In the matter of Gan v Xie [2023] NSWCA 163, the appellant (Ms Youxian Gan) commenced proceedings against the respondent (Ms Eileen Xie).  

Between August and September 2016, the appellant invested approximately $305,150 and RMB805,000 in a platform known as “MFC”, which was operated by MBI International Sdn Bhd (“MBI”). For her investment, the appellant received a variety of credits that could be sold to existing or new members of MFC, and the ability to earn a number of bonuses upon the introduction of new members to MFC. The appellant asserted that her decision to invest in MFC was brought about by the respondent who had made certain misrepresentations regarding:  

   (i)   the legitimacy of MBl’s operations;  

   (ii)  the profitability of investing in MFC; and  

   (iii) the safety of any funds so invested, assured by the fact that the price of entry into MFC, and the price at which the appellant could sell her virtual coins and credits, would only ever increase and never decrease.  

After the appellant’s entry into the scheme, MFC collapsed, resulting in widespread losses to its investors. 

This decision is relevant to the legal world as a whole as the Court provides important commentary in relation to affidavit evidence.  

In an affidavit, two of the appellant’s witnesses, Ms Zhong Di Si and Ms Jenny Wills, did not purport to recollect the precise words that were said by the respondent. They used the widely adopted method of putting the gist or substance of what they professed to remember as conversations in direct speech, qualified by the statement that words were said “to the effect” of the words purportedly quoted (provided at [98]). 

Agreeing with the observations of Jackman J in Kane’s Hire Pty Ltd v Anderson Aviation Australia Pty Ltd [2023] FCA 381 at [121]- [129], the Court (White JA, Simpson & Basten AJA agreeing) held that the fact that precise words used, and the specific occasion on which words were used, are not recalled, does not mean that a person’s memory of the substance or “gist” of what was said must be rejected (provided at [119]). 

The primary duty of a witness is one of honesty. The oath or affirmation binds the witness to tell the truth, the whole truth and nothing but the truth. Witnesses should not be compelled or encouraged into uttering untruths on oath by giving a form of words in direct speech with which they are not happy and which they cannot actually recollect in preference to their own words in indirect speech (provided at [126]).  

The practice of witnesses and lawyers working up a version of a conversation in direct speech (whether or not prefaced by the phrase “in words to the following effect”) from the witness’s actual memory merely of the substance or gist of what was said is logically, ethically and grammatically wrong. It is logically wrong because it reverses the logical process of deriving the meaning or substance of what was said from the actual words which were spoken; one cannot derive (as distinct from guess at) the actual words spoken simply from their gist. It is ethically wrong because the evidence given as a result of that process conceals the true nature and quality of the witness’s memory, and conveys a false impression of that memory. It is grammatically wrong because the use of quotation marks indicates as a matter of conventional usage that the relevant expression is a quotation of the exact words which were spoken. It could not be said that this practice is allied to an iron sense of principle (provided at [127]).  

The form in which evidence of conversations is given should reflect the difference between verbatim memory and gist memory (provided at [128]). 

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