, to which I referred above. 3. Having regard to Dr Wang's evidence, I do not find on the balance of probabilities that a representation was made that the investment in the Steller Fund was "safe" in the sense of riskless, quite apart from my finding above that Ms Xue recognised that was not the case. The representation that was made by Ms Zhuang using the Mandaring term "anquan" was a more complex one, which was capable of conveying, on Dr Wang's preferred meaning, that Ms Zhuang had "confidence in an investment not being a loss-making one", and contrasting it with more risky, more speculative or more volatile investments, or pointing to its lesser risk in the circumstances in which it was made, and providing, again on Dr Wang's evidence, a "general commendation" of the investment by comparison with other types of financial products. It potentially also conveyed that the investment was safeguarded by structural means, which both Dr Wang and Mr Yang accept is an available meaning of the term "anquan" in an appropriate context. I now turn to whether that more complex representation has been falsified. 4. Taking the most favourable of these possible meanings for Ms Xue, that the word "anquan" conveyed, in the relevant context, that Ms Zhuang had "confidence in an investment not being a loss-making one" (in Dr Wang's formulation) (rather than conveying that the investment was not a particularly speculative or volatile one, or that it had structural safeguards in place), that representation is not falsified by the matters pleaded by the Plaintiffs. First, they do not plead, and have not established, that Ms Zhuang did not have a reasonable basis for that view at the time of the 4 May WeChat exchange, although the investment already proved to be loss-making with hindsight. Second, a representation of that character is not falsified by the matters on which the Plaintiffs rely. The matters relied on to falsify the representation pleaded in paragraph 40.18 1. The Plaintiffs plead this representation is falsified by reference to the matters pleaded in paragraphs 40C(c)(i)-(viii) of the Further Amended Statement of Claim, which I have addressed above. The first of those matters (FASC [40C(c)(i)]) is that no mortgage security was taken with respect to the relevant properties or to secure the Plaintiffs' investment. For the reasons noted in paragraphs 95 and 116 above, this matter, alone or together with other matters, does not falsify a representation that the investment was "safe", in the sense of "confidence in an investment not being a loss-making one" or in the other possible senses of the term "anquan" identified by Dr Wang. As I noted above, the likelihood that investors in the Steller Fund would be repaid and that the investment would be profitable rather than loss-making depended upon the financial position of the Steller Group generally and the progress of the developments that were the subject of the Steller Fund and other developments of the Steller Group, not upon the existence or non-existence of mortgage security over the particular properties that were the subject of the Steller Fund, particularly in an undeveloped or partly developed state. 2. The second of these matters (FASC [40C(c)(ii)]) is that valuations of the properties (either before or after development) had not been obtained. For the reasons noted in paragraphs 117-118 above, the absence of valuations of the properties in their undeveloped state was of little relevance to assessing the risk of the investment; valuations in their developed state would have been of greater assistance, at least if combined with an assessment of the costs of development, and the Plaintiffs do not take the further step of showing what the valuations that might have obtained would have disclosed. This matter also does not falsify a representation that the investment was "safe", in the sense of "confidence in an investment not being a loss-making one" or in the other possible senses of the term "anquan" identified by Dr Wang. 3. The third of these matters (FASC [40C(c)(iii)]) is that the properties which were to be developed by Steller Developments were not all owned by Steller Developments, nor were contracts in place for their acquisition or development by Steller Developments. For the reasons noted in paragraph 119 above, I accept that this matter introduced real risk into the investment where, in the event of financial difficulty within the company which owned the relevant property or other companies within the Steller Group, that property would be realised for the benefit of creditors of that company and not for the benefit of investors in the Steller Fund. It seems to me that this matter, in itself, has the result that a representation in the 4 May WeChat exchange that the investment was "safe", in the sense of "confidence in an investment not being a loss-making one" or in the other possible senses of the term "anquan" identified by Dr Wang, was misleading or deceptive. For completeness, I should also note that Mr Knowles submitted, in closing submissions, that the representation to the effect that the investment was "safe", which he characterised as "safe" in the sense that it was "free or substantially free from the risk of incurring loss", was not a statement of an existing fact but a statement of a prediction or as to a future matter, and contended that the Plaintiffs' attempt to falsify that representation was misconceived in respect of aspects of the case (T765). I do not accept that submission, at least so far as the Plaintiffs rely on this aspect of the structure of the transaction to falsify the representation. A representation that an investment is "safe", so far as it relates to the structure of the investment, seems to me to be a representation of present fact, which is capable of being falsified if that structure involves unreasonable risks. 4. The fourth of these matters (FASC [40C(c)(iv)]) is that the properties were not in each case zoned for non-residential use as required by the Deed. For the reasons noted in paragraphs 120-122, this matter also does not falsify a representation that the investment was "safe", in the sense of "confidence in an investment not being a loss-making one" or in the other possible senses of the term "anquan" identified by Dr Wang. The fifth of these matters (FASC [40C(c)(v)]) is an allegation that Steller Developments was in (or arguably in) immediate default of its obligations under the Deed, and Atlas had the immediate right to bring the loan to an end, such that the Plaintiffs would not receive interest at 10% per annum for two years. This matter was not established for the reasons noted in paragraphs 123-124. The sixth of these matters (FASC 40C(c)(vi)) is an allegation that Steller Developments' financial position had deteriorated substantially in the five months prior to the making of the representations, in that its net assets had fallen by approximately 76%. This was also not established for the reasons noted in paragraphs 125-128 above. 5. The seventh of these matters (FASC 40C(c)(vii)) is that there was no material from which Atlas could properly determine that revenue earned by Steller Developments from its development of the properties would suffice to pay interest to the Plaintiffs quarterly at the rate of 10% per annum for 2 years and to enable repayment of the principal invested by them in the Steller Fund, other than by utilising monies that were invested by investors in the Steller Fund. For the reasons noted in paragraphs 129-132 above, this matter also does not falsify a representation that the investment was "safe", in the sense of "confidence in an investment not being a loss-making one" or in the other possible senses of the term "anquan" identified by Dr Wang. 6. The eighth and last of these matters (FASC 40C(c)(viii)) is an allegation that the Defendants had no knowledge of the terms of the personal guarantees in relation to investments in the Steller Fund nor of the net assets of persons or entities providing those guarantees. As I noted above, this allegation is not established since the guarantees had been made available to them and reviewed in due diligence updates. I have addressed the wider unpleaded case that the Plaintiffs sought to bring in this respect in paragraph 135 above. 7. As I noted in paragraph 136 above, it seems to me that there were material risks in an investment in the Steller Fund, likely reflected in the relatively high rate of return payable to the Plaintiffs in respect of that investment, arising from the uncertainty as to the future profit or loss that would be achieved from the development of the properties, of which their future valuations was a component part, and the range of potential outcomes; the fact that the relevant properties were not owned by Steller Developments, so that there was a structural risk for the Steller Fund in respect of a failure of the companies that owned them; and the recovery of principal and interest likely also depended on the future profitability of the Steller Group. However, I should address the Plaintiffs' pleaded case, where the allegations made involve criminal offences and there would otherwise be real unfairness to the Defendants. The representation that was made that the investment was "anquan" in Mandarin, and "safe" in the broadly similar concept in English, is falsified in only one respect, by the allegation (FASC [40C(c)(iii)]) that the properties which were to be developed by Steller Developments were not all owned by Steller Developments, nor were contracts in place for their acquisition or development by Steller Developments. 8. Mr Knowles also points, in submissions, to a wider issue as to the difficulty of the concept of "safety" in respect of an investment, although I again remind myself that Ms Zhuang did not say that the investment was "safe" (in English) but instead that it was "anquan" in the available senses of that term in Mandarin. Mr Knowles submits that: "That concept of risk or danger might properly be regarded as comprehensive in some situations (ie. where 'safe' might convey free of any risk whatsoever). However, in the context of an investment, this cannot be the correct starting point. No investment relying on enforceable rights can reasonably be said to be free, for instance, of what is sometimes termed sovereign risk, let alone the more commonly-realised risk of enterprise insolvency." 1. Mr Knowles also submits that: "The question of "safety" is relative and contextual in almost all forms, and particularly so with respect to financial products. It is neither appropriate nor possible to consider the Safety Representations in a vacuum, as to whether they are false or misleading. The term "safe" could never have been understood by an investor – and certainly a sophisticated investor such as Ms Xue - to be a guarantee by Atlas of the financial standing of the contract counterparty (ie. Steller Developments Pty Ltd) or its associated entities, together with a guarantee by Atlas that there was no or little risk of the future failure and insolvency of the associated property development business. The unanticipated future insolvency of a contract counterparty is a risk inherent in every investment, and to say that an investment is "safe" is not an assurance that that risk cannot or will not happen. Rather, the term "safe" has to be construed in the context of the parameters of the particular investment (ie. higher return higher risk vs lower return lower risk), in the context of the enquiry, and also by reference to the specific criteria by reference to which the term was used (in this context, that Atlas staff were also investing in the Steller investment, which they obviously would not have done if they had considered that the investment was in any respect not a "safe" commercial proposition)." 1. It seems to me that this submission accurately recognises the nature of financial products, but would not support a representation that an investment was "very safe", in the sense of riskless. A representation made in those terms has not been established for the reasons noted above. However, the representation that was made by the use of the term "anquan" was falsified in the manner noted in paragraph 195 above. 2. Mr Knowles also identifies several matters which he submits are relevant to the context in which a representation as to the safety of an investment in the Steller Fund was made (if it were made, which is denied), namely that: "(a) it is generally accepted that all investments (or financial products) have some risk attached to them, including by Ms Xue (T98:40-41; T99:16-17; T99:49-50) who further confirmed that she understood this premise in 2017 (T98:1-2) and also by Mr McMaster (T262:1-8); (b) it is also generally accepted that some investments are safer than others. Ms Xue gave evidence that the safest form of investment was a government issued bond issued by governments with a healthy financial position (T100:31-33); (c) further, it is generally accepted that there is a relationship between risk and return. This was accepted by Ms Xue (T220:37-39) and also by Mr McMaster, who confirmed that generally speaking the relationship was such that, the lower the risk the lower the return, and the higher the risk, the higher the return (T260:6-10). There is no evidence that either Ms Xue or Mr McMaster consider the "risk/return" relationship to be "hypothetical" (PCS [29]); this is a mischaracterisation or a fundamental misunderstanding in the plaintiffs' closing submissions. Indeed, as was, with respect, correctly noted by the Court in the course of argument, this is "probably the most fundamental proposition in capital management, that there is a relationship between risk and return, which originates in the Modigliani Miller Thesis" (T102:33-35); (d) the Safety Representations relate to a 10% yield product. It is generally accepted, including by the plaintiffs' financial advice expert, that an investment with an anticipated rate of return of 10% would have a greater risk than an investment with an anticipated return of 4% (T260:12-31); (e) the Relevant Investment related to property development. There are inherent risks in property development investments, some of which were readily acknowledged by Ms Xue, including that the construction costs might go up and that the property market might fall (T101:36-49); (f) Ms Xue also gave evidence that the risks of property development she attested to were greater than the risks involved with a bank term deposit at a bank with an A credit rating (T102:1-4) (although, following her tendency in giving risk-related evidence, she then refused to concede the logical consequence of that, being that an investment based on a bank term deposit at a bank with an A credit rating is a safer investment than investment in property development (T102:6-9); (g) on the evidence, Ms Xue appeared to have a consistent appetite for investing in products yielding between 8% to 10% or more, including the Second Investment (being the Tasman/Epping Fund), the Relevant Investment, the Microequities Investment …; (h) Ms Zhuang had some concept of Ms Xue's risk appetite, given that Ms Xue: (i) had already procured an investment in the Tasman/Epping Fund which was structured similarly to the QCAX Fund II Steller Series, with the same yield expectation, presence of guarantees and no mortgage security. In respect of this investment, the information memorandum for the Tasman/Epping Fund had been provided ([Ex J1], 1268-1274), which described the security structure, and an application form had been signed, acknowledging having read that information memorandum ([Ex J1,] 1353-1343); and (ii) had also expressed interest in investing in the Microequities Fund, at least enough to take a copy of the related information memorandum, which Ms Zhuang had mentioned to her in the same discussion (on 6 April 2017) during which she first conveyed to Ms Xue the features of the QCAX Fund II Steller Series ([Zhuang 10.7.20] at [79]). The Microequities Fund had an estimated return of 20% and was described by Ms Zhuang as "speculative in nature", "high risk" and "highly volatile" ([Zhuang 10.7.20] at [79]); (i) this objective history of investment decisions undermines Ms Xue's stated intention that she was pursuing a zero risk investment strategy (or even a low risk investment strategy) in order to purchase a house in several years' time; and (j) further to the submissions above about the meaning of "anquan", the Safety Representations, to the extent made, were made to a PRC national, and in Ms Zhuang's experience, such investors have "suffered numerous losses in China due to fraud, embezzlement of money, all sorts of difficulties that they would've experienced in China" including with Chinese banks (T355:2-11). Against that background, the concept of "safety" associated with a financial product can be readily understood to take on a different relative meaning - that is, the investment might be safe as against the risk of fraud or embezzlement, as distinct from providing no risk as to loss of capital. Indeed, the terms of the WeChat exchange referred to in paragraph [ ] (translated at [Ex P3,] 213-214) in the light of Ms Xue's evidence in cross-examination of a "subtle" enquiry involving fictional third-parties to avoid potential relationship damage, point to the likelihood that Ms Xue's enquiry and Ms Zhuang's response, in context, were addressed to a risk or risks that Ms Xue was not inclined to raise overtly with Ms Zhuang. This was not the first time such matters had been raised: in Ms Zhuang's uncontested evidence of her discussion concerning the First Investment, Ms Xue asked her "How do I know you will not run away with my money?" ([Zhuang 10.7.20] at [52])." 1. The majority of these matters relate to the relationship between risk and return, which I have addressed above. If (contrary to my finding) a representation had been made that the investment was safe in the sense of riskless, they do not displace it but instead indicate why it would have been misleading and deceptive, because an investment of this nature could not be safe in that sense. They also do not avoid the falsification of the representation that was made by the use of the term "anquan" in the manner noted in paragraph 195 above. 2. If it had been established (contrary to my finding) that the representation made in the 4 May WeChat exchange was that the investment was "safe" in the sense of riskless, then it also seems to me that that representation also could not be treated as qualified by the information contained in the information memorandum, which had been provided to Ms Xue nearly a month before and where Ms Zhuang did not here remind Ms Xue of the risk disclosures made in it. That representation, if it extended to the risk of the investment, would have been misleading and deceptive for the same reasons that I have held that a representation that the investment was "safe", if (contrary to my findings) it had been made at the April meeting, would have been misleading or deceptive. That information also does not avoid the falsification of the representation that was made by the use of the term "anquan" in the manner noted in paragraph 195 above. 3. If it had been established that the representation made in the 4 May WeChat exchange was that the investment was "safe" in the sense of riskless (contrary to my finding), I would have found that the rate of return on the investment was so high that Ms Xue must have known that it could not be "very safe" in the sense of risk free. I would there take the same sensible view that was taken by White J in Dawson v LNG Holdings [2008] NSWSC 137, to which Mr Knowles refers, relating to an investment promising somewhat higher returns than the Steller Fund that: "No-one investing money at 25 percent per annum interest in a property development which required the obtaining of a construction certificate, the building of townhouses or apartments, and the sale of the townhouses or apartments, could reasonably expect that there were no risks attached and that return of their money was assured." That is, however, no answer to the falsification of the representation that was made by the use of the term "anquan" in the manner noted in paragraph 195 above, since the receipt of a relatively high return does not disclose a risk that no assets will be available to the investor in the event of a difficulty arising with the underlying project. 1. In summary, this representation, if it is intended to mean "safe" in the sense of riskless, was not made. However, it was made and falsified in the range of other meanings that the word "anquan" could have, to which I have referred above, in the manner noted in paragraph 195 above. I also bear in mind, in reaching this conclusion, that the Plaintiffs bring their claim under ss 1041E and 1041F of the Corporations Act, and a contravention of those sections is a criminal offence, and I must apply the standard contemplated under s 140 of the Evidence Act in this regard. The representation pleaded in paragraph 40.19 1. The second pleaded representation in respect of the 4 May WeChat exchange is that Ms Zhuang's colleagues were investing in the Steller Fund. The Plaintiffs also plead a falsification of this representation but, putting that aside, this representation was plainly true, where the evidence indicates that at least two colleagues of Ms Zhuang had in fact invested in the Steller Fund. Mr Knowles rightly points out that that matter is relevant not only to the response to that allegation, but to supporting the view which Ms Zhuang claims to have held that the investment was "anquan", in the several senses of that term, and particularly having regard to its nature and the return on it. The representation pleaded in paragraph 40.20 1. The third pleaded representation in respect of the 4 May WeChat exchange is that Ms Xue could "rest assured" about the Steller Fund, and may always have been superfluous since it is difficult to see that the Plaintiffs' claim on this basis could succeed unless their claim in respect of paragraph 40.18 had already succeeded. The Plaintiffs plead this representation is falsified by reference to the same matters that are relied on to falsify the representation in paragraph 40.18, as pleaded in FASC 40C(c)(i)-(viii) which I have addressed above. This representation is, at its highest, a representation of Ms Zhuang's opinion as to that matter and it was not pleaded or established that she did not hold that opinion and did not have a reasonable basis for it in May 2017, again recognising that her colleagues had themselves invested in the Steller Fund, although it has plainly proved to be incorrect in hindsight. It is not necessary to determine whether this representation could have been falsified by the matter noted in paragraph 195 above, where this could only lead to the same result that I have reached in respect of the representation pleaded in paragraph 40.18. This representation was not falsified other than as to that matter. Legal principles, causation and determination as to the misleading and deceptive conduct claim against Atlas 1. The Plaintiffs plead (FASC [73A], denied Defence [73A]) that the pleaded representations, which I have address above, constituted misleading conduct of the Defendants in contravention of ss 1041E, 1041F and 1041H of the Corporations Act and s 12DA of the ASIC Act. This claim relies on the matters pleaded as to Ms Xue's background and wish to make investments with "no or very little risk of loss" (FASC [26]-[27]) and the allegations as to the pleaded representations and their falsity (FASC [37]-[38], [40], [40A]-[40C], [41]-[42]). I will address the claim against Atlas here and return to the claim against Ms Zhuang below. 2. Section 1041H of the Corporations Act prohibits a person from engaging in conduct, in the jurisdiction, in relation to a financial product or financial service that is misleading or deceptive or is likely to mislead or deceive. In closing submissions, Mr Einfeld addresses, by reference to authority, the matters relevant to whether misleading and deceptive conduct is established, and I accept that his summary broadly reflects the relevant principles, as follows: "The case law on misleading conduct is legion. However, the principles governing the matters in issue in the present case are likely to be uncontroversial. Relevantly:- Whether conduct is misleading or deceptive is a question of fact to be determined objectively, by reference to all of the relevant circumstances … It is uncontroversial that misleading conduct can be established where a misrepresentation was but one of a number of factors which induced a loss-making decision ... It is sufficient if the misrepresentation in question is a though not the cause of loss, and that it materially contributed to the claimant's loss: … Contravention of the provisions does not require proof of intention on the part of the representor … The question for the Court will be whether loss has been caused "by" contravening conduct; thus, third parties may rely upon the conduct of a misrepresentor … The Court is required to determine what the conduct gives the complainant to understand or what is to be taken from such conduct … A representation may be misleading, although apparently true, if it masks an underlying falsity …" [citations omitted] 1. I also outlined the applicable principles in Changizi v Rizaie [2021] NSWSC 613 at [93]-[94] as follows: "The approach to be adopted in assessing whether conduct is misleading or deceptive was summarised by Gordon J in Australian Competition and Consumer Commission v Telstra Corporation Ltd (2007) 244 ALR 470; [2007] FCA 1904 at [14] –[15], in a passage which Griffiths J followed in Forty Two International Pty Ltd v Barnes (2014) 97 ACSR 450; [2014] FCA 85 at [446] and which I followed in Re Colorado Products Pty Ltd (in prov liq) [(2014) 101 ACSR 233; [2014] NSWSC 789] at [86], as follows: "The relevant legal principles have been well traversed by Australian courts. A two-step analysis is required. First, it is necessary to ask whether each or any of the pleaded representations is conveyed by the particular events complained of … Second, it is necessary to ask whether the representations conveyed are false, misleading or deceptive or likely to mislead or deceive. This is a 'quintessential question of fact'… [citations omitted]" Conduct is misleading or deceptive or likely to mislead or deceive if it is capable of inducing error: Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640; [2013] HCA 54 . It is not necessary for [the plaintiff] to establish that [the defendant] intended to mislead or deceive and the relevant question is whether, viewed objectively, the relevant conduct was misleading or deceptive or likely to mislead or deceive: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 197 per Gibbs CJ, 216 per Brennan J; [1982] HCA 44; Australian Competition and Consumer Commission v Jewellery Group Pty Ltd (2012) 293 ALR 335; [2012] FCA 848 at [66]. Conduct is likely to mislead or deceive if there is a real and not remote chance or possibility that a person is likely to be misled or deceived, and this is so even though the possibility of that occurring is less than 50 per cent: Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60 at [112] per McHugh J; Colorado Products above at [87]; Redmond Family Holdings v GC Access Pty Ltd [2016] NSWSC 796 at [49] ff." 1. The elements of a contravention of s 1041E of the Corporations Act are in turn that (1) a person makes a statement or disseminates information (whether in the jurisdiction or elsewhere); (2) that is false in a material particular or is materially misleading; (3) and is likely, relevantly, to induce persons in the jurisdiction to apply for financial products or acquire financial products; (4) if, when making the statement or disseminating the information, the person does not care whether the statement or information is true or false, or knows or ought reasonably to have known that the statement or information is false in a material particular or is materially misleading: Australian Securities and Investments Commission v Elm Financial Services Pty Ltd (2005) 55 ACSR 544; [2005] NSWSC 1065; Australian Securities and Investments Commission v Stone Assets Management Pty Ltd [2012] FCA 630. A statement is "materially" misleading if its likely effect is to induce investors to purchase a company's securities, and whether a person ought reasonably to have known that a statement is false in a material particular or is materially misleading is an objective question: Australian Securities Commission v Macleod (2000) 22 WAR 255; 34 ACSR 135; [2000] WASCA 101, reversed on other grounds in MacLeod v Australian Securities and Investments Commission (2002) 211 CLR 287; (2002) 191 ALR 543; (2002) 76 ALJR 1445; (2002) 43 ACSR 1; [2002] HCA 37. Mr Einfeld submits, in respect of the allegation under s 1041E of the Corporations Act, that: "Ms Zhuang, and more broadly Atlas, did not care whether the statement that investment in the Steller Fund was safe, or that there were personal and group guarantees, or that a [proper] due diligence had been undertaken into the Steller companies and Developments, was true or false; moreover, that material also demonstrates that Ms Zhuang knew (and certainly she ought reasonably to have known) that the same statements were materially false or misleading." Mr Knowles did not specifically address the claim under that section in closing submissions. 1. The Plaintiffs also bring a claim under s 1041F of the Corporations Act which prohibits a person, in the jurisdiction, inducing another person to deal in financial products by making or publishing a statement, promise or forecast which he or she knows is misleading, false or deceptive, or if he or she is reckless as to whether the statement is misleading, false or deceptive, or by a dishonest concealment of material facts: National Companies and Securities Commission v Monarch Petroleum NL [1984] VR 733; (1984) 8 ACLR 785; 2 ACLC 256; R v Albuino (2001) 80 SASR 416; 165 FLR 335; [2001] SASC 397. Mr Einfeld's closing submission as to that section was merely that "[t]he facts of the case also permit a conclusion that the Defendants acted towards the Plaintiffs recklessly, in contravention of s 1041F(1)." Mr Knowles points out that the Plaintiffs do not identify, in submissions, any factual support for a proposition that the Defendants knew or were reckless as to the falsity of the relevant representations for the purposes of s 1041F of the Corporations Act. 2. The Plaintiffs also bring a claim under s 12DA of the ASIC Act, which prohibits a person, in trade or commerce, from engaging in conduct in relation to financial services that is misleading or deceptive or likely to mislead or deceive. This section can also impose civil liability if a party's conduct in relation to a transaction was misleading or deceptive, or likely to mislead or deceive, without the need for the other party to establish that the representation or conduct was intentionally misleading or deceptive or was made negligently: Australian Securities and Investments Commission v Wealth and Risk Management Pty Ltd (No 2) (2018) 124 ACSR 351; [2018] FCA 59 at [82]. The Plaintiffs also plead (FASC [73B], denied Defence [73B]) that, on the same basis, the pleaded representations constituted misleading conduct of the Defendants in contravention of s 12DB(1)(i) of the ASIC Act. 3. The Plaintiffs in turn plead (FASC [40A]) that, acting in reliance on each of the representations and induced by them, they invested funds of Ms Xue being a combined amount of $4.8 million into the Steller Fund "in the names of Tredmore and Lili", being $2 million paid from Tredmore to Atlas on 4 May 2017 comprising the First Tredmore Investment (as defined in paragraph 60 above); $2 paid million from Tredmore to Atlas on 24 May 2017 comprising the Second Tredmore Investment (as defined in paragraph 65 above); and $800,000 paid from "Ms Xue, on behalf of Lili" to Atlas on 24 May 2017 comprising the Lili Investment (as defined in paragraph 65 above). The Defendants admit the investments but do not admit that the funds invested were funds of Ms Xue and do not admit that the investments were made on behalf of any person other than the person in whose name the investments were made (Defence [40A]). The Plaintiffs also plead (FASC [40B], denied Defence [40B]) that, in and after April 2017, Ms Xue was authorised by Tredmore and Lili to manage the funds invested in the Steller Fund. The Plaintiffs then plead (FASC [42B]) that: "By reason of the false and misleading conduct specified in paragraphs 40 and 41 above and their investment of $4.8 million in the Steller Fund in reliance thereon, the Plaintiffs suffered loss and damage being $4.8 million plus interest." 1. The Plaintiffs abandoned, at the commencement of the hearing, further claims in respect of a pleaded reinvestment of their investments in 2019. 2. Mr Einfeld also drew attention to the principles applicable to causation in a misleading and deceptive conduct case, as set out by the Full Court of the Federal Court in Sutton v AJ Thompson Pty Ltd (in liq) (1987) 73 ALR 233 at 240-241, followed by Roberts-Smith J in SDS Corporation Ltd v Pasdonnay Pty Ltd [2004] WASC 26 at [400]. The Plaintiffs put this case as a "no transaction" case and I bear in mind the observations of Ward CJ in Eq (as the President then was) in Stav Investments Pty Ltd v Taylor [2022] NSWSC 208 at [541] ("STAV Investments") as to the nature of a "no transaction case", to which Mr Einfeld drew attention (T750), that the plaintiffs in such a case should: "… be put in the position where they are compensated for the entirety of their investment in … (Wyzenbeek v Australasian Marine Imports Pty Ltd (in liq) (2019) 272 FCR 373; [2019] FCAFC 167 ). As I said in Xu v Lindsay Bennelong Developments Pty Ltd [2020] NSWSC 1692 at [460] , an award for damages in a "no transaction" case in a suit for misleading and deceptive conduct requires the court to be satisfied that, "but for" the conduct at issue, the plaintiff would not have entered into the transaction, and so would not have suffered the loss." 1. It is only necessary to determine these claims in respect of the 4 May WeChat exchange given the findings that I have reached above. I have found that the representation in that exchange that the investment in the Steller Fund was "anquan" or "safe" or "very safe" was misleading or deceptive for the reasons noted above. That representation is not causative of loss in respect of the First Tredmore Investment (as defined) which preceded the WeChat exchange in which it was made. That representation is causative of loss in respect of the Second Tredmore Investment (as defined) which was made subsequent to the 4 May WeChat exchange. On balance, I find that that representation also affected the Lili Investment, as defined, despite the generality of her evidence and the lack of evidence of her risk tolerance or investment objectives, where the representation as to the safety of the project was likely material to Ms Xue's decision-making and the matter noted in paragraph 195 above was a substantial structural flaw in the project. The Plaintiffs succeed in this claim only against Atlas, and I will return to then position in respect of the claim against Ms Zhuang below. 2. It is not necessary to determine the Plaintiffs' claims under ss 1041E and 1041F of the Corporations Act or ss 12DA or 12DB of the ASIC Act, which were always superfluous since they could neither advance the Plaintiffs position if they had succeeded in their claim under s 1041H of the Corporations Act nor succeed if they had failed in that claim. Claim for unconscionable conduct 1. The Plaintiffs bring an alternative claim for unconscionable conduct, although it is difficult to see how this claim could have succeeded if the claim for misleading and deceptive conduct did not succeed. They plead (FASC [75], largely not admitted Defence [75]) that: "Between July 2015 and July 2019, Ms Xue: 75.1 Trusted Ms Zhuang to advise and act in Ms Xue's best interests in all matters, both business and personal; 75.2 Was reliant upon Ms Zhuang to advise and act in Ms Xue's best interests in all matters, both business and personal; 75.3 Believed Ms Zhuang to be a close personal friend, in addition to a business associate; 75.4 Had no friends in Australia other than Ms Zhuang; 75.5 Was emotionally dependent upon Ms Zhuang; 75.6 Signed blank forms as instructed by Ms Zhuang; 75.7 Signed forms that were written in English and were filled out in English by Ms Zhuang, as instructed by Ms Zhuang; 75.8 Enabled Ms Zhuang to use and operate Ms Xue's "lilyxue0428@163.com" email account by providing Ms Zhuang with Ms Xue's password to that email account. The plaintiff changed these passwords in March 2020; and 75.9 Was dependent upon Ms Zhuang in relation to the matters pleaded at paragraphs 16.1-16.16, 26.3-26.5, 27.2-27.5 and 40 above. (collectively, "Ms Xue's Vulnerabilities")." 1. The Plaintiffs alleged (FASC [75A], denied Defence [75A]) that, from January 2017 and May 2019, Ms Zhuang knew of each of the matters comprising Ms Xue's Vulnerabilities. They also plead (FASC [75B], denied Defence [75B]) that Ms Xue's pleaded reliance (as pleaded in FASC [16]) upon Ms Zhuang's assistance in respect of aspects of her Australian activities made her: "75B.1 more susceptible to agreeing to investment recommendations made to her by Ms Zhuang than would otherwise be the case; and 75B.1 less likely to doubt or check on the validity of investment recommendations made to her by Ms Zhuang than would otherwise be the case." 1. They then plead (FASC [75C]-[75D], denied Defence [75C]-[75D]) that, prior to the meeting in April 2017, Ms Zhuang orally informed Ms Xue in a telephone conversation that "the Steller Group developed properties and that investments in their projects were secured by first mortgages over the land and property the subject of the relevant property development and were of low risk" and that every investment made by Ms Xue or Tredmore through Atlas (including but not only the investment in the Steller Fund) was made consequent upon and in accordance with Ms Zhuang's advice to Ms Xue. The plead (FASC [75E]-[75F], denied Defence [75E]-[75F]) that the Defendants' conduct in specified circumstances involved conduct of a financial services licensee in or in relation to the provision of a financial service and was in all the circumstances unconscionable in contravention of s 991A(1) of the Corporations Act 2001 or contravened ss 12CA and 12CB of the ASIC Act. 2. Section 991A of the Corporations Act prohibits a financial services licensee, in or in relation to the provision of a financial service, from engaging in conduct that is, in all the circumstances, unconscionable. Matters of the kind specified in s 12CC of the ASIC Act may be relevant to a determination whether conduct is unconscionable for the purposes of s 991A, including the relative strengths of the bargaining positions of a licensee and his or her client; whether the client was able to understand any documents relating to the supply or possible supply of the financial services; whether any undue influence or pressure was exerted, or any unfair tactics used against, the client; and the amount for which, and circumstances under which, the client could have acquired identical or equivalent services from a person other than the licensee. 3. Section 12CA of the ASIC Act is likely narrower than s 991A of the Corporations Act and is limited to conduct that is unconscionable within the meaning of the unwritten law of the states and territories. That section will at least be contravened by conduct within the four classes of cases identified by French J at first instance in Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd (2000) 96 FCR 491; 169 ALR 324 at 331; [2000] FCA 2, namely, exploitation of vulnerability or weakness; the abuse of a position of trust or confidence; insistence upon rights in circumstances which make that hard or oppressive; or inequitable denial of legal obligations. 4. Section 12CB of the ASIC Act in turn prohibits a person, in trade or commerce, engaging in conduct that is, in all the circumstances, unconscionable, in connection with the supply or possible supply of financial services to a person (other than a listed public company) or the acquisition or possible acquisition of financial services from a person (other than a listed public company). Section 12CC in turn sets out a non-exhaustive list of factors which the court may consider in determining whether s 12CB(1) is contravened. 5. The scope of these sections was considered by the High Court of Australia in Australian Securities and Investments Commission v Kobelt (2019) 267 CLR 1; (2019) 368 ALR 1; [2019] HCA 18 ("Kobelt"). The several judgments recognise that the section requires the Court to have regard to specified factors, which will be relevant to whether statutory unconscionability will be found. Keane J there observed that the section was not limited to conduct that was "unconscionable" under the general law, but the term "unconscionable" in the section had its ordinary meaning, including exploiting or unconscientiously taking advantage of a special disadvantage; and Gageler J held that the section was not limited by equitable standards, but the use of the term "unconscionability" nonetheless "signif[ied] the gravity of the conduct necessary to be found by a Court in order to be satisfied of a breach of that standard", and the section was not confined to circumstances where the defendant had exploited a special disadvantage. The minority, Nettle and Gordon JJ (in a joint judgment) and Edelman J, arguably read the scope of the section more widely; Nettle and Gordon JJ treated the list of factors in s 12CC as indicative that statutory unconscionability is wider than unconscionability under the general law; and Edelman J emphasised that statutory unconscionability could be established by conduct that would not establish unconscionability in equity. 6. The effect of the majority view in Kobelt was summarised by Colvin J in Australian Competition and Consumer Commission v Quantum Housing Group Pty Ltd (No 2) [2020] FCA 802 at [29]-[30], observing that "the majority view supports the adoption of a standard that requires exploitation of disadvantage by a party in a stronger position by conduct that is well outside the bounds of what is generally seen to be moral, right or acceptable commercial behaviour"; that "unconscionable conduct involves dealing with those who are vulnerable in a manner that exploits that vulnerability by engaging in conduct that may be plainly or obviously criticised when viewed through the lens of an understanding of proper commercial behaviour according to prevailing norms and standards"; and that the court will have regard to the relevant statutory matters (specified in s 12CC) although the presence of one or more of those matters will not be determinative. On appeal in Australian Competition and Consumer Commission v Quantum Housing Group Pty Ltd (2021) 388 ALR 577; (2021) 151 ACSR 98; [2021] FCAFC 40, the majority in the Full Court of the Federal Court held that statutory unconscionability could be established if conduct was against conscience, as informed by the norms and values of acceptable commercial behaviour, including honesty, fairness with dealing with customers, and the performance of commercial bargains. Mr Einfeld submits and I accept that the majority there held (at [78]ff) that the case law, including Kobelt, did not require that there necessarily be some form of pre-existing disability, vulnerability or disadvantage of which advantage was taken, in order to establish unconscionability under ss 12CB or 12CC of the ASIC Act. 7. Turning now to the evidentiary basis for this claim, Ms Xue's evidence in cross-examination was that she managed a transport company in China before she moved to Australia, comprising around 10 people; she invested in one Chinese property development project, being the Beijing Shanghai Link Ecological Farm Pty Ltd; that the property development which that company undertook was much larger than her investment in Atlas; and she was very experienced in making investments in China and had a good understanding of commercial matters and a number of investments in Australia (T83). Ms Xue's practice in China was to often use assistance to carry out business affairs, make investments and assist with personal matters, and she had one personal servant while she lived in China (T86). Ms Xue's evidence in cross-examination was that Ms Zhuang and another Atlas employee also assisted her in Australia; that assistance was not limited to financial matters and they would translate matters into the English language for her; and they attended to matters for her such as paying bills, booking restaurants and helping her deal with matters at her son's school (T87). Ms Xue did not accept that her servant in China would have attended to similar matters for her (T88). Ms Xue accepted in cross-examination that she would sometimes ask Ms Zhuang for advice about things she wanted to buy, but did not always take that advice and did not take that advice where she thought doing something else was better for her (T95). Ms Xue maintained that, during 2017, she was dependent on Ms Zhuang's advice in all personal matters and entirely relied on her (T96). 8. Ms Zhuang's evidence as to the extent of Ms Xue's English skills was not entirely consistent. She initially readily accepted that she knew that Ms Xue had difficulty communicating with immigration authorities in the English language because of her lack of English (T312). She also accepted in cross-examination that she had assisted Ms Xue in relation to aspects of her personal life, particularly once she arrived in Australia (T315). She was cross-examined at length as to a number of aspects of administrative assistance to Ms Xue, including meeting routine payments for strata fees and lawn mowing fees on her behalf (T320ff), which Ms Zhuang did personally, with Ms Xue sometimes paying amounts in advance and sometimes after the event. Ms Zhuang was even cross-examined as to advice she had provided to Ms Xue as to how to access the parking station of the building in which her offices were located, which was likely to have been helpful but hardly demonstrated any element of dependence on the part of Ms Xue (T326). Ms Zhuang accepted that Atlas had referred Ms Xue to an accounting firm with which Mr Hedley had an involvement to assist her with accounting services (T327). Ms Zhuang was also cross-examined about a number of routine communications sent to her, including relating to Ms Xue's son's schooling, but it appears some of those communications may have been sent to her by Ms Xue to ask her to translate them (T336). 9. Ms Zhuang was also taken to a message she sent to Ms Xue in English and then in Chinese and she explained she was there seeking to teach Ms Xue English. Ms Zhuang there said "see, English is very simple. You probably only need about 500 words to master the language" (T344). Ms Zhuang's evidence was then that she expected Ms Xue to read and understand that message, because persons educated in China have been trained with "some English using simple words in English" (T344). Ms Zhuang observed that, although Ms Xue did not speak to her English, persons educated in China have been through English classes from primary school to university and "everyone has some basic understanding of English words." She accepted, however, that Ms Xue did not speak English well enough to converse with her (T344). 10. Mr Einfeld summarises the matters said to support Ms Xue's vulnerability, as at March 2017, in closing submissions as follows: "the evidence revealed that by the time their discussions about the Steller Fund commenced, at the end of March 2017, Ms Zhuang had involved herself in Ms Xue's life in many important respects, not just in terms of Ms Xue continuing her business dealings with Atlas, but in Ms Xue's personal life, including being a school contact point for Ms Xue's young son, paying household accounts, attending with Ms Xue to inspect a house Ms Xue subsequently purchased , accompanying Ms Xue to open a bank account - and generally in various aspects of Ms Xue's personal life. These aspects of day-to-day reliance by Ms Xue upon Ms Zhuang were in any way challenged by the Defendants in their lengthy cross-examination of Ms Xue. There is thus unchallenged evidence of these matters recorded in contemporaneous documents." 1. Mr Einfeld recognises, in closing submissions, that the facts which support the misleading conduct claim also underlie the claim for unconscionable conduct, and that Ms Xue's vulnerability is not an essential ingredient in that claim. He does not identify any other facts, beyond those relied on to support the misleading and deceptive claim, and Ms Xue's alleged vulnerability, in establishing the unconscionable conduct claim. In closing submissions, Mr Einfeld summarises the Plaintiffs' unconscionability case as follows: "All of the conduct upon which the Plaintiffs have relied to establish misleading conduct on the Defendants' part is pertinent also to their unconscionability case. What ascribes to the conduct discussed above the particular character of unconscionability in this case is that the Defendants had the capacity to know, but the Plaintiffs did not know (and the Defendants knew that the Plaintiffs did not know) all of the aspects relating to the Steller companies and properties that Atlas had had at its disposal, before Ms Zhuang discussed the Steller investment with Ms Xue. Knowledge of the features of the four sites which Steller Developments covenanted to develop, the financial circumstances of the Steller companies, the inconsistencies in the Steller financial documents, the absence of any security and of contractual or other arrangements relating to the Schedule 1 sites, Atlas' failure to investigate the wherewithal of the guarantors and the like were all known to Atlas, but not to Ms Xue. 1. Mr Einfeld also refers to the suggested relationship between Ms Xue and Ms Zhuang and submits that Ms Xue became "very much reliant upon Ms Zhuang for her advice, in personal as well as business matters, such that there was a particular vulnerability on Ms Xue's part". Mr Einfeld also refers to the elements relevant to a determination whether conduct is unconscionable under s 12CC of the ASIC Act as follows: "(a) the bargaining strengths of the parties [s12CC(1)(a)], which were in this case significantly unequal (Atlas had, but Ms Xue did not have) all relevant information concerning Atlas' Steller Fund and the projects to be developed with the invested monies; (b) the capacity of the kind envisaged by s12CC(1)(c) to understand the materials such as perhaps the Certificates that Ms Xue was given, the Information Memorandum (which she says she did not receive until many months after she made the investments); (c) the tactics employed by Atlas and Ms Zhuang, which were, in terms of s12CC(1)(d), completely unfair, in that they provided to Ms Xue inaccurate information about the utility of any guarantees, the existence of security, the development projects, the financial strength (i.e. weakness) of the Steller companies and the like; and (d) in terms of s12CC(1)(i)(ii), the Defendants unreasonable failure to disclose to Ms Xue the risks inherent in any investment in the Steller Fund; to the contrary, they minimised such risks entirely, instead recommending that the investment was safe." 1. Mr Knowles refers to Ms Zhuang's evidence in cross-examination that she did not always follow Ms Zhuang's advice and was able to make her own decisions (T95, T97) and submits that: "It is clear that Ms Xue is a sophisticated business-person, with a good knowledge of financial products and investment, evidenced by, among other things, the following: (a) by her own oral evidence, Ms Xue was very experienced at making investments in China and had a good understanding of commercial matters (T83:39-44); (b) by definition, Ms Xue is a sophisticated investor, having progressed her visa application through the SIV programme; (c) she is sole director of the first plaintiff, a role which carries with it all the statutory and fiduciary duties and responsibilities of a company director; (d) Ms Xue invested in a Chinese property development project called Beijing Shanghai Link Ecological Farm Pty Ltd (T83:14-22) and was the "legal representative" of that company, being responsible for the decisions the company makes (T83:27-29). …; (e) Ms Xue also managed a transport company in China, "composed of" around ten people (T83:7-9); (f) she has accrued a number of investments in Australia, in the few years since relocating, including at least three apartments in Sydney (T83:46-50); and (g) Ms Xue demonstrated familiarity with numerous financial and investment constructs demonstrating her significant experience as an investor, including: the relationship between risk and return, the likelihood of having to sell a property at a discount when relying upon mortgage security in the event of investment failure (T232:23-25), establishment and use of a family trust for investment (being the trust of which the first plaintiff is trustee), and the establishment of a self-managed superannuation fund, which Ms Xue set up using help from accountants in 2017 (T:17-20). Against that background, it is somewhat fantastical to believe that Ms Xue would develop some vulnerability, even in the face of a language barrier, that would cause her to dispense with her commercial acuity and interest to capitulate to any alleged "undue pressure" or other unconscionable conduct by Ms Zhuang, or indeed, anyone, in relation to a particular investment." 1. Mr Knowles also points out that Ms Xue accepted, in cross-examination, that she was not pressured by Ms Zhuang to make any investment (T98) and also points to the time taken by Ms Zhuang to make the decision whether to proceed with an investment in the Steller Fund, a matter on which the Plaintiffs also rely. Mr Knowles accepts that there is evidence that Ms Zhuang undertook "menial tasks" for Ms Xue but submits, and I accept, that those were matters of convenience for Ms Xue, rather than indicating any reliance on Ms Zhuang for decision-making. 2. It seems to me that the Plaintiffs' case that Ms Xue was under any relevant disability or vulnerability to Atlas was not established. Ms Xue was and is plainly an intelligent and sophisticated businessperson, and it was not relevantly a disability or vulnerability that Mandarin was her first language, as it is the first language of many successful Chinese businesspersons trading with or living in Australia on a temporary or permanent basis. It was also not relevantly a disability or vulnerability that she had the ability to use Atlas staff to perform administrative and other tasks for her that she could have performed for herself. The evidence established that Ms Xue made extensive use of Ms Zhuang's and Ms Wang's services, but did not establish any vulnerability on her part, beyond the fact that she would need translation assistance with written documents or oral communications of any complexity in English. She accepted in cross-examination that she knew how to obtain such assistance and had used it from time to time. That did not give rise to any disability in her written and oral dealings with Atlas which were largely in Mandarin and where she had the capacity to obtain a translation of documents such as the information memorandum if she wished to do so. 3. It seems to me that the Plaintiffs' wider unconscionability claim is also not established. The Plaintiffs have failed to establish misleading and deceptive conduct on the part of Atlas or knowing involvement in that conduct on the part of Ms Zhuang, and I have found that Atlas provided an information memorandum which included substantial risk disclosure, although neither Atlas nor Ms Xue sought to translate it from English to Mandarin and Ms Xue did not read it. The bargaining strengths of the parties were not unequal, because Ms Xue was an experienced businesswoman, and, as I have noted above, to be Mandarin speaking is not generally or in the relevant circumstances a matter of disadvantage; Ms Xue had the capacity to understand the materials provided to her, including the information memorandum, by either asking Atlas to translate it for her if it wished to obtain an investment of $4.8 million from her associated entities, or that she use a software program or a third party service which she had used in other matters to translate it for herself; even if, contrary to view that I have formed, misleading conduct had been established by reference to the Plaintiffs' pleaded case, it did not rise to the level of unconscionable conduct. It does not seem to me that this result could come as any particular surprise, where the conduct of Atlas and Ms Zhuang in this case falls well short of that addressed, for example, by the High Court in Kobelt, which the majority found was not unconscionable. 4. I should recognise, for completeness that Mr Einfeld formulated a further and somewhat different unconscionability case in closing submissions, contending that Atlas had established the Steller Fund and had an involvement with APIM which had a management role in the fund, and that Atlas was at a distinct advantage over Ms Xue, which I understand to be by way of an informational advantage, and Ms Xue was not advised to take independent legal or accounting advice in respect of the investment in the Steller Fund (T744). This proposition was put in Mr Einfeld's oral submission (T745) that: "In all relevant senses Ms Xue was at a special disadvantage, qua Ms Zhuang. Ms Zhuang knew what she was talking about. Ms Zhuang knew the fund, Ms Xue didn't and Ms Zhuang knew Ms Xue didn't. After all, prior to 6 April, apart from the conversations recorded – well, prior to and on 6 April, apart from the conversations recorded by Ms Zhuang and Ms Xue, Ms Xue knew nothing about the fund in which she was investing or the Steller people to whom the money was intended to be passed." 1. The immediate difficulty with that proposition is that the Plaintiffs' pleaded unconscionability case related to Ms Xue's personal circumstances and her previous dealings with Ms Zhuang, rather than to the relationship between a product manufacturer or promoter of a fund (or Atlas in that capacity) and an investor in that fund. A second difficulty with that proposition is that, although there will often be an informational inequality between a distributor of financial products and an investor, that inequality is addressed by the statutory regime for the regulation of financial services, which seeks to limit the disadvantage to investors which might otherwise arise by reason of that inequality. The Plaintiffs did not here contend that Atlas was in breach of any of the statutory duties that specifically apply to product manufacturers or Australian financial services licensees, although it relied on the statutory prohibitions on misleading and deceptive conduct that are applicable to dealings in financial products and financial services, as I have noted above. The inequality which arose from any information disadvantage was here addressed by Atlas providing an information memorandum to Ms Xue, which provided disclosure as to the Steller Fund and the risks of investment in the Steller Fund, and I have not accepted Ms Xue's denial that she received it, although she may well not have translated or read it. That information memorandum at least allowed Ms Xue the opportunity to inform herself as to the nature of the investment and its risks, bearing in mind the size of the investment that she was proposing to make for Tredmore and her sister. 2. Mr Einfeld further submitted that: "[w]hat is plain beyond argument is that Atlas encouraged Ms Xue to invest her money which she lost", although he accepts that does not in itself establish unconscionability and contends that this was not simply a case where an investor who had made an unsuccessful investment sought to recover its funds because it made a loss and was seeking a profit. I accept that proposition, to the extent that Tredmore and Ms Lili Xue have succeeded in part, but not all, of their claim for misleading and deceptive conduct. However, the fact of Tredmore's and Ms Lili Xue's loss and any informational disadvantage of Ms Xue, here arising from not reading the information memorandum, do not seem to me to establish a claim for unconscionability, even if the unpleaded aspect of that claim was open to Ms Xue. Claim for direct liability against Ms Zhuang 1. The Plaintiffs seek to establish personal liability on the part of Ms Zhuang, although they devoted little attention to this in the course of submissions. Paragraph 73A-73B of the Further Amended Statement of Claim pleads that the Representations (as defined) were misleading conduct of the Defendants (including Ms Zhuang) in contravention of ss 1041E and 1041H of the Corporations Act and ss 12DA and 12DB(1)(i) of the ASIC Act. It is only necessary to address this claim in respect of the representation pleaded in paragraph 40.18, as falsified by the matter pleaded in paragraph 195, which is the only claim for misleading and deceptive conduct established by the Plaintiffs. 2. The case law establishes that a claim for misleading conduct undertaken by a director, employee or agent of a company can succeed against that director, employee or agent, where it also succeeds against the company. In Houghton v Arms (2006) 225 CLR 553; [2006] HCA 59, an employee was held liable for misleading and deceptive conduct in the course of his employment, in parallel to the company's liability arising from his conduct. In Australian Securities & Investment Commission v Narain (2008) 169 FCR 211; (2008) 66 ACSR 688; [2008] FCAFC 120 ("Narain"), the Full Court of the Federal Court applied Houghton v Arms and held (at [98]) that the chief executive officer of a company was personally liable for misleading and deceptive conduct in respect of the release of a misleading statement to Australian Securities Exchange ("ASX"), where he had participated in the drafting of the announcement, approved its content and directed the company secretary to send it to the ASX, and the company secretary had performed that task on his instructions; see also Australian Securities & Investment Commission v Cycclone Magnetic Engines Inc (2009) 71 ACSR 1; [2009] QSC 58 at [221], CH Real Estate Pty Ltd v Jainran Pty Ltd [2010] NSWCA 37, Swiss Re International SE v Simpson [2018] NSWSC 233; (2018) 354 ALR 607 at [527] ("Swiss Re"), Australian Securities and Investments Commission (ASIC) v GetSwift Ltd [2021] FCA 1384 at [2120]ff ("GetSwift") and see the consideration of the issues in J Harris & S Webbey, "Personal liability for corporate disclosure problems" (2011) C&SLJ 463. I bear in mind that the parties did not address the relevant case law in submissions. 3. However, the proposition that such a claim can succeed against such a director, employee or agent personally does not mean that it inevitably will, or that the person who makes a representation for a company (which cannot speak other than by agents) necessarily does so in his or her personal capacity. In Narain, that claim succeeded where the company's chief executive officer was the central participant in the misleading disclosure. In Swiss Re, in circumstances where a company's board and advisers were involved in the drafting of an announcement, Hammerschlag J (as his Honour was then) found that neither the company's chief executive nor its chief executive officer could be regarded as the embodiment of the company in making that announcement where neither of them were the principal of the company or its directing mind (at [562]). His Honour also held that an employee who had failed to disclose particular matters in a telephone conversation with insurers had undertaken conduct only on behalf of his employer and was also "not the principal of [his employer], its mind, or directing it" (at [527]), instead being only "one, amongst many other potential human embodiments of [his employer]" and not the "one on [his employer's] behalf to disclose" the omitted information (at [529]). In GetSwift, Lee J reviewed the relevant principles at some length and observed that: "The ultimate question, which is not in dispute between the parties, is whether all of the elements of the contravention are made out against the relevant individual in his own right, or whether he merely acted as a corporate organ, thereby binding the company but not himself personally: Narain (at [96] per Jacobson and Gordon JJ). This is a question of fact: Narain (at 225 [96]–[97])." His Honour there noted that, in Swiss Re, the employees (including senior executive officers) made statements and did not disclose materials in the course of their executive duties, and announcements were drafted as a result of a "collective effort" of the board. His Honour distinguished the position in GetSwift and held that individual defendants involved in the making of several announcements were liable for their conduct. 1. In Stav Investments at [528], Ward CJ in Eq (as the President then was) in turn observed that: "It is noted that if individuals, such as the defendants, engage in conduct that is misleading or deceptive, they may be principally liable for that conduct, even if they were acting as an agent of a company (see Williams v Pisano at [42] per Emmett JA, with Bathurst CJ and McColl JA agreeing; Houghton v Arms (2006) 225 CLR 553; [2006] HCA 59 at [40]; Standard Chartered Bank v Pakistan National Shipping Corporation [No 2] [2003] 1 AC 959 at 973 –974 per Lord Rodger of Earlsferry)." [emphasis added] Her Honour there found, on the particular facts, that the defendants were not merely ministerial organs involved in making representations on behalf of the company, but that they made representations themselves as principals. That factual finding emphasises the need for that question to be addressed and then determined, as a matter of fact. 1. The Plaintiffs here put their submissions as to direct liability in a manner that did not recognise any need to establish anything more than that Ms Zhuang had made the relevant representations, and did not seek to address whether she had done so (in Ward CJ in Eq's formulation) as a "merely ministerial organ … involved in making representations on behalf of the company", or had herself made the representations as principal. Mr Einfeld did not seek to identify any particular facts which should lead to a conclusion that Ms Zhuang's conduct should be treated as binding her personally rather than binding Atlas in its corporate capacity, beyond the fact that she had made the statements that the Plaintiffs attack, and possibly the additional fact (which is common ground) that she was one of the directors of Atlas. His closing written submissions (at [146]) simply contended that Ms Zhuang made the representations that are alleged to be misleading, without addressing why she should be treated as having done so in her personal capacity rather than as Atlas' ministerial agent. In closing oral submissions on the second last day of the hearing, he addressed direct and accessorial liability together, and submitted that: "The last submission we make before we adjourn is the obvious one, that if Ms Zhuang is not liable as a principal, she is certainly liable as being a person involved in the conduct of Atlas. As a practical matter, there is no real difference because she was the face of Atlas when it comes to Atlas' dealings with Ms Xue but the sections to which we referred in outline, in particular s 12GF of the ASIC Act makes Ms Zhuang liable as an accessory, as it were, provides her with an accessorial liability. The fact that she says herself in the affidavit that she formed the view that the investment in the Steller Fund was very safe, that's the evidence at para 87 of her affidavit of 10 July, makes it extremely likely that that's what she told Ms Xue in April 2017, and Ms Zhuang's involvement, as it were, at the coalface makes it extremely probable that it's, as we say, beyond the point of argument that she was personally involved in the misleading conduct and unconscionability of the corporate entity and should be found liable as a principal, but alternatively, as an accessory." (T 747) 1. I recognise that a case could have been put, relying on matters put in other aspects of the Plaintiffs' case, that Ms Zhuang should be treated as having made the representation pleaded in paragraph 40.18, as falsified by the matter pleaded in paragraph 195, in her own right, rather than merely as a corporate organ or ministerial agent of Atlas. That case may have involved the facts that Ms Zhuang was a director of and held a senior role with Atlas, although the executives who were not held liable in Swiss Re also held senior roles with Swiss Re; she was involved with the development of the Steller product and the "due diligence" undertaken in respect of it, although that proposition would have needed to engage with the extent to which others in Atlas, including Mr Hedley and employees working with Ms Zhuang, undertook that work; she made the impugned statements, although that is the start of the inquiry rather than the end of it; and she had extensive previous dealings between herself and Ms Xue, on which the Plaintiffs relied on in other aspects of the case. If Mr Einfeld had put such a case in submissions, Mr Knowles would have had the opportunity to respond to it. However, it seems to me that it would be profoundly unfair to Ms Zhuang, and a denial of procedural fairness, for me to articulate for the first time in a judgment how the Plaintiffs could have put this claim, where they did not seek to do so, and find that Ms Zhuang is liable in a case which the Plaintiffs did not formulate and to which she has not had a substantive opportunity to respond. I note, for completeness, that I asked Mr Knowles in closing oral submissions whether the Defendants accepted that Ms Zhuang had made, in her personal capacity, any representations that were made by Atlas. Unsurprisingly, he indicated that the Defendants did not accept that matter but did not go further to hypothesise the case that the Plaintiffs might have articulated for that proposition or seek to rebut it where it had not been articulated (T787-788). 2. The Plaintiffs have not articulated a basis on which Ms Zhuang should be treated as having made the representation pleaded in paragraph 40.18, as falsified by the matter pleaded in paragraph 195, in her own right, rather than merely as a corporate organ or ministerial agent for Atlas, and I should not find against Ms Zhuang on a case that was not put. The direct representational claim against her therefore fails, in respect of the only representation that I have found to be misleading. It is not necessary to address the case in unconscionability, which has failed generally. Claim against Ms Zhuang for involvement in the pleaded statutory contraventions 1. The Plaintiffs in turn plead aspects of Ms Zhuang's dealings with Ms Xue (FASC [76]ff) and then plead that Ms Zhuang was involved in Atlas' pleaded contraventions of s 991A of the Corporations Act and ss 12CA and 12CB of the ASIC Act. The Plaintiffs did not plead the material facts relied on to support the allegation that Ms Zhuang was a person involved in the statutory contraventions pleaded against Atlas, although it is clear enough from the findings that I have reached above that Ms Zhuang was substantially involved in the events that gave rise to the contravention that I have found. More significantly, the Plaintiffs neither articulated, nor established, any case that Ms Zhuang had knowledge of the essential facts constituting that contravention so as to establish that she was involved in that contravention for the purposes of s 79 of the Corporations Act: Yorke v Lucas (1985) 158 CLR 661 at 670; (1985) 61 ALR 307; (1985) HCA 65; see also Re IW4U Pty Ltd (in liq) (2021) 150 ACSR 146; [2021] NSWSC 40 at [40]. Where the Plaintiffs do not identify a case supporting Ms Zhuang's knowledge of the essential facts of that contravention, by any pleading or submissions that would allow Ms Zhuang a fair opportunity to respond to that case, any finding adverse to Ms Zhuang in that respect would involve a fundamental denial of procedural fairness. The case against Ms Zhuang in that respect is not established. Orders and costs 1. For these reasons, the First Plaintiff, Tredmore, succeeds only against Atlas in respect of the Second Tredmore Investment. The Second Plaintiff, Ms Xue, did not bring any claim to recover any loss and she (as distinct from Tredmore) did not invest in the Steller Fund and suffered no loss in an individual capacity. The Third Plaintiff, Ms Lili Xue, succeeds in respect of the Lili Investment and the Plaintiffs collectively fail in their claim against Ms Zhuang. Tredmore's and Ms Lili Xue's damages are quantified as the amounts that they invested in the two investments, being $2 million and $800,000 respectively, on a "no transaction" case, less the substantial return they in fact made from their investments in the Steller Fund of nearly $900,000 (or a lesser amount attributable to the two investments in which they have succeeded), paid out between June 2017 and March 2019. The amount of that return is identified in Ms Zhuang's evidence (Zhuang 10.7.20 [98]), although it will need to be allocated to the relevant investments and between Tredmore and Ms Lili Xue in making orders. Had I accepted Ms Lili Xue's evidence that she would only invest on a risk free basis (which I have not accepted), I would have allowed interest on the amounts to be repaid at the risk free rate of return (which would be readily derived from public sources) on those amounts from the date of the investments to the date of judgment. Where I have not accepted that evidence, both parties accept that the Court should allow interest at the rate applicable from time to time for the purposes of s 100 of the Civil Procedure Act, again from the date of the investments to the date of judgment. I proceed on that basis. 2. I am not persuaded that the damages recoverable by the Plaintiffs can or ought to be reduced on account of any failure to take reasonable care, under s 1041E(1B) of the Corporations Act or s 12GR(3) of the ASIC Act, a matter pleaded in paragraph 92 of the Defendants' Defence and particularised by reference to the Plaintiffs' failure to make their own assessment of the risk of the investment and their failure to review or properly review the information memorandum and other material relating to the investments. This matter was not addressed in the Plaintiffs' closing submissions and was addressed only briefly in the Defendants' submissions, where Mr Knowles observed that: "even if she were to succeed in this case, Ms Xue's consciously blind approach to investment can only be characterised as negligent in failing to take reasonable care to protect her own interests. That conduct would justify a considerable reduction in the amount of compensation payable by virtue of s 1041E(1B) of the Corporations Act and s 12GR(3) of the ASIC Act: see Defence at [92]. The defendants submit that a reduction of approximately 50% of any loss would be appropriate." 1. However, it seems to me that the matter on which the Plaintiffs have partly succeeded was a structural risk in the investment, which would not reasonably have been discovered by reasonable care on their part, including a review of the information memorandum. The claim for a reduction of damages under s 1041E(1B) of the Corporations Act or s 12GR(3) of the ASIC Act therefore fails. 2. The Plaintiffs have failed in significant aspects of their case, including the claim in respect of the First Tredmore Investment, the claim against Ms Zhuang, and their unconscionability case. It also seems to me that, even with the complexities arising from translation issues, this claim would likely have been completed in a hearing of, at most, four or five days rather than fourteen days if the Plaintiffs had not multiplied the number of representations relied on, put a case as to Ms Xue's vulnerability that had no substantial evidentiary basis, and if Ms Xue had led straightforward evidence in respect of a narrower case rather than her evidence being shaped to support complex representations and then falsified in substantial parts on cross-examination. There would be a real injustice to the Defendants in ordering that they pay the substantial costs which will have arisen from the over-elaborate formulation of the Plaintiffs' case. My preliminary view is that Atlas should be required to pay one third of the Plaintiffs' costs of the proceedings against it (other than any costs dealt with by previous costs orders) as agreed or as assessed, although I will allow the parties an opportunity to make written submissions as to costs below. The Plaintiffs must pay Ms Zhuang's costs of the proceedings against her (other than any costs dealt with by previous costs orders) as agreed or as assessed, where they have failed in the claim against her. 3. I direct the parties to bring in agreed orders, including as to costs, within 14 days, or otherwise their respective orders and submissions not exceeding 6 pages in one and a half spacing and 12-point Arial font as to differences between them. ********** Amendments 24 January 2023 - To correct Counsel representation for Defendants. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 24 January 2023