ATL (Australia) Pty Ltd v Cui

Beneficial interests in the Borrower and the Borrower's Trust

1. The Borrower was the developer of real estate at Epping in New South Wales. Each of the four individual guarantors who were parties to the Loan Agreement had an interest in the Borrower through shareholdings and units in trusts. Jinsong Cui was a builder aged 45 in 2017. Terence Tang was 40 years old and had a background in mortgage broking. He had met Mr Lee through common employment in 2010-2012. By 2017 Mr Lee was in his early 30s. He was conducting his own mortgage broking business, which he had established in 2013. Mr Lee and Lance Zhao had been contemporaries at high school in 2000-2002.
2. In 2014 Mr Lee, Terence Tang and Lance Zhao agreed to establish a company, referred to as "GPI", through which they would carry on a business of real estate development. In 2015 Lance Zhao knew Jinsong Cui socially and became aware that he required finance for a building project at North Ryde. In mid-2015 Terence Tang and Lance Zhao brokered finance for Jinsong Cui's project, through GPI. In about August 2015 Lance Zhao discussed with Jinsong Cui the possibility of undertaking a real estate development in joint venture. In October 2015 Jinsong Cui, Mr Lee, Terence Tang and Lance Zhao agreed on the purchase of a site at Epping, which had Development Approval. They caused the Borrower to be incorporated in November 2015 for the purpose of carrying out the development and they established a unit trust of which the Borrower was the trustee of ("the Borrower's Trust").
3. Gondon HLHS Pty Ltd held 95% of the shares in the Borrower and 60% of the units in the Borrower's Trust. Gondon HLHS Pty Ltd held its shares in the Borrower and its units in the Borrower's Trust on trust, predominantly for Arise Group Pty Ltd (the 11th defendant). Jinsong Cui's wife, Rong CHEN, held the entirety of the shares in Arise Group Pty Ltd and was its sole director. A small minority interest in the Gondon HLHS Trust was held in equal parts by family trust companies of M Lee, Terence Tang and Lance Zhao (5.6% each).
4. The remaining 5% of the shares in the Borrower and 40% of the units in the Borrower's Trust were held by HLHS Partners Epping Pty Ltd, on trust, in equal proportions, for the respective family trust companies of Mr Lee, Terence Tang and Lance Zhao. Thus the total of the equitable interests of the respective parties in the assets and undertaking of the Borrower, measured in terms of direct and indirect holdings of units in the Borrower's Trust, was 49.9% to Rong Chen's company Arise Group Pty Ltd and 16.7% to each of Messrs Lee, Tang and Zhao, their combined interests totalling 50.1%.
5. The Borrower completed purchase of the property at Epping in early 2016 and commenced the development project. Initial funding was borrowed from sources other than the plaintiff. The purpose of borrowing from the plaintiff in March 2017 was to enable the Borrower to discharge an earlier loan that had fallen due.

Claim against Arise Group Pty Ltd, 11th defendant

1. The solicitors for the plaintiff on the lending transaction were Mr Vincent Zhu and Ms Emma Liu of Auyeng Hencent and Day Lawyers. The solicitors for the Borrower were KWL Lawyers, of which Mr Allan Wang was a principal and Ms Yalda Ali was an employed solicitor. Terence Tang assumed the role of contact person for the Borrower and the four Guarantors, being himself, Jinsong Cui, Mr Lee and Lance Zhao. On 15 March 2017, before the loan funds were advanced, Terence Tang informed Ms Emma Liu that the shares in the Borrower were not held beneficially. By email of 16 March 2017 Ms Liu requested Ms Ali to provide copies of the deeds for the unit trusts in which the shares in the Borrower were held. On 17 March 2017 Ms Ali supplied copies of the deeds by email.
2. Ms Liu on behalf of the plaintiff then drafted two Deeds of Guarantee and, by email of 23 March 2017, she transmitted them to Terence Tang to be executed, with copies to Allan Wang and Ms Ali. Each of those documents was drawn up as a guarantee, in favour of the plaintiff, of the Borrower's obligations under the Loan Agreement. The guarantors in one of the Deeds of Guarantee (referred to in these proceedings as the "Fifth Guarantee") were the unit holders of the Gondon HLHS Trust, being Arise Group Pty Ltd and the three corporate trustees of the Lee, Tang and Zhao family trusts. Gondon HLHS Pty Ltd, the trustee of that Trust and the nominal shareholder in the Borrower, was also a party to the Fifth Guarantee. The guarantors in the other Deed (the "Fourth Guarantee") were the unit holders and trustee of the HLHS Partners Epping Trust. On 23 March 2017 Terence Tang responded to the plaintiff's solicitor by email. He acknowledged receipt of the guarantees and undertook to "arrange the matter with our solicitor and directors for signing".
3. On 30 March 2017 Ms Liu sent an email to Terence Tang noting that the Fourth and Fifth Guarantees had not yet been returned executed. The evidence does not include any subsequent email by which the executed documents were transmitted to Ms Liu but on 5 April 2017 she sent an email to Terence Tang acknowledging receipt of "borrower's executed counterpart" of each of the additional Guarantees. I infer that the executed documents were delivered by some means on a date between 30 March and 5 April. The Fifth Guarantee was executed by Mr Lee, Lance Zhao and Terence Tang, each of them signing as a director of their respective family trust companies. The Guarantee was executed on behalf of Gondon HLHS Pty Ltd by both Jinsong Cui and Terence Tang as directors.
4. On page 14 of the Fifth Guarantee, where provision was made for execution by Arise Group Pty Ltd, there appeared a purported signature of Rong Chen above a line marked "Director/Secretary". Rong Chen's name was hand printed on another line below. The plaintiff now claims against Arise Group Pty Ltd the amount for which the Borrower is in default under the Loan Agreement, referred to at [3] above. The plaintiff seeks to hold Arise Group Pty Ltd liable as a guarantor on the terms of the Fifth Guarantee, relying upon the purported execution of that Guarantee by Rong Chen as director.

Issues

1. The only remaining active defendants in the proceedings are the second defendant, Mr Lee and the 11th defendant, Arise Group Pty Ltd. As against all other defendants the proceedings have either been discontinued or stayed, pursuant to the Bankruptcy Act 1966 (Cth) or the Corporations Act 2001 (Cth), or concluded by the entry of judgment.
2. The second defendant disputes liability as Guarantor on the following grounds: 1. Primarily, he pleads non est factum, claiming that when he executed the Loan Agreement in which the guarantee provision is contained, he believed he was doing so only as a director of the Borrower and as a director of his family trust company. Through his counsel's opening submissions he says that he "was not informed and did not understand or expect that he was being asked to give, or that he was signing, a personal guarantee". 2. In the alternative, Mr Lee contends that the Loan Agreement so far as it created obligations on his part as a guarantor was "unjust in the circumstances relating to the contract at the time it was made" and he seeks relief under the Contracts Review Act 1980 (NSW). 3. In a further alternative to the primary defence of non est factum, Mr Lee relies upon an agreement made by the Borrower with the plaintiff on about 14 March 2017 that the Borrower would pay interest on the loan funds from a date prior to drawdown, namely, from the date or dates that the funds were converted to Australian dollars and held on trust by the plaintiff's solicitor, in readiness for completion of the transaction. Mr Lee contends that this undertaking of the Borrower altered the circumstances of his guarantee and engaged the principles of Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549; [1987] HCA 15, resulting in discharge of his liability.
3. The 11th defendant, Arise Group Pty Ltd, disputes its liability to the plaintiff under the Fifth Guarantee on the following grounds: 1. The company denies that the Fifth Guarantee was executed on its behalf by its sole director and says that the purported signature of Rong Chen is a forgery. 2. The company denies that Rong Chen signed a statutory declaration dated 26 May 2017, which the plaintiff relies upon as ratification of the Fifth Guarantee (assuming the Guarantee not to have been executed on behalf the company). In addition to disputing the signing of the statutory declaration, the 11th defendant disputes that its content when signed would have been understood by Rong Chen and, on that basis also, the efficacy of the declaration as ratification of the Fifth Guarantee is denied. 3. Arise Group Pty Ltd also disputes the plaintiff's contention that the statutory declaration constitutes a representation on behalf of the company that the Fifth Guarantee was binding. The company disputes that the plaintiff acted to its detriment on any such representation and denies the plaintiff's assertion that the company has become estopped from disputing the Fifth Guarantee. 4. Arise Group Pty Ltd disputes that the Fifth Guarantee is a deed. It contends that it is only a contract and that it is unsupported by consideration because the plaintiff's advance to the Borrower had been made at least two weeks before the Fifth Guarantee purported to be executed. Further, if the Fifth Guarantee is a deed, Arise Group Pty Ltd denies that it has become binding because it says that the document was never effectively delivered to the plaintiff. It is said that, assuming it was in some manner delivered by Terence Tang, delivery by him could not be effective in the absence of proof that he had authority under seal for the purpose.

The second defendant's non est factum plea

1. The seminal Australian authority on the defence of non est factum is Petelin v Cullen (1975) 132 CLR 355; [1975] HCA 24. The following extracts from the judgment of the High Court in that case are sufficient for present purposes (at pp 359-360): [11] The principle which underlies the extension of the plea to cases in which a defendant has actually signed the instrument on which he is sued has not proved easy of precise formulation. The problem is that the principle must accommodate two policy considerations which pull in opposite directions: first, the injustice of holding a person to a bargain to which he has not brought a consenting mind; and, secondly, the necessity of holding a person who signs a document to that document, more particularly so as to protect innocent persons who rely on that signature when there is no reason to doubt its validity. The importance which the law assigns to the act of signing and to the protection of innocent persons who rely upon a signature is readily discerned in the statement that the plea is one "which must necessarily be kept within narrow limits" (Muskham Finance Ltd. v. Howard (1963) 1 QB 904, at p 912 ) and in the qualifications attaching to the defence which are designed to achieve this objective. [12] The class of persons who can avail themselves of the defence is limited. It is available to those who are unable to read owing to blindness or illiteracy and who must rely on others for advice as to what they are signing; it is also available to those who through no fault of their own are unable to have any understanding of the purport of a particular document. To make out the defence a defendant must show that he signed the document in the belief that it was radically different from what it was in fact and that, at least as against innocent persons, his failure to read and understand it was not due to carelessness on his part. Finally, it is accepted that there is a heavy onus on a defendant who seeks to establish the defence. All this is made clear by the recent decision of the House of Lords in Saunders v. Anglia Building Society (Gallie v. Lee) (1971) AC 1004, esp at p 1019; [1970] UKHL 5. […] [14] It is now settled beyond any shadow of doubt that when we speak of negligence or carelessness in connexion with non est factum we are not referring to the tort of negligence but to a mere failure to take reasonable precautions in ascertaining the character of a document before signing it. The insistence that such precautions should be taken as a condition of making out the defence is of fundamental importance when the defence is asserted against an innocent person, whether a third party to the transaction or not, who relies on the document and the signature which it bears and who is unaware of the circumstances in which it came to be executed. It is otherwise when the defence is asserted against the other party to the transaction who is aware of the circumstances in which it came to be executed and who knows (because the document was signed on his representation) or has reason to suspect that it was executed under some misapprehension as to its character. In such a case the law must give effect to the policy which requires that a person should not be held to a bargain to which he has not brought a consenting mind for there is no conflicting or countervailing consideration to be accommodated - no innocent person has placed reliance on the signature without reason to doubt its validity. [15] On this analysis the element of carelessness has no relevance for the present case. As the learned judge found, the appellant's belief that the document was a receipt was inspired by the agent's representation that the document acknowledged the payment of the sum of $50. It is scarcely to be conceived that the respondent was unaware of what his agent said and did; but even if he was not informed by the agent he must take responsibility for his action.
2. In that case the agent of the party who sought to rely upon a disputed signed agreement had represented to the signatory that it was an acknowledgement of receipt of £50 and did not mention that it was an extension of an option previously granted. The Court said at p 360: Consequently as against the [signatory], the [party seeking to rely upon the signed document] is not to be considered as an innocent person without knowledge or reason to doubt the validity of the […] signature.
3. Further, the party seeking to enforce the agreement was aware, from an earlier dealing, that the signatory had little appreciation of English and no capacity to understand the document that was proffered to him for execution. In connection with the previous dealing, the party who now relied upon the disputed document had advised the signatory to consult a solicitor but on the occasion in issue he did not. He "contented himself with a demand that the document be signed and omitted to give an explanation of its character". Those circumstances, also, contributed to it being inappropriate to treat the claimant as an innocent party and "would in any event support the independent conclusion that there was no carelessness on the part of the [signatory]".
4. The Court added the following: [18] The other element in the defence which requires to be mentioned is the necessity that the appellant should show that he believed the document to be radically different from what it was in fact. Once it is accepted that the primary judge could properly find that the appellant believed it to be a receipt, this point of contention disappears from the case.
5. The defence of non est factum may be invoked in cases where, through mental incapacity, the signatory has no understanding at all of the document that he or she signs, as opposed to having a positive understanding that is radically incorrect: Ford v Perpetual Trustees Victoria Limited (2009) 75 NSWLR 42; [2009] NSWCA 186. Mr Lee does not contend that he signed the Loan Agreement under a mental incapacity. In order to determine his plea it is necessary to consider the following: 1. whether Mr Lee signed the Loan Agreement understanding it to be lending transaction without any personal guarantee from himself; 2. if so, whether he was careless in signing the document on that understanding; and, 3. whether the plaintiff was relevantly innocent with respect to a misunderstanding by Mr Lee that the Loan Agreement did not contain his personal guarantee.

Mr Lee's understanding of the document signed

1. Mr Lee does not dispute that he did in fact sign the Loan Agreement and that on its face it provides a guarantee by him of the Borrower's obligations. The burden of proof rests upon him to establish that he did not understand that the Agreement had that effect. He has failed to discharge that onus.
2. The Loan Agreement bears on its cover a typed list of the parties and their capacities. The names of Jinsong Cui, Jeffery Tse Hung Lee, Tse En Tang and Liang Zhao appear, in that order, above the description: "(collectively referred to as Guarantor)". On the second page is a section entitled "PARTIES" where, again, the names of the four individuals are set out, against the description "Guarantor (jointly and severally)". Clause 10.2 is headed "Guarantor Covenants" and extends over a page and a half.
3. The first of three execution pages, at the end of the document, provides for execution by the Borrower, by the plaintiff and by another entity referred to as "Loan Facilitator". Only Jinsong Cui and Tse En (Terence) Tang signed as directors of the Borrower. The second and third execution pages provide a series of four ruled lines for placement of signatures, each with the words "Guarantor's signature" typed under the line. Also under each line is a further ruled line labelled "Name (please print)". To the left of each location for a Guarantor's signature is a similar pair of ruled lines for the signature and printed name of a witness. Mr Lee's only signature to the Loan Agreement was placed by him on one of the ruled lines labelled "Guarantor's signature". The witness to the signature of each guarantor was Ms Yalda Ali, of the firm KWL Lawyers, who were acting for the Borrower.
4. Mr Lee's date of birth is 15 March 1985. He was two days short of 32 years old when he signed the Loan agreement on 13 March 2017. He was well-versed in the English language. He had attended high school in Australia for four years from 2000 to 2004. Following that he completed 2-3 years of study for a diploma in audio engineering at SAE College in Chippendale. After graduating from the College Mr Lee had a variety of employments, including work in restaurants. By 2017 he was well familiar with lending transactions where real property was given as security. He had been employed in a mortgage broking business for three years from 2010 to 2012. As earlier referred to, he had conducted his own business in that field for a further four years from 2013 and continuing in 2017. Between 10 and 30 brokers were employed in the business, the number varying from time to time. The business was concerned with lending to purchasers of residential properties.
5. In May 2016 the Borrower entered into a written loan agreement with HIFU SPV 1 Pty Ltd ("HIFU") for an advance of $25 million in connection with the Epping project. Messrs Cui, Lee, Tang and Zhao signed the loan agreement in the capacity of guarantors of the Borrower's obligations. Each of them also signed at the same time a separate deed of guarantee and indemnity. Mr Lee was extensively cross-examined about that transaction. He said that a firm named Smart Wealth Advisors provided financial advice concerning the HIFU loan. A member of that firm informed him that he "had to go to a solicitor for legal advice" in order to complete a declaration to the effect that he had received such advice, as required by the lender. For that purpose Mr Lee consulted Colin, Biggers & Paisley solicitors concerning the deed of guarantee and indemnity in favour of HIFU. He gave these answers: Q Based, at least on your conversation that you had with the lawyer from Colin, Biggers & Paisley at the time you signed [the deed of guarantee and indemnity], you knew the effect of the guarantee you were giving was that if the company borrowing the money defaulted on the loan, you would be liable to repay the loan. A On this particular loan, yes. Q So that's something you were aware of when you signed it? A Correct.
6. Having received that advice, Mr Lee signed a statutory declaration on 9 May 2016 in which he identified, at par 1, the loan agreement between HIFU and the Borrower and the deed of guarantee and indemnity. He then declared: 2 I have received independent legal advice regarding the loan and security documents referred to in paragraph 1. 3 After receiving that advice I have freely and voluntarily signed the following documents: (a) Loan Agreement (b) Guarantee and Indemnity. In cross examination Mr Lee did not suggest that this was other than a true declaration.
7. On 18 November 2016 documents for another loan to the Borrower, from the National Australia Bank ("NAB"), were emailed to Mr Lee by Terence Tang. The email was part of a chain that included a message from the Bank to Jinsong Cui in which the Bank's security requirements were listed. The fifth requirement was: Cost and interest overrun Guarantee from the four Directors/Sponsors of [the Borrower].
8. Mr Lee said that he opened and read the email from Terence Tang, that he did not understand at the time that he would be required to give a personal guarantee but that he gained that understanding later, "just before signing the documents", as a result of receiving an explanation from Allan Wang of KWL Lawyers, who acted for the Borrower on the transaction. Mr Lee signed the Cost Overrun and Interest Shortfall Guarantee, in respect of the Borrower's obligations to the NAB loan, on 22 December 2016. His signature was witnessed by Allan Wang. Immediately above the signature space there was printed on the document, prominently, in bold within a border, a heading as follows: IMPORTANT THINGS YOU MUST KNOW BEFORE YOU SIGN
9. Under that heading, within the border, was an instruction to the intending signatory that before signing he or she should read the guarantee and also the documents for the principal transaction that was to be guaranteed. There was a recommendation that the signatory should obtain legal advice. In cross-examination Mr Lee said that he did not read the "important things" set out within the border, apart from the final dot point, as follows: This guarantee and indemnity covers liability under a future credit contract to the extent the future credit contract (together with all other existing credit contracts secured by this guarantee and indemnity) is within the limit previously agreed in writing by you.
10. In cross-examination Mr Lee gave the following answers with respect to that point: Q What did you understand that to [mean] at the time? A So, that means I'm - I'm liable to the credit contract I am signing. Q But you hadn't read the contract? A No, I haven't. Q But you were prepared to sign it anyway? A Not in any way, but under this dot points, and explanation by Allan. Q You understood, didn't you, that by signing the document, you were agreeing to legally bound [sic] by the terms of the agreement? A I understand that. Q Did you read the dot point that said, "You should obtain independent legal advice"? A Yes.
11. Later he gave evidence that he received legal advice on the guarantee for the NAB loan, as follows: Q And who gave you that legal advice? A I believe it was Allan, Allan Wang. Q. And is that the legal advice you previously referred to that Allan had pointed out that there was a guarantee? A Yeah, he mentioned that about the guarantee before I signed it. Q What other, if any, legal advice did he give you about the loan and security documents? A I can't recall. But he definitely mentioned about the guarantee before I signed it. HIS HONOUR Q What do you mean "mentioned" about? What did he say? A Explained about the guarantee - about what happened. Sort of, like, the one that in Hifu. Q What was his explanation? What words of explanation did he use? A I can't recall exactly. But he definitely said something about the guarantee. [COUNSEL] Q And so you understood, did you, that Mr Allan Wang was acting both as the solicitor for the company borrowing the money as well as giving legal advice to you? Is that correct? A Yeah, although I haven't got a formal engagement with Allan Wang, but it appears that he was giving me the legal advice.
12. Also on 22 December 2016 Mr Lee signed a statutory declaration confirming that he had received independent legal advice and independent financial advice regarding the loan and security documents for the NAB facility. The statutory declaration was in in a form similar to that which he had provided in connection with the HIFU loan.
13. Towards the end of his cross examination on the HIFU and NAB transactions Mr Lee was asked by the plaintiff's counsel why he asserted that he would not have signed the Loan Agreement between the Borrower and the plaintiff if he had known that it also contained a guarantee. His answers in that context were as follows: Q. What I'm going to suggest to you is that what you say in paragraph 102 [of Mr Lee's affidavit] is wrong, because you would have signed the documents [with the Borrower] had you have been told there was a guarantee, because that's exactly what you had done in relation to the loans to [sic] Hifu and the National Australia Bank. A. I would not agree to that. HIS HONOUR: The loans from Hifu and National Australia Bank. WITNESS: Yeah, I would not agree to that. HIS HONOUR Q. Why not? A. Because the guarantee was - was explained to me without my request before I signed it. Q. From the explanation, what did you understand the guarantee meant in relation to the Hifu and the NAB? A. Yeah, I understand. Q. What consequences did it have for you as you understood? A. I understand the guarantee was my personal guarantee. And then the lender can seek for the entire amount for myself. Q. So, if the borrowing company didn't meet the obligations for repayment of the principal [and] the interest, then the lender could look to you and enforce against you whatever was unpaid. Was that your understanding? A. Correct.
14. The following answers were given by Mr Lee concerning his state of knowledge about lenders requiring corporate guarantees, generally, in May 2016 when the HIFU loan transaction was entered into: Q You must have known, though, it wasn't unusual for lenders to require personal guarantees from directors. A I must? Q Well, you did know that it wasn't unusual for lenders to require personal guarantees from directors, didn't you? A I think it's usual for them to require that, yeah. Q So, you knew it was something that commonly happened? A Not very commonly, because every lender has got different requirements. Q You knew that it was something that wasn't uncommon? A It wasn't uncommon. Sorry, I don't - I'm not sure about that question. Q You knew that many lenders had a practice of requiring corporate borrowers to give personal guarantees from directors, didn't you? A Yes. Yes, that's right. But some lender has different requirements.
15. On 16 February 2017 the company through which Mr Lee carried on his mortgage broking business executed a deed of sale of trailing commissions. The deed contained a guarantee by himself of the performance by his company of its obligations. Mr Lee signed the document both in his capacity as director of the company and as guarantor. Mr Lee's answers when questioned about this transaction were evasive. He initially asserted "there is no personal guarantee in this document". When his attention was directed to the guarantee clause he would not admit that he had been wrong in that denial and then said: So, the guarantee is not the same as [the plaintiff's] guarantee.
16. When the issue was pressed, the following answers were given: A Okay. It guarantees the loss and damage of TCI Security, which is the buyer. So, it normally means I cannot refinance the loan as so to TCI Securities. If there is any, I have to make up the loss, which is the claw back. So, the commission gets the - gets clawed by the bank. I have to pay that back to the buyer. That's basically what it means. […] Q And, in this case, you understood that the agreement that you were signing, you were entering a transaction, or signing a transaction on behalf of [Mr Lee's mortgage brokerage company], but you were personally giving a guarantee to the buyer. A. Yes. Because I fully understand the guarantee.
17. At various points during questioning about personal guarantees that he had given for past corporate transactions, Mr Lee sought to differentiate those instances from the Loan Agreement with the Borrower on the basis that his guarantee in each of those earlier cases had been explained to him before he signed. Those answers were an ineffectual attempt to advance his defence. The question is whether Mr Lee understood the Loan Agreement, when he signed it, in a character radically different from that which it actually bore. In the context of this case, that is a question of whether he signed under the misapprehension that the Loan Agreement did not provide for his personal guarantee at all. Having regard to his acknowledged experience and understanding of the general nature of a personal guarantee, the defence of non est factum could not be sustained merely on the basis that he did not receive an explanation of the terms and details of this particular guarantee.
18. From Mr Lee's facility with the English language, his level of education, his business experience, his understanding of and familiarity with guarantees of corporate obligations and from the prominence on the Loan Agreement of clear statements of the capacity in which his signature was to be affixed, I am unpersuaded that he signed the document without realising that he was thereby assenting to a personal guarantee of the Borrower. On the contrary, I am comfortably satisfied that he did understand that by signing he would assume the obligations of a guarantor, according to his general understanding of that legal concept.
19. On the basis of his experience with HIFU's and NAB's loans to the Borrower, Mr Lee would have expected that his personal guarantee would again be required - assuming he had not been expressly told that that would be the case by Terence Tang, who was the contact with Eddie Zhou, the broker who introduced the plaintiff, or by Allan Wang or Yalda Ali, the solicitors for the Borrower. He would at least have been on the lookout for a requirement from the plaintiff that he personally guarantee the debt. When he attended the office of KWL Lawyers to execute the document, upon even the most cursory look at its cover page or at the page on which he was to place his signature he could not have missed the fact that it was indeed in the capacity of guarantor that he was required to sign. The Loan Agreement did not indicate any other capacity in which Mr Lee was to be a signatory.
20. Mr Lee made very unconvincing attempts to substantiate his claim that he did not think his personal guarantee was required in respect of the plaintiff's loan in March 2017. Those attempts commenced as follows: In my, in my impression this was a temporary loan. And then before that, before this loan draw down, there was an execution of the loan agreement page from ATL [the plaintiff] to Cui, and it didn't require my signatures. So I thought this loan would be similar. […] Similar to the loan that would not, did not require my signatures, which was made by ATL as well.
21. He explained that in that answer he was referring to an email from Terence Tang to Jinsong Cui dated 22 June 2016, to which were attached a single page described as "Execution Page - Loan Agreement", another single page entitled "Execution Page of Call Option Deed" and a final page described as "Utilisation Request". Each of those pages made provision for execution by the Borrower and related entities but not by any individuals as guarantors. None of the single pages was associated with a transaction document. Mr Lee said that he did not know anything about the transaction to which the documents of 22 June 2016 related, including whether any such transaction was entered into.
22. Cross-examination on this subject included the following: Q […] So it's your evidence that because an execution page had been emailed to someone else, […] on 22 June 2016, that you didn't think the [plaintiff's] loan documentation that you signed in March 2017, didn't have a personal guarantee? A That's correct. That's what I thought. And I thought it's quite awkward for me to sign the [plaintiff's] document because the first one didn't need my signature at all. Q [...] But […] you knew that in 2017 this was a different loan to the loan discussed in June 2016, didn't you? A Yes, but with the - it's the same lender. Q And you knew that when you were called to the office of KWL Lawyers, that your signature was going to be required on some of the documentation, didn't you? A [Terence] told me that. Told me so, yeah. Q Right. So didn't that lead you to believe that this loan in March 2017, might be of a different character than the loan that you're referring to from 2016? A Well, for every loan, every lender there is different requirement and different needs and signatures. For this - for the 2017 March one, I thought my signature was required as the capacity of the company director, one of the director, but not as my personal. Q Mr Lee, if your signature wasn't required for a loan to the company in 2016, why would it be required in 2017? A Well I have absolutely no idea, because I did not communicate with the lender, nor the broker. Q And if as you say, each lender and each loan has different requirements, how could you have possibly assumed that the loan in 2017 would be on the same terms as the loan in 2016 including that it didn't have a personal guarantee? A Well, let me correct myself. I didn't say it's the same terms of 2016, because I don't even know the terms. But, I thought it was - there is more requirement for me to sign as a company director.
23. I am satisfied that Mr Lee is, and was in March 2017, a rational person who possessed a general understanding of commercial matters. It would have been quite irrational for him to have believed that because the plaintiff did not require guarantors to execute documents relating to some transaction between it and the Borrower in June 2016 - if, indeed, that ever occurred - the plaintiff would not require guarantors for a loan of $14 million in March 2017. It would also have been irrational for Mr Lee to have believed that his signature was required on the Loan Agreement of March 2017 only in the capacity of a director of the Borrower, where the document clearly made provision for execution by the company on a separate page from that on which he and three others were required to sign as guarantors. I do not accept that Mr Lee had either of these irrational perceptions. I am satisfied that he has simply invented them to try to reconcile his signature, as guarantor, on the Loan Agreement with his claim that he did not think that the signature would bind him in that capacity.
24. Mr Lee gave many other answers that I found to be untruthful and that contributed to negating his credibility on his central contention that he did not understand he was signing a guarantee. One example of his untruthfulness is that he said he did not feel any urgency for the borrowing from the plaintiff to be completed, because he did not think the Borrower needed the money. In fact, he well knew that the loan from HIFU was either overdue or about to fall due and that he was exposed to HIFU as a guarantor. In oral evidence he denied that he knew the advance from the plaintiff was required, at least in part, to refinance the maturing HIFU loan. I do not accept that denial, which is contrary to what he deposed in par 94 of his affidavit affirmed 29 August 2019.
25. Further, in contradiction of Mr Lee's answers about lack of urgency, he gave evidence that he did not have a chance to read the Loan Agreement to ascertain what character of legal obligations he would assume by signing it, because "Terence Tang said we need to sign this as urgent, because it's for construction costs". He said that he accepted from Terence Tang that it was urgent. His claim that in those circumstances he "didn't have a chance" to read the document cannot be accepted. In any event, given the knowledge of the legal concept of guaranteeing the obligations of a corporate borrower that he had derived from three significant transactions in the preceding 12 months, it was not necessary for him to read the document in order to understand the nature of what he was committing to. The nature of his commitment was sufficiently evident to him from the words "Guarantor sign here" typed under the line on which he placed his signature.
26. Another example of Mr Lee's lack of credibility concerns his signature on each of three declarations and a consent that he signed on 16 March 2017, concerning his execution of the Loan Agreement as guarantor. Those documents were required by the plaintiff's solicitor. Schedule 2 was a statutory declaration to the effect that Mr Lee had received independent legal advice about the Loan Agreement. Parts 1 and 2 of Schedule 4 acknowledged the substance of advice received. Schedule 5 was a consent to having received advice from Allan Wang notwithstanding his conflict of duty, as the solicitor for the Borrower. In relation to all these documents Mr Lee said that the signatures on them look like his but that he did not believe he had signed them. He adhered to that evidence when shown the originals. His signature is highly characteristic and I have no doubt that each document was signed by Mr Lee.
27. I am satisfied that when Mr Lee was asked about these documents in cross-examination he was well aware that he signed each of them. His answers to the contrary were false and intended to distance him from the clear admissions that the documents contained, concerning his awareness that he had signed a personal guarantee of the Borrower's obligations. I do not conclude from the documents that Mr Lee actually did receive legal advice, from Allan Wang or anyone else. Mr Lee knew he was giving a personal guarantee, he knew the essential nature of a guarantee and he did not think he needed legal advice. Allan Wang was overseas on 13 March 2017 when the documents were signed. He left the completion of this $14 million loan transaction in the hands of Ms Yalda Ali, an employed solicitor of less than two years standing, with whom he communicated by "WeChat". He considered his firm's role in the matter as no more than secretarial, "organising the documents". He never read any of the transaction documents. Although he did not advise Mr Lee, who had not retained him, Allan Wang witnessed Mr Lee's signature to false statements that he had received advice from Allan Wang. Allan Wang's approach to every aspect of this transaction was cavalier, to say the least.
28. Two weeks after the hearing, including oral addresses, counsel for Mr Lee delivered to chambers 100 pages of written submissions. He had requested leave to "complete my submissions in writing", which I granted, not expecting anything on this scale. The written submissions argue that the occasion of signing the Loan Agreement was rushed and that Mr Lee had thought it would receive from the Borrower's solicitor an explanation of the documents, which was not forthcoming. He relies upon those matters and many other circumstances, too numerous to list, as a basis for supporting Mr Lee's claim that he did not appreciate that he was signing a personal guarantee. I have considered the points argued but I am satisfied that Mr Lee has not made out this element of his non est factum plea.

Carelessness of Mr Lee and innocence of the plaintiff

1. On the view that I take of Mr Lee's understanding that he was signing a Loan Agreement containing his personal guarantee, no question of failure on his part to take reasonable care to ascertain the effect of the document arises. If, contrary to my view, he did not appreciate that he was signing a guarantee, the circumstances that I have adverted to would amply demonstrate that he was careless, sufficiently to defeat his plea of non est factum.
2. The question of whether the plaintiff was innocent of any misunderstanding by Mr Lee also does not arise. Again, if it did, I would find no basis in the evidence for concluding that the plaintiff was other than entirely innocent. No evidence has been adduced from which it could be inferred that the plaintiff, acting reasonably, ought to have realised at the time of advancing the funds that Mr Lee may have executed the Loan Agreement in ignorance of the guarantee provisions to which he was thereby assenting. Mr Lee's counsel made the submission in writing that there were circumstances from which it should be inferred: that the plaintiff, through its solicitors, was aware that where a guarantor is not legally advised, there is a risk of some vitiating element affecting the transaction, such as that he or she may not bring a consenting mind to the transaction, particularly where the person is participating in another capacity.
3. That submission is unacceptable at a number of levels. I find no circumstances from which to draw an inference that the plaintiff's solicitors must have known that Mr Lee had not received legal advice about the transaction. Even if they did draw such a conclusion, that of itself would not indicate a "risk of some vitiating element". Further, the "risk of some vitiating element" does not equate to a lack of innocence, in the sense relevant for the defence of non est factum. The necessary lack of innocence must be with respect to a radical misunderstanding on the part of the guarantor concerning the document signed. Finally, Mr Lee was not "participating in another capacity" so far as execution of the Loan Agreement was concerned. As mentioned already, he was a signatory only as guarantor, not as a director of the Borrower.
4. The written submissions of Mr Lee's counsel are replete with criticisms: of the Borrower's solicitors for not having advised Mr Lee about his personal position in the transactions; of the plaintiff's solicitors for having completed the advance without first receiving the schedules concerning legal advice (referred to at [46] above); of Allan Wang for not having informed Mr Lee of a conflict of duty and for not having referred him to an independent legal advisor and of Mr Tang for having required the transaction documents to be executed on 13 March 2017. None of those criticisms is of any significance in circumstances where, as I have found, Mr Lee knew that he was signing a personal guarantee and understood the legal implications of it. If it were necessary to consider whether Mr Lee has proved that he was not careless of his own interests, he would fail on that element and the shortcomings of others would not absolve him of his lack of reasonable care for his own interests.
5. In the 100 pages of submissions Mr Lee's counsel has argued at length that the plaintiff cannot resist the plea of non est factum unless it can show that it relied upon Mr Lee's signature. I reject that as a matter of law. Mr Lee bears the onus of establishing the defence. In order to defeat it a creditor in the position of the plaintiff does not have to prove that it relied upon the guarantor's signature, as if its action on the guarantee were one based upon a representation. In the relevant sense, the plaintiff relies upon the signature by commencing this proceeding. Counsel's submissions refer to the fact that the plaintiff's solicitors required neither documentation to verify the identity of the signatories nor schedules concerning legal advice until after the funds had been advanced. This is said to show that the plaintiff did not, at the time of permitting the loan to be drawn down, rely upon Mr Lee's signature as guarantor. In my view the matters referred to do not support that inference. In any event, counsel's exhaustive analysis of evidence said to prove non-reliance is misconceived and irrelevant to the law concerning non est factum. The defence fails.

The second defendant's reliance upon the Contracts Review Act

1. Section 6(2) of the Contracts Review Act provides as follows: 6 Certain restrictions on grant of relief (2) A person may not be granted relief under this Act in relation to a contract so far as the contract was entered into in the course of or for the purpose of a trade, business or profession carried on by the person or proposed to be carried on by the person, other than a farming undertaking (including, but not limited to, an agricultural, pastoral, horticultural, orcharding or viticultural undertaking) carried on by the person or proposed to be carried on by the person wholly or principally in New South Wales.
2. It is established that where a business is conducted by a corporate entity, a shareholder or other person interested in the affairs of the corporation is not to be regarded as carrying on the business, and is not therefore to be denied reliance upon the Contracts Review Act by force of s 6(2): Toscano v Holland Securities Pty Ltd [1985] 1 NSWLR 145; Brighton v Australia and New Zealand Banking Group Ltd [2011] NSWCA 152; Quikfund (Australia) Pty Limited v Airmark Consolidators Pty Limited [2014] FCAFC 70. Accordingly, Mr Lee is able to invoke the provisions of the Act.
3. Mr Lee's claim for relief in this respect depends upon whether the Court should find that the guarantee provision of the Loan Agreement was "unjust in the circumstances relating to the contract at the time it was made". In making a determination on that issue the Court must have regard to s 9, as follows: 9 Matters to be considered by Court (1) In determining whether a contract or a provision of a contract is unjust in the circumstances relating to the contract at the time it was made, the Court shall have regard to the public interest and to all the circumstances of the case, including such consequences or results as those arising in the event of - (a) compliance with any or all of the provisions of the contract, or (b) non-compliance with, or contravention of, any or all of the provisions of the contract. (2) Without in any way affecting the generality of subsection (1), the matters to which the Court shall have regard shall, to the extent that they are relevant to the circumstances, include the following - (a) whether or not there was any material inequality in bargaining power between the parties to the contract, (b) whether or not prior to or at the time the contract was made its provisions were the subject of negotiation, (c) whether or not it was reasonably practicable for the party seeking relief under this Act to negotiate for the alteration of or to reject any of the provisions of the contract, (d) whether or not any provisions of the contract impose conditions which are unreasonably difficult to comply with or not reasonably necessary for the protection of the legitimate interests of any party to the contract, (e) whether or not - (i) any party to the contract (other than a corporation) was not reasonably able to protect his or her interests, or (ii) any person who represented any of the parties to the contract was not reasonably able to protect the interests of any party whom he or she represented, because of his or her age or the state of his or her physical or mental capacity, (f) the relative economic circumstances, educational background and literacy of - (i) the parties to the contract (other than a corporation), and (ii) any person who represented any of the parties to the contract, (g) where the contract is wholly or partly in writing, the physical form of the contract, and the intelligibility of the language in which it is expressed, (h) whether or not and when independent legal or other expert advice was obtained by the party seeking relief under this Act, (i) the extent (if any) to which the provisions of the contract and their legal and practical effect were accurately explained by any person to the party seeking relief under this Act, and whether or not that party understood the provisions and their effect, (j) whether any undue influence, unfair pressure or unfair tactics were exerted on or used against the party seeking relief under this Act - (i) by any other party to the contract, (ii) by any person acting or appearing or purporting to act for or on behalf of any other party to the contract, or (iii) by any person to the knowledge (at the time the contract was made) of any other party to the contract or of any person acting or appearing or purporting to act for or on behalf of any other party to the contract, (k) the conduct of the parties to the proceedings in relation to similar contracts or courses of dealing to which any of them has been a party, and (l) the commercial or other setting, purpose and effect of the contract. (3) For the purposes of subsection (2), a person shall be deemed to have represented a party to a contract if the person represented the party, or assisted the party to a significant degree, in negotiations prior to or at the time the contract was made. (4) In determining whether a contract or a provision of a contract is unjust, the Court shall not have regard to any injustice arising from circumstances that were not reasonably foreseeable at the time the contract was made. (5) In determining whether it is just to grant relief in respect of a contract or a provision of a contract that is found to be unjust, the Court may have regard to the conduct of the parties to the proceedings in relation to the performance of the contract since it was made.
4. In final submissions Mr Lee relied upon pars (a)-(d) and (f)-(j) of subs (2). There is no evidence that would support findings in favour of him under pars (a)-(c). He claimed not to have known that he was entering into a guarantee and therefore he adduced no evidence about any disadvantage he may have been under in trying to negotiate the terms of a guarantee, or which if any terms he would have sought to change, or whether the plaintiff was willing to negotiate. His submissions suggest only that he might have sought to be excused from signing the guarantee altogether. No evidence has been adduced of what attitude might have been taken to that by the plaintiff but there was no unfairness to Mr Lee associated with him not having requested that his guarantee be dispensed with. He did not ask for that and I have rejected the only explanation that he has proffered for not having asked: I have found that he was aware that he was signing a guarantee and he knew what the legal effect of that would be.
5. Under par (d) it is argued that Mr Lee has negligible assets, as his unchallenged evidence appeared to establish, and that the guarantee is therefore of no utility to the plaintiff. The lack of value of the guarantee to the plaintiff arising from the fact that Mr Lee is a man of no financial substance does not render it unfair, as might be the case with a clause that would set up a guarantor to fail and thereby to incur substantial liabilities and lose significant assets. Mr Lee's argument that the plaintiff had nothing to gain by this guarantee is based on the premise that he had nothing to lose by it. This does not give rise to any relevant unfairness.
6. With respect to par (f), Mr Lee's educational background and literacy were not such as to put him at any disadvantage in this commercial dealing. He was competent to understand the transaction he was entering into and he was experienced with respect to similar transactions. There was no language difficulty as Mr Lee could read and speak English, the language in which the legal documents were composed, as well as the Chinese dialect in which all parties to the transaction and all lawyers, apart from Ms Ali, were apparently fluent.
7. Under pars (g)-(i) it is argued on Mr Lee's behalf that the length and complexity of the Loan Agreement was such that fairness required that the personal guarantee be brought to his attention and that he have legal advice about it. I reject that submission. All that Mr Lee needed to know about the transaction was that it did contain a personal guarantee and the essential legal obligations associated with that concept. I have found that he had that level of understanding. I do not accept that he would have gained anything from receiving legal advice, with respect to his decision whether or not to sign, because he already understood the nature of what he was committing to as a guarantor. There was nothing unfair, as between himself and the plaintiff, about him not consulting a lawyer. From past experience he knew that independent legal advice could be obtained and it was no fault of the plaintiff that he failed to seek it. By signing the schedules referred to earlier in these reasons, he misled the plaintiff to the effect that he had obtained legal advice, albeit after the transaction was concluded.
8. With respect to par (j) Mr Lee submits that he was placed under unfair time pressure by another party to the contract, namely, Terence Tang. The evidence shows that he did not see the Loan Agreement and other documents that he was required to sign until he attended at the office of KWL Lawyers on the afternoon of 13 March 2017, at which time the principal solicitor for the borrower, Allan Wang, was absent overseas. Mr Lee said that he was then asked by Terence Tang to sign forthwith without opportunity to seek legal advice. That did not give rise to any unfairness because the only complaint Mr Lee has ever made about signing under those circumstances is that he did not know he was committing to a personal guarantee - not that he missed some detail of the obligations that the principal debtor was assuming or some fine point about the way in which the personal guarantee would operate. Having found that his principal complaint is false and that he did indeed know that he was signing as a guarantor, the circumstances of signing did not give rise to unfairness.
9. I reject Mr Lee's claim for relief under the Contracts Review Act.

The second defendant's case re the side letter for pre-drawdown interest

1. On 14 March 2017 the plaintiff's solicitors sent by email to the Borrower's solicitors a letter in the following terms: We understand the Borrower has previously been made aware that our client's funds are located overseas and not in Australian currency. In order to facilitate the proposed drawdown of the loan and the borrower's urgent need for funds, our client has been asked to convert its funds into Australian Dollars and make it [sic] available in Australia for anticipated drawdown tomorrow. We are instructed that our client has consented to this request on the basis that interest under the Facility will start to accrue (having the same effect as an utilisation), as and when funds under the Facility are transferred to Australia, in Australian Dollars. We have now received confirmation that the Lender has transferred the entire Facility amount to our trust account in Australian Dollars and in two tranches, one in the sum of $6,650,000 was transferred on 10 March 2017 ("Tranche One") and another one in the sum of $7,350,000 was transferred on 13 March 2017 ("Tranche Two"). Please confirm by return correspondence that the Borrower acknowledges and consents that the interest against Tranche One and Tranche Two will start to accrue from 10 March and 13 March 2017 respectively.
2. This was passed on by Ms Yalda Ali to Terence Tang. On the same day he replied to her and to the plaintiff's solicitor, with the following message: We confirm on the interest accrual date matter as per Attached.
3. Mr Lee submits that this "side letter agreement", as counsel described it, between the plaintiff and the Borrower has the effect of discharging his liability under the Guarantor Covenants in the Loan Agreement, by application of the principle stated by the High Court in Ankar Pty Ltd v National Westminster Finance (Australia) Ltd. The following extracts from the judgment of Mason ACJ, Wilson, Brennan and Dawson JJ in that case identify the principle upon which Mr Lee relies: [16] Then it has been said that any departure by the creditor from the suretyship contract "which is not obviously and without inquiry quite unsubstantial, will discharge the surety from liability, whether it injures him or not, for it constitutes an alteration in the surety's obligations" (Halsbury's Laws of England, 4th ed, vol 20 par 259). The final clause in the passage quoted from Halsbury indicates that this proposition is founded not so much on cases dealing with a breach of a term in the suretyship contract, as on cases in which conduct on the part of the creditor materially altered the surety's obligations. Such an alteration takes place when the creditor agrees to a variation of the principal contract or to an extension of time within which the debtor may comply with that contract. The creditor's agreement with the debtor thereby alters the nature of the surety's obligations without the surety's consent. […] [18] […] According to the English cases, the principle applies so as to discharge the surety when conduct on the part of the creditor has the effect of altering the surety's rights, unless the alteration is unsubstantial and not prejudicial to the surety. The rule does not permit the courts to inquire into the effect of the alteration. The consequence is that, to hold the surety to its bargain, the creditor must show that the nature of the alteration can be beneficial to the surety only or that by its nature it cannot in any circumstances increase the surety's risk, e.g., a reduction in the debtor's debt or in the interest payable by the surety. The mere possibility of detriment is enough to bring about the discharge of the surety. [19] The foundation of the rule is that the creditor, by varying the principal contract or extending time, has altered the surety's rights without consulting it though the surety has an interest in the principal contract, and that the creditor cannot be permitted to do: [citation omitted]. Thus the liability of the surety was seen to be strictissimi juris and the suretyship contract was construed strictly in his favour.
4. It is necessary to note the obligations of Mr Lee under the Guarantor Covenants in the Loan Agreement and then to determine, by reference to those Covenants, whether the side letter agreement "materially altered the surety's obligations". So far as relevant for present purposes the Guarantor Covenants are as follows (with emphasis added): 10.2 Guarantor Covenants (a) In consideration of the Lender entering into this document, each Guarantor: (i) guarantees to the Lender (as a principal obligation under this document) that the payment on the terms of this document of the Money Owing up to a maximum of the Guaranteed Amount and the punctual performance of any of the Borrower's obligations under this document; (ii) indemnifies the Lender against any liability, loss, damage, expense or claim incurred by the Investors arising directly or indirectly from any breach by the Borrower of this document; and (iii) covenants with the Lender to enter into the Call Option Deed simultaneously with the execution of this document; and (iv) consents that the Lender may lodge a caveat against the Guarantor's interest in the Land upon occurrence of an Event of Default or a Potential Event of Default. (b) This guarantee and indemnity is a principal obligation of the Guarantor and is not collateral to any other obligation. (c) The liabilities of a Guarantor are not affected by: (i) the granting to the Borrower or to any other person of any time, waiver, indulgence, consideration or concession or the discharge or release of the Borrower; (ii) the death, bankruptcy or liquidation of the Borrower, the guarantor or any one of them; (iii) and (iv) [circumstances relating to the "Investors", a term not defined in the Loan agreement, not presently relevant]; (v) the Lender obtaining a judgment against the Borrower, the Guarantor or any other person for the payment of monies payable under this document. (d) [not presently relevant]. (e) This guarantee and indemnity: (i) is of a continuing nature and will remain in effect until final discharge of the guarantee or indemnity is given by the Investors to the Guarantor; (ii) may not be considered wholly or partly discharged by the payment of the whole or any part of the amount owed by the Borrower to the Lender; and (iii) extends to the entire amount that is now owed or that may become owing at any time in the future to the Lender by the Borrower including any interest, costs or charges payable by the Lender under this document. (f), (g) and (h) [not presently relevant].
5. The expression "Money Owing" in cl 10.2(a)(i) is defined in cl 1.1 as follows: Money Owing means on any day the aggregate of all money owing or payable by the Borrower to the Lender under this document for any reason whatsoever including the Outstanding Loan and interest.
6. The words highlighted in bold in the above provisions of the Loan Agreement show that Mr Lee's liability as one of the Guarantors is limited to amounts payable by the Borrower under the Agreement. Nothing in the document gives rise to any liability of the Guarantors for any amount that may be payable by the Borrower under the side letter agreement or under any other agreement. Consequently, the side letter agreement had and has no impact whatever upon Mr Lee's obligations as a guarantor. The side letter agreement does not engage the principle in Ankar Pty Ltd v National Westminster Finance (Australia) Ltd.
7. The principle is not applicable for the further reason that it is only concerned with departures by a creditor from a suretyship contract, that occur after the suretyship contract has been made. If a change to the legal relations between the principal creditor and the principal debtor is made after the guarantee agreement has been entered into, that may attract the operation of the principle in Ankar Pty Ltd v National Westminster Finance (Australia) Ltd if the change brings about a consequent alteration to the guarantor's obligations without the guarantor's consent. Where, as in the present case, an additional agreement was made between the principal creditor and principal debtor prior to the guarantee being executed, the situation is not governed by the High Court's decision. Such a situation may give rise to questions of notice to the guarantor, questions of whether the guarantor may have been induced to enter into the guarantee by material nondisclosure and/or questions of construction as to what obligations of the principal debtor are the subject of the surety. No such questions have been agitated in this case.
8. I reject Mr Lee's defence based upon Ankar Pty Ltd v National Westminster Finance (Australia) Ltd. He is liable for the amount claimed by the plaintiff and judgment will be entered against him accordingly.

Forgery of the 11th defendant's execution of the Fifth Guarantee

1. Rong Chen affirmed an affidavit on 1 September 2019 in which she deposed that prior to the commencement of these proceedings she had never seen the Fifth Guarantee that purports to bear her signature as director of Arise Group Pty Ltd, the 11th defendant. She denies that she signed the document. On the basis of my own handwriting comparison, I am not satisfied on the balance of probabilities that she did. Her signature does not purport to be witnessed and no witness was called to say that he or she was present to see Ms Chen sign.
2. There are before the Court numerous documents bearing examples of Ms Chen's signature, placed in circumstances that do not admit of any question as to their authenticity. There are six examples of her signature on the affidavit of 1 September 2019, witnessed by a solicitor. There is a further example on her Provisional Driver Licence issued 7 February 2017 (Ex AR3). Another authentic signature appears on an affidavit, affirmed 21 February 2023 (Ex C) and yet another is on an affidavit verifying the 11th defendant's amended defence dated 12 May 2020. It is open to the Court to compare the questioned signature with the genuine examples: Singh v De Castro [2017] NSWCA 241 at [65].
3. A copy image of the questioned signature on the Fifth Guarantee appears below to the left and a copy of one of the authentic signatures, taken from an affidavit, appears below to the right. The sample signature to the right exhibits features, to be described shortly, that appear with a high degree of consistency in the authentic signatures.
5. Ms Chen's primary writing skill is in Chinese characters and her cursive signature in English is undoubtedly variable. It is common knowledge that most people's signatures exhibit variations. Nevertheless, Ms Chen's authentic signatures incorporate certain recurring character forms. The following differences between the questioned signature and the authentic samples are significant: 1. In the questioned signature, the vertical element of the capital "R" is made with a single stroke, not connected to the loop at the top of the letter nor to the lower diagonal element. In the authentic signatures, the vertical element is made with a downstroke retraced upwards and continuing into the loop and then into the lower diagonal. 2. In the questioned signature the lowercase "o" is notably circular and it is distinct from the next letter, "n". In all but one of the authentic signatures there is no distinct circular character representing an "o", rather, there is a cursive lowercase "u" formation that appears to represent both "o" and "n". The one exception is the signature on Ms Chen's provisional driver licence. 3. In the questioned signature the "n" of "Rong" concludes with a slight upward tick and the lowercase "g" is formed with a distinctly circular top component joined on the right by a downward vertical that terminates at the end of the Christian name. In all the authentic signatures, the lowercase "g" is formed quite differently, the upper element being made with a counter-clockwise stroke that begins with the continuation from the preceding "o-n" combination. Further, the vertical element of the "g" is not located on the right-hand side of the upper, circular element but commences from the left-hand side. Finally, that vertical element of the "g" in the authentic signatures does not terminate after descending "below the line" but connects, by a continuation of the pen stroke, to the top of the uppercase "C" of "Chen". 4. In the questioned signature the uppercase "C" of "Chen" commences with a fresh contact of the pen to the page and the "C" is formed solely by a counter-clockwise motion. In all of the sample signatures there is a continuous, uninterrupted pen stroke from the bottom of the lowercase "g", which merges into formation of the uppercase "C", through a reverse loop without the pen leaving the page. 5. In the questioned signature the formation of the "h" in "Chen" commences with a reverse loop whereas in all sample authentic signatures it commences with an overhand inverted "u" or "v" shape.
6. There are other reasonably consistent features of the authentic sample signatures that are not present in the questioned signature, tending to confirm my conclusion that the questioned signature is not genuine. The points of comparison listed above are sufficient to leave me unsatisfied, on the balance of probabilities, that the signature on the Fifth Guarantee is authentic. Indeed, I am affirmatively satisfied that the questioned signature is a forgery.
7. I have taken into account the statutory declaration made by Ms Chen on 26 May 2017, referred to further below. That on its face is an admission that the Fifth Guarantee was validly executed. For reasons to be explained, although I accept that Ms Chen signed the declaration I do not consider it to have any weight as an admission against her interest or against the interest of the 11th defendant because I am not satisfied that she understood the content of the declaration.

Rong Chen's statutory declaration - ratification

1. On 9 May 2017 Terence Tang sent an email to the plaintiff's solicitors requesting "temporary removal" of the registration of a security that had been given by the 11th defendant in respect of its liabilities as guarantor of the Borrower's obligations under the Loan Agreement. The security had been registered under the Personal Property Securities Act 2009 (Cth). Terence Tang wrote in his email that the temporary removal was required "due to internal restructuring of the trust" and that registration would be reinstated after 60 days. The plaintiff's solicitors replied on 19 May 2017 that registration of the security would be discharged upon satisfaction of certain conditions, one of which was that Ms Rong Chen should make a statutory declaration in the terms of a draft that was provided with the solicitors' reply.
2. The declaration required by the plaintiff's solicitors was as follows: I, Rong Chen, of […], do solemnly and sincerely declare that: 1 I am the sole director and secretary of Arise Group Pty Ltd […] ("Company") which acts as the only trustee for Arise Group Trust […]. 2 I make this declaration: (a) on my own account; and (b) to the best of my knowledge and belief as to the state of affairs of the Trust and having reviewed the relevant books and records of the assets of the Trust. No encumbrance over the Interests in the Units of the Trust 3 I acknowledge that the Company requested [the plaintiff] which is the beneficiary ("Beneficiary") under the Deed of Guarantee and Indemnity signed between the Beneficiary and the Company acting as trustee for the Trust ("Guarantor") to discharge the Personal Property Securities Registration with [number specified]. 4 I will not cause the Guarantor to grant any security interest over the rights and interest in the units of the Gondon HLHS Trust […] held by the Guarantor notwithstanding the removal of the registration. Financial Standing 5 The Trust is not insolvent or [sic] is approaching insolvency. 6 I am aware of [sic] the Guarantor's financial obligations under the Deed of Guarantee and Indemnity […] are continuing.
3. The plaintiff relies upon a statutory declaration in the above terms, bearing a signature in the name Rong Chen and dated 26 May 2017. The declaration also bears the signature of Ms Nyrie Waite, a Justice of the Peace who was in May 2017 employed by the Willoughby City Council at the Council Chambers in Chatswood. Ms Chen gave evidence that she did not sign the declaration and that she has never signed a document before a Justice of the Peace at the Willoughby Council Chambers. I reject her evidence in that respect and I accept the evidence of Ms Waite, who was also called in the trial. Ms Waite identified her signature, as witness, on the declaration. She had also written on it her Justice of the Peace number and a notation that she had confirmed the declarant's identity from a NSW Provisional Driver Licence.
4. Ms Waite did not specify on the declaration the number of Ms Chen's provisional licence, or retain a copy of it. However, a copy of the only Provisional Driver Licence that has ever been issued to Ms Chen is in evidence (Ex AR3). She does not dispute that that is her provisional licence. The photograph on it is a good likeness of Ms Chen, based upon my observation of her in the witness box. The provisional licence expired on 7 February 2017 but there is no reason why it should not have been used by Ms Chen for identification on 26 May 2017. Records subpoenaed from Roads and Maritime Services show that the date of issue to her of a full licence was 27 October 2017 and Ms Chen agreed in cross-examination that that is the first full licence she has held. I am satisfied that the provisional driver licence in Ex AR3 was presented to Ms Waite to confirm the identity of the declarant. It is improbable in the extreme that there would have existed any other provisional licence, bearing the name Rong Chen and a photograph that would have appeared to Ms Waite as an authentic image of Ms Chen.
5. Ms Waite's job description at the Council was Customer Service Officer. She had been a Justice of the Peace for one or two years prior to May 2017. Witnessing formal documents, including statutory declarations, was an aspect of the role that she performed multiple times each day. Ms Waite continued as Customer Service Officer with the Council until 2021. She had witnessed hundreds of documents by May 2017 and many more up until her departure from the Council. Understandably, she was not able to recall the occasion of this declaration being made.
6. When witnessing statutory declarations Ms Waite had a procedure card before her upon which were listed the steps required to be taken. It was her practice to follow those steps. Having first examined photographic identification to verify the declarant's identity, she would proceed as follows: Q So what is the second step that you would perform in the swearing of the statutory declaration? A Ask the declarant if they wrote the document and ensure that they understand what the document is all about. Q Sure. And if the declarants' first language, for example, wasn't English - if it was clear that it was the declarants' second language - what would you do? A They would have to assure me that they understood everything that I said. Q Sure. And how would you assure yourself of that? A I would ask them if they understand what I'm saying. Q Understood. If you felt that for whatever reason that they did not understand you, what would you do? A Refuse to sign the declaration.
7. I accept that the above steps were taken in relation to the subject declaration. For the declarant's signature not to have been placed by Ms Chen, either some other person would have to have attended before Ms Waite with photo identification in the name of Rong Chen and exhibiting an appearance that would match the photograph, or some other person would have to have forged Ms Chen's signature on the document and also forged Ms Waite's signature. That person would also have to have known Ms Waite's Justice of the Peace number and written it in. These alternative possibilities are far-fetched. The balance of probabilities is strongly towards Ms Chen having made the declaration and I find that she did.
8. However, I am not satisfied that Ms Chen knew what the declaration said or that she understood its meaning. She has some capacity to understand written English but there is no evidence that she has, or had in May 2017, any business experience or legal training or understanding. In particular, the evidence does not satisfy me that Ms Chen could have understood the substance of the declaration without first having it translated into Mandarin, the language in which her evidence was given through an interpreter, and then having the legal and commercial concepts explained to her.
9. Ms Waite's evidence did not suggest that she went beyond asking Ms Chen general questions, which I infer would have been to the effect, "Did you write the document? Do you understand it?". It would not be expected that a Justice of the Peace should or could have gone any further to verify the declarant's understanding. Ms Waite would have needed some level of legal and/or commercial understanding herself in order to have formulated more specific and testing questions. She did not claim to have such knowledge or to have enquired beyond obtaining affirmative answers from the declarant to general questions about the content of the document. Ms Waite said that she spent approximately five minutes witnessing each statutory declaration that was brought before her at the Council.
10. The plaintiff argues that the declaration of 26 May 2017 constitutes ratification by Arise Group Pty Ltd, through Ms Chen as its sole director, of the Fifth Guarantee. Although I am satisfied that Ms Chen signed the declaration, in the absence of proof on the balance of probabilities that she understood its contents I am not satisfied that it operated as ratification, to bind the 11th defendant to the terms of the Fifth Guarantee, which had not prior to that been validly executed on behalf of the company. I am not satisfied that at the time of signing the declaration Ms Chen had sufficient knowledge of the substance of the Fifth Guarantee for her act of signing the declaration to have constituted ratification of that Guarantee on behalf the company.

Rong Chen's statutory declaration - estoppel

1. In the alternative, the plaintiff submits that the 11th defendant is estopped from denying that the Fifth Guarantee is binding upon it, because Ms Chen's statutory declaration constituted a representation that the company was bound and, on the faith of that representation, the plaintiff altered its position to its detriment by discharging the registration of the personal property security over the 11th defendant's assets. I reject that argument because the discharge of registration was not a detrimental alteration of the plaintiff's position. The security was insupportable and its registration was amenable to discharge upon the application of the plaintiff at any time, because the 11th defendant had not executed the Fifth Guarantee. The signature of its sole director on that document was a forgery, as I have found. The 11th defendant had therefore never assumed liability to the plaintiff as a guarantor of the Borrower's obligations. The security, registered or otherwise, purported to secure a non-existent contingent liability and was valueless.

The Fifth Guarantee as a deed and the question of delivery

1. In view of the above findings, it is unnecessary to determine the 11th defendant's contention that the Fifth Guarantee is unenforceable against it for want of consideration. It is unnecessary to consider the plaintiff's counter argument that the Fifth Guarantee operated as a deed and was delivered as such, by or on behalf of the 11th defendant to the plaintiff, so that it would be enforceable irrespective of consideration from the plaintiff.

Orders

1. For the purposes of quantifying the sum for which the plaintiff is entitled to judgment against the second defendant, simple interest is calculated on the amount that the parties agreed was due at the commencement of the hearing on 16 February 2023 ($16,579,034.50). Interest at the pre-judgment rate of 7.1% per annum for 49 days up to the date of this judgment is $158,023.18.
2. For the above reasons, orders will be entered as follows: 1. Judgment for the plaintiff against the second defendant in the sum of $16,737,057.68 inclusive of interest up to judgment. 2. The second defendant is to pay the plaintiff's costs of the proceedings against him. 3. The plaintiff's claim against the 11th defendant is dismissed with costs.

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: 06 April 2023