Ward ACJ at [1]; White JA at [199]; Mitchelmore JA at [246]
Decision:
1. Allow the appellant’s appeal with costs.
2. Set aside the orders made by the primary judge on 16 December 2022 and in lieu thereof order that judgment be entered for the appellant against the respondent in the sum of $3,491,289.50, comprising:
(i) the value of the appellant’s claim as at 5 May 2014 ($2,069,020) plus interest on that claim at 24% per annum from 6 May 2014 to 12 December 2022, minus
(ii) the value of the respondent’s claim as at 5 May 2014 ($2,050,084) plus interest on that claim at the pre-judgment interest rate prescribed by the Supreme Court from 6 May 2014 to 12 December 2022.
3. Dismiss the cross-appeal with costs
Catchwords:
EQUITY – Set-off – Where the appellant had been ordered to account to the respondent in respect of moneys drawn under a mortgage facility secured over property held for the respondent’s benefit and the respondent had been ordered to re-pay the appellant sums owing under a loan unrelated to the mortgaged property – Whether the two claims were sufficiently closely connected that one could be said to impeach the other in the sense required for an equitable set-off.
EQUITY – Whether Brickenden principle (see Brickenden v London Loan & Savings Co [1934] 3 DLR 465) that prohibits speculation by defaulting fiduciaries as to counterfactuals had the default not occurred has application to the issues raised as to equitable set-off in the present case.
[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
AGLC
Mao v Bao [2023] NSWCA 278
Case
[2023] NSWCA 278
Decision Date
CaseChat Overview and Summary
The appeal concerned a dispute between Mao (appellant) and Bao (respondent) regarding claims for money owed. The primary judge had ordered Mao to account to Bao for moneys drawn under a mortgage facility secured over property held for Bao's benefit. Conversely, Bao was ordered to repay Mao sums owing under a separate loan agreement. The central question was whether these two distinct claims were sufficiently connected to allow for an equitable set-off, meaning one claim could be used to reduce or extinguish the other.
The legal issues before the Court of Appeal were whether the claims were sufficiently connected for equitable set-off and whether the principle established in *Brickenden v London Loan & Savings Co* applied. The *Brickenden* principle generally prohibits defaulting fiduciaries from speculating about hypothetical counterfactual scenarios had the default not occurred. The court had to determine if this principle was relevant to the equitable set-off arguments presented in this case.
The Court of Appeal allowed the appeal, finding that the primary judge erred in their assessment. The court reasoned that the claims were not sufficiently connected to warrant an equitable set-off. The court also determined that the *Brickenden* principle was not applicable to the circumstances of this case. Consequently, the orders of the primary judge were set aside.
Judgment was entered for the appellant, Mao, against the respondent, Bao, in the sum of $3,491,289.50. This amount was calculated by taking Mao's claim as at 5 May 2014, with accrued interest, and subtracting Bao's claim as at the same date, also with accrued interest. The cross-appeal by Bao was dismissed.
Orders
Orders of the court
1. Allow the appellant’s appeal with costs.
2. Set aside the orders made by the primary judge on 16 December 2022 and in lieu thereof order that judgment be entered for the appellant against the respondent in the sum of $3,491,289.50, comprising:
(i) the value of the appellant’s claim as at 5 May 2014 ($2,069,020) plus interest on that claim at 24% per annum from 6 May 2014 to 12 December 2022, minus
(ii) the value of the respondent’s claim as at 5 May 2014 ($2,050,084) plus interest on that claim at the pre-judgment interest rate prescribed by the Supreme Court from 6 May 2014 to 12 December 2022.