Jiang v Yan and Sun

Texts Cited: O’Donovan and Philips, Modern Contract of Guarantee (Westlaw AU)
J D Heydon, Heydon on Contract Volume II Particular Contracts (2024, Sumner Publications)

Category: Principal judgment

Parties: Plaintiff:
Hongduo Jiang (Litigant in person)
First Defendant:
Tao Yan (Litigant in Person)
Second Defendant:
Haitao Sun (Litigant in Person)

File Number(s): 2024/00329565

Publication restriction: Nil

Judgment

1. The plaintiff is Mr Jiang. The first defendant is Mr Yan. The second defendant is Mr Sun.

2. In their dealings with one another during the events the subject of the litigation, the parties spoke to and communicated with one another in Mandarin.

3. All 3 parties represented themselves at the hearing but previously had legal representation in these proceedings. Both the plaintiff and the first defendant were assisted by separate Mandarin interpreters throughout the hearing.

A. What is the case about?

4. It is common ground, established on the pleadings and confirmed in discussions with the parties at the start of the hearing, that:

5. The plaintiff made 2 loans to the company Western Manchester Pty Ltd.

6. The first loan was for the sum of $400,000 to be repaid within 2 years with interest payable at a fixed rate of 10% per annum. The terms of the loan were agreed orally between the plaintiff, the first defendant and the second defendant on or about 21 July 2022. The plaintiff advanced the loan money to the company on 21 July 2022 by transferring the full sum of $400,000 to the company’s bank account. The plaintiff, the first defendant and the second defendant subsequently signed a document called “Loan Agreement Date 21/07/2022” prepared by the second defendant. The written document was signed on or about 17 August 2022.

7. The second loan was for the sum of $200,000 to be repaid within 10 months with interest payable at a fixed rate of 10% per annum. The terms of the loan were agreed orally and in WeChat messages between the plaintiff and the second defendant on or about 9 October 2023. The plaintiff and the second defendant signed a written “Loan Agreement Date 09/10/2023” on or about that date. The plaintiff advanced the loan money to the company by transferring $100,000 to the company’s bank account on 10 October 2023 and a further $100,000 the following day.

8. The company paid interest on the first loan from August 2022 to April 2024.

9. The sum of $70,000 of the principal advanced under the first loan has been repaid.

10. The company paid interest on the second loan from November 2023 to April 2024.

11. The company has not repaid any of the principal advanced under the second loan.

12. The company has gone into liquidation.

13. The plaintiff claims that both the first defendant and the second defendant gave personal guarantees to repay the first loan and interest. The plaintiff alleges that the first defendant and the second defendant gave the personal guarantees orally on or about 21 July 2022 and they were subsequently reduced to writing.

14. The plaintiff claims that the second defendant gave a personal guarantee to repay the second loan and interest. The plaintiff alleges that the second defendant gave the personal guarantee orally on or about 9 October 2023 and it was subsequently reduced to writing.

B. What are the issues?

7. Each of the parties filed pleadings prepared with the assistance of their own lawyers. The plaintiff filed his statement of claim commencing the proceedings on 5 September 2024. The second defendant filed his defence on 21 October 2024 and the first defendant filed his defence on 15 November 2024.

8. As I understand it, the parties have raised on the pleadings the following issues requiring determination by the court:

9. Regarding the alleged guarantees given by the first defendant and the second defendant in respect of the first loan:

(a) (issue 1): the company received the loan monies before the alleged guarantee was given (the first defendant’s defence paragraph 4 (a), 4(e) (i), (ii) and (iii)); (b) (issue 2): the first defendant did not sign the written “Loan Agreement Date 21/07/2022” in his personal capacity, but only in his capacity as the then sole director of the company (the first defendant’s defence paragraph 4(iv)); (c) (issue 3): the second defendant executed the “First Loan Agreement (as defined in the statement of claim)” after the plaintiff had advanced the funds to the company, and the guarantee fails for want of valuable consideration and is void and unenforceable against the second defendant (the second defendant’s defence paragraph 4 c. i. and ii); and (d) (issue 4): if the guarantee is enforceable as against the second defendant, it is limited to a total of $200,000 (the second defendant’s defence paragraph 4 c. iii.).

2. Regarding the alleged guarantee given by the second defendant in respect of the second loan:

(a) (issue 5): the “Second Loan Agreement (as defined in the statement of claim)” was not executed in accordance with section 127 of the Corporations Act 2001 (Cth) as only one director executed the document (the second defendant’s defence paragraph 8 a.); and (b) (issue 6): if the guarantee was validly entered, it was limited to $200,000 (the second defendant’s defence paragraph 8 b. ii.).

9. There is a further issue (issue 7), not raised on the pleadings but which emerges from the affidavits relied upon by the parties: in their affidavits, the plaintiff and the first defendant give different versions of the conversation they both agree took place on 20 July 2022. The critical difference between each person’s version is that the plaintiff says the first defendant agreed to personally guarantee the timely repayment of the full loan, that is to say the full amount of $400,000, together with interest; whilst the first defendant says that he made it clear that he only guaranteed $200,000 and the other $200,000 would have to be guaranteed by the second defendant.

10. In his statement of claim the plaintiff pleaded an alternative claim of misleading or deceptive conduct in contravention of section 18 of the Australian Consumer Law. Little or no attention was given to this claim at the hearing. I will leave it to one side for the moment.

11. The first defendant provided the court with written closing submissions (Exhibit 1). In those submissions:

12. The first defendant submitted that the company is a separate legal entity from its directors such that, except where a director gives a personal guarantee or otherwise assumes personal liability, a director is not personally liable for company debts simply by the virtue of their office.

13. The first defendant submitted that absent execution of a personal guarantee or other unequivocal personal undertaking, there is no basis for treating him as personally liable for the company’s obligations as borrower.

14. The first defendant submitted that there was no evidence that he ever signed the Loan Agreement in a personal capacity or in any capacity that would attract personal liability. I read this submission as echoing issue 2 on the pleadings, that is that the first defendant submits he did not sign the written “Loan Agreement Date 21/07/2022” in his personal capacity, but only in his capacity as the then sole director of the company.

15. The first defendant submitted that “as a matter of law and commercial reality” personal liability on the part of a director required “a written personal guarantee or clarity of contractual intention” and that the plaintiff did not obtain any form of signed personal guarantee from him. When I enquired of the first defendant what he meant by “clarity of contractual intention” he submitted that he was referring to a legal contract.

16. The first defendant submitted that there is no statutory provision that converts a corporate debt into a director’s personal obligation where the director never personally guaranteed the debt. He submitted that the plaintiff’s claim rests on the argument that the liquidation of the company converts the borrower’s corporate obligations into personal obligations of the director at the relevant time. He submitted that the plaintiff’s claim, however, goes beyond the scope contemplated by section 588G of the Corporations Act 2001.

17. The second defendant made very brief oral closing submissions. He did not make submissions in writing. The second defendant submitted that all of the discussions regarding the business and loan agreements were in the Mandarin language. He submitted that he did not seek independent legal advice when preparing the written documents. The second defendant submitted that all 3 parties have different understandings to the Mandarin discussion and the written document. He submitted that he did not think he had made any promise after receiving the money already. I took this to mean that he did not think that he had made any promise after receiving the money for the first loan and the money for the second loan. As I understand it, this submission echoes what I have referred to as issue 3.

18. The plaintiff made very limited oral closing submissions but relied on very long and detailed written submissions in the form of Volume B of the Court Book, filed 3 February 2026 (Exhibit CBB). He also provided the court with proposed short minutes of order and various schedules (Exhibit A). It is unnecessary for me to attempt to summarise the contents of those documents.

C. What are the relevant legal principles?

14. Having regard to the issues raised by the parties, the following legal principles appear to me to be particularly relevant to guide me in making my decision.

15. Firstly, a guarantee is a type of contract. In essence, it is a binding promise of one person to be answerable for a present or future debt or obligation of another person if that other person defaults: O’Donovan and Phillips Modern Contract of Guarantee (Westlaw AU) at [1.300]; similarly J D Heydon Heydon on Contract Volume II Particular Contracts (2024, Sumner Publications) at [10.30].

16. In Canty v PaperlinX Australia Pty Ltd [2014] NSWCA 309 at [37], the Court of Appeal (Gleeson JA; Barrett and Emmett JJA agreeing) adopted Jordan CJ’s description of the general nature of a guarantee in Jowitt v Callaghan (1938) 38 SR (NSW) 512 at 516. Jordan CJ had said “The contract of guarantee or suretyship is a contract between two persons which is intended by them to secure the performance of the obligation of a third person to one of them.”.

17. In Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245 at 254, Mason CJ said that “a contract of guarantee is, subject to any qualifications made by the particular instrument, a collateral contract to answer for the debt, default or miscarriage of another who is or is contemplated to be or to become liable to the person to whom the guarantee is given”.

18. Secondly, there is no requirement in New South Wales that a contract of guarantee be made or recorded in writing. The position is different in other states of Australia (for example in Queensland and Victoria) and the United Kingdom, where there are statutory requirements for guarantees to be in writing or evidenced in writing based on modern equivalents of the English Statute of Frauds 1677 (Imp): Heydon at [10.270] and [10.330]. In New South Wales, the common law applies. Under the common law, “It is sufficient if the relevant oral dealings, documents or other conduct would, to a reasonable person in the position of the parties, manifest an intention to create a guarantee”: Heydon at [10.270].

19. Thirdly, the creation of a contract of guarantee depends on satisfaction of the general law requirements for contractual validity: Heydon at [10.290].

20. Fourthly, under the general law of contract, 4 different categories of case have been identified in situations where parties agree on terms but at the same time agree that they will prepare a written document later. The first 3 categories were identified by the High Court in Masters v Cameron (1954) 91 CLR 353 at 360 in the joint judgment of Dixon CJ, McTiernan & Kitto JJ. The fourth category was identified by McLelland J in Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) 40 NSWLR 622 at 628.

21. In Masters v Cameron, Dixon CJ, McTiernan and Kitto JJ said (at 360):

“Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.

In each of the first two cases there is a binding contract: in the first case a contract binding the parties at once to perform the agreed terms whether the contemplated formal document comes into existence or not, and to join (if they have so agreed) in settling and executing the formal document; and in the second case a contract binding the parties to join in bringing the formal contract into existence and then to carry it into execution. Of these two cases the first is the more common. Throughout the decisions on this branch of the law the proposition is insisted upon which Lord Blackburn expressed in Rossiter v Miller (1) when he said that the mere fact that the parties have expressly stipulated that there shall afterwards be a formal agreement prepared, embodying the terms, which shall be signed by the parties does not, by itself, show that they continue merely in negotiation.”

22. In Baulkham Hills, McLelland J said (at 628):

"There is in reality a fourth class additional to the three mentioned in Masters v Cameron ... namely, '... one in which the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms.' "

23. These 4 categories are not strict categories into which a case must be found to fall: Pavlovic v Universal Music Australia Pty Ltd (2015) 90 NSWLR 605 at [69]; Radovanovic v Stekovic [2024] NSWCA 129 at [22].

24. Determining whether the parties intend to be bound immediately is to be determined objectively, in accordance with the principles stated in Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95 at [25]: Rose v Manno Kingsway Pty Ltd (2025) 116 NSWLR 598 at [42]; Bettar Holdings v RWC Brookvale [2025] NSWCA 242 at [42].

25. In Ermogenous*,* Gaudron, McHugh, Hayne and Callinan JJ said (at [25]) (omitting footnotes):

‘Because the search for the “intention to create contractual relations” requires an objective assessment of the state of affairs between the parties (as distinct from the identification of any uncommunicated subjective reservation or intention that either may harbour) the circumstances which might properly be taken into account in deciding whether there was the relevant intention are so varied as to preclude the formation of any prescriptive rules. Although the word “intention” is used in this context, it is used in the same sense as it is used in other contractual contexts. It describes what it is that would objectively be conveyed by what was said or done, having regard to the circumstances in which those statements and actions happened. It is not a search for the uncommunicated subjective motives or intentions of the parties.’

26. The parties subsequent conduct may be taken into account in determining whether they intended immediately to be bound because that is a matter going to the existence (as opposed to the terms) of the contract: Rose v Manno Kingsway Pty Ltd at [43]; Bettar Holdings v RWC Brookvale at [87].

27. Fifthly, when parties or witnesses give conflicting evidence about what happened, their conflicting evidence should be tested against contemporaneous materials, objectively established facts and the apparent logic of events: Fox v Percy (2003) 214 CLR 118, per Gleeson CJ, Gummow & Kirby JJ at [31].

28. Resolution of the issues raised by the parties in accordance with those principles requires a more detailed understanding of the facts. I will address that now before returning to the issues.

D. More details about the relevant facts

29. ASIC records (CBA 48) show that the company was registered on 25 May 2017. The first defendant was the sole director of the company from that date until 1 February 2023. On that date, the second defendant was also appointed a director. From 1 February 2023 both the first defendant and the second defendant were directors until the first defendant ceased being a director on 16 May 2024. The first defendant was the secretary of the company from 25 May 2017 until 16 May 2024 when second defendant was appointed.

30. According to the first defendant, the first defendant and the second defendant had known each other since around early 2017. According to the first defendant, the company was established to be a home textiles wholesale company, importing textiles from China. According to the first defendant, from the time the company was set up, operationally the second defendant was in charge of the business. The second defendant did not dispute any of those facts. The second defendant said that the company imported plain combed cotton towels from manufacturers in China and resold them to Australian embroidering businesses for them to be further processed.

31. The plaintiff accepts the first defendant’s account of how they first met in November 2021. The account is set out in the first defendant’s affidavit at paragraphs 22 and 23 (CBA305-306):

“22. On 16 November 2021, | first met Plaintiff's wife, Ms. Xiao ZHANG, in a park near my residence. We had a pleasant conversation and found out JIANG was also from Shandong Province. During this conversation, ZHANG said to me words to the effect: What a coincidence! You and my husband come from the same hometown. You two should meet. Why don’t you come to our house tomorrow to get acquainted?| replied: Sure.

23. On 17 November 2021, I visited JIANG’s home at 31 Perkins Drive, Kellyville NSW 2155. We discussed our backgrounds and work in Australia. The conversation was in words to the following effect:

Jiang said: I used to work in the public finance sector in Shandong Provincial Finance Department before I came to Australia, and that since moving to Australia I had been working in manual jobs and I am doing general labour at a golf course farm.

I said: I am self-employed with my own security-camera installation business, and I also I have a towel and bedding wholesale business on the side.

Jiang said: Oh that's very nice. In effect I have a contact with a towel manufacturing company in Shandong called Shandong Jinhao Towel. Perhaps there’s an opportunity for cooperation between your towel business and that manufacturer. Maybe I can introduce you, and you could work together? I said: That sounds great. It would be wonderful if we could work together on that.

Our conversation was short but very pleasant. At the conclusion of our meeting, we added each other as contacts on WeChat.”

32. Shortly after this first meeting the plaintiff and the second defendant spoke on the phone.

33. On 21 November 2021, the first defendant sent the plaintiff a WeChat message with an internet link to the company’s website.

34. The plaintiff accepts the first defendant’s evidence (paragraph 27 of his affidavit at CB306) that on 28 November 2021 the plaintiff created a WeChat group chat dedicated to exploring the possible cooperation with the towel manufacturer. The group included the plaintiff, a person he referred to as “Manager Shi”, who the first defendant understood was a representative of the Shandong towel manufacturer, and the first defendant. The first defendant in turn invited Ms. Junhong YAO (also known as “Sunny Yao”) into the group. He was one of the first defendant’s contacts on the supply side for textiles.

35. The plaintiff also accepts the first defendant’s evidence (paragraph 28 of his affidavit at CB306) that over the next few weeks they used this WeChat group to discuss a potential collaboration. However, after some exchanges of information and the first defendant sought opinion from the second defendant, the first defendant found the manufacturer’s products did not have any clear advantage or unique selling point for the Australian market. After February 2022, no one in the group chat raised further business proposals. Up to that point the plaintiff had no financial involvement or role in the Company.

36. The plaintiff accepts the first defendant’s evidence that he occasionally worked for the first defendant as a casual assistant in the first defendant’s security camera installation business. The plaintiff would assist the first defendant on site with installing surveillance cameras and other equipment. This work was on an as-needed basis, roughly 3 – 4 days a week when available. The first defendant paid the plaintiff a daily wage for his help. The plaintiff would invoice the first defendant’s business for these days of work and the plaintiff would be paid accordingly. The first defendant said that they worked together between November 2021 and mid – 2024. The plaintiff said that he commenced working with the first defendant in February 2022 and did not dispute that he continued doing that until mid – 2024. It is unnecessary to resolve the conflict between the plaintiff and the first defendant as to when they started working together. The point is that, from at least February 2022 they were in regular contact with one another and had the opportunity to speak.

37. It appears to be common ground as between the plaintiff and the first defendant that one thing that they spoke about was the fact that the plaintiff had an investment property he was renovating and intending to sell. They must have spoken about it by 2 June 2022 because on that day the plaintiff sent the first defendant a WeChat message telling him that the buyer had pulled out.

38. It is common ground also between the plaintiff and the first defendant that the first defendant suggested to the plaintiff that he may be interested in lending some of the proceeds of sale to the company which would pay him 10% interest, although the plaintiff and the first defendant give different accounts of when they first discussed that possibility and how often. The plaintiff said that the first defendant repeatedly suggested this to him during the period of 17 November 2021 to 20 July 2022. The first defendant gives the impression in his affidavit (paragraph 31) that he suggested it to the plaintiff for the first time in or about July 2022 when the plaintiff told him he had sold his property and was looking to invest. That seems inherently unlikely bearing in mind that they had obviously been speaking about the sale of the plaintiff’s investment property since at least the start of June 2022.

39. The plaintiff and the first defendant give different evidence about when the topic of the first defendant giving a guarantee first came up. The plaintiff’s evidence (first affidavit paragraph 9 b.) was that in their discussions between 17 November 2021 and 20 July 2022 the first defendant promised a 10% annual interest return on a loan to the company and offered a personal guarantee. The first defendant “denied” this allegation (affidavit paragraph 29). In the account of events the first defendant gives in his affidavit, he made no reference to a guarantee being discussed until all 3 parties met on 20 July 2022. On his account of events, the first mention of a guarantee was when the first defendant said he said at that meeting “If you lend $400,000, I need to make one thing clear: I can only guarantee $200,000. If, in the worst case, something happens to the company, I can only repay $200,000. The other $200,000 would have to be guaranteed by (the second defendant)” (affidavit paragraph 33). It seems to me that this is an inherently unlikely way to bring up the subject of a guarantee for the first time. If this is what the first defendant said, it suggests that the subject of a guarantee had been discussed before.

40. The plaintiff and the first defendant give different evidence about when a loan amount of $400,000 was first mentioned. The plaintiff’s evidence was that this was the amount discussed from the outset. On the first defendant’s account of events it was suggested for the first time when all 3 parties met on 20 July 2022 and, further, when the new amount ($400,000 instead of $200,000) was first suggested it was immediately agreed upon without further discussion and the money was advanced the next day. It strikes me as inherently unlikely that a doubling of the loan amount would be suggested so casually and agreed to so readily, all in the context where the giving of a guarantee was raised for the very first time. It is more likely, it seems to me, that these matters had been discussed previously.

The meeting between the plaintiff, the first defendant and the second defendant on 20 July 2022

41. At 10:12 AM on 20 July 2022 the second defendant sent the first defendant a WeChat message asking: “Will brother Jiang come this week?”. The reference to Jiang is a reference to the plaintiff. In subsequent messages the first defendant suggested they meet that night, the second defendant agreed and the first defendant said he would tell the plaintiff.

42. It is common ground that the plaintiff, the first defendant and the second defendant met at the company’s warehouse on the evening of 20 July 2022.

43. The plaintiff described what happened at this meeting in paragraphs 9 e., f. and g. of his first affidavit. In these passages, his reference to “YAN” is a reference to the first defendant and his reference to “SUN” is to the second defendant. The plaintiff said:

“e. On 20 July 2022, YAN took me to the company to meet SUN. SUN stated that the company’s products were selling very well, with a market share ranked among the top two in Australia and showing an upward trend. He stated that the products had a good profit margin, and that both supply and customer bases were stable. He also said that if sufficient funding were available, the business would perform even better and could potentially dominate the Australian market. SUN expressed his willingness, together with YAN, to personally guarantee the timely repayment of the loan with an interest rate of 10% per annum.

f. Based on the above introductions and promises made by YAN and SUN, the three of us agreed that I would provide a loan of AUD $400,000 to the company. The loan term would be two years, with an interest rate of 10% per annum, and interest to be paid monthly. If I needed early repayment, I would be required to give the company six months’ notice. YAN and SUN agreed to personally guarantee the full repayment of the AUD $400,000 loan with their personal assets.

g. SUN stated that he would draft a loan agreement based on the above terms, which would take effect after being signed by the three parties.”

44. The first defendant described what happened at this meeting in paragraph 33 of his affidavit. His reference to “JIANG” is a reference to the plaintiff and his reference to “SUN” is to the second defendant. “Tao (YAN)” is a reference to the first defendant. “Haitao” is a reference to the second defendant. The first defendant said:

“On 20 July 2022, at about 7:30 pm, I accompanied JIANG to the Company’s warehouse, located at Unit 2, 2-4 Picrite Close, Pemulwuy, NSW. There we met with SUN to discuss JIANG's potential loan to the Company. The conversation among the three of us proceeded in words to the following effect:

SUN said: Our company’s products have a very good market in Australia. In fact, our market share for these types of home textiles is among the top in Australia. Sales are strong and our profit margins are healthy. Thanks to Tao (YAN) here, we’ve secured reliable suppliers with high-quality products, and we have stable relationships with many customers. The main thing holding us back from expanding further is a shortage of working capital. Our most popular stock tends to sell out quickly, and we often can’t afford to import as much inventory as the demand requires. With more capital, we could import larger quantities of stock and significantly increase our sales and market share.

JIANG said: Well, that’s all very good. I am considering lending $400,000 to the Company. What do you both think of that?

I said: $400,000 is higher than what we originally discussed when it was just between you and me. But that is okay. If you lend $400,000, I need to make one thing clear: I can only guarantee $200,000. If, in the worst case, something happens to the company, I can only repay $200,000. The other $200,000 would have to be guaranteed by Haitao.

SUN said: Yes, I agree. I have no problem with that. I will guarantee the remaining $200,000.

JIANG said: What about the length of the loan? Also, if I end up needing the money back earlier for some reason, how would early repayment work?

SUN said: Brother Jiang, whenever you need the money back, just let me know a few months in advance and I will make sure you get it. We just need some notice, give us a couple of months to prepare, and we can return the funds. We will not hold your money if you need it. we can raise cash by selling stock over a few months if necessary.

JIANG said: Okay, that sounds reasonable.

SUN said; Great, let’s do this. Brother Jiang, I will give you the Company’s bank account details. You can transfer the money into that account. I will also draft a loan agreement for us to sign.”

45. The second defendant made one very short affidavit. Under the heading “Response to Mr Jiang’s affidavit”, the second defendant took issue only with some of the words attributed to him in the plaintiff’s paragraph 9(e) as regards to the meeting. He did not take issue at all with the version of the meeting set out in the first defendant’s affidavit, which had been affirmed 2 months earlier. In his affidavit, the second defendant said:

‘7 I am making this affidavit in response to paragraph 9(e) of Mr Hongduo Jiang’s affidavit affirmed on 1 May 2025.

8 In that paragraph, Mr Jiang alleges that, I represented to him that “the company’s products were selling very well, with a market share ranked among the top two in Australia and showing an upward trend” and that “if sufficient funding were available, the business would perform even better and could potentially dominate the Australian market.”.

9 That is not what I said.

10 What I said to Mr Jiang was to the effect that:

I: The company’s combed cotton towels products are selling very well. They are highly sought after on Australian market by embroiders for reprocessing. There is a shortage on the market for such products. With sufficient fundings, we could further expand its combed cotton product line and increase our market share for that product.”

11 As noted above, I did not, and would not, have said that it was in the top two in the market because there were such larger companies than Western Manchester in the market.’

After the meeting on 20 July 2022

46. The next morning, at 10:12 AM on 21 July 2022, the plaintiff transferred $400,000 from his Westpac Choice account to the company’s bank account by internet banking.

47. The second defendant sent the plaintiff a WeChat message saying: “400,000 received. Pleasure doing business”.

48. At 11:58 AM on 21 July 2022, the second defendant sent the first defendant a WeChat message in which he said: “Brother Jiang’s 400,000 has been received. Your 150,000 will be transferred tomorrow and the day after.”. The first defendant replied to the second defendant at 12:16 PM: “OK”.

49. At 5:37 PM on 21 July 2022, the second defendant sent the plaintiff a WeChat message with 2 electronic files: one described as “Cash Interest Working… K(1).xlsx” and the second described as “Loan Agreement Jiang 20..720. PDF”. The plaintiff replied to the second defendant “Received, thanks Haitao”. The second defendant replied to the plaintiff at 5:46 PM: “You're welcome [Emoji]. I'll let you know when the cash is ready next month. Between 9:30 AM and 5:00 PM Monday to Friday, let me know what time works for you.”.

50. The plaintiff exhibited to his first affidavit a copy of the loan agreement PDF he said he received with the message. Neither defendant took issue with the fact that this was a copy of the document he received from the second defendant. It is at pages 61 and 62 of volume A of the court book. That document consists of 2 pages. The parties to the agreement are stated to be the plaintiff and the company. At the foot of the second page, which is at the very end of the document, it is stated in bold typeface: “(Tao Yan and Haitao Sun will personal guarantee for the full amount repayment of $400,000.00 loan)”.

51. At 11:58 AM on 22 July 2022, the second defendant sent the first defendant a WeChat message in which he said, amongst other things: “Transferred 100,000 today.”.

52. At 11:12 AM on 23 July 2022, the second defendant sent the first defendant a WeChat message in which he said: “Transferred 50,000 today.”.

53. In his affidavit, the first defendant said that the 2 payments made to him on 22 and 23 July totalling $150,000 were repayments made by the company to him of the remaining principal of loans he had previously made to the company. The second defendant did not dispute this. The fact that both transfers were made is confirmed by payment records issued by the Commonwealth Bank. I infer from the comments the plaintiff made in his affidavit in reply to the first defendant’s affidavit that the plaintiff says he did not know about these loan repayments to the first defendant at the time.

54. At 7:32 PM on 24 July 2022, the plaintiff sent the first defendant a WeChat message with copies of the interest schedule and loan agreement provided to him by the second defendant. In his message to the first defendant, the plaintiff said: “I am not sure if my understanding of the translated meaning is correct. I recall that the agreed loan term at the time was two years, with one year’s notice required for early withdrawal. However, in the contract sent by Haitao, the loan term appears to be 48 months. I am sending it to you to see if my understanding is correct.”.

55. The first defendant replied to the plaintiff at 7:39 PM and said: “Oh, it says 48 months here, right? Alright, why don’t you tell Haitao to change it, change it to two years first. You said it’s for two years — you originally told him two years, right?”. The first defendant must have read the loan agreement before sending this message to the plaintiff because he refers to the contents of it. It is significant in my view that he said nothing about the fact that the agreement ended with the words in bold typeface: “(Tao Yan and Haitao Sun will personal guarantee for the full amount repayment of $400,000.00 loan)”. If that was not correct, one would have expected him to tell the plaintiff.

56. At 8:33 PM, the plaintiff sent the following WeChat message to the second defendant:

“Me: Hi Haitao! I just reviewed the speadsheet and contract you sent. In relation to the interest payment, according to our original agreement, the fractional balance shall be settled in the final month, but I would like you to place it in the first month. Thanks, Haitao! Due to my limited English, I only understand the whole contract partially. However, I recall the loan term was originally agreed for 2 years, but I saw it was 48 months on the contract. If my understanding is not incorrect, it is better to amend it to 24 months. If we feel necessary and appropriate, before maturity, we can discuss further arrangement together based on the situation. Haitao, since my English is limited, if it is possible, please prepare a contract in Chinese. Put the Chinese version and English version together. If our schedules align, we can sign the contract together when I come to collect the funds next month. Is that all right with you? Thank you!”

57. At 8:54 PM, the second defendant replied to the plaintiff and said: “No problem — it’s probably just the month that was written incorrectly. Next time, change it to 24 months.”; “Let’s proceed exactly as discussed during the meeting with Yan Tao; there is absolutely no problem.”.

58. The following morning, at 8.01 AM on 25 July 2022, the plaintiff sent the first defendant WeChat screenshots of his WeChat conversation with the second defendant the night before.

59. At 11:44 AM on 15 August 2022, the second defendant left the plaintiff a WeChat voice message in which he said to the plaintiff: “Alright, when it’s convenient for you, you can come to the office. This can be done anytime. You can take the cash and I’ll sign for you. In relation to the contract, I will sign the contract first, and then, since both Yan and I also gave you our personal guarantee. It means that after I sign, you can find Tao Yan to sign whenever you are convenient, and both of us two will guarantee that it definitely will not have any problem to the principal.”; “The company will proceed with the formalities, so you don’t need to worry, the contract is fine. We will follow whatever we discussed in that meeting, and when it gets close to 2 years, we can discuss how to handle it.”.

60. The plaintiff accepts the first defendant’s evidence that on or about 17 August 2022 the first defendant was called by the plaintiff to attend the plaintiff’s house to sign the document. By the time it was presented to the first defendant, the plaintiff and the second defendant had already signed it. The second defendant did not dispute this evidence.

61. The document that each of the plaintiff, the first defendant and the second defendant signed on or about 17 August 2022 consisted of 2 pages. Apart from the signatures placed on the document by the plaintiff, the first defendant and the second defendant, the writing on the first page was typed and was in English. What follows is what was typed on the first page in the format appearing in the document. In what follows I have placed each person’s name in italics in brackets where their signature appears on the document.

“ Confidential

Date 21/07/2022

PARTIES

1 Hongduo Jiang (Lender)

2 WESTERN MANCHESTER PTY LTD (Company)

AGREEMENT

The Lender has agreed to provide to the Company a fixed-interest loan on the terms set out in this Agreement.

SIGNED by HONGDUO JIANG )

)

(Mr Jiang)

Signature

Signature of Witness

SIGNED for and on behalf of WESTERN )

MANCHESTER PTY LTD by: )

(Mr Yan)

Signature of authorised signatory

TAO YAN

Print full name of authorised signatory

(Mr Sun)

Signature of witness”

62. There was only one signature on the second page. It was placed at the foot of the page by the second defendant against the handwritten date 17/08/2022. The rest of the writing on the second page was typed and in English. This second page stated the following in the following format. I have placed Mr Sun’s name in italics in brackets together with the date in the place where that handwriting appears on the document.

“ Confidential

TERMS OF THIS AGREEMENT

1 INTERPRETATION

1.1 Definitions: In this Agreement, unless the context requires otherwise:

Definition Meaning

Agreement this Agreement including any schedule attached to it.

Drawdown Date 21 July 2022 or such other date as the parties agree.

Interest Rate Simple 10 % per annum.

Loan $400,000.00.

Repayment Date The twenty-forth month after the drawdown date or such other date as the parties agree

2 THE LOAN

2.1 Loan: the Lender must make the Loan available to the Company in one drawing only on the terms set out in this Agreement.

2.2 Drawdown: The Lender must pay the full amount of the Loan to the Company on the Drawdown Date in cleared funds into the nominated account of the Company.

2.3 Purpose: The Company must use all amounts drawn down only for the Purpose or for any other purpose approved by the Lender.

3 INTEREST

The Company must pay the interest on the Loan at the Interest Rate at the end of each following month.

4 Repayment and Prepayment

4.1 Repayment of Loan: The Company will repay the Loan, together with all interest accrued on it, within 360 Days after receipt of a written demand from the Lender.

4.2 Prepayment: At any time after the Drawdown Date, the Company may prepay all or any part of the Loan, together with all interest accrued on it up to the date of payment.

(Tao Yan and Haitao Sun will personal guarantee for the full amount repayment of $400,000.00 loan) (Mr Sun 17/08/2022)

63. In his affidavit, the first defendant said (paragraph 36) that he “signed the document on the understanding that my guarantee was limited to $200,000”. There is no evidence that he conveyed that understanding to the plaintiff at the time he signed the document at the plaintiff’s house.

64. The plaintiff gave evidence that the company began making monthly interest payments on 21 August 2022 and those payments continued until April 2024. Neither the first defendant nor the second defendant disputed that evidence and it was common ground. However, I note that the record of payments the plaintiff exhibited to his affidavit recorded that he “collected” the first payment on 28 August 2022.

Second loan

65. As I said at the outset of these reasons, it is common ground that the plaintiff made a second loan to the company of $200,000, the terms of which were agreed between the plaintiff and the second defendant on or about 9 October 2023 and reduced to writing. The first defendant was not a party to the negotiations, nor did he sign the written document.

66. The written document was signed by the plaintiff and the second defendant only. It is dated 9 October 2023 at the start of the typed document and in handwriting by the second defendant against his signature. The written document followed the same format as the first “Loan Agreement”. The “repayment date” was stated to be “the 10th month after the drawdown date or such other date as the parties agree”. Clause 4.1 provided “repayment of loan: the company will repay the loan, together with all interest accrued on it, within 10 months after receipt of a written demand from the lender”. Clause 4.2 provided: “prepayment: at any time after the drawdown date, the company may prepay all or part of the loan, together with all interest accrued on it up to the date payment period”. Immediately below that the following words were written in English bold type: “(Haitao Sun will personal guarantee for the full amount repayment of $200,000.00.). In addition, immediately underneath that, the following was written in Chinese in bold type, which has subsequently been translated into English as: “Haitao Sun is willing to refinance his personal property to guarantee this $200,000 commercial loan, and this entire $200,000 will be exclusively used to pay for the two 40-foot containers of towels from Sunvim Group, rather than any other purpose.”.

67. The plaintiff gave evidence of the circumstances surrounding the making of the second loan. The second defendant did not dispute the plaintiff’s evidence, which I therefore accept. The plaintiff said:

68. ‘On 20 July 2023, SUN arranged to meet me at The Fiddler in Rouse Hill. SUN told me that Christmas is a peak sales season and requested to borrow an additional AUD $150,000 to AUD $200,000 for stocking up. Based on the situation of the company as introduced by YAN and SUN before the AUD $400,000 loan and the monthly interest payments on the AUD $400,000, I agreed to lend the company another AUD $200,000 and informed SUN that my deposit would mature around 9 October. Both parties agreed to handle the transfer once the deposit matured’ (paragraph 15).

69. ‘On the morning of 9 October 2023, SUN sent me the singed LOAN AGREEMENT via WeChat and asked when my deposit would mature. I immediately replied to SUN via WeChat: “Because of the language barrier, I can’t understand the contract, but I trust you.” SUN immediately responded via WeChat: “The AUD $200,000 loan agreement is ‘exactly the same as the previous one, just the amount and dates have been updated, plus I’m using my personal home loan as collateral’.” Then, SUN sent me another WeChat message: “The Sunvim shipment is being loaded today, it will depart on the 14th and take twenty days to reach from Qingdao directly.” The AUD $200,000 loan agreement was the same as the AUD $400,000 loan agreement, with the guarantee clause similarly highlighted in bolded and blackened texts. At the end of the guarantee clause, SUN further added a Chinese statement in bolded and blackened text: “SUN is willing to use the refinancing of his personal property as security for the AUD $200,000 commercial loan, and the full amount will be used to pay for the two 40-foot containers of towel goods from Sunvim Group, and not for any other purposes.”’ (paragraph 16).

70. ‘On 9 October 2023 and 10 October 2023, SUN came to my home to guide me through the transfer process on my mobile phone. On 10 October 2023 and 11 October 2023, the AUD $200,000 was transferred to the company’s account in two separate transactions.’ (paragraph 17).

71. ‘On 11 November 2023, the company began paying me monthly interest on the AUD $200,000 loan, continuing until April 2024.’ (paragraph 18).

May 2024

68. As I mentioned at the start of these reasons, it is common ground that the company paid interest on both loans up to April 2024. The records of the payments of interest for both loans which were exhibited to the plaintiff’s first affidavit and neither defendant disputed show that the last payment of interest for both loans was “collected” by the plaintiff on 30 April 2024: $3,300 interest for the first loan (CBA 68) and $1700 interest for the second loan (CBA 76).

69. According to the evidence of both the plaintiff and the first defendant, it is common ground between them that on the evening of 8 May 2024 the first defendant spoke to the plaintiff on the telephone and informed him that the company could no longer continue operating or could not keep going.

70. This led to a series of communications between the parties conducted via WeChat and in-person that took place over a lengthy period from time to time on and after 9 May 2024. Both the plaintiff and the first defendant give evidence of those discussions in considerable detail in their affidavits. From their affidavits it is possible to identify many differences of opinion between the plaintiff and the first defendant about the interpretation or effect of their various exchanges, particularly those recorded in WeChat messages. It is unnecessary for me to attempt to identify or resolve those differences of opinion for the purpose of deciding the issues in this case.

71. Some of the communications, however, were relied upon by the plaintiff as subsequent conduct for the court to take into account in determining whether or not the first defendant and the second defendant gave legally binding guarantees, which is the principal issue in the case. I will focus on those communications.

72. On 10 May 2024 the plaintiff sent a long WeChat message to the first defendant, the second defendant and his own wife. He started the message by saying that he wanted to set out an “objective record” of the “series of events”. He invited the others to correct any inaccuracies. In relation to the first loan he said that the first defendant and the second defendant had offered personal guarantees to ensure the loans were repaid on time with a 10% annual return.

73. The first defendant left the plaintiff a voice message after he received the plaintiff’s message of 10 May 2024. The first defendant said to the plaintiff “… I understand what you’re saying. The company actually can’t get the money right now, but as for the part I’m responsible for, I’ll repay you, no problem. I’ll make sure that I can still keep my personal side intact.” At the end of his message, the first defendant said “… I certainly will take up my responsibility …”.

74. The first defendant left the plaintiff a further voice message (May 10, 16:28) in which he told the plaintiff: “Even if the company goes under, I have the ability to repay you. It’s not that I’m unable to so – I’ll definitely pay you back my share.”.

75. The first defendant then told the plaintiff in a further voice message (CBA 87): “I am putting it here, about the 400,000, in relation to that 400,000, I guarantee at least half of it, right, the 200,000 I guarantee I will definitely give you anyway.”. The message continued (CBA 88): “… So, I think, for your 200,000, I guarantee 200,000, you shall rest assure. …”.

76. The next day (May 11, 17:26), the first defendant told the plaintiff in a further message: “… I’m covering my 200,000. I’ll send it to you gradually.”.

77. On 31 May 2024, the plaintiff, the first defendant and the second defendant had a long meeting at the plaintiff’s home. The plaintiff recorded the meeting on his phone. The recording was later transcribed and translated into English. At the start of the meeting (CBA 234), the first defendant acknowledged that he and the second defendant had guaranteed the first loan. He said “… Also, I need to, I need to communicate with Haitao. Regarding the AUD $400,000 that we previously guaranteed, our principle is equality – each of us bears AUD $200,000.”. Later in the meeting (CBA 254), the first defendant again acknowledged the joint guarantee. He said “… Haitao, since we jointly guaranteed $400,000, let’s first solve that $400,000 for you. Then, with whatever extra we raise, will see if we can also cover Haitao’s $200,000 through the sale, try to get the $600,000 as much as possible.”.

E. Did the first defendant and the second defendant give legally binding guarantees in the circumstances?

The first loan

78. The following matters about what happened leading up to the meeting on 20 July 2022 are particularly relevant:

79. All of the plaintiff’s discussions about lending money to the company were with the first defendant.

80. When they first met, the first defendant had told the plaintiff that it was his business.

81. The first defendant was the sole director of the company and the second defendant was operationally in charge.

82. It was the first defendant’s suggestion to the plaintiff that he may be interested in lending some of the proceeds of sale of his investment property to the company at 10% interest. This was common ground between the first defendant and the plaintiff and was not disputed by the second defendant.

83. When the plaintiff and the first defendant discussed the possibility of the plaintiff lending money to the company, the first defendant offered the plaintiff his personal guarantee. I accept the plaintiff’s evidence about this. He says it was discussed a number of times before the meeting. The first defendant did not state in his evidence when the subject of giving a guarantee was first discussed, although his narration of events suggested that it was at the meeting on 20 July 2022, and that he was the one who raised it. I infer, for the reasons I gave earlier (paragraph 40) that it is inherently unlikely the first defendant brought up the subject of a guarantee for the first time at that meeting.

84. The meeting was not arranged until the plaintiff had completed the sale of his investment property. That is to say, the meeting was not arranged until the plaintiff had the money and was in a position to lend it.

85. When the meeting was arranged the first defendant was the person who organised it and he took the plaintiff to the meeting.

86. The plaintiff had not met with or spoken to the second defendant before the meeting.

87. The first defendant and the second defendant must have spoken to one another about what they were going to do with the money to be provided by the plaintiff. They are likely to have spoken to one another bearing in mind that the first defendant was the sole director of the company and the second defendant was operationally in charge, but more importantly they must have spoken to one another because immediately the company received the funds into its bank account the second defendant informed the first defendant that his $150,000 would be transferred to him the next day and the day after.

88. At the meeting:

89. It is common ground that at the meeting the plaintiff agreed to lend the sum of $400,000 to the company to be repaid within 2 years with interest payable at a fixed rate of 10% per annum.

90. It is common ground that both the first defendant and the second defendant agreed to give personal guarantees in respect of the loan. The parties’ common ground about that emerges by comparing the plaintiff’s and the first defendant’s separate accounts of the meeting and the second defendant’s response (see paragraphs 43 to 45).

91. What is not common ground, and is disputed, is whether as the plaintiff says both the first defendant and the second defendant agreed to personally guarantee the repayment of the full amount of the $400,000 loan, or whether as the first defendant says he agreed to guarantee $200,000 and the second defendant agreed to guarantee the other $200,000. I will return to this dispute later.

92. It is common ground, comparing the plaintiff’s and the first defendant’s separate accounts of the meeting and the second defendant’s response (see paragraphs 43 to 45), that the second defendant said he would draft a loan agreement for the 3 parties to sign.

93. On the first defendant’s account of the meeting, the second defendant also said that he would give the plaintiff the company’s bank account details and the plaintiff could transfer the money into that account. The defendant does not suggest that the second defendant said to the plaintiff that he should not transfer the money until the written loan agreement had been prepared and signed.

94. After the meeting:

95. The very next morning the plaintiff transferred the full amount of the loan ($400,000) to the company’s bank account, the second defendant acknowledged receipt and informed the first defendant, although the plaintiff had already informed the first defendant himself by sending him a copy of the “remittance proof” by WeChat. When the second defendant acknowledged receipt to the plaintiff, the second defendant said “Pleasure doing business”. Neither the first defendant nor the second defendant suggested to the plaintiff that he should have waited until they had signed the written loan agreement that the second defendant said he would prepare before advancing the loan. The fact that the plaintiff went ahead and advanced the money provides a strong indication that he considered that is what he had agreed to do the evening before. The fact that the company accepted the money provides a strong indication that the first defendant and the second defendant also considered that the plaintiff was doing what they had agreed the evening before.

96. When the second defendant sent the written loan agreement later that day it said in bold typeface: “(Tao Yan and Haitao Sun will personal guarantee for the full amount repayment of $400,000.00 loan)”. It did not state “Tao Yan will personal guarantee repayment of $200,000 of the full amount of $400,000 loan and Haitao Sun will personal guarantee repayment of $200,000 of the full amount of $400,000 loan”. The second defendant (Haitao Sun) must have understood that his guarantee was for “the full amount repayment of $400,000” because he prepared the document.

97. When they exchanged messages about the contents of the written document on 24 July 2022, the first defendant did not tell the plaintiff that the document was wrong to record that “(Tao Yan and Haitao Sun will personal guarantee for the full amount repayment of $400,000.00 loan)” (see paragraphs 54 and 55 above). One would have expected him to say so if that was not what they had discussed.

98. When the plaintiff raised his concerns with the first defendant about the terms of the written document stating that the repayment date was 48 months after the drawdown instead of the agreed loan term of 2 years, the first defendant agreed that the plaintiff had said it was for 2 years and that he should tell the second defendant to change it (see paragraphs 54 and 55 above). This exchange of messages between the plaintiff and the first defendant recognises that the parties discussed and agreed at the meeting that the loan was to be for a term of 2 years and that the document should reflect that fact. This is a strong indication that the plaintiff and the first defendant considered that they were bound by what they had discussed at the meeting.

99. When the plaintiff raised it with the second defendant, he agreed that they should change the document to 24 months and said “Let’s proceed exactly as discussed during meeting; there is absolutely no problem.” (see paragraph 57 above). This exchange of messages between the plaintiff and the second defendant was to the same effect as the exchange the plaintiff and the first defendant. It too provides a strong indication that the second defendant also considered that all 3 were bound by what they had discussed at the meeting.

100. In the second defendant’s message to the plaintiff on 15 August 2022 to make arrangements for the parties to sign the written document, the second defendant admitted that both he and the first defendant had given the plaintiff their personal guarantees (see paragraph 59 above). When making that admission, the document the second defendant was presenting for signature by all 3 parties still stated, as it had from the day after the meeting: “(Tao Yan and Haitao Sun will personal guarantee for the full amount repayment of $400,000.00 loan)”.

101. When each of the 3 parties signed the document on 17 August 2022 it contained the same statement. The second defendant signed and dated his signature immediately underneath the statement. He cannot have missed seeing it. In any event, as I said earlier, he prepared the document. It stated that he was giving a personal guarantee for the full amount of $400,000, not half of it.

102. After the first defendant informed the plaintiff on 8 May 2024 that the company could no longer continue operating or could not keep going, the first defendant admitted in his exchange of communications with the plaintiff on 10 May 2024 that he had provided a personal guarantee (see paragraphs 72 to 76 above).

103. At their long meeting at the plaintiff’s home on 31 May 2024, the first defendant acknowledged that he and the second defendant had guaranteed the first loan and that he and the second defendant had jointly guaranteed $400,000, and the second defendant did not suggest otherwise (see paragraph 77 above).

104. Having regard to all of the circumstances, but particularly to the matters I have just enumerated about what took place before the meeting, at the meeting and after it, and bearing in mind what must be considered is what would objectively be conveyed by what was said or done, having regard to the circumstances in which those statements and actions happened, I find that the parties intended to, and did, enter into a legally binding contract of guarantee in respect of the first loan at the meeting on 20 July 2022.

105. Having regard to the same matters, I do not accept the first defendant’s evidence that he said at the meeting he could only guarantee $200,000 of the $400,000 and that the second defendant agreed to guarantee the remaining $200,000.

106. I therefore find that the first defendant and the second defendant each agreed to personally guarantee repayment of the full amount of the loan at the meeting on 20 July 2022. That includes guaranteeing repayment of the full principal of $400,000 together with interest payable at the agreed rate of 10% per annum.

107. To the extent that it is necessary to make a finding, and I do not believe that it is necessary, I would conclude that the case falls within either the first category of case discussed in Masters v Cameron or the fourth class identified by McLelland J.

108. In light of those findings I can be brief in addressing the issues raised by the defendants in relation to the first loan:

109. The first issue, raised by first defendant, was that the company received the loan monies before the alleged guarantee was given. That is not the case. I have found that the guarantees were given at the meeting on 20 July 2022 and the loan monies were advanced the following day.

110. The second issue, also raised by the first defendant, was that he did not sign the written document in his personal capacity but only in his capacity as the then sole director of the company. It is unnecessary for me to address this issue because I have found the first defendant gave a legally binding guarantee at the meeting on 20 July 2022. The issue raised by the first defendant appears to be based on a misapprehension that the guarantee had to be in writing in order to be legally binding. That is not the case.

111. The third issue, raised by the second defendant, was that he executed the written document after the plaintiff had advanced the funds to the company and so the guarantee failed for want of valuable consideration and was void and unenforceable against him. As I understand it, the proposition is that because the funds had already been advanced before the guarantee was given, the consideration given by the plaintiff for the guarantee was past consideration. The argument at the bottom of this issue is based on the false assumption that the parties did not enter into a binding contract of guarantee at the meeting on 20 July 2022. I have found that they did. The exchange of promises made on 20 July 2022 provided sufficient consideration for a binding contract.

112. The seventh issue, which was not raised on the pleadings but emerged from the affidavits relied upon by the parties, concerned the factual question of whether or not the first defendant had only guaranteed half of the first loan, i.e. $200,000. I have already dealt with that issue.

The second loan

86. There is no suggestion that the first defendant guaranteed the second loan.

87. I have already set out in some detail the facts surrounding the making of the second loan and circumstances in which the plaintiff alleges that the second defendant gave a personal guarantee (see paragraphs 65 to 67 above).

88. The second defendant raised only 2 issues by way of defence. They are the fifth and sixth issues I identified earlier. I will address those 2 issues in turn.

89. Issue 5 was that the “Second Loan Agreement (as defined in the statement of claim)” was not executed in accordance with section 127 of the Corporations Act 2001 (Cth) as only one director executed the document (second defendant’s defence paragraph 8 a.).

90. Section 127 of the Corporations Act 2001 (Cth) provides as follows:

“127 Execution of documents (including deeds) by the company itself

(1) A company may execute a document without using a common seal if the document is signed by:

(a) 2 directors of the company; or

(b) a director and a company secretary of the company; or

(c) for a proprietary company that has a sole director who is also the sole company secretary—that director.

Note: If a company executes a document in this way, people will be able to rely on the assumptions in subsection 129(5) for dealings in relation to the company.

(2) A company with a common seal may execute a document if the seal is fixed to the document and the fixing of the seal is witnessed by:

(a) 2 directors of the company; or

(b) a director and a company secretary of the company; or

(c) for a proprietary company that has a sole director who is also the sole company secretary—that director.

Note: If a company executes a document in this way, people will be able to rely on the assumptions in subsection 129(6) for dealings in relation to the company.

(3) A company may execute a document as a deed if the document is expressed to be executed as a deed and is executed in accordance with subsection (1) or (2).

(4) This section does not limit the ways in which a company may execute a document (including a deed).”

91. The “Second Loan Agreement” is defined in paragraph 8 of the statement of claim. The particulars to paragraph 8 state that the terms of the Second Loan Agreement were agreed orally between the plaintiff, the company and the second defendant and then reduced to writing, with the written loan agreement dated 9 October 2023.

92. In so far as the terms were agreed orally between the plaintiff and “the company”, as at 9 October 2023 the second defendant was still operationally in charge of the business as he had been from the outset, but by then he was also a director. There is no suggestion that he did not have full authority to enter into a loan agreement on behalf of the company.

93. It was not necessary for the company to execute a document at all in order to enter into a binding loan agreement. It follows that it was not necessary for the company to execute a document in accordance with section 127. The issue raised by the second defendant is therefore based on a false premise.

94. Issue 6 was that if the guarantee was validly entered, it was limited to $200,000 (the second defendant’s defence paragraph 8 b. ii.).

95. The second defendant did not address this issue in his evidence or submissions.

96. The discussions between the plaintiff and the second defendant and the terms of the written document prepared and presented by the second defendant to the plaintiff made it clear that the second loan was to be on the same terms as the first loan as regards the payment of interest – i.e. interest was to be paid at 10% per annum.

97. The guarantee was being given therefore in a context where the company was required both to repay the principal sum and to pay interest in the meantime.

98. In the written document it is stated either as part of clause 4.2 or immediately under it: “(Haitao Sun will personal guarantee for the full amount repayment of $200,000.00)”. The words written in Chinese immediately under that had been translated into English as follows: “Haitao Sun is willing to refinance his personal property to guarantee this $200,000 commercial loan, and this entire $200,000 will be exclusively used to pay for the two 40-foot containers of towels from Sunvim Group, rather than any other purpose.”.

99. The references to “the full amount repayment” and “this … commercial loan” appear in a context where the same document states in clause 3 that “The Company must pay interest on the Loan at the Interest Rate at the end of each following month.”. In that context I infer that “the full amount repayment” was a reference to the full amount required to be paid under the agreement, i.e. principal and interest. The same may be inferred from the reference to it being a “commercial loan”.

100. In all the circumstances, I do not accept that the second defendant’s guarantee of the second loan is limited to $200,000.

101. I find that the second defendant personally guaranteed the payment of the principal and interest in relation to the second loan.

F. Conclusions

102. For those reasons I find that the plaintiff is entitled to judgment against the first defendant for the unpaid balance of the principal of the first loan ($330,000) together with interest at the contractual rate of 10% per annum.

103. The interest calculations are as follows:

| Event Description | Event Date | Amount | Period From | Period To | No. of days in Period | Interest Rate | daily Interest Rate | Interest for Period | | Principal - Payment of Interest stops | 22/04/2024 | $400,000 | 22/04/2024 | 10/05/2024 | 19 | 10% | $109.29 | $2,076.50 | | Payment of $20,000 | 11/05/2024 | $380,000 | 11/05/2024 | 29/06/2024 | 50 | 10% | $103.83 | $5,191.26 | | Payment of $20,000* | 30/06/2024 | $360,000 | 30/06/2024 | 16/07/2024 | 17 | 10% | $98.36 | $1,672.13 | | Payment of $10,000 | 17/07/2024 | $350,000 | 17/07/2024 | 24/07/2024 | 8 | 10% | $95.63 | $765.03 | | payment of $20,000 | 25/07/2024 | $330,000 | 25/07/2024 | 31/12/2024 | 160 | 10% | $90.16 | $14,426.23 | | Normal Year, change daily rate | 1/01/2025 | $330,000 | 1/01/2025 | 27/03/2026 | 451 | 10% | $90.41 | $40,775.34 | | | | | | Total Days | 705 | | TOTAL INTEREST | $64,906.49 | | | | | | | | | TOTAL AMOUNT OWING | $394,906.49 |

104. The plaintiff is therefore entitled to judgment against the first defendant in the sum of $394,906.49, made up as follows:

105. The unpaid balance of the principal of the first loan of $330,000; and

106. Total outstanding interest owing under the first loan in the amount of $64,906.49.

107. For those reasons I find that the plaintiff is entitled to judgment against the second defendant for the sum of the unpaid balance of the principal of the first loan ($330,000) together with interest at the contractual rate of 10% per annum and the unpaid balance of the principal of the second loan ($200,000) together with interest at the contractual rate of 10% per annum.

108. I have already set out the interest calculations in relation to the first loan.

109. The interest calculations on the second loan are as follows:

| Event Description | Event Date | Amount | Period From | Period To | No. of days in Period | Interest Rate | daily Interest Rate | Interest for Period | | Principal - Payment of Interest stops | 12/04/2024 | $200,000 | 12/04/2024 | 31/12/2024 | 264 | 10% | $54.64 | $14,426.23 | | Normal Year, Change daily rate | 1/01/2025 | $200,000 | 1/01/2025 | 27/03/2026 | 451 | 10% | $54.79 | $24,712.33 | | | | | | Total Days | 715 | | TOTAL INTEREST | $39,183.56 | | | | | | | | | TOTAL AMOUNT OWING | $239,138.56 |

108. The plaintiff is therefore entitled to judgment against second defendant in the sum of $634,045.05, made up as follows:

109. The unpaid balance of the principal of the first loan of $330,000;

110. Total outstanding interest owing under the first loan in the amount of $64,906.49;

111. The unpaid balance of the principal of the second loan of $200,000; and

112. Total outstanding interest owing under the second loan in the amount of $39,138.56.

113. Given those conclusions it is unnecessary for me to address the plaintiff’s pleaded misleading or deceptive conduct claim.

G. Costs

110. Notwithstanding that the parties represented themselves at the hearing, they each had legal representation in the past.

111. Costs should follow the event.

112. The plaintiff is entitled to a costs order against each defendant.

H. Orders

113. For those reasons I make the following orders:

114. Judgment in favour of the plaintiff against the first defendant in the sum of $394,906.49.

115. Judgment in favour of the plaintiff against the second defendant in the sum of $634,045.05.

116. First defendant to pay the plaintiff’s costs of the proceedings.

117. Second defendant to pay the plaintiff’s costs of the proceedings.