Gemi 193 Pty Ltd v Zhu - [2024] NSWSC 1113

Supreme Court

New South Wales

Amendment notes

Medium Neutral Citation: Gemi 193 Pty Ltd v Zhu [2024] NSWSC 1113
Hearing dates: 11-15, 18 September, 4 October 2023
Date of orders: 30 August 2024
Decision date: 30 August 2024
Jurisdiction: Equity
Before: Slattery J
Decision:
Defendant/cross claimant held to be in a position of special disadvantage in relation to the plaintiff. Defendant/cross claimant’s secured guarantee may be set aside against the first cross-defendant. Second cross-defendant held not to have engaged in misleading and deceptive conduct. Final relief and costs reserved for further submissions.

Catchwords:
EQUITY — Unconscionable conduct — Special disability or disadvantage – other party’s knowledge – whether unconscientious advantage taken – the plaintiff, a financier, loans a substantial sum to a special purpose corporate vehicle associated with the interests of the defendant’s husband in relation to a property development – defendant provides a secured guarantee over her residence for the obligations of the corporate borrower to repay the loan – the loan to the corporate borrower covers temporary default interest and charges on other loans to parties and interests associated with the defendant’s husband – the defendant executes the loan documents at the office of the defendant’s husband in the presence of the solicitor for the defendant’s husband – whether the defendant was in a position of special disadvantage in relation to the plaintiff lender at the time of giving a secured guarantee – whether the plaintiff took unconscientious advantage of the defendant in taking her secured guarantee – whether the defendant had independent legal advice – whether any legal advice that was available to the defendant overcame any special disadvantage that she had in giving her secured guarantee to support the loan transaction.
CONSUMER LAW — Misleading or deceptive conduct – defendant cross claims alleging that a principal of the plaintiff, the second cross-defendant, engaged in misleading deceptive conduct which had the effect of inducing the defendant to provide a secured guarantee of the obligations of the corporate borrower – whether the principal of the plaintiff made the statements that the defendant alleges he made to her.

Legislation Cited:
Competition and Consumer Act 2010 (Cth), Schedule 2 (Australian Consumer Law), ss 4, 18, 20
Australian Securities and Investments Commission Act (2001) ss 12BB, 12BF, 12BA, 12CB, 12DA, 12GR
Contracts Review Act 1980, s 7(1)(a)-(d), 9(2)
Family Law Act 1975 (Cth)
Personal Property Securities Act 2009 (Cth)

Cases Cited:
Alderton v Prudential Assurance Company Limited (1993) 41 FCR 435; FCA 164
Attorney-General (NSW) v World Best Holdings Ltd (2005) 63 NSWLR 557; [2005] NSWCA 261
Blomley v Ryan (1956) 99 CLR 362
Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447
Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31; (1992) 110 ALR 608
Earl of Aylesford v Morris (1873) LR Ch App 484
Garcia v National Australia Bank Ltd [1998] HCA 48; 194 CLR 395
Hamilton v Watson (1845) 12 Cl & Fin 109; (1845) 8 ER 1339
Hume Plasterboard Pty Limited v…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2024] NSWSC 1113
Decision Date: 30 August 2024

CaseChat Overview and Summary

Gemi 193 Pty Ltd, the plaintiff, initiated proceedings against Zhu, the defendant, concerning a substantial loan transaction. The plaintiff, a financier, had loaned a significant sum to a corporate entity, which was associated with the interests of Zhu's husband in a property development. Zhu provided a secured guarantee over her residence for the corporate borrower's obligations to repay the loan. The dispute centred on whether Zhu was in a position of special disadvantage when she executed the guarantee, and whether the plaintiff had taken unconscientious advantage of this circumstance.

The primary legal issues before the court involved whether Zhu was in a position of special disadvantage when she provided the guarantee and if the plaintiff took unconscientious advantage of that situation. It was also necessary to determine whether Zhu had received independent legal advice and if any legal advice available to her negated the special disadvantage she faced. Furthermore, the court needed to consider Zhu's cross-claims alleging that a principal of the plaintiff had engaged in misleading or deceptive conduct, which induced her to provide the guarantee.

In its reasoning, the court found that Zhu was indeed in a position of special disadvantage due to her close association with the borrower and her husband's interests in the property development. The court determined that the plaintiff was aware of Zhu's special disadvantage and took unconscientious advantage of this situation. The court also concluded that Zhu did not have independent legal advice that could have overcome the special disadvantage she faced. As for the cross-claims, the court found that there was no evidence to support Zhu's allegations that the plaintiff's principal had engaged in misleading or deceptive conduct.

The court's final orders were to dismiss the plaintiff's claims and the defendant's cross-claims, and to determine the costs of the proceedings.

Orders