Liang v Dai

[2019] NSWDC 595

District Court

New South Wales

Medium Neutral Citation:	Liang v Dai [2019] NSWDC 595
Hearing dates:	17 October 2019
Date of orders:	24 October 2019
Decision date:	24 October 2019
Jurisdiction:	Civil
Before:	Scotting DCJ
Decision:	(1)   Verdict for the plaintiff in the sum of $550,691.25. (2)   The defendant is to pay the plaintiff’s costs of the proceedings on the ordinary basis. (3)   In the event that either party seeks an alternative order as to interest and/or costs, I grant leave to the parties to approach      my Associate to list the matter for hearing of such an application.
Catchwords:	CONTRACTS — Breach of contract — Consequences of breach — Construction — Extrinsic evidence — Prior negotiations — Formation — Consideration — Deeds - Formation — Incompleteness — Essential or important matter yet to be agreed - Parties — Privity — Agency
Cases Cited:	ANZ Banking Group Ltd v Frost Holdings Pty Ltd [1989] VR 695 Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109 Australian Broadcasting Corp v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 Axelsen v O’Brien (1949) 80 CLR 219 at 226 Candish Nominees Pty Ltd v Colaw Pty Ltd [1987] 4 SR (WA) 242 Cherry v Park-Steele [2017] NSWCA 295 Chesterfield and Midland Silkstone Colliery Co (Ltd) v Hawkins (1865) 159 ER 698 Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 91 ALJR 486 Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 Greer v Kettle [1938] AC 156 Hall v Busst (1960) 104 CLR 206 Hart v MacDonald (1910) 10 CLR 417 Hope v RCA Photophone of Australia Pty Ltd (1937) 59 CLR 348 Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68 MacDonald v Shinko Australia Pty Ltd [1999] 2 Qd R 152 Mainteck Services Pty Ltd v Stein Hurley SA (2014) 89 NSWLR 633 McGrath v Suresteps; Suresteps v HIH Overseas Holdings Ltd (in liq) (2011) 81 NSWLR 690 Montgomerie v United Kingdom Mutual Steamship Association Ltd [1891] 1 QB 370 Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 Newey v Westpac Banking Corporation [2014] NSWCA 319 Scammel v Onston [1941] AC 251 Schack v Anthony (1813) 105 ER 214 Teheran-Europe Co Ltd v S T Belton (Tractors) Ltd [1968] 2 QB 53 Thorby v Goldberg (1964) 112 CLR 597 Tipperary Developments Pty Ltd v Western Australia (2009) 38 WAR 488 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 Whitlock v Brew (No 2) (1968) 118 CLR 445 WIN Corporation Pty Ltd v Nine Network Pty Ltd [2016] NSWCA 297
Category:	Principal judgment
Parties:	Duan Liang (Plaintiff) Meng Dai (Defendant)
Representation:	Counsel: C Tam (Plaintiff) D Weinberger (Defendant)   Solicitors: Holding Redlich (Plaintiff) Piper Alderman (Defendant)
File Number(s):	2019/188408
Publication restriction:	None

Judgment

Introduction

1. The plaintiff seeks damages for breach of a loan agreement between the parties in the sum of $488,700 plus interest calculated at 10% per annum in accordance with the agreement.

2. The loan agreement was recorded in a Deed of Loan dated 19 July 2018 and a Deed of Variation dated 22 May 2019.

3. The defendant, Meng (Adam) Dai, contends that the loan agreement was not with the plaintiff but with either Nan (Sylvia) Zhao or a company within the One Pro Group of Companies. Further or in the alternative, the defendant contends that the loan agreement concluded by him was done so on behalf of a company, Ming Tian Pty Ltd (Ming Tian) of which he is the sole director and shareholder.

Facts

4. In December 2017, One Pro Group Baulkham Hills Pty Ltd (OPGBH) was the owner of real property at 93 Windsor Road Baulkham Hills (the property). It intended to develop the property by constructing 40 townhouses on it (the project).

5. On 17 December 2017 OPGBH entered into a contract with Ming Tian to construct the townhouses (the Construction Contract). It was a term of the Construction Contract that Ming Tian would provide security for its obligations by providing unconditional bank guarantees or by allowing the retention of 2.5% of the contract sum from each progress payment due to it.

6. At all relevant times, Ms Zhao was employed as the General Manager of One Pro Investment Group Pty Ltd (One Pro) and had the day to day responsibility for managing the project on behalf of OPGBH. Ms Zhao is the daughter of Zhijian Zhao, the sole director of OPGBH. The plaintiff, Duan (Jasmine) Liang, was employed as the Financial Manager of One Pro and worked under the supervision of Ms Zhao.

7. In or about mid-2018, Ms Zhao and the plaintiff negotiated finance for the project with CVS Lane 57 Pty Limited (CVS). OPGBH and CVS reached in principle agreement for the provision of finance for the project.

8. It was a requirement of CVS that OPGBH, CVS and Ming Tian enter into a tri-partite agreement relating to the project (the Builder’s Side Deed). It was a further requirement of CVS that Ming Tian provide security for its obligations under the Construction Contract by way of unconditional bank guarantees in an amount of 5% of the contract sum, which amounted to a little over $1 million.

9. In or about late June or early July 2018 the defendant informed Ms Zhao in a telephone conversation that Ming Tian could only provide a bank guarantee for $500,000, which was insufficient to meet the requirements of CVS. Ms Zhao deposed in her affidavit that the conversation was to the following effect:

Adam:   I only have half a million and can give a bank guarantee. But that is not enough to meet CVS requirements.

Sylvia:   Are you asking me to lend you the rest?

Adam:   Yes. If you can lend me the rest it works.

10. The defendant deposed that the conversation was to the following effect:

Sylvia:   CVS Lane won’t accept retention monies as security, you will need to provide bank guarantees. We want to finalise the side deed and get this finance in place and get the project started.

Adam:   I understand but you know Ming Tian is not in a position to fund both bank guarantees up front, it will require a deposit of $1 million.

Sylvia:   What if we were to lend you the money to fund one of the bank guarantees, you would have to fund the other.

Adam:   Ok, yes that could work.

Sylvia:   Ok we will arrange the paperwork.

11. On 17 July 2018 Ms Zhao spoke to a solicitor, Ms Tong and asked her to draft a loan agreement for this purpose.

12. Later on that day, the plaintiff sent an email to Ms Tong in the following terms:

…

As discussed with Sylvia, we consider to arrange an interest free loan to Adam (Ming Tian). Some key conditions include:

Principal: $538,703.45

Interest: no interst (sic)

Payback: 10% of Ming Tian claim per month until principal fully paid.

We are not sure whether it is secured if doing this way (sic). And it is our first time to do development (sic), we are not sure in what format the payback is optimal.

Sylvia will give you a call shortly to further discuss it. We are happy you consult Chi on this matte too (sic).

13. At about 6pm on 18 July 2018, Ms Tong sent a draft deed to the plaintiff and Ms Zhao by email.

14. At or around this time, Ms Zhao asked the plaintiff if she would be prepared to be the lender of the funds to be provided to the defendant. The plaintiff agreed that she would do so. Ms Zhao wanted there to be some separation between the parties to the loan because she was concerned that the deal with CVS might fall through if they had further reasons to be concerned about the financial position of Ming Tian. The project had been extensively delayed and OPGBH had sold a number of the townhouses ‘off the plan’ and the sunset date for completion of those sales was 30 June 2020. The market was falling and Ms Zhao was concerned to have the building work commence as soon as possible. Ms Zhao believed that if OPGBH had to find another financier that further extensive delays to the project would be incurred.

15. Later that day, the defendant attended the offices of One Pro in the city. He was asked to wait while the plaintiff and Ms Zhao made some amendments to the Deed of Loan. He was presented with the Deed of Loan and took between 5 and 10 minutes to read it. He then signed it in the presence of Chuanqiang Fu (Ms Zhao’s husband). By this time it was the early hours of 19 July 2018.

16. At the time of signing the Deed of Loan, the defendant made no complaint that it specified the wrong parties to the agreement, to the contrary telling the plaintiff that he was ‘happy with it’. Before leaving One Pro’s office, the defendant gave to the plaintiff a piece of paper with his personal bank account details on it, so that she could transfer the funds to that account.

17. The parties to the Deed of Loan were the plaintiff as lender and the defendant as borrower and guarantor. The recitals to the Deed of Loan stated:

A. The Lender has agreed to lend and the Borrower has agreed to borrow from Lender the Loan Amount on the terms of this Deed.

B. The Borrower has agreed to repay the Loan Amount to the Lender on the terms set out in this Deed.

18. By clause 2 of the Deed of Loan the defendant acknowledged receipt of the Loan Amount (defined as the sum of $538,700) and that it must be repaid fully on the Last Repayment Date.

19. Clause 3(a) of the Deed of Loan set out the repayment schedule. The loan was interest free if the repayments were made on time, otherwise the defendant was obliged to pay interest at the rate of 10% per annum calculated on a monthly basis.

20. Clause 4 of the Deed of Loan provided that any default in making the repayments in accordance with clause 3(a) would render any outstanding amount immediately payable.

21. Clause 6 of the Deed of Loan provided for a personal guarantee by the guarantor of the obligations of the borrower.

22. Clause 11.3 of the Deed of Loan provided that the Deed was the ‘entire Deed and understanding between the parties on everything connected with the subject matter of the Deed’ and ‘supersedes any prior Deed or understanding between the parties on anything concerned with the subject matter’.

23. Shortly after the Deed of Loan was executed Ms Zhao transferred the funds to be loaned to the defendant from her personal bank account to the plaintiff’s personal bank account.

24. On 23 July 2018 the plaintiff transferred the sum of $538,700 to the defendant’s personal bank account.

25. The Builder’s Side Deed was executed on 27 September 2018.

26. On 15 November 2018 a transfer of $50,000 was made from the bank account of Ming Tian to the plaintiff’s bank account. The plaintiff transferred the $50,000 to Ms Zhao. No other repayments were made by the defendant or Ming Tian.

27. On 1 May 2019 OPGBH and Ming Tian executed a Deed of Termination to bring the Construction Contract to an end.

28. Between 9 May 2019 and 16 May 2019 the plaintiff and the defendant corresponded by email and via a messaging service, WeChat, about a repayment plan. At no time in that correspondence did the defendant suggest that the Loan Amount was not owed by him personally or that it was owed to Ms Zhao or a One Pro company.

29. In or about mid May 2019 the plaintiff asked Ms Tong to prepare a Deed of Variation to vary the Deed of Loan.

30. On 22 May 2019 Ms Tong provided the Deed of Variation to the plaintiff. The plaintiff and the defendant met later that day in the Gateway Coffee Shop in the building where One Pro’s office is located. The plaintiff gave the Deed of Variation to the defendant and he read it. The parties then executed the Deed of Variation in the presence of Shuang Shuang Xie, an employee of One Pro.

31. The parties to the Deed of Variation were the plaintiff as lender and the defendant as borrower and guarantor. The recitals to the Deed of Variation provided:

A. The Lender, the Borrower and the Guarantor entered into a Deed of Loan on 19 July 2018.

B. The Deed of Loan provided for the Loan Amount to be paid in instalments pursuant to clause 3 of the Deed of Loan.

C. The parties have agreed to:

(a)   vary the dates for repayment of the Loan Amount; and

(b)   vary the repayment instalments of the Loan Amount.

D. The Borrower has agreed to provide security to the Lender to secure its obligations under the Deed of Loan and this Deed.

32. By clause 2(b) of the Deed of Variation the defendant agreed to repay the Loan Amount in accordance with an alternate repayment schedule. By clause 2(c) of the Deed of Variation interest was specified to be payable at the rate of 10% per annum from the date of the Deed of Loan on any outstanding amount, until the Loan Amount is fully repaid.

33. Clause 2(d) of the Deed of Variation inserted a new clause 13 in the Deed of Loan, to the effect that the defendant would give security over any real property that he owned and giving the plaintiff a caveatable interest in any such property.

34. Clause 4.3 of the Deed of Variation was an entire agreement clause in the same terms as the Deed of Loan (see [22] above).

35. The defendant has not paid any of the repayments of the Loan Amount set out in the Deed of Variation.

Issues of Credit

36. The plaintiff and Ms Zhao were called to give evidence.

37. The plaintiff had considerable difficulties with English. She struggled if the questions put to her were too long and when the cross-examiner spoke too quickly, which occurred on multiple occasions. She appeared to be nervous and this manifested in her smiling and at times almost laughing. I do not believe that she found the experience of giving evidence funny or that she did not take it seriously. I formed the impression that the plaintiff did not have an extensive knowledge of the background to the project. This is not surprising because she was an employee of One Pro and did not have ultimate responsibility for the project. I do not accept her evidence that the repayment schedule was not intended to reflect progress payments under the Construction Contract. She may not have understood the question and in any event nothing in this case turns on her credit. Her explanation for why she entered into the transaction was because Ms Zhao asked her too. I think that this was a truthful answer. She did not accept the proposition that she entered into the transaction to trick CVS and I accept her evidence on this point, and generally. I am of the view that the plaintiff was doing her best to tell the truth.

38. Ms Zhao was an impressive witness. I found her to be careful and considered in her evidence. She deposed to her concerns about CVS and Ming Tian in her affidavit and that she was motivated by her concerns over the delays involved in the project. She accepted these matters in cross-examination. She denied trying to trick CVS and I accept her evidence. I am not satisfied that CVS would have cared where the money came from so long as unconditional bank guarantees were provided. Ms Zhao gave evidence in cross-examination that it was the defendant who asked for the repayment schedule that appeared in the Deed of Loan and she did not know where he got that from. It is likely that her evidence is mistaken on this point, but I am satisfied that she was trying to give honest evidence. Again nothing turns on this point because it was not suggested that I should construe the repayments to have been conditional on payments being made under the Construction Contract. In any event, this argument would fall away with respect to the Deed of Variation because by the time it was entered into the Construction Contract had been terminated.

Statement of the case

39. It is common ground that:

1. the defendant signed the Deed of Loan and the Deed of Variation;

2. the defendant received the Loan Amount;

3. only the sum of $50,000 of the Loan Amount has been repaid.

40. The defendant’s argument is that the action has been pursued by the improper plaintiff against the improper defendant, and that it is only necessary for the defendant to succeed on one of these arguments. The defendant had previously claimed that the agreement was a sham, but abandoned this argument at trial. The defendant did not contend that the Deeds should be rectified.

41. The defendant’s argument as to the improper parties is that there was a concluded agreement as a result of the conversations set out in [9] and [10] above and that the person agreeing to advance the funds was either Ms Zhao personally or in her capacity as an agent of One Pro (I will use this term here to refer to either OPGBH or One Pro) and that the person borrowing the funds was Ming Tian. The defendant submits the plaintiff was the agent of a disclosed principal of either Ms Zhao or One Pro and that he was the agent of the disclosed principal Ming Tian. The ordinary rule applying to disclosed principal agreements is that only the principal and the third party, can sue or be sued on the agreement: Montgomerie v United Kingdom Mutual Steamship Association Ltd [1891] 1 QB 370 at 371 and Candish Nominees Pty Ltd v Colaw Pty Ltd [1987] 4 SR (WA) 242 at 243. On the defendant’s argument, the plaintiff and the defendant were only the agents of their respective disclosed principals and neither can sue or be sued on the agreement.

42. The plaintiff relies on the express terms of the Deed of Loan and the Deed of Variation.

Relevant legal principles

The concluded bargain

43. Where there are imprecise or incomplete negotiations there will often be doubt about whether finality of agreement has been reached. The court’s task in these circumstances is to ascertain from the dealings between the parties whether they intended to make a concluded bargain or not. That intention is to be determined objectively by reference to what a reasonable observer would have concluded: Australian Broadcasting Corp v XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540 at 548-550.

44. In cases where the intention is equivocal, conduct or correspondence following the offer and acceptance can be used as evidence to show whether or not a contract was concluded: Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68.

45. A contract is uncertain if essential terms are uncertain or lacking: Axelsen v O’Brien (1949) 80 CLR 219 at 226. Inessential terms can be filled in by the court, ignored or severed. At least, the parties to the contract, the principal undertakings, the subject matter and the price must be certain: ANZ Banking Group Ltd v Frost Holdings Pty Ltd [1989] VR 695.

46. There can be no binding agreement unless the terms of the bargain, or at least the essential or critical terms, have been agreed on. There is no concluded contract where an essential or critical term is expressly left from future agreement between the parties: Thorby v Goldberg (1964) 112 CLR 597 at 607 per Menzies J.

47. If the parties have negotiated but not reached final agreement or the agreement that they have reached is so unclear as to lack sensible meaning then it is fair to say that a contract has not come into existence: Scammel v Onston [1941] AC 251 at 268-9 per Lord Wright. Whilst the courts should be reluctant to strike down a bargain reached in good faith, the parties must agree on their respective rights and obligations and it is not a matter for the Court to write the agreement for them: Hall v Busst (1960) 104 CLR 206 at 222.

Agency

48. Where an agent enters into an agreement with a third party on behalf of a disclosed principal, the normal rule is that the contract is that of the principal and only the principal and the third party can be sued or sue on the agreement: Montgomerie at 371. To that rule there are a number of exceptions.

49. First, the agent may be added as a party to the contract and appointed as the party to be sued: Montgomerie at 371.

50. Second, where the principal is excluded. This includes where the contract is made by a deed inter partes to which the principal is not a party. In that case, by ancient rule of common law it does not matter whether or not the person made a party is or is not an agent: Montgomerie at 372, Schack v Anthony (1813) 105 ER 214 and Chesterfield and Midland Silkstone Colliery Co (Ltd) v Hawkins (1865) 159 ER 698.

48. A deed inter partes is a deed made between two or more named persons: Tipperary Developments Pty Ltd v Western Australia (2009) 38 WAR 488 at [250] per McLure JA (Wheeler and Newnes JJA agreeing).

Contractual interpretation

52. The task of identifying the legal meaning of provisions in a commercial contract is to identify the imputed intention of the parties by reference to the contractual text construed in the light of its context and purpose: Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at [35] and Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at [46]-[51].

53. A court will take an objective approach to interpreting the contract. In a commercial agreement, the question is what a reasonable business person would have understood the terms to mean, taking into account the language used, the surrounding circumstances known to the parties and the commercial purpose of the objects to be secured. The last requirement is facilitated by understanding the genesis of the transaction, the background, the context and the market the parties are operating in. Unless the contrary is indicated the court is entitled to approach interpretation on the basis that the parties intended to produce a commercial result. A commercial contract should be construed to avoid it making a commercial nonsense or working a commercial inconvenience: Electricity Generation Corporation v Woodside Energy Ltd at [35].

54. Evidence of prior negotiations, which may reflect the subjective intentions of the parties, is admissible only to the extent that it establishes objective facts known to both parties to elucidate with greater precision, the commercial purpose or the subject matter of the contract: WIN Corporation Pty Ltd v Nine Network Pty Ltd [2016] NSWCA 297 at [57].

55. Evidence of the parties’ subjective intentions is not relevant to construction of a contract: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at [40].

56. Evidence in surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning: Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352 per Mason J (Stephen and Wilson JJ agreeing).

57. ‘Admissible’ in this context means use rather than receipt into evidence: Cherry v Park-Steele [2017] NSWCA 295 at [69]. In other words, ambiguity is not required to be established as a gateway, before evidence of surrounding circumstances can be considered: Cherry at [71]. If a written contract is ambiguous, evidence of surrounding circumstances may be tendered and used to assist in its construction: Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 91 ALJR 486.

58. The reference to ‘plain meaning’ by Mason J reflects the primacy of the text of a written contract. The start and end points of the construction of a written contract is the language chosen by the parties to record their agreement: Cherry at [72], Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109 per Gibbs CJ and Mainteck Services Pty Ltd v Stein Hurley SA (2014) 89 NSWLR 633 at [74] per Leeming JA.

59. Evidence of surrounding circumstances cannot be used to detract from the contractual text used by the parties. If after considering the contract as a whole and the background circumstances known to both parties, a court concludes that the language of the contract is unambiguous the Court:

1. must give effect to that language unless to do so would give the contract an absurd operation: Newey v Westpac Banking Corporation [2014] NSWCA 319 at [91]; and/or

2. cannot depart from the ordinary meaning of the words because it regards the result as inconvenient or unjust: McGrath v Suresteps; Suresteps v HIH Overseas Holdings Ltd (in liq) (2011) 81 NSWLR 690 at [17].

60. A party’s subjective intentions can be relevant to issues arising at law (for example non est factum or duress) or in equity (for example equitable estoppel or rescission for innocent misrepresentation or undue influence). Further, if it is alleged that the contract is a sham or should be rectified in equity then such evidence is relevant and essential: Cherry at [58].

61. An entire agreement clause can be effective to exclude extrinsic evidence of additional or different terms: Hope v RCA Photophone of Australia Pty Ltd (1937) 59 CLR 348. An entire agreement clause is not effective to exclude extrinsic evidence of a collateral contract, or evidence relevant to implied terms or rectification: Hart v MacDonald (1910) 10 CLR 417 and MacDonald v Shinko Australia Pty Ltd [1999] 2 Qd R 152.

62. Estoppel by deed is a common law rule of evidence founded on the principle that a solemn and unambiguous statement or engagement entered into by deed must not be contradicted by other evidence. The exceptions to this rule include at law, if the deed is fraudulent or illegal and in equity, if there are proper grounds for rectifying the deed or where the recital sought to be relied on is untrue on the grounds of innocent or fraudulent misrepresentation: Greer v Kettle [1938] AC 156 at 171 per Lord Maugham (Lord Atkin, Lord Macmillan and Lord Roche agreeing).

Consideration

63. I am not satisfied that the conversations referred to in [9] and [10] above constituted a concluded agreement. By the end of that discussion, there was no agreement between the parties about the essential terms including who would be the parties to the loan agreement, the precise amount of the loan, the term of the loan or if interest was to be paid, and if so at what rate. Further, there were no mechanisms discussed to decide these outstanding matters and objectively they were subject to further agreement. According to the defendant’s version of the discussion, the arrangement was to be the subject of Ms Zhao arranging ‘paperwork’ relating to it.

64. The subsequent conduct of the parties supports the conclusion that there was no concluded agreement at that time. Ms Zhao and the plaintiff took steps to reduce the loan agreement to writing in the Deed of Loan. The Deed of Loan provided for the essential terms that were lacking at the end of the discussion. The defendant agreed to those terms by executing the Deed of Loan. Fundamentally, the Deed of Loan conclusively identified the parties to the agreement. The Loan Amount was not advanced until after the Deed of Loan was executed. The Loan Amount was transferred by the plaintiff from her personal bank account to the defendant’s personal bank account.

65. After considering the Deed of Loan, the Deed of Variation and the surrounding circumstances I am satisfied that there is no sufficient reason to ignore or qualify the plain meaning of the language used in the Deeds.

66. The only ambiguity that can be identified in support of the defendant’s argument is that there was no reason to include the personal guarantee in the Deed of Loan if the defendant, as opposed to Ming Tian, was the Borrower.

67. No evidence was led as to why the personal guarantee was included in the Deed of Loan, what the contents of the draft provided by Ms Tong were or what changes to it were made by Ms Zhao and the plaintiff. I am not permitted to speculate as to those matters. The defendant could have cross-examined the plaintiff and/or Ms Zhao about those matters but chose not to. A call was made for certain documents relating to the correspondence with Ms Tong relating to the draft and no complaint was made about a failure to produce any relevant document, such as the draft deed prepared by Ms Tong.

68. The plaintiff has not sought to sue on the personal guarantee in these proceedings. The personal guarantee in context provides merely an alternative way for the plaintiff to recover the funds that were advanced. In the circumstances, those terms relating to the personal guarantee can be severed without affecting the main part of the agreement: Whitlock v Brew (No 2) (1968) 118 CLR 445.

69. It is clear that the commercial purpose of the loan was to provide Ming Tian with the funds required to obtain the unconditional bank guarantees and inferentially this supports that Ming Tian was the Borrower. But that commercial purpose cannot be relied on to contradict the plain meaning of the Deeds.

70. The language of the Deed of Loan and the Deed of Variation is clear. The defendant was the Borrower of the Loan Amount from the plaintiff and was obliged to it in accordance with the repayment schedule specified in the Deed of Loan and subsequently varied in the Deed of Variation. The defendant has failed to comply with those obligations and has breached the agreement contained in the Deed of Loan as varied by the Deed of Variation. The plaintiff is entitled to damages for breach of the agreement.

71. The defendant’s agency argument fails because it failed to take into account the exceptions to the ordinary rule. This includes the common law rule that the parties to a deed are prima facie bound by their agreement.

72. The defendant has not argued that any of the recognised exceptions to this prima facie position apply. First, the defendant expressly abandoned the argument that the agreement was a sham. Second, the defendant has not contended that the Deeds should be rectified.

73. Further, the various statements made by the defendant in the email correspondence and the WeChat messages all confirm the existence of an agreement in which he was personally bound to repay the loan to the plaintiff.

Conclusion

74. The plaintiff is entitled to damages for repayment of the Loan Amount together with interest calculated at 10% per annum in accordance with the agreement.

75. Clause 3(b) of the Deed of Loan as varied by the Deed of Variation provided that interest on the Loan Amount (defined to be the sum of $538,700 in the Deed of Loan) is payable from 19 July 2018 until fully repaid by the Borrower. Interest was stated to be ‘calculated on the basis of the amount outstanding at the time’. On these terms it appears to me that the payment of interest is based on a simple interest calculation from the date of the Deed of Loan to date.

76. Clause 5(b) of the Deed of Loan entitles the plaintiff to all costs of enforcement as part of the Loan Amount where the Borrower fails to comply with his obligations. I have not had the benefit of any submissions as to what consequences flow from this clause.

Orders

77. The orders I make are as follows:

1. Verdict for the plaintiff in the sum of $550,691.25 (including interest at the rate of 10% per annum up to 24 October 2019 (463 days)).

2. The defendant is to pay the plaintiff’s costs of the proceedings on the ordinary basis.

3. In the event that either party seeks an alternative order as to interest and/or costs, I grant leave to the parties to approach my Associate to list the matter for hearing of such an application.

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Decision last updated: 24 October 2019