Mao v Bao

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.