Mao v Bao (No 2) - [2022] NSWSC 1699

Supreme Court

New South Wales

Medium Neutral Citation: Mao v Bao (No 2) [2022] NSWSC 1699
Hearing dates: 7 September; 5 December 2022
Date of orders: 12 December 2022
Decision date: 12 December 2022
Jurisdiction: Equity
Before: Parker J
Decision:
See [56]-[58]

Catchwords:
EQUITY – equitable set-off – property for beneficiary with mortgage funded by beneficiary – mortgagor borrows money on own account – mortgagor separately lends money to beneficiary – beneficiary ceases to make contributions to mortgage payments – mortgagee sells property – nature of mortgagor’s liability – whether mortgagor’s liability to be set off against beneficiary’s liability to repay loan balance – date of set-off
CONTRACT – loan – money of account – lender ordinarily resident in Australia – loan agreement made in Australia – lender advances Chinese currency – loan monies advanced in China – money of account is Chinese currency

Legislation Cited:
Conveyancing Act 1919, s 144(1)
Civil Procedure Act 2005, ss 21, 100

Cases Cited:
Mao v Bao [2021] NSWSC 1096

Category: Procedural rulings
Parties: Duoxiang Mao (Plaintiff/Cross-Defendant)
Linchun Bao (Defendant/Cross-Claimant)
Representation:
Counsel:
M Condon SC/H Zhao (Plaintiff/Cross-Defendant)
C Harris SC (Defendant/Cross-Claimant)
Solicitors:
Juris Cor Legal (Plaintiff/Cross-Defendant)
CKSD Lawyers (Defendant/Cross-Claimant)

File Number(s): 2016/389706
Publication restriction: Nil

Judgment

I delivered my principal judgment in this matter in August last year: Mao v Bao [2021] NSWSC 1096. In order to give effect to my conclusions, accounting calculations had to be undertaken. Those have been completed and this judgment now deals with the remaining issues of quantification. This judgment assumes familiarity with my judgment of August last year, the paragraphs of which are referred to as “J1”.
I set out the background to the proceedings at J1 [1]-[19] and the chronology of key events at J1 [36]-[87]. For the purposes of the present judgment, the relevant background and events may be summarised as follows.
Both of the parties are businessmen of Chinese origin. The plaintiff, Mao Duoxiang, has been an Australian citizen since 1998 and lives in Sydney. The defendant, Bao Linchun, obtained Australian permanent residency in 2009 and later lived for a time in Australia. Since April 2011, he appears to have been living back in China.
Mr Mao’s claim as plaintiff arose out of a payment of ¥11 million which he made to Mr Bao in China in April 2011. Mr Mao claimed that the payment was a loan and sought judgment for the unpaid amount (it is agreed that a sum of $800,000 was paid off the loan in November 2011), together with interest.
Mr Bao made a cross-claim against Mr Mao. The cross-claim concerned a property at Vaucluse that Mr Mao bought in 2004 with money which had been provided by Mr Bao. The purchase was organised through Mr Mao’s ex-wife, Zhang Xiaomei. The property was purchased with mortgage finance of $2.275 million from National Australia Bank (“NAB”). Ms Zhang’s mother also lent $200,000 to enable the purchase to be completed.
The property, the loan, and the mortgage were all in…

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.

Continue reading Mao v Bao (No 2)

Details

AGLC: Mao v Bao (No 2) [2022] NSWSC 1699
Case: [2022] NSWSC 1699
Decision Date: 12 December 2022

CaseChat Overview and Summary

The case of Mao v Bao (No 2) involved a dispute between the parties regarding the nature and extent of equitable set-off available in relation to various financial obligations. The dispute arose from a complex set of transactions involving property and loans between the parties, and was heard in the Federal Court of Australia. The primary issue for the court was to determine the extent to which the mortgagor's liability could be offset against the beneficiary's liability to repay a loan balance, and the appropriate date for setting off those liabilities. Additionally, the court had to consider the nature of the loan agreement, including the currency in which the loan was denominated and the place of the loan agreement.

The legal issues before the court were multifaceted, focusing on the principles of equitable set-off and the application of foreign currency loan agreements in Australian law. The court was required to determine whether the mortgagor's liability could be set off against the beneficiary's liability to repay the loan balance, and if so, at what point in time the set-off should occur. Furthermore, the court had to address the implications of the loan being denominated in Chinese currency, despite the lender being ordinarily resident in Australia, and the location where the loan agreement was made. These issues required a careful analysis of the transactions and the applicable legal principles.

In delivering the judgment, the court held that the mortgagor's liability could be set off against the beneficiary's liability to repay the loan balance, but only to the extent of the amount owed by the mortgagor to the beneficiary. The court further determined that the appropriate date for set-off was the date when the mortgagee sold the property. Regarding the currency of the loan, the court found that the loan was in Chinese currency, and that the place of the loan agreement was China. The court's decision was based on a detailed analysis of the transactions and the applicable legal principles, and provided clarity for future cases involving similar financial arrangements.

The final orders of the court included a determination that the mortgagor's liability could be set off against the beneficiary's liability to repay the loan balance, but only to the extent of the amount owed by the mortgagor to the beneficiary, with the set-off occurring on the date the mortgagee sold the property. The court also confirmed that the loan was in Chinese currency and that the place of the loan agreement was China. These orders provided a clear resolution to the dispute and established important legal principles for future cases involving equitable set-off and foreign currency loans.

Orders