In 2016 and 2017, former legal practitioner Cedric Ng agreed to purchase two tranches of shares from SHS Law under the impression it was highly successful and there were unique opportunities to return to the profession. While being fed lies by the CEO of the safety of his investments, SHS Law was close to collapse. 

Appearing before the NSW Supreme Court, Mr Ng detailed allegations against Joshua Chan, the firm’s CEO, and an alleged agent responsible for attracting investors. Over three investments, Mr Ng paid the firm $430,000 on promises that it would be worth it. 

Mr Ng claimed both Mr Chan and agent Bao “Jackson” Ming Xian – referred to as only Jackson by the court – “made fraudulent, misleading and deceptive statements about the profitability, operations and business prospects of SHS Law”. Mr Chan has denied these statements and that Jackson acted expressly as his agent. 

In 2017, and shortly after the last investment, SHS Law ceased providing professional services after the Law Society of NSW stepped in to investigate an allegation Mr Chan was withdrawing funds from the firm’s trust and general accounts without authority. 

The Supreme Court has ordered Mr Chan to pay Mr Ng $430,000 and interest – to be awarded as damages for fraudulent misrepresentation under the ASIC Act. 

The firm, misrepresentation and its investor agent

In July 2016, Mr Ng was introduced to Jackson at a social event conducted by Chinese Business Association, of which Jackson was vice-president. Mr Ng told the court it was then that he was made aware of an opportunity to invest in SHS Law by Jackson, who explained it was a large law firm and “one of the biggest Chinese law firms” in Australia. 

Mr Ng was given a business card from Jackson, describing him as the “senior project manager” with SHS Law. Mr Chan has, however, denied Jackson was ever employed by the firm and that he was just “a person who introduced investment opportunities to lawyers at SHS Law and that he would receive a commission”. 

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In the court’s view, Jackson was given the task by Mr Chan of generating interest from investors and would then make up his own mind, based on knowledge of SHS Law. 

“Whether or not Jackson was an agent of SHS Law, there are indications that Jackson was acting as Mr Chan’s agent both to make representations on Mr Chan’s behalf [so that he could receive] the purchase money,” Supreme Court documents noted. 

When Mr Ng arrived at the offices to discuss the shares, Jackson greeted him and told him he would be explaining the investment in lieu of Mr Chan. He again said SHS Law was “awarded as the number one best immigration law firm in Australia” and explained one of the partners was retiring so it would be a “good opportunity” to invest. 

Jackson said that after deductions and expenses, the firm was making over $2 million and, if Mr Ng agreed to obtain 5 per cent of shares, he would be making a $100,000 per year return from the share of profit “without doing anything”. 

At a later meeting, Mr Chan himself told Mr Ng that he could work at the firm and would receive an hourly-based salary with the title of lawyer. 

Mr Chan then provided bank statements covering present and previous financial years’ cash flow and explained that the bank statements did not show the true worth of SHS Law “because there is a lot of money which is still not processed and is in trust”. 

He then allegedly said: “It’s a safe investment. It is the best thing you can do. The firm is very stable, there [are] lots of business. We cannot handle the workload; we need more staff so you should come and help us [as a legal practitioner at the firm].” 

When Mr Ng decided to proceed with the purchase, he met Mr Chan in his offices and was given a document that showed the purchase price was $105,000, rather than the agreed price of $250,000. Puzzled, he asked about the discrepancies, which had been explained away as “how it works out on the share register”. 

From that moment forward, Mr Chan would assure Mr Ng that the firm was “busy with lots of business” and “your investment is safe with us”. 

SHS Law collapse and Mr Chan’s exposure

In 2017, Mr Chan and Mr Ng were coincidentally both in Hong Kong and agreed to meet but the timing and place of the meeting have not been agreed upon by both parties, lending to the court’s understanding Mr Ng was reliable but Mr Chan was not. 

During this meeting, Mr Chan told Mr Ng that a principal of the firm was retiring and is looking to sell his shares. He asked Mr Ng if he would be interested in the shares and offered him the position of “partner and principal in charge” of SHS Law. On the basis of this meeting, Mr Ng decided to invest a further $195,000 into the firm. 

In the first few days of June 2017, Mr Ng attended the offices and met with principal lawyer Sam Hegney where he was advised he could not be a principal lawyer without a practicing certificate. Mr Hegney also showed Mr Ng the balance of the trust account, which was sitting at only $5,000 and far below the riches he believed from Mr Chan. 

Mr Hegney agreed to meet two days later to supply a bank authority to allow Mr Ng an opportunity to operate the trust account, but when the day came Mr Hegney called to inform him Mr Chan had resigned “due to very serious personal health reasons”. 

Mr Ng was then informed there was no money in the trust account and SHS Law could no longer operate. When he attempted to communicate to Mr Chan about the money, he was first provided confusing information and then was not responded to at all. 

“All this money was paid away in reliance on fraudulent and misleading representation to acquire shares in SHS Law, which is no longer in business,” the court said. “Mr Ng would not have paid or directed his father to pay any of these amounts but not for Mr Chan’s fraudulent and misleading representation [of the firm’s finances].” 

The court inferred that SHS Law’s shares were worthless at the time of trial and were worthless at the time of the second tranche due to the proximity of the firm’s collapse. 

As for the first tranche, SHS Law was still actively trading and there was no telling how profitable shares were at this point in time. The court ruled the claim for damages over fraud or misleading and deceptive conduct in this instance had failed. However, these damages were not the only remedies sought by Mr Ng.