Ye v Fang

Background

1. Mr Ye (sometimes referred to as "Will") described his occupation as "recruiter". He gave evidence that he had not lent anyone any money prior to February 2017. It seems that Mr Ye met Cola at some stage in 2016, and Cola introduced him to Ms Fang (sometimes referred to as "Lisa") towards the end of that year. Mr Ye gave evidence that he met her only once in 2016.
2. Cola operated a Gloria Jeans coffee business in Park Street, Sydney. It seems that Mr Ye was in 2016 interested in purchasing the business from Cola.
3. Ms Fang, through the company, operated a café business at 500 George Street, Sydney. Ms Fang is the sole director and sole shareholder in the company. There is evidence that in late 2016 the company was proposing to borrow money from Capital Securities XVI Pty Ltd, to be secured by a second mortgage over the Lidcombe property. The ANZ Bank held a first mortgage over the property. Ms Fang met with Mr Cheng on 7 December 2016 in relation to the proposed loan. Mr Cheng deposed that on that occasion Ms Fang told him that the loan was for working capital for her business. Ms Fang did not expressly deny that evidence, but deposed that the purpose of the loan was to assist Cola with the cashflow for the Gloria Jeans business. In any event, Mr Cheng later forwarded the executed loan and mortgage documents to the lender's solicitors. However, the loan did not proceed. Ms Fang gave evidence that she decided not to go ahead with it because she did not want the Lidcombe property, which was her and her son's home, to be used as security. Mr Cheng gave evidence that he was told by Cola on 9 February 2017 that the loan was not proceeding because ANZ would not give its approval to a second mortgage.
4. Another company, WS Espresso Pty Ltd, was incorporated on 28 January 2017. Cola and Ms Fang were its shareholders. Ms Fang was appointed as the sole director and company secretary. This company operated a café business at 234 George Street, Sydney. This café is sometimes referred to by Ms Fang as the Wynyard store. Ms Fang deposed that although she was the director of the company, Cola made all of the decisions for the business and was responsible for its management and finances. Cola replaced Ms Fang as the sole director and company secretary in July 2017. Ms Fang deposed that this business closed in about February 2018 due to poor performance. A liquidator was appointed to WS Espresso Pty Ltd in February 2019.
5. Ms Fang gave evidence that in about January 2017 she gave instructions to CS Lawyers (Mr Cheng's firm) to act in relation to a lease for WS Espresso Pty Ltd. She deposed that the lease was "unrelated to these proceedings". Mr Cheng did not give any evidence about that lease.

The events of February 2017

1. Mr Ye deposed that on either 5 or 6 February 2017 he met with Ms Fang and Cola at the 500 George Street café. As already noted, Ms Fang denies that she attended any such meeting. Indeed, Ms Fang asserts that aside from her first meeting with Mr Ye, which she said occurred in about September 2016, she did not meet him or speak to him until around April 2017.
2. Much of Mr Ye's account of the meeting contained in his first affidavit was rejected due to its form. Leave was granted to adduce oral evidence in chief on the topic. Mr Ye gave an account of the meeting accordingly (see at transcript pages 40 to 43).
3. The account is not entirely coherent in parts, and in some places is difficult to follow. In closing submissions, counsel for the defendants described the evidence as shambolic and unpersuasive. However, I think that Mr Ye made a genuine attempt to describe what he recalls of the meeting, which he says took place more than three years ago.
4. Some notable aspects of Mr Ye's account of the meeting include the following: 1. Cola spoke about the prospects of a new shop on George Street; 2. in response to a question about how much money was needed, Ms Fang said $250,000 to $300,000 but at least $250,000; 3. Ms Fang said the money was for leasing, a bank guarantee and shop fitting; 4. Mr Ye asked whether they were sure about the 20% interest rate, and Cola said 20% should be ok; 5. Mr Ye asked when the money was needed, and Ms Fang said "we need the money as soon as possible, the shop fitters are ready to go"; 6. Ms Fang said that Cola will get the solicitors "to get the agreement" as [soon as] possible, but the urgent thing was the lease; 7. Ms Fang asked whether Mr Ye could give $100,000 first "so we can do the lease…then the rest is not very rushed"; 8. Ms Fang said that whenever we need the money later we will let you know how much; 9. there was discussion about getting the agreement done, putting in the principal amount and interest to start from the first instalment date, the $100,000 date; 10. Ms Fang said that the $100,000 was needed as soon as possible and asked that it be transferred into Cola's account; 11. Mr Ye said to Ms Fang that she was the borrower and "you provide the security" and he could give a bank cheque to the company or Ms Fang; 12. Ms Fang said that Cola looks after everything for her, so it is easier if the transfer is to him; 13. Ms Fang said that you don't need to worry because the loan agreement will write down all the money we receive; 14. Mr Ye said "Ok give me your bank details", and he wrote down the details Cola then gave him; 15. either Cola or Ms Fang said that the $250,000 to $300,000 was for leasing, a bank guarantee and shop fitting, but they may need some other money for the start-up of the new business; and 16. Mr Ye said that they could talk about that later.
5. In his affidavit, Mr Ye deposed that during the meeting Ms Fang said words to the following effect: You need to transfer 100K first, let us do the lease, then when we start the shop fitting, we will ask you to transfer the rest. And also that she said she would: like to sign the loan agreement immediately to show our faith. And further said words to the following effect: Xiaoqing Qi [Cola] looks after everything for the new shop, he will look after the lease and shop fitting, so transfer to him, that is easier, all the expenses regarding the new shop will come from that account, easier to manage. And finally said words to the following effect: Because the loan is for a particular purpose - to set up a new workshop espresso, it is just like buying a car from dealer, I borrow the money from the bank, but the money doesn't go to me, but goes to the car dealer straight away, and I get the car. And on the loan agreement, it will clearly say Fan Fang receives the money on the drawdown date.
6. In cross-examination, Mr Ye maintained that whilst no exact amount had, at the meeting, been agreed to be lent, Ms Fang said it was "$250,000 to $300,000" and that was agreed at the meeting. Mr Ye rejected the suggestion that Cola was to be the borrower. Mr Ye said that Ms Fang (whom he described as "the big boss for all the companies") was the borrower. Mr Ye accepted that it was his intention that once a final agreement was reached it would be put in writing.
7. Mr Ye gave evidence that between 7 February 2017 and 20 March 2017 he made various electronic funds transfers to a bank account the details for which were given to him by Cola at the meeting. The documentary evidence reveals that a number of transfers were made from a Commonwealth Bank of Australia account in the name of Business BSH Capital Funding to a St George bank account in Cola's name. At one point in his cross-examination, Mr Ye described the former account as "my company account"; he agreed that it was not his own account. In re-examination he said it was his business account. In any event, it emerged that Mr Ye did not personally make the transfers, but rather gave instructions to his "partner and good friend" Ying Liang, who effected the transfers accordingly. Ying Liang's name appears on the Commonwealth Bank of Australia documents in relation to the transfers. I accept that Ying Liang effected the transfers on the instructions of Mr Ye. I further accept that the transfers were made into an account the details of which were provided to Mr Ye by Cola.
8. The transfers occurred as follows: Date Amount 7 February 2017 $100,000 8 February 2017 $99,000 21 February 2017 $50,000 27 February 2017 $26,000 10 March 2017 $10,000 20 March 2017 $98,000

The total amount of funds so transferred was $383,000. $285,000 had been transferred by 10 March 2017.

1. I have already referred to evidence given by Mr Ye about what was said to him about the first transfer, of $100,000. In relation to the second transfer, of $99,000, Mr Ye gave evidence to the effect that he received a call on WeChat from Cola, and that he could also hear Ms Fang participating in the call. Mr Ye says that Cola asked for $100,000 to be transferred for shop fitting, and said that in future he (Cola) would tell him (Mr Ye) how much was needed to be transferred into the account. Mr Ye says that he asked whether Ms Fang was there and she said: Yeah, its okay - its okay...Just do what - what he said. Mr Ye says that he made the $99,000 transfer later that day. Ms Fang denies that the conversation occurred.
2. Mr Ye gave evidence that the next three transfers (on 21 February, 27 February and 10 March 2017) were effected after he received instructions from Cola. In relation to the final transfer, of $98,000 on 20 March 2017, Mr Ye says that this followed a conversation he had with Ms Fang at a meeting on 18 March 2017. As previously noted, Ms Fang denies that she attended the alleged meeting.
3. Mr Cheng gave evidence that he had a meeting in his office with Cola on 8 February 2017. Mr Cheng says that Cola told him that Ms Fang had found a private lender who would lend money to her, and that she wanted a deed of loan. Mr Cheng says that Cola identified the lender as Mr Ye, and that Cola proceeded to provide various details about the loan. Mr Cheng made a file note of the meeting.
4. Mr Cheng's file note appears to record Ms Fang and the company as the borrower, and Mr Ye as the lender. It refers to an amount of $250,000 noted as "paid already". A figure of $50,000 appears, described as an amount of interest and seemingly to be paid monthly over 12 months. There is a reference to a term of two years from 7 February 2017 to 6 February 2019. There is also a reference to "property + P/L" adjacent to "security"; and beneath that "caveat + PPSR" appears. There are other notes which are not necessary to refer to here.
5. Mr Cheng deposed that either during or very shortly after his meeting with Cola he called Ms Fang on the telephone. He gave evidence that he told her that Cola had come to the office and told him that "you were going to borrow some money". Mr Cheng says that he gave Ms Fang "the summary of background". Mr Cheng says that Ms Fang then said: Yeah, that's true. That's for working capital.
6. Mr Cheng says that Ms Fang also said: I'm happy to proceed.
7. In his affidavit, Mr Cheng stated that Ms Fang said: Yes I know all about it Mr Cheng, please go ahead with the loan agreement.
8. Mr Cheng gave evidence that he had a clear recollection of Ms Fang's words, but could not remember his exact words which were "merely introduction". When pressed in cross-examination, Mr Cheng said: I cannot say I remember word by word, but literally when I - when I called her, I was literally reading my file note. That I could remember.
9. Mr Cheng also said that "the first thing for me would be to identify my client", and that in accordance with normal practice "of course I needed to confirm instructions with Lisa [Ms Fang]". The file note Mr Cheng made in relation to his meeting with Cola on 8 February 2017 concludes with the following: Called Lisa confirming above details. Lisa: "I know, please go ahead."
10. In her second affidavit, Ms Fang denied that any telephone call occurred as deposed to by Mr Cheng. In cross-examination, she firmly denied that there had been any such telephone call, stating that she was certain that Mr Cheng did not call her.
11. As noted earlier, Mr Cheng gave evidence that on 9 February 2017 Cola told him that the loan from Capital Securities XVI Pty Ltd was not proceeding. Mr Cheng made a file note of that conversation. It appears (including from the file note itself) that Mr Cheng instructed his secretary, Ms Southwell, to contact Ms Fang to obtain confirmation of the position. It further appears, from an addition to the file note (most likely made by Ms Southwell), and an email sent by Ms Southwell to Ms Fang on 16 February 2017, that on 13 February 2017 instructions were obtained from Ms Fang that the loan was not proceeding. Ms Southwell's email of 16 February 2017 attached a tax invoice in respect of the Capital Securities XVI Pty Ltd matter.
12. In the meantime, on 9 February 2017 Ms Southwell sent an email addressed to both Cola and Ms Fang. The subject of the email was marked as "Loan Agreement - Fang Fan Pty Ltd". The email was in the following terms: Dear Cola, We are instructed that the terms of the Loan Agreement will be as follows: Borrower: Fan Fang and Fang Fan Pty Ltd t/as Express Workshop Town Hall. Lender: Wei Ye of 152 Neville St, Smithfield NSW 2164. Amount: $250,000 which has already been lent. Term of loan: 2 years from 7/2/17 to 6/2/19. Interest: annual interest of $50,000 paid by equal monthly instalments. Security: registration of PPSR against Fang Fan Pty Ltd and Caveat on Fan Fang's personal property at 1/30-32 Livingstone Rd, Lidcombe NSW 2141. Other conditions: if the borrower wants to sell the property or the Gloria Jeans business the lender's loan is to be repaid first. If Wei Ye buys the Gloria Jeans business then the loan amount shall be used against the purchase price. Cola, please advise if you agree with the terms so that we can commence drafting the Loan Agreement and ancillary documents. Please note that this transaction might have an impact on the loan agreement with Capital Securities XVI Pty Ltd. Our fees to prepare the documents will be $1,200.00 plus GST. Disbursements are expected to be approximately $300 plus GST.
13. There is no evidence of any written response being made to this email. Ms Fang accepts that she received the email but says that she did not read it. She gave evidence to the same effect in relation to a number of emails later sent to her by CS Lawyers.
14. It appears that on 14 February 2017 Cola provided Mr Cheng with further details of the "new loan agreement" with Mr Ye. Mr Cheng made a file note of this conversation.
15. On 15 February 2017, Ms Southwell sent another email to Ms Fang and Cola. The subject was marked as "Loan Agreement". The email was in the following terms: Dear Lisa & Cola, We refer to Cola's recent meeting with Shun Cheng and set out the following additional conditions of the loan as we understand. If any condition is incorrect please advise us. Repayment date of loan will be the 1st day of each month. If the Lender purchases your Gloria Jeans business, then $250,000 will be deducted from the Purchase Price. If the borrower (Fan Fang & Fan Fan [sic] Pty Ltd) wishes to sell the business and her property then the borrower must inform the lender. The Borrower's decision to sell will be subject to the Lender's consent. If the loan is not fully repaid within 2 years then the Lender can exercise a power of sale of the business and the Borrower's property. Please confirm the above terms are correct and we will then proceed to prepare loan documents for the parties approval and execution if approved.
16. There is no evidence of any written response to this email. Mr Cheng could not recall receiving any verbal reply from Ms Fang.
17. On 17 February 2017 Mr Cheng sent another email to Ms Fang and Cola. The subject was marked as "Fan Fang [sic] Pty Ltd and Fang Fan [sic] loan from Wei Ye with security". A costs agreement was attached.
18. Later on 17 February 2017 Mr Cheng sent an email to Ms Fang, copied to Cola. The subject was marked as "Miscellaneous". A draft Loan Agreement was attached. The email was in the following terms: Hi Lisa & Cola, Please see attached draft Loan Agreement. I believe it reflects the intentions of both parties. Please note, even though GSA was mentioned in the Load [sic] Agreement as referred in Third Schedule, I haven't prepared it for the sake of saving costs. There will be extra costs if you want to lodge caveat and PPSR. Feel free to forward this draft to the lender but I don't think you should forward my email to you to him.
19. In brief, the draft Loan Agreement made provision in respect of a loan of $250,000 from Mr Ye to Ms Fang and the company, repayable in two years together with total interest of $100,000 (being $50,000 per annum). Minimum monthly repayments were to be $4,166.70. Ms Fang and the company were to provide the security described in the Third Schedule to the agreement.
20. On 20 February 2017 Ms Southwell sent another email to Ms Fang, copied to Cola. An updated draft Loan Agreement was attached. This draft was in similar terms to the earlier draft save that the amount of the loan was increased to $300,000. As noted in the email itself, there was no change to the interest provisions.
21. CS Lawyers seems not to have had any further involvement with the matter until about 22 March 2017.
22. Before leaving the events of February 2017, it should be noted that Ms Fang deposed that at some time around February 2017, Cola asked her to sign a one page document which had places for her to sign as well as for the company and WS Espresso Pty Ltd to sign. Ms Fang says that she signed the document and returned it to Cola and "didn't think any more of the matter". She deposed that when she signed the document she did not know "it was to borrow money from Mr Ye", but became aware of that in about late April 2017 when she had a conversation with Cola. The document she describes was not produced when a call was made for it. Ms Fang did not otherwise identify any document to be the document she says she signed. It was not suggested that Mr Ye signed the document.

The events of March 2017

1. Mr Ye deposed in his second affidavit that he had a meeting with Ms Fang and Cola on 18 March 2017 at the 500 George Street café. He deposed that there was a conversation to the following effect: Ms Fang: The costs are more than we expected, and we need an extra $100,000. This is for some equipment and start-up of the new shop. Mr Ye: Let me check how much I can have, roughly I only can lend 80K but I will try my best. Mr Ye says that he checked his available funds, and told Ms Fang and Cola that he could only lend a further $83,000. Mr Ye deposed that the conversation continued: Mr Ye: I have paid $30,000 [sic] and $83,000 all together. We should amend the loan agreement and put the extra into it. Ms Fang: The 83K plus interest can be paid back very soon after the Gateway Workshop Espresso settled or I get my property refinanced. Two months time is enough. Mr Ye: As friends, I trust you guys, lets get the $300K signed first, if I can't get the extra plus its interest back in 2 months then lets amend the loan agreement. Ms Fang: Agree, everything is in control. Ms Fang: The first deposit date is the drawdown date from which the interest starts to count, and it is in the loan agreement. Mr Ye: So, the $300k's interest counts from 7th of Feb 2017, what about the extra $83K? Ms Fang: The $83K interest rate is same with the $300K, but start to count from the deposit date. Mr Ye: Agree, it is fair enough. In oral evidence, Mr Ye stated that the above reference to $30,000 was an error, the correct figure being $300,000.
2. Ms Fang denies that any meeting or conversation occurred as alleged by Mr Ye.
3. In cross-examination, Mr Ye agreed that when he spoke of amending the loan agreement he was referring to the written draft agreement. He said that by 18 March 2017 Mr Cheng had shown the draft to him (and may have provided him with a copy). Mr Ye also agreed that at that time only $285,000 had been advanced, not the $300,000 he says that he spoke of at the meeting. Mr Ye sought to explain that Ms Fang had told him he could keep 3 months interest, so he had kept $15,000 in his account.
4. On 22 March 2017 Mr Cheng made a file note of a conversation in relation to the loan. He cannot recall, and the file note does not indicate, who the conversation was with or whether the conversation was in person or over the telephone. Ms Fang denies that she met Mr Cheng on that day or gave him instructions as recorded in the file note. The file note includes the figure $300,000. In cross-examination, Mr Cheng said it was likely this was the first occasion the amount of $300,000 was mentioned. However, this seems to be incorrect, as a draft containing that amount had been provided on 20 February 2017. The file note also includes a reference to interest of $60,000 per annum, and monthly repayments of $5,000. There is also a reference to Workshop Xpresso [sic] Pty Ltd. In cross-examination, Mr Cheng said that he was told around that time that WS Espresso Pty Ltd was to be involved in the agreement.
5. Mr Cheng deposed that he had a meeting with Ms Fang and Cola in his office on 27 March 2017. Ms Fang agrees that she attended Mr Cheng's office with Cola once in March 2017, but she denies that there was any discussion about a loan on that occasion. She says that Cola and Mr Cheng discussed the sale of the Gloria Jeans business, and that she did not participate in the conversation. Mr Cheng did not make a file note as such in relation to the meeting. He says, however, that Ms Fang and Cola came to the meeting with a copy of a draft Loan Agreement which contained some handwritten notes, and that he made some further notes of his own on the document during the conference. He identified, for example, a note he made on the front page in the following terms: Working copy with Cola + Lisa. Mr Cheng identified some further notes of his on the page of the draft that contains the schedules to the agreement. Mr Cheng deposed that during the conference Ms Fang said: When amendments have been made, the amended document should also be sent to Mr Ye.
6. In cross-examination, Mr Cheng maintained that the meeting concerned the loan from Mr Ye, and that he recalled Ms Fang being present. Mr Cheng said that Cola mentioned to him around that time that he was trying to sell the Gloria Jeans business, but he stated that he did not have any instructions to act on any sale of that business.
7. On 27 March 2017 Mr Cheng sent an email to Cola, copied, it seems, to Mr Ye. The email attached what was described in the email as the "further finalised agreement". Mr Cheng said that the failure to also send the email to Ms Fang was probably an error on his part.
8. The revised draft Loan Agreement added WS Espresso Pty Ltd as a borrower. The interest provisions were amended to show total interest of $120,000 (being $60,000 per annum). For some reason, the minimum monthly payment remained at $4,166.70. It seems that no further changes were made to this draft. However, the Loan Agreement was not signed by the parties until 11 May 2017.

The signed Loan Agreement

1. The Loan Agreement was signed by each of the named parties on 11 May 2017. Mr Ye signed as Lender. Ms Fang signed as Borrower personally, as well as on behalf of the company and on behalf of WS Espresso Pty Ltd. The signing occurred at Mr Cheng's office. He witnessed all of the signatures.
2. The Loan Agreement relevantly provides: THIS AGREEMENT dated day of February 2017 BETWEEN Fan Fang of Unit 1, 30-32 Livingstone Road, Lidcombe NSW 2141 And Fan Fang [sic] Pty Ltd A.C.N. 608 393 415 of Unit 1, 30-32 Livingstone Road, Lidcombe NSW 2141 And WS Espresso Pty Ltd ABN 55 617 062 441 of 242 George Street, Sydney NSW 2000 (Borrower) And Wei Ye of 152 Neville Street, Smithfield NSW 2164 (Lender) RECITALS A. The Lender has, at the request of the Borrower, agreed to lend moneys to the Borrower in accordance with and subject to the terms of this agreement. B. The Borrower acknowledges that the money referred to in this agreement has been paid to the Borrower on the Drawdown date. … 2. Loan The Lender has at the request of the Borrower agreed to lend to the Borrower the principal sum shown in the first schedule on the drawdown date shown in the first schedule. 3. Interest The Borrower covenants with the Lender to pay to the Lender interest in respect of the principal sum calculated in accordance with the provisions of the second schedule at the time and in the manner therein set forth and to duly and punctually observe and perform every other obligation contained in the second schedule. 4. Repayment (a) The Borrower covenants with the Lender to repay the principal sum or so much thereof as is then unpaid to the Lender on the due date shown in the first schedule. … 5. Security (a) In consideration of the Lender advancing or agreeing to advance moneys to the Borrower under or pursuant to this agreement the Borrower agrees to execute in favour of the Lender of [sic] the securities referred to in the third schedule. (b) The Borrower agrees that each of the securities described in the third schedule is security to the intent that the moneys owing are secured thereby. Default under any of the securities shall constitute default under this agreement. (c) The parties agree that if the Lender purchases the Borrower's (Fan Fang [sic] Pty Ltd) business Gloria Jeans, the loan amount of $300,000.00 shall be deducted from the purchase price of the business. (d) If the loan amount is not fully repaid by the Due Date, then the Lender may exercise his power as allowed by the law including sale of the property/business. … First Schedule Item 1 Principal sum of $300,000.00 Item 2 Due date 06 February 2019 Item 3 Drawdown date: 07 February 2017 The second schedule Interest on loan The borrower will pay to the lender the principal sum including interest, or so much thereof as shall remain unpaid. The total interest to be paid by the Borrower to the Lender is $120,000.00 at $60,000.00 per annum. The minimum monthly repayment the borrower will make to the lender is $4,166.70 on the first day of each month and the balance must be paid by the Due date. Third schedule Security The Borrower is willing to provide security as follows: 1. General Security Agreement and PPSR registration on - Fan Fang and Fan Fang [sic] Pty Ltd and WS Espresso Pty Ltd 2. Caveat over Unit 1, 30-32 Livingstone Road, Lidcombe NSW 2141 being the land contained in Folio Identifier 4/SP83650.
3. The accounts of what occurred at Mr Cheng's office on 11 May 2017 differ in numerous respects. Most of these are of little moment and were not the subject of any, or any significant, cross-examination. The principal matter in contest concerns whether Mr Cheng provided an explanation of the Loan Agreement to Ms Fang before she signed it.
4. Mr Cheng deposed that he read the Loan Agreement paragraph by paragraph and explained the effect of each clause to Ms Fang. He deposed that he pointed at the first page and also to the schedule and said: First of all, this is a loan agreement between yourself, Fan Fang [sic] Pty Limited, WS Espresso Pty Ltd and Wei Ye. You are the sole director and shareholder of both companies. Then the most important part of this loan agreement is that (pointing at the first and second schedules) you borrowed $300,000.00 from Wei Ye on 7 February 2017 and the total interest is $120,000.00 with monthly repayment of $4,166.70. For this loan (pointing at the third schedule) you use your own residential property as security by giving the lender a caveat. By giving that, you acknowledge that the lender has got caveatable interest in your property. A caveat is different from a mortgage but it is still a serious undertaking. You are putting your personal property at risk if the loan is not repaid. The GSA and then the PPSR registration will allow the lender to become a secured creditor of the two companies as grantors. I don't know how the money has been advanced because it didn't go through me and was arranged directly by you guys before I was contacted.
5. Mr Cheng further deposed that Ms Fang then said: I understand. This is for the working capital for my business. I want to proceed with the loan.
6. Mr Cheng deposed that Cola had not been present when he explained the Loan Agreement to Ms Fang.
7. In her first affidavit, Ms Fang deposed (omitting certain parts that were not read): On 11 May 2017, I and Cola attended to the office of CS Lawyers and I said that I was here to re-sign some document. Mr Cheng handed me the document and requested me to sign by saying "this is where you need to sign". I did not observe Cheng make any notes during the course of our meeting. I then signed the loan agreement.
8. In her second affidavit, Ms Fang essentially denied Mr Cheng's account. Ms Fang deposed that she was with Cola during the entire meeting with Mr Cheng.
9. In cross-examination, Mr Cheng said that his meeting with Ms Fang went for more than 10 minutes. He said he believed it was roughly 20 to 30 minutes. He agreed that he made no file note. He said that he did have a recollection of the meeting, although not word-by-word exactly. He later agreed that what appears in his affidavit about explaining the Loan Agreement was a reconstruction of the advice he would ordinarily provide to a borrower in that situation. Mr Cheng denied that Ms Fang had asked him whether she could be liable if she had not received the money.
10. In cross-examination, Ms Fang agreed that when she went to the office she knew she was attending to execute a loan agreement. She agreed that she understood that the document she was signing was a loan agreement between herself and Mr Ye. She agreed that she understood she was signing a document that was updating a document she had signed earlier, in February 2017. Ms Fang denied that Mr Cheng explained the document to her or went through it with her line-by-line. She denied that she had any conversation with Mr Cheng alone. Ms Fang denied that she was told that she was acknowledging that $300,000 had already been received. She denied that Mr Cheng explained that she would be providing her residential property as security for the loan. Ms Fang later seemed to accept, however, that she understood that if she didn't repay the money she could lose her house at Lidcombe. Ms Fang denied that she told Mr Cheng that she understood, that the loan was for working capital for her business, and that she wanted to proceed with the loan. Ms Fang agreed that she did not tell Mr Cheng that she didn't understand the document; or ask him to explain any of the terms to her. Ms Fang agreed that she knew Mr Cheng was acting as her solicitor, and that she could ask him anything about the Loan Agreement.
11. On 12 May 2017 Mr Cheng sent an email to Ms Fang and Mr Ye which attached a copy of the Loan Agreement as executed by the parties.

Later events

1. Subsequently, there were various WeChat communications between Mr Ye and Ms Fang in relation to their dealings. Some of these became the subject of the cross-examinations of Mr Ye and Ms Fang. Both sides sought to place reliance on parts of these communications as support for their case or as contrary to the case of their opponent. I have considered these messages. However, in my view, none of these communications (which were translated into English) provided strong support for either case or contained clear admissions of significance. Similarly, I do not think that the evidence given by Yuqin Liu, about a conversation she had with Mr Ye in about May 2017, is of significance. The conversation concerned dealings between Mr Ye and Cola. Mr Ye gave evidence that he advanced other money to Cola at about that time. It is likely that the conversation was concerned with that money, not the $383,000 the subject of the claim in these proceedings.
2. In early November 2018, Mr Ye lodged a caveat on the title to the Lidcombe property, claiming an interest as a chargee pursuant to the executed Loan Agreement.
3. On 21 November 2018, solicitors acting for Ms Fang and the company sent a letter to Mr Ye's solicitors. The letter attached a Notice of Termination from Ms Fang and the company to Mr Ye, which stated that the borrowers did not receive payment of the loan sum by the drawdown date of 7 February 2017, and that the borrowers hereby give notice that the Loan Agreement "is terminated on 23 November 2018".
4. It is not in dispute that the defendants have not paid any part of the amount the plaintiff claims is owing to him, or any amount of interest. The plaintiff claims that a principal amount of $383,000, and interest of $120,000, became due to him on 6 February 2019.

Credibility and reliability of witnesses

1. The crucial witnesses in the case are of course Mr Ye, Ms Fang and Mr Cheng.
2. I have no hesitation in stating that I regard Mr Cheng as a witness who told the truth to the best of his ability, as far as his recollection of events would allow. His recollection of the details of some of the conversations was understandably sketchy, but overall I consider that his accounts of the conversations were broadly accurate. His ability to recall aspects of some of the conversations was aided by contemporaneously made file notes, including in respect of conversations he had with Cola and Ms Fang on 8 February 2017. In that regard, I accept Mr Cheng's evidence that during a telephone conversation with Ms Fang he spoke to her about the matters he had discussed and noted during his meeting with Cola. These matters included: Ms Fang and the company borrowing $250,000 from Mr Ye (an amount said to have been "paid already"); interest of $50,000; a two year term (7 February 2017 to 6 February 2019); and security by way of a caveat. I further accept that after Mr Cheng spoke about those matters, Ms Fang told Mr Cheng that she knew all about them, and that the money was for working capital. I further find that Ms Fang asked Mr Cheng to go ahead with the drafting of a loan agreement. Ms Fang's firm denial that any such conversation occurred must therefore be rejected. I note that Ms Fang maintained in cross-examination that she was certain that Mr Cheng did not call her on that occasion.
3. These findings, and my generally favourable impression of Mr Cheng as a witness, lead me to conclude not only that Mr Cheng's testimony should be preferred to that of Ms Fang where they are in conflict, but also that Ms Fang's evidence generally has to be treated with considerable caution.
4. Some other aspects of Ms Fang's evidence reinforced that conclusion. For example: 1. Ms Fang was inconsistent in relation to the purpose of the proposed loan from Capital Securities XVI Pty Ltd. In her affidavit she said it was to assist Cola with cashflow requirements for the Gloria Jeans store. In cross-examination she said it was for her business at 500 George Street; and 2. Ms Fang's evidence in relation to the emails she received from CS Lawyers was problematic. Ms Fang deposed that she didn't check the content of any of the emails she received from CS Lawyers "as the emails were addressed to Cola in addition to me". On her own evidence, she must have examined the emails closely enough to notice the addressees. If that is so, she would have also noticed the subject headings of the emails. Those headings plainly showed that the solicitors were working on a loan transaction involving Ms Fang and the company. One of the headings also referred to Mr Ye and "security". In cross-examination, Ms Fang denied that the reason she didn't read the emails was because she trusted Cola to deal with the solicitors. If that denial was true, it seems implausible that Ms Fang would not have opened the emails and read them to at least some extent, yet she claimed that the emails remained marked "unread" until July 2019. Further, Ms Fang confirmed in cross-examination that the CS Lawyers emails were sent to the email address she used for her businesses. She went on to say that she only checked her emails about once every two weeks. I found that evidence implausible too.
5. Considering her evidence as a whole, I have come to the conclusion that Ms Fang's testimony should not be relied upon except to the extent that it is against her interest or corroborated by other evidence that is of a reliable nature.
6. Whilst I have some misgivings about the accuracy of Mr Ye's evidence insofar as it is based on recollection and not corroborated by contemporaneous documentary evidence, I formed a reasonably favourable impression of him as a witness. I note that his counsel conceded that at times Mr Ye "presented as less than an ideal witness". That is so, particularly on the occasions that he gave answers that were somewhat lengthy, self-serving and not entirely responsive to the question asked. Also, there were some inconsistencies in his evidence (for example as to whether the money he advanced to Cola in May or June 2017 was a loan). Nevertheless, I think that for the most part Mr Ye attempted to give an accurate account of the events as he recalled them. At least in relation to the meeting on 5 or 6 February 2017, Mr Ye's account gains support from the evidence given by Mr Cheng about his meeting with Cola and telephone conversation with Ms Fang on 8 February 2017. I generally prefer his evidence to that of Ms Fang.
7. In making these observations about Ms Fang and Mr Ye I have taken into account the fact that in each case English is not their preferred language. However, both appeared to have enough proficiency in English to be well capable of understanding the questions put to them, even if on occasions the questions needed to be repeated.

Determination

1. I am satisfied that on 5 or 6 February 2017 there was a meeting at the 500 George Street café between Mr Ye, Ms Fang and Cola at which the terms of a loan from Mr Ye to Ms Fang and the company were discussed. I am further satisfied that a binding agreement was on that occasion reached between those parties, albeit that it was contemplated that they would later enter into a written loan agreement which would henceforth contain the terms of the loan.
2. Mr Cheng's evidence of his conversations with Cola and Ms Fang on 8 February 2017, and in particular the content of his file note, firmly support a conclusion that a discussion of the character of that recalled by Mr Ye did indeed take place. His account, which is based only on his recollection, is no doubt incomplete in some respects, including as to some matters of detail. However, I am prepared to accept Mr Ye's evidence in this regard as a reasonably accurate summary of most of what was said at the meeting.
3. In my opinion, the evidence shows that the discussion concerned a loan from Mr Ye in an amount of at least $250,000 and up to $300,000 for the purpose of establishing a new shop on George Street. There was discussion about Ms Fang being the borrower and the provider of security for the loan. It is likely, based on Mr Cheng's file note, that the company was also spoken of as being a borrower and provider of security. It was agreed that the interest rate would be 20%. I infer from Mr Cheng's file note that the 20% was an annual rate, and that it was agreed that the term of the loan would be two years. It seems likely that Ms Fang offered to provide security over her property at Lidcombe, in respect of which Mr Ye would have a caveat, and further offered security over the assets of the company. I infer that Mr Ye was agreeable to that. There was also discussion about an initial advance of $100,000, to be made promptly, with other advances to be made as required. There was also discussion about having solicitors prepare a written agreement for the parties to enter into. I am satisfied that in the course of the meeting consensus was reached between Mr Ye and Ms Fang (for herself and the company) on the terms of a loan agreement as described above. In my opinion, viewing the matter objectively, Mr Ye, Ms Fang and the company should be taken to have intended to be immediately bound to the terms of the agreement in circumstances where it was contemplated that at least $100,000 would be advanced promptly and before the written agreement was entered into.
4. I am also satisfied that Ms Fang said that the initial $100,000 should be paid into Cola's account, and that Cola provided the details of the account to Mr Ye. Mr Ye arranged for the $100,000 to be transferred accordingly on 7 February 2017.
5. This payment was an advance made pursuant to the terms of the agreement made on 5 or 6 February 2017. The payments made into Cola's account on 8 February, 21 February, 27 February and 10 March 2017 (totalling a further $185,000) were in my view also made pursuant to the terms of the agreement. The payments were arranged by Mr Ye for the purpose of fulfilling his obligations under the agreement. It does not matter whether the funds were owned by Mr Ye when they were paid. The payments were made on instructions given by Cola, who had Ms Fang's authority to give such instructions. I prefer Mr Ye's evidence to that of Ms Fang in relation to the WeChat call which occurred on or about the day the transfer of $99,000 was made. Aside from my general preference for his evidence over that of Ms Fang, it seems to me that Ms Fang telling Mr Ye that Cola could give directions for the making of advances is consistent with the apparently close business and personal relationship that existed between Ms Fang and Cola at that time. In this regard, I note that they were the shareholders in the recently incorporated WS Espresso Pty Ltd, which became the operator of the Wynyard store.
6. In accordance with the agreement made on 5 or 6 February 2017, steps were taken to have a written agreement prepared. Cola met Mr Cheng in relation to the matter on 8 February 2017. By that time, almost $200,000 had already been advanced by Mr Ye. Mr Cheng's note to the effect that all of the $250,000 had already been paid is inaccurate and may be an error on his part. Nothing of significance turns on that. Subsequently, Mr Cheng took steps to have his instructions confirmed by Cola and Ms Fang, by means of his emails to them on 9 February and 15 February 2017. It is not clear whether Mr Cheng received any express confirmation from either Cola or Ms Fang in that regard, but it is likely that he did so before providing the draft Loan Agreement to them on 17 February 2017.
7. The various emails sent by CS Lawyers in February 2017 were undoubtedly received by Ms Fang. I find that she at least noticed their subject headings and was thus aware that the solicitors were working on a secured loan transaction involving herself and the company. If, as she claims, she did not proceed to read the emails, that conduct ought be seen as a reflection of her placing trust in Cola to deal with the solicitors on the matter on her behalf and on behalf of the company.
8. Various amendments were made to the draft Loan Agreement. I infer from the updated draft Loan Agreement sent on 20 February 2017 that by that time instructions had been given that $300,000 would be borrowed.
9. I accept that Mr Ye had a meeting with Cola and Ms Fang at the 500 George Street café on about 18 March 2017. Ms Fang's denial that any such meeting occurred is accordingly rejected. I am also prepared to accept that there was a discussion, substantially to the effect of that deposed to by Mr Ye, about the making of a further advance that would have the effect that the current agreed maximum of $300,000 would be exceeded.
10. It is clear from Mr Ye's account that it was envisaged that an advance could be made that would result in an amount of $83,000 being lent over and above the $300,000 amount. It is also clear from that account that the $83,000 was not to be included in the Loan Agreement that was expected to be soon entered into. There was, however, some discussion to the effect that the Loan Agreement might at some later stage be amended to include the $83,000.
11. The plaintiff contended that the effect of the discussion on about 18 March 2017 was an oral variation of the agreement made on about 5 or 6 February 2017. I do not think that is the correct analysis of the situation. It is not necessary, of course, to fit contract cases within the three classes identified in Masters v Cameron (1954) 91 CLR 353 at 360, or the fourth class identified in Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 at 628 (see Pavlovic v Universal Music Australia Pty Ltd (2015) 90 NSWLR 605; [2015] NSWCA 313 at [67]-[69]). However, I agree with the plaintiff's submission that the agreement reached on 5 or 6 February 2017 was in the nature of an agreement falling within the so-called fourth class identified in the Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (supra). That is to say, it seems to me that Mr Ye, Ms Fang and the company became immediately bound by the terms agreed on 5 or 6 February 2017, but expected to enter into a further contract in writing that would take the place of the first contract and may contain, by consent, additional terms. I think that the parties should be taken to have contemplated that additional terms might be added, as the agreement was reached on 5 or 6 February 2017 in circumstances where the borrowers were pressing for an immediate advance of $100,000, and there was little time in which to work through all the details of the transaction. In these circumstances, and bearing in mind that the further written agreement had not yet been made, it is difficult to regard what occurred on about 18 March 2017 as a variation of the agreement made in February 2017. It seems to me that the agreement in relation to the additional $83,000 advance is an agreement separate from the agreement made in February 2017 which concerned advances of between $250,000 and $300,000. The additional $83,000 could have been made the subject of the further written agreement but the parties deliberately chose not to do so. I note that the plaintiff did not plead that the $83,000 advance was the subject of any separate agreement.
12. If it is correct that what occurred on about 18 March 2017 amounted to a variation of the February 2017 agreement, the variation would not stand apart from the written Loan Agreement eventually entered into. The parties intended that the later written agreement would take the place of the earlier agreement. That substitution would include, or encompass, any variations to the February 2017 agreement.
13. In late March 2017 some further amendments were made to the draft Loan Agreement. It nonetheless continued to state that the amount of the loan was $300,000. Mr Cheng had received some further instructions on 22 March 2017, and I accept his evidence that he met with Ms Fang and Cola on 27 March 2017 and discussed the draft Loan Agreement with them. Again, I reject Ms Fang's denials to the contrary. By that time, it was proposed that WS Espresso Pty Ltd would be added as a borrower.
14. The parties entered into the Loan Agreement on 11 May 2017 when they each signed it. Having so signed the Loan Agreement, each of the parties became bound by its terms (see Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471; [2004] HCA 55 at [33]). Ms Fang accepted that she knew the instrument was a loan agreement. She should thus be taken to have known that she signed a contractual document. The document is binding upon her, and the company, even if she did not read it (see Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; [2004] HCA 52 at [57]). It was not suggested that the instrument was vitiated by any factor such as fraud, mistake, misrepresentation or unconscionable conduct. Indeed, the Notice of Termination given on 21 November 2018 implies that a valid agreement was entered into, but was liable to be terminated due to default on the part of Mr Ye.
15. In any event, even in the absence of a file note, I am comfortably satisfied by Mr Cheng's evidence that he provided an explanation of the Loan Agreement to Ms Fang (in the absence of Cola) such that she had an understanding of the main provisions of the Loan Agreement when she signed it. Those provisions included: the acknowledgement that $300,000 had been paid on the Drawdown date of 7 February 2017; the requirement for that sum and the interest of $120,000 to be repaid by 6 February 2019; that she and the other borrowers were providing security for the repayment of the loan; and that in her case the security was over her Lidcombe property. I further accept that after the explanation, and before signing the Loan Agreement, Ms Fang told Mr Cheng that she understood the agreement. I reject the assertion made by Ms Fang in her first affidavit that at the time of signing she believed that no monies had yet been advanced by Mr Ye. I find that she was aware that Mr Ye had advanced money, and that the amount advanced was at least $300,000.
16. It follows from the above that Ms Fang and the company were obliged to repay the sum of $300,000, together with the agreed interest, by 6 February 2019. No repayments of either principal or interest were made in the interim. Accordingly, Ms Fang and the company were obliged to pay the sum of $420,000 to Mr Ye on 6 February 2019. The debt remains unpaid. Mr Ye is entitled to judgment accordingly, plus interest pursuant to s 100 of the Civil Procedure Act 2005 (NSW) from that date up to the date of judgment. The interest has been calculated as $28,677.81 up to 3 June 2020.
17. I do not think that Mr Ye is entitled to succeed in respect of the additional $83,000. As I have said, this was the subject of a separate agreement which did not form part of the pleaded case. In closing submissions, counsel for the plaintiff advanced some alternative grounds upon which the $83,000 might be able to be recovered (including pursuant to a separate contract, or on restitutionary grounds). Counsel appeared to accept that those grounds were "not necessarily pleaded in the Statement of Claim". The defendants made it clear at the outset of the hearing that they would seek to hold the plaintiff to his pleading. No application to amend was subsequently made. I do not think it would be appropriate to permit a departure from the pleadings in these circumstances.
18. As noted earlier, the plaintiff seeks a declaration that he has an equitable charge over Ms Fang's Lidcombe property. The defendants did not submit that if the Loan Agreement was enforceable against them, it was nonetheless ineffective to create an equitable charge over the property. In my view, the terms of clauses 5(a), 5(b) and 5(d) of the Loan Agreement, read with the Third Schedule, evince an intention to create an equitable charge over the Lidcombe property in favour of Mr Ye. By clause 5(b), the monies owing under the Loan Agreement are to be secured by the securities described in the Third Schedule. One of those securities is described as a caveat over the Lidcombe property. By clause 5(a), the Borrower agrees to "execute" such a caveat. I would take that to mean an agreement that the owner of the property (Ms Fang) would consent to the lodgement of a caveat by Mr Ye. In addition, clause 5(d) provides that if the loan is not fully repaid by 6 February 2019, Mr Ye may exercise a power to sell the property. By these provisions the Lidcombe property was appropriated to Mr Ye for payment of amounts owing to him under the Loan Agreement (see Roberts v Investwell Pty Ltd (in liquidation) [2012] NSWCA 134 at [26]-[29]). Accordingly, it is appropriate for the Court to make a declaration to the effect that under the terms of the Loan Agreement, Ms Fang granted an equitable charge in favour of Mr Ye to secure repayment to him of amounts owing under the agreement. I do not see any need for any other declaratory relief in relation to the Loan Agreement.
19. The plaintiff accepted that as the registered mortgagee of the Lidcombe property is not a party to the proceedings, it is not presently appropriate to seek orders for judicial sale. The plaintiff suggests that if he is otherwise successful in obtaining a monetary judgment, and if such judgment is not satisfied within a certain period, then the plaintiff could seek judicial sale orders by way of a Notice of Motion that named the mortgagee as a respondent. This may be an appropriate course, although I note that there may be costs consequences where the judicial sale issue is effectively required to be dealt with as a separate question due to the failure of the plaintiff to join a necessary party. This matter, and the question of costs of the proceedings to date, should be considered by the parties, and they should confer to see if any agreement can be reached as to appropriate orders or directions. The parties will be directed to submit proposed Short Minutes of Order, whether agreed or not, within 14 days.

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