Gan v Xie [2023] NSWCA 163

Gan v Xie [2023] NSWCA 163
Court of Appeal of New South Wales
White JA, Simpson, & Basten AJJA
Consumer law – Gan invested in a virtual platform called MFC – Gan received credits that could be sold to existing or new members, and could earn bonuses by introducing new members – Gan asserted that she decided to invest because Xie had made oral misrepresentations that participation in MFC was risk-free, the company behind MFC was legitimate, she would get her principal back after one year, the more money she invested, the sooner she would get her principal back, if her investment were not risk free, Ms Xie would return the amount of her principal, she would not need to do anything to make money, and she could withdraw cash at any time – MFC collapsed and Gan lost her money – Gan alleged that MFC was a pyramid scheme contrary to s45(1) of the Australian Consumer Law, and that Xie had participated in a pyramid scheme contrary to s44(1) – Gan sought to lead tendency evidence from other investors that Xie had made similar misrepresentations to them – the primary judge rejected this evidence on the basis of lack of probative value, and because Gan had not served a notice of intention to adduce tendency evidence on Xie – the primary judge dismissed the proceedings, finding that MFC was not a pyramid scheme – the primary judge also found that the alleged representations had not been made and that Gan had not been induced to invest by Xie – Gan appealed – held: in assessing the credibility of the witnesses, the primary judge had an advantage not enjoyed by the Court of Appeal – nevertheless, the adverse credit findings should be set aside – the primary judge had palpably misused her advantage as a trial judge – on the respondent’s own description of the scheme, it had the characteristics of a pyramid scheme – the “characteristics” of a scheme in s45 denote the objective features of the scheme – the scheme was a pyramid scheme – Gan had served an affidavit on Xie regarding the proposed tendency evidence, and Xie therefore knew what evidence was sought to be adduced, and the nature of that evidence as tendency evidence – the primary judge ought to have regarded this as a factor weighing heavily in favour of dispensing with the requirement for the service of a tendency notice – if accepted, this evidence had significant probative value by demonstrating a tendency on the part of Xie to make representations about the scheme to the same or similar effect as some of the representations Gan said had been made to her – the trial judge had erred in not admitting this evidence – it would not be possible for the Court of Appeal to decide the contested issues of fact – appeal allowed, and proceedings remitted to the District Court for a new trial before a different judge.
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