These proceedings concern a General Security Agreement ("the Agreement") dated 13 January 2016, entered into between the plaintiff (as the Secured Party), the first defendant (as the Grantor), and the second defendant (as the Guarantor). The second defendant ("Mr Hu") was at that time the sole shareholder in, and the sole director of, the first defendant.
Pursuant to the Agreement, the plaintiff lent amounts in excess of $20 million to the first defendant in three tranches in January and February 2016 and a further tranche in March 2018. The term of the loan for each tranche was three years from the date of the Agreement (i.e., for a term ending on 13 January 2019). In respect of each tranche, interest was payable at the rate of 15% per annum, calculated annually. The loan was primarily secured by a charge over the personal property of the first defendant. By clause 16 of the Agreement, the second defendant agreed that the "guarantee and indemnity" extended to the "ultimate balance owing under this agreement".
The loan was evidently intended to assist the first defendant in its development of a property in Epping. The development project was known as "Emerald Epping".
The first defendant was not in a position to repay the loan when it became due for repayment in January 2019. The situation was the subject of discussions that took place in December 2018 between Mr Huo, a director of the plaintiff, and Mr Hu. There is a difference between the two about what was said in the course of those discussions.
By their Amended Commercial List Response, the defendants contend, based on Mr Hu's version of events, that an oral agreement was reached to the effect that the plaintiff would not take action against the defendants who would instead be allowed to repay the loan out of agreed portions of net proceeds of sale as and when sales of units in the Epping development were settled. The defendants further contend that the oral agreement gave rise to an expectation that the loan would be allowed to be repaid in that fashion and that, in reliance upon that expectation, certain proceeds of sales (totalling $1,163,815.93) were paid to the plaintiff in February 2021 but the defendants otherwise did not take steps to repay the amounts claimed by the plaintiffs. The defendants allege that the plaintiff knew or intended the defendants to rely upon such an expectation, and that were the plaintiff allowed to resile from the oral agreement the defendants would suffer loss or damage. It is alleged that the plaintiff is thus estopped from requiring repayment of the loan otherwise than in accordance with the oral agreement.
The plaintiff denies the existence of any estoppel that would prevent it from exercising its rights in accordance with the terms of the Agreement. By its Summons filed on 30 October 2020, the plaintiff sought monetary judgments against both the first and second defendants for the amount outstanding under the Agreement.
The first defendant went into liquidation (creditor's voluntary winding up) on 11 September 2022, and the proceedings against it were thereby stayed. However, on 13 March 2023, its newly appointed solicitors filed a submitting appearance, save as to costs. In those circumstances, the Court granted leave to the plaintiff pursuant to s 500(2) of the Corporations Act 2001 (Cth) to proceed against the first defendant.
Leave was also granted to file a Further Amended Commercial List Statement which made minor amendments to correct some errors and refer to certain events that occurred after the commencement of the proceedings.
The second defendant, Mr Hu, appeared for himself at the hearing. He had previously been represented by various firms of solicitors, most recently until about two weeks before the hearing. An application made by Mr Hu for an adjournment, so as to obtain further legal advice, was rejected.
The plaintiff claims a total amount of $27,667,026.53 (including interest) against each defendant.
[2]
Summary of salient evidence
The plaintiff was incorporated in the Marshall Islands on 31 August 2015. The first defendant was incorporated on 24 December 2015.
There is no dispute that the parties entered into the Agreement dated 13 January 2016. Counterparts of the Agreement were executed by Mr Huo on behalf of the plaintiff, and by Mr Hu on behalf of the first defendant and himself personally.
As noted earlier, the Agreement was entered into by the plaintiff as the Secured Party, the first defendant as the Grantor, and Mr Hu as the Guarantor. The recitals to the Agreement included the following:
A. The secured party has, at the guarantor's request, agreed to lend money to the grantor in accordance with and subject to the terms of this agreement.
B. The grantor is, by himself or through entities it controls, engaged in the business of property development.
C. The essence of the transaction embodied in this agreement is that, in consideration of the provision of the loan facility by the secured party, the grantor promises to repay the loan on terms defined in clause 3, and provide security in terms defined in clauses 5 and 6.
D. The parties acknowledge and agree that the secured party will provide to the grantor a loan out of a fund pool totalling $20,000,000 United States of America Dollars (US$). The loan will be provided in tranches, and each tranche will be made in Australian Dollars (AUD$), pursuant to the reference exchange rate on the date of the advance of the tranche.
E. The parties acknowledge and agree that the term of the loan will be calculated by reference to the date of this agreement, commencing on the date of the agreement, and ending three years thereafter, unless the secured party has agreed to an extension of up to two years.
Clause 3 relevantly provided:
3. Loan
(a) The parties agree that the loan will be advanced in the following manner:
(i) The secured party will transfer the loan amount into the trust account of the secured party's solicitor (advance of the loan);
(ii) The secured party's solicitor will, upon the secured party's instruction and provision of security in accordance with this agreement, and in particular clause 6, release the funds only to the grantor's nominee;
(iii) The loan term will commence, and the interest will be calculated from the date of the advance of the loan.
(b) The secured party has at the request of the guarantor agreed to lend the principal sum to the grantor on the following terms:
(i) Principal sum fund pool: $US 20,000,000, payable in tranches and in $AUD;
A. Principal sum will be paid in tranches in accordance with cl. 3(b)(v) or as otherwise agreed by the parties;
(ii) Principal sum payment method: B. Each tranche of the principal sum will be paid into the secured party's solicitor's trust account;
C. Each tranche of the principal sum will be paid in $AUD, at the reference exchange rate on the day of the transfer into the secured party's solicitor's trust account;
(iii) Term of loan: The term of the loan for all tranches is three years from the date of this agreement;
with possibility of two year extension at the secured party's absolute discretion and upon the grantor's request;
(v) Latest Date tranche advances to be made Amount of the tranche advance to be made
T1 12 January 2016 AUD$ 1,600,000.00
T2 19 January 2016 AUD$ 9,740,000.00
T3 05 February 2016 AUD$ 9,250,000.00
T4 Upon Grantor's request, on the date which is two months after the Grantor's request for the funds is served on the Secured Party Upon Grantor's request, subject to the amount remaining in the Principal fund pool and the reference exchange date on the date that tranche advance is made
… … …
(vi) Interest: For each tranche, interest of 15% p.a. calculated annually, from the date of the advance of the tranche;
(vii) Interest Instalments due: Annually, on the anniversary of the date of the advance of each tranche;
… … …
… … …
(x) Principal repayment due: At the end of the term of loan.
[3]
By cl 5 of the Agreement, the first defendant granted a charge over all of its personal property in favour of the plaintiff. Clause 6 provided for certain additional security to be provided, including through the execution of a Shareholding Agreement between the first defendant and Mr Hu.
Clause 16 of the Agreement relevantly provides:
16. Guarantor's guarantee and indemnity
(a) The guarantor agrees that the guarantee and indemnity is a continuing guarantee, and extends to the ultimate balance owing under this agreement, and that the guarantor remains fully liable under the guarantee and indemnity despite the fact that the secured party might have done something which would otherwise have the effect at law or in equity of varying or discharging the guarantor's liability. Without detracting from this general statement none of the following events varies or discharges the guarantor's liability to the secured party:
(i) The granting of time, credit or any concessions to the grantor; or
(ii) Varying, altering, or disputing the grantor's liability under this agreement; or
(iii) The guarantor dying or becoming legally incapable;
Clause 17 of the Agreement relevantly provides:
17. General
(a) This agreement embodies the entire agreement between the parties and supersedes any prior negotiation, conduct, arrangement, understanding or agreement, express or implied, with respect to the subject matter of this agreement.
(b) A provision of, or a right, discretion, authority, or power created under this agreement may not be:
(i) Waived except in writing signed by the party granting the waiver; and
(ii) Varied except in writing signed by the parties.
(c) A failure or delay in exercise, or partial exercise, of a power, right, authority, discretion, or remedy arising from a breach of, or default under this agreement does not result in a waiver of that right, power, authority, discretion or remedy.
Mr Huo gave evidence, that was not challenged, that the plaintiff advanced funds pursuant to the Agreement into the trust account of its solicitors, Lin Tang & Co. Lawyers, in four tranches as follows:
1. $1,600,000 on 13 January 2016;
2. $9,740,000 on 19 January 2016;
3. $9,250,000 on 5 February 2016; and
4. $27,896.63 on 22 March 2016.
The total of the above amounts is $20,617,896.63.
The abovementioned evidence is to some extent corroborated by the solicitor's trust account ledger. The ledger records amounts received on account of "Loan Sum" totalling $20,665,917.03, with the various amounts received on about the dates nominated by Mr Huo, save that the fourth tranche was not received until 22 March 2018, not 2016 as suggested by Mr Huo. Further, the defendants admit that between 18 January 2016 and 22 March 2018, various amounts totalling $20,617,896.63 were transferred by the solicitors to Bridgeland Second Pty Ltd, a company Mr Hu accepted was the first defendant's nominee for the purposes of the Agreement. In these circumstances, I accept Mr Huo's evidence that a total of $20,617,896.63 was advanced by the plaintiff pursuant to the Agreement by the four payments he identified, such payments being made on about 13 January 2016, 19 January 2016, 5 February 2016 and 22 March 2018.
Mr Huo also gave evidence to the effect that:
1. in January-February 2017, interest totalling $3,088,500 was paid in respect of the first three tranches; and
2. in January 2018, interest totalling $3,088,500 was paid in respect of the first three tranches.
It seems, based on calculations provided to the Court, that those payments met in full the liability for interest for the first two years in respect of those tranches. I accept that those payments were payments of interest, not early repayments of principal. In cross-examination, Mr Hu agreed that that was the case.
The term of the loan ended on 13 January 2019. At that time, the first defendant became liable to repay the principal of $20,617,896.63 and interest on the four tranches up to that date. It is clear that the first defendant was not in a position to meet those obligations.
Mr Huo and Mr Hu met in Sydney on 13 December 2018 to discuss repayment of the amounts owed. In paragraphs 30 and 31 of his affidavit of 5 May 2022, Mr Huo deposed that a conversation to the following effect occurred at the meeting:
30 At the December 2018 Meeting, Mr Hu and I had conversation with words to the following effect:
Mr Hu: H & H is currently facing financial difficulties and is unable to pay the Principal Sum and forthcoming interest of the Loan. The Development has been delayed by the builder and we have not been able to complete it in time.
Mr Huo: If H & H cannot pay the Principal Sum on 13 January 2019, when can it repay?
Mr Hu: I expect that the development will be completed in late April 2019 when the Occupation Certificate will be obtained from the government and the strata plan will be registered. On settlement of the apartments, which will happen around a few weeks afterwards, H & H will be able to collect money from the Developer and pay back the Principal Sum and interest for the past year to Noda. I have also been trying my best to talk to some banks, and we will have some meetings quite soon. I may be able to obtain a refinance from a bank so that I can pay you back even before the completion of the development, so that I don't need to pay the further interest with a rate of 15%. Otherwise, I can pay you back from the settlement proceeds of selling which will happen around late May 2019. If the sale proceeds are not sufficient to pay back the Loan in full, I will also be able to arrange finance with a bank using unsold apartments as a collateral. Alternatively, we can discuss the option that you take some apartments in the Development as part-repayment of the Loan if you are happy to do so. I acknowledge that the Loan is due and payable on 13 January 2019, and I regret that I am not able to arrange for it to be paid. I would appreciate if you could consider not suing for me [sic] immediately after Jan 2019 so that I can either obtain a (re)finance or I complete the Development as soon as possible and repay the Loan through settlements. This is for your convenience as well if you are going to take part of the properties in lieu of part-payment, as the properties will be fully built and ready to be sold and settled. So, you don't need to deal with the Developer or builders, or worry about the compliance issue of the properties, which will save you· a lot of time.
31 During the December 2018 Meeting, after considering Mr Hu's request, we concluded the meeting with words to the following effect:
Mr Huo: The money owing under the Agreement is due and payable on 13 January 2019, and if it is not paid H & H will be in default. This is very clear. However, considering what you have said and our friendship, I will not sue you immediately after 13 January 2019. But you need to update me as soon as possible whether you can obtain refinance from a bank so that you can pay me off. Once you know when you can get the finance, we can then discuss further to draft and document a new loan agreement to extend the Loan until the date of the new finance. So, you can pay me off the principal and interest accumulated until that date from the finance from the bank. Otherwise, considering what you have told me, you need to complete the development as soon as possible and settle the pre-sold ones in order to pay me back the whole or part of the principal and interest. If it is not enough, you can pay me off from the bank's finance for the rest of the properties when the development is completed. Or I may consider taking up some of the properties in lieu of· your part-payment. Of course, we need to discuss further about this plan by documenting a new agreement at that time. In this option, we also need to draft a new loan agreement to extend the Loan to some date, say when the development is completed, that is when the properties are fully built and can be settled to a purchaser, so to document the extension of time and interest accumulated up till that date. Hopefully it will save me some time and effort as per what you have said. In the meantime, all interest owing on 13 January 2019 will be capitalised, and interest will continue to accrue at 15% until Noda has been repaid in full. The guarantee and all of the other general terms and conditions of the loan agreement will continue to apply too. I'll also want a few things:
1. You must appoint me as the sole director and secretary of H & H so that I can have control of the settlement proceeds once the proceeds have been transferred to H&H as a registered mortgagee;
2. You must add me as a signatory on the bank account of H & H so that I can be repaid once the settlement proceeds are transferred to H & H as a registered mortgagee since the principal and interests are due and payable since 13 January 2019;
3. You must hand over all of the certificates of title to my solicitors to hold until all amounts owing under the Agreement are paid in full.
Mr Hu: I agree. Only one thing, there is some tax issue that I need to attend to. As you will not be in Australia, it will be procedurally hard for you to sign or attend to these issues. I will stay as company secretary until then. After this, I will resign as company secretary, and you can be the sole secretary. Thank you.
Mr Hu signed documents on that day concerning his resignation as a director of the first defendant and the appointment of Mr Huo as a director in his place. One of the documents signed by Mr Hu refers to him resigning as a company secretary and Mr Huo being appointed to that position.
Mr Huo further deposed that, immediately following the meeting, he and Mr Hu went to a Westpac branch in the City and arranged for Mr Huo to become a signatory on the first defendant's bank account.
Mr Hu deposed that he generally agreed with the words attributed to himself and Mr Huo in paragraph 30 of the latter's affidavit. However, he deposed that the conversation also included discussion to the following effect:
Mr Hu: We will need to discuss however later how the payments will be distributed between yourself and Mr Chiao given that Mr Chiao has obviously also invested significant funds in the development, especially the final $8 million that he was able to raise from his relatives. I am thankful for your patience to date and Mr Chiao has agreed to provide you with the majority of the funds once the properties begin to sell but he would like to discuss the possibility for some of the payments being repaid to him as previously requested. I believe that once the properties have reached completion we should able to quickly sell down the units to be able to fully repay your loan.
Mr Huo: I am willing to consider that proposal further once we get closer to practical completion and it can be a matter we discuss in due course however the most important thing for me is that everyone is working towards repayment of the loan in some form.
In response to paragraph 31 of Mr Huo's affidavit, Mr Hu deposed that Mr Huo also said words to the following effect:
Mr Huo: Considering that there may still be some time until the property reaches completion. I can see that there is not much benefit in taking any legal action against you for the time being. I can agree that I will not take any legal action for the time being and whilst you are selling apartments and making repayments (Forbearance Arrangement).
Mr Hu also denied that he said the words attributed to him about the position of company secretary of the first defendant. Mr Hu did not, however, take issue with Mr Huo's evidence about becoming a signatory in respect of the first defendant's bank account.
There is no dispute that the loan and the accrued interest was not paid to the plaintiff on 13 January 2019. Nor is it disputed that, on 16 January 2019, solicitors acting for the first defendant handed the certificates of title in respect of the land at Epping to solicitors acting for the plaintiff. I note, however, that Mr Hu deposed that in giving instructions for that to occur, he was acting in accordance with what he describes as the Forbearance Arrangement, and on the assumption that Mr Huo "would permit the reasonable sale of the properties in order to permit [the first defendant] to be able to continue to make repayments to him".
On 19 February 2019, solicitors acting on the instructions of Mr Huo sent an email to Mr Hu which included the following:
Hope you have been well since our last meeting.
We would like to further confirm your plan about the repayment of the loan. As discussed at our last meeting, you were expecting to have a clearer understanding of the resolution of the loan by this stage. Please provide us with an update on the following:
Progress of the project (expected date for the OC and the registration of the strata plan); and
Whether you prefer to proceed with a refinance of the loan before or after the settlements.
We also include the summary of the legal costs incurred to date and the likely legal costs to be incurred in the future (on the basis of $45 plus GST per unit for Matthew's time, and $35 plus GST per unit for my time).
The email contained a table of actual or expected legal costs. One of the items was:
Draft new loan agreement in relation to extension.
On 26 April 2019, Mr Hu sent an email to Jie Sheng (an assistant to Mr Huo) in the following terms:
According to the report of the first quarter, the situation is summarized as follows:
At present, the total sales amount of exchanged contracts is $11,591,000 (AUD 11.591 million).
The settlement will begin in mid-May. At present, the work we need to do has basically finished before the settlement. We only need to wait for approvals from the local government. Therefore, we should be able to repay about AUD 11 million from May to June. For other amount owing, we have some plans, which will be decided after discussion with Mr. HUO face to face around 15 May (I will confirm the specific meeting time with Mr. HUO around 10 May).
Mr Huo deposed that he, Mr Hu and a director of Bridgeland Second Pty Ltd (Mr Chiao) met in Beijing on 16 May 2019 to discuss repayment of the amounts owing under the Agreement, but no agreement was reached.
Mr Hu deposed that at that meeting he asked Mr Huo to consider suspending interest and accepting some of the properties as payment under the loan, and asked him to agree to "maintaining our current situation in order for us to discuss how the proceeds from the future sale lots should be split between Mr Chiao and yourself". Mr Hu deposed that Mr Huo responded with words to the following effect:
Mr Huo: Let me discuss with my solicitor regarding your request however I agree to maintaining the current arrangement and will not take any legal action against you so that you can focus on selling the apartments.
Mr Huo, in his affidavit in reply, denied that any agreement was reached or that he agreed to maintaining the "current arrangement".
On 17 May 2019, Mr Sheng sent a WeChat message to Mr Hu that included the following:
Hello, Mr HU. I talked with Mr. HUO's lawyer about your proposal of "suspend interest accumulation and use apartments to cover the debt" raised at yesterday's meeting. You can discuss the proceeding of this plan with your lawyer, but subject to the following prerequisites …
Mr Hu responded later on 17 May 2019 in the following terms:
I have received your message, Jie SHENG. Thank you. We will proceed with Mr. HUO's lawyer according to Mr. HUO's prerequisites and help me convey our thanks for Mr. HUO's understanding.
The Epping development was completed in about October 2019. Shortly thereafter, sales were completed in respect of 11 apartments in the development. Presumably as a result of such sales, the first defendant made payments to the plaintiff of the following amounts:
1. $2,000,000 on 29 October 2019;
2. $2,000,000 on 1 November 2019;
3. $2,000,000 on 4 November 2019;
4. $1,120,000 on 18 November 2019; and
5. $423,695.08 on 12 May 2020.
Mr Hu deposed that after the sale of the initial 11 apartments, he, Mr Huo and Mr Chiao "entered into a protracted period of negotiations". He deposed that the negotiations extended into mid-2020. Mr Hu deposed that he continued to make sales "in line with the Forbearance Arrangement". He further deposed that some sales were unable to be completed because Mr Huo would not give his consent, being dissatisfied with the amount of proceeds proposed to be paid to him [i.e., the plaintiff].
It appears from correspondence between the solicitors for the respective parties in April 2020 that the plaintiff was insisting that it be paid all of the net proceeds of sales, whereas the defendants wanted some of the proceeds to be paid to a builder. The defendants' solicitors seem to have accepted that the plaintiff's position accorded with its "entitlements".
On 8 October 2020, the plaintiff's solicitors sent a letter of demand to the defendants' solicitors, claiming an amount of $20,715,533.41.
The proceedings were commenced by the filing of a Summons in the Commercial List on 30 October 2020.
Since the commencement of the proceedings, three further payments have been made to the plaintiff. These were:
1. $538,458.37 on 5 February 2021;
2. $569,215.06 on 8 February 2021; and
3. $56,142.50 on 9 February 2021.
Those payments were made out of sales of apartments in the Epping development.
In November 2021, the first defendant, as mortgagee, entered into possession of the remaining Epping properties. By that time, Mr Hu had been re-appointed as a director of the company, and Mr Huo had been removed as a director. Mr Huo says that this occurred without his knowledge, but nothing turns on this. It seems that some further sales of properties have since occurred, but no further payments have been made to the plaintiff.
As noted earlier, the first defendant went into liquidation on 11 September 2022, and its solicitors have filed a submitting appearance, save as to costs.
[4]
Determination
The only substantial defence to the plaintiff's claims that is raised in the Amended Commercial List Response is the alleged estoppel described above at [5].
The estoppel contended for rests upon the oral agreement (or Forbearance Arrangement, as referred to in Mr Hu's affidavit) said to have been made in December 2018 in the discussions between Mr Huo and Mr Hu. It is said that the estoppel operates to preclude the plaintiff from requiring repayment of amounts owed under the Agreement otherwise than in accordance with the oral agreement. The alleged oral agreement is to the effect that the plaintiff would not take action to enforce its rights whilst the defendants took steps to repay the loan out of the net proceeds of sales of units in the Epping development. It is alleged that by reason of the oral agreement the defendants had an expectation (described as the Deferred Payment Expectation) that the plaintiff would not enforce its rights under the Agreement and would allow the defendants to repay the loan out of agreed portions of net proceeds of sale as and when sales of units were settled.
For the following reasons, I am not satisfied that any oral agreement (or Forbearance Arrangement) was made as alleged. No estoppel has been established.
First, I accept Mr Huo's account of the discussion, as contained in paragraphs 30 and 31 of his 5 May 2022 affidavit, as a broadly accurate recollection of the substance of what was said. Mr Huo's account, which was not touched upon in cross-examination, is largely accepted by Mr Hu, albeit that Mr Hu claims that certain additional words of significance were said. I note that Mr Huo's account is consistent with the subsequent conduct of the parties in changing the directors of the first defendant, in adding Mr Huo as a signatory on its bank account, and in the handing over of certificates of title to the plaintiff's solicitors. More significantly, Mr Huo's account seems to me to be consistent with the subsequent communications between the parties, including the email sent by his solicitors on 19 February 2019. During the 13 December 2018 discussion, Mr Huo, in responding to Mr Hu's request that he not sue immediately after repayment of the loan fell due, agreed to not do so, but spoke of further discussions to be held and a new loan agreement to be entered into. The email of 19 February 2019, which called upon Mr Hu to provide an "update", expressly contemplated a new loan agreement. Mr Huo's account also seems to me to accord with the discussions that took place in May 2019, the tenor of which (as reflected in the WeChat messages) plainly suggests that no concluded agreement, whether written or oral, had been reached. Certainly, there is no statement in any of the written communications between the parties that a concluded agreement or arrangement had been reached to the effect of the oral agreement alleged.
Secondly, I am not satisfied that Mr Huo said words to the effect of the additional words attributed to him by Mr Hu, and which are set out above at [26]. I accept Mr Huo's denial that he said the words attributed to him. Whilst Mr Huo may have said that he would not for the time being take legal action, I do not accept that he gave any firm assurance to the effect that no legal action would be taken "whilst you are selling apartments and making repayments". It is clear that repayment via the sale of apartments was only one of the options under discussion in December 2018, and it was not expected that any sales would be completed until about May 2019. Again, the content of the subsequent communications does not suggest that any firm assurance was given as deposed to by Mr Hu, and the giving of such a firm assurance would be inconsistent with the tenor of the discussions which even Mr Hu accepts occurred. Further, when asked about his December 2018 meeting with Mr Huo, Mr Hu suggested that he may have signed a document that recorded the conditions of an agreement by Mr Huo not to take legal action. This evidence was somewhat confusing, and the existence of such a document is neither referred to in any of the written communications that are in evidence, nor otherwise advanced in the proceedings. Whilst I think that Mr Hu was trying to give his evidence honestly and to the best of his ability, I do not have confidence that his evidence about this matter is reliable or accurate. In the absence of corroboration by other testimony, or support from the documentary evidence, I am unable to accept that Mr Huo said the additional words attributed to him by Mr Hu.
Thirdly, based on Mr Huo's account of the discussion on 13 December 2018, it cannot be concluded that the plaintiff agreed to anything more than a temporary forbearance to take action to enforce its rights. That is to say, Mr Huo did no more than indicate that, for the time being, whilst various possible means of repayment were considered, no such action would be taken. At the same time, Mr Huo was making it clear that the terms and conditions of the Agreement would continue to apply, including as to interest, until the plaintiff was paid in full. In these circumstances, and having regard to cll 17(b) and 17(c) of the Agreement, it would not have been reasonable for the defendants to assume or expect that the plaintiff would not take any action for so long as they were proceeding towards the repayment of the loan out of the net proceeds of sales of units. That is, it would not have been reasonable to hold the alleged Deferred Payment Expectation. For similar reasons, neither can the conduct of the plaintiff, in commencing proceedings in October 2020 and prosecuting the proceedings thereafter, be regarded as an unconscientious exercise of its legal rights. By that time, no new agreement had been entered into, and although some payments had been made to the plaintiff out of sales of units, more than $20 million apparently remained outstanding.
Fourthly, it has not been shown that the defendants (or either of them) have acted to their detriment in reliance upon what was said by Mr Huo in December 2018. The making of payments to the plaintiff of amounts that are owing under the Agreement cannot itself amount to relevant detriment. Further, it is difficult to see how any failure to make such payments could amount to relevant detriment when it was made clear by Mr Huo in December 2018 that interest would continue to run. In any event, it has not been shown that there were any payments that could have been made to the plaintiff but were not so paid.
As the alleged estoppel has not been made out, the plaintiff is not precluded from enforcing its rights under the Agreement against the defendants.
I should record that in the witness box, and in submissions, Mr Hu sought to raise another issue. As I understood it, Mr Hu complained that some sales of units did not go ahead, and thus payments in reduction of the amount owing were not made, due to failures on the part of the plaintiff or Bridgeland Second Pty Ltd to reach an agreement of some kind. It seemed to be suggested that the plaintiff thereby declined the opportunity to receive additional payments. However, the issue is not referred to, even obliquely, in the Amended Commercial List Response. It cannot be regarded as an issue properly or fairly raised, and I therefore do not propose to deal further with it.
The plaintiff provided the Court with a calculation, in spreadsheet form, of the amount outstanding under the Agreement. Counsel for the plaintiff explained the entries in the spreadsheet by reference to the evidence of payments made and received, and the relevant terms of the Agreement. I am satisfied that the spreadsheet is accurate, so that the amount owing to the plaintiff under the Agreement as at the date of hearing (27 March 2023) is $27,667,026.53. I note that Mr Hu said in the witness box that he had no issue with the calculation contained in the spreadsheet.
The amount outstanding under the Agreement is a debt owed by the first defendant to the plaintiff. Further, pursuant to cl 16(a) of the Agreement, Mr Hu agreed that his guarantee extended "to the ultimate balance owing under this agreement". That expression encompasses the amount presently outstanding under the Agreement in circumstances where the loan was due to be repaid on 13 January 2019 and the amount outstanding has been established in recovery proceedings. Accordingly, Mr Hu as a guarantor is also liable to the plaintiff in the sum of $27,667,026.53.
Judgments will be entered in favour of the plaintiff against both defendants in that amount. The judgments will be ordered to take effect from 27 March 2023.
As for costs, I think it would be appropriate to order that the first defendant pay the plaintiff's costs up to the date of liquidation (11 September 2022), but not thereafter. From that date, the proceedings against the first defendant were stayed (and thus effectively proceeded only against Mr Hu) until the date of the hearing, when leave to proceed against the first defendant was granted. By that time, the first defendant had filed a submitting appearance, save as to costs, and it was on the basis of that submitting appearance that leave to proceed was granted. There seems to be no reason why an order should not be made that the second defendant pay the plaintiff's costs of the proceedings.
The Court will make costs orders in accordance with the above unless any party notifies my Associate by 6 April 2023 that different orders ought be made. In that event, I will make directions for brief written submissions to be made on costs, with a view to that issue being determined on the papers.
[5]
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Decision last updated: 31 March 2023