Ji v Gu

Medium Neutral Citation: Ji v Gu [2026] NSWSC 796

Hearing dates: 1 to 4 June 2026

Date of orders: 10 July 2026

Decision date: 10 July 2026

Jurisdiction: Common Law

Before: Schmidt AJ

Decision: 1. Judgment will be entered for Ms Gu.
2. The parties should confer and provide final orders, including as to costs, within 14 days, together with short written submissions in the event of any dispute.

Catchwords: CONTRACTS — undue influence — whether defendant subjected to excessive pressure — where agreement improvident and plaintiff received a substantial commercial benefit, while defendant obtained none — where terms not negotiated with defendant who executed agreement late at night — where plaintiff aware defendant’s interests were not protected — where plaintiff relies on claimed independent legal advice — facility agreement and mortgage set aside
CONTRACTS — unjust contracts — Contracts Review Act 1980 (NSW), s 7 — whether terms of agreement were also unconscionable, harsh and oppressive
EQUITY — unconscionable conduct — special disability or disadvantage — where plaintiff had actual knowledge of defendant’s special disadvantage
CONSUMER LAW — unconscionable conduct —Australian Securities and Investments Commission Act 2001 (Cth) and Australian Consumer Law — where plaintiff exploited defendant’s known financial vulnerability and lack of commercial sophistication
CONSUMER LAW — misleading or deceptive conduct — representations as to future matters — where plaintiff’s misleading and deceptive statements induced defendant’s entry into the agreement
EVIDENCE — witness credibility — defendant’s evidence preferred in the event of conflict

Legislation Cited: Australian Securities and Investment Commission Act 2001 (Cth), ss 12CB, 12CC, 12DA
Competition and Consumer Act 2010 (Cth), sch 2, ss 4, 18, 21, 22, 236
Contracts Review Act 1980 (NSW), ss 4, 7, 9
Corporations Act 2001 (Cth), ss 194H, 1041H
Legal Profession Uniform Law (NSW) 2014 (NSW), ss 174, 178, 180
Real Property Act 1990 (NSW), s 57(2)(b)
Uniform Civil Procedure Rules 2005 (NSW), r 42

Cases Cited: Australian Competition and Consumer Commission v Quantum Housing Group Pty Ltd (2021) 285 FCR 133; [2021] FCAFC 40
Bank of NSW v Rogers (1941) 65 CLR 42; [1941] HCA 9
Bester v Perpetual Trustee Co Ltd [1970] 3 NSWR 30
Blomley v Ryan (1954) 99 CLR 362; [1956] HCA 81
Booth v Zhou (No 2) [2024] WASCA 128
Bridgewater v Leahy (1998) 194 CLR 457; [1998] HCA 66
Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; [1983] HCA 14
Commonwealth of Australia v McLean (Court of Appeal (NSW), 31 December 1996, unrep)
Fast Fix Loans Pty Ltd v Samardzic [2011] NSWCA 260; (2011) 15 BPR 29,445
Fox v Percy (2003) 214 CLR 118; [2003] HCA 22
Google Inc v Australian Competition and Consumer Commission (2013) 249 CLR 435; [2013] HCA 1
Gu v Zhou [2026] NSWSC 501
Hewitt v Gardner; Hewitt v Gardner [2009] NSWSC 1107
Huynh v Ledinh Sovereign Super Pty Ltd [2024] NSWCA 78
I & L Securities v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109; [2002] HCA 41
Johnson v Buttress (1936) 56 CLR 113; [1936] HCA 41
Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392; [2013] HCA 25
McLennan by his tutor Kennedy v McLennan [2026] NSWCA 102
Nemeth v Australian Litigation Funders Pty Ltd [2014] NSWCA 198
Nitopi v Nitopi (2022) 109 NSWLR 390; [2022] NSWCA 162
Perpetual Trustee Company Limited v Albert and Rose Khoshaba [2006] NSWCA 41; (2006) 14 BPR 26,639
Perpetual Trustee Company Ltd v Milanex Pty Ltd (In Liq) [2011] NSWCA 367
Productivity Partners Pty Ltd v Australian Competition and Consumer Commission; Wills v Australian Competition and Consumer Commission (2024) 281 CLR 338; [2024] HCA 27
Provident Capital Ltd v Papa (2013) 84 NSWLR 231; [2013] NSWCA 36
RHG Mortgage Corporation Ltd v Ianni [2016] NSWCA 270
Riz v Perpetual Trustee Australia Limited [2007] NSWSC 1153; [2008] NSW ConvR 56-198
Self Care IP Holdings Pty Ltd v Allergan Australia Pty Ltd (2023) 277 CLR 186; [2023] HCA 8
Stivactas v Michelatos (No 2) (1993) NSW ConvR 55-683; [1994] ANZ ConvR 252
Stubbings v Jams 2 Pty Ltd (2022) 276 CLR 1; [2022] HCA 6
Thorne v Kennedy (2017) 263 CLR 85; [2017] HCA 49
Toll (FGCT) Pty Ltd v Alpha Pharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52
Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389; (2011) 15 BPR 29,699
Wilton v Farnworth (1948) 76 CLR 646; [1948] HCA 20

Category: Principal judgment

Parties: Qiaofen Ji (Plaintiff/Cross-Defendant)
Yi Fen Gu (Defendant/Cross-Claimant)

Representation: Counsel:
M Wang (Plaintiff/Cross-Defendant)
Dr S Baron Levi (Defendant/Cross-Claimant)
Solicitors:
Longton Blackwell Pty Ltd (Plaintiff/Cross-Defendant)
International Lawyers Co-operative (Defendant/Cross-Claimant)

File Number(s): 2025/00067142

JUDGMENT

1. Ms Ji seeks possession of Ms Gu’s home at Campsie. It secures advances dealt with in a January 2024 facility agreement she entered with Ms Ji, as well as interest. Ms Gu did not receive those funds. Before they entered this agreement Ms Ji had already paid some of them to a Ms Zhou, a real estate agent and mutual former friend. Of the further funds also advanced to Ms Zhou under the agreement, Ms Ji retained some $30,000 for the payment of interest.

2. The registered mortgage which Ms Gu provided over her property secures all these advances. She agreed to this arrangement, knowing that Ms Zhou had been unable to repay her the considerable funds which Ms Gu had also loaned her, which were unsecured. There is no question that the facility agreement was a most improvident transaction, given its terms and Ms Gu’s circumstances.

3. When she entered the facility agreement Ms Ji was aware of the close relationship which existed between the elderly Ms Gu and Ms Zhou, as well as Ms Zhou’s apparently desperate financial situation. When she signed it Ms Ji also knew that during the course of the previous night Ms Gu and Ms Zhou had entered into a separate agreement, to which she was not a party, while they were together at the solicitor’s office to which Ms Zhou had taken Ms Gu.

4. It was then that Ms Gu was persuaded to sign the facility agreement, which to that point she had resisted, even after it had been explained to her in Mandarin by the solicitor Mr Wong, who Ms Zhou had arranged to see Ms Gu. That was after they met alone, when they agreed to a separate agreement, which Mr Wong then documented and they also signed.

5. Ms Ji signed the facility agreement the following morning, when Ms Zhou took it to her. Unbeknownst to Ms Ji, however, Ms Zhou had failed to have the agreement redrawn, in the way Ms Gu had asked her to do after she returned home from Mr Wong’s office, as Ms Zhou had promised she would. Ms Gu only then having read what she had signed. Despite this Ms Gu did not claim in these proceedings that she was not bound by the facility agreement or mortgage.

6. Ms Gu intended, by the agreement she and Ms Zhou had signed, that Ms Zhou would be obliged to repay all of the advances, as well as the interest dealt with in the facility agreement. Ms Zhou did not satisfy either obligation, with the eventual result that Ms Ji brought these proceedings against Ms Gu, in order to enforce the security over Ms Gu’s home.

7. Ms Gu has already obtained a default judgment against Ms Zhou in separate proceedings, which Ms Zhou unsuccessfully later sought to have set aside: Gu v Zhou [2026] NSWSC 501. The claims Ms Gu successfully pursued related to the loans she had herself made to Ms Zhou, before she entered the facility agreement.

8. Ms Gu also made a claim against Ms Zhou in those proceedings in relation to the agreement they had entered at the time she signed the facility agreement. For reasons which were not explained, Ms Gu has not yet pursued that claim. But it can be observed that it faces the obvious hurdle of Ms Gu establishing that it provides for what she understood, that depending on its proper construction. That does not arise to be resolved in these proceedings.

The competing claims

9. Despite Ms Zhou’s undoubted involvement in the parties’ dealings, neither party pursues claims against her in these proceedings and she was not called to give evidence.

10. Ms Ji seeks to enforce the facility agreement and mortgage. By her cross-claim, Ms Gu seeks to have them set aside.

11. To resist that claim, Ms Ji relies on Ms Gu having had independent legal advice from Mr Wong. There being no issue that payments due under the facility agreement in 2024 and 2025 were not made, and the sums advanced were not repaid when they fell due. Despite the service of a default notice in January 2025 on Ms Gu, pursuant to s 57(2)(b) of the Real Property Act 1990 (NSW).

12. That Ms Gu had independent advice is disputed, despite the certificates Mr Wong signed. Ms Gu also claims that notices of default which she had received were not valid and thus denies that Ms Ji is entitled to possession of the property.

13. Ms Gu’s defence admits that she owns the property; that she signed the facility agreement; and that the mortgage has been registered as security against the property. But she claims that the facility agreement is void, voidable or had been rescinded, for reasons pleaded in her cross-claim. She also denies being in default, Ms Ji having paid all of the borrowed funds to Ms Zhou, with the result that any default had been hers.

14. By her amended cross-claim, which was finally filed by consent at the hearing, Ms Gu seeks declarations that the facility agreement is void, voidable or has been rescinded and is of no effect. And that the mortgage is also void. She also seeks orders setting aside the facility agreement, the mortgage and the notice of default, and permanently restraining Ms Ji from purporting to take possession of her property.

15. The cross-claim also pleads that over a number of years Ms Gu had loaned considerable funds to Ms Zhou, for whom Ms Gu had undertaken some cleaning and cooking after her retirement; that Ms Zhou had introduced Ms Gu to Ms Ji, when Ms Zhou was seeking to borrow further funds, which Ms Gu had refused to lend her; and that Ms Ji had already loaned Ms Zhou funds which she had not repaid.

16. Ms Gu’s cross-claim also pleads:

17. that Ms Gu was at a special disadvantage, of which Ms Zhou was aware;

18. that Ms Zhou had exploited this in order to obtain a financial advantage in circumstances which were unconscionable, with the result that the facility agreement was voidable and ought to be rescinded;

19. Ms Ji’s conduct having been unconscionable, contrary to s 21(1)(a) of the Australian Consumer Law: Schedule 2 of the Competition and Consumer Act 2010 (Cth), and s 12CB of the Australian Securities and Investment Commission Act (Cth);

Conclusion

27. For reasons which follow, despite the case advanced for Ms Ji, I have concluded that the relief she sought must be refused and that pursued by Ms Gu granted.

Issues

28. There was little issue between the parties about the applicable law and principles.

29. They identified the matters of fact and law in issue to be:

“I. Matters of Fact in Issue

A. Cross-Claimant’s Personal Circumstances and Vulnerability

1. Whether the cross-claimant was retired, without regular income, and financially dependent on limited savings.

2. Whether the cross-claimant had no family in Australia, was emotionally isolated, and maintained a relationship of emotional and social dependence with Ms Zhou.

3. Whether the cross-claimant lacked business or legal experience and did not comprehend the nature or consequences of the Facility Agreement.

4. Whether the cross-claimant was a stranger and a volunteer to the transaction, deriving no material benefit from it.

5. Whether the cross-claimant encumbered her only substantial asset, being her home, by signing the Facility Agreement and Mortgage.

6. Whether the cross-claimant signed the agreement without receiving independent or effective legal advice.

B. The Defendant/Cross-Defendant’s Knowledge or Awareness

7. Whether the cross-defendant knew or ought to have known that the cross-claimant:

(a). was retired and financially insecure;

(b). was vulnerable;

(c). received no benefit under the Facility Deed; and

(d). did not fully comprehend the document or its risks.

8. Whether the cross-defendant knew or ought to have known that the cross-claimant signed the document without genuine independent legal advice.

9. Whether the cross-defendant knew that the transaction was improvident, uncommercial or manifestly disadvantageous to the cross-claimant.

C. Pressure, Influence and Conduct of Ms Zhou

10. Whether Ms Zhou exercised undue influence over the cross-claimant in procuring her signature.

11. Whether the cross-defendant was aware, or ought to have been aware, that Ms Zhou was exerting undue influence upon the cross-claimant.

12. Whether the cross-defendant knew or ought to have known that the cross-claimant’s will was overborne or that her judgment as to her own best interests was impaired.

D. Representations and Inducement

13. Whether the cross-claimant was repeatedly pressured to sign, having previously refused to do so.

14. Whether the cross-claimant was told the loan amount was $250,000 (not $500,000).

15. Whether the cross-claimant was told the agreement concerned the provision of security for a loan to Ms Zhou, rather than a direct loan from the plaintiff to herself.

16. Whether the initial $250,000 advanced was advanced under the Facility Agreement.

17. Whether false representations were made (in the presence of the cross-defendant) that:

(a). Ms Zhou had only one mortgage over her property;

(b) the sale of her property would yield $2.6 million in net equity; and

(c) the Facility Agreement was merely a short-term arrangement until the sale.

18. Whether the cross-defendant failed to correct these false representations.”

30. Not all of these issues were finally pressed, given evidence Ms Gu gave which was not challenged, as well as evidence Ms Ji gave in cross-examination.

31. What remained in issue included:

32. The credibility of Ms Ji and Ms Gu; and

33. Whether and against whom Jones v Dunkel inferences should be drawn, given that Mr Wong, the solicitor who provided the certificate on which Ms Ji relies, who Ms Gu denies having retained, was not called. Nor was Ms Zhou.

34. What was not in issue included that:

35. Ordinarily, “In the absence of fraud or some other of the special circumstances of the character mentioned, a man cannot escape the consequences of signing a document by saying, and proving, that he did not understand it. Unless he was prepared to take the chance of being bound by the terms of the document, whatever they might be, it was for him to protect himself by abstaining from signing the document until he understood it and was satisfied with it. Any weakening of these principles would make chaos of every-day business transactions.”: Wilton v Farnworth (1948) 76 CLR 646 at 649; [1948] HCA 20, applied in Toll (FGCT) Pty Ltd v Alpha Pharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52; and

36. To sign a document known and intended to affect legal relations is an act which itself ordinarily conveys a representation to a reasonable reader of the document. The representation is that the person who signs either has read and approved the contents of the document or is willing to take the chance of being bound by those contents, whatever they might be. “That representation is even stronger where the signature appears below a perfectly legible written request to read the document before signing it.”: Toll at [45].

37. It is against those principles that the question of whether Ms Gu established the disputed special circumstances, given the solicitor’s certificates on which Ms Ji relies, must be considered.

The parties’ cases

34. Both Ms Ji and Ms Gu gave affidavit evidence and were cross-examined. Neither Ms Zhou nor Mr Wong were called.

35. The parties addressed their cases in written opening and oral closing submissions, which were largely directed to the orders pursued by the cross-claim. They can shortly be explained.

Ms Ji

36. The case advanced for Ms Ji was shortly put, not addressing most of what had been advanced for Ms Gu in written submissions by reference to relevant authorities, which were thus not challenged. And finally, also responding but briefly to the oral submissions advanced for Ms Gu.

37. Ms Ji’s case was principally advanced by reference to McLennan by his tutor Kennedy v McLennan [2026] NSWCA 102. It was delivered on the third day of the hearing and applied some of the authorities addressed in Ms Gu’s written submissions. It was concerned with a claim of unconscionable conduct.

38. Ms Ji sought to draw an analogy. It having been accepted in McLennan that given the plaintiff father’s education, business acumen and cognitive abilities, he was capable of assessing the merits of the there challenged transaction, without the need for advice. The special disadvantage he claimed had been established by the family relationship, was rejected on the evidence which there arose to be considered, circumstances which bore little resemblance to those of this case.

39. Still, an analogy was sought to be drawn with the circumstances there considered, which Ms Gu resisted. Contending that her position was relevantly different and that her case did not rest alone on claimed equitable unconscionability, which depends on the establishment of special disability. While her other claims did not.

40. Otherwise, three main points were pressed for Ms Ji:

41. That Ms Gu was not a person under any such disability, given that:

(a) there had not been sufficient time for any special relationship to have developed between Ms Gu and Ms Zhou; (b) Ms Gu had both business and legal acumen, evidenced by a joint venture agreement she had earlier drafted, which disclosed that she had a certain level of sophistication, given the property development she had entered with Ms Zhou. It also establishing that she had an understanding of financial risks, profit, and expenses, which enabled her to understand the risk of entering the facility agreement, without having obtained financial advice. (c) The evidence also establishing that the consequences of entering that agreement were clear to her at the time she entered it, despite having executed it late at night; (d) Ms Gu had earlier repeatedly refused to enter the facility agreement, that establishing that she had the ability to make decisions in her own best interests; (e) a difference in her and Ms Zhou’s level of business acumen and legal knowledge was not capable of establishing the required special disadvantage, even though Ms Ji knew of their close relationship; and (f) Ms Gu herself had good reason for agreeing to enter the facility agreement, given the consequences she appreciated, of Ms Zhou going to jail if she was unable to obtain the further advance she required from Ms Ji.

2. In any event, Ms Ji did not have constructive knowledge of Ms Gu’s circumstances. That could not have arisen from the solicitor’s advice having been given to her late at night. Ms Ji not being aware of the substantial sums Ms Zhou also owed Ms Gu and not being obliged to make any enquiry as to what Ms Gu’s circumstances were. Even if it were accepted that the obvious question at the time was what had caused Ms Gu to change her mind overnight, Ms Zhou having left their meeting understanding that Ms Gu had refused to provide the security Ms Zhou required; and

3. That Ms Gu had obtained independent, effective legal advice. With the result that a Jones v Dunkel inference should be drawn against Ms Gu, she not having called evidence from Mr Wong, who had given the advice Ms Ji was entitled to rely on.

4. It was also contended for Ms Ji that even on Ms Gu’s best case, her home should be sold and an order for $250,000 made in her favour. The facility agreement having clearly indicated that the security she gave was for $500,000, which Ms Gu was capable of having read and understood, before she signed the agreement.

5. A calculation was also advanced as to what Ms Zhou’s likely equity in her Wahroonga property was at the time the facility agreement was entered. Given what the sale of the property, when settled in July 2024, had generated and there being evidence of the existence of four other loans known to be attracting interest, when the facility agreement was entered.

6. It is unnecessary to explain this calculation. It is speculative, given the limited evidence on which it was based and being intended, as it was, to shed light on Ms Zhou’s repeated claims that she had $2.6m equity in the property, at the time the facility agreement was entered. Despite, at that time, unbeknownst to Ms Gu, this was doubted by Ms Ji. She having obtained legal advice that the property could not be used to secure the further advance Ms Zhou required, given what it already secured and what existing caveats on the property disclosed. Information which she had not disclosed to Ms Gu.

7. The true position could have been established by calling Ms Zhou. That she was not called by Ms Ji, precludes the acceptance of the purported calculation.

8. The view was also urged by Ms Ji that the separate agreement which Ms Zhou and Ms Gu had entered when Ms Gu signed the facility agreement, gave Ms Gu a basis to have brought legal proceedings against Ms Zhou before she sold the property, it entitling Ms Gu to have placed a caveat on the property.

9. This also cannot be determined in these proceedings. Depending as that does not only on the construction of the agreement, Ms Gu and Ms Zhou entered, but also on an analysis of the applicable law, which was not attempted.

Ms Gu

47. In final submissions it was urged that despite how Ms Ji’s case was put, the cross-claim required a consideration of the various causes of action Ms Gu pursued, which each attracted their own tests, to which attention had to be paid. Contrary to the approach urged for Ms Ji.

48. The relevance of independent legal advice differing, for example, depending on the nature of the claim pursued. Such advice not being capable, for instance, of curing actual undue influence, but perhaps displacing an applicable presumption. The onus of establishing that there had been independent and effective legal advice then falling on Ms Ji.

49. It followed that Ms Ji was not entitled to conflate the different tests which applied to Ms Gu’s various claims, in the way that she sought to do. By a focus on whether Ms Gu was under a special disability, that not being relevant to all of the causes of action which she pursued.

50. The two paths which clearly led to the making of the orders Ms Gu sought, given the evidence received, including admissions Ms Ji had herself made, were argued to be Ms Zhou’s actual undue influence on Ms Gu and the claim she pressed under the Contracts R**eview Act 1980 (NSW), that the facility agreement was unjust.

51. Actual undue influence was submitted to have been established by Ms Ji’s own evidence, given that the facility agreement could not be explained by ordinary motives. Ms Ji having accepted that it went beyond what even a very good friend would ever be expected to assume. Ms Ji also having considered that it was unusual for Ms Gu to have done so, she herself having received no benefit or money under the facility agreement. Having entered it without obtaining any security from Ms Zhou, also having been what no reasonable person would do.

52. Ms Ji’s evidence thus satisfied the test explained in Thorne v Kennedy (2017) 263 CLR 85; [2017] HCA 49. It establishing her knowledge of matters which entitled Ms Gu to an order for rescission. This and the terms of the agreement and certificates on which Ms Ji relied also establishing that it was unjust.

53. It is unnecessary at this point to explain the submissions advanced about Ms Gu’s other claims.

The challenged facility agreement

54. The conclusions which I have reached must be understood in the context of the express terms of the facility agreement which Ms Ji’s solicitors prepared, after Ms Zhou advised that it should be provided to solicitors who would be representing Ms Gu. There is no evidence that Ms Gu had any contact with them, before Ms Zhou took Ms Gu to see Mr Wong, despite the facility agreement having earlier been sent to his firm. There is also no evidence that Ms Gu was aware of this.

55. There is also no suggestion that the terms of this agreement were negotiated with Ms Gu. She was unaware of its creation before Ms Zhou provided it to her in December 2023. Ms Gu having earlier refused both to lend Ms Zhou further funds, or to secure further borrowings Ms Zhou proposed to obtain from Ms Ji. There is also no evidence that Ms Gu ever discussed its terms with Ms Ji or Ms Zhou, before she was taken to see Mr Wong on 3 January 2024. I accept her evidence that she never even read it until after she had signed it.

56. Given the terms of the agreement, it is possible that it was initially drafted by Ms Ji’s solicitors on the basis that Ms Zhou would be the borrower and Ms Gu a guarantor. The executed agreement referring to “the Guarantor” under the heading “Background”.

57. But the executed facility agreement only had two parties. The Lender Ms Zhou and the Borrower Ms Gu. And its terms did not provide for any guarantee. Curiously, under the heading “Facility details”, it refers to them both by name and “capacity”, namely “[i]n her own corporate capacity”. Nothing in the agreement accords with either having such capacity, but nothing appears to turn on this.

58. The commencement date of the agreement is 4 January 2024, the date on which Ms Ji executed it. The agreement indicates that it was signed by Ms Gu and witnessed by Mr Wong on 3 January, but other contemporaneous records suggest that this was an error. Ms Gu is also likely to have signed it in the early hours of 4 January.

59. The facility limit was $500,000. The repayment date was 12 months from the commencement date. Other terms were favourable to Ms Ji, securing as it did unsecured loans she had earlier already made to Ms Zhou, which she had failed to repay.

60. A “higher interest rate” was specified to be 2% per month and the lower, 1.5%. Four months’ interest, $30,000, was payable in advance on the commencement date and monthly payments were due from the 5th month after the commencement date.

61. The special conditions were:

“1. By entering into this Facility agreement, the Borrower acknowledges and agrees that:

a. the Lender has already advanced $250,000 to the Borrower’s nominated account on 17 July 2023; and

b. the Lender shall advance the balance of the Facility Limited deducting the 4 months’ interest, being $220,000 to the Borrower’s nominated account specified in Schedule 2 upon the fully execution of this Facility Agreement.”

62. The security provided was by way of mortgage over Ms Gu’s home. She alone was responsible for paying the entire facility amount on the end date, with provision made for early repayment: cl 7. This according with discussions between Ms Ji, Ms Gu and Ms Zhou about repayment on the intended sale of Ms Zhou’s Wahroonga property.

63. Default events were specified to include non-payment of any amount owing under the facility: cl 9.2(a). Any default making the Facility Limit Owing immediately payable, that attracting the higher interest rate and also permitting Ms Ji to enforce her security: cl 10. In which event Ms Gu acknowledged Ms Ji did not have to enforce any other instrument which she held: cl 11. And that she had to make all payments, without set off or counterclaim: cl 13.

64. Both parties acknowledged they had the opportunity to obtain independent legal advice: cl 23. The agreement also required the execution of a drawdown notice, acknowledgment of legal advice and a legal practitioner’s certificate.

65. By the 3 January drawdown notice, Ms Gu acknowledged something which had not, in fact, occurred. Namely, that $250,000 had been advanced to her authorised account, specified to be an account in Ms Zhou’s name. There she also requested the payment of a further $219,784.77 into Ms Zhou’s account, that sum reflecting the agreed prepayment of interest, as well as fees dealt elsewhere in the agreement.

66. The acknowledgment of legal advice Ms Gu was required to give included:

“(d) solicitors do not give financial (as distinct from legal) advice; and

(e) if I have any doubts about the wisdom of the transaction, or its possible financial consequences for me or I have any other questions about any financial aspect of the transaction or the Facility, I should consult an accountant or other financial counsellor of my choice before signing the Facility documents.

After receiving the above advice. I freely and voluntarily signed the Facility documents.”

67. Given the circumstances in which it was known to Ms Ji that Ms Gu had signed the agreement during the night, it is apparent that Ms Ji was well aware that Ms Gu had not, in reality, had any opportunity to seek financial advice.

68. The legal certificate Ms Ji relies on provides:

69. In cross-examination, Ms Gu denied that she had told Mr Wong the things this certificate required. She was reluctant to say that his certificate was false, but when pressed said that what it contained was not true.

70. I also accept Ms Gu’s evidence that she was not focusing on what Mr Wong then told her, given the tired, agitated state she described she was then in, understandably, in the circumstances. With the result that it is possible that the certificate accurately reflects what she told Mr Wong.

Credit issues

71. In resolving what was in issue in relation to credit I have borne in mind the need, as far as possible, to reach conclusions “on the basis of contemporary materials, objectively established facts and the apparent logic of events”: Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [31].

72. Ms Ji’s evidence has to be understood in the context that unlike Ms Gu, she is an experienced businesswoman who successfully operates a business, MYK Metaverse Health Clinic, although she described it to be a shop. But she is also in the business of loaning considerable funds to others, both secured and unsecured. In Ms Gu’s case, unarguably for very considerable profit.

73. Before she and Ms Gu entered the facility agreement in terms which Ms Ji required, Ms Ji had already loaned Ms Zhou considerable sums, unsecured, which she had not repaid. Ms Zhou still owed Ms Ji some $250,000 when she asked for a further loan of $250,000, in circumstances Ms Ji understood to involve an emergency.

74. On her own evidence Ms Zhou told Ms Ji that she feared that the forced sale of her home would result in a sale price of only some $5m, while if she sold it herself, a price of $6.8m could be achieved. That having a considerable impact on her claimed $2.6m equity in the property. Ms Zhou also told her that she had become liable to pay interest at a rate of $50,000 per day on other borrowings.

75. On Ms Ji’s evidence, while believing Ms Zhou about the emergency she confronted, she came to doubt her claimed equity in her home, having sought legal advice. Her solicitor had been unable to substantiate that she had such an interest, but advised Ms Ji that the property secured other borrowings and was also subject to a caveat. With the result that not even a further caveat could be lodged.

76. Ms Zhou disputed this, when Ms Ji disclosed the advice to her, but still Ms Ji refused to advance her the further funds she required. But she did not disclose the advice to Ms Gu.

77. It was out of friendship, Ms Ji said, that she had obtained legal advice about how the borrowings Ms Zhou needed could be secured, as well as the risk of making a further advance to her. The result was the facility agreement she entered with Ms Gu.

78. I am not persuaded that friendship is what drove Ms Ji’s entry into this agreement. It was rather that it was to her considerable commercial advantage.

79. Ms Ji’s evidence establishes that in December 2023, she was persuaded by Ms Zhou to have her solicitors draw the facility agreement and mortgage which were sent to Mr Wong’s firm in early December, Ms Zhou having advised that it would act for Ms Gu. There is no evidence that Ms Gu was aware of this.

80. The facility agreement required Ms Gu to provide security for both Ms Zhou’s existing borrowings and the further $250,000 loan she then urgently needed. Its terms were thus to Ms Ji’s considerable advantage, given that what Ms Zhou was then unable to repay was unsecured. It was to Ms Gu’s obvious disadvantage. Ms Zhou not being a party to the agreement and assuming no obligation under it, with Ms Gu assuming all the risk and not receiving the benefit of any of the funds.

“Elder sister, what do you think I should do, I saw both you and your lawyer signing the contract at that time. My lawyer also organised for me the security of $500,000 with your property at the land title office before $250,000 was released to help her. I wouldn't have released more money to her without all of that.”

88. When taken to that message, Ms Ji had to accept that her oral evidence was wrong. That was not an admission made contrary to interest. But rather an acceptance that what she had earlier written put beyond doubt that her oral evidence was incorrect.

89. That in her cross-examination Ms Ji did not adopt an approach of strict adherence to her oath was thus revealed by that and other of her answers.

90. Like many witnesses, including Ms Gu, Ms Ji had difficulty in confining her evidence to the questions which she was asked. Instead, volunteering information she considered to be relevant, despite being asked to desist. But in Ms Ji’s case, even when directed to answer a question, she did not always do so.

91. Ms Ji had amended her affidavits when she was called to give evidence. They had been prepared with the assistance of an interpreter and it was said that she required the assistance of an interpreter for all of her cross examination.

92. In cross-examination Ms Ji claimed difficulty in remembering some matters she had dealt with in her affidavits, even though she had not corrected them. This was not the result of any difficulty with the interpretation at the hearing. Ms Ji’s responses to certain questions she was asked was also consistent with her having a considerable understanding of spoken English.

93. On the first day of her cross-examination, when taken to her affidavit, Ms Ji was invited to read part of it. When I raised the necessity of clarifying that she could actually read English she volunteered that she could read and understand it. Her answer was then repeated by the interpreter. I do not accept that Ms Ji made any mistake in giving that evidence, as was later submitted.

94. On the second day of her cross-examination Ms Ji claimed that she could not read or understand English, contradicting the evidence she gave the day before. I am unable to accept that evidence. Ms Ji was under no misapprehension when she gave evidence on the first day, that had revealed that she could both read and understand written English.

95. The attempted change in Ms Ji’s evidence about her command of English, I am satisfied, reflected a later realisation that her earlier evidence did not assist her defence of Ms Gu’s cross-claim.

96. The final result of the many problems with Ms Ji’s evidence was that I was not persuaded by evidence which she gave, when it was contradicted by that given by Ms Gu.

97. Ms Gu’s evidence was also challenged. But her evidence did not share the many problems which affected that which Ms Ji gave.

98. In Ms Gu’s case, unlike Ms Ji, she had had a friendship with Ms Zhou over many years, which had been interrupted for some years but, on resumption, had quickly developed to the point that they regarded each other as family members. That being reflected by the trust which Ms Gu placed in Ms Zhou, with the result that she joined in the joint venture Ms Zhou proposed, to acquire an investment property. It was documented in handwriting by Ms Gu, to record what they had agreed. A translation is in evidence.

Jones v Dunkel inferences

111. The rule is concerned with a party’s unexplained failure to give or call evidence where it would be natural for that evidence to be led, or where the party might reasonably be expected to lead that evidence.

112. Its operation was explained in RHG Mortgage Corporation Ltd v Ianni [2016] NSWCA 270. Such an “inference is open where there is an unexplained failure to call evidence as to a matter which calls for explanation from a person whom it could reasonably be expected would be called to give such evidence. The rule in such a case permits evidence in relation to that matter to be given greater weight, and an inference or inferences to be more readily drawn, when the party who might have called evidence to the contrary has chosen not to do so.”: at [160].

113. The rule typically applying “to strengthen or weaken an inference otherwise available on the evidence for the benefit of the party not in default”: Commonwealth of Australia v McLean (Court of Appeal (NSW), 31 December 1996, unrep), cited in RHG Mortgage Corporation Ltd.

114. The three relevant considerations are: first, that the missing witness would be expected to be called by one party rather than the other; secondly, that this evidence would elucidate a particular matter; and thirdly, that the absence is unexplained: at [75]-[96].

115. When those conditions are satisfied, the inference that the evidence would not have helped the party’s case may be drawn and used in two ways. First, in deciding whether to accept any other evidence given, whether for or against that party, which relates to a matter about which the person not called could have given evidence. Secondly, in deciding whether or not to draw inferences of fact which are open, about matters that person could have given evidence about.

116. Both Mr Wong and Ms Zhou could have shed light on the matters on which Ms Ji relies to resist Ms Gu’s claims.

117. That Ms Ji did not call evidence from either arises to be considered in circumstances where there is no executed costs agreement or retainer in evidence, only documents Ms Gu denied having received, which had been obtained on subpoena.

118. It having been Ms Zhou who advised that Mr Wong’s firm acted for Ms Gu, but no evidence that it ever contacted her before Ms Zhou took Ms Gu to see him late at night.

119. In all the circumstances I consider that a Jones v Dunkel inference must be drawn against Ms Ji, she not having called Mr Wong or Ms Zhou to challenge Ms Gu’s evidence. Such an inference cannot be drawn against Ms Gu, who, on her evidence has never received or paid any bill from Mr Wong and still has on foot other proceedings against Ms Zhou.

Was undue influence established?

120. I am satisfied that the evidence establishes, overwhelmingly, that Ms Gu was subjected to undue influence. As well as Ms Ji’s involvement, given what she knew, understood and herself did.

121. Not only was Ms Ji aware of much of what Ms Zhou did, I am satisfied that the result of how they acted together to advance their respective interests, was to Ms Gu’s considerable, known detriment.

122. Both having sought and finally succeeded in having Ms Gu succumb to the pressure placed on her, late at night, after Mr Wong had explained the agreement. As Ms Ji knew, before she also executed the facility agreement in the morning when Ms Zhou brought it to her, Ms Zhou having kept her informed of relevant developments, albeit not all she did through the night.

123. They both, unlike Ms Gu, being aware of the seriousness of Ms Zhou’s financial problems and the nature of the resulting risk Ms Gu accepted, when she entered the facility agreement and mortgage. A risk Ms Ji herself was not prepared to take. Given Ms Zhou’s financial situation, the likely loss of her home when Ms Zhou’s financial distress resulted in her failure to repay Ms Ji, an obligation which the facility agreement Ms Ji had her solicitors draw, did not impose on Ms Zhou. As she well knew.

The applicable law

124. In Thorne v Kennedy, in issue was whether two agreements were voidable for duress, undue influence, or unconscionable conduct. Undue influence, it was explained, can arise from widely different sources, “one of which is excessive pressure”: at [30].

125. There it was explained that undue influence can arise from “the ‘deliberate contrivance’ of another (which naturally includes pressure) giving rise to such influence over the mind of the other that the act of the other is not a ‘free act’”: at [31]. What that requires being “at the very least, the judgmental capacity of the party seeking relief must be ‘markedly sub-standard’ as a result of the effect upon the person’s mind of the will of another”: at [32].

126. One method of proof of the existence of undue influence is by direct evidence of the circumstances of the particular transaction: at [34].

127. Another, by a presumption. Namely, “where common experience is that the existence of one fact means that another fact also exists. Common experience giving rise to a presumption that a transaction was not the exercise of a person’s free will if (i) the person is proved to be in a particular relationship, and (ii) the transaction is one, commonly involving a ‘substantial benefit’ to another, which cannot be explained by ‘ordinary motives’, or ‘is not readily explicable by the relationship of the parties’”: at [34].

128. The presumption can also be raised by proof that the history of the particular relationship involved one party occupying a position of ascendency or influence, and the other a corresponding position of dependency or trust.

129. The presumption is rebuttable “by the other party proving that the particular transaction or transfer, in its particular circumstances, was nevertheless the result of the weaker party’s free will”: at [34].

130. Independent legal advice, which Ms Ji claims Ms Gu had, is relevant: Bester v Perpetual Trustee Co Ltd [1970] 3 NSWR 30. Whether Ms Gu received such advice is disputed.

131. If she did, its effect, “for the purpose of enlivening the client’s appreciation of the transaction, its legal effects and the alternatives (if any) which are open to the client”, also have to be considered: Stivactas v Michelatos (No 2) (1993) NSW ConvR 55-683; [1994] ANZ ConvR 252, cited in Hewitt v Gardner; Hewitt v Gardner [2009] NSWSC 1107 at [78].

132. It there also being explained by Ward J that in order to rebut the presumption of undue influence, the fact that independent, competent and sufficient legal advice has been received is relevant. Such advice being “an antidote” to the invalidating presumption arising in the context of undue influence, citing Brereton J in Riz v Perpetual Trustee Australia Limited [2007] NSWSC 1153 at [116]; [2008] NSW ConvR 56-198. It being insufficient to ensure that the client comprehends the content’s nature and effect of the relevant documentation, advice having to be given about “the propriety of the transaction”: at [77]. Her Honour concluding in that case, that advice as to what might flow from that transaction might have been expected: at [81].

How the evidence established the claimed undue influence

148. The pressure which Ms Zhou was able to put on Ms Gu was the result of both her circumstances and their relationship, of which Ms Ji was also aware, as well as of Ms Gu’s past dealings with Ms Zhou. The final result being that it allowed both Ms Ji and Ms Zho to take advantage of Ms Gu, as they did, to both their financial benefit.

149. Ms Gu was elderly, an immigrant from China who had long lived here and known Ms Zhou, having in recent years come to form a very close relationship with her, which Ms Ji described in her evidence. Ms Zhou and Ms Ji were also Mandarin speakers and there were no language difficulties between the three.

150. Ms Zhou and Ms Gu had lost touch for some years. When they reconnected, their relationship quickly developed to the point that Ms Zhou was not only able to persuade Ms Gu to lend her considerable funds, evidenced only by IOUs. But also to enter into an improvident property venture which resulted in her having no interest in the property, even when acquired.

151. Ms Gu had no family and had come to consider herself a member of Ms Zhou’s family, living at the family home one night a week, when she did cleaning and cooking work for a small payment. Ms Zhou having promised to care for Ms Gu in her old age and even shown her a will which she had signed, making her a beneficiary, along with her husband and sons.

152. This helped Ms Zhou use the connection she had so created to manipulate Ms Gu, to her very considerable disadvantage, as well as finally also to Ms Ji’s considerable advantage as well as her own.

153. The course which Ms Ji and Ms Zhou pursued together to achieve that result was predatory and knowing. The pressure exerted including Ms Ji suggesting that Ms Gu help Ms Zhou, knowing that her claim that she still had a $2.6m equity in her home, had not been established and was likely untrue, given advice which she had received, which she did not reveal to Ms Gu. Nor did she disclose the other borrowings which Ms Ji knew that property already secured, which increased the risk she urged Ms Gu to take.

154. Succumbing to this pressure late at night, while alone with Ms Zhou, resulted in a predictable, very adverse outcome for Ms Gu. Ms Ji having signed the agreement and advanced the further funds to Ms Zhou, knowing she had already failed to pay what she owed Ms Ji, which was reflected in the funds dealt with in the facility agreement. That was also not disclosed to Ms Gu.

155. It was Ms Ji who had her solicitors draw the facility agreement to which Ms Zhou was not a party. It was Ms Ji who engineered Ms Zhou telling Ms Gu at their dinner that the equity in her home was still $2.6m. It must be accepted that Ms Ji pursued this course, in order to help persuade Ms Gu that she should take the risks which Ms Ji knew the facility agreement imposed. Despite doubting that Ms Zhou’s representation was true, given other borrowings which she was aware it already secured.

“This agreement is made between Yi Fen Gu and Huijuan Zhou.

The parties acknowledge and agree that Huijuan Zhou will sell her property known as 79 Junction Road Wahroonga, and transfer $500,000 of the sales price to Yi Fen Gu’s nominated bank account.

The parties acknowledge and agree that Huijuan Zhou will be fully responsible for Yi Fen Gu’s obligation as borrower on her security property known as 6/31-33 Dryden Street, Campsie NSW 2194.”

214. On its face, contrary to Ms Gu’s understanding, the agreement appears to concern the borrowings Ms Zhou owed Ms Gu, rather than what Ms Gu had to pay under the facility agreement. That accords with the handwritten words Ms Zhou added: “[f]or loan repayment purpose”, at the end of the second paragraph, before it was signed.

215. It was only then that Ms Gu executed the facility agreement and mortgage, understanding that the second agreement protected her and Mr Wong signed the certificates on which Ms Ji relied.

216. There is no evidence that Mr Wong gave Ms Gu any advice about the second agreement. I am satisfied that it formed part of the pressure which resulted in Ms Gu signing the facility agreement and mortgage.

217. There is no suggestion that Ms Ji was involved in the discussion about the second agreement. But there is no doubt that Ms Zhou remained in phone contact with Ms Ji throughout the night. She informed Ms Ji once the facility agreement had been signed. Ms Ji was then concerned to ensure that Mr Wong had signed the certificates she required. They then arranged to meet in the morning, so that Ms Ji could execute the facility agreement and the advance could be made to Ms Zhou.

218. But when she got home, Ms Gu read what she had signed. It was then that she first realised that the facility agreement secured $500,000 borrowings, not only the $250,000 further advance she understood Ms Zhou so urgently needed. At about 2 am, Ms Gu contacted Ms Zhou by WeChat. Their exchange was:

Ms Gu: “It occurred to me just now that I should have told the lawyer to only take out a loan of 250,000. Cancel the maxi[m]um amount of 500,000. Can the maxi[m]um amount of the loan be cancelled?”

Ms Zhou: “My Dear. Don’t worry. I will sort it out as soon as I can, so that you can have peaceful sleeps!”

219. Despite what Ms Zhou thereby promised, which it is not suggested she disclosed to Ms Ji, Ms Zhou did not contact Mr Wong and the facility agreement was not amended, before Ms Zhou gave it to Ms Ji to sign.

220. After Ms Ji signed it, the further funds were paid to Ms Zhou.

221. What Ms Ji did know when she signed the agreement which helped establish the undue influence in which she was involved, included that:

222. despite not being prepared to advance Ms Zhou further funds without Ms Gu’s security, even though she knew about Ms Gu’s limited means and close family-like relationship with Ms Zhou, Ms Ji had not required Ms Gu to obtain financial advice;

223. but Ms Ji did require the certificate her solicitors had drafted, to be provided by Mr Wong;

224. Ms Ji knew that Ms Gu had only been prepared to provide the security she required after having met with Mr Wong and Ms Zhou late at night for a number of hours, when they had entered the second agreement, a copy of which she received, which did not refer to the facility agreement or mortgage;

225. Ms Ji also knew Ms Gu must have been very tired when she entered those agreements, having neither had financial advice nor advice about the viability of the transaction she had agreed to;

226. the certificates required that Ms Gu tell Mr Wong that she understood the financial risk the facility agreement posed to her, despite Ms Ji herself not having disclosed to Ms Gu what she knew about that risk and the advice she had received about Ms Zhou’s situation;

227. Ms Ji doubted, as a result, that Ms Zhou had the $2.6m equity in the property which she had elicited from Ms Zhou the previous night, but did not disclose this to Ms Gu; and

228. Ms Ji also did not disclose her experience that Ms Zhou was not reliable in meeting her obligations to pay interest and repay borrowings, which also put Ms Gu at risk, given that she had no security over Ms Zhou’s property.

229. There is no evidence that after Ms Ji executed the facility agreement, she or her solicitors provided Ms Gu with a copy. Had they done so, Ms Zhou’s failure to keep the promise she had earlier made to Ms Gu, to have the agreement amended, would have come to light.

230. The result was that it was only after Ms Zhou had sold her property without repaying what the facility agreement secured, that Ms Gu consulted a solicitor. Ms Ji having repeatedly advised her after they had entered the agreement, that she should seek legal advice and place a caveat on Ms Zhou’s property. But still not disclosing her legal advice that this could not assist Ms Gu.

231. While Ms Ji’s conduct after the agreement was entered does not help establish the undue influence I am satisfied she was involved in, it is certainly consistent with that involvement.

Unjust contract claim

226. I am also satisfied that the evidence establishes that the agreement was unjust.

227. This claim is regulated by the Contracts Review Act 1980 (NSW). It providing in s 7 that where the Court finds a contract or a provision of a contract to have been unjust in the circumstances relating to the contract at the time it was made, it may, if it considers it just to do so, and for the purpose of avoiding as far as practicable an unjust consequence or result, do any one or more of the things specified in s 7(1)(a)-(d). They include refusing to enforce any or all of the provisions of the contract or making an order declaring it void, in whole or in part.

228. “Unjust” is defined in s 4 to include “unconscionable, harsh or oppressive”. In determining whether a contract is unjust, s 9(1) requires the Court to have regard to the public interest and all the circumstances of the case, including consequences or results arising in the event of:

“(a) compliance with any or all of the provisions of the contract, or

(b) non-compliance with, or contravention of, any or all of the provisions of the contract.”

229. Section 9(2) specifies other matters which the Court shall have regard, to the extent they are relevant to be:

“(a) whether or not there was any material inequality in bargaining power between the parties to the contract,

(b) whether or not prior to or at the time the contract was made its provisions were the subject of negotiation,

(c) whether or not it was reasonably practicable for the party seeking relief under this Act to negotiate for the alteration of or to reject any of the provisions of the contract,

(d) whether or not any provisions of the contract impose conditions which are unreasonably difficult to comply with or not reasonably necessary for the protection of the legitimate interests of any party to the contract,

(e) whether or not—

(i) any party to the contract (other than a corporation) was not reasonably able to protect his or her interests, or

(ii) any person who represented any of the parties to the contract was not reasonably able to protect the interests of any party whom he or she represented,

because of his or her age or the state of his or her physical or mental capacity,

(f) the relative economic circumstances, educational background and literacy of—

(i) the parties to the contract (other than a corporation), and

(ii) any person who represented any of the parties to the contract,

(g) where the contract is wholly or partly in writing, the physical form of the contract, and the intelligibility of the language in which it is expressed,

(h) whether or not and when independent legal or other expert advice was obtained by the party seeking relief under this Act,

(i) the extent (if any) to which the provisions of the contract and their legal and practical effect were accurately explained by any person to the party seeking relief under this Act, and whether or not that party understood the provisions and their effect,

(j) whether any undue influence, unfair pressure or unfair tactics were exerted on or used against the party seeking relief under this Act—

(i) by any other party to the contract,

(ii) by any person acting or appearing or purporting to act for or on behalf of any other party to the contract, or

(iii) by any person to the knowledge (at the time the contract was made) of any other party to the contract or of any person acting or appearing or purporting to act for or on behalf of any other party to the contract,

(k) the conduct of the parties to the proceedings in relation to similar contracts or courses of dealing to which any of them has been a party, and

(l) the commercial or other setting, purpose and effect of the contract.”

230. In the circumstances the evidence which I have explained also establishes, I am satisfied, a proper basis for the conclusion that the facility agreement was unjust. Its terms being as they were unconscionable, harsh and also oppressive, as was apparent at the time they were entered, given all that Ms Ji then knew, understood and did.

231. Including that Ms Gu had not been involved in negotiating any of the terms of the documents Ms Ji’s solicitors had prepared; that there was a considerable inequality in bargaining positions between Ms Ji and Ms Gu, especially given what Ms Ji knew about Ms Zhou’s circumstances, which she did not disclose to Ms Gu; and that the agreement contained no provisions which would reasonably protect her interests.

232. Subsections 9(4) and (5) are also relevant, providing:

“(4) In determining whether a contract or a provision of a contract is unjust, the Court shall not have regard to any injustice arising from circumstances that were not reasonably foreseeable at the time the contract was made.

(5) In determining whether it is just to grant relief in respect of a contract or a provision of a contract that is found to be unjust, the Court may have regard to the conduct of the parties to the proceedings in relation to the performance of the contract since it was made.”

233. The result of the entry of the facility agreement accorded with Ms Ji’s prior experience of Ms Zhou and her understanding of her financial problems. Namely, that Ms Zhou did not pay the interest or repay the borrowings the facility agreement dealt with, as Ms Ji knew she had represented to Ms Gu that she would, once her Wahroonga property was sold. With the result that Ms Ji then sought to enforce her security by the pursuit of these proceedings, Ms Gu thereby facing the loss of her home, having had no benefit at all from what was dealt with in the facility agreement and not having the means herself, to meet the obligations it imposed.

234. Ms Ji relied on her conduct, when the interest fell into arrears, when she advised Ms Gu to seek legal advice and place a caveat on the Wahroonga property, to resist Ms Gu’s claims. But also necessary to take into account is that she still did not disclose to Ms Gu that she doubted that Ms Zhou had the claimed $2.6m equity in the property, or her legal advice that it was already encumbered, with the result that not even a further caveat could be lodged.

235. I thus do not accept that the conduct Ms Ji relied on supports the conclusion that the facility agreement and mortgage were not unjust.

236. The operation of the Act was again explained in Huynh v Ledinh Sovereign Super Pty Ltd [2024] NSWCA 78 citing, at [69], Nemeth v Australian Litigation Funders Pty Ltd [2014] NSWCA 198 at [97] and Perpetual Trustee Company Limited v Albert and Rose Khoshaba [2006] NSWCA 41; (2006) 14 BPR 26,639 at [99], [106]. There explained is that s 7 of the CRA involves a three-step analysis:

237. the first, making findings of primary fact;

238. the second, a finding that the contract is or is not unjust; and

239. the third, the exercise of the power to grant relief under the Act which may, but need not, follow from the conclusion that a contract is unjust.

The primary facts

237. I have already dealt with those facts in detail and will not repeat them.

The contract is unjust

238. I am satisfied that they also establish that the facility agreement and resulting mortgage were unjust.

239. In arriving at conclusions about whether a contract is or is not unjust, it being relevant to consider the need to protect a contracting party who is not able fully to protect their own interests against factors that may cause injustice. For reasons such as vulnerability resulting from a lack of education or intelligence, gullibility, the predation of fraud and greed, and sometimes from loyalty and love. At the heart of the evaluative exercise being recognition of the inadequacy of one party to protect her or his interests in the circumstances: Provident Capital Ltd v Papa (2013) 84 NSWLR 231; [2013] NSWCA 36 at [7].

240. The evidence well establishes that Ms Gu had such vulnerability, as Ms Ji actually appreciated, but was unconcerned about.

241. Actual or constructive knowledge of such circumstances is relevant. As is the lender’s appreciation of the significant risk of the transaction, being one which it was not prepared to take without the provision of “clean” security: Fast Fix Loans Pty Ltd v Samardzic [2011] NSWCA 260 at [50]; (2011) 15 BPR 29,445.

242. That a lender has a lack of concern with the suitability of the borrower and the serviceability of a loan also being relevant: Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389 at [264]; (2011) 15 BPR 29,699. There it was concluded that the business structure the lender puts in place and how it operates can result in it being significantly responsible for the preying upon borrowers: at [265].

243. These are all relevant considerations in this case.

244. Together Ms Zhou and Ms Ji set out to manipulate Ms Gu into providing security for Ms Zhou’s existing and proposed further borrowings, despite her obvious vulnerability. Ms Ji was aware of the process Ms Zhou proposed to pursue to persuade Ms Gu to provide the security needed, even if not aware of all that Ms Zhou did, and failed to do that night, before Ms Ji signed the agreement. Still, she was unconcerned, despite the obligations she knew it imposed on Ms Gu, who had not had time to obtain the advice she needed.

245. I am satisfied that Ms Ji knew about both Ms Zhou and Ms Gu’s financial circumstances; Ms Gu’s resulting vulnerability to being manipulated by Ms Zhou, given how she had come to be regarded as a part of her family, having no family of her own; her resulting loyalty to Ms Zhou and the consequences of the circumstances in which she had signed the agreement, given the certificates she required..

246. Ms Ji undoubtedly also appreciated the significant risk which Ms Gu was accepting when she entered the facility agreement and provided security over her home. All that she knew explaining the legal certificate she required. On her own evidence, Ms Ji was not concerned about Ms Gu’s apparent vulnerability and how Ms Zhou was exploiting it, given the commercial advantage that resulted for her. That accords with the terms of the certificates she required.

The claimed unconscionability

252. Both equitable and statutory unconscionability were also pleaded by Ms Gu.

253. The legal tests are different, but I am also satisfied that Ms Gu has also established these claims by the evidence I have explained.

254. The reasons can more shortly be given.

Equitable unconscionability

255. Equitable unconscionability depends on special disadvantage being established: Thorne at [38]-[39]. That is disadvantage which seriously undermines the ability of the innocent party to make a judgment as to his or her own interests. The other party having taken advantage of the disadvantage, by victimisation, unconscionable conduct or exploitation, knowing of the special disadvantage: at [38].

256. Special disadvantage can be established by factors such as illness, ignorance, inexperience, impaired faculties, financial need or other circumstances which affect the ability to conserve the party’s own interests, as well as poverty, sickness, age, sex, infirmity, of body or mind, drunkenness, illiteracy, lack of education, or of assistance or explanation where that is necessary: Blomley v Ryan (1954) 99 CLR 362 at 405; [1956] HCA 81, cited in Amadio at 461-2 and Stubbings v Jams 2 Pty Lt**d (2022) 276 CLR 1; [2022] HCA 6 at [40].

257. Special disadvantage can also result from strong emotion or attachment, even when the party has a real understanding of what they are doing, when that has impaired their ability to form a judgment as to their own best interests: Bridgewater v Leahy (1998) 194 CLR 457; [1998] HCA 66 at [115].

258. Inadequacy of consideration is an important consideration. That supporting the inference that there was a position of special disadvantage and tending to show the unfair use which was made: Blomley at 405.

259. Actual knowledge is not essential, it being sufficient that the counterparty ought to have known of it: Thorne at [44]-[45]. Wilful ignorance is also sufficient: Kakavas v Crown Melbourne Ltd at [156], discussed in Nitopi v Nitopi (2022) 109 NSWLR 390; [2022] NSWCA 162 on which reliance was finally placed by Ms Ji.

260. While Ms Ji disputed that Ms Gu had a special disadvantage, I am satisfied that the evidence I have explained undoubtedly establishes that she did.

261. That conclusion resting not only on the time and circumstances in which Ms Ji knew Ms Gu had executed the facility agreement, but the lack of consideration and its improvidence, which Ms Ji appreciated. Ms Gu obtaining no benefit from what she agreed, at a time when she had received no adequate advice or explanation of what she was agreeing to and bearing the entirety of the predicable consequences of Ms Zhou’s failure to meet the obligations imposed on Ms Gu.

262. Risks which Ms Ji well appreciated, but did not disclose to Ms Gu, despite what she knew about her close relationship with Ms Zhou. Also understanding that the agreement had not been negotiated with Ms Gu.

Statutory unconscionability

266. This claim is pursued under s 21 of the Australian Consumer La**w and s 12CB of the Australian Securities and Investments Commission Act 2001 (Cth), which both prohibit conduct which is in all of the circumstances unconscionable. Although s 12CB only applies to the provision or acquisition of financial services. Understandably, given what the facility agreement provided for, it was not suggested that its terms were not attracted.

267. “Unconscionable conduct” is not defined. But it does not depend on special disadvantage being established: Australian Competition and Consumer Commission v Quantum Housing Group Pty Ltd (2021) 285 FCR 133; [2021] FCAFC 40 at [83]-[84]. There is also no issue that available relief extends to persons involved in the contravention of the statutory prohibitions.

268. In Quantum Housing, it was also explained that unconscionable conduct “on its ordinary and natural interpretation, means doing what should not be done in good conscience”: at [87].

269. Its meaning being “more broad-ranging than the equitable principles”. It expressing “a normative standard of conscience which is permeated with accepted and acceptable community standards”. But conduct is not to be denounced by a court as unconscionable unless it is “outside societal norms of acceptable commercial behaviour [so] as to warrant condemnation as conduct that is offensive to conscience”: Productivity Partners Pty Ltd v Australian Competition and Consumer Commission; Wills v Australian Competition and Consumer Commission (2024) 281 CLR 338; [2024] HCA 27 at [60].

270. Section 22(1)(a)‑(l) of the Australian Consumer Law specifies matters that may be considered in the overall evaluation of the totality of the circumstances, to the extent they are applicable. This is why both “close attention to the statute and the values derived from it, as well as from the unwritten law”, as well as “close consideration of the facts”, are all necessary: Productivity Partners at [60].

271. It is s 12CC of the ASIC Act which specifies the relevant considerations in that Act. They require considerations of matters such as:

“(a) the relative strengths of the bargaining positions of the supplier and the service recipient; and

(b) whether, as a result of conduct engaged in by the supplier, the service recipient was required to comply with conditions that were not reasonably necessary for the protection of the legitimate interests of the supplier; and

(c) whether the service recipient was able to understand any documents relating to the supply or possible supply of the financial services; and

(d) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, the service recipient or a person acting on behalf of the service recipient by the supplier or a person acting on behalf of the supplier in relation to the supply or possible supply of the financial services; and

(e) the amount for which, and the circumstances under which, the service recipient could have acquired identical or equivalent financial services from a person other than the supplier; and

(f) the extent to which the supplier’s conduct towards the service recipient was consistent with the supplier’s conduct in similar transactions between the supplier and other like service recipients; and

(g) if the supplier is a corporation—the requirements of any applicable industry code (see subsection (3)); and

(h) the requirements of any other industry code (see subsection (3)), if the service recipient acted on the reasonable belief that the supplier would comply with that code; and

(i) the extent to which the supplier unreasonably failed to disclose to the service recipient:

(i) any intended conduct of the supplier that might affect the interests of the service recipient; and

(ii) any risks to the service recipient arising from the supplier’s intended conduct (being risks that the supplier should have foreseen would not be apparent to the service recipient); and

(j) if there is a contract between the supplier and the service recipient for the supply of the financial services:

(i) the extent to which the supplier was willing to negotiate the terms and conditions of the contract with the service recipient; and

(ii) the terms and conditions of the contract; and

(iii) the conduct of the supplier and the service recipient in complying with the terms and conditions of the contract; and

(iv) any conduct that the supplier or the service recipient engaged in, in connection with their commercial relationship, after they entered into the contract; and

(k) without limiting paragraph (j), whether the supplier has a contractual right to vary unilaterally a term or condition of a contract between the supplier and the service recipient for the supply of the financial services; and

(l) the extent to which the supplier and the service recipient acted in good faith.”

272. This claim thus requires the conclusion that the evidence I have discussed also establishes that Ms Ji, the person knowingly concerned, had knowledge of “the essential matters constituting the contravention (be they facts, circumstances, or states of mind)” and not “the character, quality, nature, or status of those matters”: Productivity Partners at [82]. With the result that knowledge that what was being done was unconscionable, is also not required.

273. So considering the evidence, I am also satisfied that the claimed unconscionability has also been established.

274. It may not be accepted that acceptable commercial behaviour permitted:

275. Ms Ji to encourage Ms Gu to provide security over her home for Ms Zhou’s existing unsecured and further borrowings, having knowingly drawn from Ms Zhou a representation which she did not herself believe to be true, that Ms Zhou still had $2.6m equity, which she would soon realise from the sale of her home;

276. Ms Ji not to disclose to Ms Gu what she knew about Ms Zhou’s parlous financial circumstances, which she was aware made the facility agreement improvident, given advice which she had already received;

277. Ms Ji to enter the facility agreement which she knew Ms Zhou had persuaded Ms Gu to sign late at night after being taken to Mr Wong, who Ms Ji required not give Ms Gu advice about the viability of the agreement, knowing that Ms Zhou had also not had time to obtain financial advice; and

278. Ms Ji simply closing her eyes as she did to Ms Gu’s known financial vulnerability: Amadio at 478.

279. The evidence well established the predatory state of Ms Ji’s mind. Exploiting Ms Gu as she did to her considerable commercial advantage, despite knowing the likely result for Ms Gu being the loss of the home she depended on being able to live in, during her retirement, not herself having the means to meet the obligations it imposed.

280. Ms Ji was commercially sophisticated and clearly aware that Ms Gu was not, despite the case sought to be advanced in these proceedings, about Ms Gu’s claimed sophistication.

281. There is no evidence that Ms Ji was aware of the joint venture which Ms Zhou had earlier induced Ms Gu to enter. Had she been, it could only have reinforced what was apparent to her at the time the facility agreement was entered, on what she did know. Namely, that Ms Gu, unlike Ms Zhou, was commercially unsophisticated, with the result that she was yet again being duped by Ms Zhou, with Ms Ji’s assistance.

282. These conclusions also support the making of orders in favour of Ms Gu.

Misleading or deceptive conduct

279. The cross-claim was also pressed on the basis of alleged misleading and deceptive conduct, given what Ms Ji induced Ms Zhou to tell Ms Gu at their dinner about the $2.6m equity she still claimed she had in her home, despite the $50,000 per day interest she claimed she then had to pay.

280. This claim is regulated by the ASIC Act, the Corporations Act and the ACL: ss 12DA ,194H, and 18, respectively. Section 18 being concerned with misleading and deceptive conduct in trade or commerce, and s 1041H with conduct in relation to a financial product or service that is misleading or deceptive or likely to mislead or deceive.

281. It is unnecessary to explain the statutory differences, given the way the case was pressed and met.

282. In Self Care IP Holdings Pty Ltd v Allergan Australia Pty Ltd (2023) 277 CLR 186; [2023] HCA 8 at [80]-[82], applying Google Inc v Australian Competition and Consumer Commission (2013) 249 CLR 435 at 464-465; [2013] HCA 1 at [89], the four steps involved in determining whether s 18 has been breached, which involve “quintessential question[s] of fact”, were identified to be:

283. first, identifying with precision the “conduct” said to contravene s 18, that requiring:

284. the alleged conduct to be identified;

285. where it is claimed to amount to a representation, whether the alleged representation is established by the evidence; and

286. the question “does the evidence establish that the person engaged in the conduct” being answered;

287. second, considering whether the identified conduct was conduct “in trade or commerce”;

288. third, considering what meaning that conduct conveyed to its intended audience; and

289. fourth, determining whether that conduct in light of that meaning was "misleading or deceptive or ... likely to mislead or deceive”, that is “whether it has the tendency to lead into error”.

290. The third and fourth steps also require the Court “to characterise, as an objective matter, the conduct viewed as a whole and its notional effects, judged by reference to its context, on the state of mind of the relevant person or class of persons.” That context including “the immediate context – relevantly, all the words in the document or other communication and the manner in which those words are conveyed, not just a word or phrase in isolation – and the broader context of the relevant surrounding facts and circumstances”: at [82].

291. Often “the simpler the description of the conduct that is said to be misleading or deceptive or likely to be so, the easier it will be to focus upon whether that conduct has the requisite character”. But the description of the conduct alleged and identified at the first step “should be sufficiently comprehensive to expose the complaint, because it is that conduct that will ultimately, as a whole, be determined to be or not to be misleading or deceptive”: at [82].

“(1) If:

(a) a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act); and

(b) the person does not have reasonable grounds for making the representation;

the representation is taken, for the purposes of this Schedule, to be misleading.

(2) For the purposes of applying subsection (1) in relation to a proceeding concerning a representation made with respect to a future matter by:

(a) a party to the proceeding; or

(b) any other person;

the party or other person is taken not to have had reasonable grounds for making the representation, unless evidence is adduced to the contrary.

(3) To avoid doubt, subsection (2) does not:

(a) have the effect that, merely because such evidence to the contrary is adduced, the person who made the representation is taken to have had reasonable grounds for making the representation; or

(b) have the effect of placing on any person an onus of proving that the person who made the representation had reasonable grounds for making the representation.

(4) Subsection (1) does not limit by implication the meaning of a reference in this Schedule to:

(a) a misleading representation; or

(b) a representation that is misleading in a material particular; or

(c) conduct that is misleading or is likely or liable to mislead;

and, in particular, does not imply that a representation that a person makes with respect to any future matter is not misleading merely because the person has reasonable grounds for making the representation.”

286. Causation must also be addressed: s 236 ACL. That is established by evidence that the representation materially contributed to the loss, that not depending on it being the cause*:* I & L Securities v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109; [2002] HCA 41 at [57]-[58].

287. As must that Ms Ji was knowingly concerned, having knowledge of the essential facts which made the representations likely to mislead or deceive: Anchorage Capital Master Offshore Ltd v Sparkes [2023] NSWCA 88 at [330].

288. In the case of this agreement, the representation about the equity Ms Zhou had in her home, which Ms Ji induced, I am satisfied, did play a part in what caused Ms Gu to enter the agreement as she did.

289. The central question being whether the conduct Ms Gu relied on, viewed as a whole, had sufficient tendency to lead her into error. That is, to form an erroneous assumption or conclusion about some relevant fact or matter. That not depending on intention, but an objective assessment of the evidence relied on to establish that Ms Gu had actually been deceived. That requiring an objective consideration of whether that conduct was likely to mislead or deceive, given her known characteristics.

The conduct

290. The conduct relied on was pleaded and admitted to be:

“[25] At the dinner, the Cross-defendant asked Zhou what would be the surplus left after the sale of her house at 79 Junction Road Wahroonga NSW (the Wahroonga property) to which Zhou replied that after the sale Zhou would be left with a surplus of $2,600,000.

[26] Then, in the presence of the Cross-defendant, Zhou turned to the Cross-claimant and asked if she could help her by offering her home as security.

[27] Zhou told the Cross-claimant in the presence of the Cross-defendant that the loan was only for a short period until Zhou sold her Wahroonga property.”

291. There is no real issue about these facts or Ms Ji’s involvement in the conduct Ms Gu relies on.

292. In cross-examination, Ms Ji accepted that it was her who asked Ms Zhou how much equity she would have if she sold her house and paid off her mortgage. Not only was she thus connected with the statement Ms Zhou made, but she did not disclose her doubt about its truth, or the basis of that doubt.

The conduct was pursued “in trade or commerce”

293. There was no dispute about this. It was established by the evidence of how Ms Zhou pursued the business of lending in which she engages.

294. In Ms Gu’s case, by attending the dinner Ms Zhou had arranged, in order that she could help persuade Ms Gu to enter the facility agreement Ms Ji had instructed her lawyers to draw, which Ms Zhou had earlier provided to Ms Gu, who was refusing to enter it.

What meaning the conduct conveyed

295. On her evidence, Ms Ji had knowledge of facts which demonstrated that Ms Zhou’s representations about her position, that on sale she would have sufficient equity to repay the borrowings she was asking Ms Gu to secure, were both misleading and likely false.

296. They were about future matters, that attracting s 4, as Ms Gu submitted. That having the result that they must be taken to be misleading, absent evidence to the contrary and otherwise requiring reasonable grounds. There is no such evidence or reasonable grounds.

297. To the contrary, on the evidence, Ms Gu had no reason to believe that Ms Zhou’s representations were untrue. Objectively, Ms Ji’s conduct on Ms Gu’s state of mind, viewed as a whole and its notional effects judged by reference to its context, it must be accepted, did influence her to enter into the facility agreement, despite her concerns about further assisting Ms Zhou. That in part being the result of Ms Ji’s conduct.

Whether Ms Ji’s conduct was misleading or deceptive, likely to mislead or deceive and had the tendency to lead Ms Gu into error

298. In all of the circumstances, I am satisfied that it must also be concluded that the conduct was misleading and deceptive. It induced Ms Gu’s belief that the statements Ms Ji had induced Ms Zhou to make about the equity she still had in her Wahroonga property, in order to persuade Ms Gu to enter the facility agreement, were true. Ms Gu not having disclosed that she had reason to believe that they were untrue.

299. Unlike Ms Ji, Ms Gu then had no reason to doubt the truth of what Ms Zhou told her, at Ms Ji’s urging, when she was trying to help Ms Zhou persuade Ms Gu to enter the facility agreement. That being to the benefit of both Ms Ji and Ms Zhou, but not Ms Gu, given the risks she thereby assumed.

300. The result was that Ms Ji led Ms Gu into real error, to her considerable disadvantage and Ms Ji’s undoubted unjust advantage, given the terms of the agreement and mortgage Ms Ji now seeks to enforce. That resulting in the loss of her home, despite Ms Gu having received no benefit under the facility agreement, it having imposed no obligations on Ms Zhou. Despite they having also discussed that it would be Ms Zhou who would meet all the obligations it imposed on Ms Gu, finally, when she sold her property.

Causation

301. On that evidence causation is also established.

302. What Ms Ji did having helped induce Ms Gu to enter this improvident agreement, as well as the mortgage Ms Ji also required. What Ms Zhou told Ms Gu later that night, about the risk of her going to jail, also contributed to that outcome. But that does not detract from the conclusion that causation is established by the evidence on which Ms Gu relies.

303. The result is that relevant misleading and deceptive conduct on Ms Ji’s part is also established. That also supports the making of the orders sought.

Costs

304. The usual order under the Uniform Civil Procedure Rules 2005 (NSW) is that costs follow the event: r 42. In this case, that is an order in favour of Ms Gu.

305. In the event that there is any dispute about the appropriate order, the parties should approach within 14 days with short written submissions.

Orders

306. Judgment will be entered for Ms Gu.

307. The parties should confer and provide final orders, including as to costs, within 14 days, together with short written submissions in the event of any dispute.

**********

Amendments

28 July 2026

At paragraph 307, the duplicated words "including as to costs" has been deleted.