Background
Tianyu Zou and Yaphy International Pty Ltd invested in transactions intended to finance and facilitate the export of Australian-made infant formula to China. Mr Zou dealt principally with Yuqi (Kevin) Zhang, who in turn dealt with Zhen Ji, Southern Farms Pty Ltd and Mr Ji’s company BuyerCamp Pty Ltd. Most of the invested funds were lost.
In June 2022, Mr Zhang gave Mr Zou a fabricated invoice purporting to show that infant-formula manufacturer JBX Pty Ltd supplied Southern Farms directly. Mr Zhang also orally represented that such a direct trading relationship existed. Mr Zou relied on those representations when causing Yaphy to enter the transactions and make payments. The plaintiffs sued Mr Zhang, Mr Ji and BuyerCamp under s 18 of the Australian Consumer Law and in deceit.
The Court’s Holding
Slattery J declared that Mr Zhang engaged in misleading and deceptive conduct contrary to s 18 by providing the false invoice and making the accompanying oral representation. No direct trading relationship existed between JBX and Southern Farms. The Court found that the plaintiffs relied on the representations, causing Mr Zou to have Yaphy pay a net $1,203,870, and provisionally assessed their damage at that amount.
The judgment did not finally determine all liability or damages issues. The Court reserved questions concerning any loss suffered personally by Mr Zou, the treatment of later payments, proportionate liability and costs. Although the findings left the claims against Mr Ji and BuyerCamp open to dismissal, the Court reserved whether the plaintiffs could recover from them on a causation-without-reliance theory after further submissions. It also found that Mr Zhang was not Mr Ji’s agent for making the representations.
Key Takeaways
- Passing on a fabricated supplier invoice and affirming the direct commercial relationship it depicts can constitute misleading and deceptive conduct under Australian Consumer Law s 18.
- The Court found that Mr Zou made the relevant decisions for Yaphy, allowing his reliance to establish the company’s reliance and resulting loss.
- The $1,203,870 damages figure was provisional, with allocation of loss, credits, apportionment and the remaining defendants’ liability reserved.
Why It Matters
The decision illustrates the substantial exposure faced by intermediaries who circulate unverified supply-chain documents to prospective investors. A person may adopt and convey a representation as their own even when the underlying document originated elsewhere.
It also highlights the importance of distinguishing reliance from broader statutory causation. Whether parties who did not directly induce the plaintiffs’ reliance may nevertheless be liable for causing the loss remained unresolved pending further submissions.