Shumin Li v Han Li

The Advances

1. The proceedings concerned four advances made by the plaintiff to Mr Khor which were made as follows: 1. An advance of $100,000 made on 26 July 2011 2. An advance of 150,000 made on 16 November 2011 3. An advance of $80,000 made on 9 September 2011 4. An advance of $12,000 made on 27 June 2012.

The St George Bank Facility

1. Advances 2 to 4 were made by the plaintiff from monies derived from a facility which he obtained from St George Bank. This facility was secured by mortgage over the plaintiff's home ("The St George Facility").
2. The loan agreements in each case were made entirely orally. The plaintiff gave evidence as to the discussions which gave rise to the various agreements. He was not required for cross-examination.
3. The defendant's evidence, again uncontradicted, was that Mr Khor repaid certain monies directly to St George Bank to the credit of the St George Bank Facility. These repayments totalled $142,943.27.
4. On 8 November 2019, the plaintiff discharged the St George Facility by making a payment to that bank in the sum of $214,005.29. The bank statements for the St George Bank Facility (Ex P1) showed that this sum represented the total of the loan then outstanding at the date of closure of the facility, and included all interest and insurance payments made out of it, less the payments made into the account by Mr Khor.
5. The plaintiff invited me to infer that the sum of $214,005.29 was entirely attributable to the loan taken out by the plaintiff for the benefit of, and at the request of Mr Khor, together with interest and insurance payments therefrom. The plaintiff asked me to infer that he obtained no benefit from the St George Bank Facility. I believe that both inferences are well available on the evidence, and I so find.

The issues

1. There are only two issues which arose in the proceedings. These were: 1. Whether the plaintiff's claims were statute barred; and 2. if not, whether Mr Khor's estate was liable to repay to the plaintiff interest payable in respect of the St George Facility.

The Limitation Act Issue

1. As I have earlier indicated, the agreements to make the advances in each case were made entirely orally. The oral agreements were never reduced to writing. Importantly, the evidence as to the terms of the oral agreements was silent as to when the loans were repayable. In these circumstances the parties were agreed that the prima facie position was that the loans were repayable on demand. This was a correct position for them to adopt.
2. The High Court made this clear in Young v Queensland Trustee Ltd (1956) 99 CLR 560, where at 566 - 567 the court stated (footnotes omitted): A loan of money payable on request creates an immediate debt. Speaking of a promissory note payable on demand Parke B. in Norton v Ellam, said: "It is the same as the case of money lent payable upon request, with interest, where no demand is necessary before bringing the action. There is no obligation in law to give any notice at all; if you choose to make it part of the contract that notice shall be given, you may do so. The debt which constitutes the cause of action arises instantly on the loan. Where money is lent, simply, it is not denied that the statute begins to run from the time of lending".
3. See also Chidiac v Maatouk [2010] NSWSC 386 at [235] per Ward J (as her Honour then was) and Fischer v Nemeske Pty Ltd [2014] NSWSC 203 at [177] per Stevenson J.
4. Mr Ellison of senior counsel, who appeared for the defendant, submitted that accordingly, in the case of each of the four advances, time commenced to run against the causes of action from the date of the relevant advance. As such he contended that each of the advances were statute barred.
5. Mr Price of counsel, who appeared for the plaintiff, submitted: 1. that in the circumstances of this case, the loan terms required that notice of demand for repayment be given to the borrower before the obligation to repay arose. On this argument, as demand was not made until 21 November 2019, time did not commence to run until that date, in which case the claims made in the proceedings were not statute barred; 2. Alternatively, that there had been confirmation of the various causes of action for the purposes of section 54 of the Limitation Act 1969 ('the Act').

Should an Obligation to Give Notice be Inferred/Implied into the Loan Advance Agreements

1. Mr Ellison SC submitted that the evidence is silent as to the requirement for a demand for repayment, and that there was no basis for inferring the existence of such an unspoken term. He also submitted that there was no basis for implying such a term.
2. The plaintiff submitted that a requirement to give notice should be inferred or implied into the loan transactions. In that regard, I was referred to the High Court's decision in Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 422 where Brennan CJ, Dawson and Toohey JJ stated: The implication which the appellants seek to make is based upon the presumed or imputed intention of the parties. In that context, the remarks of the majority in the Privy Council in BP Refinery (Westernport) Pty Ltd v Shire of Hastings are frequently called in aid: "(1) [the implication] must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that 'it goes without saying'; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract." In laying down those criteria, it was recognised that there was a degree of overlap. Further, as Deane J has observed, the cases in which the criteria in BP Refinery (Westernport) Pry Ltd v Shire of Hastings have been applied in this Court are cases in which there was a formal contract, complete on its face. He pointed out that a rigid approach should be avoided in cases, such as the present, where there is no formal contract. In those cases the actual terms of the contract must first be inferred before any question of implication arises. That is to say, it is necessary to arrive at some conclusion as to the actual intention of the parties before considering any presumed or imputed intention. And the test to be then applied was in a later case formulated by Deane J in these terms: ''The most that can be said consistently with the need for some degree of flexibility is that, in a case where it is apparent that the parties have not attempted to spell out the full terms of their contract, a court should imply a term by reference to the imputed intention of the parties if, but only if, it can be seen that the implication of the particular term is necessary for the reasonable or effective operation of a contract of that nature in the circumstances of the case. That general statement of principle is subject to the qualification that a term may be implied in a contract by established mercantile usage or professional practice or by a past course of dealing between the parties."
3. The judgment of Deane J to which Brennan CJ, Dawson and Toohey JJ referred, was His Honour's judgment in Hawkins v Clayton (1988) 164 CLR 539 at 573.
4. Mr Ellison SC suggested that this approach to the issue of inferred or implied terms in the context of informal contracts is only applicable to informal contracts which involved ongoing business relations. I do not accept that this is the case. In my view, there is no basis for so limiting what fell from the High Court in the passages which I have just quoted.
5. That said, I do not believe that in this case there can be inferred or implied into the contracts of loan a term that monies would not become payable until a formal demand had been made for such repayment.
6. To my mind, there is nothing in the dealings between the parties which would suggest such a term.
7. As to advance 1, all that the evidence discloses is an expectation that the advance would be paid "in a couple of months" (see [6] of the affidavit of Shumin Li, affirmed 8 September 2021).
8. The evidence is silent about any matter going to the repayment of advance 2.
9. As to advance 3, all that the evidence discloses is the following: On or about 9 December 2011, I had a telephone conversation with Nicholas in words to the following effect: Nicholas: My client didn't pay me. Can I borrow another $80,000? Me: No, I have already lent you $250,000. You need to pay me back first. What if you can't pay me? Nicholas: I am paying your St George account monthly. If I can't pay you, you can have my house. (see [17] of the affidavit of Shumin Li affirmed 8 September 2021).
10. Finally as to the fourth loan, the evidence rises no higher than the following: On 27 June 2012 I had a telephone conversation with Nicholas in words to the following effect: Nicholas: You still have $12,000 left in the loan account, right? Can I borrow it? I sued my client, but it didn't go very well. I didn't get the money back. Me: You know that's the last $12,000 in the loan portfolio, right? Nicholas: Yes. Me: That's the last money I can lend to you. Nicholas: Can you do a bank transfer to my account today? Me: OK, send me your bank account again. ([19] of the affidavit of Shumin Li affirmed 8 September 2021).
11. Paragraph 23 of the Li affidavit is also relevant. It is in the following terms: On 14 April 2018 I met Nicholas at his warehouse at 17a Birmingham Avenue, Villawood. This was the last time we met. We had a conversation in words to the following effect: Me: How's the lawsuit? Nicholas: It's over, Lee declared bankruptcy and transferred shares to other people. If I continue suing them, then I have to start a new case, I don't have that much money. Me: What about my money? Where did you use the first $100,000 I transferred to you from HSBC bank? Nicholas: I put into the company (NSK Consultancy). Me: What about the St George Bank money? Nicholas: I used some of the money to buy Steel Plank and scaffolding. I need to make some money to pay you back Me: What about this new business? Do you own this business? Nicholas: I own 25% of this business, there are 4 owners, I am one of them. Me: Looks like this business is in good shape. Your warehouse is full, and you have customers coming on Saturday Nicholas: Have you sold the house? Me: No, it was mortgaged for you. I don't want to do anything until you repay the loan. Nicholas: It's my fault I drag you in. Me: I could have bought another property if I didn't lend the money to you. Do you have any plan of when you are going to repay the loan? Nicholas: Please give me 3 more years. I am working on it. Please give me 3 more years. Me: OK. 3 more years is fine.
12. This exchange between the plaintiff and Mr Khor does not suggest the plaintiff was particularly diligent in keeping track of the debt. Indeed, it demonstrates a decided lack of curiosity as to where the loaned money had gone. The exchange between lender and borrower merely culminates in the plaintiff asking for a plan for repayment, and a seeming agreement by Mr Khor to repay the monies outstanding after a further three years. This conversation, it should be noted, occurred 7 years after the first advance.
13. The advances were transactions between friends, attended by no formality of any description. In those circumstances it seems objectively unlikely for the parties to have intended that a notice of demand for repayment was required before the monies would become repayable.
14. In my opinion, there is nothing in the dealings between the parties, as disclosed on the minimal evidence as to their affairs, which would permit me to infer that an obligation fell on the plaintiff to give notice to repay before the loans became due and payable. I do not find that such term should be implied as "necessary for the reasonable or effective operation of a contract of that nature in the circumstances of the case" (Hawkins v Clayton (1988) 164 CLR 539 at 573 per Deane J).

Confirmation

1. I turn then to the plaintiff's alternate submission. He argued that the payments made by Mr Khor to the credit of the St George Bank Facility constituted a confirmation of this loan for the purposes of section 54 of the Limitation Act 1969.
2. Section 54 is in the following terms: 54 Confirmation (1) Where, after a limitation period fixed by or under this Act for a cause of action commences to run but before the expiration of the limitation period, a person against whom (either solely or with other persons) the cause of action lies confirms the cause of action, the time during which the limitation period runs before the date of the confirmation does not count in the reckoning of the limitation period for an action on the cause of action by a person having the benefit of the confirmation against a person bound by the confirmation. (2) For the purposes of this section - (a) a person confirms a cause of action if, but only if, the person - (i) acknowledges, to a person having (either solely or with other persons) the cause of action, the right or title of the person to whom the acknowledgment is made, or (ii) makes, to a person having (either solely or with other persons) the cause of action, a payment in respect of the right or title of the person to whom the payment is made, (b) a confirmation of a cause of action to recover interest on principal money operates also as a confirmation of a cause of action to recover the principal money, and (c) a confirmation of a cause of action to recover income falling due at any time operates also as a confirmation of a cause of action to recover income falling due at a later time on the same account. (3) Where a person has (either solely or with other persons) a cause of action to foreclose the equity of redemption of mortgaged property or to recover possession of mortgaged property, a payment to the person of principal or interest secured by the mortgage or a payment to the person otherwise in respect of the person's right or title to the mortgage is a confirmation by the payer of the cause of action. (4) An acknowledgment for the purposes of this section must be in writing and signed by the maker. (5) For the purposes of this section a person has the benefit of a confirmation if, but only if, the confirmation is made to the person or to a person through whom the person claims. (6) For the purposes of this section a person is bound by a confirmation if, but only if - (a) the person is a maker of the confirmation, (b) the person is, in relation to the cause of action, a successor of a maker under a devolution from the maker occurring after the making of the confirmation, (c) where the maker is, at the time when the person makes the confirmation, (either solely or with other persons) a trustee of the will or of the estate of a deceased person - the firstmentioned person is at the date of the confirmation or afterwards becomes a trustee of the will or of the estate, (d) where the maker is, at the time when the person makes the confirmation (either solely or with other persons) a trustee (other than a trustee of the will or of the estate of a deceased person) - the firstmentioned person is at the date of the confirmation or afterwards becomes a trustee of the trust of which the maker is a trustee, or (e) the person is bound under subsection (7). (7) (a) Paragraph (b) applies to a confirmation of a cause of action - (i) to recover property, being goods, (ii) to recover property, being land, (iii) to enforce in respect of property an equitable estate or interest in land, (iv) to foreclose the equity of redemption of mortgaged property, (v) to redeem mortgaged property, (vi) to recover principal money or interest secured by mortgage of property, by way of the appointment of a receiver of mortgaged property or of the income or profits of mortgaged property or by way of sale, lease or other disposition of mortgaged property or by way of other remedy affecting mortgaged property, or (vii) to recover trust property or property into which trust property can be traced. (b) Where a maker of a confirmation to which this paragraph applies is, on the date of the confirmation, in possession of the property, the confirmation binds a person in possession during the ensuing period of limitation, not being, or claiming through, a person other than the maker who is, on the date of the confirmation, in possession of the property.
3. The plaintiff submitted that the payments made by Mr Khor into the St George Facility were acts of confirmation for the purposes of section 54(2)(a)(ii) of the Act. He went on to submit that as a consequence of the payments, time does not run against the plaintiff's causes of action until after the last payment. This occurred in September 2019. Accordingly, it was submitted the proceedings were not statute barred.
4. Mr Ellison's response to this contention was that there could be no confirmation as there was no writing signed by the maker, as required by section 54(4).
5. I do not accept this argument. In my view, section 54(4) is directed to acknowledgments, not payments. In other words, section 54(4) is directed to a confirmation as contemplated by section 54(2)(a)(i) of the Act, not section 54(2)(a)(ii). It is the latter subsection upon which the plaintiff relies.
6. Accordingly, I am of the view that Mr Price's alternate contention is correct and that the payments made by Mr Khor did constitute acts of confirmation, with the effect that the plaintiff's claims are not statute barred.

The liability of Mr Khor to pay interest on the St George facility.

1. I turn then to the issue as to whether there is to be an inferred or implied term in the loan agreements in relation to the monies derived from the St George Facility, to the effect that Mr Khor would pay to the plaintiff all interest charges levied by St George Bank.
2. In that regard, the plaintiff again relied upon the passages to which I have earlier referred in Byrne and Hawkins v Clayton.
3. Mr Price submitted that the evidence disclosed that: 1. Mr Khor knew the plaintiff was mortgaging his house to raise the St George Facility; and 2. He knew that the Facility was interest-bearing; and 3. He expressly agreed to pay the costs of insuring the loan; and 4. Mr Khor knew that the St George Facility was arranged entirely for his benefit; and 5. He entered into a regime of making repayments directly to St George bank to be credited to the St George Facility.
4. The facts which underlay these submissions were uncontradicted.
5. On the basis of those facts, I find that it should be inferred that the loan agreements funded out of the St George Facility contained a term that Mr Khor was liable to meet the interest obligations incurred by the plaintiff to St George Bank. Alternatively, I find that such a term should be implied. I find that the term can readily be said to be necessary for the reasonable or effective operation of the contract.
6. I believe that this implication/inference is best described in the vernacular, rather than in legal language. In my view the parties must have intended that the plaintiff not be "out of pocket" as a result of taking out the St George Facility for the benefit of Mr Khor.
7. Mr Ellison SC submitted that such an implied term must be clear. I accept that this is the case, but do not see the implication sought by the plaintiff as other than clear. The defendant further submitted that Mr Khor's knowledge of the fact that the loan was interest bearing is insufficient to ground the implication. That may well be so, but that was but one of the facts upon which the plaintiff relies to found the inference/implication. When all of those facts are taken into account I consider that the inference/implication is appropriate.
8. Finally, the defendant reiterated the submission that implied terms to provide business efficacy have no application to cases not involving ongoing business relationships. As I have earlier indicated I do not believe there is any basis to such a submission.

Conclusion.

1. For the foregoing reasons there should be judgment for the plaintiff as sought.

Orders 1. In proceedings number 2021/202510 2. That the proceedings be dismissed. 3. In proceedings number 2022/61979 4. That there be judgment and verdict for the plaintiff against the defendant in the sum of $315,005.26. 5. That there be interest thereon from 21 November 2019 at the rates pertaining from time to time pursuant to section 100 of the Civil Procedure Act 2005 (NSW). 6. That any party wishing to be heard on the issue of costs notify my associate of that fact on or before noon on 4pm on 25 March 2022 ("Notification") 7. That in the event of Notification, the notifying party shall file and serve any evidence and submissions on the issue of costs on or before 4:00pm on 1 April 2022. 8. That the non-notifying party file and serve any evidence and submissions which it wishes to make on the issue of costs on or before 4:00pm on 8 April 2022. 9. That the notifying party file and serve any submissions in reply on or before 4:00pm 14 April 2022 10. That the filing of the documents referred to in orders (4), (5), and (6) be effected by way of email transmission to my associate. 11. That any issue as to costs be decided on the papers. 12. That in the absence of Notification, the Court will order that the defendant pay the plaintiff's costs.

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