Li v Tang

Paciocco v Australia and New Zealand Banking Group Limited [2016] HCA 28 Perpetual Trustee Co Ltd v Khoshoba [2006] NSWCA 41 Provident Capital Ltd v Naumovski [2013] NSWSC 40 Provident Capital Ltd v Papa [2013] NSWCA 36 RAMS Mortgage Corporation Ltd v Skipworth (2007) 239 ALR 799; [2007] WASC 24 RHG Mortgage Limited v Rosario Ianni [2015] NSWCA 56 Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656; [2005] HCA 71 Scottish Amicable Life Assurance Society v Reg Provident Insurances Pty Ltd (1985) 9 ACLR 909 Singh v De Castro; Dhaliwal v De Castro; Brar v De Castro [2017] NSWCA 241 Toll (FGCT) Pty Ltd v Alpha Pharm Pty Ltd 79 ALJR 129 [2004] HCA 52 Toscano v Holland Securities Pty Limited (1985) 1 NSWLR 145 Wenham & Anor b Ella (1972) 127 CLR 454; [1972] HCA 43 West v AGC (Advances) Limited (1986) 5 NSLWR 610 Wilton v Farnworth (1948) 76 CLR 64 Category: Principal judgment Parties: Weijian Li (Plaintiff) Frank Tang (First Defendant) Yanjuan Guan (Second Defendant) National Australia Bank Ltd (Third Defendant) Representation: Counsel: Mr A Macauley (Plaintiff) Ms J Mee (First & Second Defendants)

Solicitors: JC Legal (Plaintiff) Jurisbridge Legal (First and Second Defendants) National Australia Bank (Third Defendant) File Number(s): 2020/73666

Judgment

1. Mr Li seeks judgment for $1million and interest which he claims Mr Tang owes him under agreements which they entered in relation to an investment he originally made in Mr Tang's company Quickly Buys (NSW) Pty Ltd in 2016, on the basis that it would not attract the payment of any interest. Mr Li also seeks a declaration that what he is owed is secured by a charge Mr Tang granted in 2019 over his aliquot share of a property situated at Oatlands, the home which he owns jointly with his wife, Ms Guan.
2. Mr Li also seeks judgment for possession of the property, leave to issue a writ of possession, as well as an order that the property be sold under the Court's jurisdiction, with the proceeds to be distributed in a specified order.
3. The National Australia Bank has a registered mortgage over the property and has entered a submitting appearance. Mr Tang and Ms Guan resist the orders sought.

Conclusion

1. The case which Mr Tang pleaded altered significantly when his case was opened and both his evidence and that of Mr Li departed in some respects from their pleadings.
2. As a result, Mr Li was not cross examined on aspects of his evidence and he did not call evidence from his mother, to support his case that Mr Tang had not repaid him $200,000, as he had pleaded.
3. By his concessions Mr Tang not only accepted that he had not made such a payment, he also accepted that it was not a part of the oral business agreement which he claimed he had entered with Mr Li and his father in 2016, that $400,000 of the investment "was not ever intended to be repayable because it was intended to be used for the plaintiff's employment and employment related expenses".
4. The result of Mr Tang's concessions was that what had been agreed to be in issue between he and Mr Li before the hearing commenced altered considerably, although Ms Guan's position remained the same. She was not required for cross-examination. Her evidence that she was unaware of Mr Tang's dealings with Mr Li and the charge he had granted over the property was not challenged.
5. The resolution of what remained in issue between Mr Li and Mr Tang turned on the credibility and reliability of their evidence, as well as on the construction of written agreements which they had signed.
6. For reasons which follow I have concluded that a great deal of Mr Tang's evidence could not be accepted, being neither reliable nor credible and on critical matters, could not be accepted without corroboration. I have also concluded that in the case of conflict, Mr Tang's evidence could not be preferred over that given by Mr Li. Further, that Mr Li's evidence, that from the outset Mr Tang guaranteed repayment of the entire investment in his company Quickly Buys (NSW) Pty Ltd after it was taken over by a Chinese investor, which was imminent, must be accepted.
7. Even so, I am not satisfied that all of the orders which Mr Li sought can be made.
8. In short that is because while under their agreements Mr Tang undoubtedly finally promised again in 2019 to repay Mr Li's investment, as well as interest and gave a charge over the property, orders for possession and judicial sale of the property cannot be made. That is because in the circumstances in which the 2019 agreement under which the charge was given was made, it could not deliver the parties' bargain and was thus not enforceable.

The pleaded case

1. Mr Li's pleaded case rested on various agreements: 1. an oral agreement for the purchase of 60 preference shares in Quickly Buys (NSW) for $600,000, which were issued on 4 May 2016 to Weiwei JL Investments Pty Ltd, of which Mr Li was sole director and shareholder; 2. a 4 May 2016 written loan agreement for $400,000 between Mr Li and Quickly Buys (NSW) for a term of two years, without payment of interest, the repayment of which Mr Tang guaranteed, although he was not a named party to the agreement; 3. a $400,000 February 2018 written loan agreement which Mr Li and Quickly Buys (NSW) entered, by which Mr Tang again provided a guarantee and also executed as guarantor, with the loan repayable on 31 May 2018, or thereafter in agreed tranches, with interest then payable at a rate of 2% per month; 4. a written February 2018 share purchase agreement which Weiwei entered with Mr Tang for the purchase of its preference shares in Quickly Buys (NSW) for $600,000, which was also payable on or before 31 May 2018, or again thereafter in agreed tranches, with interest also payable at a rate of 2% per month; 5. a written May 2019 loan agreement between Mr Li and Mr Tang in respect of a loan of $1million which Mr Tang acknowledged he had received in June 2016, which amongst other things: 1. provided a term of 30 years; 2. reduced the rate of interest to 1% per month, with a default interest rate of 2%; and 3. gave a charge over the property. 1. a written January 2020 deed of assignment by which Weiwei assigned to Mr Li the debt Mr Tang owed it under the February 2018 share purchase agreement.
2. The 2019 agreement, to which Weiwei was not a party, did not purport to rescind or vary the earlier agreements. It was finally common ground that what was there agreed by Mr Li and Mr Tang could not alter the fact that it was Weiwei, not Mr Li, who had owned the Quickly Buys (NSW) preference shares that it had already sold to Mr Tang under the 2018 share sale agreement, for $600,000.
3. Mr Li still relied on the 2019 agreement, particularly the charge Mr Tang had thereby given over the property, to advance his case. He thus pressed for interest to be calculated on the lower rates there agreed, submitting that if the 2019 agreement was not valid, interest would have to be calculated at the higher rates specified in the 2018 agreement.
4. Mr Tang's amended defence pleaded that he was not bound by any of the agreements he had signed in 2016, 2018 or 2019. He claimed that earlier in 2016 he had entered an oral "business agreement" with Mr Li and his father, to which no reference was made in any of the later written agreements, but which did not vary, rescind or replace that agreement and by which they remained bound. Under the business agreement $1million had been advanced to Quickly Buys (NSW) before the 2016 written loan agreement was signed, the oral agreement providing that: 1. Quickly Buys (NSW) would employ Mr Li on specified terms and assist him in obtaining residency in Australia, by way of employer sponsorship; 2. Mr Li's father would provide $400,000 to be used to pay Mr Li's salary and compensate Quickly Buys (NSW) for the expense of employing him and sponsoring him; 3. any part of the $400,000 which was not spent on Mr Li's employment and employment related expenses, would be reimbursed after he had obtained permanent residency; and 4. either Mr Li's father personally, or an entity which he nominated, would invest in Quickly Buys (NSW), by paying $600,000 for newly issued shares which would amount to a 20% shareholding.

Issues

1. What was not in issue was identified before the hearing to be that: "1. On 21 April 2016, Quickly Buys (NSW) Pty Ltd received the sum of $200,000, with a receipt executed by Mr Tang on its behalf recording that the monies had been received from Weiwei JL Investments Pty Ltd. 2. On 3 May 2016, Quickly Buys (NSW) Pty Ltd issued to Weiwei JL Investments Pty Ltd 60 preference shares in exchange for $600,000. 3. On 4 May 2016, Quickly Buys (NSW) Pty Ltd received the sum of $800,000, with receipts executed by Mr Tang on its behalf recording that the monies had been received from Weiwei JL Investments Pty Ltd. 4. On 4 May 2016, Mr Li and Mr Tang signed a document entitled "Loan Agreement" and dated 4 May 2016 (the May 2016 Loan Agreement). 5. On 11 September 2017, Quickly Buys (NSW) Pty Ltd paid to Mr Li's bank account the sum of $40,000 via two payments of $20,000. 6. On 19 February 2018, Mr Li and Mr Tang signed the document entitled "Loan Agreement" and dated 19 February 2018, (the February 2018 Loan Agreement). 7. On 19 February 2018, Mr Li and Mr Tang signed the document entitled "Share Purchase Agreement" and dated 19 February 2018, (the February 2018 Share Purchase Agreement). 8. On 25 August 2018, Quickly Buys (NSW) Pty Ltd paid to Mr Li's bank account the sum of $20,000. 9. On 26 August 2018, Quickly Buys (NSW) Pty Ltd paid to Mr Li's bank account the sum of $20,000. 10. On 5 September 2018, Quickly Buys (NSW) Pty Ltd paid to Mr Li's bank account the sum of $11,600. 11. On or around 15 May 2019, Mr Li and Mr Tang signed the document entitled "Loan Agreement", (the May 2019 Loan Agreement). 12. On 24 January 2020, Weiwei JL Investments Pty Ltd and Mr Li signed a Deed of Assignment, (the Assignment). 13. On 31 January 2020, Mr Tang was given notice of the Assignment for the purposes of s 12 of the Conveyancing Act 1919 (NSW)."
2. The disputed facts requiring the Court's determination were then identified to be: "14. What was discussed between Mr Tang, Mr Li and his parents in or around March 2016, including whether the parties discussed and agreed the matters referred to as the 2016 Business Agreement in [6] of the First Defendant's Defense. 15. Without limiting 14, what (if anything) was discussed in relation to assisting Mr Li with obtaining a visa for the purposes of obtaining residency in Australia by way of employer sponsorship, and employment and employment-related expenses. 16. Whether $400,000 of the $800,000 paid to Quickly Buys on 4 May 2016 that did not represent part payment for the shares was paid on behalf of Weiwei JL Investments Pty Ltd or Weijian Li. 17. The extent of Mr Tang's ability to read and understand written English and whether, as Mr Tang contends, he is "not capable of writing and reading comprehensive English" as asserted in his affidavit of 24 August 2020 at [9]. 18. Whether Mr Tang did not read, understand or was not capable of understanding: (a) the May 2016 Loan Agreement; (b) the February 2018 Loan Agreement; (c) the February 2018 Share Purchase Agreement; or (d) the May 2019 Loan Agreement. 19. At whose request was the May 2016 Loan Agreement prepared, who presented it to whom for signing, and what was discussed at the time of signing it? 20. The payer and purpose of the $100,000 payments received by Mr Li on 17 June 2016 and 29 July 2016. 21. The amount spent on Weijian Li's employment and employment-related expenses. 22. The circumstances in which the February 2018 Loan Agreement and February 2018 Share Purchase Agreement were prepared, presented and signed, including what was discussed prior to and at the time of signing, and whether Mr Tang felt pressured to sign either or both of them. 23. The circumstances in which the May 2019 Loan Agreement was prepared, presented and signed, including what was discussed prior to and at the time of signing, and whether Mr Tang felt pressured to sign it."

Credibility and reliability

1. Mr Tang's concession that a term of the business arrangement which he had advanced in his defence had not been agreed, as well as the many concessions which he made in cross-examination, help explain why his evidence cannot be accepted without corroboration and why in the case of conflict Mr Li's evidence must be preferred. So do contemporaneous documents which are inconsistent with aspects of Mr Tang's evidence.
2. Mr Li's case was that in relevant respects Mr Tang's evidence was untrue and could not be accepted. Mr Tang's case was to the contrary.
3. In final submissions it was argued that Mr Li's evidence had been self-serving, especially in relation to what had been agreed in relation to his visa, which he was keen to downplay as a factor in what had been agreed, as well as in relation to his interest in staying in Australia and working in the concrete industry.
4. I am satisfied that Mr Tang's submissions may not be accepted.
5. Mr Li was frank about his desire to pursue the opportunity to live and work here and the role that played in his decision to make the investment in Mr Tang's company. What remained in issue was what Mr Tang claimed had been agreed in relation to Mr Li's pursuit of a visa. Mr Tang admitted his own wrongdoing in relation to his own visa. I do not accept that it can be concluded that Mr Li was also involved in such wrongdoing, or that it was its abandonment, which led him to pursue repayment of the investment, which I do accept that Mr Tang had promised.
6. In order to understand these conclusions, it is necessary to put the competing evidence into context.

Quickly Buys (NSW)

1. It was Mr Tang who in his affidavit described the businesses in which he was involved and how Quickly Buys (NSW) came to cease trading.
2. Mr Tang there deposed that in 2015 he had been approached by a Mr Yang and Mr Zhuang, who were operating a business known as Quickly Buys, (or "Sougo" in Chinese), in China. It was a one stop shop platform business for the sale of a range of construction and renovation materials. He was experienced in the construction and renovation industries in Australia and they sought his assistance in establishing a similar business here, they having already set up Australia Quickly Buys Pty Ltd for that purpose.
3. Mr Tang understood that they intended to set up separate businesses in each State, by way of joint venture, with Australia Quickly Buys leasing premises and importing products from China from suppliers who provided goods on credit, each State entity then adding a margin on goods which they were to sell from a warehouse.
4. Australia Quickly Buys' first joint venture was established in Sydney, with Quickly Buys (NSW) being incorporated in March 2015. Mr Tang was then given a minority shareholding in Quickly Buys (NSW), became a director and managed its business. A Mr Wei also invested in the business. Mr Tang's company, Building 100 Pty Ltd, finally leased the warehouse which Quickly Buys (NSW) used, rather than Australia Quickly Buys, but Quickly Buys (NSW) paid the rent. All of the stock imported was stored in the Quickly Buys (NSW) warehouse.
5. Mr Tang claimed to have invested over $1million in Quickly Buys (NSW)'s business and other shareholders around $600,000, which was required for expenses, including the warehouse fit out.
6. Mr Yang and Mr Zhuang initially managed Australia Quickly Buys, but they were not familiar with Australian standards, with resulting problems for Quickly Buys (NSW). The business did not go well and Mr Tang then agreed with Mr Yang and Mr Zhuang that they would transfer all of their shares in Australia Quickly Buys to him; he would also operate its business; and he would be responsible for dealing with Australia Quickly Buys' outstanding payments to suppliers.
7. Mr Wei also quit the business and in December 2015, Mr Tang became the sole shareholder of both Australia Quickly Buys and Quickly Buys (NSW).

Mr Tang's command of English

1. It is convenient now to explain my conclusion about Mr Tang's evidence, by reference to the issue over his command of English.
2. Mr Li and Mr Tang spoke to each other in Cantonese, other than when in company with English speakers and in writing, including on WeChat, they communicated with each other in Mandarin. Mr Li gave his evidence in English, while Mr Tang had the assistance of an interpreter.
3. On Mr Li's evidence while they communicated with each other in Cantonese, Mr Tang spoke to employees and others at work in English and also there read and wrote in English. Mr Tang disputed this
4. I am satisfied that Mr Li's evidence must be accepted. Mr Tang's evidence in cross-examination established that he had a much greater command of spoken and written English than he claimed, consistent with having come to Australia over 30 years ago to study English here. His work since then involved building up and operating a multi-million dollar business in which he not only employed staff, imported goods from China and sold them in the Australian construction industry, but permitted him and his other companies to pursue the joint venture.
5. In the course of his business dealings he spoke and wrote in English, as well as reading and understanding commercial documents written in English, including when he entered into the joint venture, after which he became the CEO of the joint venture company.
6. In his affidavit amongst other things Mr Tang had claimed that it was Mr Li who had produced the 2016 loan agreement for him to sign; he did not understand all of the English words, terms and concepts used in that agreement, nor its meaning and effect; that he believed that the agreement was between Quickly Buys (NSW) and Mr Li's father; and that he did not know the agreement contained a personal guarantee and indemnification from him, if Quickly Buys (NSW) failed to repay Mr Li. That evidence cannot be accepted.
7. In a painstaking cross-examination, because of his initial resistance to what was being put to him, amongst many other things, Mr Tang conceded that:

• he understood the various responsibilities which he had as a director;
• in that position he had reviewed and understood documents written in English, such as purchase orders and tax invoices;

Jones v Dunkel inferences

1. Mr Li denied that the 2016 business agreement on which Mr Tang's defence rested had come into existence, or that his father was a party to the 2016 oral agreement. Mr Tang denied that his accountant Harry had produced the 2016 loan agreement for he and Mr Li to sign at their meeting, as was Mr Li's evidence.
2. Neither Mr Li's father nor Harry were called, nor did Mr Tang rely on financial, legal or other records which could have supported his accounts about relevant matters.
3. Mr Li said he had signed the 2016 written loan agreement because he was not a lawyer and he trusted Mr Tang, when he had Harry produce it for him to sign, on the day the final $800,000 payment was received. That was also why he did not later object when given the receipts Harry had prepared, which indicated that Weiwei had paid the $1million, which it had not. He said that was because he did not then understand the difference between himself and his company and so was not worried about this.
4. Harry had prepared other documents in evidence, including a handwritten note to Mr Tang in English and could have shed light not only on matters such as how the 2016 loan agreement came to be produced and signed, but also on Mr Tang's real command of English, amongst other matters. A Jones v Dunkel inference thus runs against Mr Tang, there being no explanation for why Harry was not called.
5. That inference is concerned with a party's unexplained failure to give evidence or call a witness, where it would be natural for that evidence to be led, or where the party might reasonably be expected to lead that evidence. Its operation raises three relevant considerations: 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: RHG Mortgage Limited v Rosario Ianni [2015] NSWCA 56 at [75]-[96].
6. A similar inference arises in relation to Mr Li's failure to call evidence from his father, who could also have given evidence on matters in issue in relation to the claimed 2016 business agreement and thus the credibility of Mr Li and Mr Tang. There was also no explanation for evidence not being called from him. The reason why Mr Li's mother was not called was explained, namely, Mr Tang's concession that he had not in fact paid Mr Li $200,000, as he had pleaded.

Conclusion

1. Despite Mr Li's father not having been called, given all of the problems with Mr Tang's evidence I have already explained and those which I will further discuss, I am well satisfied that in the case of conflict his evidence could not be preferred over that of Mr Li.
2. That conclusion was also supported by Mr Tang's evidence in cross-examination about his history of dishonesty in relation to his own visas, which it is unnecessary here to explain, but in respect of which he was given a certificate under s 128 of the Evidence Act 2005 (NSW).

The 2016 agreements

1. It is not in issue that in 2016 both an oral agreement and the 2016 written loan agreement were made.
2. What lies in issue about them has to be resolved in light of the parties' commercial purposes in reaching those agreements, about which there was also a dispute.
3. The onus falls on Mr Li to establish that the oral agreement which he described came into existence, rather than the 2016 business agreement on which Mr Tang advanced his defence.
4. I am satisfied that Mr Li met that onus.
5. In reaching that conclusion I have not accepted that Mr Li's evidence in cross-examination was, as was submitted for Mr Tang in closing, that he did not make a distinction in his own mind between Mr Tang and his company, which was argued to support the conclusion that Mr Tang had given no personal guarantee under the oral agreement.
6. Mr Li's evidence in cross-examination was that Mr Tang had repeatedly promised that he would return the investment after Lesso took over. He also said that he did not draw a distinction between himself and Weiwei, when it was issued receipts for the $1million paid.
7. Mr Li also denied that the entire $1million was not a loan, because $600,000 was paid for shares. He explained that he did not care about the shares which were issued and only $400,000 being a loan, because the structure had been Mr Tang's idea. He trusted Mr Tang and his promise to return the $1million after the Lesso sale, a guarantee which Mr Tang had repeated at every dinner before the investment was made.
8. While that was not what the 2016 written loan agreement provided for, Mr Li insisted that it was a part of the oral agreement and something that Mr Tang also repeated in 2017 and in 2018 and 2019, when they signed the further agreements. Mr Tang denied this, his case being that he and Mr Li remained bound by the business agreement, under which he had not provided any guarantee.
9. I am satisfied that Mr Tang's evidence about the parties to and terms of the 2016 oral agreement simply cannot be preferred over that of Mr Li, for reasons which I will explain.

Conclusion

1. In summary I have thus concluded that: 1. in 2016 Mr Li, Mr Tang and Quickly Buys (NSW) initially entered an oral agreement under which the $1million was invested, with Mr Tang guaranteeing its repayment after Quickly Buys (NSW) was sold to Lesso, its terms reflecting the structure he had suggested, $400,000 by way of loan and $600,000 for a 20% interest in the company's shares; 2. despite the receipts Quickly Buys (NSW) later issued, none of the $1million was paid by Weiwei; 3. the 2016 business agreement on which Mr Tang's defence rested, to which he claimed Mr Li's father was also a party, never came into existence; 4. it was also Mr Tang who had the 2016 written loan agreement, which documented the $400,000 loan agreed as part of the 2016 oral agreement, but contained more favourable terms as to repayment, it there being agreed that the loan would not be repayable for 2 years, prepared and presented it to Mr Li to sign at his office, after the final payment was received.

The commercial purpose of the $1million investment;

1. In resolving what lies in issue account must be taken of the parties' commercial purposes, which was also in issue.
2. As the Chief Justice observed in Lawrence v Ciantar [2020] NSWCA 89, in Australia the principles surrounding the construction of commercial contracts are well established: at [98]. In Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7 it was observed that "[t]he meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean" in context: at [35]. Further, that "it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract."
3. These requirements do not alter because those who are involved in commercial dealings come from other countries, or that they communicate with each other in languages other than English, as Mr Li and Mr Tang did. But such circumstances can shed light on the commercial purpose or objects of the contracts which they enter with each other and must thus be taken into account.
4. It seems inherently improbable that:

• four people unknown to each other, who all came to Australia from China, two of whom are living here, one long term and the other having recently completed his university studies and the other two, his parents, who live in China and are visiting their son here, are introduced to each other in Sydney by a waiter known only to the long term resident, who only met the family when he served them at a restaurant at the fish market;
• the four then meet at a dinner where the long-term resident tells the family that he is looking for investors in his building supply company, which imports supplies from China for sale in the Australian market;
• the four meet again over some meals and at the company's warehouse, when they discuss the imminent sale of the company and in that context, a $1million investment;
• the parents return to China and the son then does some work, unpaid, in the company's business; and
• the son then incorporates an Australian company of which he is the sole director and shareholder and without anyone first obtaining any legal or financial advice or the terms of the agreement being documented, $1million is paid from China to the company, on the basis that no interest will be payable on the investment.

The parties to and terms of the 2016 oral agreement

1. That Mr Li's father was a party to the oral agreement was still in issue. I am satisfied that he was not.
2. On Mr Li's evidence he was not only involved from the outset in all the discussions, no agreement was made before his parents returned to China and it was he who later entered the oral agreement with Mr Tang. That was also denied by Mr Tang.
3. Mr Li's evidence about what Mr Tang told he and his parents, who had a cement business in China, in their meetings in February and March 2016 before they returned to China included that: 1. His company owned the stock in the warehouse; that he had supply contracts with many developers; a lot of developments needed the materials he could supply and the market in Australia was so big that he could make a profit without much effort, so that if they wanted to invest, there was a lot of opportunity in his company; 2. that Lesso was interested in acquiring his company for more than $5million; 3. that he then needed $1million and was willing to sell 20% of the company on the basis it was worth only $5million; and that they could make a lot of profit if they invested then; 4. he would guarantee that they will not lose any of the $1million; and 5. Mr Li could gain some work experience with him.
4. Before Mr Li's parents returned to China Mr Tang presented them with a document for a $1million investment to review, but they wanted more time to consider. They were not given a copy of the document to retain. This was all denied by Mr Tang, but it was common ground that afterwards, Mr Li performed some work in the Quickly Buys (NSW) business.
5. On Mr Li's evidence, before his parents returned to China, they were not willing to invest and it was only as a result of his work experience, that he become prepared to do so.
6. Mr Li said that Mr Tang had earlier offered him the opportunity to obtain some experience in his business, which he took up in April, when he began work at the offices above the warehouse at Greenacre. Having had that experience Mr Li decided to make the investment because he had formed a positive view of Mr Tang. He had met Mr Tang's wife and mother and he appeared to be a good family man, which Mr Li considered to be important.
7. Mr Li had earlier discussed with his parents his ambition to follow the family business in construction in Australia and his father had asked Mr Tang if he was aware of any work opportunities or experience which Mr Li could pursue, which Mr Tang offered to give him. At that time Mr Li was 24 years of age, having recently completed his university studies here.

How did the 2016 written loan agreement come to be entered?

1. This helps explain the conclusions I have reached about Mr Li and Mr Tang's competing evidence about the 2016 written loan agreement.
2. It was on 4 May 2016, before the joint venture with Lesso was agreed, that Mr Li and Mr Tang signed the 2016 loan agreement, to which Mr Tang was not a party, but in which he guaranteed repayment of the loan, consistently with what he had earlier offered and had been agreed.
3. Given his concessions it cannot be accepted that when he signed it, Mr Tang did not understand that the 2016 loan agreement contained that guarantee, as he claimed.
4. Mr Tang was a very experienced businessman. The agreement was a little more than a page long, in relatively simple, but favorable terms in relation to repayment, consistent with it being drafted in accordance with his instructions. As was the fact that it did not name him as a party, despite providing for his guarantee, which he now relies on to resist Mr Li's claims.
5. On Mr Li's account Mr Tang presented him with that document to sign at Quickly Buys (NSW)'s office, when "I had another conversation with Mr Tang about arranging the transfer of $1,000,000.00. As I was speaking with Mr Tang, he had an employee responsible for many of the Business' financial aspects, named Harry, whose last name I do not recall, bring to him a loan agreement between myself and Quickly Buys (NSW) Pty Ltd to loan $400,000.00. At this time, Mr Tang said to me in Cantonese words to the effect: "Here is the document to transfer you the shares for the investment, it is very straight-forward, you can just sign here and it will be enforceable."
6. Mr Tang denied this. On his account, it was Mr Li who produced the document for him to sign, with their discussion being: "Before I signed the May 2016 Loan Agreement, I asked the Plaintiff in Cantonese, words to the effect: Me: What does this document say? The Plaintiff: Don't worry, it just records my Father's investment in your company, and the migration arrangement cannot reflect in the agreement so $400,000 is made as a loan. Me: Ok, I trust your Father. He is a good man".
7. Mr Li denied this.
8. I am satisfied that Mr Tang's evidence again cannot be accepted. His failure to call evidence from Harry supports that conclusion, as do the other problems with his evidence which I have already discussed.

Was Mr Tang also bound by the 2016 loan agreement?

1. I am satisfied that Mr Tang was also personally bound by this agreement, despite not being named as a party and signing it only for Quickly Buys (NSW).
2. The 2016 loan agreement reflected the guarantee Mr Tang had already agreed under the oral agreement.
3. I also do not accept Mr Tang's evidence that he did not understand the agreement and then asked Mr Li to explain it, before they signed it, when Mr Li produced it, again preferring Mr Li's evidence that it was produced by Mr Tang's accountant Harry for signature, the day the final $800,000 was received.
4. While Mr Tang was not named as a party to the agreement, on his evidence in cross-examination he signed it, understanding that it provided for the guarantee which he there gave. Contrary to Mr Tang's claim that he believed he was signing the agreement as a mere receipt, he also conceded in cross examination that he understood by signing it, that he was bound by it.
5. The meaning of a commercial contract must, however, be determined by reference to what a reasonable businessperson would have understood the terms in question to mean. That requires the language which the parties used, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract, to be considered. The latter is facilitated by an understanding of the genesis of the transaction, the background, the context and the market in which the parties are operating, which I have already discussed: Electricity Generation Corporation v Woodside Energy Ltd at [35].
6. The guarantee provided: "8 Guarantee: The director of Quickly Buys (NSW) Pty Ltd, Frank Tang guarantees the performance by the borrower under this agreement and indemnifies the lender against any cost or loss whatsoever arising as a result of the default by the borrower in performing its obligations under this agreement for whatever reason. The lender may seek to recover any loss from the guarantor before seeking recovery from the borrower and any settlement or compromise with the lender will not release the guarantor from the obligation to pay any balance that may be owing to the lender."
7. In Scottish Amicable Life Assurance Society v Reg Austin Insurances Pty Ltd (1985) 9 ACLR 909 a personal indemnity by the directors of a company was executed in the same way as the main agreement was executed by the company, but it was concluded that the indemnity still bound the directors in their personal capacity.

The purpose of the $40,000 payment

1. It was in 2017 that Mr Tang paid Mr Li $40,000 at a time when the investment attracted no interest. There is an issue as to what the purpose of this payment was.
2. In their communications Mr Tang never denied his obligation to repay Mr Li's investment. Mr Li's evidence was that Mr Tang offered that the $40,000 be treated as interest, given his delay in making any repayment. Mr Tang denied this. On his case it was the 2018 agreements which first provided for interest, which were entered after Quickly Buys (NSW) had ceased to trade, its shares were worthless and he had offered Mr Li 20% of his shares in Australia Quickly Buys, which he had refused.
3. That the shares Mr Tang offered in Australia Quickly Buys had any value seems questionable, given Mr Tang's evidence about the failure of the joint venture and resulting litigation. Mr Li' s return to China in 2017 because the business was not succeeding explains his rejection of that offer.
4. On Mr Li's evidence, he returned understanding that the takeover of Quickly Buys (NSW) had completed, but he had not been paid and Weiwei's shares had not been acquired, despite what had been agreed. He was thus pursuing repayment of the investment, consistent with Mr Tang's repeated promises and the terms of the 2016 oral agreement, that the investment would be repaid when Quickly Buys (NSW) was sold.
5. On Mr Tang's evidence Quickly Buys (NSW) was in no position to make any payments, but he paid Mr Li $40,000 on behalf of the company, not understanding that he had any obligations to do so, but because he felt sorry for Mr Li's family because the Quickly Buys (NSW) business had not gone well.
6. Again, I am satisfied that Mr Li's evidence that Mr Tang offered to have the $40,000 treated as interest must be preferred.
7. That also seems improbable, given that under neither the 2016 oral agreement nor the 2016 written loan agreement was interest payable on any part of the investment. Yet Mr Tang offering in 2017, without obligation or documentation, to have his payment treated as interest, because of his failure to make any of the repayment he had guaranteed, is no more unlikely than Mr Li making his interest free investment in the way it was agreed that he did.
8. That this was what Mr Tang offered is also supported by the fact that there is no issue that after he returned to China, Mr Li and Mr Tang discussed new terms under which Mr Tang would have longer to repay the investment, but would pay interest if it was not repaid. They then discussed and agreed the terms of the agreements which Mr Li's girlfriend prepared and Mr Li met Mr Tang when he went to Sydney in February 2018, to sign them.

The 2018 agreements

1. I have concluded that Mr Tang is bound by the 2018 agreements.

How the 2018 agreements came to be entered

1. Mr Li's evidence was that Mr Tang had represented that Lesso was interested in acquiring Quickly Buys (NSW) for over $5million. In May or June 2016 Harry had told him that Mr Pan was another shareholder who worked mostly in China. In July or August 2016 Mr Tang had said that the sale may not be for as much as $5million, but they should have no problem getting $3million and "don't worry you will still get your money back I promise". Mr Tang also then said that Mr Pan was dealing with Lesso, which had agreed only to $2.4million after seeing the financial documents and later, that most of the money was paid to Mr Pan in China and that Mr Tang had received only $300,000, but "don't worry, I will definitely repay your money".
2. Mr Tang denied these events but no documents or other evidence corroborated his evidence and there is no issue that Mr Li returned to China in 2017, Quickly Buys (NSW) not having become a party to the joint venture, neither it nor its business having been sold and none of his investment having been repaid. They then discussed new terms.
3. While there were also disagreements between Mr Li and Mr Tang about what then occurred and was discussed, there is no issue that Mr Li pursued Mr Tang for repayment of the investment and in their exchanges, Mr Tang did not deny his obligation to repay. Instead he paid the $40,000 I have already discussed and further discussions resulted in the entry of the 2018 agreements in early 2018 when Mr Li was in Sydney.
4. The share purchase agreement correctly identified Weiwei as the owner of the shares and the loan agreement, Mr Li as lender of the $400,000.
5. Mr Li's evidence in cross-examination was that the detail of the 2018 agreements, including the interest rate and the guarantee were discussed over the phone and agreed with Mr Tang, before he returned to Australia for their signature, Mr Tang not making repayments and they thus agreeing to the payment of interest.
6. By then Mr Li understood the difference between the acquisition of the shares and the loan, having had advice. He insisted that he had an appointment with Mr Tang to sign the agreements, but agreed that he had not provided him the written agreements beforehand. Mr Tang read the agreements and they discussed them before signing them in front of a witness who Mr Li did not know and who he thought may have arrived while he had gone upstairs, to print out some documents.

Was Mr Tang bound by the 2018 agreements?

1. I am also satisfied that Mr Tang was bound by these agreements which, contrary to his case, were the result of his negotiations with Mr Li.

The loan agreement

1. Even though he was not named as a party, Mr Tang executed the loan agreement twice, once for Quickly Buys (NSW) as borrower and the second time for himself as guarantor.
2. It was conceded in final submissions that at common law, there would be "clear consideration" in terms of the extension of the loan on the one hand and the provision of a guarantee and interest on the other. The extended time for repayment appeared in cl 2 of the loan agreement, which provided: "2. Repayment of loan 2.1 The Borrower shall make full repayment of $400,000.00 to the Lender on or before the 31 May 2018. 2.2 Should the Borrower fail to repay the full amount of $400,000.00 to the Lender on or before the 31 May 2018, the following payment schedule will apply: 2.2.1 On or before the 31 May 2018 the Borrower will make a repayment of $100,000.00 to the Lender; and 2.2.2 On or before the 31 August 2018 the Borrower will make a repayment of $150,000.00 to the Lender; and 2.2.3 On or before the 30 November 2018 the Borrower will make a repayment of $150,000.00 to the Lender."
3. The loan agreement reflected that it was Mr Li who had loaned Quickly Buys (NSW) $400,000 under the 2016 oral agreement, which had earlier been dealt with in the 2016 loan agreement, which provided that the loan was due to be repaid within 2 years. Clause 4 of the 2018 loan agreement provided: "4. Guarantee 4.1 The director of Quickly Buys (NSW) Pty Ltd, Frank Tang (D.O.B. 25 October 1969) with driver's license number XXXXX, of XXXX Bettington Rd Oatlands, NSW, 2117, guarantees the performance by the Borrower under this agreement and indemnifies the Lender against any cost or loss arising as a result of the default by the Borrower in performing its obligations under this Agreement. The Lender may seek to recover any loss from the guarantor before seeking recovery from the Borrower and any settlement of compromise with the Lender will not release the guarantor from the obligation to pay any balance that may be owing to the Lender."
4. Mr Tang accepted that he had provided Mr Li the personal information contained in this clause.
5. Mr Tang was personally bound by this agreement, even though not named as a party, having signed it as he did on his own behalf, as well as for Quickly Buys (NSW). Given this and the terms of the guarantee he gave, there is an even stronger basis for the conclusion that he was also bound by this agreement, for the reasons explained in relation to the 2016 loan agreement.

The share purchase agreement

1. Mr Tang was the purchaser of Weiwei's shares under the share purchase agreement which he executed and for which there was clearly also consideration. It provided in cll 1 and 2: "1. Purchase Price 1.1The Buyer promises to pay the amount of six hundred thousand Australian dollars only ($600,000.00 AUD) ("Purchase Price") in consideration for the twenty percent (20%) of shares owned by the Seller in the company Quickly Buys (NSW) Pty Ltd (ACN 605 955 379). 2. Payment Schedule 2.1 The Buyer shall make full payment of $600,000.00 to the Seller on or before the 31 May 2018, the following payment schedule will apply: 2.21 On or before the 31 May 2018 the Buyer will make a payment of $200,000.00 to the Seller; and 2.2.2 On or before the 31 August 2018 the Buyer will make a payment of $200,000.00 to the Seller; and 2.2.3 On or before the 30 November 2018 the Buyer will make a payment of $200,000.00 to the Seller."
2. Clause 3.1 dealt with the sale of the shares, providing: "Upon the terms and subject to the conditions set forth in this Agreement, the Seller hereby sells, assigns, transfers, conveys and delivers to Buyer, and Buyer hereby purchases, acquires and accepts from Seller, free and clear of Encumbrances, all of Seller's right, title and interest in, at the time of Closing, the agreed 20% Shares in consideration for $600,000.00."
3. The case which Mr Tang advanced, that given cl 2.2, cl 2.1 was meaningless cannot be accepted. Clause 2.1 provided for him to pay the agreed amount for the shares on or before 31 May and cl 2.2 a regime for payment in smaller agreed tranches, if the loan was not repaid by that date. It was only in that event that interest became payable.
4. It was not contended that properly construed, under the share purchase agreement Mr Tang did not acquire an equitable interest in Weiwei's shares, but argued that cl 3.1 did not result in a transfer of the shares and that no transfer had later been delivered. On his case, the clause intended that on execution the shares would later be transferred and payment would then follow. There having been no transfer, the purchase price never became payable.
5. Despite the reference in cl 3.1 to the term "Closing", which is not defined, I am satisfied that these submissions cannot be accepted. Quickly Buys (NSW) was not a public company and so in context, logically, the time of transfer provided for in the clause must have been close of business on the day of execution, that being the work which this aspect of cl 3.1 had to do.

Should the 2018 agreements be set aside?

1. Mr Tang's case that the agreements should be set aside or declared void, rested on the circumstances in which they were entered, and the rates of interest provided in cl 3.1 of the loan agreement and cl 4 of the share purchase agreement. They provided: "3. Interest Rate 3.1 Should the Borrower fail to make payment in accordance with clause 2, interest is payable on all amounts owed by the Borrower to the Lender under this Agreement and the interest is calculated on the daily balance of the Loan under 2% interest per month. 4. Interest Rate 4.1 Should the Buyer be in default of Clause 2 - payment schedule, interest is payable on all amounts owed by the Buyer to Seller under this Agreement and the interest is calculated on the daily balance of the Loan under 2% interest per month."

Compound or simple interest?

1. Mr Tang's case was that the reference to the daily balance under the loan in those clauses was a reference to the principle amount in the absence of compounding, interest on interest thus not being provided for, despite interest being payable "on all amounts owed".
2. This submission cannot be accepted.
3. The interest rate clauses both provide for payment of interest of 2% per month "on all amounts owed", not for payment of an annual rate of interest on the principal. That must be reflected in the calculation of interest, as does the requirement that interest be "calculated on the daily balance of the loan", which thus alters daily.

The Contracts Review Act claim

1. Mr Tang's case was finally only advanced under s 9 of the Contracts Review Act 1980 (NSW), which empowers the Court to refuse to enforce or declare void a contract found to have been "unjust in the circumstances relating to the contract at the time it was made", if just to do so, "for the purpose of avoiding as far as practicable an unjust consequence or result": s 7.
2. Section 6(2) precludes such orders being made in relation to a contract so far as it was "entered in the course of or for the purpose of a trade, business or profession carried on by the person or proposed to be carried on by the person, other than a farming undertaking". This was considered in Toscano v Holland Securities Pty Limited (1985) 1 NSWLR 145 and Australian Bank Limited v Stokes (1985) 3 NSWLR 174, not to preclude directors who give a guarantee for a business from relying on the section, because it is the company, not they who are carrying on the business.
3. The application of s 6(2) must be "looked at as a matter of substance and not form": Ford bht Watkinson v Perpetual Trustees Victoria Ltd (2009) 75 NSWLR 42; [2009] NSWCA 186: at [98].
4. That the exclusion also applies to the share purchase agreement is thus not apparent. Mr Tang acquiring those shares as he did, at a time when he was not only already a shareholder and director of Quickly Buys (NSW), which had not been deregistered, but was storing its remaining assets in his warehouse, establishes that he was carrying on a business and that he acquired the shares at a time when, while the company was not trading, the stock had still to be dealt with, as did his own ongoing commercial dealings with Mr Li.
5. Even if s 6(2) did apply, I am satisfied that Mr Tang did not make out his case under the Contracts Review Act, in relation to either agreement.
6. Section 9(1) provides that in determining whether a contract or one of its provisions is unjust in the circumstances at the time it was made, the Court must have regard to the public interest and "to all the circumstances of the case, including such consequences or results as those arising in the event of compliance or noncompliance". Subsection 9(2) specifies relevant matters to be considered: "(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."

The law

1. The interest agreed in the 2018 agreements, on Mr Tang's case fell within the scope of the penalty doctrine discussed in Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656; [2005] HCA 71: at [11]. There it was observed that the law of penalties, in its standard application is attracted where a contract stipulates that on breach, the contract-breaker will pay an agreed sum which exceeds what can be regarded as a genuine pre-estimate of the damage likely to be caused by the breach at [10].
2. It was there accepted that the principles discussed in Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1914] UKHL 1; [1915] AC 79 at [86]-[87] continue to express the law applicable to the identification, proof and consequences of penalties in contractual stipulations. In Paciocco v Australia and New Zealand Banking Group Limited (2016) 285 CLR 525; [2016] HCA 28 at [33], the "first and principle" of those tests was identified to be that a sum stipulated will be a penalty if it is: "extravagant and unconscionable in amount in comparison with the greatest loss that could conceivably be proved to have followed from the breach. If the "test" is understood to convey that only loss in the nature of damages directly flowing from the breach is to be considered, then it is unduly restrictive, though no doubt it remains useful to many cases."

The parties' cases

1. Mr Tang did not suggest that he had ever sought finance elsewhere to pay what was owed. He did not lead evidence as to the rate at which finance was then available to Quickly Buys (NSW) or him elsewhere. Nor did he lead any expert evidence about such matters. His case rested only on late served Reserve Bank published data.
2. On that data Mr Tang argued that the 24% per annum agreed was "a very high interest rate", out of all proportion to Mr Li's commercial interests in performance of the contracts and could not possibly be a pre-estimate of the loss he suffered in the event of late payment. It was rather extravagant and out of proportion to any loss, so as to amount to a punishment. That, it was submitted for Mr Li, sought to advance arguments based on usury laws which since the early 20th century, have not applied to commercial loans.
3. Mr Tang relied on a table that identified that unsecured loans were available to small business under a variable term agreement at 6.43% and for 3 year fixed at 5.23%. But that this would have applied to Mr Tang was not established. What a "small business" was, was not identified. But it was also submitted to be relevant that even the rates for medium businesses were well below 24%. Further, that the highest rate there specified was for a personal loan at 13%.
4. Mr Li's case was that this overlooked other relevant evidence, including that the standard rate on "personal loans, revolving credit and credit cards" between 2016 and 2019 was between 19.77% and 19.94%.
5. Mr Li submitted that while a relevant indicator of punishment was that the amount specified was out of proportion with the positive interest in the performance of the contact, so that it amounted to a deterrence to breach by threat of punishment, the legitimate interests which had to be taken into account in arriving at that conclusion included intangible and unquantifiable interests, not directly occasioned by the default and too remote to be recoverable at common law: Paciocco at [65] per Kiefel J; [161]-163] and [171]-[172] per Gageler J and [283] per Keane J.
6. But here the rate agreed did not arise to be paid on breach.
7. Further, on the evidence 24% was "barely above" the rate charged by financial institutions on outstanding credit card balances, or on the evidence adduced by Mr Tang, on personal loans and revolving credit of between 19.77% and 19.94%, charged by financial institutions with diversified portfolios of loans over which defaults can be spread, as opposed to an individual like Mr Li, who was not in the business of lending.

The agreed interest was not a penalty

1. Mr Tang could find no authority in which circumstances analogous to those which arise for consideration in this case, have been considered. That is not surprising, given that the 2018 agreements did not provide for interest payable on breach, but gave Mr Tang even further time to repay the interest free $1million investment he obtained in early 2016, having represented that his company, Quickly Buys (NSW), was financially successful and about to be acquired by Lesso, after which the investment would be repaid, when:

• in fact, in 2016 he was concerned that Quickly Buys (NSW) could not meet its debts;
• Quickly Buys (NSW) was not sold, but instead he and other of his companies had the benefit of the joint venture which he negotiated with Lesso;
• neither he nor Quickly Buys (NSW) repaid Mr Li's investment; and
• under the February 2018 agreements he negotiated for interest only to become payable at the rate of 2% per month, if what was due was not paid by the extended dates then agreed.

1. It follows that the interest which became payable under these agreements not flowing from breach of any obligations which they imposed, distinguishes these agreements from those which arose for consideration in the authorities Mr Tang relied on.
2. Even accepting that the principles relied on applied, there was no issue that whether a rate of interest involves a punishment must be determined objectively, in the context of the surrounding circumstances. One was that Mr Li was not in the business of lending. Another that since 2016 Mr Tang had interest free use of his investment. There was no evidence as to what rates lenders such as Mr Li might have loaned money unsecured, to someone in Mr Tang's circumstances. Nor at what rates finance was then available to Quickly Buys (NSW) or Mr Tang from other lenders, about which he could conceivably have given evidence, or about which expert evidence could have been called.
3. In Paciocco it was observed by Kiefel J that the sum stipulated must be "extravagant and unconscionable", before it can be characterised as a penalty: at [33]. Further, that "extravagant", "exorbitant" and "unconscionable" are "strong words" and that despite the different expressions used, they all describe the plainly excessive nature of the stipulation, in comparison with the interest sought to be protected by that stipulation: at [34].

Other claims

1. The other claims initially relied on in the alternative were advanced under the general law, ss 20 or 21 of the Australian Consumer Law (Cth); and ss 12CA and 12CB of the Australian Securities and Investments Commission Act 2001 (Cth). Those claims were finally not pressed, despite having been addressed in written submissions. Had they been, I am satisfied that they would also have had to be rejected.
2. In the circumstances it is not necessary to explain why.

The 2019 loan agreement

1. There was no issue that this agreement was prepared by Mr Li's solicitors and signed by both Mr Li and Mr Tang, or that he made no further payments to Mr Li after they entered this agreement.
2. In issue was whether the agreement was valid and enforceable, it being accepted by Mr Li that while agreements can contain acknowledgements, which could constitute prima facie evidence, they cannot dictate the truth of facts known and demonstrated on the evidence.

Conclusion

1. In summary I have concluded that the 2019 agreement was not valid or enforceable, with the result that orders in favour of Mr Li must be made in accordance with the 2018 agreements, by which he and Mr Tang remain bound.

How the agreement came to be made

1. Mr Li's evidence was that the 2019 agreement came to be negotiated after Mr Tang failed to make payments due in November 2018. In February 2019 Mr Li visited him at his new office and they spoke in the presence of Harry, about his new business and his need for more time to pay. They agreed on a lower interest rate of 1% per month, with interest only payable at 2% on default and a term of 30 years, which Mr Tang not only then again offered to guarantee, but he also offered "I will even give you my property as security".
2. Mr Tang denied this. On his affidavit evidence he advised Mr Li in August 2018 that he could not then repay all of the money, when Mr Li told him that he should at least repay interest, with the result that he paid Mr Li $51,600 in August and September. It was Mr Li who later proposed the 30-year term.
3. Again, Mr Tang claimed that he did not read or understand the agreement which he signed. It was not explained to him by a solicitor; he was shocked to find that it granted the charge and would not have entered the agreement, if he had known of this. Mr Li later promised that it would never be used against him.
4. This was denied by Mr Li, whose evidence I am satisfied must again be preferred.
5. In cross-examination Mr Tang conceded that Mr Li had reminded him about deadlines imposed by the 2018 agreements for the payment of money on WeChat and that they had discussed him being given more time to pay. He then said that his proposal had been that the loan be given for the rest of his life and Mr Li who had responded with an offer of 30 years; that they had negotiated conditions; that he wanted repayment to be limited to $850,000 "because his family didn't suffer that much loss"; that he did not know why he had to sign the 2019 agreement, but signed it not knowing or caring what it said, although understanding the charge he was thereby giving over his home.
6. Contemporaneous documents established that Mr Tang had not only met with the solicitors acting for him, and not Mr Li, on that transaction, but that aspects of the 2019 agreement were negotiated by the parties' legal representatives; a solicitor witnessed Mr Tang's execution, and also executed certificates provided to Mr Li, in relation to the legal advice Mr Tang had been given, directed to the requirements of the National Credit Code.

The 2019 agreement is unenforceable

1. Mr Li's case was that aspects of the 2019 agreement could be enforced and Mr Tang's that the entire agreement was unenforceable.
2. I am satisfied that Mr Li was not entitled to enforce the aspect of the 2019 agreement on which he relied and that the parties remained bound by the 2018 agreements.

Mr Li's concessions

1. There was no issue that the 2019 agreement was intended to replace the 2018 agreements. It was prepared by Mr Li's solicitors and was correctly premised on the basis that Mr Li and Mr Tang were already bound by earlier agreements. But it did not accurately reflect their terms, nor even refer to them, let alone provide that they were to be varied or rescinded.
2. Neither Mr Li nor Mr Tang gave evidence about the instructions they had given their solicitors, which resulted in the 2019 agreement not accurately reflecting their prior dealings.
3. It was also not in issue that Mr Li and Mr Tang were not in a position to alter what Mr Tang had agreed with Weiwei under the 2018 share purchase agreement, Weiwei not being a party to the 2019 agreement and it not purporting to vary or rescind the 2018 share purchase agreement.
4. Mr Li thus conceded that at best the 2019 agreement could operate only as a variation of the 2018 loan agreement, the charge thus securing repayment only of $400,000. He also accepted that if the 2019 agreement was found to be valid, notwithstanding the legal position, interest should be capped on both debts for the duration of that agreement. If it was not valid, interest would have to be calculated in accordance with the 2018 agreements.
5. It was cl 3.2 which Mr Li relied on to argue that despite the difficulty, the 2019 agreement remained enforceable. It provides: "3.2 The Borrower must pay to the Lender, upon discharge or other termination of the Loan, the Loan Discharge Fee in addition to any amount of the Principal Sum and interest as is then outstanding and unpaid."
6. The agreement did not provide for a loan discharge fee but, it was submitted, under cl 3.2 on termination what Mr Tang was obliged to pay was the outstanding principal sum of $400,000 the subject of the 2018 loan agreement, with interest calculated in accordance with cl 4 of the 2019 agreement and subject to the charge he had there given. It was properly conceded, however, that there were difficulties in so construing the agreement.
7. They seem to me to be insurmountable, with the result that the agreement is not binding or enforceable.

The 2019 agreement could not deliver what Mr Tang had bargained for

1. That is because Mr Li's approach does not pay necessary regard to the schedule to the 2019 agreement, which specifies the principal sum to be $1million, or to cl 4. It deals with repayment of the entire $1million and interest, which is to be calculated in accordance with the acknowledgement given in cl 4.3, that monthly interest on that sum has been already paid to the date of the agreement, albeit at the rate it provides, 1% per month.
2. The 2019 agreement was premised on: 1. Mr Tang acknowledging that he had received the "principal sum" of $1million on the "drawdown date", specified to be "early June 2016", even though it was Quickly Buys (NSW) which had then received the money, which Mr Li conceded was not a correct legal characterisation of what had occurred; 2. the term of the loan being for 30 years from the draw down date; 3. interest being payable on the entire amount at 1% per month and on default, 2%, from the drawdown date; 4. Mr Li acknowledging that monthly interest had already been paid up to the date of the agreement; and 5. Mr Tang giving a charge over the property.
3. The 2019 agreement did not reflect that under the 2018 share purchase agreement Weiwei had already sold its shares to Mr Tang for $600,000. Weiwei was not a party to the 2019 agreement and had not yet assigned its interest in the 2018 share purchase agreement to Mr Li. The 2019 agreement could thus not deal with the $600,000 Mr Tang owed Weiwei, or the interest which he owed it under the 2018 share purchase agreement, as the parties accepted it purported to do.
4. It follows that the 2019 also agreement proceeded on a common and material mistake, that Mr Li and Mr Tang could deal with the entire $1million investment and all the interest which he owed. They could not. The result was that Mr Li could not deliver to Mr Tang what he had bargained for, in return for giving the charge.
5. Mr Tang thus did not obtain the benefits it was agreed he would receive under the 2019 agreement, in return for giving the charge. Namely, time to repay the entire $1million over 30 years, at a lower primary interest rate of 1% per month in future, than had been agreed under the 2018 agreements, together with an acceptance that all of the interest which he already owed, had been paid up to the date the 2019 agreement was entered.

The charge

1. The validity of the charge, even if the 2019 agreement was otherwise valid, was also in issue. It was common ground that the only charge Mr Tang could give was over his aliquot share of the property. Clause 6.1 provided: "The Borrower warrants that the Borrower has the legal and beneficial title to the Property subject only to the notifications disclosed on the certificate of title and has full power to enter into and perform its obligations under this Agreement and that the Property is not subject to any other security or any right of restriction."
2. The effect of cl 6.1 is that the charge was only given in relation to Mr Tang's interest in the property. Ms Guan's interest being disclosed on the certificate of title as it was and NAB's registered mortgage not affecting the charge which he gave, cl 6.1 was effective.
3. It thus cannot be concluded that the charge was invalid, given as it was only in respect of Mr Tang's interest in the property, his aliquot share. The charge did no more than that, even though, if it came to be enforced after default, that could have had an impact on Ms Guan, if orders of the kind sought here were made in accordance with the charge Mr Tang gave.

The other claims

1. The Contracts Review Act and unconscionability cases advanced in relation to the 2019 agreement were also abandoned.
2. Had they not been, for similar reasons to those given in relation to the 2018 agreements, they could also not have been accepted. But it is now unnecessary to explain why.

Repudiation

1. There was also an issue as to what Mr Li would be entitled to, if the 2019 agreement was valid, given Mr Tang's default, he having failed to pay any interest and on Mr Li's case, having repudiated this agreement in 2020 by the advice then given by his solicitors, a repudiation which he accepted..
2. I am satisfied that by the advice Mr Tang's solicitors gave that he repudiated the 2019 agreement and Mr Li accepted that repudiation, that bringing the agreement to an end and that entitling him to bring these proceedings to recover what he was owed under the agreement, up to the date of its termination.
3. Whether that affected Mr Li's rights under the charge and whether it survived the termination of the agreement, to secure repayment of what Mr Tang owed under the agreement was also in issue. That depends on the intentions of the parties, by the charge given.
4. That it was not intended that the charge would not survive a termination was established by the terms of the 2019 agreement, entered in the circumstances I have discussed. Otherwise, Mr Tang's repudiation would effectively have relieved him of the charge he had given in return for the considerably more generous terms which he thereby secured. That was clearly not intended.
5. Like the case of charges in building contracts which have been found still to secure payment of progress payments which became due prior to termination, after termination of the 2019 agreement in this case, the charge securing as it did payment of both principal and interest payable monthly, after termination it still secured both the $1million, as well as the unpaid interest due up to the date of termination: McCosker v Lovett (1995) 7 BPR 14,507; (1995) 12 BCL 146 at 14.510, followed in Danthanarayana v GR8 Constructions Pty Ltd (2012) 201 FCR 347; [2012] FCA 231, as explained at [46]-[52].
6. Orders in accordance with cl 8 of the 2019 agreement, which envisages Mr Li taking possession, selling the property and applying the proceeds "towards satisfaction of any amount owing from time to time" under the agreement, which includes outstanding interest calculated in accordance with cl 4, could then be made: cll 8 (c) and (d).
7. Any surplus from the sale, calculated in accordance with all of the other provisions of cl 8, which also contemplate for example, the appointment of a receiver, would be repaid to Mr Tang, without interest: cl 8(e).

Ms Guan's interest in the property did not make the charge unenforceable

1. Mr Li correctly accepted that the charge given by the 2019 agreement could only confer a right to payment of the debt, to the extent of Mr Tang's interest in the property, as Ward CJ in Eq discussed in Morris Finance at [29].
2. If I am wrong in the conclusions which I have reached in relation to the enforcement of the 2019 agreement, I would have concluded that Ms Guan's case that the charge given by cl 9.1 of the 2019 agreement could not be enforced, could not be accepted. Orders of the type made by Ward CJ in Eq in Morris Finance Ltd v Free [2017] NSWSC 1417 for judicial sale of the property, which would also reflect her interest in the property, as well as that of NAB, could thus have been made.
3. It was contended that the property being owned by Ms Guan and Mr Tang as joint tenants; the 2019 agreement not specifying that the charge was given only over his aliquot share; Mr Tang having wrongly warranted that he had beneficial and legal title to the property; and Ms Guan not being aware of the charge which Mr Tang had given over the family home, it could not be enforced, even on application to this Court for an order for sale.
4. I am satisfied this could not be accepted, given the terms of the charge and the evidence.
5. Mr Tang's evidence that he did not intend to give the charge cannot be accepted, as I have explained.
6. But Mr Tang was not involved in any wrongdoing when he gave the charge, given his interest in the property and what he agreed with Mr Li. He was legally advised about that charge, which is expressed to be given over the whole of the property, as McDougall J explained was necessary in Awadallah v Hymix Australia Pty Ltd (2015) 17 BPR 33,953; [2015] NSWSC 117 at [47]-[48.
7. It was accepted that the cases relied on to support Ms Guan's case were not squarely on foot, concerned as they were with the consequence of forgeries of signatures and where one co-owner purported to deal with the land on behalf of both, for example in RAMS Mortgage Corporation Ltd v Skipworth (2007) 239 ALR 799; [2007] WASC 24 at [29].
8. True it is that the Court has a discretion as to whether a sale should be ordered and undoubtedly Ms Guan's interest in the matrimonial property would have to be taken into account, in determining whether to exercise that discretion and on what terms. But her interest as a joint tenant is not of a kind which alone could preclude an order for sale, there having been no wrongdoing on the part of either Mr Li nor Mr Tang involved in the giving of the charge, contrary to situations involving the forgery of signatures on mortgage documents.

Valuation and the discretion to order a sale

1. What was discussed in King Investment Solutions v Hussain 64 NSWLR 441; [2005] NSWSC 1076, where there was no evidence of valuation, would also not have precluded an order for judicial sale in this case.
2. Here there is evidence about the value of the property, Mr Tang agreeing in cross-examination that when the NAB loan was refinanced 2 years ago it had a valuation of $1.7million and its mortgage being in respect of a loan of $1.4million. It was not suggested that interest on that loan had not been paid. That evidence would thus be a sufficient basis upon which a reserve price could be fixed although, of course the parties could agree a reserve.
3. Contrary to the case advanced on the evidence about valuation, it would thus seem to be unlikely that after NAB was paid out, nothing would be left to apply to Mr Li's debt.
4. Each of their half share in the remaining equity appeared 2 years ago to have been worth some $150,000. That would not be an obvious basis on which the Court would refrain from ordering a sale, notwithstanding the absence of current valuation, which could of course be higher.
5. Ms Guan also advanced no case in relation to hardship, which could have raised other relevant considerations, if they were available.
6. It follows that appropriate orders reflecting the interests in the property of Mr Tang, Ms Guan and the NAB, as well as the usual incidents of a sale, such as vacant possession, could have been ordered in terms of the kind ordered in Morris Finance.

Interest and orders

1. The usual costs order under the Uniform Civil Procedure Rules 2005 (NSW) is that costs follow the event, which in this case is an order that Mr Tang must bear Mr Li's costs, as agreed or assessed.
2. Unless the parties' approach to be heard within 7 days on costs, that will be the Court's order.
3. The parties should calculate interest and file orders which reflect these conclusions, including as to costs, within 14 days.

Orders

1. For the reasons given judgment will be entered for Mr Li, with final orders reserved.

Amendments 23 August 2021 - Para 226 can changed to cannot DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 23 August 2021