Hong v Guo [2026] NSWSC 530 | Case summary | Zoe

NSWNSWSC

Hong v Guo

[2026] NSWSC 530

Supreme Court of NSW|2026-05-15|Before: Parker J

View on NSW Caselaw

At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2026-05-15

Before

Parker J

Catchwords

CIVIL PROCEDURE — Application to take evidence by video link — whether permissible under Chinese law — Held permissible to take evidence by video link from Hong Kong PRIVATE INTERNATIONAL LAW — Enforcement of judgment at common law — Judgment on loan agreement — Defence of fraud — Alleged sham document — Defence of fraud fails PRIVATE INTERNATIONAL LAW — Enforcement of judgment at common law — Judgment on loan agreement — Natural justice — Whether defendant had actual notice or due notice of foreign proceedings — Service effected through public service announcement under Chinese law — Authority cautioning against foreign modes of service not involving personal notification being sufficient notice — Defendant failed to prove absence of actual notice

Source

Original judgment source is linked above.

Catchwords

CIVIL PROCEDURE — Application to take evidence by video link — whether permissible under Chinese law — Held permissible to take evidence by video link from Hong Kong PRIVATE INTERNATIONAL LAW — Enforcement of judgment at common law — Judgment on loan agreement — Defence of fraud — Alleged sham document — Defence of fraud fails PRIVATE INTERNATIONAL LAW — Enforcement of judgment at common law — Judgment on loan agreement — Natural justice — Whether defendant had actual notice or due notice of foreign proceedings — Service effected through public service announcement under Chinese law — Authority cautioning against foreign modes of service not involving personal notification being sufficient notice — Defendant failed to prove absence of actual notice

Judgment

Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.

Medium Neutral Citation: Hong v Guo [2026] NSWSC 530

Hearing dates: 31 March; 3, 22, 23 and 24 April; 9 May; 22, 23 September; 9 October 2025; 15 May 2026;

Date of orders: 15 May 2026

Decision date: 15 May 2026

Jurisdiction: Equity

Before: Parker J

Decision: See [327]

Catchwords: CIVIL PROCEDURE — Application to take evidence by video link — whether permissible under Chinese law — Held permissible to take evidence by video link from Hong Kong
PRIVATE INTERNATIONAL LAW — Enforcement of judgment at common law — Judgment on loan agreement — Defence of fraud — Alleged sham document — Defence of fraud fails
PRIVATE INTERNATIONAL LAW — Enforcement of judgment at common law — Judgment on loan agreement — Natural justice — Whether defendant had actual notice or due notice of foreign proceedings — Service effected through public service announcement under Chinese law — Authority cautioning against foreign modes of service not involving personal notification being sufficient notice — Defendant failed to prove absence of actual notice

Legislation Cited: Civil Procedure Law of the People’s Republic of China (PRC), arts 92, 253 Evidence Act 1995, s 140(2)

Mr Guo was born in 1966 in the Baita Municipality in China. Baita is a town in the Jieyang District of eastern Guangdong Province.
According to Mr Guo, he began his business career in 1986, trading and selling cooking oil. In 2004, he relocated his business from Baita to Shenzhen. Shenzhen is the largest city in Guangdong Province, and lies on the central part of its coast, just north of Hong Kong.
Thereafter, Mr Guo conducted the business through a newly incorporated company named Niannianfeng Group Co Limited (“NNF”) and two subsidiaries, Shenzhen Niannianfeng Grains & Oil Co Limited (“SNGO”) and Huizhou Niannianfeng Grains & Oil Co Limited (“HNGO”). Mr Guo was the beneficial owner of all of the shares in NNF (and thus of SNGO and HNGO).
According to Mr Guo, private short term money lending is a thriving business in China because of difficulties obtaining conventional bank finance. Such lending takes place on a short-term basis, generally unsecured, at high interest rates. Lenders obtain their lending capital from private depositors who place similarly short-term deposits at high interest.
Mr Guo says that he first met Mr Hong in 1992. Mr Hong was two years younger than Mr Guo, and also came from Baita. After Mr Guo moved his business to Shenzhen in 2004, they came into closer contact. Mr Hong was working as an employee in a private lending business. His office was not far away from Mr Guo’s. Both men were members of an association for business people from Baita, to which I will refer as the “Baita Business Association”.
According to Mr Guo, in December 2012 he was approached by Mr Hong, who wanted to go out on his own as a private lender. Mr Hong invited Mr Guo to invest in the company which was to conduct the new business. In due course, he did so. The company was named Shenzhen Baita Investment Development Co Limited and was referred to in evidence as the “Baita Company”.
Mr Guo says that he acquired a 10% shareholding in the Baita Company. However, it seems that the interest was actually held on Mr Guo’s behalf by Mr Jiannan Huang, who is Mr Guo’s brother-in-law. It seems that other members of the Baita Business Association may also have been involved with the Baita Company, although whether as shareholders, depositors or borrowers is not clear.
Mr Guo described the Baita Company as having been, at least initially, the vehicle through which Mr Guo conducted his private lending business. However, the transactions which are the subject of these proceedings were the subject of loan agreements between Mr Guo and Mr Hong personally. The Baita Company was not a party to the agreements (or the Shenzhen Court proceedings). The evidence leaves unclear what the precise nature of the Company’s business was, and, to the extent that business involved money lending, where the boundary lay between the Company’s activities and Mr Hong’s own personal lending.
According to Mr Guo, by 2012-2013 his cooking oil business was operating, through NNF and its subsidiaries, on a large scale. The business had assets worth billions of yuan and over 600 employees. Among the executives who reported to Mr Guo was Mr Zetao Chen. Mr Chen became chief executive of the business in 2015.
Mr Guo says that he first obtained an Australian work visa in 2013, at which time he became an Australian resident for tax purposes. He established a home at Killarney Heights in Sydney, and his son was born in Sydney in 2013. Mr Guo himself continued to live in China but made regular visits to Australia, typically for a week or so every 2-3 months. In 2015 he obtained permanent residency, and it seems he has lived in Australia since leaving China in late October 2015 (see below).
The dealings between Mr Hong and Mr Guo which are the subject of these proceedings involved frequent payments back and forth, which gave rise to a running account. The payments were handled for the principals by accountants working for them: on Mr Hong’s side by Mr Ying Ling Zhang and on Mr Guo’s side by Ms Dongni Xie. They were not made directly between Mr Hong and Mr Guo. Instead they were made from, and into, bank accounts held in the names of nominees.
In total, Mr Hong and Mr Guo signed six formal agreements concerning the lending terms between them (one was signed on Mr Guo’s behalf by Ms Xie, but he accepts that he authorised her to do so). The documents are dated from 2013 to 2017. I will refer to them in this judgment as the “Loan Documents”. I set out their provisions in more detail in later sections of the judgment. For the purposes of this chronology, I will describe only their general effect as I place them in context with other events.
The first Loan Document was dated 1 August 2013. It was styled “Maximum Credit Loan Contract” (“Loan Contract”). The Contract covered the period from 1 August 2013 to 30 July 2014. It provided for Mr Hong to grant Mr Guo a line of credit up to ¥150 million. Each advance was to be recorded in a document styled “Loan Receipt” which was to specify the amount, and the repayment date. Interest was to be payable at 2.5% per month. Any unused credit line would expire at the end of the credit period.
In May 2014 Mr Hong and Mr Guo signed the second Loan Document. It was an agreement styled “Supplementary Agreement to the Maximum Credit Loan Contract” (“Supplementary Contract”). It provided for the credit period to be extended from 30 July 2014 to 30 July 2015 and for the credit limit to be increased from ¥150 million to ¥250 million.
On the same occasion, Mr Hong, Mr Guo, and Mr Huang signed a document styled “Maximum Amount Pledge Contract” (“Pledge Contract”). It provided for Mr Huang to pledge the 10% interest he held in the Baita Company as security for Mr Guo’s indebtedness to Mr Hong.
In Mr Guo’s affidavit, he deposed that by mid-2015 his cooking oil business was suffering cash flow problems, and he needed substantial amounts of money. The problems appear to have come to a head in July 2015. The fourth Loan Document was styled “Letter of Confirmation” (“Confirmation Letter”) and was dated 30 July. In the Letter, Mr Guo acknowledged an indebtedness to Mr Hong of ¥160 million by way of principal, together with interest up to the date of the Letter, 30 July 2015, of ¥25.7 million. Personal guarantees were also provided by Mr Guo’s company and Mr Huang agreed to pledge further shares held on Mr Guo’s behalf in another company.
A month later, in late August, the fifth Loan Document was signed by Mr Hong and Mr Guo. It was styled “Supplementary Agreement”. It provided that any dispute arising from the Loan Contract could be the subject of proceedings in the Shenzhen Court.
Mr Guo’s financial difficulties continued. On or about 21 October he stepped down as director of his companies and withdrew from his involvement in them. According to Mr Guo, this was at Mr Chen’s suggestion. Very soon afterwards, Mr Guo left mainland China for Hong Kong, where he seems to have spent a couple of days. On 24 October he flew from Hong Kong to Sydney. It seems that at around this time, or shortly afterwards, NNF and its subsidiaries ceased to trade.
Mr Hong’s statement of claim was filed with the Shenzhen Court on 28 October, four days after Mr Guo had left Hong Kong. As already noted, the Court gave judgment in Mr Hong’s favour, for ¥185.7 million in principal and interest, with ongoing interest at 24%, in June 2016. I describe the course of the proceedings in detail in a later section of this judgment.
Mr Guo now lives permanently in Australia. He has never returned to mainland China since leaving in October 2015, although the evidence refers to him paying one or two visits to Hong Kong. According to Mr Guo, it was during the first of these visits, in 2017, that he learned for the first time, in a meeting with Mr Chen and Mr Hong, that Mr Hong had brought proceedings against him, and had in fact obtained judgment.
In March 2017, the sixth and final Loan Document, styled “Debt Repayment Agreement”, was signed by Mr Hong, Mr Huang, and Ms Xie on behalf of Mr Guo (Mr Guo was in Australia, but it is not disputed that he authorised Ms Xie to sign for him). Mr Huang agreed to transfer his 10% shareholding in the Baita Company, previously the subject of the Pledge Contract, to Mr Hong in part payment of the amount owing from Mr Guo to Mr Hong under the judgment.
Mr Guo took no action about the judgment. He says he was distracted by other matters. Nor, it seems, did Mr Hong take any further action to enforce the judgment against Mr Guo personally until August 2021, when he commenced the present proceedings.
In 2023 Mr Guo, acting through lawyers in China, petitioned the Shenzhen Court to reopen the 2016 judgment. It seems that the Court has not made any decision on this application, and it remains pending.

In support of Mr Hong’s case, affidavits were filed from Mr Hong himself and from Mr Ying Ling Zhang. There was also an affidavit from Mr Qin Xiao Zhang (no relation), who was the president of the Baita Business Association and deposed that he was present at the meeting at which the Confirmation Letter was signed.
Mr Guo’s case relied on affidavits from Mr Guo himself, Ms Xie and Ms Yuemin Guo. Ms Guo is Mr Guo’s niece. She was an employee of his who was involved in effecting some of the loan payments that are the subject of these proceedings under the supervision of Ms Xie.
The hearing began on 31 March last year but ran into an immediate difficulty over the prospective cross-examination of Mr Hong. He had been intending to travel to Australia to give evidence, but the immigration authorities refused his application for a visa to enable him to do so.
An application was made instead to take Mr Hong’s evidence by video link from China. This was opposed, among other reasons, on the basis that it would be potentially unfair if Mr Guo was exposed to cross-examination in person but Mr Hong was not. A question was also raised about whether taking evidence in this way would be permissible in accordance with Chinese law, based on the observations of Williams J in In the matter of Sunnya Pty Ltd [2023] NSWSC 1286. The latter point raised a further question about whether the evidence of the other witnesses based in China (Mr Ying Ling Zhang, Mr Qin Xiao Zhang, Ms Xie and Ms Guo) could, as had been planned, be taken by video link either.
Eventually expert evidence was produced from a solicitor practising in Hong Kong which established that, whatever the position might be in the People’s Republic of China itself, it would be permissible for evidence to be taken from the Chinese witnesses in Hong Kong (by video link, or, if desired, in person). Further hearing dates were scheduled on 22, 23 and 24 April at which evidence was given by Ms Guo and Ms Xie, and then Mr Ying Ling Zhang and Mr Qin Xiao Zhang (witnesses for Mr Hong who were, by agreement interposed) by video link from Hong Kong. Mr Guo, in Australia, then gave evidence in person.
Mr Guo’s evidence did not finish on 24 April, and the trial was adjourned until 9 May, and then 22 September, to allow it to be completed. Earlier, the possibility of taking Mr Hong’s evidence in person in Hong Kong had been raised, but eventually that evidence was taken via video link on 23 and 24 September.
All of the witnesses speak only Chinese. Their affidavits were prepared in Chinese, and they gave evidence through an interpreter.

Documentary evidence: In the course of the hearing, Mr Hong’s lawyers produced a schedule listing the payments which were claimed to have been made by his nominees to, and received by his nominees from, nominees of Mr Guo for the purposes of the loan account between them. There were several versions of the schedule. The initial version was based on the list of payments to Mr Guo put forward by Mr Hong in his July 2022 affidavit (see [67] below). Then the payments from Mr Guo to Mr Hong identified by Ms Guo (see [63] below) were added. Further revisions took place as a result of points raised by Mr Guo’s lawyers. Eventually, a final version of the schedule was produced (in the course of final closing submissions) and it was agreed that all of the payments and repayments listed therein had in fact been made between the identified payers and recipients. There remained, however, a dispute about whether all of the payments claimed to have been made on behalf of Mr Hong were actually part of the Hong-Guo loan account.
The final version of the schedule recorded payments by Mr Hong totalling ¥548.9 million. The first payment took place in December 2012 and the last in November 2014. The repayments by Mr Guo totalled ¥387.9 million. The first repayment occurred in February 2013 and the last in April 2015. At all times the running balance was in Mr Hong’s favour. The closing balance was ¥167.9 million.
As already noted, the Loan Contract was dated 1 August 2013. It identified Mr Hong (“Party A”) as lender and Mr Guo (“Party B”) as borrower. The Contract provided in conventional form for the grant of the line of credit (Articles 2 and 3); the rights and obligations of the Lender and the Borrower (Articles 4 and 5); and events of default (Article 6).
As already noted, the available credit line was ¥150 million (Article 2.1) which was to be available from 1 August 2013 to 30 July 2014 (Article 2.2). Interest was calculated at 2.5% per month, calculated on a daily basis, and was payable monthly (Article 2.4).
Article 3.1 provided a mechanism for drawn down under the line of credit:

The Supplementary Contract was, as its name suggested, drafted by reference to the Loan Contract. The parties and their addresses were the same. It was signed by Mr Hong and Mr Guo on 12 May 2014.
As already noted, clause 1 provided that the credit line was to be “adjusted” from ¥150 million to ¥250 million. The credit period was extended so as to run from 30 July 2014 to 30 July 2015 (clause 2). Clause 3 provided that the interest rate was to be “adjusted” to 2.5% per month, although this rate was the same rate as had already been specified in the Loan Contract.
The parties to the Pledge Contract were Mr Hong as Party A (Creditor and Pledgee); Mr Huang as Party B (Pledgor); and Mr Guo as Party C (Debtor). Mr Guo’s address was again given as Baolian Village, Baita Town. The Contract was signed by Mr Hong, Mr Huang and Mr Guo also on 12 May 2014.
The Contract recited that it had been entered into to “ensure the effective performance” of the Loan Contract, as varied by the Supplementary Contract. Article I stated that Mr Huang held 10.45576408% of the “total capital contribution” of the Baita Company and pledged that interest as security for the debts of Mr Guo to Mr Hong. The remainder of the Contract contained consequential provisions in conventional form, which do not need to be set out.
Also on 12 May 2014 Mr Guo signed an updated version of the commissioned payment notice. The Notice was in the same form as the August 2013 notice, except that it added reference to the Supplementary Contract and a fourth authorised account was added. This was an account held in the name of Shenzhen Heshunteng Trading Co Limited (“Heshunteng”).
No Loan Receipts pursuant to clause 3.2 of the Loan Contract were in evidence. It seems that the procedure set out on that clause was not followed. There was, however, no evidence before the Court to confirm this or to explain why it was so.
The Loan Contract and the Supplementary Contract each bore a serial number. In each case the serial number consisted of two or three letters, followed by eight digits. Of the eight digits, the first four corresponded with the year in which the Contract was signed and the following two digits the month. The final two digits were, in the case of the Loan Contract, “02”, and, in the case of the Supplementary Contract, “10”. In cross-examination, Mr Hong identified the final two digits as representing the number of contracts made in the month in question. Thus the Loan Contract was the second contract signed for the month of August 2013. This seems plausible and was not challenged by counsel for Mr Guo.
The commissioned payment notices also each bore a serial number. In each case, this was the same as the serial number of the Contract signed on the same day, but with two extra digits, which in each case was “01”. It is tempting to think that this represented the first notice issued pursuant to the parent Contract, and that if further commissioned payment notices (or, perhaps, Loan Receipts) had been issued, they would have been numbered “02”, “03” and so forth, but there was no evidence to confirm this.
Affidavit Evidence: Mr Hong’s first affidavit was made in October 2021 and was of a largely formal nature. Mr Hong deposed having entered into the Loan Contract and the Supplementary Contract, annexing copies. He did not say anything about the circumstances in which the two Contracts had been entered into.
Nor did Mr Hong refer to the individual payments and repayments on the account between him and Mr Guo. He simply stated that Mr Guo had borrowed the sum of ¥160 million (the figure in the Confirmation Letter) from him.
Mr Guo’s first affidavit was made in May 2022. It began by referring to payments made by him to Mr Hong. According to Mr Guo, these payments began in mid-January 2013, soon after the Baita Company had been established. Mr Hong would contact him from time to time to give him account details for his (Mr Hong’s) nominees who were to receive the monies. Mr Guo described the payments as “deposits” paid to the Baita Company.
Mr Guo deposed that payments were made on his behalf from one or other of five nominee accounts. Three of the nominees were the family members referred to in the two commissioned payment notices. Two were companies which he described as having been “fully under my control”. One was Heshunteng, the company referred to in the May 2014 commissioned payment notice. The other was a company not referred to in either notice. Mr Guo stated that money paid from the accounts in the names of these payers was “money that belonged to me or my company”.
An affidavit from Ms Guo (who deposed that she worked for Mr Guo in Shenzhen between about September 2011 and about October 2015) summarised the payments from Mr Guo to Mr Hong and exhibited supporting bank documents. She calculated the total as ¥387.9 million. The payments in question were made between 30 January 2013 and 10 April 2015.
Mr Guo next referred in his affidavit to borrowings undertaken by him from Mr Hong. He deposed that from time to time if he needed cash for his business or if he knew someone who needed cash, he would ask Mr Hong to send him some money for “a few weeks”. Mr Guo deposed that Mr Hong “was able to lend large amounts of money” to him on short notice, and that he would pay interest at 2.5% per month.
Mr Guo went on to explain the execution of the Loan Contract in the following way:

Mr Hong deposed that between August 2013 and January 2015 he transferred large amounts of monies through his nominees’ accounts to Mr Guo’s nominated accounts, amounting to ¥174.5 million by way of principal. Mr Hong referred specifically to Mr Guo’s statement about not owing any money to Mr Hong in April 2014, before the Supplementary Contract was signed. Mr Hong deposed that this statement was untrue. Mr Guo owed him monies, both by way of principal and interest, at all times from 2013 onwards.
In December 2022, Mr Guo made a further affidavit by way of reply. In a sentence not ultimately read, he referred to Ms Guo’s collection of payment records and stated that the Loan Contract applied equally to loans by him to Mr Hong.
Mr Guo’s December 2022 affidavit was accompanied by an affidavit from Ms Xie. She deposed that she was first introduced to Mr Hong by Mr Guo in about early 2013 and was instructed by Mr Guo that she would be responsible for all money transfers between the parties. Mr Hong then introduced Mr Ying Ling Zhang as her opposite number in his organisation.
Ms Xie described the running account as one between NNF and the Baita Company. She deposed that she did not know when the first transfer of funds between the parties took place. When she started overseeing the payments there had already been several transfers.
Ms Xie deposed that regular account reconciliations took place. Initially they took place monthly. Typically, that would involve Ms Xie and Mr Zhang going through and identifying each transfer to be applied to the account and agreeing a month end balance. The process would take place over the phone at the beginning of the following calendar month. After about six months, the reconciliations became more irregular as Mr Zhang and Ms Xie became more familiar with each other and difficulties with reconciling payments and receipts were ironed out.
There was a further reply from Mr Hong ten months later, in October 2023. Mr Hong again denied that he ever entered into any agreement to borrow monies from Mr Guo. The payments tabulated by Ms Guo were not loans by Mr Guo but repayments (in part) of monies previously lent to him and interest. Mr Hong deposed that he started to lend monies to Mr Guo in December 2012 and that by mid-November 2014 he had made payments totalling ¥548.9 million for which he produced his own tabulation.
In a further supplementary affidavit made in March last year, just before the trial began, Mr Hong gave an expanded description of his dealings with Mr Guo before the Loan Contract was entered into. He deposed:

Counsel also asked Mr Zhang about the account reconciliation process. Mr Zhang confirmed that there were regular reconciliations which he undertook with Ms Xie. Counsel put to Mr Zhang that in some months Mr Hong owed Mr Guo money on the running account. But he denied this. He insisted that Mr Guo was always the debtor.
In cross-examination, Mr Guo confirmed that before October 2015 he lived for most of the time in China. He said that he had a home at Baita Town and also a home in Shenzhen. However, when referred to the Baolian Village address given as his address in the Loan Contract and subsequent Loan Documents he said that this was only the address of his date of birth and he did not actually live there; instead, he lived in Shenzhen. How his evidence about the Baolian Village address was to be reconciled with his earlier evidence about having a home at Baita Town was not addressed in his further oral evidence.
Mr Guo was asked about his financial position between late 2012 and 2015. He said that he only began to experience problems in October 2015, shortly before he handed over to Mr Chen and left China. He repeatedly denied that his businesses were suffering significant problems in 2014 or earlier. He insisted that there were no “large scale problems” in any of his companies at that time, although sometimes loans would be overdue for “one or two days”.
Counsel then took Mr Guo to Mr Hong’s payment schedule (in its then form). Counsel identified various payments on the schedule which Mr Guo acknowledged were payments on the Loan Account between Mr Hong and himself. Mr Guo acknowledged that he had received payments from Mr Hong by way of loan between late 2012 and April 2015. Among these payments was a payment made to his company Heshunteng.
This evidence was given at the end of Mr Guo’s cross-examination on 24 April last year (see [37] above). When the cross-examination resumed on 9 May, counsel returned to the payment schedule. But Mr Guo said that over the adjournment he had been giving more thought to the payments listed in it, explaining that he had not been given a Chinese language version of the schedule on 24 April. He said that some transactions had not been correctly recorded. For example, one of the payees for Mr Hong, the company Tongxinglong did not “belong” to the Loan Account. The same was so for another payee, Mr Chuxiang Zhang. He did not however elaborate any further.
Counsel then turned to the Loan Contract of August 2013. Mr Guo agreed with counsel that at the time the agreement was entered into he owed “quite a lot of money to Mr Hong”. Later he said that it was ¥50-60 million “so far as I remember”. He denied, however, that the reason he was asked to sign the Loan Contract was because he was not repaying his debts as they fell due at the time.
When asked to explain how the agreement came about, Mr Guo said that the loans were made by Mr Hong, not on his own behalf, but on behalf of the Baita Company. He said that there were many shareholders of the Baita Company who were borrowing money from it and a decision had been made to put all of the shareholders on a proper footing in this regard.
Mr Guo said that despite the alleged involvement of the Baita Company, Mr Hong was recorded as the lender in the Loan Contract. He acknowledged that he had read the contract, understood it, and by the time he signed it was very experienced in commercial transactions. He understood that there was a legal obligation on him to repay and he could be sued if he failed to do so. He also acknowledged that there had been previous loans to him and the purpose of signing the agreement was to put the lending on a more formal footing.
Mr Guo agreed with counsel’s suggestion that he had claimed in his affidavit evidence that there was a separate written agreement under which he lent money to Mr Hong. Mr Guo said that the agreement had been lost.
Counsel asked about the documents assembled by Ms Guo documenting the payments made by Mr Guo to Mr Hong. Mr Guo said that there had been more documents originally but they had been burned by Mr Chen. Documents produced by his niece related only to the 12 payers identified in the Shenzhen Court proceedings. The documents had been obtained from the Shenzhen Court after Mr Guo had learned of the judgment. Mr Guo was challenged about his failure to mention any of this in his affidavits but he said he only obtained full information in 2023 after he had brought proceedings in China against Mr Chen.
Counsel also asked Mr Guo about the Supplementary Contract of May 2014. Mr Guo denied that he was in any financial difficulties at the time. He denied that he owed Mr Hong more than ¥150 million and had a need for money to fund projects in Australia. He accepted that on his case he had no need to supplement the loan but did so anyway. When asked why, he gave essentially the same explanation as he had given in his affidavit, namely that the purpose of signing the agreement was to boost external confidence in the Baita Company.
In Mr Hong’s cross-examination, he was asked about his involvement with the establishment of the Baita Company. Mr Hong agreed that he was involved in recruiting investors for the Company, but denied that he was involved in approaching Mr Guo (or Mr Huang). Mr Hong agreed that money lending was part of the Baita Company’s business, but said that the monies the Company lent came from monies subscribed by those who invested in it. The Company did not itself take deposits.
Mr Hong said that the money he lent to Mr Guo was lent by him personally. Some of it was his own money and some was money lent by friends. Mr Hong lent money to other borrowers as well. There were more than twenty of them. He charged a higher rate to the borrowers then he paid to those who lent him money.
Mr Hong rejected counsel’s suggestion that, when asking Mr Guo to invest in the Baita Company, he offered to lend money to Mr Guo at cost. Mr Hong repeated that he did not ask Mr Guo to invest in the Company. He did however charge Mr Guo a lower rate of interest (2.5% per month) than that which was paid by his other borrowers (between 3 and 3.5% per month).
Mr Hong confirmed that he began making loans to Mr Guo in December 2012. At that time there was no written contract between them. Regular reconciliations were undertaken to determine the balance of the Loan Account. On Mr Guo’s side the reconciliation was carried out by Ms Xie.
Counsel asked Mr Hong whether he kept his own records of amounts owed by his borrowing customers. Mr Hong said that he did. These records were kept “in the form of statements” on a computer. Mr Ying Ling Zhang was responsible for keeping them. Mr Hong agreed with counsel that they had not been produced to the Shenzhen Court or to this Court.
Counsel asked Mr Hong to explain why the statements had not been produced to either Court. Mr Hong replied that the Confirmation Letter was produced to the Shenzhen Court and supported the amount claimed. Counsel pressed Mr Hong, putting to him that the internal records would at least have supported his case in these proceedings. Mr Hong’s replies did not appear responsive and left some doubt about the precise form of the internal “statements”. At one point Mr Hong said he saw no difference between the internal “statements” and “statements” issued by banks on the other. At another point he said that the internal “statements” were “consistent with bank statements”.
When asked about the August 2013 Loan Contract, Mr Hong said that it had been drafted by his lawyer. He said that he intended the ¥150 million credit limit to cover both monies already advanced to Mr Guo and monies which might be advanced in future. At the time Mr Guo owed him money, but less than ¥150 million.
Mr Hong agreed that at the time the loan was unsecured, and there was nothing in the Loan Contract about Mr Guo providing any form of security. Mr Hong denied counsel’s suggestion that the Contract had been entered into at the request of the Baita Company’s shareholders. He also denied that Mr Guo told him that he (Mr Guo) would agree to sign a written loan agreement if Mr Hong also signed an agreement covering the monies which Mr Guo had lent him. Counsel did not pursue Mr Hong’s motivation for entering into the Loan Contract any further.
So far as the Supplementary Contract was concerned, Mr Hong effectively repeated his affidavit evidence. He said that Mr Guo was behind on payments and “strapped” for funding and he (Mr Guo) was asked to increase the line of credit. He said that he thought that the transaction was risky and required pledges by way of security. He increased the limit by ¥100 million but made no change to the interest rate. Mr Hong acknowledged that the Supplementary Contract itself did not mention any security, but said that Mr Huang had separately provided a pledge over the 10% of the Baita Company’s shares held by Mr Huang on Mr Guo’s behalf. Counsel did not put to Mr Hong Mr Guo’s allegation that no money was owed at the time and the Supplementary Contract was entered into at Mr Hong’s request so as to bolster the Baita Company’s credibility as a lender.
Counsel next asked Mr Hong about the payments from Tongxinglong to Heshunteng ([75] above). Mr Hong maintained that he controlled Tongxinglong and denied that the payments between it and Heshunteng were made pursuant to some arrangement separate from the Loan Account between himself and Mr Guo.
In this connection, counsel pointed out that Heshunteng was not referred to in the first commissioned payment notice and only appeared in the second commissioned payment notice of May 2014. Counsel suggested that payments to Heshunteng were only part of the Loan Account from the date of the second Notice onwards. Mr Hong initially appeared to agree but then said that Heshunteng had been “orally recognised” by Mr Guo as a payee before the Contract was signed. He said that he was provided with the details of the account “on the spot” and made payments to Heshunteng even though a formal “line of credit” was not in place at the time.
Counsel put to Mr Hong Mr Guo’s allegations that he (Mr Guo) had made loans to Mr Hong, and from time to time Mr Hong had been indebted to him. Mr Hong denied these allegations. He said that the payments made by Mr Guo were repayments and he had never owed Mr Guo money.
Counsel then put to Mr Hong a narration on a bank record for one of the payments in his payment schedule. The payment in question was made on Mr Hong’s behalf to Mr Guo. The narration described the transfer as a “repayment”. Mr Hong said that this transfer would have been made by Mr Zhang on his behalf and the reference to a “repayment” must have been a slip. He maintained that he had never owed Mr Guo any money.

Mr Hong referred to Mr Guo’s description of the meeting with Mr Hong in which he signed the Confirmation Letter. Mr Hong described this description as a “falsification”. He specifically stated that it was untrue that the Confirmation Letter was signed on 28 July 2015.
Mr Hong’s July 2022 affidavit was accompanied by affidavits from Mr Qin Xiao Zhang (see [33] above) and Mr Hong’s accountant or bookkeeper, Mr Ying Ling Zhang. Mr Qin Xiao Zhang’s affidavit was brief. He deposed that he was present at a meeting at Mr Hong’s office in Shenzhen on 30 July 2015 at which Mr Guo “signed and issued” the Confirmation Letter. He did not say anything about what was actually said at the meeting.
Mr Ying Ling Zhang’s affidavit was likewise brief. He deposed that on 30 July 2015, by arrangement between Mr Hong and Mr Guo, he had a telephone discussion with Ms Xie for the purpose of reconciling the Loan Account and determining a final outstanding figure for the amount owed by Mr Guo to Mr Hong. He and Ms Xie undertook this reconciliation and confirmed a figure of ¥160 million for outstanding principal, plus (unspecified) interest. Mr Zhang did not claim to have been present at the meeting when the Confirmation Letter was itself signed.
In his December 2022 affidavit ([69] above), Mr Guo replied to the affidavit evidence of Mr Hong, Mr Qin Xiao Zhang and Mr Ying Ling Zhang. He denied that the meeting at which the Confirmation Letter was signed took place at Mr Hong’s office. He maintained instead that the meeting took place, following a meeting with Mr Zhou at his own home, on 28 July. He specifically deposed that he remembered Mr Hong coming to his home after he signed an agreement with Mr Zhou.
Mr Guo also denied that Mr Qin Xiao Zhang was present at the meeting, and denied that it took place on 30 July 2015. He specifically deposed that he was in Guangzhou on 30 July. He denied further that he directed Ms Xie to conduct an account of reconciliation with Mr Ying Ling Zhang in July 2015.
In Ms Xie’s December 2022 affidavit ([70] above), she deposed that in June 2015 Mr Chen assigned her to other tasks within the NNF companies. As a result, she did not conduct an account reconciliation with Mr Zhang on 30 July 2015.
In Mr Hong’s October 2023 affidavit ([73] above), he made a further reply. He joined issue with Mr Guo about the date and location of the meeting at which the Confirmation Letter was signed. He also denied that he had given Mr Guo to understand that he would not pursue the liabilities acknowledged by Mr Guo in the Letter. He deposed that he told Mr Guo that if no repayments were received he would take legal action, and he continued to demand payment following the signing of the Letter on 30 July 2015. After discussion, Mr Guo agreed to sign the Supplementary Agreement.
In reply to Ms Xie’s affidavit, Mr Hong denied that, so far as he was aware, Ms Xie’s responsibilities changed in June 2015. He deposed:

Counsel for Mr Hong began his cross-examination of Mr Guo about the Confirmation Letter by exploring the circumstances which led up to it. Counsel asked Mr Guo whether in mid-2015 his companies were experiencing financial problems. Mr Guo agreed that there was “a bit of difficulty”. He maintained, however, that he did not default on bank obligations or have proceedings commenced against him until mid-October.
Counsel asked Mr Guo about the account he had given in his affidavit evidence, in which he deposed that the Confirmation Letter was signed on 28 July (not 30 July, as dated), immediately after signing an agreement with another business associate, Mr Chulong Zhou earlier that day, and immediately after being discharged from hospital. Mr Guo confirmed that he had been in hospital in Guangzhou where he had been diagnosed with cancer, or potentially with cancer. He said that he spent two weeks in hospital, although later he said that it might have been only about one week he said that he was “100% sure” that he had been in hospital in Guangzhou on 28 July.
Counsel suggested that if Mr Guo had been in hospital for a week or so before 28 July he must have been in hospital at all times from 23 July onwards. Mr Guo then said he was not sure; he explained in the end he did not need to have a major operation and the problem was dealt with by keyhole surgery. Nevertheless, he accepted counsel’s suggestion that he must have been in hospital for a period of time before the 28th of July.
Counsel then produced Australian departure and arrival records which demonstrated that Mr Guo had flown to Australia and arrived on 25 July, and had then left again on 27 July. Mr Guo sought to explain this by saying that he had been in hospital in Guangzhou on 20 July when he had been informed of the possibility of cancer. He then travelled to Australia to tell his ex-wife about the diagnosis and to ask her to return to China with him which he did. He insisted that he was in Guangzhou on 28 July, although he said that he may in fact have had the operation in early August. He said that he asked his Chinese lawyers to try and get hospital records to confirm this but did not explain why that had not occurred.
Mr Guo accepted that, on his evidence, he signed two agreements on 28 July but they were dated on different dates. But he insisted that this had been so. He repeatedly stated that he had no reason to make it up. He could readily have accepted that the Confirmation Letter was signed two days later, but he insisted that he clearly remembered the documents being signed on the same date and this was how he knew that the Letter had been signed on 28 July, not 30 July.
Counsel had Mr Guo read the Letter in Court and he did so, agreeing that the Letter was straightforward and took him a short period of time (less than a minute) to read. He agreed that he understood that the Letter said that he owed Mr Hong money. He said, however, that its purpose was to protect his assets and the numbers in it were not genuine. He agreed with counsel that he did not ask any questions about the content of the Letter, but said that Mr Chen had already talked to him about it beforehand.
When asked how signing the document would protect his interests, Mr Guo identified four assets, allegedly worth ¥400 million, which, it seemed, would pass to Mr Hong’s control. The fourth of these assets was the loan which Mr Guo had allegedly made to Mr Hong himself, which Mr Guo put at ¥100 million plus. He acknowledged that he had not previously given this explanation in his affidavit evidence.
Counsel next asked Mr Guo about the Supplementary Agreement of 30 August, providing for disputes about the Loan Contract to be resolved by proceedings in the Shenzhen Court. Counsel suggested that this Agreement did not make sense if the Confirmation Letter had been designed to protect Mr Guo’s assets, eliciting the following response:

Counsel then turned to the Supplementary Agreement of 30 August. Mr Hong said that he had his son, who was studying in Sydney, take the document to Mr Guo, who was in Sydney at the time, and obtain Mr Guo’s signature. Mr Hong’s son then sent the agreement back to him by mail, whereupon Mr Hong signed it. Mr Hong accepted therefore that it was not signed by him until some time after it was actually signed by Mr Guo.
Mr Hong denied counsel’s suggestion that the purpose of the Agreement was to protect Mr Guo’s assets from creditors. He explained that it was more favourable for him to sue in the Shenzhen Court (rather than bring arbitration proceedings in Shenzhen, as had previously been provided) because that would allow him to recover court costs against Mr Guo.
Counsel questioned Mr Hong on the meeting which Mr Hong claimed to have had with Mr Guo in mid-October 2015. When asked where the meeting was held, Mr Hong said that it was at “the canteen” but his memory was “fuzzy” about exactly where. It was definitely not, as counsel suggested, at a property owned by Mr Guo. By then, according to Mr Hong, Mr Guo was in hiding from his creditors.
Mr Hong confirmed that the use of Mr Guo’s villa ([134] above) was discussed. Mr Hong said that, owing to Mr Guo’s default, his own business was short of money and could not afford to continue the rent on its office. He said it was agreed that he could use Mr Guo’s villa instead. He added, however, that he also told Mr Guo that he would be suing him. Mr Hong rejected counsel’s suggestion that there had been discussion about Mr Guo’s other creditors at the meeting. In particular, he said that the idea that Mr Guo wanted Mr Hong to pay money that he (Mr Hong) owed to Mr Guo so that Mr Guo could then pay his creditors was “bullshit”.
Consistently with Mr Guo’s evidence, his counsel suggested to Mr Hong that the meeting which Mr Hong claimed to have taken place in Hong Kong shortly before Mr Guo left for Australia had not occurred. Mr Hong disagreed. He said that he remembered the meeting “vividly”. He maintained that he had told Mr Guo at the meeting that he would be suing him. He also said that he urged Mr Guo to stay in China and work through his financial troubles but Mr Guo refused. He said Mr Guo by that stage owed more than ¥400 million to various creditors, including himself.

According to the expert evidence, which was not in dispute, under Chinese law, once the Shenzhen Court accepted the filing of Mr Hong’s claim, it became the responsibility of the Court (and not Mr Hong) to arrange for service of the Court documents on the defendants. In this regard, the records of the Court which are in evidence establish the following.
The Court sent Mr Guo’s documents, addressed to him, to the Baolian Village address. On 14 December delivery was attempted, but was unsuccessful and the documents were returned undelivered.
The Court sent SNGO and NNF’s documents, both addressed to “the person in charge”, to the Union Square address, where they were both delivered on 11 December and accepted by “Tang Li”. In cross-examination, Ms Guo identified Tang Li as a clerk in Mr Guo’s Shenzhen office who worked for Ms Guo until Ms Guo left in about October 2015.
The Court also sent a set of NNF’s documents, addressed to Mr Guo (presumably as public officer, see [150] above) at Union Square. Delivery was attempted on 23 December and again on 30 December, but on each occasion was unsuccessful.
There are records of further sets of NNF’s and SNGO’s documents being delivered at Union Square on 6 January and accepted by Tang Li.
Following the return of the documents addressed to Mr Guo, the information about Mr Hong’s claim against him was published in a court bulletin issued by the Court on 13 January. It is not in dispute that, by this means, process was effectively served upon Mr Guo under Chinese law.
The evidence in support of Mr Hong’s claim included numerous witness statements from nominees of Mr Hong who had made payment on his behalf. They deposed to having made specified payments to one or other of Mr Guo’s nominees by way of loan from Mr Hong to Mr Guo. In total there were 47 payments from 12 different nominees of Mr Hong, totalling ¥174.5 million. All of the payments were made after the date of the Loan Contract. There was no reference in the evidence to repayments by Mr Guo.
The statements included one from Mr Ying Ling Zhang, made in April 2016. He deposed to having made 16 payments to nominees of Mr Guo between August 2013 and February 2014, which totalled ¥60.3 million. As with the other statements, Mr Zhang’s statement did not refer to any repayments he had received.
The hearing took place in the Shenzhen Court in April 2016. The Court was constituted by three judges: Presiding Judge Lai; Judge Li; and Acting Judge Yi. After the evidence had been presented, there occurred what was described in the transcript as the “court investigation” stage, in which the judges asked questions of Mr Hong’s counsel. Mr Hong’s attorney then submitted that the claims made in the statement of claim (to the extent pressed; the claim for costs was abandoned) were made out. The judges then retired to consider their decision.
Early in the hearing Mr Hong’s attorney was asked about how the claimed debt was made up:

Mr Guo agreed with counsel that he had not called evidence from Mr Huang or from his niece Ms Li Min Guo. He also accepted that he had never returned to mainland China after leaving in October 2015, but denied that this was because he was not prepared to face up to the consequences of his actions. In re-examination, he said that Mr Huang was in China and had fallen out with him. Ms Li Min Guo was also in China, although Mr Guo did not offer any further reason for failing to call her as a witness. He said that he had decided never to return to China until justice had been done on Mr Chen.
Counsel for Mr Guo cross-examined Mr Hong on his involvement in the Shenzhen Court proceedings. Mr Hong said that the proceedings were conducted on his behalf by lawyers. He instructed the lawyers and helped with the preparation of some of the documents. He did not attend the proceedings. He also spoke to the witnesses who were called on his behalf in the proceedings. He did not, however, see their witness statements nor did he tell them what to include in those statements.
At a later point, Mr Hong was shown a list of the witnesses who were called on his behalf in the Chinese Court proceedings. He said that he was not responsible for selecting them and received advice from a lawyer on this question.
Counsel referred to the statement made by Mr Ying Ling Zhang in the Shenzhen Court proceedings. Counsel put to Mr Hong that the statement did not include any of the repayments made by Mr Guo to Mr Zhang, and that it referred only to some of the payments made by him to Mr Guo. Mr Hong appeared to accept this but said that the Confirmation Letter made it unnecessary to include repayments by Mr Guo, or all of the payments made by him.
In the same vein, counsel put to Mr Hong that he failed to tell the Shenzhen Court about the payments totalling ¥548.9 million which he claimed in these proceedings to have made to Mr Hong. Mr Hong agreed that he had not given this figure to the Shenzhen Court. But he said that it had not been requested by the Court and also again relied on the Confirmation Letter as a form of account stated. For similar reasons, he said that it was unnecessary to produce to the Court the reconciliation sheet upon which the Letter had been based.
Counsel suggested that the reason for failing to mention this figure was that it included the Tongxinglong-Heshunteng payments, and those were the subject of a separate arrangement. Mr Hong rejected this suggestion. Mr Hong referred to the “rolling basis” of his dealings with Mr Guo and accepted counsel’s suggestion that he was saying that this meant that the payments had effectively been repaid.
Finally, counsel suggested that he knew at the time of the proceedings that the Confirmation Letter did not reflect his true financial position vis a vis Mr Guo. Mr Hong rejected this. He said that the financial position was clearly reflected in the Letter.
Mr Hong agreed with counsel that following Mr Guo’s departure for Australia he still had Mr Guo’s telephone number and could therefore have told Mr Guo about the Shenzhen Court proceedings. In particular, counsel suggested he could have sent Mr Guo a text message. Mr Hong said that he did not send a text message to Mr Guo, but did tell him about the proceedings on the telephone and on WeChat. Indeed, he said that he sent a copy of the judgment to Mr Guo on WeChat, but said that he was unable to locate his WeChat records from that period.
Counsel responded by suggesting that Mr Hong could have sent the Court documents to Mr Guo by WeChat when the proceedings were first begun. Mr Hong said this had not occurred to him because he knew the Shenzhen Court had notified Mr Guo. He accepted, however, that he understood that the notification would have been sent to Mr Guo at an address in China where he was no longer living.
Counsel suggested that at the meeting in Hong Kong in early 2017 Mr Hong told Mr Guo that he was owed money by the two people Mr Guo had identified in his evidence ([182] above). Mr Hong said that he did not discuss other borrowers’ affairs with Mr Guo. The discussion was confined to the dealings between himself and Mr Guo. He acknowledged, however, that the two individuals did in fact owe him money (he said more than ¥70 million) at the time. The cross-examination continued:

Mr Hong said that later, at the meeting, Mr Guo offered him ¥20 million which he turned down.
Counsel next cross-examined Mr Hong about the Loan Repayment Agreement of March 2017. Mr Hong agreed that the arrangement under which the shares in the Baita Company would be transferred to him before he and Mr Guo agreed on the amount which was owing was unusual. He said, however, that the shares were not in fact transferred to him.
Counsel put to Mr Hong that there was no prior pledge arrangement as recounted in the Loan Repayment Agreement. Mr Hong disagreed, repeating that a pledge agreement had been signed in May 2014 when the Supplementary Contract was signed.
Counsel asked Mr Hong why, if Mr Huang had failed to transfer the shares, Mr Hong had not sued him. Mr Hong replied that it would be useless to sue Mr Huang because he had been “scammed out” of his only property by Mr Guo. If Mr Hong had sued him, it would simply have been a waste of costs. Mr Hong suggested that this was the explanation for the antipathy between Mr Huang and Mr Guo.
At this point in the cross-examination, a document in Chinese was tendered and translated. From the description given by the interpreter, it seems that the document was some sort of share receipt issued by the Baita Company. Counsel suggested that the document showed that Mr Hong had in fact obtained the shares in the Baita Company, but Mr Hong disagreed, claiming that Mr Huang had to cooperate and had refused to do so.
By this stage a copy of the Pledge Contract had also been obtained and tendered. Mr Hong acknowledged that the document had not been produced in the Shenzhen Court proceedings and had not been produced at an earlier stage of the present proceedings. He suggested that it had been overlooked and pointed out that the eventual production of the document was a point in his favour.
Finally, counsel asked Mr Hong about the evidence given by Mr Qin Xiao Zhang and Mr Ying Ling Zhang about the preparation of their affidavits. Mr Hong insisted that the affidavits had been prepared by his lawyers, he did not give the drafts to the witnesses and did not know whether they had requested any changes before they signed those affidavits.

Counsel for Mr Guo identified two factual issues for determination. The first concerned Mr Guo’s claim that the Shenzhen judgment had been procured by fraud. Counsel pointed out that the only evidence before the Shenzhen Court which supported the quantum of the judgment given was the Confirmation Letter. Accordingly, the critical question was whether the Letter was, to Mr Hong’s knowledge, a sham.
The second issue arose under Mr Guo’s natural justice defence. The question was stated by counsel as being whether Mr Guo “had actual notice of the proceedings prior to the Shenzhen Court delivering its judgment” and, if he did not, “what responsibility” Mr Hong bore for that state of affairs.
For the purposes of determining these factual issues, the credibility of the relevant witnesses’ evidence on those issues was, naturally, a relevant consideration. There were also submissions dealing with the credit of Mr Guo and Mr Hong more generally. I will set out the submissions on the two factual issues (including credit submissions specific to those issues) and deal with the general credit submissions after I have done so.
Fraud defence**:** In support of his submission that the Confirmation Letter was a sham, counsel for Mr Guo made several separate points. I will summarise them in a slightly different order from counsel’s.
Counsel first pointed out that the Confirmation Letter did not bear a serial number of the type found on other Loan Documents. Counsel acknowledged that this, on its own, was a small point, but submitted that it suggested that the Letter had not been drafted in the same manner as the other Loan Documents. It was, counsel suggested, consistent with Mr Guo’s evidence that Mr Chen had had a hand in drafting it.
Counsel’s second contention was that it would not have made commercial sense for Mr Guo to sign the Confirmation Letter if it meant what it said. There was no advantage, counsel submitted, for either party. It was unnecessary from Mr Hong’s point of view, because if there was an amount outstanding it could be proved from the banking records. And if, as Mr Hong claimed, Mr Guo was desperately in debt, there was no benefit to him in signing the document.
In fact, counsel submitted, it would have been “commercially irrational” for Mr Guo to have signed the Confirmation Letter. There was no benefit to him in giving additional security being offered in the form of guarantees from NNF and its subsidiaries. Nor was there any benefit to him in pledging his shareholding in the Yingkou Company. Indeed, the pledging of those shares was said to support Mr Guo’s account because it would have been a means of protecting them from creditors.
Counsel next criticised Mr Hong’s evidence about the signing of the Confirmation Letter. In the first place, counsel pointed out that in his affidavit evidence, Mr Hong did not offer any account of the conversation at the meeting at which the Letter was signed. Counsel submitted that this, of itself, gave rise to an inference that his evidence would not assist his case (Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418-419).
Counsel noted that Mr Hong did, when asked about it in cross-examination, describe what had happened on the day on which the Letter was signed. But counsel submitted that his version of events was not credible.
Counsel fastened on the sequence of events which he put to Mr Hong in cross-examination and which Mr Hong initially appeared to accept ([138] above). That involved Mr Hong first looking at a reconciliation sheet supposedly provided by Mr Zhang. Next Mr Hong gave instructions to his lawyers to prepare the Letter with the figure obtained from that sheet. And third, on the same day, he gave the Confirmation Letter to Mr Guo for him to sign.
Counsel submitted that this account could not possibly be correct. Mr Hong could not have given instructions about the preparation of the Letter without speaking to Mr Guo first. Otherwise, he could not have known that Mr Guo was prepared to offer the further security in the form of company guarantees and the pledge of the shares in the real estate company. Counsel submitted that, given the precision of what was initially put to, and accepted by, Mr Hong, his later claim that there had in fact been a prior discussion between him and Mr Guo about the terms of the Letter could only have been incorrect, and damaging to his credit.
Fourthly, counsel criticised Mr Ying Ling Zhang’s evidence on the subject. Counsel made five points.
Counsel submitted that it was quite clear from the evidence given by Mr Zhang in cross-examination that his affidavit had been prepared for him by Mr Hong and he had not brought any independent recollection to bear on its content. Counsel characterised Mr Zhang as merely having acted, in the affidavit, as Mr Hong’s mouthpiece. The same was so for Mr Zhang’s statement in the Shenzhen Court proceedings.
It was notable, in counsel’s submission, that Mr Zhang gave no evidence in his affidavit about the internal records, in the form of “statements” of the running balance of the Hong-Guo loan account, which he was responsible for keeping, according to Mr Hong’s evidence. Nor were any such statements produced or tendered in these proceedings. Counsel submitted that this should result in a Jones v Dunkel inference being drawn that the statements would not have supported Mr Hong’s case. Orally, counsel expanded this submission to cover the reconciliation sheet which Mr Hong said had been generated for the purposes of the Confirmation Letter on 30 July 2015.
It was also remarkable, in counsel’s submission, that Mr Zhang did not mention in his affidavit the statement he had earlier made to the Shenzhen Court. Counsel submitted that the explanation for this was probably that, according to Mr Zhang’s evidence in cross-examination, he had followed essentially the same process in preparing his statement in those proceedings that he followed in preparing his affidavit in these proceedings. Furthermore, Mr Zhang had been unable to explain satisfactorily why his statement had referred to only some of the payment he had made on Mr Hong’s behalf, and not to the payments he had received.
Counsel also noted that Mr Zhang’s evidence was inconsistent in some respects with that of other witnesses. His claim that the reconciliation on 30 July 2015 had been undertaken with Ms Xie was inconsistent with her evidence. Counsel submitted that Ms Xie’s evidence had been only perfunctorily challenged in cross-examination and should be accepted; Mr Zhang must have been mistaken. And his claim in cross-examination that he did not actually produce a reconciliation sheet for Mr Hong was inconsistent with Mr Hong’s own evidence.
Mr Zhang’s manner of giving evidence was also, according to counsel, unsatisfactory. Counsel referred to repeated passages in his evidence where he batted off specific questions about the Loan Account by saying that the figure had been agreed in the Confirmation Letter. Counsel also noted Mr Zhang’s evidence in cross-examination that, although he had not kept a written record of the result of the reconciliation he was able to recall precisely that the exact amount of principal (¥160 million) and the exact amount of interest (¥25,700,250) supposedly owing.
Counsel submitted, having regard to these matters, that Mr Ying Ling Zhang’s evidence insofar as it purported to support Mr Hong’s case could not be accepted. Counsel did, however, note that in his affidavit Mr Zhang had stated that Mr Chen had knowledge of the reconciliation supposedly performed on the day the Confirmation Letter was signed. This, in counsel’s submission, was “not inconsistent” with Mr Guo’s claim that it was Mr Chen who had been responsible for the creation of the Letter for the purpose of defrauding Mr Guo’s creditors.
Fifthly, counsel addressed Mr Qin Xiao Zhang’s evidence. Counsel acknowledged that Mr Zhang was also present at the meeting with Mr Guo and gave evidence as part of Mr Hong’s case. But that evidence did not go very far. Mr Zhang said nothing about the content of the conversation. All his evidence did was to confirm that Mr Guo signed the Confirmation Letter (which was not in dispute) and support Mr Hong’s evidence as to where, and on what date, the meeting took place (which, in counsel’s submission, was not of any great importance).
Counsel accepted that Mr Zhang contradicted Mr Guo’s evidence that Mr Chen was present when the Letter was signed and that he (Mr Zhang) was not, and adhered to that evidence in cross-examination. But counsel submitted that the weight of that evidence was “fatally undermined” because of Mr Zhang’s evidence in cross-examination that the affidavit was originally prepared by Mr Hong and he signed it without requesting any changes. Counsel submitted that, like Mr Ying Ling Zhang, Mr Qin Xiao Zhang was no more than a mouthpiece for Mr Hong.
Finally, counsel argued that there were discrepancies between the ¥160 million figure for Mr Guo’s debt to Mr Hong recorded in the Confirmation Letter, on the one hand, and Mr Hong’s payment schedule with its supporting bank records, on the other. Counsel made three general points. In the first place, the schedule balance did not reconcile precisely with the round figure in the Letter. Secondly, of the ¥570 million in payments in the schedule, a substantial amount (¥141 million) was paid before the original Loan Contract was signed. Thirdly, the payments in the schedule which had been relied upon in the Shenzhen Court proceedings totalled only ¥135 million).
Incidentally, however, some of the supporting bank records did, in counsel’s submission, provide some support for Mr Guo’s claims about the previous dealings between the parties. He made two points.
Many of the notations on the bank records contained Chinese characters which had originally been translated as “transfer” but which both parties’ interpreters agreed were better translated “funds back and forth”. According to counsel, this supported Mr Guo’s contention that there was a running account between the parties, with Mr Guo sometimes owing Mr Hong money and vice versa.
Counsel also pointed to one transfer record which described the relevant payment from Mr Hong to Mr Guo as a “repayment”. Counsel argued that the use of the term “repayment” was significant and supported Mr Guo’s evidence that from time to time it was Mr Hong who owed Mr Guo money.
Counsel however focussed most of his submissions on the Tongxinglong-Heshunteng payments ([75] above). There were 22 such payments in Mr Hong’s payment schedule, totalling ¥166.2 million, and no repayments to Tongxinglong (from Heshunteng or any other nominee of Mr Guo). Counsel acknowledged that Heshunteng was an authorised recipient for Mr Guo under the second commissioned payment notice of May 2014, but pointed out that only four of the 22 payments were made after that date. If all 22 payments were ignored, the Hong-Guo loan account would have been roughly in balance as at 30 July 2015. Counsel invited me to conclude that this was the true financial position between the parties.
As already noted, the allegation that the Tongxinglong-Heshunteng payments did not “belong” to the loan account first arose in Mr Guo’s cross-examination. Counsel submitted that Mr Guo’s oral evidence on this subject should be preferred to that of Mr Hong. He advanced various reasons.
Counsel referred to Mr Ying Ling Zhang’s evidence in cross-examination that he knew nothing about Tongxinglong apart from the fact that it had made payments to one or more of Mr Guo’s nominees. Counsel submitted that it would have been unlikely for Mr Zhang, placed as he was, not to have known whether payments from Tongxinglong to Heshunteng part of the Hong-Guo loan account.
Counsel noted that, when asked about the updated commissioned payment notice of May 2014, Mr Hong initially said that payments made after that date were to be included in the loan account. But when it was pointed out to him that most of the transfers had taken place prior to that date, he said that prior payments should also be included. Counsel submitted that this change in evidence lacked credibility.
Counsel pointed out that the Tongxinglong payments did not feature in the evidence before the Shenzhen Court. As counsel put the point, those payments had not been subject of a claim in the Shenzhen Court proceedings, even though, on the face of it, they had never been repaid.
By contrast, Mr Hong did include in his claim in the Shenzhen proceedings payments made by a different company, Shenzhen Jixiingbai Trading Corporation. Notably, these payments were all made after the revised commissioned payment notice of May 2014 had first included Heshunteng as an authorised recipient of funds.
Counsel noted that Mr Guo had also said that the payments to Mr Chuxiang Zhang did not “belong” to the Hong-Guo Loan Account ([80] above). According to counsel’s calculations, the payments by Mr Zhang totalled ¥19.5 million. If those payments were excluded, the balance on the account would be approximately ¥18 million in Mr Guo’s favour.
Counsel submitted that, as the only evidence before the Shenzhen Court to support the judgment came from the Confirmation Letter, it was only necessary, to sustain Mr Guo’s fraud defence, to show that the ¥160 million figure in the Confirmation Letter was false to Mr Hong’s knowledge. Even if Mr Guo in fact owed money to Mr Hong as at 30 July 2015 that would not be fatal to the fraud defence so long as the amount was “materially” less than ¥160 million.
Counsel submitted, therefore, that it was essential from Mr Guo’s point of view for the Court to resolve in his favour the conflicts of evidence between Mr Guo and him about the prior state of the Loan Account between them, and the circumstances in which the Loan Contract and the Supplementary Contract were signed. But if the Court felt it necessary to go into the question, Mr Guo’s version of events should be preferred.
Apart from (I presume) relying on his submissions as to the relevant creditworthiness of Mr Guo and Mr Hong generally, counsel submitted that it was clear from the Contracts that they were “incomplete as a record of the agreement between the parties” and “did not govern the entirety” of the parties’ contractual relationship. Counsel made two points.
On Mr Hong’s case, the payments on the Loan Account began in December 2012. Yet the Loan Contract was not signed until more than seven months later, and did not refer to any pre-existing loans. Counsel also noted that none of the payments which predated the loan contract were the subject of evidence in the Shenzhen Court.
The Loan Contract provided for a credit limit of ¥150 million, which was increased to ¥250 million in the Supplementary Contract. But before the Loan Contract was even signed, Mr Hong, according to his payment schedule, made ¥141 million in advances to Mr Guo, and by the time the Supplementary Contract was signed, that figure had increased to ¥474 million.
Counsel for Mr Hong began their response by addressing the onus of proof and the degree of proof required. The onus was on Mr Guo. And I had to be satisfied that the Confirmation Letter, which was apparently entirely regular on its face, was actually a sham. I would have to find that the Letter had been signed by Mr Hong as part of a scheme to defraud Mr Guo’s creditors, and presented to the Shenzhen Court by Mr Hong with full knowledge that the debt recorded in it was false. Counsel submitted that the gravity of these allegations demanded strict and convincing proof: Briginshaw v Briginshaw (1938) 60 CLR 336; Evidence Act 1995, s 140(2).
Counsel submitted that the six Loan Documents, on their face, told a clear story which made perfect commercial sense. To accept Mr Guo’s account of events I would have to accept that the Documents did not reflect the reality of the dealings between the parties. The Confirmation Letter was the clearest example of this; on Mr Guo’s version of events it was a complete sham. But counsel also pointed out that, on Mr Guo’s account, the other Loan Documents did not truly, or at least completely, represent the true position either.
Counsel submitted that there was no contemporaneous documentary evidence whatsoever to corroborate Mr Guo’s story. Nor was there any corroborating evidence from Mr Huang or from Mr Chen, the supposed mastermind of the scheme. Mr Guo had sought to explain the absence of Mr Chen by alleging that Mr Chen had been double-crossing him all along, but there was no independent corroboration for this either. Again, all I had was Mr Guo’s word to go on.
Counsel launched a wide-ranging attack on the credibility of Mr Guo’s story. This involved several different points, which can be summarised as follows.
Mr Guo’s claim that he only began to experience financial difficulties shortly before signing the Confirmation Letter was not credible. So too was his claim that, at the time, it was Mr Hong who owed him money. In fact, Mr Guo had signed the Supplementary Contract providing for an extension of his loan facility from Mr Hong as early as May 2014. Counsel submitted that I should not accept Mr Guo’s attempt to explain this away as having been, in effect, window-dressing for the benefit of Mr Hong.
Furthermore, Mr Guo had at the same time pledged the shares in the Baita Company held on his behalf by Mr Huang. Counsel asked why he would have done this if, as he claimed, it was only later that he fell into financial difficulty and decided to have Mr Hong warehouse his assets.
Counsel also noted that in his affidavit evidence Mr Guo said nothing about the individual loan transactions; it was only in cross-examination that he claimed that some of the payments were not properly part of the loan account.
The story in Mr Guo’s affidavit about the Letter being signed immediately after he had been discharged from a period in hospital (including his insistence that the Letter had in fact been signed on 28 July, rather than the date which it bears, 30 July) had been falsified by the tender of Mr Guo’s travel records at trial. His attempt to explain himself in cross-examination was, in counsel’s submission, totally unconvincing: it only raised further questions.
Furthermore, in counsel’s submission, the “scam” described by Mr Guo did not make any sense. Mr Guo’s shares in the Baita Company were already held for him by Mr Huang. How would pretending that Mr Hong had security over them make them any safer? And if, as Mr Guo claimed, Mr Hong was indebted to him and unable to repay, how could he possibly have seen Mr Hong as a safe person to warehouse his assets?
The way in which the story developed was also, in counsel’s submission, telling. As it eventually developed, the supposed plan to protect Mr Guo’s assets involved not only the Confirmation Letter, but also the Supplementary Agreement allowing Mr Guo to sue in the Shenzhen Court and the 2017 Debt Repayment Agreement (as it had to, because the latter Agreements were wholly consistent with the Confirmation Letter). Yet in Mr Guo’s affidavit he only made the briefest of references to the Letter having been for the protection of his assets, and did not refer to the later Agreements at all. The full story only emerged in cross-examination when he was confronted with the difficulties in his account of the lead-up to signing the Letter, and with the terms of the later Agreements.
Counsel submitted that there was nothing commercially strange or suspicious about the terms of the Confirmation Letter. In fact, in counsel’s submission, it fitted perfectly with the earlier and later Loan Documents.
In particular, counsel submitted that the grant of further security in the form of guarantees and a pledge of the shares in the Yingkou Company fitted squarely into the pattern of Mr Guo having fallen into increasing debt which he was unable to repay. The lack of a serial number on the Confirmation Letter was a trivial detail.
Counsel added that the money flowing between the parties, as set out in the schedule of payments, contradicted Mr Guo’s claim that he was a lender to Mr Hong. Counsel made four points.
At the time the Loan Contract was signed in August 2013, Mr Guo was indebted to Mr Hong overall. This was more consistent with Mr Hong’s explanation for how the Contract came to be signed than Mr Guo’s.
Again, at the time the Supplementary Contract was signed in May 2014, Mr Guo was indebted overall to Mr Hong. Apart from supporting Mr Hong’s case that Mr Guo was always a borrower, this specifically contradicted Mr Guo’s evidence that he owed no money to Mr Hong at the time and the increase was for Mr Hong’s own purposes.
All the transactions on the payment schedule between November 2014 to July 2015 were repayments by Mr Guo to Mr Hong. This was consistent with Mr Guo making partial repayments of existing loans. And it was inconsistent with Mr Guo’s evidence that, at least at the end of the period, his business was experiencing cashflow difficulties. In those circumstances it would have not made sense for him to be making advances to Mr Hong.
The total figure owing as at the date the Confirmation Letter was signed (if the Tongxinglong-Heshunteng payments were included) was ¥167.9 million. This was consistent with the statement by Mr Hong’s attorney to the Shenzhen Court that the ¥160 million figure in the Letter involved an agreed compromise.
Counsel submitted that the narrations in the payment records relied upon by counsel for Mr Guo did not go far enough to establish the contrary. The phrase “funds back and forth” was quite consistent with the fact that there was a running account; it did not demonstrate that Mr Hong was the borrower overall or indeed at any particular time. And while the reference to “repayment” in one of the narrations, on its own, might have suggested that Mr Hong was indebted to Mr Guo at the time of that payment, there were 280 payments in total. No other similar entry had been identified. Counsel submitted that in the circumstances the single reference to “repayment” was likely a mistake.
Counsel submitted that it was crucial to Mr Guo’s case for me to accept that the Tongxinglong-Heshunteng payments were not part of the account between Mr Hong and Mr Guo for the purposes of the Loan Contract, and I should not accept that contention. Counsel made five main points.
Mr Guo gave no evidence to justify the conclusion that contractually the payments in question did not fall within the Hong-Guo loan account. Counsel submitted that this was not a matter for Mr Hong to deal with in his evidence. Mr Guo bore the onus. He could, and should, have gone into detail in his affidavit.
Heshunteng was expressly nominated, by the second commissioned payment notice, as a payee for Mr Guo under the Loan Contract. This showed that payments to Heshunteng did in fact form part of the account between Mr Hong and Mr Guo. The force of this point was not, counsel argued, diminished by the fact that some of the Tongxinglong-Heshunteng payments were made before the date of the second commissioned payments notice. Creating formal documents to reflect what was already happening was apparently part of the parties’ practice. For instance, large payments were made by Mr Hong to Mr Guo even before the arrangement between them was first documented in the Loan Contract. Indeed, in counsel’s submission, the notice effectively operated retrospectively in making Heshunteng an authorised payee under the Contract.
Nor was the failure to refer to the Tongxinglong-Heshunteng payments in the Shenzhen Court proceedings of any significance. The case put by Mr Hong to the Shenzhen Court relied upon the acknowledgement in the Confirmation Letter of a principal liability of ¥160 million. Evidence of individual payments was given only to show that payments totalling at least that figure had been made. It was unnecessary to prove all of the payments.
The fact that Tongxinglong’s payments were only made to Heshunteng, and not any of Mr Guo’s other nominated payees, proved nothing. It certainly did not establish that there was a separate arrangement between Tongxinglong and Heshunteng outside the Loan Contract between Mr Hong and Mr Guo.
Nor was Mr Ying Ling Zhang’s evidence that he was unaware whether Tongxinglong was part of the Loan Contract of any significance. The Loan Contract did not itself identify Mr Guo’s nominees; that was done separately. Furthermore, Mr Zhang was giving evidence on a matter of detail long after the event. It was hardly surprising that he would be unable to recall this sort of detail.
Counsel defended the credibility of Mr Hong’s evidence concerning the Confirmation Letter. They made three points.
No inference could be drawn against Mr Hong for failing to produce copies of periodic account reconciliations. He was not asked whether the records still existed, or to explain why he did not provide the documents to this Court for the purpose of the proceedings. There was no reason to think that the documents were even still in existence; it was more than likely that they were not.
Nor could any adverse inference be drawn on account of Mr Hong’s lack of any detailed evidence concerning the conversations surrounding the Confirmation Letter. The onus was on Mr Guo. Mr Hong responded to him with a denial, and that was all that was required.
The way in which the statements had been prepared in the Shenzhen proceedings, and in these proceedings, did not reflect any discredit on Mr Hong. He deposed clearly that he did not prepare those statements or affidavits; rather, they were provided to the witnesses by his lawyers. There was no reason to disbelieve his evidence on this point.
Counsel also defended Mr Qin Xiao Zhang’s evidence. Counsel again made three points.
Mr Zhang’s evidence was not, as counsel for Mr Guo had suggested, confined to peripheral or immaterial issues. Mr Zhang deposed that Mr Chen was not present when the Confirmation Letter was signed. This was a significant issue in the case. Mr Zhang contradicted Mr Guo’s claim that Mr Chen was there. If Mr Zhang was correct, Mr Guo’s whole story was undermined. Why, counsel asked, would Mr Chen have masterminded the whole plan but not turned up at the meeting to explain it to Mr Guo?
Mr Zhang’s evidence about the circumstances in which he signed his affidavit did not undermine his credit. The affidavit was short and readily comprehensible. It was not suggested to Mr Zhang that he did not understand it when signing it, or that he was perjuring himself to help Mr Hong in the proceedings.
Mr Guo had also claimed in his affidavit that he had come to the meeting directly from hospital and this was specifically challenged by Mr Zhang in his affidavit. Mr Zhang was vindicated when Mr Guo later abandoned his story under cross-examination. In counsel’s submission, this enhanced Mr Zhang’s credibility.
Finally, counsel defended Mr Ying Ling Zhang against the attacks made on him by counsel for Mr Guo. Counsel made several points.
Again, in counsel’s submission, the circumstances in which Mr Zhang’s affidavit was signed did not undermine the credibility of his evidence. The affidavit was short and easy to understand. Again, it was not put to Mr Zhang that the evidence in the affidavit was wrong or mistaken.
There was nothing sinister about Mr Zhang’s failure to refer to the computerised records of the reconciliations. He was not asked about the subject. Nor was there any reason to think that the records were still in existence.
Nor could anything be inferred from Mr Zhang’s failure to mention that he gave evidence in the Shenzhen Court proceedings, or to recall why his evidence in those proceedings referred to some of the payments between the parties but not others. There was no apparent reason why Mr Zhang should have mentioned his role as a witness in the Shenzhen Proceedings. And his failure to recall details of the evidence he gave in those proceedings was hardly surprising.
In reply, counsel for Mr Guo maintained that I should accept Mr Guo’s account of the circumstances in which the Loan Contract and the Supplementary Contract were signed. But counsel repeated that even if I did not do so, that should not affect the result of the case. The Confirmation Letter was the critical Loan Document, as it, and it alone, justified the decision of the Shenzhen Court. In counsel’s submission, if, when bringing the Shenzhen proceedings, Mr Hong knew that Mr Guo did not in fact owe the ¥160 million recorded in the Letter, or at least owed substantially less than that, he was guilty of fraud.
Counsel maintained that there was no apparent commercial justification for the Confirmation Letter. Counsel repeated that the amount of the debt could have been proved by Mr Hong in other ways, and the Letter provided for additional security in the form of the guarantees and the pledge of shares on the Yingkou Company without, in counsel’s submission, “obtaining any corresponding benefit of forbearance”.
Nor, in counsel’s submission, was the challenge to the Confirmation Letter confined to the point about the Tongxinglong-Heshunteng payments. Counsel reminded me of the other arguments challenging the credibility of the Letter. Moreover, counsel submitted that there was an issue about payments to Mr Chuxiang Zhang, which made up ¥19.5 million of the total figure in the payment schedule.
In reply to the point about a lack of evidence from Mr Guo about excluding the Tongxinglong-Heshunteng payments from the Hong-Guo loan account, counsel reminded me of what Mr Guo said in cross-examination on 9 May ([80] above). Counsel submitted that this evidence was spontaneous and believable. At the time, the payment schedule did not contain a running balance as it did in the final version.
Counsel also maintained his contention that other evidence did not support the inclusion of the Tongxinglong-Heshunteng payments, repeating in particular that most of the payments took place before the second commissioned payment notice. Counsel submitted that, as a matter of interpretation and apparent intention, the terms of the notice did not operate retrospectively.
Natural justice defence: Counsel for Mr Guo submitted that he had neither actual notice nor “due notice” of the Shenzhen Court proceedings (as to “due notice”, this concept is discussed below). Counsel’s argument on the facts may be summarised as follows.
Mr Guo’s denial that Mr Hong told him about the impending proceedings before he left China on 24 October 2015 should be accepted. In any event, the dispute between Mr Guo and Mr Hong on this question was “largely irrelevant”. This was because Mr Guo could not have been given “due notice” of the proceedings until after they had been commenced.
The documents sent by post were returned to sender, and there was no reason to think that Mr Guo would have seen the Shenzhen Court’s bulletin advertising the proceedings against him. There was no evidence of any communication to Mr Guo giving him notice of the proceedings.
Mr Hong knew that Mr Guo had gone to Australia. Through a son of his living in Australia he had been able to get the Supplementary Agreement delivered to Mr Guo in Australia for signature in August 2015, only two months before. He did not, however, attempt to send the Shenzhen Court documents to Mr Guo by this means. Nor did he attempt to do so by a messenger service such as WhatsApp or WeChat.
Service of the Shenzhen Court judgment was effected by delivery to Ms Xie, as acknowledged by her, on 5 July 2016. But there was no evidence that the judgment was actually brought to Mr Guo’s attention and “certainly no reason to infer” that this was done within the 15-day period beginning on 5 July allowed for an appeal.
Counsel for Mr Hong submitted that on the evidence it was clear that when Mr Guo left China on 24 October 2015 he was well aware that proceedings against him by Mr Hong were pending. Counsel made the following points.
Two months beforehand, Mr Guo signed the Supplementary Agreement, which provided for proceedings on the Loan Contract to be brought in the Shenzhen Court. In counsel’s submission, the bringing of such proceedings was the whole point of the Agreement. Mr Guo’s explanation in cross-examination that the Agreement was part of the alleged sham was opportunistic and should not be accepted.
Against this background, Mr Hong’s testimony that he told Mr Guo in mid-October that he proposed to sue him (which, counsel submitted, was unshaken in cross-examination) should be accepted.
Counsel further submitted that I should not accept Mr Guo’s evidence that, following the commencement of the Shenzhen Court proceedings on 28 October 2015, he remained unaware of them until the meeting in Hong Kong in 2017. Counsel made the following points.
The Shenzhen Court records showed that the initiating process documents were mailed, and accepted for delivery, by Mr Guo’s three companies.
On his own evidence, Mr Guo remained in contact with Mr Chen after October 2015. It was highly likely, in counsel’s submission, that Mr Chen or those still working for Mr Guo’s business and reporting to him would have advised Mr Guo of the proceedings.
Mr Guo or those working for him continued to maintain a presence at Union Square near the former office of his companies under the control of Mr Guo’s niece, Li Min Guo. There appeared to have been regular visits to the office by lawyers to collect papers, and the papers collected would presumably have included the Shenzhen Court judgment against Mr Guo, which had been collected by Ms Xie. It was highly improbable, in counsel’s submission, that news would not have reached Mr Guo about the judgment through those sources.
Mr Guo called no evidence from Mr Chen or from Ms Li Min Guo, or from the lawyers who were involved in retrieving documents from the premises at Union Square. Mr Guo only attempted to explain the failure to call evidence from Mr Chen, and, as already noted, counsel pointed out that the explanation offered (that Mr Chen was double crossing Mr Guo) was based solely on Mr Guo’s own assertions and lacked corroboration from any independent source.
Mr Hong said that he expressly mentioned the proceedings to Mr Guo when speaking to him after his return to Australia, and adhered to that evidence in cross-examination. There was no reason not to accept this evidence. Mr Hong had no reason to conceal the proceedings from Mr Guo.
On his own evidence, Mr Guo was aware of the judgment against him from January 2017, but took no action. Indeed, the Debt Repayment Agreement expressly referred to the judgment. Mr Guo’s explanation that the Agreement was all part of the sham was not credible.
In reply, counsel for Mr Guo maintained that I should accept his evidence that he was unaware of the Shenzhen Court proceedings until 2017. Mr Hong’s claim that he foreshadowed the bringing of the proceedings beforehand should not be believed; but in any event what was required was notice after the proceedings had actually been commenced. Counsel also noted that Mr Hong had not produced any telephone records in support of his claim that after commencing the proceedings he told Mr Guo about them over the phone. Nor did the evidence about the collection of documents addressed to Mr Guo’s companies at Union Square prove that Mr Guo had been told about the proceedings brought against him personally.
General c****redit of Mr Guo and Mr Hong**:** I have already noted some of the criticisms which were made by counsel for Mr Hong about Mr Guo’s evidence on the key areas of factual dispute. In addition, counsel made several general points about Mr Guo’s credibility as a witness.
Counsel first pointed out that, on Mr Guo’s own account, he had behaved fraudulently towards his creditors. In order to uphold his story, I would have to conclude that Mr Guo was someone who was quite prepared to lie when it suited him to do so. This could not but affect the credibility of what he now said to be the truth.
Counsel also submitted that there were deficiencies in the manner in which Mr Guo gave evidence which cast doubt on his credit generally. These deficiencies were supported by various examples taken from the transcript. One was that Mr Guo would, under cross-examination, introduce new elements to his case which, if true, ought to have been included in his affidavit evidence (and in some cases were inconsistent with his affidavit evidence). The other was that there were instances of evasion and non-responsiveness in Mr Guo’s evidence.
Counsel for Mr Guo acknowledged that the cross-examination “exposed some errors in his recollection of events”. In particular, his story that he was in hospital immediately before signing the Confirmation Letter was “mistaken as to the timing of his operation and hospitalisation”. But counsel submitted that cross-examination was more useful to gauge the “motivations and personality” of a witness rather than to obtain accurate recollections of “particular conversations or events” (citing Leggatt J (as his Lordship then was) in Gestmin SGPS SA v Credit Suisse (UK Ltd) [2013] EWHC 3560 (Comm) at [22], cited with approval in ET*-China.com International Holdings Ltd v Cheung* [2021] NSWCA 24 at [27]).
Counsel also submitted that Mr Guo’s credit was enhanced by some of his evidence. Counsel instanced Mr Guo’s evidence about being told at the 2017 meeting that Mr Hong was owed money by two specified debtors, whose names he was able to give. Mr Hong denied that the debtors had been mentioned at the meeting, but conceded that they in fact owed him money. Counsel submitted that Mr Guo’s version of events had to be accepted: how, counsel asked, would Mr Guo have known the debtors’ names unless he had been told by Mr Hong.
Counsel for Mr Guo did not seek to defend him against the specific criticisms made about the manner in which he gave evidence. Counsel did, however, caution me against making findings based on Mr Guo’s presentation as a witness, especially when he gave evidence through an interpreter and in person. In this regard, counsel pointed out that the other protagonist, Mr Hong, gave evidence by video link (using a different interpreter) and criticisms could also be made of some of his answers. Counsel also submitted that Mr Guo’s “forthright manner” in giving evidence was readily explained by the wrong he perceived to have been done to him.
Counsel for Mr Hong submitted that it was wrong to suggest that there was some sort of equivalence between him and Mr Guo so far as credibility was concerned. Counsel acknowledged that there were some blemishes in Mr Hong’s evidence but submitted that they were minor, and could be attributed, at least in part, to the linguistic complexity of some of the questions which he had been asked.
Counsel also submitted that Mr Hong had been vindicated in some of his evidence, which ought to result in his credit being enhanced. Counsel referred in particular to Mr Hong’s evidence in cross-examination about having obtained further security in May 2014. Counsel for Mr Guo challenged this evidence but Mr Hong held firm. In the end the Pledge Contract was found and tendered, establishing that Mr Hong had been telling the truth all along.

General c****redit of Mr Hong and Mr Guo**:** I agree that it is rarely possible to draw reliable conclusions just from the way in which witnesses present when giving their evidence in the witness box. It is even harder to do so when they give evidence through an interpreter and there may be cultural factors at work of which the Court is unaware. This makes it difficult to make anything of the submission from counsel for Mr Guo that his demeanour could be understood in the context of perceived injustice (Mr Hong also at times gave the impression of outrage at Mr Guo’s allegations). I think that witness demeanour is not a significant factor in the present case.
But that does not mean that the divergences between Mr Guo’s affidavit evidence and the evidence he gave in cross-examination, or the argumentative and non-responsive answers he gave to some of the questions in cross-examination, can be brushed aside merely by saying that they were matters of detail which did not bear on his “motivations and personality”. The significance of such matters must of course vary according to the circumstances. But there are some cases in which they allow the Court to draw general conclusions about what it is that the witnesses can actually recall, and whether they are doing their best to assist the Court in an objective way.
I think Mr Guo’s evidence about the circumstances in which he attended the meeting at which the Confirmation Letter was signed is an illustration of this. The allegations in the affidavit that their meeting happened just after he had been released from hospital was not a mere contextual detail. It formed an important part of a case which Mr Guo apparently wished to make that he had been imposed upon both by Mr Hong and Mr Chen. Although Mr Guo abandoned the story in cross-examination, he did not explain how he had come to tell it in the first place. Even if it was an honest mistake, that says little about Mr Guo’s ability to remember the events in question.
Counsel for Mr Hong was also correct to point out that Mr Guo’s whole case on the fraud defence involved saying that the Confirmation Letter and the subsequent Loan Documents were false, and that he actively participated (at the least) in bringing those false documents in an attempt to defraud his creditors.
Mr Hong is not in the same position. Counsel did not point me to any instance where he actually contradicted evidence in an earlier affidavit, or where his evidence was demonstrably contradicted by documentary or other objective evidence. Although counsel submitted that at some points in Mr Hong’s cross-examination he contradicted himself, or gave non-responsive answers, there were not many of these criticisms and they were necessarily clouded by the fact that Mr Hong’s evidence was given through an interpreter.
In evaluating the parties’ submissions on this topic, the forensic context must be taken into account. On the significant factual issues in the case, Mr Hong and Mr Guo contradict each other. On the central issues posed by the fraud defence, honest mistake is impossible: one or the other of them must be consciously lying. The onus lies squarely on Mr Guo. In this context, a general comparison of the credit of Mr Hong and Mr Guo will not lead anywhere unless Mr Guo’s is manifestly superior to Mr Hong’s.
I am not satisfied that any such superiority has been established. If anything, I think that the reverse is the case. I will come back to the credit contest in dealing with the specific factual issues, to which I now turn.
Fraud defence: Mr Guo’s counsel did not dispute that Mr Guo bore the onus of proof on the fraud defence (as well as on the natural justice defence). Nor did counsel dispute the submission by counsel for Mr Hong that the Briginshaw standard of proof was applicable. In any event, I think that the submission was plainly correct and I will proceed accordingly.
I propose to address the areas of factual dispute in three stages. First, I deal with the arguments concerning objective factors. Next, I consider the intrinsic weight of the evidence from Mr Hong and his other witnesses. Finally, I deal with the points concerning Mr Guo’s evidence, and that of his other witnesses. I have followed this approach because ultimately the question for me is whether Mr Guo’s evidence, when all of the criticisms made of it are taken into account, can be accommodated with the objective facts and ought to prevail over the evidence of Mr Hong and his other witnesses.
The first point taken by counsel for Mr Guo concerning objective factors was the absence of a serial number on the Confirmation Letter. Counsel himself conceded that the point was a minor one. In any event, I see nothing surprising about the explanation offered by Mr Hong when the point was put to him in cross-examination. As Mr Hong said, the documents in evidence which bore serial numbers contemplated the making of further advances and the Letter did not. In any event, the absence of a serial number on the Letter, even if it were unexplained, would not really provide any real support for the hypothesis that the Letter was prepared by Mr Chen.
I also reject the submission that there was no apparent commercial benefit to Mr Hong in obtaining the Letter from Mr Guo.
By the Letter, Mr Hong obtained three things from Mr Guo. The first was additional security in the form of the pledge and the guarantees. The second was an acknowledgement that a specific amount was owing. The third was an express promise to pay that amount “as soon as possible”.
The provision of further security was an obvious commercial advantage. As some of the arguments in the present case illustrate, so was the acknowledgement that specified sums were owing by way of principal and interest.
As to the fresh promise to repay, under Australian law such a promise might not add anything by way of consideration: JH Heydon, Heydon on Contract (2019, Thomson Reuters) at [5.430]ff. But there was nothing in the evidence about what Chinese law says in that regard. Furthermore, even if, strictly speaking, Mr Guo’s promise had no legal weight, it might still have had a reputational weight, and possibly an evidentiary weight in the event of enforcement proceedings.
Nor am I satisfied that there was no benefit to Mr Guo in signing the Letter.
According to the closing balance in Mr Hong’s payment schedule, the ¥160 million in the Letter represented a discount of approximately ¥7.9 million on the principal amount owing at the time. There is also the statement made by Mr Hong’s attorney in the Shenzhen Court proceedings that there was a discount in the interest figure. Even though that statement does not prove that such a discount was given, Mr Guo bears the onus and the evidence does not show how the interest figure was calculated. Mr Guo has therefore failed to establish that there was no financial benefit in signing the Letter.
It may be true that the Letter did not give Mr Guo an extension of time to pay. But for practical purposes, giving Mr Hong what he wanted might have been perceived by Mr Guo as being likely to give him a period of grace, if only for a relatively short time. And what would the alternative have been? Mr Guo might well have calculated that it was better to give Mr Hong what he was asking for rather than provoke him into taking enforcement action by a refusal. In my view there was, on the face of it, nothing commercially strange or irrational in Mr Guo signing the Letter.
Next I come to Mr Hong’s payment schedule and the supporting bank records.
I do not think there is anything strange about payments in the schedule having been made before the Loan Contract was signed. It frequently happens that a loan arrangement begins informally and is then regularised with a formal loan contract. Mr Guo himself said in cross-examination that something of that sort happened in this very case.
There is nothing in the suggestion by counsel for Mr Guo that the Loan Contract and the Supplementary Contract are somehow suspect because the aggregate of the payments made by Mr Hong exceeded the credit limits in those Contracts. The figures quoted by counsel are aggregate figures which take no account of the repayments in the meantime. Once the repayments are taken into account, the point disappears.
Nor is there anything in the point that the closing balance in the schedule does not reconcile precisely with the figure in the Confirmation Letter. As I have already explained, this is a factor which, if anything, bolsters the credibility of the latter figure.
Nor do the “funds back and forth” narrations in the supporting bank records help counsel’s argument. In the end, it was common ground between the parties that there was a running account between them.
I also agree with counsel for Mr Hong that, in the context, the single identified reference in a narration to a “repayment” by Mr Hong to Mr Guo is of no significance. Taken literally, it is inconsistent with the payment schedule, which records that all times it was Mr Guo who was indebted to Mr Hong. It is readily explicable as a slip.
The payment schedule thus provides substantial objective support for the Confirmation Letter’s validity. This is a factor heavily in Mr Hong’s favour unless Mr Guo can show that the payments by Tongxinglong should not have been included in the schedule.
As to the evidence presented in the Shenzhen Court proceedings:
The case presented for Mr Hong did not set out to prove the quantum owing by proving all of the individual payments and repayments on the loan account. As counsel for Mr Guo himself emphasised, Mr Hong’s case relied solely on the Confirmation Letter. It was made quite clear to the Court that the payment evidence which was presented was incomplete.
Although Mr Hong’s attorney told the Court that evidence of payments totalling ¥174.8 million had been proved for the purpose of demonstrating that a total of more than ¥160 million was lent, the purpose of doing so remains somewhat obscure. But there is no reason to think that Mr Hong had anything to do with his attorney’s forensic decision which was made in this regard. Mr Hong’s evidence that he did not himself attend the hearing was not challenged.
The statement by Mr Hong’s attorney to the Court that there were payments of ¥310 million and repayments of ¥150 million are different from the figures in the payment schedule (which cover the whole of the period from December 2012 to April 2015). But again, those figures were not integral to the case which was being made on Mr Hong’s behalf and how the figures the attorney gave to the Court were calculated, or over what period, is anyone’s guess. There is certainly no reason to think that Mr Hong had any hand in them.
Still less is there any ground for criticism of Mr Ying Ling Zhang’s witness statement in the Shenzhen Court proceedings. What he said in that statement was, so far as can be seen, entirely accurate within the confines of the case presented by Mr Hong’s attorney.
As to the Jones v Dunkel inference which counsel sought to have the Court draw concerning the failure to tender the internal “statements” to which Mr Hong referred in his oral evidence:
It is true that Mr Hong never gave a clear answer to counsel’s question about why the statements were not tendered. It is, however, difficult to be satisfied that Mr Hong fully understood the thrust of the question and was trying to evade it. Presumably, he was not familiar with Australian legal procedure, and translation difficulties may have intervened.
Without intending any criticism of counsel for Mr Guo, I think his questions on this topic failed to put the critical question. In the case of witness testimony, a Jones v Dunkel inference will not arise unless it was first established with a reasonable degree of confidence that the witness in question actually has, or may be expected to have, evidence to give on the relevant question. It is not enough for the party seeking the inference merely to allege that the witness might have relevant knowledge: Payne v Parker [1976] 1 NSWLR 191 at page 202. By parity of reasoning, when a party seeks to have a Jones v Dunkel inference drawn as a result of failure to tender a document, the inference will not run unless it is first established (by the party seeking to have the inference drawn) that the documents exists, or at least likely exists. In the present case it is far from self-evident that the internal “statements” are, or were at the time when Mr Hong’s lawyers should first have realised their relevance to the proceedings, still in existence. Counsel did not put to Mr Hong that they were.
The same considerations apply with even greater force to Mr Hong’s failure to tender the reconciliation sheet generated on 30 July 2015. I am not sure that counsel actually asked Mr Hong in cross-examination why the sheet in question, as distinct from the internal “statements”, had not been tendered. In any event, there was no reason to think that the sheet would necessarily still have been in existence (especially once the Confirmation Letter had been signed and judgment had been obtained on it). Neither Mr Hong nor Mr Zhang was asked about that.
I turn now to Mr Hong’s evidence.
I do not think that Mr Hong’s failure to give evidence in his affidavit about how the Confirmation Letter came to be signed and what was said between the parties on that occasion is of any great significance. In the first place, I cannot see how any Ferrcom inference can be maintained if, as occurred in the present case, the topic is not addressed in the witness’s evidence in chief but is broached in cross-examination. Such an inference is based on supposition that the party in question fears to adduce evidence on the subject. Once the evidence has been adduced, even if belatedly in cross-examination, it must be addressed on its merits. Any inference from the failure to adduce it in chief falls away, leaving at most a matter for comment which may go to credit.
The failure to give evidence on the subject in Mr Hong’s affidavits must be understood in the procedural context of the case. Mr Hong was the plaintiff, but as the case developed it was Mr Guo who bore the onus. In effect, Mr Hong was replying to what Mr Guo had said. He might have gone into more detail in his affidavit, but I do not think his failure to do so casts any real doubt on his denial. As he said in cross-examination, his version of events was straightforward and there was little to say apart from what would be inferred from the terms of the Confirmation Letter itself.
Nor did I find the criticism made by counsel for Mr Guo of Mr Hong’s evidence on the sequence of events on 30 July 2015 particularly compelling. Counsel’s criticisms fastened on a supposed failure to identify that there would have been a conversation between Mr Guo and Mr Hong before instructions were given by Mr Hong to his lawyers to draft the Letter. But in fact, as the passage quoted from Mr Hong’s cross-examination at [141] shows, when Mr Hong was first asked about the question by counsel, he did mention a conversation with Mr Guo. Counsel’s summary of Mr Hong’s evidence left that conversation out, no doubt inadvertently, but it is that which appears to have caused the whole problem. In any event, a mistake in failure to recall such a conversation, in the course of a cross-examination ten years later, is hardly significant enough to cast doubt on the whole of Mr Hong’s story.
As to the evidence of Qin Xiao Zhang:
The main criticism of Mr Zhang’s evidence by counsel for Mr Guo was that the way in which Mr Zhang’s evidence was prepared made him no more than a mouthpiece for Mr Hong. I am not sure that that criticism is factually correct. It is true that Mr Zhang accepted in cross-examination that the affidavit had been given to him by Mr Hong. But Mr Hong denied that he personally gave Mr Zhang the affidavit, and said that it must have been provided to Mr Zhang by his solicitor. This one of several instances where an apparently clear concession obtained by counsel may have resulted from a misunderstanding or a mistranslation.
But even assuming that Mr Zhang’s affidavit was drafted by Mr Hong and given directly to him by Mr Hong, it does not follow that it is worthless as evidence. Such a practice is generally unsatisfactory, but its effect on the credibility of the evidence depends on the circumstances, and in particular on the particular content of the affidavit. In the present case, Mr Zhang’s evidence was brief and factual. It did not involve recounting the details of conversations or giving descriptions of other events which were likely to have been shaped, even if subconsciously, by Mr Hong’s interests in the litigation. In my view, even if it was prepared by Mr Hong in draft and adopted by Mr Zhang, it would be going too far to reject it for that reason.
Mr Zhang presented as independent and was unshaken in cross-examination. I agree with counsel for Mr Hong that the evidence he gave denying that Mr Guo could have come from hospital was enhanced when Mr Guo later modified his evidence on this point. Overall, I think there is no inherent reason not to accept Mr Zhang’s testimony that he was present at the meeting and that Mr Chen was not.
As to the evidence of Mr Ying Ling Zhang:
Again, I have some doubt, in the face of Mr Hong’s denial, that Mr Zhang’s affidavit was actually drafted by Mr Hong and given by him directly to Mr Zhang, and, again, if that did happen then I do not think it necessarily calls for rejection of the factual statements made by Mr Zhang in the affidavit. But I did think that some of Mr Zhang’s evidence was unresponsive and he appeared to be telling the Court what he thought the Court needed to hear rather than simply answering the questions which were put to him. To that extent, I have been somewhat cautious in my evaluation of his evidence.
Mr Zhang was, however, not a particularly important witness so far as the signing of the Confirmation Letter was concerned. It was not suggested that he attended the meeting at which it was signed. His role was confined to undertaking the reconciliation and providing the reconciliation sheet to Mr Hong.
Given my reservations about Mr Zhang’s evidence, I am not satisfied, in the face of a denial by Ms Xie, that he undertook the reconciliation on 30 July 2015 with her as his opposite number. But this is a minor point. Counsel for Mr Guo did not suggest to Mr Zhang that no such reconciliation took place at all. The identity of Mr Guo’s representative is hardly a significant matter in the scheme of things.
Nor would it actually matter if, as counsel for Mr Guo suggested, Mr Chen had been involved in conducting the reconciliation. The important question is whether the reconciliation was accurate. Counsel for Mr Guo put to Mr Ying Ling Zhang that the figures for principal and interest in the Confirmation Letter were “not accurate” but Mr Zhang denied this and counsel did not elaborate. At no point did he suggest directly that the reconciliation produced by Mr Zhang and his opposite number was fraudulent.
It may indeed strain credulity to believe that Mr Zhang had an independent recollection of what the reconciliation balance was on 30 July 2015, down to the last ¥250 in interest. But given Mr Zhang’s role in conducting the regular reconciliations, it was perfectly plausible for him to remember the overall state of the account. I therefore think that there is no inherent reason to reject his testimony that Mr Hong was always in credit on his account with Mr Guo.
This brings me to Mr Guo’s evidence. In what follows I will contrast Mr Guo’s evidence on the disputed areas of fact relevant to the fraud defence with that of Mr Hong and his witnesses. For convenience, I will organise the discussion under several headings.
The first area of debate concerns the nature of the dealings between Mr Hong and Mr Guo from December 2012 onwards.
Mr Guo claimed that the monies he received from Mr Hong were in some way connected with the Baita Company, and Ms Xie said something to similar effect. But on the documentation before the Court, the loan relationship was between Mr Hong personally and Mr Guo personally. The case was conducted by the parties on that basis. Even if Mr Hong made the loans as some sort of nominee or trustee for the Company, that would have no effect on the parties’ contractual rights and obligations inter se.
The circumstances surrounding the entry into the Loan Contract are now nearly all common ground. Mr Guo accepts that he was indebted to Mr Hong in a substantial amount and says that the Contract was executed to regularise the position. The only area of dispute between the parties is that Mr Guo says that the impetus for formalising the arrangement came from shareholders of the Baita Company, and Mr Hong disagrees. Again, the resolution of this dispute is irrelevant for present purposes.
Mr Guo did claim that the payments identified by Ms Yuemin Guo in her May 2022 affidavit represented a separate loan from him to Mr Hong, and that at the same time as the Loan Contract was signed, an equivalent contract was signed by the parties to cover that loan under which Mr Guo was the lender and Mr Hong was the borrower. Ms Xie, however, did not support the allegation that there were two separate accounts. The payments in question were treated in Mr Hong’s payment schedule as repayments of previous advances by Mr Hong and by the end of the hearing that appeared to be common ground. Counsel for Mr Guo did not ask me to find that there was any separate loan agreement from Mr Guo to Mr Hong of the type alleged by Mr Guo in his evidence.
Mr Guo also claimed at one point in his evidence that Ms Yuemin Guo had identified only some of the payments which he had made to Mr Hong. Mr Guo suggested that there were, or might have been, other payments where the records had been lost or destroyed by Mr Chen. But again, nothing was done thereafter to bolster this assertion. Counsel for Mr Guo again did not seek any finding that the final agreed payment schedule was incomplete in this regard.
There was a clear dispute between Mr Hong and Mr Guo about the state of the account. Mr Guo claimed that from time to time the account was in his favour. In particular, according to Mr Guo, it was in his favour when the Supplementary Contract was signed in May 2014, and the increased credit limit was just window dressing. But there was no support from Ms Xie for this assertion, and it was contrary to the evidence not only of Mr Hong but also of Mr Zhang. Most importantly, as counsel for Mr Hong pointed out, it was inconsistent with the payment schedule, which showed a balance at the time, even excluding payments by Tongxinglong which was in Mr Hong’s favour. I therefore do not accept Mr Guo’s evidence on this point.
In theory, as counsel for Mr Guo submitted, a finding that Mr Guo was wrong about the circumstances in which the Supplementary Contract was signed does not necessarily establish that Mr Guo was still indebted to Mr Hong when the Confirmation Letter was signed on 30 July 2015. But the finding cannot help but be a serious blow to Mr Guo’s credit. Mr Guo’s assertion that he was not indebted to Mr Hong in May 2014 was part of the framing for his account of what happened in July 2015. The story he told was an elaborate one and it is very difficult to accept that he could have made an honest mistake in putting it forward.
The next area of factual dispute concerns the payments by Tongxinglong (and Mr Chuxiang) recorded in Mr Hong’s payment schedule.
The payments made by Tongxinglong were all made to Mr Guo’s company Heshunteng. Mr Guo did not suggest that the payments were made for some purpose other than lending, for instance as investments. He appeared to accept that the payments were loans. The only question was whether they formed part of the Hong-Guo loan account.
In the Loan Contract the parties prescribed a formal procedure, in the form of “Loan Receipts”, which would have left no doubt as to whether particular payments made between their nominees were subject to its terms, but they did not use that procedure. Instead they used the commissioned payment notice procedure for designating payments to Mr Guo’s nominees which would be subject to it. But no equivalent procedure had to be followed before payments made on Mr Hong’s behalf could be counted. On the face of it, Mr Hong was free to use any nominees he wished for the purpose of making payments under the Contract.
Heshunteng was expressly nominated as a payee for Mr Guo in May 2014. On the face of it, this meant that, at least after that date, any payment by any nominee of Mr Hong to that company was a payment for the purposes of the Loan Contract. What this meant was that for Mr Guo to succeed he needed to show that there was some specific agreement between the parties which required that the Tongxinglong payments were to be kept separate, and that this agreement overrode the effect of the May 2014 commissioned payment notice.
Mr Guo did not describe any such agreement in his evidence. All he did was to assert the conclusion that Tongxinglong did not “belong” to the Loan Contract.
This assertion was a novel and belated one, given Mr Guo’s earlier evidence. He had previously deposed that Heshunteng was his company and that payments to it fell under the Loan Contract. If there had been some separate arrangement concerning payments by Tongxinglong to Heshunteng, especially one which excluded the operation of the second commissioned payment notice, it is surprising that Mr Guo did not mention it.
Nor had Mr Guo made any distinction in his previous evidence between the payments made to Heshunteng after the second commissioned payment notice and the payments made before it was signed. Indeed he had volunteered that payments made to his other company, Guangbinsheng, were part of the loan account even though that company was not recorded in any commissioned payment notice at all. Again if there was something special about the payments to Heshunteng before the second commissioned payment notice, one would have expected Mr Guo to mention it.
Even if, as a matter of construction, the commissioned payment notice applied only to future payments to Heshunteng, as a matter of contractual interpretation, that would not help the argument for Mr Guo. Regularising such payments by formally including them in the notice would have been consistent with the parties’ practices under the Loan Agreement.
In any event, what matters is what the parties agreed would be the relevant payments for the purposes of the Confirmation Letter. Even if there had previously been some sort of agreement that loans by Tongxinglong to Heshunteng were, in whole or part, excluded from the Loan Account, it would have been open to Mr Hong to require that they be included for the purposes of the Letter. Of course, there is no such evidence of any such discussion, but that only points up the lack of evidence of any separate arrangement for Tongxinglong payments in the first place.
The fact that Mr Ying Ling Zhang did not know anything about Tongxinglong hardly assists Mr Guo’s case. Mr Zhang was not a decision-maker and there was nothing strange about his not recalling details about one of the many nominee payers used by Mr Hong. Similarly, for reasons I have already given, the failure to refer to payments by Tongxinglong in the Shenzhen Court proceedings is of no real significance.
Mr Guo’s assertion that payments by Mr Chuxiang Zhang did not “belong” to the Hong-Guo loan account runs into similar problems. The only difference is that in the case of payments by Mr Zhang there was even less evidence for counsel for Mr Guo to go on. There is simply nothing to support Mr Guo’s assertion and I reject it.
The next area of dispute concerns the events on 30 July 2015.
Mr Guo’s description of having signed the Confirmation Letter just after having come out of hospital following an operation for cancer did not survive cross-examination. I have already explained why I do not agree that this is simply a minor matter of detail. It was an important part of the way Mr Guo framed his story. An honest mistake seems a most unlikely explanation.
It is also relevant that in Mr Guo’s initial affidavit the reference to the Letter being signed to protect his assets was presented as a minor, almost incidental, detail. The full story did not emerge until Mr Guo’s cross-examination. That is another factor which makes Mr Guo’s evidence on the subject inherently difficult to accept.
A further problem for Mr Guo was a lack of corroboration from Mr Chen. The explanation offered for Mr Chen’s failure to give evidence was that Mr Chen had double-crossed him and he was party to the conspiracy which Mr Guo alleges. But as counsel for Mr Hong correctly pointed out, I have only Mr Guo’s word for that. There is no documentary or other independent evidence that Mr Chen has even refused to help Mr Guo in the proceedings, let alone to explain why.
Similar considerations apply to Mr Huang, who on Mr Guo’s account attended the meeting to play his part in the conspiracy. Mr Huang may have fallen out with Mr Guo, but that does not necessarily justify Mr Guo’s failure to call him. Mr Hong suggested that Mr Huang believes himself to be “scammed” by his brother-in-law. There was no evidence to support this, but Mr Guo did not advance evidence in support of any contrary hypothesis.
I am not satisfied that Mr Qin Xiao Zhang was not present at the meeting, or that Mr Chen was present. Even without all of the other baggage Mr Guo is carrying, there is simply no reason to prefer his evidence on this question to that of Mr Zhang.
I do not accept that this is merely a matter of detail as counsel for Mr Guo suggested. The presence of Mr Chen at the meeting was a key element in Mr Guo’s description of what happened; if Mr Chen had not attended the meeting, then in theory he might still have been pulling the strings behind the scenes, but Mr Guo’s account would necessarily have been quite different.
Mr Qin Xiao Zhang’s presence at the meeting presents a further obstacle to accepting Mr Guo’s story. On Mr Guo’s account, the sham nature of the Confirmation Letter and the fraud on Mr Guo’s creditors which motivated it must have been manifest to all concerned. If so, Mr Zhang would presumably have witnessed it and could have been asked to corroborate Mr Guo’s story. But instead, when Mr Zhang gave his evidence (before Mr Guo’s story had been fully set out in cross-examination) no suggestion was made to him that there had been any underhand conduct at the meeting.
It is also necessary to consider the inherent credibility of Mr Guo’s story. I agree with counsel for Mr Hong that it hardly seems logical for Mr Guo to have used Mr Hong to warehouse his assets if Mr Hong was himself in financial difficulty. There are two further points as well.
On Mr Guo’s account, he found himself under pressure from his creditors, and in desperate and urgent need of someone who could plausibly take control of his assets. It then just so happened that, lying ready to hand, was a set of loan documentation which had been created two years before, but under which no money was owing, which would be perfect for warehousing purposes. Such an astonishing coincidence is altogether too good to be true.
On Mr Guo’s case, the warehousing arrangement was not a short term one. Mr Guo explained both the Supplementary Agreement of August 2015 and the Debt Repayment Agreement of March 2017 as further steps taken to sustain the original sham. The implication was that, as late as 2017, Mr Hong, Mr Guo, Mr Huang and Mr Chen were still working together to protect Mr Guo’s assets from his creditors. But when did it end? The double-cross can only have happened when Mr Guo’s creditors gave up on recovering anything from him and the coast became clear for Mr Guo to retrieve his supposedly warehoused assets. When was that? Mr Guo did not say. All we know is that he has never to this day been back to mainland China.
To find in Mr Guo’s favour on the fraud defence, I must accept his account of how the Confirmation Letter came into being despite these difficulties. But for practical purposes there is an overriding problem. Unless Mr Guo can satisfy me that the Tongxinglong payments (and the payments by Mr Chuxiang Zhang) had been agreed to fall outside the loan account, Mr Hong’s payment schedule would provide compelling support for the validity of the Letter. He has not done so.
The events leading up to the collapse of Mr Guo’s business remain murky. Mr Guo has clearly come to believe that Mr Chen was responsible. Mr Guo may, as a result of conversations with Mr Chen, have thought that signing the Confirmation Letter would allow him to do some sort of deal with Mr Hong later, after he had solved his problems with his other creditors. But the evidence does not, in my opinion, establish that he actually made the warehousing deal with Mr Hong which he now alleges.
It follows that I am not satisfied the Confirmation Letter was a sham. For that reason, Mr Guo has failed to prove that a fraud was practised by Mr Hong on the Shenzhen Court when he later took proceedings to enforce the obligations acknowledged in the Letter.
Natural justice defence: On Mr Hong’s case, there are three ways in which Mr Guo might have learned that proceedings in the Shenzhen Court were to be, or had been, brought against him. The first is in the conversation between Mr Hong and Mr Guo in mid-October, or the alleged further conversation in Hong Kong just before Mr Guo left China. The second is through telephone calls or WeChat messages from Mr Hong to Mr Guo in Australia after the proceedings had been begun. The third is through being told by Mr Chen or others in China who had been charged by Mr Guo with looking after his interests.
There is no documentary evidence, or independent testimonial evidence, to confirm or refute Mr Hong’s allegation that he advised Mr Guo of the proceedings both before and after Mr Guo left China. In each case it is simply a matter of balancing the credibility of Mr Hong’s allegation against Mr Guo’s denial. As to the third possible method, there seems no doubt that copies of the originating process and of the eventual judgment found their way to Mr Guo’s “shadow office” at Union Square in Shenzhen. The question is whether to believe Mr Guo’s testimony that, even so, neither Mr Chen nor anyone else told him about those documents, or otherwise informed him about the proceedings having been brought against him.
It is common ground that Mr Hong and Mr Guo had a meeting in Shenzhen in mid-October 2015 and I think that it is probable that there was a further meeting in Hong Kong as Mr Hong claims. Certainly I am not satisfied to the contrary. I see no reason to accept Mr Guo’s evidence over Mr Hong’s on this point.
I also think it likely that the impending proceedings in the Shenzhen Court would have been discussed at those meetings, or at least the second of them. It is highly unlikely that Mr Hong would have retained his attorney any less than a week or so before the proceedings were commenced on 28 October, and it could well have been longer. Presumably the whole point of the meeting from Mr Hong’s point of view would have been to find out whether he would need to proceed with the litigation. Again Mr Guo’s evidence does not persuade me to the contrary.
The alleged disclosure by telephone or WeChat after Mr Guo had arrived in Australia is not so clear.
There is no dispute that telephone contact continued between Mr Hong and Mr Guo, but the evidence does not reveal how frequently it took place or what its subject matter was. Once Mr Guo had left China Mr Hong had no alternative but to press on with the litigation. The topic may well have come up in passing, but there is less reason for assuming that it necessarily would have.
Nor did I find Mr Hong’s suggestion that he sent copies of the Court documents to Mr Guo by WeChat particularly convincing. The evidence Mr Hong gave in cross-examination suggests that (consistently with Chinese practice) he saw the question of service as one for the Shenzhen Court. There is nothing to suggest that he would have perceived it as being necessary, or even desirable, to effect informal service of the documents on Mr Guo.
In these circumstances I am not prepared to make an affirmative finding that Mr Hong told Mr Guo about the proceedings. But owing to Mr Guo’s lack of credibility I am not prepared to make a finding to the contrary either. Mr Guo has failed to discharge the onus on the point.
So far as the third potential method by which Mr Guo might have learned of the proceedings is concerned, several points arise.
It seems clear enough from Mr Guo’s own evidence that Mr Chen’s responsibilities involved monitoring the legal claims which arose out of the collapse of Mr Guo’s business. It hardly seems likely that in doing so a claim for a sum as significant as Mr Hong’s (more than ¥185 million) would have been overlooked.
The same applies to the passing on of the Court documents. The lawyer who was visiting Mr Guo’s shadow office at Union Square, Mr Zhao, was presumably retained for the very purpose of monitoring legal proceedings.
There was not, as I understood counsel for Mr Guo, any point taken about the distinction between claims against the companies and claims against Mr Guo personally. That was understandable. There seems to have been at all times a considerable overlap between Mr Guo’s personal affairs and those of the companies through which he operated his business.
I have already referred to Mr Guo’s failure to call any evidence from Mr Chen. In the present circumstances, I agree with counsel for Mr Hong that it is also relevant that no evidence was called either from Ms Li Min Guo or from Mr Zhao. Mr Guo said that Ms Guo was in China, but this, of itself, is hardly an explanation for failure to call her. And no explanation was offered for the failure to call Mr Zhao at all.
I also agree that Mr Guo’s lack of action in 2017, despite his professed outrage of having found out that judgment had been given against him, is a factor which counts against his claim that he was unaware of the proceedings beforehand. The proceedings involving his ex-wife which supposedly distracted him are vaguely described and there is no documentary evidence which fixes the dates on which those proceedings began and ended. Moreover, it hardly seems likely that the proceedings would have been so all-consuming so as to prevent Mr Guo from instructing lawyers in China for a period of years.
In any event, Mr Guo’s claim to have been outraged is difficult to reconcile with the record. Mr Hong placed the Hong Kong meeting with Mr Guo and Mr Chen as having occurred in about January 2017. Mr Guo did not specify the date, but it must have been before March 2017, when the Debt Repayment Agreement was signed. That Agreement quite plainly provides for the shares held by Mr Huang on Mr Guo’s behalf in the Baita Company to be made available to satisfy the judgment. Thus, far from being outraged by the disclosure, for two months or so Mr Guo did nothing, and then signed an agreement to cooperate with enforcement of the judgment.
This reinforces a point that I have already made: in 2017, Mr Hong and Mr Chen were still acting consistently with what Mr Guo claims to have been the sham agreement, by enforcing it. The double-cross had not taken place. Indeed, by obtaining the judgment, Mr Hong was only doing what Mr Guo says he intended him to do, namely enforce the acknowledgment in the Confirmation Letter so as to keep Mr Guo’s assets out of other creditors’ hands. On his own case, there would have been no reason to complain or take any action about it.
The credibility of Mr Guo’s evidence on the natural justice issue is of course influenced by general credibility considerations to which I have already referred. But in addition, I have now concluded that Mr Guo’s case on the fraud issue must be rejected. Again, there is no realistic possibility of honest mistake. And if I reject Mr Guo’s evidence on the fraud issue as an invention, that must be a further heavy blow to the credibility of the allegations which he makes on the natural justice issue.
In conclusion, I think it is likely that Mr Guo was told in October 2015 by Mr Hong about the proceedings which Mr Hong then intended to bring against him. But it is not necessary to go that far. The onus lies on Mr Guo. It is sufficient to say that he has not satisfied me to the contrary.
I accept that actual notice required notice to Mr Guo that proceedings had been commenced against him, given in sufficient time to enable him to defend them. Advance notice before the proceedings had been commenced, and notice that judgment had been given, therefore would not amount to actual notice, although they may be relevant to “due notice”.
I have already said that I am not satisfied that Mr Guo was not told by Mr Hong about the proceedings after he returned to Australia. Nor am I satisfied that he did not receive notice of the originating process and other documents delivered to Union Square, or otherwise learn of the proceedings having been commenced against him. Mr Guo has failed to satisfy me that he lacked actual knowledge of the proceedings prior to judgment being given against him in the Shenzhen Court. For completeness, I record that I am not satisfied either that he did not receive notice of the judgment against him before the expiry of the appeal period.

Boele was an appeal against a successful application for summary judgment enforcing the judgment of a Norwegian appellate court against an Australian resident. The defendant was purportedly represented in the appellate proceedings by a lawyer whom he had retained to act in first instance proceedings. He alleged, however, that he was unaware of the appellate proceedings and not given any instructions to the Norwegian lawyer to defend them on his behalf.
The argument for the plaintiff was that under Norwegian law, the Norwegian lawyer’s authority to act in the appellate proceedings continued unless the Court and the other parties to the proceedings were informed that his instructions had been withdrawn. But Giles JA held that the evidence did not allow the Court to conclude “with the confidence required for summary judgment” that this was so, and the judgment was set aside.
Counsel for Mr Hong submitted that, even if he had not received actual notice of the proceedings, Mr Guo had received due notice. Counsel relied on three matters:
Mr Guo had been told before leaving China by Mr Hong that the proceedings would be brought;
the Court documents were served in accordance with the applicable Chinese law; and
the Court documents were also deemed to have been served under the procedure specified in the Loan Contract (article 9(2)).
For the moment I will put my finding concerning prior notice aside and concentrate on questions of service. Counsel for Mr Guo conceded that service of the Shenzhen Court documents had been effected by public announcement in accordance with Chinese law and at Union Square in accordance with the provisions of article 9(2) of the Loan Contract. But counsel submitted that, although relevant, these factors were not determinative.
In this regard, counsel suggested that older cases such as Vallee were no longer necessarily a reliable guide to what the courts required by way of due notice. Central to counsel’s argument was the decision of the Victorian Court of Appeal in Yin v Wu (2023) 73 VR 21. That also was a case involving serving of Chinese court process by means of public announcement. As in Boele, an application for summary judgment on the resulting default judgment succeeded at first instance, but the judgment was set aside on appeal.
The Court referred to the statement of principle in Davies, Bell and Brereton, Nygh's Conflict of Laws in Australia (10th ed, 2019, LexisNexis) [40.84]. The current edition of Nygh (the 11th edition) states the principle in substantially same terms:

Counsel acknowledged that this statement of principle was obiter and did not, strictly speaking, bind the Court. Counsel submitted, however, that it was persuasive and should be adopted. Counsel submitted that Mr Hong should not be permitted to take advantage of the service method adopted by the Chinese court. Mr Hong could, and in counsel’s submission should, have provided copies of the documents by way of informal service, either by sending them electronically by telephone message or by having his son deliver copies to Mr Guo in Australia.
In response, counsel for Mr Hong contended that the Court should not impose any such requirement on Mr Hong when Mr Guo had consented to be served according to the procedure specified in the Loan Contract. Counsel submitted that the facts in Yin were distinguishable from those of the present case. But with appropriate diffidence counsel submitted, in addition, that the comment by the Court at [109] demonstrated a disturbing lack of comity towards the Chinese courts, to the extent, if necessary, that I should conclude that they were wrong.
I do not find the argument by counsel for Mr Guo persuasive. That is for several reasons.
In my view, this is a conventional case of an agreed “mode of notification” of proceedings. Article 9(2) was not just an agreement that service might be effected by sending the Court documents to the Tower Office address at Union Square. Mr Guo also undertook to notify any change to his address. There is no evidence that he did so. No doubt this was because he was on the run from his creditors, including Mr Hong. Notifying a valid address for service of process would have been the last thing on his mind.
Mr Guo did in fact maintain a shadow office at Union Square and used it, indirectly, to monitor correspondence being delivered to the former Tower A office there. But he did so for his own purposes. There is no evidence that he told Mr Hong, or any of his other creditors, of what he was doing.
It should be emphasised that under Chinese law service was for the Shenzhen Court to effect. Mr Hong seems to have been conscious of this and his attorney certainly would have been. There is no evidence that, after the failed attempt at service at Baita, the Court made any request to Mr Hong’s attorney for assistance in finding Mr Guo.
If I accept for the sake of argument that the proceedings never came up in discussions between Mr Hong and Mr Guo after they were commenced, then I must proceed on the basis that Mr Hong simply did not know one way or another about service. Why in these circumstances did he have to concern himself with whether Mr Guo had actually received the Court documents? If Mr Guo had been interested in defending any proceedings against him arising under the Confirmation Letter, he could readily have notified a new address under Art 9(2) at which he was sure to receive any originating process. And if I further assume that the Court documents did not in fact reach him following their delivery to Tang Li, why was it Mr Hong’s responsibility to guard against such a possibility by separately sending the documents to Mr Guo by way of informal service?
What I have said is concerned with the service of originating process. But I have also found against Mr Guo on the question of service of the judgment itself. Although, if the originating process had not come to Mr Guo’s attention, actual notice would not be established, service of the default judgment in accordance with court rules within the time allocated for appeal was found to be due notice in Jeannot v Fuerst (1909) 25 TLR 424.
I do not think the decision of the Victorian Court of Appeal in Yin helps counsel’s argument. To explain why, it is necessary to say something more about the facts and the reasoning in that case.
The decision in Yin can be traced back to the judgment of the Victorian Supreme Court (Barber J) in Terrell v Terrell [1971] VR 155. At [157]-[158] his Honour said:

Another decision referred to by the Court of Appeal was that of Cameron J in Xu v Wan**g (2019) 58 VR 536. That case concerned a Chinese judgment which was obtained by default following service by public announcement as in the present case. The plaintiff in the Chinese proceedings had already been joined as a defendant to proceedings in Victoria covering the same issues, and had not revealed the pendency of the Chinese proceedings to the defendant (the plaintiff in Victoria).
In refusing to enforce the Chinese judgment, Cameron J referred to the terms of Art 92 of the Civil Procedure Law of the People’s Republic of China, which permits service by public announcement where “the whereabouts of the person to be served is unknown”. His Honour appears to have considered that this condition was not satisfied, because the plaintiff was at all times aware of how to contact the defendant, being engaged in litigation against him in Victoria (see [107(a)-(b)]). There had also been a failure to discover relevant documents ([107(c)]) and the bringing of the Chinese proceedings was effectively an abuse of process ([107(d)]).
As already noted, Yin was a case where the plaintiff was seeking to enforce a foreign judgment summarily. As the Court of Appeal noted, this altered the onus of proof, which would ordinarily lie on the defendant: at [88]-[91]. There was evidence from the defendant, which had not been tested at trial, that he had no actual notice of the proceedings. Furthermore, the Court was not satisfied on the evidence that service by public notice was valid under Chinese law: at [92]-[94].
The Court of Appeal in Yin referred to the decision in Jeannot. But that decision was seen as “unsatisfactory”, because, as in Xu, the plaintiff in the French action was in correspondence with the English defendant but failed to disclose the fact that judgment had been obtained in the French court: at [102].
In these circumstances, I think that the decision in Yin is distinguishable from the present case for a number of reasons.
Terrell, the starting point for the relevant line of authority, was a case about the recognition of a foreign divorce. The statement of principle in that case does not necessarily apply in commercial litigation, especially litigation such as the present where the parties have, in their previous dealings, agreed a mode of service for any proceedings arising out of those dealings. It is true that both Xu and Yin were commercial cases of this type, but there was no agreed mode of service in those cases.
In both Xu and Yin, there was, at best, uncertainty about whether service had been properly effected under Chinese law. In Xu, Cameron J seems to have assumed that the reference in Art 92 of the Civil Procedure Law of the People’s Republic of China to the whereabouts of the person to be served being unknown is a reference to being unknown by the plaintiff. If service is effected by the Court, that may be a questionable assumption. But in any event, there was an express concession in the present case by counsel for Mr Guo that service was effected in accordance with Chinese law.
In Xu, the plaintiff in the Chinese proceedings had been guilty of sharp practice, at the least, in failing to disclose to the defendant that proceedings had been brought in China. A similar basis was given by the Court of Appeal in Yin for distinguishing Jeannot. Nothing of that sort has occurred here.
In Yin, because the appeal arose out of a summary judgment application, there had been no final finding on whether the defendant had actual notice of the Chinese proceedings, or on the facts generally. In those circumstances, it could hardly be expected that the Court could make a final judgment on whether, if actual notice were not established, there had been due notice. But in the present case, all of the facts had been fully found.
Finally, I think that the present case gives rise to more fundamental questions of natural justice than have been considered in the authorities to which I have referred. That fundamental consideration concerns the materiality of any breach of the rules of natural justice.
As already noted, Mr Guo defended these proceedings on the grounds that not only the Confirmation Letter, but also the Supplementary Agreement and the Debt Repayment Agreement were part of the same ongoing fraud on his creditors. On his case, the bringing of the proceedings in the Shenzhen Court was a step taken in the carrying out of the same fraudulent agreement. Presumably, it was something which Mr Guo would have wanted Mr Hong to do in order to protect his assets from the claims of other creditors who were circling in 2015 and 2016.
That being the case, suppose that Mr Guo, being unaware of the proceedings in the Shenzhen Court, came to learn of them before judgment was delivered in June 2016. It seems fanciful to think that he would have defended the proceedings by advancing the defence in the present case, namely that the Confirmation Letter was a fraud. Success in that defence would simply have opened his assets up to the very claim by his other creditors which he says he was seeking to avoid.
I asked counsel for the parties in final submissions how the rules of natural justice would apply in such circumstances. I had in mind the statement by Gleeson CJ in Re Minister for Immigration and Multicultural and Indigenous Affairs; Ex Parte Lam (2003) 214 CLR 1 that the natural justice doctrine, at least in administrative law, is concerned with “practical injustice” (at [37]-[38]).
In response, neither counsel advanced any argument on the authorities. Counsel for Mr Guo, however, submitted that Mr Guo’s subsequent actions in applying to have the judgment set aside showed that he would nevertheless have taken action had he been given notice of the proceedings at the time. But with respect I do not find this convincing.
It is one thing for Mr Guo, now living in Australia, to instruct lawyers in China to apply to reopen the decision of the Shenzhen Court. It would be quite another to present a full-blown defence relying on what Mr Guo now says was his own fraud. It is hard to see how that defence could have been pursued in 2015-2016 without Mr Guo travelling to China to give evidence in support of it, which would have exposed him not only to claims by his other creditors but also, potentially, to criminal penalties under Chinese law.
For these reasons, if the requirements of the natural justice defence had otherwise been established, I would have required further argument on the question of materiality. As it is, the natural justice defence fails for other reasons and it is not necessary to explore the question further.

Hong v Guo

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment

JUDGMENT

Claims and issues for determination

Summary and analysis of evidence

Chronology of key events

Witnesses

Loan Contract, Supplementary Agreement and Pledge Contract

Confirmation Letter and Mr Guo’s departure from China

Shenzhen proceedings and later events

Submissions on factual issues

Conclusions on factual issues

Fraud defence

Natural justice defence

Conclusions

Orders

Amendments

15 May 2026

15 May 2026

04 September 2026

Parties

Legislation Cited (1)

Cases Cited (11)