Shao v Crown Global Capital Pty Ltd (in prov liq) ACN 604 292 140 & Anor

[2025] HCATrans 59

[2025] HCATrans 059

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S46 of 2025

B e t w e e n -

YAKUN SHAO

Appellant

and

CROWN GLOBAL CAPITAL PTY LTD (IN PROV LIQ) ACN 604 292 140

First Respondent

CROWN GROUP HOLDINGS PTY LTD (IN PROV LIQ)

Second Respondent

GAGELER CJ
GORDON J
EDELMAN J
STEWARD J
GLEESON J

TRANSCRIPT OF PROCEEDINGS

AT BRISBANE ON TUESDAY, 2 SEPTEMBER 2025, AT 10.00 AM

Copyright in the High Court of Australia

MR J. HOROWITZ:   May it please the Court, I appear with my learned friend MR M.A. HAZAN for the appellant.  (instructed by Yau & Wang Lawyers)

MR S.A. LAWRANCE, SC:   May it please your Honours, I appear with my learned friends MS C.M.R. ERNST and MS S.T. BRADBURY for the respondents.  (instructed by Mangioni Biggs + Co)

GAGELER CJ:   Thank you, Mr Lawrance.  Mr Horowitz.

MR HOROWITZ:   Thank you, your Honour.  Your Honours have my outline of oral submissions.  I propose to deal with the notice of contention in reply, if that is suitable. 

GAGELER CJ:   Yes, that is fine.  Thank you. 

MR HOROWITZ:   Just an administrative matter to get out of the way in the first instance, the respondents are in provisional liquidation.  If I could just ask the Court to turn to the appellant’s book of further materials at page 26. 

GAGELER CJ:   Say that page again, please.

MR HOROWITZ:   Page 26.

GAGELER CJ:   Yes.

MR HOROWITZ:   There is an order that was made in the Court of Appeal granting leave to the appellant:

pursuant to s471B of the Corporations Act –

to proceed in this appeal.  I note that the respondents, as far as I am aware, remain in provisional liquidation.

GAGELER CJ:   Thank you.

MR HOROWITZ:   This case involves what was termed a note facility agreement, and that might be an appropriate place to start.  That appears at page 4 of the appellant’s book of further materials.  If I can just take the Court briefly to some of the relevant terms.  On page 4 itself at the beginning, under:

Note Facility Agreement –

it says: 

We confirm that Qian Peng and Yakun Shao –

they are both there defined as the lender:

has agreed to make available this facility on the following terms and conditions.

The borrower is Crown Global Capital, the first respondent.  The guarantor is Crown Group Holdings, the second respondent.  The limit of the facility is $1 million, in number 3.  Turning over the page to clause 7:

The Borrower must issue Notes to the Lender upon settlement of each cash advance made available under this facility . . . The Borrower must provide to the Lender a certificate substantially in the form of Annexure B –

And if we turn to annexure B, which is on page 11, we will see there the note certificate that was issued in this case.  It is addressed to Mr Peng and Ms Shao.  It certifies that they hold a million notes.  The drawdown amount is $1 million; interest rate, 12 per cent, payable quarterly.  The expiry date was originally 26 February, but that was modified by hand to 5 March.  Then, if we turn the page to page 12, it states there in clause 3 that: 

The Borrower may at any time by issuing a Redemption Notice to the Lender redeem any Notes, and on the Expiry Date must redeem all Notes, which have not previously been redeemed . . . and repay the Face Value and all interest accrued but unpaid on the Note to the date of payment.

That clause gives rise to an obligation in debt, we say.  Clause 4 provided the means by which payment was to be made, and stated that:

All money payable by the Borrower to the Lender under the Notes must be paid by cheque drawn by the Borrower and either delivered personally to the Lender on the due date for payment or deposited into the Lender’s bank account as notified by the Lender to the Borrower from time to time.

Justice Ball at first instance determined that this allowed for electronic transfers, and the lender, as we know, is defined as both Mr Peng and Ms Shao. 

GAGELER CJ:   This is the critical provision in your submission, I take it?

MR HOROWITZ:   This is the critical ‑ ‑ ‑

GAGELER CJ:   The critical provision in clause 4.

MR HOROWITZ:   Yes.  Yes, that is right.

GLEESON J:   The primary judge did not find a breach of clause 4. 

MR HOROWITZ:   No.

GLEESON J:   Was that subject to the appeal to the New South Wales Court of Appeal?

MR HOROWITZ:   That was only dealt with somewhat peripherally.  The question was whether Ms Shao had lost her right to claim damages by reason of having sued Mr Peng before suing Crown.

GLEESON J:   And it is implicitly for breach of clause 4.

MR HOROWITZ:   Yes.  Well, indeed, expressly.  That was the pleaded – it was pleaded that she was entitled to damages because of a breach of clause 4.

GLEESON J:   I see.

MR HOROWITZ:   And it was maintained on the appeal, in the same way that it is maintained here, that it was breach of clause 4 that led to the right to damages.

GLEESON J:   Not breach of clause 3?

MR HOROWITZ:   No.

GLEESON J:   Thank you.

MR HOROWITZ:   No, we accept that there is no breach of clause 3 by itself.  The obligation in debt has been discharged.  What there is is a breach of clause 4.  We say whereas clause 3 sounds in an action in debt, the breach of clause 4 sounds in an action in damages.

EDELMAN J:   Well, a breach of clause 3 could sound in action for damages, as well, if the money was not paid.

MR HOROWITZ:   Consequential damages – yes, that is true.  Sorry, that is correct.  There is a debt obligation in clause 3.  There are also other obligations in clause 3(a), such as the obligation to issue a redemption notice if there is going to be early repayment, and there is an obligation to pay on the expiry date.  So, yes, breach of those aspects of the clauses would sound in damages.

GORDON J:   And one of them is joint and several and the other is several.

MR HOROWITZ:   Yes.

GORDON J:   That is your case.

MR HOROWITZ:   Clause 4 is several – that is right – and clause 3 is joint, and I will take the Court to the authorities in support of that in due course.

GAGELER CJ:   Mr Horowitz, to the extent that there is a difference between you and your opponent as to the construction of clause 4, could you identify that difference and state the construction for which you contend.

MR HOROWITZ:   As I understand it, my opponents contend that there cannot be a discharge of the debt under clause 3, or any other provision, unless clause 4 is complied with.  So, they say clause 4 is a condition precedent for the discharge of the debt, and so that if clause 4 is not complied with, there has been no discharge of the debt at all and, consequently, the appellant’s only cause of action is in debt, not in damages.

GORDON J:   It is more fundamental than that, is it not?  That is why I put to you that it is joint and several.  They say there is one obligation, not two obligations.  That is, that the debt and the form of the repayment of the debt are inextricably linked, that you cannot separate them out – that is the respondent’s case, as I understand it – and that therefore you must elect in order to determine how you are going to seek to recover.  Your case is:  no, there are two obligations, not one; one is in debt and one is for contract.

MR HOROWITZ:   Yes.  I accept that way of putting it, your Honour.  Thank you.  So, one of the arguments that is made by my friends is that clause – the appellant seeks to rely upon an implied term, that the debt cannot be repaid in any way other than in accordance with clause 4.  Our response to that is, looking at the words of clause 4, it expressly says that:

All money payable . . . must be paid –

in this manner.  That is, both of the lenders must nominate the account.  We say there is no need to imply a clause, because where the act that is complained of is the breach of an express term, one does not need to imply any further term which would have the effect of preventing that act.  We cite Lewison on contracts in our submissions for that proposition.  Now, if I could turn – actually, I will not take your Honours there yet, but the Court of Appeal held that clause 4:

required Crown . . . to pay out the debt only when both joint creditors, Ms Shao and Mr Peng, had nominated an account into which the monies could be paid.

During the term of the loan – it was a 12‑month loan – Shao and Peng separated, and Peng misappropriated other moneys that belonged to Ms Shao, which had nothing to do with this facility agreement.  In August of 2015, Ms Shao informed Crown of her separation from Peng, of her intention to divorce him, and of his misappropriation of the moneys.

That was the subject of much of the dispute below on the question of whether or not Mr Peng had authority – either actual or apparent authority – to give directions to Crown, and Justice Ball found that after Ms Shao had informed Crown about her separation from Peng, and her intention to divorce him, there was no apparent authority after that date.

So, that happened in August of 2015.  Notwithstanding that notification to Crown, on 17 February, Crown emailed Mr Peng alone to notify him that the facility agreement was due to expire on 26 February, and this is at the respondent’s book of further material, page 4.  At the bottom of the page, we have the email from Ms Edwards, who was an employee of Crown, writing to Mr Peng, telling him that the:

Loan Notes Facility . . . will expire on 26 February –

As it happened, that was incorrect, because the date had been changed on the document to 5 March.  Then, referring to clause 4, which was the method of payment, and asking whether payment should be by cheque or transfer, and if by transfer:

please provide the account details so that we can proceed accordingly.

Mr Peng responded as we see at the top of the page saying:

Thanks for the reminder.

It would be good to receive the repayment via transfer –

into the following account.  That was an account in his name.  Notably, it was a different account to the account where Crown had been paying the quarterly interest payments.  Those payments had been made into a joint account of Ms Shao and Mr Peng.  So, Crown was aware that Mr Peng was changing the account that the payment was to be received.

After receiving that response from Mr Peng, Crown went and paid the $1 million in principal and some $18,000‑odd in interests that had accrued but had not yet been paid.  The Court of Appeal found that this email from Ms Edwards to Mr Peng constituted a valid redemption notice under clause 3(a), and that was able to be accepted by Mr Peng.  On 3 March ‑ ‑ ‑

GAGELER CJ:   And you do not challenge that.

MR HOROWITZ:   No, we do not challenge that.  On 3 March ‑ ‑ ‑

EDELMAN J:   That is because clause 3, “lender” – you accept now, I take it – is to be read severally.  Clause 3 of the note facility agreement.

MR HOROWITZ:   Well, the Court of Appeal held that, in the context of a redemption notice and the requirement to issue a redemption notice, either Mr Peng or Ms Shao were able to accept it themselves.  That is a consequence of clause 3 being a joint obligation, I believe, because, where there is a joint obligation, either one of the joint obliges can accept it, differently to a several obligation where obviously both have to accept it.

EDELMAN J:   My recollection, though, was that the trial judge read “lender” in clause 3 as being either Ms Shao or Mr Peng.

MR HOROWITZ:   For the purposes of accepting a redemption notice, yes, that is correct.

EDELMAN J:   Yes.

MR HOROWITZ:   Not for the purposes of discharging the debt, though.

EDELMAN J:   Yes.

MR HOROWITZ:   So, the moneys were paid back on 25 February 2016. On 3 March, some two days before the facility agreement was due to expire, Shao telephoned Crown to discuss the imminent expiry of the facility agreement, only to be told that the moneys had already been repaid to Mr Peng.  Shao commenced proceedings that same day against Mr Peng and obtained freezing orders against him but discovered in the course of those proceedings that the moneys had already been dissipated by Mr Peng transferring the moneys to his parents in China.

In the 2016 proceedings, at the time that Ms Shao rushed up to court to get an injunction, there were a number of defendants named, including the respondents.  It was decided, however, not to proceed against the respondents – or any of the other defendants – other than Mr Peng.  Expedition was granted and Ms Shao proceeded to obtain judgment against Mr Peng for the full amount, relevantly, of the $1 million and the $18,000 in interest, and she ultimately bankrupted him.

So, if I could take your Honours then to one of the critical paragraphs in the Court of Appeal’s judgment, which is in the core appeal book at page 59.

GAGELER CJ:   What paragraph is that?

MR HOROWITZ:   Paragraph 38.

GAGELER CJ:   Thank you.

MR HOROWITZ:   So, the Court of Appeal said:

In light of –

the previous factual findings:

the question remained whether Ms Shao was entitled to sue Crown for her debt given her earlier suit against Mr Peng.

That, I should point out, is incorrect.  Ms Shao never sued Crown for debt.  It is common ground between the parties that the claim made against Crown below was a claim for damages:

The primary judge found that when Ms Shao learned that Mr Peng had applied the proceeds of the Note Facility to his own use, she had a choice between:

(1)suing Crown for recovery of the proceeds on the ground that its payment to Mr Peng did not validly discharge the debt . . . or

(2)accepting that the payment to Mr Peng validly discharged the debt owed by Crown . . . and suing Mr Peng.

To recover those moneys.  What we say this omits is a third option, which is the option to accept that the debt was discharged by the payment out, but it was not discharged in conformity with the contract.  In particular, clause 4.  That enabled Ms Shao to sue for the damages that arose from the defective performance of the discharge of the debt.  We say this is an application of orthodox contractual principle and we rely upon a number of cases for that proposition.

The first that I will take your Honours to is MacKenzie v Albany Finance, which is in the joint book of authorities behind tab 23, which is page 512.  Just very briefly, that case involved the appellants, the MacKenzies, having made interest‑bearing deposits with Albany Finance.  Those deposits rolled over after the maturity date, and the term of the deposit was that interest would keep accruing and the moneys were repayable on demand. 

What occurred was that Albany made several repayments after the maturity date but without any demand having been made for those payments.  The question was whether the appellants were entitled to interest as a result of the payment having been made without demand.  That is, it was not made in conformity with the contract.  The relevant paragraph I will take your Honours to is paragraph 106, which is at the bottom of page 556 of the joint bundle, where his Honour Justice Heenan says:

Consequently, for repayments to be made by the respondent to the appellant under this loan, they should have been made upon a demand for repayment of the entire deposit, in which case the whole of the principal and accrued interest would have become due and payable . . . Repayment of any or all of the deposit by the respondent, without demand being made or without interest being paid, would not be a payment made in conformity with the terms of the deposit.  Unless accepted at the time such repayment was offered, or subsequently ratified, such a repayment would be in breach of the terms of the contract of deposit and could expose the respondent to a claim for damages, if –

for example:

the appellants were only able to reinvest the principal for the remainder of the term or terms at lower interest rates.

Importantly here, his Honour says then:

Such a premature or part payment of principal could be made and accepted, but would still entitle the appellant to bring a claim for damages for loss of interest if reinvestment on comparable terms was not possible.  Alternatively, if a premature repayment or partial repayment had been offered, the appellants would have been entitled to refuse to accept payment and to insist on the investment continuing –

In my submission, that is an equivalent choice to the one that Ms Shao had in this case.

EDELMAN J:   So, the principle you are just relying on is that acceptance of performance does not waive a claim for damages for breach in the manner of the performance.

MR HOROWITZ:   That is exactly correct, your Honour.

EDELMAN J:   That is a principle that is a little bit older than 2004.

MR HOROWITZ:   No – yes, that is true, but it is a principle that has been elucidated since Hungerfords v Walker in relation to money claims and the ability to accept repayment of the debt and then seek consequential damages for the defective repayment, and so it is in that ‑ ‑ ‑ 

GORDON J:   So, put it in these terms, there are many old cases dealing with goods, where goods can be accepted but you can still breach – bring an action for breach in relation to the nature of those goods.  So, is it any different from those cases?

MR HOROWITZ:   No, we say it is not, and we say that is made clear in Hungerfords v Walker and cases which follow on from Hungerfords v Walker, such as MacKenzie.  So, one case that expressly refers to Hungerfords v Walker that we rely upon is Hardie v Shadbolt, which is in the joint book of authorities at page 437, which is behind tab 19.

That was a case in which a plaintiff was able to accept repayment of a debt in breach of contract and sue for damages.  So, what happened in this case is that debts were repaid late as opposed to early, like in the MacKenzie case.  If your Honours see, at paragraph 7 to 11, there are the dates that the payments were due and the dates that they were actually paid.

GAGELER CJ:   Do we need to go into that much detail?

MR HOROWITZ:   No.  I will go straight to page 456, which sets out, at paragraph 57, the fact that:

the respondents claimed in the alternative damages for breach of the Agreement, quantified as the amount due on the termination date . . . plus loss of opportunity to use the moneys comprising the principal outstanding . . . to their commercial advantage –

and reliance was placed on Hungerfords v Walker as authority for the ability to claim that.  Now, although Hungerfords v Walker itself was about damages, it also established that the failure to pay debt in accordance with a time stipulation in a contract enabled the lender to claim consequential damages resulting from their loss of the use of the money between the time that the money was due for payment and the time that it was repaid.  The respondents do not take issue with those principles.

What they say, however, is that those principles do not enable a plaintiff to obtain the quantum of the debt as damages or, effectively, a similar almost identical quantum of the debt as damages.  Our response to that is that it depends on what consequential loss is suffered as a result of the debtor’s breach of contract.

So, in Hardie v Shadbolt, the loss that was compensated for was a temporary loss of the use of the moneys.  What has happened in this case is that Crown’s defective performance in repaying the debt resulted in a permanent loss of the use of the $1 million by Ms Shao, rather than just the temporary loss.

That is the consequential damage that she suffered when Crown breached clause 4.  The purpose of clause 4, as was found by the courts below, was to protect both Mr Peng and Ms Shao.  One of the things that it was to protect them from was that one or the other would take the moneys for themselves.

EDELMAN J:   Why on your case was the consequential loss the whole of the amount of the money?  Why was it not half?

MR HOROWITZ:   Because we established that Ms Shao was the beneficial owner of the entirety of the money, so she had contributed the entirety of the funds.  That was pleaded – it was originally denied or not admitted, but at the haring at first instance the respondents admitted that she was the beneficial owner of the entirety of the funds.

EDELMAN J:   Does that mean that Mr Peng had an obligation to her – although he was jointly entitled to the debt, he had an obligation to her to contribute 100 per cent of any recovery that he achieved?

MR HOROWITZ:   Yes, that is correct, your Honour.

EDELMAN J:   Was there a finding to that effect?

MR HOROWITZ:   There was a finding that the moneys were beneficially owned by Ms Shao, and I believe the finding was that the moneys that ‑ ‑ ‑

EDELMAN J:   That is the moneys that were contributed to the loan, not the debt itself.

MR HOROWITZ:   But the finding, I believe, was that Ms Shao and Mr Peng were trustees who held the interest in the debt on trust for Ms Shao alone. 

EDELMAN J:   Thank you.

MR HOROWITZ:   I will try and obtain a reference to that in the judgment.  So, what we say is that, by paying the million dollars to Mr Peng, Crown enabled him to misappropriate it, which he did.  Accordingly, Ms Shao is not suing Crown now to recover the million dollars as a debt, she is suing to recover the million dollars in consequential damages that she suffered as a result of their breach of clause 4.  It is also entirely possible that the quantum that is sought in a case such as this could far exceed the amount of the debt.

If, for example, instead of clause 4 in this contract, Ms Shao had asked to have inserted a clause that Crown agreed with which required Crown to pay the loan proceeds into a solicitor’s trust account and it was recorded that that was because Ms Shao had entered into a contract to purchase a property and the completion date was 12 months hence and the money was required to complete the purchase of the property – time being of the essence – if Crown then paid the moneys directly to Ms Shao, she could accept that the debt was discharged but still sue Crown for the consequential loss that she suffered as a result of them not complying with the obligation to pay it to the solicitor’s account if the contract fell over as a result and she lost the deposit and she lost any profits on the property.

I give that example to illustrate that, while Hungerfords v Walker and Hardie v Shadbolt and MacKenzie v Albany Finance deal with breaches as to time stipulations in a contract, there is no difference in principle between a breach as to a time stipulation and a breach as to a place stipulation where the moneys have to be paid.

GAGELER CJ:   So the primary authority that you rely on is Hungerfords v Walker?

MR HOROWITZ:   Yes.

GAGELER CJ:   And the cases that you go on to refer to in paragraph 4, you say, are illustrations of that principle working out in a similar circumstance to the present?

MR HOROWITZ:   I am sorry, paragraph 4 of?

GAGELER CJ:   Paragraph 4 of your outline.

MR HOROWITZ:   Yes, those cases – well, two of them precede Hungerfords v Walker, but essentially, yes.  One can apply the same reasoning to explain the results in those cases.

Now, Crown makes the submission that what Ms Shao is claiming in this case is to be entitled to have both repayment of the debt and damages to compensate her for not receiving the moneys comprising repayment of the debt, but the whole point is that Ms Shao did not receive the debt.  She accepts that it was discharged but defectively.  So, there is no injustice involved in Ms Shao’s suing Crown for damages.

Crown accepts that Ms Shao could have sued it in debt and it would have been liable to pay out an additional million dollars on top of the million dollars that it paid to Mr Peng, but Crown says that because Ms Shao attempted to recover the money from Mr Peng first, Ms Shao is now shut out from obtaining any relief against Crown.  If that were correct, it would leave Ms Shao bearing the entirety of the loss in circumstances where she was the only innocent party in this transaction.

Now, if I can turn, please, to those three cases that I refer to in paragraph 4 of the outline, the first one being Ardern, which is behind tab 13, at page 365.  Ardern involved two partners who opened a joint account with a bank.  The cheques that were drawn on the account were required to be signed by both partners.  One of the partners forged Ardern’s signature on 13 of the cheques and the bank paid the money out and then Ardern sued the bank for breach of contract.

The question in that case was whether Mr Ardern could sue the bank in relation to its wrongful repayment of a debt where that debt was owed jointly to both Ardern and his partner, Mr Brookes, but where Mr Brookes was disentitled from suing the bank by reason of his fraudulent conduct.  Justice Martin held that there were in fact two separate obligations:  an obligation in debt owed jointly and an obligation not to honour cheques unless signed by both, and that obligation was owed severally.

STEWARD J:   Is the key to that distinction that the requirement that there be both signatures on the cheques is protective – it is a protective clause?

MR HOROWITZ:   Yes, precisely, your Honour.

STEWARD J:   You would say it is the same here ‑ ‑ ‑ 

MR HOROWITZ:   Exactly the same.

STEWARD J:   ‑ ‑ ‑ this is a protective.

MR HOROWITZ:   Indeed, that was ‑ ‑ ‑ 

STEWARD J:   That is why it is not jointly, it is several; it is protective against each other.

MR HOROWITZ:   Yes.  Indeed, there was an express finding to that effect ‑ ‑ ‑ 

GORDON J:   Page 574 of Ardern.

MR HOROWITZ:   Yes, but I was going to say, your Honour, there is an express finding in the judgment of the Court of Appeal, if I could just interpolate, at paragraph 60, which is on page 65 of the core appeal book.  Her Honour Justice Adamson writes, at the bottom of page 65:

the reference to “Lender” in cl 4 . . . must mean both of them jointly –

That is not saying that the clause is a joint clause, her Honour there is saying the definition of “Lender” is to be interpreted as Shao and Peng, and her Honour says:

to fulfil the purpose of protecting each of the lenders as well as Crown.  It protects each of the lenders from the other nominating an account to which the other lender has sole access –

STEWARD J:   And I think Justice Martin at page 573 of the Victorian Law Report, about halfway down the page:

This condition, as to both partners signing, was obviously inserted for the benefit of each partner, to prevent any dishonest drawings –

MR HOROWITZ:   Yes.

STEWARD J:   Yes, I see.

MR HOROWITZ:   Just while ‑ ‑ ‑ 

GORDON J:   So, can I just – I know I came back to this earlier.  Reduced to its simplest terms – I do not mean this pejoratively – you have a contract, you say it has an express term, that term has an undertaking or an obligation or a condition that the manner of the payment is to be done by account nominated by two people in a protective sense described both by the primary judge in the Court of Appeal here and by the Supreme Court of Victoria in Ardern at 573 and again at 574, and that was breached.

MR HOROWITZ:   Yes.

GORDON J:   You say you are entitled to damages for breach, notwithstanding the fact that the separate debt obligation was discharged.

MR HOROWITZ:   With respect, yes, that is our case.

GLEESON J:   And presumably you would say that the damages would be reduced for the amount that you have recovered in the bankruptcy.

MR HOROWITZ:   Yes, of course, and we have taken that into account.

GORDON J:   And that was $17,000.

MR HOROWITZ:   It was, yes.  Had we recovered a larger amount, it would have been reduced further.  Indeed, had we recovered the entire amount, then there would have been no need to sue Crown at all, potentially.  Relevantly, I might just mention in response to my friends’ argument that Ardern involved the implication of a term, one can see, from about point 4 on the page of 573, his Honour says:

the agreement in this case was that the bank would open a joint account in the names of both partners and that no cheque would be honoured unless signed by both of them.

So, we say that was an express term, not an implied term.

EDELMAN J:   Why does it matter whether it was an express or an implied term in Ardern or in this case?

MR HOROWITZ:   Well, my friends say that there was no reason to imply a term for business efficacy or for any other of the reasons and that we have not met all of the tests set out in BP Refinery.

EDELMAN J:   But you only rely on clause 4.

MR HOROWITZ:   Yes, we only rely on clause 4, and we say that, to the extent that there is a necessary implication that one cannot pay out other than in accordance with clause 4, that is just an implication that flows from the natural words of clause 4.  It is still an express term; it is not an implied term.  It is a matter of construction.

At the bottom of page 370 of the bundle, or 574 in the Victorian Law Report, there is a reference there to Justice Martin proposing to permit Mr Ardern to elect whether he will have judgment for damages or a declaration that the bank had wrongfully debited the account.  So, that is to say that Mr Ardern had to make an election between rejecting the bank’s purported repayment of the debt, in which case the account would have been credited, or accepting that the debt had been discharged, albeit defectively, and claiming damages arising from the defective discharge.  In this case, because they were partnership funds, the judge held that Mr Ardern was entitled to half the amount in the account.

Importantly, we say it would have made no difference if Mr Ardern sued Mr Brookes before he sued the bank, other than Justice Martin would not have been able to give him an election in the form that his Honour did at the bottom of page 574 because, by suing Mr Brookes, he would have accepted that the debt was discharged, because that was the basis of his suit against Mr Brookes in trying to recover the moneys from Mr Brookes, and so he would have only had the opportunity to claim damages.

In the same way, we say in this case, Ms Shao could have sued Crown – without suing Mr Peng first, she could have sued Crown and claimed damages.  She would not have had to claim debt against Crown if she sued them first, just as Mr Ardern had an election ‑ ‑ ‑

EDELMAN J:   She might have been met by a defence of failure to mitigate.

MR HOROWITZ:   Yes, it may have been, and we say that one of the things that she did by suing Peng was attempt to mitigate, and it is on that basis that Ms Shao claims the costs of the suit against Mr Peng.

GLEESON J:   Was the primary judge taken to this line of authority?

MR HOROWITZ:   No.  However, the Court of Appeal was.  Ardern has been followed fairly extensively in Australia, New Zealand and England, and it is referred to in a number of textbooks which are set out in my written submissions, but I will not detain the Court by taking your Honours to any of those.

The next case that we rely upon in this regard is Catlin, which is to be found behind tab 17, at page 413.  In Catlin, the bank paid out funds that were held in a joint account on the instructions of Mr Catlin alone, despite being required to act only on instructions signed by both Mr and Mrs Catlin.  Following Ardern, the court held that Mrs Catlin was entitled to damages for the bank’s breach of its obligation not to honour instructions that had not been signed by both account holders.  So, at page 417 of the bundle at G, which is page 763 in the report, it stated there:

Mr. and Mrs. Catlin instructed the defendants in writing that all orders for payment or transfer from the account were to be signed by both of them.

So, we say again that that is an express clause, an express obligation.  Then, at page 422 of the bundle, at page 768 in the report, his Honour Justice Bingham sets out at D:

The factual position can therefore be put very shortly.  The plaintiff and her husband deposited funds in a joint deposit account with the defendants on terms of an express mandate that no payment out of the account should be made save on the joint signatures of both account holders.  In breach of that mandate, and without the knowledge or authority of the plaintiff, the defendants negligently transferred all the funds out of the account –

That reference to “negligently” is not a reference to a cause of action in negligence but negligently in terms of the performance of the contract.  His Honour says at the bottom at that paragraph: 

One might suppose that there could be no answer to her claim.

But the defendants in that case raised Brewer v Westminster, and his Honour says that:

I should be sorry to conclude that they are right.  The plaintiff has suffered serious loss through no fault of her own.  A rule that denies her any remedy in such circumstances is not one that could be viewed with complacency.

I might interpolate that the same proposition applies in this case.  Then turning over to page 425, at line C: 

The defendants agreed to honour instructions signed by both account holders.  This no doubt imported a negative duty not to honour instructions not signed by both account holders.  This duty also could, in theory, have been owed jointly, but it must (to make sense) have been owed to the account holders severally, because the only purpose of requiring two signatures was to obviate the possibility of independent action by one account holder to the detriment of the other.

We say clause 4 has the same effect here.  Now, my friends seem to suggest that the words: 

This no doubt imported a negative duty not to honour instructions not signed by both account holders.

again is an implied term in the contract, but again, we say that that is not an implied term; it is an implication that arises from the words.  And ‑ ‑ ‑

EDELMAN J:   It has to be a term, I think, on any view, because it is, as I understand it from your submission, accepted that without acceptance by Ms Shao, the debt would not have been discharged.

MR HOROWITZ:   Yes.

EDELMAN J:   So, there has to be either a negative implication in clause 4 or an express stipulation as part of clause 4 that required the payment to be made as notified by both of them. 

MR HOROWITZ:   Yes, we say it is express, and it is just a matter of construction and there is no need to imply it.  The next case that we rely upon is DAR, which is behind tab 18, page 427 of the bundle.  That case involved a debtor, Aon, who owed moneys to two joint creditors:  FNS and DAR.

Those moneys were to be paid into a designated bank account agreed by both FNS and DAR – we say, a relevantly identical obligation to that in this case – and in breach of that term, Aon paid the moneys owing on the instructions of only one of the joint creditors, FNS, and DAR sued and was held entitled to damages, subject to assessment.  So, relevantly on page 428 of the bundle, at paragraph 4 of the judgment, the relevant term is set out at the very bottom of the page: 

Payments to FNS Consultant/DAR –

that is, the two joint creditors: 

will be made in accordance with the above pro rata basis, immediately upon receipt . . . and into a designated Bank Account to be agreed.

Then, if we turn to paragraph 18, Lord Justice Mance says:

In circumstances –

that I do not need to go into:

Aon has, it appears, paid monies on account of the 60 per cent brokerage due to DAR/FNS to Mr Sfeir alone –

who is FNS.  Then, in paragraph 19:

DAR’s case is that it was not open to Aon to make such payments to Mr Sfeir alone without any prior notice to and without any consent . . . The judge accepted that case.

And then if we turn to the top of page 434, his Honour says at top of that page:

The relevant clause was clearly aimed at regulating the way in which payment should be made, not just its timing.  The phrase “a designated bank account to be agreed” was on the face of it to ensure that there could be no doubt about where and to what place the joint venturers’ share was to go.  They were to agree and to designate a bank account for the purposes of receiving payments.  On the face of it such a provision was important for everyone concerned; for Aon, who would know that it had to meet the obligation to FNS/DAR, and also to FNS and DAR, who would know as between themselves that the commission which they had obviously agreed to split between themselves . . . would be safely received in the designated and agreed bank account for the protection of each of them.

So, all of these cases have the same theme, that a clause such as clause 4 is specifically to protect joint creditors, and there can be a breach of clause 4 which sounds in damages.  Then, in paragraph 30, Lord Justice Mance says that the clause was:

for the benefit of each and every one of the three parties . . . it is the necessary corollary of it that Aon owed a duty to DAR and to FNS, individually or severally, not to make payments otherwise.

Finally, looking at paragraph 35, his Honour says:

Assuming that the monies paid to Mr Sfeir were due in terms of the agreement as all or part of the brokerage . . . then DAR has in my judgment a valid claim for damages, even though no designated account was ever opened.  It was a breach –

of the agreement:

in such circumstances –

for Aon:

to pay and, but for the breach . . . one can readily surmise that Mr Sfeir and Mr Said would have come to some agreement . . . about a joint bank account or jointly agreed method of payment –

In that circumstance, there was a payment out by claiming damages or electing to claim damages.  DAR accepted that there was no more claim for debt under the contract.  Instead, it was a claim in damages for breach of that clause requiring a joint bank account to be nominated.

Now, underlying the respondents’ submissions, there seems to be an assumption that a debtor either repays a debt in conformity with a contract or the debtor has not performed the contract at all.  They seem to deny the possibility that a debtor may defectively perform a contract.  We say that that possibility is expressly contemplated by cases such as Hungerfords v Walker and MacKenzie v Albany Finance but also it can be inferred inferentially from the result that, in DAR and Catlin and Ardern, the plaintiffs were entitled to damages.

A similar argument to the argument that has been put by the respondents was made in Albright & Wilson UK Ltd v Biachem, and that case is to be found at tab 12 of the joint bundle, page 349.  Just briefly, that case involved a delivery of a chemical to the wrong location, which led to an explosion at a factory.

It was argued that because the contract required the chemical to be delivered to another location, and no delivery had been made to that other location, then the only damages that could be claimed for breach of contract was for failure to deliver the chemical at all.  That is, the chemical had not been delivered to A; instead it was delivered to B.

So, you could get damages for failure to deliver to A but no damages for delivery to B, which resulted in the explosion at the factory.  That argument was rejected by the Court of Appeal.  This decision was partly reversed in the House of Lords, but not on this point.

GAGELER CJ:   So, is there a proposition of law you are trying to extract?

MR HOROWITZ:   Yes.

GAGELER CJ:   Perhaps you could take us to that.

MR HOROWITZ:   Yes.  At paragraph [21], on page 357.  At the bottom of the page, this:

demonstrates that the concept of purported performance that the judge was asked to pass on extends to cases where there is objectively an attempt to perform a contract, but that attempt goes wrong.

Then, if we turn to page 362, at the top of page 362, it was argued by counsel for Berk – who had delivered to the wrong place – that:

A breach of s 14 was to be determined as to what happened at the place of delivery.  That was required to be at the fluids plant.  No delivery was made there:  the goods were sent to the phosphates plant.  So the time for performance by Berk had not yet arisen, and the only fault on Berk’s part was not to deliver at all.  As a result, the damages would be somewhat less –

GAGELER CJ:   So, stated at a level of principle that can be applied to the present case, what is it that you say this case illustrates?

MR HOROWITZ:   We say that ‑ ‑ ‑

GLEESON J:   It is at paragraph [37], I think.

MR HOROWITZ:   Yes.  If I could just ask your Honours to read paragraph [37]. 

EDELMAN J:   As I understand it, you are just making a point that existed long before 1893 and the Sale of Goods Act.  It is just that acceptance of a performance does not waive a breach in terms of the manner or the circumstances of the performance.

MR HOROWITZ:   Yes.

EDELMAN J:   Accepting defective goods does not mean you cannot sue for the defect.  That is the only point, is it not?

MR HOROWITZ:   It is, but the respondents say that there was no performance of the contract – that when they paid Peng, that was a payment which was entirely outside of any relevant to the facility agreement between them and the lender.

We say that that is a commercially absurd proposition, because when Crown paid Mr Peng, they sent him an email telling him they were going to pay him; they asked him where to pay it; they paid in accordance with the direction; when Ms Shao rang them, they said:  we have paid it already to Mr Peng.  Then, in the proceedings below, they defended the case on the

basis that they had paid it properly in accordance with the contract because Mr Peng had authority from Ms Shao – whether actual or apparent – to direct them where to pay the payment.

So, we say, that the proposition in Albright applies.  They purported to perform, it was a defective performance, and that performance was accepted so far as it discharged the debt, but it gave rise to a claim in damages.

GLEESON J:   So, one of the errors that you are pointing to in the Court of Appeal’s judgment is the last sentence of paragraph 65, where Justice Adamson found that Crown:

did not thereby obtain good discharge of the debt.

Is that right?

MR HOROWITZ:   Yes, that is correct – subject to this.  At the time they made the payment, they did not obtain a good discharge of the debt, because Ms Shao had the election whether to accept that the debt was discharged or not.  Having accepted that it is discharged, she was then entitled to claim damages.

My final point is on the question of ratification.  Our principal proposition is that there is no ratification involved by Ms Shao having sued Mr Peng.  Approbation and reprobation fundamentally involves a choice between two inconsistent rights, and for all of the reasons that I have given, there was no inconsistency here, because she was able to accept the discharge of the debt and then sue for damages, so the question of ratification simply does not arise.  Unless your Honours have any further questions, those are my submissions.

GAGELER CJ:   Thank you.Mr Lawrance.

MR LAWRANCE:   Your Honours, I will start, if I may, by answering the question that your Honour the Chief Justice asked to my learned friend at the outset, that is, what is the construction that we give to clause 4 of the note terms and conditions.  If I can take your Honours to those, which are in the appellant’s book of further material ‑ ‑ ‑

GAGELER CJ:   Mr Lawrance, could you speak up a little?

MR LAWRANCE:   Yes, I am sorry, your Honour, I will speak up.  If your Honours have the appellant’s book of further material, the relevant term is clause 4 on page 12.  In our submission, clause 4 sets out the mode of payment that must be followed to get a good discharge of a payment obligation under the notes.  That is the construction that the learned trial judge gave to that clause at paragraph 40 of his Honour’s reasons, and we say in essence that his Honour was correct to give the clause that construction.

While your Honours have the agreement before you, may I jump ahead and give your Honours two points concerning the construction of this agreement.  The first is that, if your Honours see in clause 4 the expression:

All money payable by the Borrower to the Lender under the Notes –

there is no separate fund here, there is no identifiable fund.  The relationship between borrower and lender is purely one of debtor and creditor.  So, when clause 4 speaks of “money payable”, it is not speaking of an identified or identifiable fund of money or money’s worth that must be paid.  In the literal sense, there is no such thing as “money payable by the Borrower to the Lender”.

What the note terms and conditions impose are payment obligations.  That is, obligations on the borrower to make a payment by delivering money or otherwise discharging the obligation by money’s worth, so that when one comes to construe clause 4, and in particular the reference to:

All money payable by the Borrower to the Lender –

the absence of any identifiable money that is the money to be paid is a reason why, in our submission, that clause should be understood as dealing with the way in which a payment obligation must be performed under the agreement.  The second point ‑ ‑ ‑

EDELMAN J:   I think that is common ground, is it not?  What seems to be in dispute is whether or not, in addition to it being a precondition to discharge, it also creates a duty as to the manner in which the payment must occur.

MR LAWRANCE:   Yes, with respect, a duty and a duty that is owed severally rather than jointly.  And if I am right in the first point that I have put to your Honours as to there being, in the literal sense, no money payable under this agreement, so that when one reads:

All money payable by the Borrower to the Lender under the Notes must –

one understands those words as setting out how the borrower needs to go about performing or satisfying a payment obligation, then that is a different meaning.

That is giving those words a different meaning to the words that our learned friends would seek to give them if one were to treat them as, essentially, the Ardern term, if I can use the shorthand.

EDELMAN J:   So, you reject the findings that it had a protective purpose?

MR LAWRANCE:   No, with respect, absolutely not.  It has a protective purpose, and the protective purpose is adequately served by the fact that if the payment is made, if the payment obligation is purported to be satisfied in a way that does not comply with clause 4, then the debt just will not be discharged.

So, the innocent account holder is protected, because the debt is simply not discharged.  They are protected in that way.  They do not need to be protected by a separate and several negative stipulation of the type proposed in Ardern, which picks up the suggestion of Sir Arthur Goodhart in the note that is in volume 4 of the book of authorities.

EDELMAN J:   Justice Bingham would be wrong in Catlin as well.

MR LAWRANCE:   With respect, yes.  Again, unnecessary to – Catlin is also a mandate case.  We do say that ‑ ‑ ‑

EDELMAN J:   It is a lot of cases that have relied upon that type of negative stipulation in an express term of this nature.

MR LAWRANCE:   Yes, and in this country it is in particular Ardern and Vella v Permanent Mortgages, but taking it as a matter of first principles, if the bank sends the customer a bank statement that incorrectly debits the account by $1 million, in my submission, it is not a term of the bank and customer contact that that gives rise to the right to sue the bank for $1 million as damages.  It is simply a wrongful debit in the running ledger between banker and customer that can be corrected.

It does not mean that the bank, by making the wrongful debit, has inadvertently extended further credit to the customer which the customer can enforce via a claim for money damages, so that – I will come to it in a little while, but in our submission, Brewer was wrong and has been the departure point for the line of cases that begins with Ardern, which all proceed on the false premise that the innocent account holder in that example cannot enforce the debt for its true amount.

Now, if that is right and the debt is the debt, and the innocent account holder can enforce the debt for the true amount, then the innocent account holder is perfectly adequately protected by the fact that the debt is not discharged, and there is no need to construe or apply – it does not, in my submission, matter which it is – the terms as including the Goodhart several promise not to pay in the wrong way.

Indeed, there is a slight circularity implicit in the Goodhart implied term because, ex hypothesis, if the payment in this case did not accord with the mode required by clause 4 of the note terms and conditions, there has not been loss suffered by the innocent account holder, because the debt just has not been discharged.  The account holder is in no different position to the position they were in before the purported payment.  That was the first point I wished to give your Honours on the note facility agreement.

The second is shorter, and it is this.  Your Honours have seen that the contract is, in fact a note facility agreement, so it is an agreement under which the borrower agrees to issue and the lender agrees to subscribe for notes.  Once issued, those notes are promissory notes, they would be promissory notes for the purpose of the Bills of Exchange Act, if it mattered.  The point is that they are inherently transferable and, indeed, the transferability of the notes is recognised in clause 7(b) at page 7 of the appellant’s books of further material.

I am sorry, I have given your Honours the wrong page.  It is page 5, where clause 7(b) recognises the transferability of the notes.  The only point I say your Honours get from that is that when your Honours are construing clauses 3 and 4 in the note terms and conditions.  They need to be read taking into account the transferability of the notes, which means that the lender could be a person to whom the notes were transferred.

It could be a single person, it could be three people to whom the notes were jointly transferred.  The only point is that although, in this particular certificate, the lender is constituted by two persons, when one comes to construe the note terms and conditions, one needs to take into account the fact that the lender might be a single person or might be multiple persons.

GORDON J:   But if you accept the protective purpose, which you do not challenge, as I understand it, does not that argument work against you?

MR LAWRANCE:   In my submission, no.  I accept ‑ ‑ ‑ 

GORDON J:   Why is that?

MR LAWRANCE:   Because the protective purpose is achieved by providing for the debt still to be there and enforced by the innocent account holder if it is not discharged in the way provided for by the contract.  So, in the case of Ardern, for example, when I come to it, it will be my submission that there being no valid right to debit the account, because the debt simply has not been discharged.

There was no right in the bank having paid on that cheque which was not a cheque that was properly within the bank’s mandate to pay on as agent for the customer – there was just then no right to debit the account in the bank, so that the innocent account holder – in that case, Mr Ardern – is protected by virtue of the fact that the account balance in that case has not been reduced.

EDELMAN J:   If that argument is right, it would work for goods as well as for money, would it not?  If you had a clause for – if this were not payment of money, if it were the provision of goods, and the requirement, the precondition, your terms were that the goods were delivered to a particular place for the protection of the purchaser, your argument would be:  well, if the goods are delivered to the wrong place, the purchaser has got perfectly adequate protection of rejecting the goods, no claim for breach of contract.  There is no ability to accept the goods and sue for breach of contract.

MR LAWRANCE:   Well, it is different in this sense, in my submission.  In the case of the payment, it is either a payment that does or does not discharge the debt obligation.  So that in the case of Ardern, for example, the account balance had a balance prior to the plaintiff making an election and, in my submission, it was a balance that was not reduced by the £626, it is binary in a case of ‑ ‑ ‑ 

EDELMAN J:   The same with goods.  The goods either do discharge the obligation of performance or not.  If you say, well, delivery to Rotterdam rather than to Antwerp is a precondition, the obligation is either not discharged or it is discharged.

MR LAWRANCE:   Well, goods might be different in this sense, in that one could substantially perform the contract for delivery of goods and still breach.  However, in the case of the payment of money, it is either paid in accordance with the requirements – in this case, of clause 4 – or it is not.  So, it is binary in that sense.

Your Honours, can I come back, then, to the start of the first point in our outline that we provided this morning and deal with Brewer, which your Honours will find at page 406 of the bundle.  This was the case in which his Honour Justice McNair held that the rule in Brandon v Scott prevented the innocent account holder from obtaining a declaration as to the true balance of the account in the sense that it held that the innocent account holder could not obtain a declaration that the debit was wrongful.

The point I wished to draw attention to is that, if your Honours have page 412 of the bundle, which is 656 of the report, your Honours will see at point G to H on the page that Justice McNair accepted, in our submission, correctly, that the bank had not obtained a good discharge of the debt, which would have the result – when combined with his Honour’s earlier acceptance that Brandon v Scott prevented the account holders from obtaining a declaration that the debit could not be maintained – that the debt owed by the bank would become, in a sense, a form of imperfect obligation, in the sense that the debt remains because it has not been discharged, but neither account holder would be able to enforce it, which tends, in our submission, to suggest the problem in the earlier treatment of Brandon v Scott.

Your Honours have seen from the written submissions that different solutions to Brewer were posited by Sir Arthur Goodhart and Dr Glanville Williams.  I will not take your Honours to them, but I will just point out that in the Goodhart solution, if I can put it that way, which is the genesis for the term that Justice Martin found as the term of the contract in Ardern, the author accepts that Justice McNair was correct to conclude that Brandon v Scott prevented the plaintiff from obtaining the declaration sought.

What we say is the correct answer to the unsatisfactory result in Brewer is that proposed by Dr Williams in his note.  I will take your Honours to it, if I may, it is page 768 of the bundle.  The relevant note starts at the foot of the page.  On 769 there are two paragraphs dealing with bailment – the last two paragraphs on that page.  Then, at page 770, there is what we say is the correct answer to the Brewer difficulty, beginning with the passage:

The position is a bit more difficult where instead of a bailment there is a debt.

Then, at point 5 on the page:

It is submitted with respect that the error in this reasoning is in asserting that A –

being the wrongful account holder in Brewer:

had been paid.

And then, slightly further on:

The payment was something quite outside of and irrelevant to the contractual obligation.  The proper solution was to allow A and B to join in an action against the bank, and to allow the bank to counterclaim against A for repayment.

GAGELER CJ:   Mr Lawrance, is that a convenient time for us to take a morning adjournment?

MR LAWRANCE:   Yes, your Honour.

GAGELER CJ:   Thank you.

AT 11.16 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.30 AM:

GAGELER CJ:   Mr Lawrance.

MR LAWRANCE:   Does your Honour wish me to – would your Honour be inconvenienced if I waited for my opponent?

GAGELER CJ:   No.  It might be a good idea.

MR HOROWITZ:   I apologise to the Court.

MR LAWRANCE:   Your Honours, may I come to Ardern, which is at page 365 of the joint book of authorities.  Although it is at the end of the reasons, can I deal with the permission given to the plaintiff to elect between a declaration and damages.  So, that is at the foot of page 574 of the report.  That is an election between damages of £331:

or a declaration such as is sought –

and that is a declaration for – that would be a declaration that the debit of twice that amount, £662‑odd, was wrongful and could not be maintained.  So, the first point is that there is an acceptance in Adern that Brandon v Scott – which was the cause of the unsatisfactory result in Brewer – does not prevent the declaration that is being offered to the plaintiff here.  So, the rationale or the motivation for the Goodhart solution is gone, because there is an acceptance that the plaintiff can have the declaration that was denied in Brewer.

If one were to ask, at the time these reasons were delivered, what is the account balance, I think your Honours already have my submission, but that is a question that would be capable of being answered, and the answer would be that it was a balance that had not been reduced by the £662 that had been paid on the cheques signed by only one account holder.  Now, if that is the case, and one pauses at that point and asks what is the plaintiff’s loss, even assuming there had been a breach of the Goodhart several promise, there would, in our submission, be no loss because the full account balance is there and able to be recovered by the account holders from the bank.

The reasons, in our submission, are opaque as to why the plaintiff, by making an election, is able to reduce the true account balance.  It may be that the correct analysis is that because the paying bank is the agent of its customer, the election is really the ratification by the plaintiff Ardern of the bank’s act as agent, without authority, in paying on the cheques.  That would be one way of explaining why the plaintiff would have a right to elect so as to reduce the account balance.  But absent ratification of that type, in our submission, there would be no loss and no damages.

EDELMAN J:   I mean, strictly, even if there were a ratification, there ought to be still a claim on the premise that there is a duty, because there is still a breach of contract, it is just that it would not – it is claim where you would recover nominal damages.

MR LAWRANCE:   With respect, I accept that.  It may be that one could have a situation in which there was some other consequential loss that had been suffered as a result of the breach of the Goodhart several promise, if it be a term of the contract.  So, my position would be more accurately stated by saying that the plaintiff’s loss would not include the £331 because there has been no diminution in the balance of the account.

It was in any event, in our submission, an error for Justice Martin to find that the contract contained the Goodhart negative promises.  If your Honours have page 367 of the bundle, which is 571 of the report, the relevant utterances are set out in the second paragraph of the reasons, the first sentence:

Each of them stated that all cheques to be drawn on such an account were to be signed by both of them, and the manager said he was agreeable to that.

Those statements were concerned with the issue of what authority the bank as agent required in order to pay a cheque drawn on the account, and their meaning should be assessed in that context.

If I were to give your Honours this example:  if a teller had cashed a cheque signed by only Mr Brookes and the bank manager had realised the mistake and said, well, we obviously cannot debit the account for the amount of that cheque, you will just have to wear that loss, then it is unlikely that these parties intended, in my submission, that in that situation the innocent account holder should have a claim against the bank for breach of contract.

It just would not – it not necessary to protect either account holder, and provided it is accepted, as it was in Ardern, that the innocent account holder – and, indeed, it must follow that the wrongful account holder as well – could have the debit reversed, there is no need to read the term as importing the several negative promises.

Treating the express words as giving rise to separate, several negative promises in favour of each of the account holders gives rise to further difficulties, in our submission.  If, for example, there had been three account holders rather than two and the bank had paid on the signature of one, then if each of the innocent account holders was in the position of the plaintiff in Ardern, that would give rise to the prospect of inconsistent elections because, ex hypothesis, the Ardern Goodhart promises are several promises, so, one would have two innocent account holders, each with a claim for breach of the promise owed to him or her individually, and that would give rise, as we say, to the prospect of inconsistent elections.

The same difficulty would arise even with only two account holders in circumstances where the cheque was signed by a rogue third party and not signed by either account holder, because in that situation, each of the account holders would be an innocent account holder and each would have the right to elect between damages or debiting the account and, again, that would give rise to the prospect of inconsistent elections.  There is, in our submission, a further difficulty that arises, which one sees from considering the position of the bank and its claim against Mr Brookes.

So, at least, prior to the election, the bank had a claim against Mr Brookes to recover the £622 paid to him as moneys had and received.  So, if the bank has paid under a mistake – the mistake being that it thought it was authorised to pay on the cheques – it has paid out £622 to Mr Brookes, it could recover those moneys from him as moneys had and received.

It is difficult to understand how that claim, at least for the amount of £622, could be maintained if Mr Ardern makes an election to take £331 as damages but at the cost of the debit being continued.  To allow the bank to recover the £622 from Mr Brookes would overcompensate the bank in that case, but if the claim is extinguished because, if it be the case, there has been ratification by Ardern of the payment, then Mr Brookes has received a windfall of £331.

So, for those reasons, we submit that Ardern was wrongly decided insofar as the agreement was held to contain the several promises and Mr Ardern was held to have a right to damages.  Alternatively, if Ardern is good law, it should not, in our submission, be expanded beyond the mandate cases, and that is the context in which Ardern has been followed in Australia, principally in Vella v Permanent Mortgages Pty Ltd (2008) 13 BPR 25,343.

Can I deal then with DAR International, which is at page 427 of the joint book of authorities.  The submission I wish to put to your Honours in respect of this case is that it is explicable as a case dealing with an obligation to pay from an identified fund.  So, unlike the contract before your Honours where there is no identifiable money that is money payable, if your Honours have, at 428 of the bundle, the contract that was considered by the Court of Appeal in DAR.

One sees, starting at about point 6 on page 428, that one is dealing with an identified pool of money, namely, the earnings generated by AON in respect of the Saudi Arabian Airlines account.  And it is those moneys, which are defined in the agreement to be “revenue”, that are required to be dealt with in a particular way, and that particular way includes that 60 per cent of them are to be paid into the nominated account.

GORDON J:   It is not identified in the sense that one could go to a specific account, though, is it?

MR LAWRANCE:   With respect, no, it is not, but ‑ ‑ ‑

GORDON J:   So, it is not an identified fund in the sense of, I can go to an account and say that amount of money sitting in that account or, more importantly, the right to call for a repayment of that amount.  It is not that kind of identified fund.

MR LAWRANCE:   Well, no, it is, in my submission.  There are earnings being received from Saudi Arabian Airlines, and it is not identified to the counterparties in the sense that the counterparties to this contract will not see what account those moneys are going into.  But they are moneys that are an identifiable fund and there is a promise to pay from that identifiable fund, and if it were necessary, in this case of DAR, it would be a case in which the promise to pay from an identified fund even gave rise to a charge in favour of the parties entitled to be paid those moneys.

So, the submission we make is that this is a case where one can see an identified fund being dealt with, and so it is sensible to speak of moneys being paid not in accordance with the direction, because one can see that they have been paid somewhere else.

GAGELER CJ:   Mr Lawrance, could we go back a step.  If you say Ardern was wrongly decided, you also say that Catlin was wrongly decided, I take it.

MR LAWRANCE:   Yes, your Honour, and also Vella, being the case that followed it in Australia.

GAGELER CJ:   DAR was a case where the Court of Appeal Justice who gave the leading judgment saw himself as applying the principle in Catlin, I think.

MR LAWRANCE:   Yes.  But the reason I address ‑ ‑ ‑

GAGELER CJ:   Whether or not the case can be explained on some other basis is really neither here nor there, is it?

MR LAWRANCE:   I only advance the submission for this reason:  our primary submission is that Ardern was wrong, but I also put to your Honours the submission that if it is good law, it should be confined to the mandate cases, and DAR is not a mandate case.

GAGELER CJ:   I see.

MR LAWRANCE:   That is why I addressed DAR.

GAGELER CJ:   Thank you.

MR LAWRANCE:   Could I then turn to ratification, and could I identify a principle of law that we say is an important one in the context of this case.  Could I start with Peruvian Guano, which is at page 605 of the joint book of authorities.  The principle that we seek to have your Honours take from it appears at pages 616 to 617 of the bundle, which is pages 499 to 500 of the report, in particular, at bundle 616 at point 5 on the page, there is the statement:

The effect of this resolution is plain.  It is an attempt to affirm in part and disaffirm in part.  A principal must act consistently; he cannot, as was stated by Lord Kenyon, blow hot and cold –

And on the following page, 617 of the bundle, that is given some more context in this particular case.  If your Honours have, four lines down, the sentence:

Now the resolution here is ambiguous –

That is a reference to the resolution that appears at about point 3 on the page at bundle 616, which was relied on as part of the act of ratification of the compromise agreement:

the resolution here is ambiguous, but the act of the Republic in retaining the £260,000 is plain and unambiguous.

That being the settlement sum, but then a few lines further down, there is the sentence that begins on the right‑hand side of the page:

The Republic, then, with full knowledge of the facts, deliberately insist on retaining the money paid as the consideration for the release.

Slightly further down, at about point 5 on the page:

Here the £260,000 would not have been paid had it not been for the agreement –

It is:

the expressive and emphatic language of the agreement itself, it was paid “as the price of perpetual peace”—between the Republic and the Defendants.

So that one cannot divorce the reason for the payment in this case from the acceptance of ‑ ‑ ‑ 

EDELMAN J:   None of this is in controversy.  I mean, it is common ground, as I understand it, between the parties that the performance had not been provided in terms of the condition precedent in paragraph 4, and that that was accepted, ratified.  The only issue in dispute is whether there is a separate obligation, or duty, that condition 4 required, which would not have been ratified or accepted because of the manner in which the performance was provided.

MR LAWRANCE:   Well, the submission we put is that the ratification extends to the nomination of the account.  So, the appellant has ratified the nomination of the account because the money would not have been paid, and obviously would not have been paid into that account but for the nomination of the account by Mr Peng, who purported to nominate the account on behalf of both himself and the appellant.

The point we make is that she has ratified the nomination of the account, she cannot now sue for breach of the term on the basis that the money was not paid into an account that was nominated.

EDELMAN J:   So, there is two separate arguments that you are wrapping up ‑ ‑ ‑ 

MR LAWRANCE:   Yes.

EDELMAN J:   ‑ ‑ ‑ and the first argument is that there is no duty to notify – sorry, no duty to comply with the clause 4 requirements as a separate obligation, and the second one is that, even if there is such a duty, that performance of that duty had been waived, or the breach of that duty had been waived by accepting that the debt had been paid.

MR LAWRANCE:   I think the way I would put the second point is that the appellant has ratified her agent’s act of nominating the account.  Ratification operating retrospectively, if she has ratified that nomination, then there is just no breach and she cannot sue for breach of that term, even if that term be a term of the contract, which as your Honour observes, our first point is it is not.

GLEESON J:   How does she ratify it?  Is it just by a pleading?

MR LAWRANCE:   No, she does ratify it by the pleading, but then she – the appellant goes on to pursue Mr Peng to judgment, being a judgment to which she is only entitled if the nomination was a valid nomination, and then she bankrupts Mr Peng.

Then she proves, in his bankruptcy for $17,000, that is attributable in large part to her proof in his bankruptcy for the million dollars, being a million dollars or so, to which she is only beneficially entitled if the moneys in Mr Peng’s hand are the moneys paid by Crown, and they are only those moneys if he validly nominated pursuant to – if he gave a valid nomination.

So, the nomination was clearly not valid at the time, but she ratified it.  To answer your Honour’s question directly, the first point in time at which she ratifies is when she asserts in the claim against Mr Peng that the moneys in his hands, which he received from Crown pursuant to a payment made pursuant to the very direction in question, were beneficially hers.

I will take your Honour, if I may, to the appellant’s book of further material, just to be precise about it.  It is page 20 of the book of further material, and your Honour sees this is the pleading in the statement of claim, the 2016 proceedings against Mr Peng.  Paragraph 39, the pleading of the direction to pay into his account.  Paragraph 40:

not authorised by Shao to make the Direction.

Paragraph 41:

pursuant to the Direction, Crown paid the sum of $1,018,7410 into the ANZ bank account –

Then paragraph 42.  If it is not ratified before now, it is ratified at paragraph 42:

The sum of $1,018,740 paid by Crown to Peng was beneficially owned by Shao.

That, in our submission, is ratification.  The ratification, in our submission, extends to Peng’s unauthorised act at the time as agent for her, and also himself, in giving the nomination in paragraph 39.  Sorry, it is a very long‑winded answer to your Honour’s question.

At the risk of labouring it, the reason we submit that the principle stated by Justice Chitty in Peruvian Guano is of assistance is because of the proposition at page 617 of the bundle, that if one is considering what is the transaction that the agent has effected which has been ratified – which is an exercise in characterisation, because one needs to characterise what is in and what is without the transaction – one could not in this case divorce from the payment and the agent’s act of acceptance of a payment.

One cannot divorce the reason why the payment is made.  There is a very sensible reason for that, in our submission, and it is stated by the authors of Bowstead & Reynolds in their commentary on article 17(4).  If the principal could affirm in part and disaffirm in part, the principal would be in a position to bring into effect a very different kind of transaction, a different transaction to the one the third party had in contemplation.

In Peruvian Guano, the transaction that the third party had in contemplation was payment of £260,000 as a settlement sum.  In this case, the transaction that Crown had in contemplate was payment pursuant to a direction given by both lenders.

There is a second case that states the principle similarly.  I am sorry that it is not in the bundle of authorities, but we have provided which have hopefully reached your Honours.  It is the decision of Justice Jacobs in Australian Blue Metal Limited v Hughes (1961) 79 WN (NSW) 498. The relevant passage is at page 515 of the report. At page 515, in the left‑hand column, at the foot of the page, there is a paragraph that begins:

It is true that the receipt of the money even with knowledge –

I will not read it all out, but in that paragraph at the top of the next page, his Honour says:

The principle of ratification, as I see it, is that a purported principal cannot both approbate and reprobate the actions of his purported agent.  Therefore, if the principal accepts benefits which flow from the allegedly unauthorized act of the agent and knows that the benefit so flows he must, except in very special circumstances, be taken to have ratified the agent’s act.

We rely on that statement of principle ‑ ‑ ‑ 

GORDON J:   And you say the act here cannot be separated.  It either succeeds or fails, does it not, on that point?

MR LAWRANCE:   Yes, the act cannot be separated from – the act of the agent in accepting and retaining the payment from Crown cannot be separated from the agent’s act of nominating the account into which that is to be paid.  It is all ‑ ‑ ‑

GORDON J:   And if you are wrong about that, then that is the end of it?

MR LAWRANCE:   If I am wrong about that, then I have lost on ratification.  If I am wrong about the nomination having been ratified, then your Honours would, in my submission, consider whether the tender of the payment by Crown, which is a non‑conforming tender, has nevertheless been accepted by the agent and that acceptance of the payment has been ratified, leading to the same result that there is a non‑conforming tender that has been accepted and that acceptance is ratified – if I am wrong on both those points, then I have lost on ratification and that leaves only the construction question as to whether the Goodhart several promise is a term of the contract.

GORDON J:   Thank you.

GLEESON J:   Mr Lawrance, can I just check, what do you say are the benefits that Ms Shao has accepted in this context?

MR LAWRANCE:   She has accepted the benefit of being a beneficiary of a trust fund in the hands of Mr Peng to the tune of $1,000,000, because unless that payment to Mr Peng were the Crown moneys, then she is not entitled.  She has no beneficial entitlement to those moneys in Mr Peng’s hands and they would be his moneys, with Crown having a right – an in personam right, at least – to recover them from Mr Peng.

The statement of principle I have taken your Honours to in the decision of Justice Jacobs in Australian Blue Metal Limited has been twice approved in Australia.  Can I just give your Honours the references.  The first is the Full Court of the Supreme Court of Western Australia in Brockway v Pando (2000) 22 WAR 405. The relevant passage is paragraph 120 on page 434 of the report. Secondly, by the New South Wales Court of Appeal in Leybourne v Permanent Custodians Ltd [2010] NSWCA 78, at paragraph 133.

Those are the principles of law that we wished to draw attention to.  On the facts of this case, the payment was made to Mr Peng’s account on 25 February 2016.  At the time it was made, it was not made into an account that had been notified by the lender.  So, as at 25 February, immediately after making that payment, there has been no valid discharge of the debt owed by the first respondent to the appellant, Mr Peng.  It is accepted that something that the appellant did after 25 February 2015 caused that payment – which, at the time it was made, had not discharged the debt – to change into a payment that did discharge the debt.  In our submission, that something was ratification.

So, that it is expressed many times in our learned friends’ written submissions as an acceptance of something by the appellant – an acceptance by the appellant that the debt had been discharged – but to label it or frame the analysis in terms of acceptance, in our submission, only obscures it.  What one is dealing with here is ratification.  There is no separation doctrine of acceptance, and in that context, your Honours have our submission that the ratification of the agent’s transaction extends to the whole of the transaction, not just part of it.

Your Honours, that is what I wish to put on ratification.  May I address abuse of process.  It was not considered – it was not dealt with by either the Court of Appeal or the learned trial judge.  The facts we rely on are these:  the conversation between the appellant and the employee of Crown that is set out in paragraph 33 of the trial judge’s reasons, at core appeal book page 16, and, in particular, the absence of complaint about the repayment having been made to Mr Peng; the commencement of proceedings naming the respondents as defendants; the discontinuance of those proceedings prior to service in circumstances where the appellant was actively contemplating a claim against the respondents and the respondents, if liable, had an obvious cross‑claim again Mr Peng; the conduct in continuing not to commence against the respondents or intimate a claim against the respondents for a period of almost six years, during which time the appellant pursued Mr Peng to judgment and bankrupted him, incurring costs along the way well in excess of the dividends she recovered and then, on the eve of the limitation period in circumstances where Mr Peng has been bankrupted, bringing against the respondents a claim that the appellant had been contemplating since 2016.

EDELMAN J:   This issue in the notice of contention only arises if you have lost on all of your primary arguments.

MR LAWRANCE:   Yes.

EDELMAN J:   If you have lost on all of your primary arguments, then it would mean that the appellant had a claim for breach of contract against the respondent?

MR LAWRANCE:   Yes.

EDELMAN J:   Would not that then also require that the appellant have mitigated its loss for the appellant to claim damages in the full amount?  If so, why would not a step in mitigation be required to be proceeding to satisfaction against Mr Peng?

MR LAWRANCE:   The best answer I can give to that, your Honour, is that this is a case where the respondents would be the ones primarily liable to the appellant.  By proceeding in the way in which the appellants proceeded and deferring commencing against Crown – or intimating a claim against Crown – the appellant put the respondents in a position where, by the time the claim was brought against them, when it could have been brought at the outset, Mr Peng has been pursued to bankruptcy.

Possibly, that is an inarticulate way of saying or submitting that the appellant on this notice of contention point needed to include Crown in the initial proceedings, and it may well be that she also had to in those proceedings proceed against Mr Peng and pursue Mr Peng, but the proposition that the appellant ought also to have proceeded against Crown is not inconsistent with that.

So, I should make it clear that it is not a case where the respondents have been vexed twice.  It does not have that characteristic.  The Court in Tomlinson v Ramsey Food and UBS v Tyne accepted the proceedings could be stated as an abuse of process if they were unjustifiably oppressive or brought the administration of justice into disrepute, and the submission we make is that the claim against the respondents ought to have been raised in the 2016 proceedings against Mr Peng.

As regards the submission that the decision to omit the respondents from the 2016 proceedings was justified by a desire to proceed more expeditiously against Mr Peng, even if that were initially accepted, by the time that Mr Peng failed to account for the money to the appellant in accordance with Justice Sackar’s October 2016 judgment, it was clear that that reason had gone.

So, for those reasons, we submit it was unjustifiably oppressive to the respondents and brought the administration of justice into disrepute to invoke the processes of the Court in 2022 to bring the present claim against the respondents.

GORDON J:   Just so I am clear, you said properly that your client has not been vexed twice – or your clients have not been vexed twice.  Does that mean that the second‑last sentence of your outline of oral argument – that the belated complaint falls away, as well?

MR LAWRANCE:   No, not in this sense – it does not fall away in this sense.  We have been put in a position of having to defend the proceedings a long time after they ought to have been brought, in our submission, and in circumstances where Mr Peng has been bankrupted, but I do not say that the belated is prejudicial in any sense other than that.

GORDON J:   Thank you.

MR LAWRANCE:   If it please your Honours, those are our submissions.

GAGELER CJ:   Thank you, Mr Lawrance.  Mr Horowitz.

MR HOROWITZ:   Thank you, your Honour.  My friend’s principal argument is that there is a binary effect – the debt is either discharged or it is not discharged – and he concedes that Ardern and Catlin have to be found to be wrong, if that is right.  He distinguishes DAR, as I understand it, on the basis that the funds are effectively trust funds, but when one looks at that agreement in DAR, in my submission, there is no trust imposed on those funds, so they are general funds.  They can be intermixed with Aon’s funds.  There are no trust obligations.  In my submission, that is not a distinguishing feature.

So, DAR would have to be wrong, but also MacKenzie v Albany Finance would have to be wrong, because there, there was a payment that was made out early and it was accepted and there were still damages that were recoverable.  It was not a question of it is either discharged or it is not and that is the end of the investigation.  One still looks at whether it is discharged in conformity with the contract, or not.

My friend says that a joint creditor is adequately protected if the joint creditor can sue in debt and therefore should not be entitled to damages, but this is equivalent to saying that where a plaintiff can get specific performance, then they are not entitled to damages because they can get specific performance, therefore you do not need to read a breach of contract as entitling them to damages.

Contract law has long recognised that there are primary obligations, and if the primary obligations are not fulfilled, then the plaintiff has an election.  They can either seek to have them fulfilled through, in this instance, debt – or, in other instances, specific performance – or they can seek the secondary obligation, which is a right in damages in lieu of seeking the first obligation.  So, in my submission, the fact that there is an answer that you can possibly sue in debt does not itself deprive the appellant of the ability to claim damages.

My friend said that the declaration in Ardern that the debt had not been discharged should have been available on the Williams solution to this issue rather than the Goodhart solution, but the Goodhart solution was that the protective clause requiring two signatures was a several clause, not a joint clause.  That was the whole basis of the Goodhart solution.  Williams’ solution was to say, well, this is just not a payment under the contract at all, it is entirely outside of the contract.

In my submission, the Williams article does not get around the problem that was raised in Brewer, which was that if one of the joint creditors is disabled by his own fraud from suing, then neither of the joint creditors can recover.  That was the basis in the Goodhart – Williams suggests that Justice McNair in Brewer decided the case on the basis that one of the joint creditors had already been paid and that that was inconsistent with saying that the debt had not been discharged, but that is not the case.  In Brewer it was decided not that the creditor had been paid but the creditor was disabled from being sued.  That principle is – with respect, Justice McNair was right so far as that principle is concerned.

If I can just hand up one case, which is a decision of the New South Wales Court of Appeal.  I will not read it out, but I will just refer your Honours to paragraph 16 of this decision of MMI General Insurance Ltd v Baktoo.  In paragraph 16, there is a reference to cases dealing with fraudulent claims and the principle that a:

party to a fraud, he who profits by it, shall not be allowed to create an obligation in another by his own misconduct, and make that misconduct the foundation of an action at law.’

Over the page, on 613, there is a reference to Brewer.  In my submission, the Williams article does not get around that difficulty, it is necessary to have a several obligation enforceable by the innocent account holder in order to get around that problem.

My friend raised the prospect of inconsistent elections as a reason not to follow the reasoning in Ardern, and to say that if there are three account holders one might want a declaration that the account was invalidly debited and another might want damages.  At the end of the day, however, declaratory relief is discretionary, and the court in determining whether to award damages or whether to make a declaration would take into account that fact.  So, there would be no harm done to the bank as a result of two different plaintiffs wanting different relief.

Then, before turning to the notice of contention, my friend raised the issue of ratification.  We say, in response to the submissions that he made, that ratification is only to the minimum extent that is necessary in the circumstances of the case.  Ratification is a legal fiction, and we rely upon Harrisons & Crosfield for that proposition.

In this instance, there were two separate acts by Mr Peng.  He sent an email notifying and nominating an account to Crown and then they subsequently paid the moneys which he accepted into his bank account.  We say there are two separate acts.  If ratification is at all relevant, which we say it is not for reasons I expressed in chief, but if it were relevant, we say that Ms Shao can ratify the acceptance without ratifying the nomination. 

My friend says, well, they are inextricably interlinked and you cannot untangle them, but it would have been possible for Crown to make a payment to Mr Peng, because they had his account on file from another transaction.  They were property developers, and there was evidence that both Peng and Shao were involved in other transactions.

If they had his bank account on file and they paid the money into his bank account without him making any nomination, then there would have been no ratification possible by Ms Shao of a notification given by Peng, because he would not have given one.  So, it is possible conceptually to just ratify the acceptance without ratifying the notification.

GAGELER CJ:   I note that in the pleading of Ms Shao’s case against Mr Peng, it is specifically pleaded at paragraph 40 that: 

Peng was not authorised by Shao to make the Direction.

MR HOROWITZ:   I am sorry, your Honour, I did not hear ‑ ‑ ‑

GAGELER CJ:   Yes, if you look at page 20 of the appellant’s book of further material, in the pleading of Ms Shao’s case against Mr Peng, there is a specific pleading that he was not authorised by her to make the direction.  So, at least as the case seems to have been pleaded, a lack of authority was part of the case she was asserting, not the existence of authority.

MR HOROWITZ:   Yes.  That is correct, your Honour, with respect.

GLEESON J:   Paragraph 42 is just an assertion of beneficial ownership.  Do you say that it is necessary to imply into that a ratification of acceptance of the funds, as opposed to merely the receipt of the funds?

MR HOROWITZ:   It is necessary to imply an acceptance that the debt was discharged in order to get there, and my friend says, well, there is no difference between ratification and acceptance.  With respect, there is, because the acceptance – the ability of a joint creditor to accept defective performance in the discharge of a debt – arises in this case under clause 4, because it is a several clause.  So, Ms Shao has the ability, as a joint creditor to whom that several obligation is owed, to say:  yes, I accept the defective performance, or no, I do not.  It does not come to a question of ratification. 

Just before moving to the notice of contention, if I can answer Justice Edelman’s question from before the morning tea break, which was about whether there were any findings about Shao’s beneficial ownership.  There are, and they are on paragraph 18 – sorry, page 13 of the core appeal book is from the primary judgment, and paragraph 18 on that page sets out the trust that I mentioned earlier.

EDELMAN J:   It was trust of a promise.

MR HOROWITZ:   I am sorry?

EDELMAN J:   It was a trust of a promise.

MR HOROWITZ:   Yes.  Then, at paragraph – actually, the first paragraph of that judgment also says that:

the sum of $1,000,000 . . . in fact belonged to Ms Shao.

GORDON J:   What do I do about page 56 of the core appeal book?  Is the declaration that is made by Justice Sackar to the same effect?

MR HOROWITZ:   Yes, it is.

GORDON J:   That is paragraph 30 where the declaration is set out.

MR HOROWITZ:   Yes, that was effectively the declaration of a constructive trust, a Black v Freedman‑type constructive trust based on stolen funds that belonged to Ms Shao.

Finally, if I might address briefly the notice of contention, we say principally that Ms Shao’s remedies against Peng on the one hand and Crown on the other were cumulative.  They were not alternative and inconsistent.  So, on the principle set out in Baxter v Obacelo Pty Ltd, Ms Shao was free to sue Peng and Crown successively.  There was no abuse of process in this case because, firstly and principally, Crown was not vexed at all in the 2016 proceedings, never having even been served.

Secondly, to the extent that Ms Shao needed a good reason not to proceed against Crown, she had a couple of good reasons.  One, she wanted to obtain expedition.  As I mentioned in my submissions in chief, Ms Shao had had other moneys stolen from her by Mr Peng in 2015, and there are findings in the judgment about that which are referred to in my submissions, and she had managed to get most of those moneys repaid shortly after suing Mr Peng.  So, it was legitimate for her to attempt to do that this time without incurring the expenses of proceeding against Crown. 

Secondly, she had obtained a freezing order against Mr Peng and she had had to give an undertaking as to damages and it is common practice in the New South Wales Supreme Court for matters where there is a freezing order to be expedited because of the burden that that imposes on the party who is injuncted, and also that the expedition will reduce the exposure to damages of the plaintiff under the undertaking as to damages.  So, for those reasons, it was a perfectly legitimate forensic choice that Ms Shao made to just try and recover the money from Mr Peng without involving Crown.

This case is far removed from UBS v Tyne, where there were claims that were made that were essentially the same as claims that had previously been brought in another court; an array arose out of the same factual circumstances, making substantially the same allegations.  In this case, there was not – this case could not be described as the staged conduct of what is factually one dispute.  Ms Shao’s case against Peng was a relatively straightforward one.  He had stolen her money, and she sought a constructive trust and she ultimately obtained that without the case being defended at the final hearing by Mr Peng. 

I should mention that Mr Peng actually filed a cross‑claim in that case seeking relief under the Family Law Act and if Crown had been involved, then they would have been forced to sit through potentially lengthy proceedings.  If Mr Peng had ultimately pressed his cross‑claim and run it, they would have been forced to sit through Family Law Act

proceedings, rather than just dealing with a case solely on their own liability, as this one was.

Finally, Ms Shao’s case against Crown was more complex than her case against Mr Peng because the case against Crown involved the question of whether or not Mr Peng had actual or ostensible authority, and that was the basis upon which most of the time in the case was spent below.

So, in the circumstances, we say that this case is nothing close to the circumstances of UBS v Tyne and this Court would not find that there has been any abuse of process by Ms Shao waiting to see what she recovered from Mr Peng before determining to embark on proceedings against Crown.  May it please the Court.

GAGELER CJ:   Thank you, Mr Horowitz.  The Court will consider its decision in this matter and will adjourn until 10.00 am tomorrow.

AT 12.28 PM THE MATTER WAS ADJOURNED