He v Yeung

Background

1. The parties had known each other for many years. It is not in issue that in April 2004 the respondent agreed to provide a loan to assist the applicant in purchasing a residential property. The first advance of $83,800 was made in April 2004 to assist with the deposit. The second amount of $120,000 was advanced on 3 June 2004. It is also not in issue that this loan was for a period of 6 months.
2. In August 2005 the respondent advanced further loans to the applicant and her husband. It was agreed that as at that date the amount outstanding under the first loan was $143,495.67. The respondent agreed to loan an additional amount of $36,504.33 bringing the amount of the loan up to $180,000. The additional amount was to be provided as $6,000 in cash and the balance of $30,504.33 by way of bank cheque.
3. The parties documented their agreement on 18 August 2005. That document was in the following terms: This is an agreement from Simon Yeung loan to Qin-He & David Zhang. Details: Loan amount $180,000.00 start from 13/08/2005. Return the loan in whole $180,000.00 plus interest at 13/02/2006. Interest 10% per annum calculated every three months that is $4,500/quarter. Personal guaranty by Qin-He and David Zhang. New address: xxx Ashfield. Old address: xxx Strathfield. No penalty on early repayment, but penalty on late repayment if not settle on or before 13/02/2006. Interest will raise to 20% per annum. [signed by the respondent, applicant and Mr Zhang and witnessed by the respondent's son] Note: this new agreement instead all old agreement. Acknowledge to receive: Last loan 143495.57 Bank Cheque 30504.33 Cash 6000.00 Total $180,000 [signed by Mr Zhang]
4. There was no issue that an amount of $62,500 was repaid to the respondent on 6 November 2006. By 24 December 2006, taking into account interest on the loan from 18 August 2005 (claimed to be $22,241) and the $62,500 repayment, the amount outstanding was $139,741. That figure was rounded to $140,000.
5. On 24 December 2006 the applicant (alone) entered into an agreement with the respondent in respect of the outstanding loan amount of $140,000. The applicant granted the respondent a second unregistered mortgage over the Property and consented to the respondent registering a Caveat on the title of the Property.
6. The mortgage was dated 24 December 2006. It was signed by the applicant (as mortgagor) and the respondent (as mortgagee) and their signatures were witnessed by Peter Duncan, a friend of the respondent's solicitor, David Leamey. The mortgage recorded that the applicant mortgaged her estate and interest in the Property and covenanted with the respondent in accordance with annexure "A" to the mortgage. That annexure was dated 24 December 2006 and provided as follows: 1. This mortgage is to secure all of the loan obligations of Qin He & David Zhang to Simon Yeung including the loan of $140,000 receipt of which is hereby acknowledged which is to be repaid in full on or before the 23rd December 2007. 2. The interest payable on the loan is the 10% per annum fixed on the balance advanced. 3. In the event that the loan hereby secured is not repaid in full on or before the 23rd December 2007 then Simon Yeung may issue a section 55(2)(b) (sic) notice under the Real Property Act & Simon Yeung may then sell the property, if necessary Simon Yeung may seek an Order for possession of the property to enable it to be sold. 4. The sale of the property is to be way of auction sale with a Real Estate Agent licensed in the Sydney metropolitan area, there shall be an advertising period of at least 4 weeks. 5. Any surplus from the sale of the property after deducting the loan principal, interest outstanding, legal costs & fees, Real Estate Agent's fees & advertising costs. Land Tax, Council rates & water rates & the like, shall be paid to Qin He.
7. The applicant also signed a document entitled "Declaration of Purpose". It was dated 24 December 2006 and was in the following terms: I Qin HE declare that the loan in the sum of $140,000 from Simon Yeung is for business & investment purposes.
8. The applicant's husband signed a document in the following terms: I David Zhang request Simon Yeung to advance the sum of $140,000 to my wife Qin HE pursuant to the Mortgage, loan & Caveat signed this 24th December 2006.
9. The Caveat registered on 28 December 2006 recorded the nature of the estate or interest in the land as being "Pursuant to Loan in the sum of $140,000 and to a mortgage by Qin He". The nature of the instrument was recorded as a mortgage dated 24 December 2006, the parties to which were recorded as the applicant and the respondent. The facts stated in the Caveat were "loan by Simon Yeung to Qin He and David Zhang". The statutory declaration was made by the respondent on 27 December 2006. Section L of the Caveat, the "Consent of the Registered Proprietor", was signed by the applicant.
10. The applicant made no further repayments despite a number of written demands, including on 1 July 2010, 12 May 2012 and 7 September 2012.
11. On 29 June 2013 a meeting was held at the offices of McKenzie Leamey, solicitors, between Mr Leamey (representing the respondent), the respondent, the applicant and Mr Zhang. It was not in issue that at this meeting the prospect of refinancing was discussed.
12. On 3 July 2013 Mr Leamey wrote to the applicant in terms that included the following: [The respondent] is not prepared to withdraw the caveat before settlement for the refinance. We will attend the settlement & handover in exchange for the part payment of the debt & then lodge a fresh caveat after settlement. Effectively we will be consenting to the discharge of the current mortgagee & the registration of a mortgage in priority to [the respondent's] second mortgage. We could take the opportunity to enter into a deed of priority with the incoming mortgagee. However you have advised that such course is not acceptable to you. In the circumstances & given that no payments have been made on the loan since it was drawn on 24th December 2006 and that it is well & truly overdue, I am instructed to commence proceedings in the Supreme Court of New South Wales for Orders seeking: ● Possession of the property; ● The appointment of a Receiver to sell the property; and ● Costs We enclose a section 57(2)(b) notice & a Notice of default under the Conveyancing Act. We shall provide copies to Westpac, the first mortgagee & join them in the proceedings. To avoid the commencement of proceedings we demand that you repay the balance owing within one month of service of this demand on you. Alternatively you can voluntarily enter into an agreement for the sale of the property and the repayment of both mortgages, thus saving you costs.
13. On 25 September 2013 the applicant and Mr Zhang wrote to the respondent in terms that included the following: We state and order you as following: 1. We do not owe you any money. 2. Your Appointment of a Receiver must be cancelled by you. We will sue you if any damages and losses occur. 3. The caveat which you lodged on my property must be lapsed immediately. Otherwise we will sue you if any damages and losses occur.
14. On 13 October 2013 Mr Leamey wrote to the applicant in response to her letter of 25 September 2013 to the respondent. That letter included the following: If you claim that the funds borrowed on 24th December 2006 were repaid, then please advise to whom they were repaid & when & provide a copy of the receipt for payment.
15. On 23 October 2013 the applicant and her husband responded to the letter of 13 October 2013 in terms that included the following: In your letter you said "If you claim that the funds borrowed on 24th December 2006 were repaid, then please advise to whom they were repaid & when & provide a copy of the receipt for payment". We tell you clearly that we did not receive any fund on 24th December 2006. If you have any documents which can approve the fund be borrowed on 24th December 2006, please send us a copy of the original documents such as [the respondent's] personal cheque, bank cheque or bank statement. To YOUR DEFAULT NOTICE We never had entered into any mortgage contract with [the respondent] in our record. You mentioned the mortgage dated 24th December 2006 in your default notice, please send us a copy of the original mortgage contract. You must offer us the copy of the mortgage contract and the copy of document, which you claim the funds borrowed on 24th December 2006 within 14 days. Otherwise it means that the mortgage and the funds never exist. We will refuse to respond any your letter in the future, we will take legal action against you if you continue to do that. Once again we order that [the respondent] must withdraw the caveat immediately, he have no any interest on the land, and proceeding will be commenced without any further notice to you.
16. On 14 November 2013 a lapsing notice was issued and was received by the respondent on approximately 15 November 2013.
17. On 24 November 2013 Mr Leamey wrote to the applicant advising that he was instructed to apply for an order that the Caveat be extended. That letter included the following: In accordance with Practice Note 8 of the Equity Division of the Supreme Court we are required to try to settle the urgent aspect of this matter. We purpose that the caveat remain in force. If it is the case that the property is to be sold then [the respondent] would provide a withdrawal of caveat at settlement upon the basis that the surplus after repaying Westpac is paid into a Solicitors Trust Account up to the amount of $270,754 plus 6 months interest of say $11,000 plus an allowance for costs of $20,000, making a total of $301,754, you could take the surplus over & above that. We would then litigate the claim in the Court and be subject to the determination of the Court as to who is to receive the funds held in trust.

Proceedings commenced

1. The respondent commenced proceedings by Statement of Claim filed on 25 November 2013. The applicant filed a Defence on 3 December 2013. The respondent filed a Reply on 2 January 2014. The applicant filed an Amended Defence dated 17 March 2014. The respondent filed a Reply to the Amended Defence on 26 March 2014.
2. The respondent claimed a money sum based on the loan at $140,000 plus interest. There was also a claim for possession of the Property and an order for sale.
3. There were many disparate claims made by the applicant that are unnecessary to refer to on this application. The applicant accepted that in August 2005 the loan was for $180,000 made up of the balance of the first loan of $143,495.67 and an additional loan of $36,504.33. The applicant also accepted that the additional loan was to be made up of $6,000 cash, about which there was no issue, and a bank cheque for $30,504.33. The applicant claimed that neither she nor her husband received the bank cheque.

The hearing

1. At the hearing before Young AJ on 18 September 2014 Mr PM Barham, of counsel, appeared for the respondent and the applicant appeared in person. However Mr Zhang was permitted to speak on the applicant's behalf. After discussion with Mr Barham about the difficulties in the respondent's case for an order for possession, the primary judge made clear to the applicant that the respondent was only seeking a judgment for a money sum and nothing further.
2. The respondent relied upon his affidavit sworn on 24 November 2013; and another sworn 31 March 2014. He also relied on the affidavits of Jenneta Lobrigo sworn on 7 April 2014; Peter Duncan sworn on 9 April 2014; Mary Janice Leamey sworn on 7 April 2014; and David Leamey sworn on 11 April 2014. The applicant relied upon her own affidavits sworn on 3 December 2013 and 10 May 2014.
3. The respondent's affidavit evidence set out the history to the parties' relationship and the circumstances surrounding the entry into the loan agreements, the signing of the mortgage and other documents and the applicant's consent to the Caveat.
4. The applicant's affidavit evidence put in issue the signatures on the mortgage that was signed on 24 December 2006. It also included a claim that the bank cheque was never received. There was a suggestion that the bank cheque was to be handed over on 13 August 2005.
5. The respondent gave affidavit evidence in reply to these claims. In respect of the bank cheque, the respondent's evidence was that "I believe that the bank cheque for $30,504.33 was handed over on 12/8/2005". He also gave evidence that at no stage prior to late 2013 did the applicant or her husband "dispute that the $140,000 loan was advanced in full". In response to the applicant's claims about the signing of the mortgage, the respondent relied upon the affidavits of Mr Duncan, Mr and Mrs Leamey and Ms Lobrigo. Mr Duncan gave detailed evidence of witnessing the signatures of the applicant and her husband on the mortgage document. Ms Lobrigo and Mr and Mrs Leamey gave evidence of observing Mr Duncan witnessing their signatures.
6. Neither the respondent nor any of the respondent's witnesses were cross-examined. The applicant was not cross-examined.
7. Although Mr Zhang had not filed any affidavit evidence, the primary judge permitted him to give oral evidence. Prior to giving evidence, Mr Zhang suggested that the 2005 loan agreement document, which he signed, had parts missing from it, apparently including his signature with a suggestion that it was "fake". However the respondent produced the original to the Court and the primary judge indicated that the copy about which Mr Zhang was complaining had parts blanked out by an annexure note over that part of the document.
8. Mr Zhang claimed in evidence-in-chief that neither he nor his wife received the bank cheque (tr 11). He also claimed that the 2006 loan was an "additional loan" and was not "converted from any previous loan" (tr 11).
9. In cross-examination Mr Zhang agreed that he had been a director of his own company from 1999 to approximately 2005. He maintained his claim that neither he nor the applicant received the bank cheque (tr 15). He claimed that "we owe something about $86,900 something" (tr 18). His evidence was that although he signed a document which recorded that a bank cheque in the amount of $30,504.33 was to make up part of the loan, he did not receive it. He gave the following evidence in cross-examination (tr 19-20): Q. You tell the Court do you, you were waiting for a bank cheque of $30,504.33? A. That's right. HIS HONOUR Q. Did you ever ask for it? A. Yes. Q. When did you do that? A. Oh, of course, we did it. Q. How, by letter or by phone call or what? A. Yeah, by some conversation, you know. Q. When did you do that? A. During the period, you know, we have, you know, talking about it because that's very personal, you know, agreement, so since we didn't receive it I think, okay, if he not going to, you know, give me more loan, that's fine, you know, so we think it's like that, so, like I say, we still have some dispute about that, but I know I didn't send any letter, you know, but -- BARHAM Q. Sorry, I cut you off, I apologise, I didn't mean to cut you off? A. So, just, you know -- Q. You didn't write to Mr Yeung at any time before 24 December 2006 and say what about this $30,504.33, you never did that, did you? A. No. Q. You didn't send him an email? A. No. Q. You say you had a conversation with him? A. That's right. Q. When were the conversations? A. I can't remember. We have a conversation before, you know, few times, you know. Q. Was that about the cash $6,000 down the bottom there, were you waiting for the cash $6,000 or did you receive that? A. We received that. We stated very clearly in our defence alright, we received the $6,000 cash, but we didn't receive the 30,000 bank cheque.
10. The parties made short submissions. Mr Zhang's submissions were as follows (tr 27): Your Honour the loan agreement on 2006, that one, so it's not convert from previous loan. It's totally new loan. That's why I want to know when Mr David Leamey drafted this contract, you know, what did they discuss between [respondent] and David Leamey, alright. Because according to this contract there is nothing to say about a previous loan, alright. So also that the figure, the figure's totally different because we must determine that $30,000 you know bank cheque is existing or not. That's the key point. So about this bank cheque the figure is totally wrong. Another thing is they say they give a lot of demand with letter in writing, you know, but they never take legal action against us for last five, six years, you know. But this contract is for one year's contract. So if they think this legal forceful contract they should take us to the court after one year if I failed to pay. That means what conduct 2007 they should take us to court straight away. Why it takes so long not take legal action? That's the big question for them to answer, you know. So that means that this contract is totally have problem. They, it's not convert from previous loan. It's totally new loan and we never received the $140,000 loan, your Honour. That's so for is unsold to this contract.

The Judgment

1. In short ex tempore reasons the primary judge referred to it being common ground that there was an original loan in 2004 and then further loans and that $62,500 was repaid on 6 November 2006. The reasons included the following: The vital document was created on 12 August 2005, the original is exhibit PX 1. It seems to have been created on an early model computer and is hard to read but there is a photostat in the papers which makes it a little more legible. It basically says: "This is an agreement between Simon Yeung. Loan to Qin He and David Zhang. Details. Loan amount $180,000. Start from 13/08/2005". Then down the bottom it has: "Note: This new agreement instead all old agreements. Acknowledged to receive Last loan $143,495.67 Bank cheque $30,504.33 Cash $6,000 Total $180,000"
2. The primary judge observed that this document was signed by the applicant and Mr Zhang, the latter signing twice. His Honour referred to Mr Zhang's complaint at the beginning of the trial about his copy of the document and observed that it was "relatively clear" that the annexure note had obscured Mr Zhang's signature.
3. The primary judge referred to: Mr Zhang's claim that the bank cheque was never received; the respondent's evidence that he was told by the bank that it was too old to be traced; and Mr Zhang's suggestion that this was "hard to believe". His Honour then said: It is of course quite clear that Mr Zhang could have produced his bank statements for the period of August 2005 and that may or may not have shown a deposit or non deposit of the $30,000 bank cheque. He did not do that.
4. The primary judge referred to the fact that the litigants were unrepresented but noted that they were not uneducated people, both having degrees in China, and in the case of Mr Zhang, studying conveyancing. His Honour also referred to Mr Zhang's background in computers.
5. The primary judge referred to Mr Zhang's denial that neither he nor the applicant received the bank cheque and also to his evidence that he had never protested in writing in relation to that non-receipt. His Honour also referred to Mr Zhang's claim that there were conversations with the respondent about the non-receipt of the bank cheque. His Honour then noted the absence of any complaint by the applicant or Mr Zhang at times when opportunities to make such complaints were available. His Honour observed that "if a person has an opportunity to deny a vital fact and does not deny the vital fact when given the opportunity to do so that is some material to suggest that the vital fact may well be right". On balance the primary judge was satisfied that the bank cheque was handed over to the applicant and her husband.
6. The primary judge then dealt with the issue as to whether there was a consolidation of the loan in August 2005 together with a new loan of $36,000. His Honour said: The whole defence appears to be a matter of insisting on various minor technicalities and putting the [respondent] to proof without really putting forward any substantial matter. Furthermore, when a substantial matter is put forward it is really material that cannot be accepted. For instance, [the applicant] consistently says that no-one witnessed her signature to the mortgage. She does not deny that she signed the mortgage, which is an unregistered mortgage, but she says it was not witnessed. Three people swear that they were there when Mr Duncan witnessed the document [the applicant] had signed. This matter affects the credibility of [the applicant] considerably, and indeed the way in which Mr Zhang conducted himself about the alleged discrepancy in the key document and in the witness box again makes me hesitant about accepting a lot of what he says. It does not matter very much because the [respondent's] case would succeed on the document. The calculations show that there is $248,279.45 owing from the [applicant] to the [respondent] and the [respondent] is entitled to a verdict for that amount and the costs to date.

Leave to appeal

1. In answer to the observation made by the primary judge referred to above (par [41]) the applicant sought to rely upon an affidavit sworn on 30 August 2015 to which there was annexed a number of bank statements for the period August 2005 to December 2005 together with letters from Westpac certifying that two accounts were not opened until April 2006 and May 2006. The purpose of reliance on these statements and letters is to show the absence of any deposit of the bank cheque. As the primary judge said, such evidence was not called at trial. The respondent would have been entitled to pursue investigations in respect of the applicant's bank accounts and that of her husband had there been such evidence deployed in any of the affidavits at trial. That opportunity has not been afforded to the respondent.
2. The applicant also sought to give evidence in this affidavit challenging the evidence of Mr Duncan, Ms Lobrigo and Mr and Mrs Leamey about the signing of the mortgage and other documents on 24 December 2006. The affidavits of those witnesses were served well prior to the hearing. Indeed the applicant responded to the affidavit of Ms Lobrigo in her affidavit of 10 May 2014 making similar claims to those contained in the affidavit of 30 August 2015.
3. I am satisfied that applicant's application to rely upon this evidence should be rejected.
4. Although in written submissions there was a complaint about the approach adopted by the primary judge to the demands that were served, in oral submissions Mr Zhang made clear that the only matter about which complaint is maintained is the primary judge's finding that "the bank cheque was handed over".
5. It is not suggested that there is any matter of general principle or public importance in this application. Notwithstanding that a small amount may be in issue, this Court may grant leave where there is a clear injustice: Carolan v AMF Bowling Pty Ltd t/as Bennetts Green Bowl [1995] NSWCA 69.
6. Even if the applicant had relied upon bank statements that did not include the deposit of the bank cheque, this would have been but one factor to be taken into account in deciding whether the bank cheque was handed over to the applicant and/or her husband. Although both the applicant and her husband claimed that the bank cheque was not received from the respondent, they faced the problem that, until the respondent commenced these proceedings, neither had complained in writing that they did not receive it. Indeed there was no evidence that when the applicant and Mr Zhang met with the respondent and Mr Leamey on 29 June 2013 to discuss refinancing the loan there was any mention of the claim that the bank cheque was not received. When the applicant and Mr Zhang wrote to the respondent on 25 September 2013 and Mr Leamey on 23 October 2013 there was no mention of a claim that the bank cheque had not been received. Rather there was a general claim that the applicant and Mr Zhang did not owe any money to the respondent.
7. During oral submissions on this application Mr Zhang claimed that there were discussions with the respondent about the non-receipt of the bank cheque. There is no mention of these discussions in any of the affidavit evidence or in the correspondence between the parties prior to the commencement of the proceedings.
8. The respondent points to a number of features of the parties' relationship in support of the contention that leave to appeal should be refused. The first was that a loan repayment in the significant amount of $62,500 was made. Demands setting out the calculation and listing the capital amount of $140,000 were not disputed by the applicant on the grounds now raised by her in the proceedings.
9. The affidavit evidence of Mr Duncan; Mr and Mrs Leamey and Ms Lobrigo was evidence available to the trial judge to reject the claim made by the applicant and her husband that the mortgage was not signed in December 2006. The primary judge was entitled to take that evidence into account in dealing with the applicant's claim (and that of her husband) that the bank cheque for $30,504.33 was not received from the respondent. So too was Mr Zhang's attempt to suggest that the vital 2005 loan document was somehow a "fake" for it only to be discovered that an annexure note had obliterated his signature.
10. A powerful factor taken into account by the primary judge was the absence of any complaint in respect of the alleged non-receipt of the bank cheque. Importantly, although there were allegations made about fake witness signatures being placed on the documents in December 2006, it is clear that the applicant signed the mortgage and Mr Zhang signed the document requesting the respondent to advance the sum of $140,000 to the applicant "pursuant to the Mortgage, loan & Caveat signed this 24th of December 2006". This document was signed but one year and four months after the respondent allegedly failed to produce the bank cheque in August 2005. The fact that the applicant and Mr Zhang signed documents recognising and confirming the amount of the loan as at that date, without any suggestion that the amount should be reduced by the amount of the bank cheque, is powerful evidence in support of the primary judge's finding. As the primary judge said the applicant and her husband failed to take up opportunities to complain about the alleged failure to hand over the bank cheque when one would have expected such a complaint to be made. This was an exquisite example of one of those opportunities.
11. There was no error made by the primary judge in finding that the bank cheque was handed over.

Conclusion

1. There is no prospect that if leave were granted the proposed appeal could succeed. In those circumstances I propose that leave to appeal be refused and the applicant be ordered to pay the respondent's 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: 10 December 2015