Sha v Liu

Supreme Court of NSW|2022-03-08|Before: Leeming JA, Gilbert J

Solicitors: Xiao Lawyers (Plaintiff) Juris Cor Legal (Defendant) File Number(s): 2020/00084727 Publication restriction: Nil

Judgment

LEEMING JA: Mr Yunlong Sha, resident of the People's Republic of China and Chief Executive Officer and Managing Director of Puxin Ltd, a US listed company, sues Ms Hua Liu on a guarantee following the failure of her company A & T Education Holdings Pty Ltd to repay a loan of $1,000,000 purportedly made by him to it in early January 2019 pursuant to written loan agreement dated 28 December 2018. The litigation is a little unusual. In issue is whether a contract was entered into, and whether the guarantee is enforceable, notwithstanding that it is accepted that Ms Liu signed the loan agreement containing a guarantee and that funds were credited to the company's bank account which have not been repaid.

Overview of the dispute

The company was originally named as the first defendant and Ms Liu as the second defendant. Shortly after the proceedings were commenced, the company went into external administration, and it was deregistered in October 2021. Since it thereafter ceased to exist, by dint of s 601AD of the Corporations Act 2001 (Cth), I ordered that it be removed as a party.
The company was involved in the operation of various educational institutions in Australia, which seem to have had a focus on overseas students. The evidence discloses that the company was in perilous financial straits in late 2018, with large arrears of rent on premises to the south of the Sydney CBD. A series of contemporaneous WeChat exchanges between Ms Liu and Mr Peng Wang, the Chief Financial Officer of Puxin, reiterate her company's immediate need for funds to pay rent and staff. (All of the conversations and written communications between the parties were in Chinese, but there were agreed translations in evidence.) One dated 3 January 2019 stated that five months' rent was outstanding, totalling $719,792.40, and that this was "the most urgent fee we need to pay within this week. Otherwise, we will lose the lease".
Puxin was considering investing in the company. It seems that external lawyers and accountants were retained. One attraction seems to have been the chance of receiving some form of accreditation under the Tertiary Education Quality and Standards Agency Act 2011 (Cth). The translation of one contemporaneous document suggests what was planned was $9 million by way of debt, convertible into equity in the event that a "university licence" were granted, with further debt finance to follow. None of this occurred. In April 2019, Puxin advised that it had "officially terminated this project internally", on the basis of extant litigation involving allegations of fraud involving A & T Education Holdings. This seems to be a reference to the proceedings described in Haiye Developments Pty Ltd v The Commercial Business Centre Pty Ltd [2020] NSWSC 732, although nothing turns on it, because the present dispute concerns a loan made a few months earlier, before Puxin had decided not to proceed.
The documents from late December 2018 suggest not only that the transaction could not proceed until Puxin's requirements of financial and legal due diligence had been completed, but also that Puxin could not itself provide funds in the absence of due diligence, and that that due diligence could not occur in the timeframe which Ms Liu insisted was required.
As it turns out, funds were provided to A & T Education Holdings in January and March 2019. In both cases, funds were credited to a Commonwealth Bank account in the name of Southern Sydney Business Institute Pty Ltd ("SSBI"). A & T Education Holdings was the sole shareholder of Southern Sydney Business Institute, and Ms Liu was its sole director.
The first reflected the loan on which Mr Sha sues. An amount of $992,610.44 was credited to the SSBI bank account on 8 January 2019. It was accepted that the source of the funds was a bank account denominated in US dollars in the name of Ms Wenjing Song. It was uncontroversial that she was Mr Sha's wife.
The second occurred in two tranches. An amount of $191,686.51 was credited to the same SSBI bank account on 4 March 2019. It too was sourced from Ms Song's US dollar denominated bank account. The entry also states "LOAN" (this is absent from the entry on 8 January). Three days later, on 7 March 2019, $297,231.89 was transferred into a different Commonwealth Bank account, apparently in the name "A&T". The bank document states that the source of the funds was "Baoleme Technology Co Ltd". Whereas the transfers from Ms Song's account involved a conversion from US dollars, that from Baoleme Technology involved a conversion from Hong Kong dollars.
The uncontested evidence was that Mr Peng Wang, the Chief Financial Officer of Puxin, caused these transfers, in response to further requests for funds from Ms Liu. However, on Mr Sha's case, the first represented a personal loan from Mr Sha, while the second represented a personal loan from Mr Wang.
It was common ground that nothing had been repaid.
Ms Liu signed loan agreements in relation to the transfers. The documents were in similar form. They were drafted by her (or her company's) solicitors. In each case, A & T Education Holdings was the borrower and she guaranteed the company's obligations. In each case, Ms Liu executed the document both as sole director and secretary of her company, and personally as guarantor. In the case of the first transfer, the plaintiff was the lender. In the case of the second transfer, Mr Wang was the lender. The second did not include cl 7.5 (of which more later). Both were styled agreements. A submission that the agreement between Mr Sha, the company and Ms Liu should be regarded as a deed notwithstanding its form, which Mr Sha's counsel flagged on the first day, was left undeveloped, and when at the close of submissions I inquired of it, I was told that it was withdrawn.
I was taken with great care through many of the loan clauses, in oral and written submissions, but little turns on their detail. It is convenient to note that cl 7 was headed "Repayment", and (in the case of the loan from Mr Sha) contained five subclauses. Subclause 7.1 provided that the loan will be repaid in full one year after it was advanced; subcl 7.2 provided that "The Loan may be repaid in whole or in part without premium or penalty"; subcl 7.3 prescribed how repayment was to occur and subcl 7.4 authorised early repayment of the whole or part of the loan. Subclause 7.5 was the subject of specific negotiation, and bears upon one aspect of Ms Liu's defence that no contract came into existence. It provides: "The parties agree that the Loan shall be repaid in full in the event that the transaction between Puxin Education & Technology Group and the Borrower has been completed".
There was no cl 7.5 in the loan agreement with Mr Wang.
There are a number of unusual features in what occurred, the first three of which were raised during the hearing.
First, it is difficult to understand why the Managing Director and Chief Financial Officer of a listed company would personally lend amounts to a company which the listed company was in the process of investing in. In this country, and without being exhaustive, the loan would be a material personal interest within the meaning of s 191 of the Corporations Act which would trigger disclosure obligations to the Puxin board, and would prevent his presence or voting on the acquisition unless it were itself the subject of a resolution or exemption (cf s 195); it may be doubted that the position in the United States is significantly different. But putting to one side statute, the loans placed the men in a clear position of conflict between duty and self-interest. The fact that the borrowing company was in financial difficulty, coupled with cl 7.5 - which conferred a direct financial benefit upon Mr Sha if the transaction proceeded - only heightens the reality of the conflict.
Secondly, insofar as it might be inferred that funds from an account in the name of Mr Sha's wife were to be treated as funds from Mr Sha himself, that is arguably undercut by the fact that when Mr Peng Wang caused the March transfers to be made, corresponding to a personal loan made by him, part of the transfer was also made from the account in the name of Mr Sha's wife.
Thirdly, and to my mind the most difficult to explain, there is no doubt that the funds were transferred, and there is no doubt that Ms Liu signed documents to the effect that her company borrowed $1,000,000 from Mr Sha and $500,000 from Mr Wang. Mr Wang was called in Mr Sha's case. Indeed, he was the main witness, providing two affidavits, and was called in advance of the plaintiff. A major topic of Mr Wang's second affidavit was the $500,000 loan. Yet the only claim in this litigation is based on the first transfer in January 2019, and not the second transfer some 8 weeks later. When I raised this with the plaintiff's counsel, I was told it was irrelevant, and that the evidence had only been prepared in relation to defences that were no longer pressed. That may well have been the purpose of the evidence. However, I do not agree that I may for that reason put the later transfer to one side. The evidence was read and tendered by the plaintiff without restriction, and is available for all purposes: see Cherry v Steele-Park (2017) 96 NSWLR 548; [2017] NSWCA 295 at [55] (the position may well be different in South Australia, where the plaintiff's lawyers practised). No substantive explanation or submission was made explaining this.
I only noticed a fourth matter after judgment was reserved. The exhibit to Mr Wang's affidavit describing the second tranche of the $500,000 said to have been lent by him, and which is sourced from a Hong Kong company, also includes a description, in capitals but reproduced in the court book in small typeface, "CONSULTANCY FEE FOR MARCH 2019". The print out is from a Commonwealth Bank portal. The corresponding entry in the print out for first tranche is "LOAN". I infer from the form of the document that the words "LOAN" and "CONSULTANTCY FEE FOR MARCH 2019" were chosen by the person who caused the transfers to be made. But it is not immediately apparent why funds said to reflect a loan from Mr Wang would be described as a consultancy fee, as if the transfer represented the derivation of income by A & T Education Holdings rather than a loan requiring repayment, and from the perspective of Baoleme Technology would appear as an expense, rather than the making of a loan.
Mr Wang was required to attend (by audio-visual link from China) for cross-examination, but he was not asked any questions about the above or any other topic.
But the Court's task is confined to resolving those issues that have been raised by the parties, by reference to the evidence adduced and submissions advanced by them. For present purposes, the significance of the matters referred to above is twofold. One aspect relates to the way in which the use of funds from an account seemingly in the name of Ms Song bears upon the agency which the plaintiff asked me to infer. A second is that the entirety of the exchanges makes it quite clear that the parties were in many ways unconcerned by the distinction between Ms Liu's positions (i) as sole director and shareholder of her company, (ii) as ultimate controller of wholly owned subsidiaries of that company, and (iii) in her own right (that is not said by way of criticism; to the contrary, it reflects the commercial reality of the situation).

Pleadings

A powerful indication that the pleadings were less than ideal is that both sides maintained, at the end of the trial, that the points taken by the other side were outside the scope of the pleadings.
On the one hand, Mr Sha alleged that "[o]n or about December 2018 the parties executed a written loan agreement". Ms Liu did not admit the allegation. Although there was a written agreement dated 28 December 2018, it was only executed by A & T Education Holdings and Ms Liu on 7 January 2019. No evidence was adduced that it was ever signed by Mr Sha. As Ms Liu submitted in closing address, the substance of Mr Sha's case was that by effecting the transfer of (almost) $1 million, a contract in the form supplied by Ms Liu and executed by her and her company came into existence. Ms Liu was content to proceed on the basis that that was how Mr Sha put his case, but noted that insofar as the contract was one which came into existence by conduct, rather than exchange of signed counterparts, and (as will be seen) the conduct was that of Mr Wang causing funds from Ms Song's account to be transferred, that necessarily introduced issues of agency.
On the other hand, in response to Ms Liu's submissions, Mr Sha complained that the only two issues identified at the conclusion of the trial, on the basis of which Ms Liu defended the proceedings, namely, the existence of a contract and whether consideration had moved from Mr Sha, had not been pleaded. The emphasis of this complaint was on the former. However, there was no application to reopen, and I did not understand Mr Sha to submit that he could not deal with the points, although an adjournment was granted for that purpose.
In relation to Mr Sha's complaint that the existence of a binding contract was not available on the pleadings, which had said nothing about agency, it is true that there was no positive allegation of absence of agency in the defence but that reflects the way in which the statement of claim was formulated, which departed from the evidence adduced. If as Mr Sha alleged, he had executed the written contract, then whether there was a contract could scarcely be in issue, and he would not have to resort to relying on conduct of others acting on his behalf. And Ms Liu by her defence expressly put in issue the existence of the contract. If particulars had been sought of that denial (as amounting to a pregnant negative: see Hill End Gold Ltd v First Tiffany Resource Corp [2008] NSWSC 1412 at [9]) they were not in evidence.
What is more, much of the defence was directed to elaborate cases of estoppel by representation and contraventions of the Australian Consumer Law which amounted to a defence or alternatively an equitable set off, which were apt to give rise to contested issues of fact. Indeed the majority of the evidence tendered was directed to those allegations. In short, on the face of the defence, this was a plain case for the filing of a reply, which did not occur.
In relation to the submission that no consideration had been shown to have moved from Mr Sha, made in answer to the allegation in the statement of claim that "[o]n or about 8 January 2019, the plaintiff advanced the principal sum", Ms Liu had denied the paragraph and said that her company had received the sum of $992,610.44 from Puxin at around that date. It seems that that positive allegation in the defence as to the source of the funds is not made out, for there is nothing connecting Ms Song's bank account with Puxin, and all the evidence tells against Puxin being able to advance company funds in the absence of due diligence. But all that matters for present purpose is that it is that the parties were in dispute as to the source of the funds transferred to A & T Education Holdings on 8 January 2019.
This is a very unpropitious background for Mr Sha, who himself needs to depart from his positively alleged case in a way that requires agency, and who seemingly did not bother to explore what underlay the allegations and denials in the defence, to complain about deficiencies in Ms Liu's pleading.
It was at least implicit in the submissions capably made by Mr Katekar on behalf of Ms Liu that I would not treat Mr Sha as bound to the particular way in which his claim in contract had been pleaded. It was said in closing address: "What I have done in approaching the Court today is perhaps been too generous to my friend by approaching the matter of well, there's no executed loan agreement but is there, on the evidence, other evidence that might persuade your Honour that there was offer and acceptance. That's the - I guess I was seeking to approach it in a s 56 [scil, of the Civil Procedure Act 2005 (NSW)], what's the real issue in dispute in this case and ask your Honour to address that."
As indicated during closing addresses, I do not propose to determine the case on the basis that the plaintiff had failed to establish a written agreement executed by both sides on or about 28 December 2018. This is not a case where the defendant (or the trial judge) failed to appreciate that there was a shift from the pleaded case of an executed contract to an offer accepted by conduct; cf Kriketos v Livschitz [2009] NSWCA 96; 14 BPR 26,717 at [104]. Rather, I should deal with the substance of the case, as exposed by the documentary evidence served a year before the hearing, of a partially executed agreement which, so Mr Sha submitted, had been performed by him. In doing so, I should address the substance of Ms Liu's submissions, notwithstanding Mr Sha's protest that they should have been specifically pleaded, a protest which overlooks his own failure to plead the case advanced in his evidence.

Findings of fact

There is no dispute, and I find, that: 1. Ms Liu executed a loan agreement on behalf of A & T Education Holdings for it to borrow $1,000,000 repayable (relevantly) after 12 months; 2. The same document was also executed by Ms Liu in per personal capacity as guarantor of the obligations of her company and sent to Mr Wang; 3. An amount just less than AUD$1,000,000 was credited to A & T Education Holdings account with the Commonwealth Bank of Australia within a day of her execution of the document; 4. No part of the sum has been repaid, and 5. Appropriate notice and demands have been made upon borrower and guarantor.
I shall need to return to some of the detail leading up to the execution of the document in due course, but it will be convenient first to summarise Ms Liu's defence as refined at the conclusion of the evidence. It was summarised thus by Mr Katekar shortly after the lunch adjournment on the first day: "Mr Sha hasn't signed the contract, it hasn't been countersigned and there's no evidence - I'll be seeking to persuade your Honour - that Mr Sha had, by his words or conduct, accepted that offer; that's proposition 1. Proposition number 2 is if your Honour is against me on that … It's not a deed, it's a contract. It's an agreement. For the guarantee to be enforceable, consideration must move from Mr Sha, and in this case, it needed to go to the first defendant in consideration for Ms Liu to provide Mr Sha with a guarantee which Mr Sha seeks to enforce. The evidence of Mr Wang is that the consideration did not move from Mr Sha. And so we say firstly, there's no agreement, they haven't established the existence of an agreement; and second, they haven't established the existence of consideration to so entitle them to enforce the guarantee."
These points turned on Mr Sha's (a) failing to establish that he had executed the contract, (b) relying on the conduct of others in causing funds to be transferred to A & T Education Holdings' bank account and (c) needing to establish that those others (Mr Wang and Ms Song) were Mr Sha's agents. They enable me to pass over most of the evidence directed to the allegations based on the defences of estoppel, misleading and deceptive conduct and equitable set-off.

WeChat messages

Extracts of a WeChat "conversation" were tendered without objection. The exchanges in late 2018 and early 2019 were all between Mr Wang and Ms Liu. All were in Chinese, but a translation was uncontroversial, and in what follows I shall reproduce merely the translation. The exchange relevantly proceeded as follows. Between 1.57am and 2.22pm on 29 December 2018, there were the following exchanges: "PW: For the present, we probably can't complete the loan process before the holiday, because the solicitors and the auditors have been on holiday already. Headquarters will be closed since 4pm this afternoon. Sorry! I'm afraid we can't meet the due day of 2nd January. HL: Peng, when do you think it could be done….. PW: According to our internal procedure, FDD and LDD must be finished, and TS must be signed before lending the money. PW: I've been following up in these days. Our procedure is quite strict because all of the documents are required to be disclosed. HL: Is there an estimated time? I'm looking for other solutions as well, but the university application requires urgent attention. PW: I'm not sure when the process could be completed because we engaged in external solicitors and auditors. PW: The university application fee is $250,000, right? HL: It's about $300,000. But we have no idea about the quote from Deloitte. PW: What is Deloitte's specific work? PW: We could help you to estimate if their quote is reasonable. HL: Business plan. PW: Has David provided the scope? HL: Not yet. David advised that he will let me know the quotation on 7th. HL: Peng, I might need your help. PW: Let me think. HL: The process of University application needs your engagement. Alan has reported the new shareholder's information to tesqa. I can't report Chengshiwai's information. PW: Definitely. PW: I'll figure out the funds. PW: I'll call you later. HL: It doesn't matter the money is more or less. I'm even willing to give it to you for free. I wish I could get your understanding and support. PW: I understand."
On 30 and 31 Ms Liu send further messages requesting attention to the loan. At around 4pm on 31 December, Mr Wang wrote: "Puxin has confirmed that they can't process the loan. I'll try something else for you. The legal and financial due diligence can be started after the new year holiday."
On the morning of 2 January, Ms Liu asked "Peng, could you help me figure out the loan?", to which he responded "I'm trying".
That evening, Mr Wang asked "Could you advise which must be paid within this week, and which can be paid in instalments?".
That request led to a long response, translated as follows: "Peng, at present, the most urgent fee is the rent of the CCI campus. The problem left over by Chengshiwai because it failed to fulfil the obligation to cooperate. Five-month rents of CCI campus are overdue now. The monthly rent is $143,958.48. The total amount is $719,792.40. The final due date is 7th January. This is also the most urgent fee we need to pay within this week. Otherwise, we will lose the lease. This campus will be used for the university next year, we must keep it. Besides, Level 5-7 of CCI campus has been sublet, the pressure from the rent will go down since 2019. My cash will be used for everyday expenses of the university project. There is not much left. I need your support. Thank you!"
Ms Liu then added "Either a personal guarantee or company guarantee could be provided". An hour later, she added "please reply when you are available". Around another hour later, Mr Wang confirmed receipt and asked "Is it necessary to pay the other party in a lump sum? Can we make the payment in 2 or 3 instalments?" to which Ms Liu replied "Probably not. It is overdue for five months".
Ms Liu added the following morning, "I'm sorry for interrupting your rest last night", and further exchanges on 4 January were directed to finding a time at which both were out of meetings and could speak.
There is then a break in the WeChat printouts until, at 11.36am on 6 January, Ms Liu provided the bank account details into which the $992,610.44 was credited a day or so later. It seems highly likely that there were communications between Mr Wang and Ms Liu in the meantime (in part because on previous days she sent multiple messages, in part because the bank account details arrive divorced from context, and in part because of the messages which follow in short order). Within 3 minutes after the bank account details, are the following messages: "HL: Thanks. I can't thank you more. PW: The total amount in AUD? HL: $1 million Australian dollars. HL: AUD exchange rate is very low currently. PW: Received."
At 12.31pm Ms Liu wrote, "Peng, please see the revised document", to which Mr Wang responded "OK".
At 2.50pm Ms Liu wrote, "Peng, you could amend the document directly if necessary" and then at 5.45pm she added "7.5 has been added. Please check." Evidently there were other communications, perhaps by telephone, leading to the introduction of cl 7.5 (I shall turn to the clauses presently).
Separately, printouts of the same WeChat messages were tendered, apparently viewed from a different platform or device. The Chinese characters are identical, although the (agreed) English translations are slightly different from those reproduced above; nothing turns on the differences. These appeared to show that attachments were from time to time sent via the WeChat messages, including one on 6 January at 17.44 immediately before Ms Liu's message "7.5 has been added. Please check". It was common ground between the parties that that is what occurred.
There followed a series of messages between 6:10pm and 7:52pm that evening: "PW: Excluding the deal with Puxin, when PEG could pay off $1M by itself? HL: The principal and interest will be repaid in one year. HL: 7.1. PW: I have reviewed the terms and conditions. My question is that is it possible to pay off $1M in one year according to the actual operating situation? HL: No problem. Because we don't have any pressure about the rent after subleasing, and the charges from the university have been settled. PW: OK HL: Peng, please let me know if you don't have any enquiry about the Loan Agreement. I'll send a signed copy to you. PW: No further inquiry."
The following morning, Ms Liu said "Peng, I have signed the agreement. Thank you" and Mr Wang responded "Got it". He added on the afternoon (7 January 2019): "Mr Sha will transfer the money from United States tonight. I assume the funds will reach your account within two days".
The following day Mr Wang asked whether Ms Liu had received the money, and she responded that she had.

Testimonial evidence

Some of the gaps in the WeChat exchanges were filled by testimonial evidence.
In particular, Mr Wang's affidavit stated that after receiving the message at 11.36am on 6 January 2019 (which provided the SSBI's bank account details), "I then discussed the matter with [Mr Sha] who was willing to provide the loan". He said that he received a draft loan agreement including the guarantee by Ms Liu personally. Mr Wang's affidavit then stated: "After I received the draft loan agreement, I discussed the draft with [Ms Liu] via WeChat. At 17.44pm, she sent me a message saying that "7.5 has been added. Please check". I then had the following conversation with her" and the affidavit reproduced the exchanges in a form which was almost identical to the translations of the Chinese WeChat messages reproduced above. The affidavit differed only in three respects. 1. The first was that the first message in the affidavit was "when can PEG pay off this $1M by itself" whereas one of the agreed translations was "when PEG can pay off $1m by itself". 2. The second was that the affidavit consistently had Ms Liu referring to Mr Wang as "General Manager Peng" rather than "Peng". 3. The third is that the affidavit did not suggest any break in time between the second last and last message, whereas in fact Ms Liu's words translated as "Peng, I have signed the agreement. Thank you" were sent the following morning.
I proceed on the basis that the "conversation" to which Mr Wang referred was not a separate conversation between people speaking, but was simply the WeChat messages reproduced above. I am of that view because it is the most natural reading of the affidavit, because of the overwhelming similarity in the translations of the conversations, which are also exhibited to this paragraph of the affidavit, and because it is not entirely unnatural to describe the exchange of WeChat messages as a "conversation".
It will be seen that Mr Wang says nothing of the communications, if any, that led to the insertion of cl 7.5. I return to this below.
Mr Wang also gave evidence concerning the transfer of funds. He said: "On or about 8 January 2019, I caused US$712,900.00 (an equivalent of one million Australian dollars at the time of transfer) to be advanced from the account of Wenjing Song, who is the wife of the Plaintiff, to the account of SSBI (account number ending 8095), which is the account nominated by [Ms Liu]. A copy of the statement is attached and marked as 'PW5'."
Considerable reliance was placed upon evidence concerning Mr Wang acting on behalf of Mr Sha. This amounted to two paragraphs. Mr Sha said in his affidavit: "I usually communicated with Hua Liu via WeChat messages. My colleague Peng Wang (CFO at Puxin) also communicated with the Second Defendant via WeChat on my behalf in respect of the loan agreement."
Mr Wang said in his affidavit: "I usually communicated with [Ms Liu] via WeChat messages on behalf of Puxin and the Plaintiff."

WeChat messages between Mr Sha and Ms Liu in 2020

Finally, after neither loan was repaid, there was the following exchange between Mr Sha and Ms Liu between 3.15pm and 4.18pm on 16 January 2020. It is difficult to appreciate its force by attempting to summarise it, and Mr Sha placed great reliance upon it, so the exchange is reproduced below in full: "HL: Mr. Sha, is it possible that you give me little more time to have the problem resolved in a simple way? YS: Pay our money back, thanks. HL: I will not delay the repayment if I can. Just three months. It might take a longer if we go to the court. Please weigh and judge. I wouldn't be able to make the repayment without the university being approved. I hope none of us being suffered from that. I'm really sorry to get to this situation and I hope you can understand. I was told by Director Wang Peng many times that Puxin will definitely buy the university. I would otherwise not borrow the money. Hope that you can understand my difficult situation. YS: It is okay if you can make the repayment in three days. I would otherwise trust the court more. I hope that you can understand. HL: That's beyond my capabilities. I have the full record of the chat and conversation between me and Director Wang Peng. I was certain that the purchase would definitely happen. I would otherwise not to borrow the money and lend my personal US$50,000 to you and him for cash flow. Director Wang Peng said that it was not convenient to transfer US$50,000 to another person. I promise to pay the money. I just need little more time. Your kind understanding will be greatly appreciated. YS: You have friends and acquaintances. They know that your university is almost ready they will congratulate you. They are willing to lend you money. So you will have the money in three days to make the repayment. The problem will be resolved perfectly. HL: I wouldn't delay the repayment if I can borrow the money. I have spent all I have on the applying of the university. I have been working in the education industry for nearly 20 years and I have fought for this dream for my entire life. As you may understand, I will pay your money back even if I have to hand over the university to someone else after approval. Please help me by extending the due date. Your kindness will be remembered and appreciated for the rest of my life. YS: The creditor is waiting for my money, the situation is already extremely urgent, they are asking multiple times every day. We expect to be repaid within 3 days, for which we will be more than thankful. YS: If you do not repay the money, we'll make sense of this in court; you must also bear the litigation costs which are not low, please consider seriously. HS: Everything has a reason, hope Mr. Sha understands. I have already explained to you the details of the matter. Please you must forgive. Going to court hurts everyone far too much. Please [prayer emoji] YS: I can understand your difficulties, please also understand our difficulties. We have already taken control of relevant information; still expecting repayment within 3 days. HL: If I can I would not trouble you. Sorry [prayer emoji] YS: If you cannot borrow money from your friends, this point alone can indicate many problems. We cannot owe money without repaying, so, within three days, we wait for your repayment, so that we can repay. Please also consider our difficulties, and not make us break a promise. HL: It is not that I cannot borrow money. But that friends have already given so much support to this project of mine. I cannot ask them again. If it was not that Boss Wang confirmed Puxin becoming a shareholder at the time, I would not have asked you either. Hope that you would understand my difficulties. No use to explain too much. I'll strive to repay quickly, I truly have no power over whatever other matters you would like addressed. But if three years of my hard work in the last three months fails because of this, I will be even less able to repay your money. Please understand. Director Wang said at the time that you were also a financially free person, and only had trouble paying the US$50,000 due to reasons with ID, and I paid this money from my personal account without question because I trusted you and him. I will definitely hurry up, hope you understand. Many thanks [prayer emoji] YS: I have already explained very clearly, if there is anything unclear, we can discuss further. Hoping that you will repay according to the agreement, reminder to you: it is already overdue, and our patience is not without principle. YS: An arrow does not return once shot, we will exhaust all relief strategies, defending our rights, hoping that you would weigh up the pros and cons, and fulfill your promise. HL: There's truly nothing I can do. I really need some time YS: That is your problem, and even though we want to help, we have difficulties ourselves, and cannot help you."
Four days later, Ms Liu said that the university had emailed and said that there would be a response in early March. There ensued the following exchange: "HL: Please give me two more months' time. Thank you. [folded hands emoji] HL: [image of an email from TEQSA concerning the site visit] YS: Apologies, please repay immediately! HL: There will be an outcome 4 weeks after site visit ends. Mr Sha, if I had money now I will repay you immediately. I really don't have it now. I am very sorry. I will hurry up."
Mr Sha relied upon Ms Liu's repeated acknowledgements of her obligation to repay as post-contractual conduct bearing upon the existence of a contract.

Submissions on the existence of a contract

Ms Liu drew attention to the reference to the "revised document" in the message sent at 12.31pm on 6 January, and said that was an invitation to treat. An offer capable of acceptance was not, according to Ms Liu, made until the signed contract was sent the following morning. Importantly, after the draft document was sent at 12.31pm, there was the evidence about the discussion between Messrs Sha and Wang, and it was only after that that new cl 7.5 was inserted. Ms Liu said there was no evidence of any subsequent discussion between Messrs Wang and Sha.
It followed according to Ms Liu that not only had it not been shown that Mr Sha ever executed the contract, but further he had not accepted the offer in its final form (including cl 7.5). Further, there was no evidence that Mr Sha advanced the money in accordance with the agreement. Rather, the evidence adduced by Mr Sha was that it was Mr Wang who caused the funds to be transferred from Ms Song's account. Ms Liu acknowledged that Mr Wang sent a WeChat message to Ms Liu saying that "Mr Sha will transfer the money", but that that was not what occurred; instead Mr Wang caused money in Mr Sha's wife's account to be transferred. Mr Katekar said: "Now what is required is a communication by Mr Sha that he accepts the offer by words or conduct. There's no conduct of Mr Sha to accept it."
He said that there was nothing in the evidence to suggest that money in Ms Song's account was money coming from Mr Sha. He added: "Neither Mr Wang nor Mr Sha says that that was Mr Sha's money anywhere, but then what Mr Wang continues to do in his second affidavit is say to your Honour that he advanced a separate loan."
By way of summary, Mr Katekar advanced his two points as follows: KATEKAR: They're my two points. As far as the acceptance is concerned, I mean, your Honour will be familiar with cases like Branir and Brambles where there's an unexecuted oral agreement that then leads into conduct between the parties which is consistent with those terms. What has happened here is of a different order because what occurred was an offer by Ms Liu to enter into an agreement … [F]irst proposition, Mr Sha did not sign the agreement so there's no communication of acceptance of that offer so the plaintiff is left with a[n] acceptance by conduct, but that acceptance can only have been by the provision of the money. But that provision of the money, according to the evidence, was by Mr Wang out of an account not held by Mr Sha, also being an account that Mr Wang used himself for separate purposes. So the inference that that money came from Mr Sha or under his authority is not satisfied in the evidence. So that second point underpins both my non acceptance point and my no consideration point. Because it's an agreement, there needs to be consideration and Mr Sha has come to this Court to ask for an enforcement of a right that he says he has for Ms Liu to pay him a million dollars plus interest, which she didn't pay. Commercially, your Honour, I accept A & T did receive the money, no doubt. HIS HONOUR: And used it. KATEKAR: And used it for the purposes of the company, no doubt, and the context was that Puxin was seeking to buy the company, they needed the money; I don't quarrel with any of that. Ms Liu was saying, 'To stay alive in advance of you purchasing this with your intended transaction, the company needs to stay alive, we need the money advanced', no doubt. But the difficulties that are confronted by the plaintiff in this case is really that he hasn't established that he has an agreement with [Ms Liu] to guarantee repayment of this money. HIS HONOUR: I think you say, even if he does, it's in the form of an agreement, not a deed, and this is a guarantee. KATEKAR: Yes, [for] which he hasn't provided consideration. In another world, Ms Song might seek to bring proceedings against A & T for satisfaction of the money that's been advanced. A & T may struggle to defend that it may; it may not but from Ms Liu's perspective, Ms Liu did not guarantee anything to Ms Song. That's my case."
Mr Sha submitted that: "Formation of contract occurred when Mr Wang, on behalf of and with the Plaintiff['s] authority, conveyed Mr Sha's acceptance of Ms Lui's offer of a personal guarantee in exchange for a loan to A&T. Acting on Mr Sha's behalf Mr Wang then negotiated terms for a written agreement with Ms Lui including the amount of the loan and amended terms (sent on 6 January 2019) and included amended terms by way of a new clause 7.5, introduced at the request of Mr Wang (on behalf of the Plaintiff) ("the Offer") and accepted by Ms Lui through her execution of the Agreement containing the amended term. The Second Defendant thus 'accepted' that Offer by signing and providing the executed Agreement to the Plaintiff's agent, Mr Wang." (footnotes and evidentiary references omitted)
That submission (in paragraph 22 of Mr Sha's written submissions dated 8 March 2022) was elaborated at paragraphs 24-28.

Consideration

I do not accept Ms Liu's first point that no contract came into existence. However, I also do not accept Mr Sha's analysis for concluding that a contract did come into existence.
I start with determining precisely what occurred. I accept Ms Liu's submission that a draft loan agreement was provided around the middle of the day on 6 January 2019, followed by a later document with only the latter containing cl 7.5. The actual documents which seem to have been sent as attachments to WeChat messages were not themselves in evidence. But it is clear that at around 5.44pm Ms Liu send an unsigned draft document, containing cl 7.5, and it is clear that on the following morning, on being told that Mr Wang had "No further issues", she executed that document and sent a pdf of it. It is also clear that the later loan agreement borrowing $500,000 from Mr Wang, which otherwise closely resembles the loan agreement on which Mr Sha sues, does not contain cl 7.5. Finally, for what it is worth, the filename of the word document sent at 5.44pm is shown on the screenshot as "A T Loan from Puxin Education…up-1.docx", and that has a couple of indicia of being a later draft of a document (the last characters of the filename suggest a document provided in mark up and the existence of an earlier draft which did not end in "-1"). In short, all the evidence points in favour of the 5.44pm document being a later draft of an earlier document, but containing cl 7.5.
I also accept Ms Liu's submission that the inclusion of cl 7.5 was a material change from the earlier draft. It had the effect of conditionally accelerating the time on which A & T Education Holdings was required to repay the entirety of the loan. Contrary to the first component of Mr Sha's submission, I do not see how a contract could have come into existence prior to cl 7.5 being raised, formulated and incorporated into the loan agreement. Mr Sha contended that a contract came into existence when Mr Wang conveyed Mr Sha's acceptance of Ms Lui's offer of a personal guarantee. But at that stage, neither the amount of the loan nor its term had been agreed. Further, although Mr Sha submitted that after this informal agreement had been reached, "Mr Wang then negotiated terms for a written agreement", that is inconsistent with the WeChat messages. For at 12.31pm Ms Liu wrote "Peng, please see the revised document", and her language of "revised" coupled with the gap in the evidence adduced by Mr Sha between 2 and 6 January leads me to infer that an earlier draft contract had been provided by Ms Liu to Mr Wang. Contrary to Mr Sha's submission, this is not a case of an informal presently binding agreement to be formally documented in the future (ie the first category mentioned in Masters v Cameron (1954) 91 CLR 353 at 360; [1954] HCA 72), but rather a case where the parties progressed their written drafts of a straightforward contract simultaneously with negotiating its essential terms including amount and term.
Hence the force of Ms Liu's submission that no contract could have been formed prior to 5.44pm on 6 January, when for the first time a draft containing cl 7.5 was provided, and her further submission that in the absence of any evidence of communication of acceptance to a loan and guarantee including cl 7.5, no contract could have been formed.

No communication of Mr Sha's acceptance?

Let it be accepted that no contract was formed prior to 5.44pm on 6 January 2019. I think, on the evidence, that that is the better view, in light of the absence of evidence as to the conversations leading up to the inclusion of a draft contract containing cl 7.5. But it does not follow from the absence of any document thereafter signed by Mr Sha that no contract came into existence. Although Mr Sha directed little attention to acceptance by conduct, Ms Liu engaged with this possibility directly in her submissions in chief. It was appropriate that she do so, in light of the crediting of her company's account with $992,610.44 on around 7 January. As Ms Liu appreciated, this was a case where the acceptance by conduct of the offer constituted by her provision of an executed contract was probably the most obvious way in which a contract may have been formed.
Just because the parties' document contemplated execution by both sides, it does not follow that if Mr Sha caused funds to be provided to the nominated account after Ms Liu had executed the document on behalf of her company and herself, but without Mr Sha having signed it, there was no contract.
As Mahoney JA observed in Air Great Lakes Pty Ltd v K S Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309 at 326 and as McLelland J reiterated in Baulkham Hills Private Hospital Pty Ltd v G R Securities Pty Ltd (1986) 40 NSWLR 622 at 627, it is useful to distinguish the question whether the parties have arrived at a consensus from the question whether the consensus at which the parties have arrived should constitute a binding contract. The latter may be affected by words or conduct bearing upon the circumstances in which the parties will become bound.
In the present case, the negotiations seem exclusively to have been conducted in Chinese, although the contractual document was in English and contained a clause giving exclusive jurisdiction to the courts of New South Wales. Mr Wang's English seems to have been much better than Mr Sha's. I see no reason to doubt that this was a case where Mr Sha left it to Mr Wang to settle the form of the written contract, and that this was achieved and communicated to Ms Liu when, after cl 7.5 had been added, Mr Wang confirmed "No further enquiry" in response to Ms Liu's request "Peng, please let me know if you don't have any enquiry about the Loan Agreement. I'll send a signed copy to you". That Mr Sha left it to Mr Wang to communicate with Ms Liu on his behalf is consistent with the unchallenged evidence of both men reproduced above, and with the practicalities of how to reach agreement as to the terms of an English language contract between native Chinese speakers. But as Mahoney JA and McLelland J indicated, agreement on the terms is distinct from agreement that the parties are bound by those terms.
It is open for parties engaged in contractual negotiations to specify that a contract will only come into existence if a particular process is followed. As Owen J, Roper CJ in Eq and Herron J said in Gilbert J McCaul (Aust) Pty Ltd v Pitt Club Ltd (1957) 59 SR (NSW) 122 at 123: "[The] offer prescribed the time and manner for acceptance. Only by performing the conditions prescribed could it be accepted ..."
Express stipulation to that effect is not uncommon. The option considered in Hagerty v Hills Central Pty Ltd [2018] NSWCA 200; 19 BPR 38,853 at [32], which provided that the irrevocable offer might be "accepted strictly in accordance with the provision of this Deed" and would otherwise lapse, is an example, and reflects one aspect of why it is said that generally the effectual exercise of an option requires strict adherence to the method prescribed in the instrument creating it: Tonitto v Bassal (1992) 28 NSWLR 564 at 574. The same result may also be achieved through business custom. Thus, a contract for the sale of real property ordinarily only comes into existence upon exchange: exchange is "the crucial and vital fact which brings the contract into existence": Eccles v Bryant and Pollock [1948] Ch 93 at 99; Allen v Carbone (1975) 132 CLR 528 at 532-533; [1975] HCA 14; G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 at 634.
But there is nothing in the words or conduct in December and January 2019 to the effect that the parties are to be understood as insisting that there would be no contract until and unless Mr Sha sent a counterpart signed by him to Ms Liu. To the contrary, the occasion for the transaction was that A & T Education Holdings was known to be in urgent need of funds. Clause 4.2 provided that "The Loan will be drawn down in a single sum as soon as practicable after this agreement has been signed". Ms Liu had already provided details of the bank account into which the funds were to be deposited. In those circumstances, there is no reason to conclude that the parties insisted upon an exchange of signed agreements, as opposed to communication of acceptance by performance. Any such conclusion would be inconsistent with the urgent need for funds.
It must also be borne in mind that it is open to an offeror to dispense with the notification of acceptance entirely. Bowen LJ made this clear in Carlill v Carbolic Smoke Ball Company [1893] 1 QB 256 at 269-270: "One cannot doubt that, as an ordinary rule of law, an acceptance of an offer made ought to be notified to the person who makes the offer, in order that the two minds may come together. … But there is this clear gloss to be made upon that doctrine, that as notification of acceptance is required for the benefit of the person who makes the offer, the person who makes the offer may dispense with notice to himself if he thinks it desirable to do so, and I suppose there can be no doubt that where a person in an offer made by him to another person, expressly or impliedly intimates a particular mode of acceptance as sufficient to make the bargain binding, it is only necessary for the other person to whom such offer is made to follow the indicated method of acceptance; and if the person making the offer, expressly or impliedly intimates in his offer that it will be sufficient to act on the proposal without communicating acceptance of it to himself, performance of the condition is a sufficient acceptance without notification."
Bowen LJ gave an example which is apposite: "If I advertise to the world that my dog is lost, and that anybody who brings the dog to a particular place will be paid some money, are all the police or other persons whose business it is to find lost dogs to be expected to sit down and write me a note saying that they have accepted my proposal? Why, of course, they at once look after the dog, and as soon as they find the dog they have performed the condition. The essence of the transaction is that the dog should be found, and it is not necessary under such circumstances, as it seems to me, that in order to make the contract binding there should be any notification of acceptance. It follows from the nature of the thing that the performance of the condition is sufficient acceptance without the notification of it, and a person who makes an offer in an advertisement of that kind makes an offer which must be read by the light of that common sense reflection. He does, therefore, in his offer impliedly indicate that he does not require notification of the acceptance of the offer."
So too here. Here Ms Liu had already provided the bank account details, and had stressed that the funds were needed urgently (writing of the outstanding rent, Ms Liu had said, "[W]e need to pay within this week. Otherwise we will lose the lease"). The contract itself provided that the loan was to be drawn down in full as soon as practicable after it was executed. The "essence of the transaction" was the provision of $1,000,000 by way of loan to the account nominated by Ms Liu.
True it is that Mr Sha and Ms Liu contemplated the execution of a written document, unlike the advertisement for a lost dog in Bowen LJ's example. That did not prevent the Full Court of the Supreme Court of Tasmania from relying on the reasoning in Carlill v Carbolic Smoke Ball Company to sustain the conclusion that a contract had been formed notwithstanding the failure to execute a written agreement: Crow v Municipality of Clarence [1983] Tas R 56 at 72. But I shall also bear steadily in mind other appellate decisions to the effect that one would expect very clear language or conduct from which to infer, in the case of a bilateral contract such as the present, that communication of acceptance had been dispensed with: Latec Finance Pty Ltd v Knight [1969] 2 NSWR 79 at 81; Bombardier Inc v Avwest Aircraft Pty Ltd [2020] WASCA 2 at [68]. A similar point was made in Pavlovic v Universal Music Australia Pty Ltd (2015) 90 NSWLR 605; [2015] NSWCA 313 at [18] and [79], where the parties had from the start intended their agreement to be embodied in a deed executed by each of them, although there Bathurst CJ also observed that the nature and ambit of the dispute between the parties provided powerful reasons to conclude that any accord that was reached be recorded in a formal document.
Nonetheless, it is clear that acceptance by conduct is capable of applying to bilateral contracts being negotiated by the exchange of drafts between the parties. This was explained by Lord Blackburn in Brogden v Metropolitan Railway Co (1877) 2 App Cas 666 at 693: "When they had come so near as I have said, still it remained to execute formal agreements, and the parties evidently contemplated that they were to exchange agreements, so that each side should be perfectly safe and secure, knowing that the other side was bound. But, although that was what each party contemplated, still I agree (I think the Lord Chief Justice Cockburn states it clearly enough), 'that if a draft having been prepared and agreed upon as the basis of a deed or contract to be executed between two parties, the parties, without waiting for the execution of the more formal instrument, proceed to act upon the draft, and treat it as binding upon them, both parties will be bound by it. But it must be clear that the parties have both waived the execution of the formal instrument and have agreed expressly, or as shewn by their conduct, to act on the informal one.'"
On the facts of the present case, was it really necessary for Mr Sha to return an executed copy of the agreement in order for a contract to be formed, after the (almost) $1,000,000 was transferred into the account nominated by Ms Liu? To my mind the position is straightforward. No intention should be imputed to Ms Liu to treat acceptance of a signed counterpart of the agreement as indispensable to the formation of contractual relations. To the contrary, this is a plain case where there was acceptance by conduct. What else could the transfer of funds refer to if not acceptance to be bound by the terms of the document executed by Ms Liu? One has only to ask, by reference to what McHugh JA described as the "ultimate issue" in Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 at 535, whether "a reasonable bystander would regard the conduct of the offeree, including his silence, as signalling to the offeror that his offer has been accepted". The same point was made in in Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153; [2001] NSWCA 61 at [162], in Secure Parking Pty Ltd v Woollahra Municipal Council [2016] NSWCA 154 at [48], [54] and [56], and no doubt in other decisions binding upon me. The transaction was straightforward, and short term, the parties trusted each other, and the need for the funds was pressing. This is far removed from the cases where courts have declined to impute an intention that the parties were bound (see for example, R T & Y E Falls Investments Pty Ltd v State of New South Wales [2001] NSWSC 1027 at [53]). I am conscious that in a case such as the present it has been said that the conduct must "indicate unambiguously" or be such as "necessarily to lead to the inference" that the contract had been accepted: see Laidlaw v Hillier Hewitt Elsley Pty Ltd [2009] NSWCA 44 at [5]-[9], a view endorsed in Plankton Australia Pty Ltd v Rainstorm Dust Control Pty Ltd [2018] FCAFC 205 at [179]. It is unnecessary to address whether any difference is real or merely semantic, because as I have endeavoured to explain, the transfer of funds could relate only to the loan agreement executed by Ms Liu and sent by her to Mr Wang shortly beforehand.
In short, looking at the negotiations culminating in the loan agreement which included cl 7.5, the WeChat expression of agreement, the provision by Ms Liu of the loan agreement executed by her, and the transfer of almost $1,000,000 into the nominated account, this is a plain case where Mr Sha is to be taken to have accepted the offer propounded by Ms Liu when she sent the executed copy of the loan agreement to Mr Wang.
Mr Sha also relied on the post-contractual conduct of Ms Liu. He said that the lengthy WeChat exchange reproduced above contained a series of admissions by Ms Liu that she had to repay the amount lent.
Of course, "post-contractual" conduct is admissible and may bear upon whether a contract has been entered into. The circularity of "post-contractual" was noted by Basten JA in Darzi Group Pty Ltd v Nolde Pty Ltd (2019) 100 NSWLR 394; [2019] NSWCA 210 at [50]; the issue is better described as the reliance upon subsequent conduct to determine whether, at an earlier point of time, the parties are to be taken to have entered into a binding agreement. The admissibility of such evidence is uncontroversial (the authorities are collected in GC NSW Pty Ltd v Galati [2020] NSWCA 326 at [92] and Bundanoon Sandstone Pty Ltd v Cenric Group Pty Ltd; TWT Property Group Pty Ltd v Cenric Group Pty Ltd [2019] NSWCA 87; 373 ALR 591 at [131]). And it is true that Ms Liu repeatedly confirmed in January 2020 that there was an obligation to repay the funds advanced. But I do not agree that the communications have the force attributed to them by Mr Sha. First, the statements by Ms Liu acknowledging an obligation to repay are arguably apt as a matter of ordinary (albeit translated) English to refer to the obligation of the borrowing company to repay an amount lent, rather than Ms Liu's guarantee of her company's obligations, although perhaps this may be reading too much into an informal exchange. Secondly, on any view of the matter, there was an obligation to repay. If as Ms Liu contends there was no contract, then even so either or both of A & T Education Holdings or SSBI must have been subject to a quasi-contractual obligation to repay the funds credited to the account. Both A & T Education Holdings and SSBI were wholly owned, directly or indirectly, by Ms Liu, and it was not contended that the funds were provided by way of gift. They had to be repaid even if there were no contract, and thus Ms Liu's repeated acknowledgement that they had to be repaid does not bear upon whether or not there was a contract. (That reasoning does not turn on whether the quasi-contractual obligation fell upon the nominated borrower A & T Education Holdings or the recipient of most of the funds SSBI, or both.)
So far I have followed the parties' submissions and proceeded in accordance with conventional notions of offer and acceptance. There is a measure of artificiality in taking that course. Courts have referred to this for decades. As was said in Murdoch v Mudgee Dolomite & Lime Pty Ltd (in liq) [2022] NSWCA 12 at [166]: "[L]egal analysis as to the formation of contract need not be constricted to mechanical notions of offer and acceptance: Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424; [2001] FCA 1833 at [369]. All this reflects what Lord Wilberforce had earlier observed of the difficulties caused by English law having committed itself to a 'rather technical and schematic doctrine of contract' which caused 'many situations of daily life' only to 'fit uneasily into the marked slots of offer, acceptance and consideration': New Zealand Shipping Co Ltd v A M Satterthwaite & Co Ltd [1975] AC 154 at 167."
The passage from Branir cited above, and mentioned by Ms Liu in her submissions reproduced above, included Allsop J's statement that: "[A] number of authorities discuss the need not to constrict one's thinking in the formation of contract to mechanical notions of offer and acceptance. Contracts often, and perhaps generally do, arise in that way. They can also arise when business people speak and act and order their affairs in a way without necessarily stopping for the formalities of dotting i's and crossing t's or where they think they have done so. Here, the i's were not dotted and the t's were not crossed because of Mr Graham's conduct. Sometimes this failure occurs because, having discussed the commercial essentials and having put in place necessary structural matters, the parties go about their commercial business on the clear basis of some manifested mutual assent, without ensuring the exhaustive completeness of documentation. In such circumstances, even in the absence of clear offer and acceptance, and even without being able (as one can here) to identify precisely when a contract arose, if it can be stated with confidence that by a certain point the parties mutually assented to a sufficiently clear regime which must, in the circumstances, have been intended to be binding, the court will recognise the existence of a contract. Sometimes this is said to be a process of inference or implication. For my part, I would see it as the inferring of a real intention expressed through, or to be found in, a body of conduct, including, sometimes, communications, even if it be the case that the parties did not consciously advert to, or discuss, some aspect of the relationship and say: 'and we hereby agree to be bound' in this or that respect. The essential question in such cases is whether the parties' conduct, including what was said and not said and including the evident commercial aims and expectations of the parties, reveals an understanding or agreement or, as sometimes expressed, a manifestation of mutual assent, which bespeaks an intention to be legally bound to the essential elements of a contract."
Although the tenor of that passage is that contracts not uncommonly arise in the absence of a formally accepted offer, other decisions have stated that this is rarer (see P'Auer AG v Polybuild Technologies International Pty Ltd [2015] VSCA 42 at [10], which had been reiterated in a series of other mostly Victorian decisions, to which may be added what was said in Blackpool and Fylde Aero Club Ltd v Blackpool Borough Council [1990] 1 WLR 1195 at 1202; [1990] 3 All ER 25 at 31). Whether the phenomenon is common or rare is an empirical question of fact, rather than a question of law. I suspect that the difference of opinion may reflect whether attention is being given merely to bespoke contracts which are more likely to result in litigation in superior courts, as opposed to the vastly greater number of humdrum contracts which are entered into in day to day commerce.
McHugh JA observed in Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 at 11,117, that commercial discussions are often too unrefined to fit easily into the slots of "offer", "acceptance", "consideration" and "intention to create a legal relationship" which are the benchmarks of the contract of classical theory. This is not to deprecate the efficacy of a traditional analysis based on offer and acceptance, still less to contend for its jettisoning. The communicated acceptance of an offer is a very clear means by which a contract is formed. Probably none could be clearer. But the presently relevant proposition is that the absence of a communicated verbal acceptance does not entail the absence of a contract. The position is no different from abandonment: courts may infer from their conduct that the parties have agreed to discharge a contract: see Fitzgerald v Masters (1956) 95 CLR 420 at 432; [1956] HCA 53, Sze Tu v Lowe (2014) 89 NSWLR 317; [2014] NSWCA 462 at [303]-[306] and Técnicas Reunidas SA v Andrew [2018] NSWCA 192 at [51]-[52], to which reference is made in J D Heydon, Heydon on Contract (Lawbook Co 2019), p 40. Just as the conclusion that the parties have agreed to bring an existing contract to an end may be inferred from conduct, so too may the conclusion that the parties have agreed to bring into existence a new contract where formerly there was none.
If one steps back, and sees the evident agreement on the terms of the loan and guarantee, the execution of the document by Ms Liu, and the subsequent transfer of substantially the entirety of the $1,000,000 which was promised, the overwhelming conclusion is that the parties treated themselves as bound by the terms of the written document. Indeed, to paraphrase what was said in In re Baden's Trusts (No 2) [1973] Ch 9 at 20 of the submissions made by a very capable advocate and future Chancery judge Mr Vinelott QC, only Mr Katekar's persuasiveness has prevented me from saying that the contention is almost unarguable.
I am conscious that Mr Katekar observed, correctly, that his point about the loan funds not having been shown to have come from Mr Sha, applied to both of his points. But this is much more directly related to his second submission, based on the absence of consideration, and I shall deal with it immediately.

Absence of consideration moving from Mr Sha?

I turn to Ms Liu's fallback submission that Mr Sha cannot enforce the guarantee because it has not been shown that consideration moved from him. Mr Sha said, strenuously, that this was wrong in law, and that all that was necessary was to show that consideration had passed. That is best seen from the following exchange: "ADAMS: … And when one considers the evidence in total it is clear that there was consideration for the guarantee that was offered. HIS HONOUR: I'm going to interrupt because I understand Mr Katekar's point to be a much narrower one. And that is he says you lose unless you can show that consideration came from Mr Sha. And I think my first question is-- ADAMS: We reject that. HIS HONOUR: You reject that as a proposition of law; is that right? ADAMS: Correct, that's correct. HIS HONOUR: Do you have a factual fallback just in case it's correct as a proposition of law? ADAMS: We say that as a proposition of law one looks to whether or not the funds were provided. They were provided and that's established and we rely on Russo for that. And in any event the funds came from the plaintiff's wife's account. And the consideration, if nothing else, was that he procured the transfer of those funds to the benefit of the person providing the guarantee. So he has provided consideration on any analysis by reason of the fact that he has procured the transfer of those funds from his wife's account. … HIS HONOUR: … If it's the case that you tell me that it's not necessary for consideration to move from Mr Sha then I want to make sure I understand why you say that is so. ADAMS: Well we say consideration has passed. HIS HONOUR: And I keep on interrupting you to say that the proposition you've got to deal with it turns upon the source of the consideration but not merely the fact that it has passed. ADAMS: Well we rely on Russo to say that the source does not invalidate the existence of consideration."
Counsel's reference was to Russo v Buck [2006] SASC 380. It is true that passages of that decision contain statements (at [119], [120], [122] and [124]) that the lender in that litigation was entitled to claim repayment even if the moneys advanced came from another source. But there is no suggestion in Doyle CJ's reasons that any point was made directed to the requirement that a plaintiff suing on a simple contract must show consideration moving from the promisee. Rather, the borrower appears to have submitted, bluntly, that because the lender had "used the funds of another client without proper authority from that client", he was not obliged to repay. That was the context in which Doyle CJ made the statements relied upon. At [23], the Chief Justice described the issue thus: "the legal consequence of the fact that PFM received the funds from the Bucks after it made the first advance to Mr Russo"; it seems to follow that this was a case where the funds did in fact come from the promisee. There is not a single mention in a long judgment of the doctrine of consideration. A later judgment on costs records that "Mr Russo's Statement of Claim raised a confusingly varied series of claims, a number of which are plainly misconceived": Russo v Buck (No 2) [2007] SASC 157 at [25].
The mode of submission employed by Mr Sha is sadly familiar. All too commonly, an advocate takes words from another judgment which, if they were applicable to the facts at hand, would help his or her submission. This misunderstands the role of reasons for judgment, and the way precedent works. Judgments are always to be read in context, and what matters is the proposition or principle which is endorsed or rejected, rather than the particular way in which the reasons are expressed.
Sir George Jessel MR long ago explained this in Hood v Newby (1881) 21 Ch D 605, a characteristically ex tempore judgment, at 608-9: "You must always look to what was being discussed by the Judges as well as to the words used. The words used are undoubtedly sufficient to cover the doctrine contended for on the part of the Respondent, but when you see what was before them and what they had to consider it was this, whether the act of bankruptcy must be available at the date of the contract or at the date of the order of adjudication, and in deciding the latter they used the words 'available for that particular adjudication', meaning available at that time, which was the only point they had to consider. They did not consider the other point, or intend to decide it, and indeed if you look at mere dicta there is a dictum in Ex parte Hankin the other way. But I do not rely upon it for the same reason; that was not the point then before the Court of Appeal. It appears to me that these decisions do not cover this point at all …" (reference omitted)
The Master of the Rolls was explaining that even if the words of a judgment literally apply to the facts of the present case, it does not follow that they have any precedential value or are even of any assistance. A judgment is not authority for a point not argued in it, even if it is expressed in a way that purports to address the point.
The judgment in Russo is not authority for any dilution of the rule that consideration must move from the promisee, and not for a moment do I consider that Doyle CJ was purporting to depart from such a fundamental principle of the law of contract.
I regard this Court as bound to reject Mr Sha's contention that it suffices to show that consideration moved. The position in the United States is different. As Windeyer J observed in Coulls v Bagot's Executor and Trustee Co Ltd (1967) 119 CLR 460 at 495; [1967] HCA 3, "[f]or us [meaning, as opposed to the United States] the rule prevails that a plaintiff who sues on a promise must shew a consideration for it provided by him". His Honour explained why that was so, and why Lord Denning's various statements to the contrary could not be accepted, and it is fair to say that the history of the development of the rule - which has fended off determined attempts by very able judges notably Lord Mansfield to abolish it - is not without interest or complexity. But the existence of the rule today, subject to various exceptions and subject always to statute, is clear. Windeyer J concluded at 499: "For these reasons I must respectfully, and I may add somewhat regretfully, say that I cannot from an excursion into history reach the conclusion that Lord Denning has. Whether we like them or not, the rules relating to consideration seem to me a stubborn part of our law. They cannot be displaced by courts by head-on collision. Fortior et potentior est dispositio legis quam hominis."
To similar effect, in Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 at 117; [1988] HCA 44 Mason CJ and Wilson J referred to developments in the United States thus: "There, the problems arising from the traditional rules have been avoided by not requiring that consideration move from the promisee to the promisor". Their point was to contrast the position in the United States with that which prevailed in this country.
The modern formulation of the rule is sufficiently traced to Viscount Haldane LC's formulation in Dunlop Pneumatic Tyre Company Ltd v Selfridge and Company Ltd [1915] AC 847 at 853: "[I]f a person with whom a contract not under seal has been made is to be able to enforce it consideration must have been given by him to the promisor or to some other person at the promisor's request."
The same rule (and its non-applicability to bills of exchange) may be seen in the reasons of Dixon J in Wragge v Sims Cooper & Company (Australia) Pty Ltd (1933) 50 CLR 483 at 493; [1933] HCA 59.
In Pico Holdings Inc v Wave Vistas Pty Ltd [2005] HCA 13; 79 ALJR 825 at [66] a unanimous High Court rejected a submission advanced by a company which had provided security for a loan in the following terms: "The first respondent advanced one other consideration argument - that the Lender conferred no benefit on the first respondent, and that the first respondent 'was not a party to any consideration.' This argument is fallacious. Consideration must move from the promisee (the Lender); it need not move to the promisor (the first respondent)."
The contention that consideration need not be shown to move from the promisee was crisply rejected by Brereton J in Moustach Pty Limited v Eddie Takchi [2015] NSWSC 2079 at [37].
The proposition that the enforceability of a simple contract requires consideration to move from the promisee is scarcely obscure. It is described unambiguously in N Seddon and R Bigwood, Cheshire & Fifoot: Law of Contract (11th Aust ed, LexisNexis, 2017), p 182 and J W Carter, Contract Law in Australia (7th ed, LexisNexis, 2018), [6-19]. None of the decisions mentioned above was even addressed by Mr Sha. I would commit serious error to accept Mr Sha's primary submission.
Mr Sha had a fallback submission, to the effect that Mr Sha procured the provision of the funds. Although the evidence is slight, it is unchallenged. The documents establish that funds held in a bank account in Ms Song's name were transferred to the credit of A & T Education Holdings, on account of Mr Sha. Mr Wang's unchallenged evidence is that Mr Wang caused this to occur. It may be inferred that Mr Wang had authority from the bank to cause funds to be transferred from an account in Mr Sha's wife's name, and that he did that with the authorisation of Mr Sha. It is not unusual for husbands and wives to hold separate bank accounts but nonetheless to regard them as assets of the marriage, available to be used by either party. Nor is it unusual for a husband who is engaged in business to have assets held in the name of his wife. No attempt was made to cross-examine Mr Sha or Mr Wang as to any absence of authority to do what Mr Wang said he caused to occur.
Although the evidence is slight, the appropriate inference is that Mr Sha authorised Mr Wang to cause money to be transferred from Mr Sha's wife's account, and in doing so, provided consideration in support of the loan agreement. The same conclusion confirms that the transfer amounted to conduct attributable to Mr Sha accepting Ms Liu's offer.
In any event, by letter of demand dated 16 January 2020, solicitors expressly stating that they acted for Mr Sha stated that the monies were provided to A & T Education Holdings on instructions from our client. There is no reason to doubt that Mr Sha's solicitors had actual authority to send that demand. It is difficult to avoid the conclusion that Mr Sha thereby ratified what Mr Wang had done the previous year, and as was said in Celthene Pty Ltd v W K J Hauliers Pty Ltd [1981] 1 NSWLR 606 at 615, even if there is a requirement that ratification take place within a reasonable time, in circumstances such as this, that requirement is satisfied. The same reasoning was applied in Commissioner of Taxation v Croft [2017] 2 Qd R 382; [2016] QSC 190 at [64]-[65].

Orders

Both of the defences pressed by Ms Liu having failed, there should be judgment for Mr Sha against Ms Liu.
Mr Sha did not in fact lend $1,000,000 to Ms Liu; instead he caused to be credited $992,610.44 into the nominated account. Nothing in the loan agreement permitted him to charge Ms Liu international exchange fees or otherwise to take the benefit of the some $7,400 deficiency.
Mr Sha is entitled to pre-judgment interest. His statement of claim seeks interest at the "basic rate" contained in the agreement of 5% per annum. That rate seems to be uncontroversial, and accords with the authorities collected in French v Bremner; Bremner v French [2020] NSWCA 339 at [69]. It is to be applied to the amount actually lent. The statement of claim also seeks interest at 5% per annum compounded monthly from 16 February 2020. No basis for this is articulated in the pleading, nor can I see a basis for it in the contract.
The interest component is $992,610.44 x 0.05 x 3 for the 3 years from 9 January 2019 until 8 January 2022, and $992,610.44 x 0.05 x (23 + 28 + 24) / 365 for the period from 9 January until today. That amounts to $148,891.57 + $10,198.05 = $159,089.62.
I turn to costs. The usual rule is that Mr Sha should obtain his costs. However, this litigation should have concluded in a day. The evidence was completed, and Mr Katekar (whom I asked to address first) completed his closing address very early in the afternoon of the first day. Counsel for Mr Sha sought and obtained a short adjournment. He thereafter sought an overnight adjournment, which I also granted, although making it plain that he was at risk of a special costs order flagged by Ms Liu. The submissions made by Mr Sha on the second day made necessary by the adjournment were largely unsuccessful. I have concluded that Mr Sha was wrong in what was available on the pleadings, wrong in his characterisation of offer and acceptance, and wrong to submit that consideration need not move from the promisee, although he was correct to abandon a submission that the Loan Agreement was in fact a deed. I do not think that Ms Liu should pay Mr Sha's costs insofar as they were inflated by an unnecessary adjournment to make submissions the large majority of which were ill-founded, or to abandon a hopeless submission.
This is a case which warrants a departure from the ordinary rule that costs follow the event. Ms Liu should pay Mr Sha's costs of the proceedings against her, save that the costs of the trial should be assessed as if the hearing had completed in a single day. I have considered whether Mr Sha should be ordered to pay Ms Liu's costs of the second day, but concluded that in circumstances where the abbreviation of the trial was attributable to her late decision not to go into evidence and to abandon most of her pleaded case, it would not be right to do so.
I make the following orders: 1. Judgment for the plaintiff Mr Yunlong Sha against the defendant Ms Hua Liu in the amount of $992,610.44 plus interest of $159,089.62. 2. Ms Liu to pay Mr Sha's costs of the proceeding as agreed or assessed, but on the basis that the costs of the trial should be calculated as if the hearing had completed in a single day.

Amendments 08 February 2023 - [76] and [103]: changed "Mr Liu" to "Ms Liu" 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: 08 February 2023

(2019) 100 NSWLR 394

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