Shao v Crown Global Capital Pty Ltd

Shao v Crown Global Capital Pty Ltd - [2024] NSWCA 302 - NSWCA 2024 case summary — Zoe

[4]

The Facility Agreement

The Facility Agreement is dated 18 February 2015 and was signed by Crown on 23 February 2015 ([17]). On 6 March 2015, Ms Shao arranged for $1 million of her own money to be paid to Crown by two bank cheques drawn from two of her accounts. The bank cheques were provided by Mr Peng to Crown ([18]). It was common ground that Crown was unaware of the provenance of the funds.
The letter from Crown to Ms Shao and Mr Peng which comprises the Facility Agreement commences with the following words: "We confirm that Qian Peng and Yakun Shao (Lender) has agreed to make available this facility on the following terms and conditions."
The Facility Agreement relevantly provides: "3. Limit The maximum principal amount of cash advances to be made available under this facility is AUD1,000,000 or such other amount as agreed between the parties (Limit). … 7. Notes (a) The Borrower must issue Notes to the Lender upon settlement of each cash advance made available under this facility pursuant to a Drawdown Notice. The Borrower must provide to the Lender a certificate substantially in the form of Annexure B upon the issue of the Notes. (b) The Borrower must establish and maintain a register of Note holders. In the register of note holders there must be entered the names and addresses of the Note holders whose Notes are carried on that register of Note holders, the number of the Notes held by each Note holder, the date of issue, transfer of such Notes and (as regards Notes no longer outstanding) particulars of redemption by the Borrower, and such other particulars as the Borrower thinks fit. 8. Repayment Drawings made available under this facility are repayable by redemption of Notes at any time in accordance with their terms and otherwise on the Expiry Date."
"Notes" are defined to mean "notes issued, or to be issued, by the Borrower in accordance with the terms set out in Annexure B". "Expiry Date" is defined to mean the date set out in the terms and conditions of the Notes in Annexure B to the Facility Agreement, which contained the form of the Note Certificate. Annexure B initially defined the Expiry Date as 26 February 2016 but that was amended to 5 March 2016 ([15]).
Annexure B (in the terms and conditions of the Note Certificate) also included the drawdown amount ($1 million); the interest rate per annum (12%); and the dates for interest payment (quarterly).
The Note Certificate also contained the following terms: "3. Redemption (a) The Borrower may at any time by issuing a Redemption Notice to the Lender redeem any Notes, and on the Expiry Date must redeem all Notes, which have not previously been redeemed for cash at their Face Value and repay the Face Value and all interest accrued but unpaid on the Note to the date of payment. (b) If the Borrower redeems any Notes before the Expiry Date, the Borrower must issue to the Lender a new Note Certificate in respect of the remaining Notes held by the Lender. 4. Payment of money All money payable by the Borrower to the Lender under the Notes must be paid by cheque drawn by the Borrower and either delivered personally to the Lender on the due date for payment or deposited into the Lender's bank account as notified by the Lender to the Borrower from time to time."
The Facility Agreement defines "Redemption Notice" as "a notice substantially in the form of Annexure C duly completed and signed by or on behalf of the Borrower or in any other form (including verbal) as the Lender in its absolute discretion accepts".
Annexure A to the Facility Agreement contained the form of a drawdown notice. Annexure B contained the form of the Note Certificate and Annexure C, a possible form of Redemption Notice.
On 16 March 2015, Prisca Edwards, an employee of Crown, spoke to Mr Peng to ask him into which account he wished the interest payments to be deposited. He nominated an account which he held jointly with Ms Shao (the joint account) ([19]). On 31 March 2015, Crown made the first interest payment into that account. It continued to do so for the next two interest payments.
On 23 June 2015, Ms Shao introduced herself to Ms Edwards and enquired about a development at Ashfield with which Crown was associated (Crown Ashfield) ([22]). On 2 July 2015, Ms Shao met with Ms Edwards to arrange a possible investment in Crown Ashfield. In WeChat messages between Ms Edwards and Ms Shao on 6 July 2015, Ms Shao told Ms Edwards that she and Mr Peng were not speaking and he was ignoring her.

[7]

The 2016 proceedings

On that day, 3 March 2016, Ms Shao again commenced proceedings in the Supreme Court and sought freezing orders against Mr Peng (the 2016 proceedings). Black J made freezing orders against Mr Peng on that date, but by that time Mr Peng had already transferred the money to accounts in China ([34]).
The defendants to the 2016 proceedings were, in order, Mr Peng, the Australia and New Zealand Banking Group Limited, the Commonwealth Bank of Australia, Commonwealth Securities Limited and Crown (the same two entities who are the respondents in the appeal). On 10 March 2016, Ms Shao sought leave to discontinue the proceedings as against Crown, which had not yet been served. Black J granted the leave sought.
On 18 March 2016, Ms Shao filed an amended summons in the 2016 proceedings seeking damages from Mr Peng in the amount of $1,158,740, for the $140,000 which remained outstanding following his misappropriation of $600,000 from her in August 2015 and for the proceeds of the Facility Agreement. On 24 March 2016, she filed a statement of claim in the 2016 proceedings. By that time, Mr Peng was the only defendant, leave to discontinue having been granted against every other defendant. The statement of claim contained the following allegations: "39. On 17 February 2016, without notifying Shao, Peng directed Crown to pay the proceeds of the expiring Facility into an ANZ bank account in Peng's name only ("Direction"). Particulars Email from Peng to Prisca Edwards sent on 17 February 2016 at 12.00pm. 40. Peng was not authorised by Shao to make the Direction. 41. On 25 February 2016, pursuant to the Direction, Crown paid the sum of $1,018,740 into the ANZ bank account specified by Peng. 42. The sum of $1,018,740 paid by Crown to Peng was beneficially owned by Shao." (Emphasis added to indicate the allegation which Crown contended in this Court was critical on the basis that it was consistent only with the propositions that the notes had been redeemed (implicitly following the service of valid Redemption Notice) and that the monies had been repaid by Crown.)
In an affidavit filed on 8 July 2016 in the 2016 proceedings, Ms Shao deposed that her assets included "[t]he sum of $1,000,000, being monies I invested with [Crown] on 6 March 2015 which were redeemed by [Mr Peng] without my authority on or around 25 February 2016" ([35]).
Mr Peng filed a cross-claim in the 2016 proceedings which raised property and money claims under the Family Law Act 1975 (Cth). Ms Shao expended money defending the cross-claim (which she claimed as damages in the Court below).
On 8 August 2016, Ms Shao and Mr Peng were divorced ([2]).
On 7 October 2016, written submissions were filed on behalf of Ms Shao in the 2016 proceedings which said, in part: "…when Mr Peng received from Crown $1 million plus interest, he held those funds on trust, if not for Ms Shao alone …, then at least on trust for himself and Ms Shao." ([35])
On 10 October 2016, the 2016 proceedings were heard by Sackar J. Mr Peng's solicitor withdrew before the substantive hearing began, with the result that Mr Peng neither defended Ms Shao's claims nor pressed his cross-claim. Sackar J made declarations and orders which included the following: "A declaration that the amount of AUD $1 million (Fund) which formed part of the sum of AUD $1,018,740 paid by [Crown] on 25 February 2016 to the first defendant's account with Australia and New Zealand Banking Group, account number [XXXXX] was received and held by the first defendant on trust for the plaintiff." ([36])

[9]

The proceedings in the Court below

On 18 February 2022, Ms Shao commenced the proceedings in the Court below against Crown. In addition to the principal sum and interest, she claimed $314,398.35 in legal costs and disbursements in relation to the 2016 proceedings and the bankruptcy proceedings ([5]).
The primary judge dismissed Ms Shao's summons with costs. His Honour found at [40]: "The relationship between Ms Shao and Mr Peng on the one hand and Crown on the other was that of creditor and debtor governed by the terms of the contract between them. The terms of the Facility Agreement, and clauses 3 and 4 of the Note Certificate in particular, set out how repayment of the debt was to be made for Crown to obtain a good discharge for it. They do not set out obligations that Crown owed in relation to a sum of money in respect of which Ms Shao and Mr Peng had any pre-existing rights. It was not a breach by Crown of the Facility Agreement for it to pay away its own money in any way it considered appropriate. However, the risk it ran in making a payment that was not in accordance with the Facility Agreement was that it would not receive a good discharge for the debt it owed to Mr Peng and Ms Shao."
The primary judge found that service of the Redemption Notice on Mr Peng alone (being Crown's email to Mr Peng on 17 February 2016) was valid, did not amount to a breach of the Note Certificate and was sufficient to constitute service on both lenders ([56], [68], [69]) because notice to one of the lenders, in this context, was sufficient.
However, his Honour found that notice of the account into which the monies were to be paid had to be given by both lenders (or one, if the one had authority, whether actual or ostensible, to act on behalf of the other) ([56]). Crown was not entitled to act on a nomination by Mr Peng of a different account to which the payment ought be made for the purposes of cl 4 of the Note Certificate ([56]). His Honour found that by at least 24 August 2015, Crown could not reasonably have regarded Mr Peng as having authority to act on behalf of Ms Shao (because it knew through Ms Edwards that they were not talking and were contemplating divorce). Accordingly, the primary judge found that Mr Peng had neither Ms Shao's actual nor ostensible authority to nominate his own account for the payment of monies for the purposes of cl 4 of the Note Certificate.
Further, the primary judge found that, while Crown was entitled to pay the proceeds of the Note Facility into the account nominated by Mr Peng (because it was Crown's own money that was being paid), this payment was insufficient to amount to good discharge of the debt owed by Crown to Mr Peng and Ms Shao jointly ([69]).
The primary judge explained the reason why the Redemption Notice could be given to Mr Peng alone but that Crown could not get a good discharge of the debt it owed to Ms Shao and Mr Peng by paying the proceeds into the account nominated by Mr Peng alone in the following passage at [56]: "In my opinion, the question is not to be resolved by asking whether 'Lender' means either or both Mr Peng and Ms Shao. It is apparent that 'Lender' is defined to mean both - it is defined as 'Qian Peng and Yakun Shao' (emphasis added). The question is how a specific right or obligation in relation to both of them jointly is to be discharged or exercised. That depends on the precise right or obligation. Where the relevant right or obligation is a right or obligation on the part of the Lender to give notice of an account, it seems to me the notice must be given by both of them. If it were otherwise, there is a risk that Crown would be given inconsistent directions. It should not be up to Crown to resolve which direction it should follow. There is no mechanism by which it could do so. Rather, it should be up to Mr Peng and Ms Shao to resolve what direction should be given. The resolution of that issue would depend on the rights and obligations between them. It follows that Mr Peng alone was not entitled to give an effective notice nominating a different account to which the payment was to be made. The position is different in the case of the form of the Redemption Notice and service of it. It is apparent from the definition of 'Redemption Notice' that the form of the notice is determined by Crown and the question is whether that form is accepted by the 'Lender'. Acceptance by one joint lender appears to be sufficient just as payment to one joint lender is sufficient to discharge the debt. For similar reasons, service of the Redemption Notice on one joint lender is sufficient."
In light of these findings, the question remained whether Ms Shao was entitled to sue Crown for her debt given her earlier suit against Mr Peng. The primary judge found that when Ms Shao learned that Mr Peng had applied the proceeds of the Note Facility to his own use, she had a choice between: 1. suing Crown for recovery of the proceeds on the ground that its payment to Mr Peng did not validly discharge the debt owed by Crown to her and Mr Peng jointly; or 2. accepting that the payment to Mr Peng validly discharged the debt owed by Crown to Mr Peng and Ms Shao and suing Mr Peng ([79]).
The primary judge found that by suing Mr Peng in the 2016 proceedings, Ms Shao had elected for option (2) above and had thereby ratified the otherwise unauthorised acts of Mr Peng. His Honour said at [78]: "In the present case, Ms Shao's claim against Mr Peng depended on acceptance of the proposition that she had rights in respect of the $1,018,740 that had been paid to Mr Peng. Ms Shao's rights to the money depended on her establishing that the money represented the repayment of a debt to which she was entitled. Consequently, by making the claim, obtaining judgment against Mr Peng and seeking to enforce that judgment, Ms Shao ratified those acts of Mr Peng that had that consequence."
The primary judge also addressed Ms Shao's claim for damages and quantified the amount of damages to which she would have been entitled had she succeeded in her claim, which did not arise in light of the finding made in [78].

[10]

The grounds of appeal

Ms Shao appeals on the following grounds (as set out in the Amended Notice of Appeal filed on 22 November 2024): "1. The primary judge erred in holding that the requirement to issue a 'Redemption Notice' to the 'Lender' pursuant to cl. 3(a) of the Note Certificate could be satisfied by issuing a Redemption Notice to one of two joint lenders alone, in circumstances where 'Lender' was defined in the Facility Agreement to mean both joint lenders (Judgment at [56]). 2. The primary judge erred in holding that an alternative form of Redemption Notice was capable of being accepted by one of two joint lenders alone, in circumstances where the Facility Agreement provided that acceptance of an alternative form of Redemption Notice was in the absolute discretion of the 'Lender', and 'Lender' was defined in the Facility Agreement to mean both joint lenders (Judgment at [561]). 3. The primary judge ought to have held that: (a) the Respondents breached the Facility Agreement by failing to issue a Redemption Notice to the Lender pursuant to cl. 3(a) of the Note Certificate; and (b) as a result of the Respondents' breach, the Appellant suffered damages in the amount of $1,298,098.78. 3A. The primary judge ought to have found that, had a Redemption Notice been issued to the Appellant (as well as Qian Peng), the proceeds of the Facility Agreement would not have been paid into Peng 's bank account. 4. The primary judge erred in holding that the Appellant ratified Qian Peng's conduct in: (a) directing the Respondents to pay the proceeds of the Facility Agreement (Proceeds) into his bank account; and (b) receiving the Proceeds in his bank account; by suing Peng for the Proceeds in 2016, in circumstances where the 2016 proceedings were brought on the premise that Peng did not have the Appellant's authority to act as he did (Judgment at [78]). 5. The primary judge erred in holding that, had the Appellant succeeded on her claim against the Respondents, she would only have been entitled to recover $113,567.04 of her costs of pursuing Peng to recover the Proceeds (Judgment at [88]). 6. The primary judge ought to have held that the Appellant was entitled to recover $289,075.26 of her costs of pursuing Peng to recover the Proceeds."
Grounds 1-3A can be conveniently addressed together as they concern the efficacy of the Redemption Notice; ground 4 concerns ratification; and grounds 5 and 6 concern damages and arise only if Ms Shao is successful on her other grounds.

[12]

The relationship between a debtor and joint creditors

At law, a payment to one joint creditor discharges a debt owed to them jointly: McIntyre v Gye (1994) 51 FCR 472 at 479. However, the parties can alter the legal position by contract: in other words, they can agree on a method by which the obligation to pay must be performed: Mizzi v Reliance Financial Services Pty Ltd [2007] NSWSC 37 at [84] (Brereton J). If the borrower does not comply with the agreed method when purporting to repay the debt, the borrower does not obtain good discharge of the debt and may expose itself to a claim for damages.
In McKenzie v Albany Finance Ltd [2004] WASCA 301, the appellant investors made interest-bearing deposits with the respondent financier which could be rolled over until the maturity date. It was held that the relationship between the parties in relation to a deposit of $64,000 was analogous to that of banker and customer and that therefore the deposit was repayable on demand for the whole of the term, at the expiry of which the whole of the principal and accrued interest would become due and payable. The respondent financier repaid part of the funds without demand and prior to the maturity date.
E M Heenan J said at [106]: "… Repayment of any or all of the deposit by the respondent, without demand being made or without interest being paid, would not be a payment made in conformity with the terms of the deposit. Unless accepted at the time such repayment was offered, or subsequently ratified, such a repayment would be in breach of the terms of the contract of deposit and could expose the respondent to a claim for damages, if the appellants were only able to reinvest the principal for the remainder of the term or terms at lower interest rates. Such a premature or part payment of principal could be made and accepted, but would still entitle the appellant to bring a claim for damages for loss of interest if reinvestment on comparable terms was not possible. Alternatively, if a premature repayment or partial repayment had been offered, the appellants would have been entitled to refuse to accept payment and to insist on the investment continuing until maturity and then to require full repayment plus interest on the maturity date. …"

[14]

Inconsistent positions taken in subsequent proceedings

A plaintiff is not entitled to take a position in proceedings which is inconsistent with its prior conduct in endorsing the validity of a transaction or taking the benefit of conduct which it subsequently seeks to disavow. As Scrutton LJ said in Verschures Creameries Limited v Hull and Netherlands Steamship Company Limited [1921] 2 KB 608 (Verschures) (a decision relied on by the primary judge at [77]) at 611-612: " … A plaintiff is not permitted to 'approbate and reprobate.' … A person cannot say at one time that a transaction is valid and thereby obtain some advantage, to which he could only be entitled on the footing that it is valid, and then turn round and say it is void for the purpose of securing some other advantage. That is to approbate and reprobate the transaction."
In Verschures, the plaintiff sued the recipients of a number of cases of margarine for goods sold and delivered. It then brought proceedings against the carriers alleging misdelivery, which were dismissed for the reasons given by Atkin LJ at 612: "The owners treated the goods as having rightly come to his hands; they sued him for the price of them, recovered judgment against him, and made him a bankrupt. Thereby they affirmed and ratified the act of their forwarding agents. Having done that, they cannot afterwards sue the agents as having acted in breach of their mandate. Their attempted reservation of rights against the agents was ineffective. They were renouncing by their act the rights they were attempting to reserve."
This principle is not limited to agency cases but applies generally and has been treated as synonymous with the equitable doctrine of election: Lissenden v C.A.V. Bosch Ltd [1940] AC 412 at 417 (Viscount Maugham). The test is an objective one and depends on the objective quality of the putative principal's actions and not on their subjective intentions: Lamshed v Lamshed (1963) 109 CLR 440 at 448; [1963] HCA 60.

[16]

The customers' mandate to the bank where the account is held jointly

In Ardern v Bank of New South Wales [1956] VLR 569 (Ardern), Mr Ardern, and Mr Brookes had a joint account with the defendant bank. The terms of the arrangement were that the bank would honour only cheques signed by both account holders. The bank honoured several cheques which had been signed by Mr Brookes but not by Mr Ardern, whose signature had been forged by Mr Brookes. Mr Ardern successfully sued the bank to recover the monies lost. Martin J held that the condition of the mandate, that the bank was only obliged to honour cheques signed by both account holders, "was obviously inserted for the benefit of each partner, to prevent any dishonest drawings of the other" (573). His Honour continued, at 573-574: "Accordingly, the contract was not merely one that defendant should receive and hold money on a joint account which is a joint contract, but also an agreement with each partner that it would not honour cheques unless in the form authorized which entails obligations to each of them severally. … … the undertaking of the bank not to honour cheques unless they were signed by both partners was a condition which inured for the benefit of each partner …"
In Vella v Permanent Mortgages Pty Ltd [2008] NSWSC 505 (Vella), the plaintiff's signature was forged on mortgages which were ultimately registered. The money from the three mortgages and a further amount were paid into an account held jointly by the plaintiff and Mr Caradonna, the fraudster. The plaintiff's signature was also forged on cheques signed by Mr Caradonna, in circumstances where the ANZ was obliged to pay only on cheques signed by both the plaintiff and Mr Caradonna. The plaintiff sued various parties including the mortgagee, the bank, Mr Caradonna and his trustee in bankruptcy. Young CJ in Eq held that the damages recoverable by the plaintiff should reflect only the plaintiff's proportional interest in the property and not the whole of the moneys wrongly paid out. There was no inconsistency in Vella because Vella sought to recover from all parties in the same proceedings (the fraudster's trustee in bankruptcy asserted no entitlement to the fund).
Mr Horowitz also relied on cases concerning the sale of goods and misdelivery. None of these authorities were put to the primary judge and none, in my view, have any material bearing on any of the grounds of appeal. Accordingly I do not propose to address them.

[17]

Grounds 1-3A: whether the Redemption Notice given by Crown was in accordance with its contract with Ms Shao and Mr Peng

Mr Horowitz submitted that Crown's obligation to issue a redemption notice was, like its obligation not to pay out the proceeds of the notes to any account other than one which had been nominated by both joint lenders, a "several obligation". He submitted that the trial judge's finding to the contrary was "inherently contradictory".
Although the opening words of the Facility Agreement indicate that "Lender" is a reference to Ms Shao and Mr Peng, the meaning of "Lender" throughout the agreement (whether it means, in any given context, either Ms Shao or Mr Peng or both of them) is, ultimately, a question of construction. The answer to this question depends on the language and purpose of the clause in which the word "Lender" is to be found.
I accept the submission put by Mr Lawrance SC, who appeared for Crown with Ms Ernst, that the purpose of the Redemption Notice is to communicate to the lenders Crown's irrevocable exercise of its unilateral right to repay early (the right to repay early being conditional on Crown having issued a valid Redemption Notice). The definition of Redemption Notice in the Facility Agreement (set out above) indicates that it can be given in any form, including verbal, "as the Lender in its absolute discretion accepts". A Redemption Notice has no protective purpose. For this reason, the primary judge was correct to conclude that "Lender", in this context, means either Ms Shao or Mr Peng (or both of them).
By contrast, the reference to "Lender" in cl 4 of the Note Certificate must mean both of them jointly to fulfil the purpose of protecting each of the lenders as well as Crown. It protects each of the lenders from the other nominating an account to which the other lender has sole access and it protects Crown by providing that it is entitled to receive one direction from both lenders (rather potentially inconsistent directions from each), as the primary judge explained at [56]. For this reason, the primary judge was correct to find that cl 4 of the Note Certificate requires the joint lenders to give a single direction to Crown nominating the account into which the proceeds are to be paid, but a Redemption Notice need not be served on both lenders.
Accordingly, grounds 1, 2 and 3 have not been made out.
The redemption notice was valid because it was given to Mr Peng who was one of the lenders. Accordingly ground 3A does not arise.

[21]

Whether Ms Shao's right to claim damages survives her ratification of Mr Peng's acts

As to (3), Mr Horowitz relied on Ardern to submit that because a debt can be discharged contrary to a mandate specifying how payment is to be made, one of two joint creditors is able to sue for damages as a result of the discharge in breach of the mandate although the debt has been discharged. He submitted that, by analogy, even if the debt owed by Crown to Ms Shao and Mr Peng was validly discharged, Ms Shao was still entitled to sue Crown for damages as a result of the discharge of the debt in breach of the terms of the Facility Agreement.
Mr Horowitz also sought to draw a distinction between Ms Shao's ratification of Mr Peng's acceptance of payment (which he accepted) and her ratification of his nomination of a bank account (which he rejected). He submitted that just as Mr Ardern, who ratified Mr Brookes' acceptance of payment when he sued the bank for damages, was not precluded from suing for damages for breaches of other obligations, Ms Shao's ratification of Mr Peng's acceptance of payment by Crown was not a bar to her damages claim against Crown. He submitted that her suit for Crown's "defective performance" of their payment obligation remains intact.
One of the difficulties with this argument is that it fails to take account of the difference between the present case and that of a customer who operates a cheque account and thereby gives a mandate to the bank to honour cheques presented to the bank. The bank's obligation to honour a cheque only when the conditions of the mandate have been fulfilled is conceptually different from the debtor/creditor relationship which otherwise exists between banker and customer. In the former case, a putative third party (the payee or endorsee of the cheque) is involved.
Another difficulty is that it fails to take account of the forensic inconsistency between Ms Shao's conduct in accepting the discharge for the purposes of the 2016 proceedings and denying the discharge in the proceedings in the Court below. In the Court below, Ms Shao's case was that Crown was not authorised to discharge the debt because it had not issued a valid redemption notice to her as well as Mr Peng or obtained a nominated account from her as well as Mr Peng and that it was, accordingly, liable to her for the whole of the debt as well as damages. As the primary judge found, these positions were entirely inconsistent, which meant that she ought not be permitted to maintain the proceedings. Since she had, by her earlier conduct, ratified the deficiencies in Mr Peng's authority to nominate the account, Crown had received good discharge of the debt from the time of her ratification. Thus, she had no claim for damages against Crown.

Parties

Applicant/Plaintiff:

Shao

Respondent/Defendant:

Crown Global Capital Pty Ltd

Legislation Cited (1)

Family Law Act 1975(Cth)

Cases Cited (13)

Solicitors: Yau & Wang Lawyers (Appellant) Mangioni Biggs + Co (Respondents) File Number(s): 2023/255891 Decision under appeal Court or tribunal: Supreme Court Jurisdiction: Equity - Commercial List Citation: Shao v Crown Global Capital Pty Limited [2023] NSWSC 820 Date of Decision: 14 July 2023 Before: Ball J File Number(s): 2022/48845

HEADNOTE [This headnote is not to be read as part of the judgment] This appeal arises out of a Facility Agreement entered into between Yakun Shao and her husband, Qian Peng (as lenders), and Crown Global Capital Pty Ltd (as borrower) in 2015 pursuant to which Ms Shao advanced $1 million of her own money to Crown to invest over a one-year term. Interest repayments were made quarterly into a joint bank account of Ms Shao and Mr Peng. The Facility Agreement relevantly provided that drawings under the facility were repayable at any time by the "redemption of Notes" and were otherwise repayable on the "Expiry Date". Annexure B to the Facility Agreement was a Note Certificate which provided at cl 3 that Crown may, at any time "by issuing a Redemption Notice to the Lender", redeem any notes. Redemption Notices could be issued in written form or verbally. Clause 4 of the Note Certificate stated that all money payable by Crown "to the Lender" must be paid by cheque deposited "into the Lender's bank account as notified by the Lender to [Crown] from time to time". On 17 February 2016, Crown emailed Mr Peng to remind him that the Facility Agreement was to expire shortly and to ask him into which account he would like the proceeds to be paid. Mr Peng provided bank account details for an account held solely in his name. On 25 February 2016 (before the "Expiry Date" of the Facility Agreement) the proceeds (totalling $1,018,740) were paid into that account and, soon after, Mr Peng transferred them to his parents in China. On 3 March 2016, Ms Shao learned that the proceeds had been paid to Mr Peng and commenced proceedings against him to recover them (the 2016 proceedings). Ms Shao obtained judgment against Mr Peng in the amount of $1,018,740 but, as Mr Peng was declared bankrupt in 2019, has recovered only $17,000. Ms Shao subsequently brought proceedings in the Equity Division against Crown seeking damages or orders for payment as equitable compensation or monies had and received for the principal loan amount plus interest and legal costs in relation to the 2016 proceedings and the bankruptcy proceedings. Ball J (the primary judge) dismissed Ms Shao's claim. His Honour found that while Crown's payment of the proceeds of the facility into Mr Peng's account was not a good discharge of the debt it owed to Mr Peng and Ms Shao (because Mr Peng's nomination of his bank account was not in accordance with cl 4 of the Note Certificate, which required nomination by both lenders), Ms Shao had ratified the otherwise unauthorised acts of Mr Peng by suing him in the 2016 Proceedings (a claim which necessarily depended on Crown having given a valid Redemption Notice and having repaid the debt). Ms Shao appealed, submitting that the primary judge erred in finding, first, that the Redemption Notice issued by Crown was valid (as it was issued only to Mr Peng and not to both lenders) and, second, that she had ratified Mr Peng's nomination of his bank account and receipt of the proceeds of the facility. The Court held (Adamson JA, Leeming and Payne JJA agreeing), dismissing the appeal: Issue 1: efficacy of Crown's Redemption Notice (1) Although "Lender" is stated in the opening words of the Facility Agreement to be Ms Shao and Mr Peng, its meaning throughout the agreement (whether it means either or both of them) is a question of construction: at [58]. Federation Insurance Limited v Wasson (1987) 163 CLR 303; [1987] HCA 34, applied. (2) The reference to "Lender" in cl 3 of the Note Certificate means either Ms Shao or Mr Peng, such that a Redemption Notice only needs to be issued to one of them. This is because a Redemption Notice has no protective purpose and merely communicates Crown's exercise of its unilateral right to repay early. The Redemption Notice provided to Mr Peng was effective: at [59]-[62]. Issue 2: ratification (3) The primary judge correctly found that Crown did not obtain good discharge of its debt to Ms Shao and Mr Peng by paying Mr Peng. The common law principle that payment to one joint creditor is sufficient to give good discharge of a debt owed to both is subject to agreement to the contrary. Clause 4 of the Note Certificate required both Ms Shao and Mr Peng nominate an account into which the proceeds of the facility could be paid: at [65]. McIntyre v Gye (1994) 51 FCR 472; Mizzi v Reliance Financial Services Pty Ltd [2007] NSWSC 37, cited. (4) The basis of the 2016 proceedings was that the monies paid by Crown to Mr Peng discharged the debt Crown owed to Mr Peng and Ms Shao. That necessarily involved Ms Shao's acceptance of the validity of Crown's Redemption Notice and her ratification of Mr Peng's nomination of his bank account. It follows that Ms Shao cannot now bring proceedings against Crown on the basis that it had not obtained good discharge of its debt: at [66]. Verschures Creameries Limited v Hull and Netherlands Steamship Company Limited [1921] 2 KB 60, applied. (5) Ms Shao's right to claim damages against Crown does not survive her ratification of Mr Peng's acts. Thus, she is not entitled to sue Crown for damages as a result of its discharge of the debt in breach of the terms of the Facility Agreement: at [67]-[70]. Ardern v Bank of New South Wales [1956] VLR 569; Vella v Permanent Mortgages Pty Ltd [2008] NSWSC 505, distinguished.

[2004] WASCA 301

(1987) 163 CLR 303

(1907) 5 CLR 68

(1963) 109 CLR 440

(1994) 51 FCR 472

(2018) 265 CLR 77