Wang v Gu

[2019] NSWDC 356

District Court

New South Wales

Medium Neutral Citation:	Wang v Gu & Anor [2019] NSWDC 356
Hearing dates:	10, 11 and 12 July 2019
Date of orders:	26 July 2019
Decision date:	26 July 2019
Jurisdiction:	Civil
Before:	Russell SC DCJ
Decision:	(1)   Judgment for the plaintiff against the first defendant for $265,164; (2)   Judgment for the plaintiff against the second defendant for $162,164; (3) Order pursuant to s 99 of the Civil Procedure Act 2005 that the plaintiff’s solicitor is not entitled to charge the plaintiff any costs for or incidental to the plaintiff’s affidavit affirmed on 13 February 2019 or for attending court on 10 July 2019. (4)   Order the defendants to pay the plaintiff’s costs, but that such costs are not to include any costs of the plaintiff’s solicitor for or incidental to the plaintiff’s affidavit affirmed on 13 February 2019 or for attending court on 10 July 2019.
Catchwords:	CONTRACTS – identity of the borrower – whether monies were paid by defendants for plaintiff’s benefit – whether there had been repayments of the loans
Legislation Cited:	Civil Procedure Act 2005 (NSW)
Category:	Principal judgment
Parties:	Limin Wang (Plaintiff) Rui Gu (First Defendant) Geng Yao (Second Defendant)
Representation:	Counsel: A Edington (Plaintiff) Rui Gu (Self-represented) Geng Yao (Self-represented)   Solicitors: Juris Cor Legal (Plaintiff)
File Number(s):	2018/55545

Judgment

Introduction

1. The first defendant is the wife of the second defendant. The defendants operated café businesses. The first defendant was the person who conducted the business operations and who looked after the finances. The second defendant was a chef who worked in the businesses, largely in food preparation. Several cafes were conducted by the defendants through means of companies.

2. The second defendant met the plaintiff in about 2009, when he was a client of a business conducted by the plaintiff in the inner city. The second defendant and the plaintiff became friends, exchanging stories of shared experiences in China, which was their country of origin. The second defendant introduced the plaintiff to the first defendant and conversations took place concerning the borrowing of money.

3. The plaintiff gave evidence through a Mandarin interpreter. The first and second defendants represented themselves during the hearing. They gave evidence in English, although their English was very much a second language. When the plaintiff and the defendants spoke to each other in the past, the conversations were conducted in their common language of Mandarin. Because the plaintiff gave evidence through an interpreter, and because the defendants were limited in their ability to express things in English, I gained no assistance in assessing credibility from the demeanour of any of the parties in the witness box.

4. The defendants prepared their own affidavits, which were expressed in less than perfect English. However, the Defence filed was well-expressed, and it appears that the defendants had some legal assistance in preparing that document, which complied with the Rules, and which addressed each and every paragraph in the Statement of Claim, in the manner that a qualified lawyer would.

The Pleadings

5. The plaintiff’s Statement of Claim was filed on 19 February 2018. She sued upon two written agreements. The First Agreement was dated 23 April 2012, and was one by which the defendants agreed to repay the plaintiff the sum of $162,164, being monies already advanced by the plaintiff to the defendants between October 2010 and December 2011. There was also a provision concerning interest. The plaintiff’s case was that she had originally advanced $170,000, but she gave credit to the defendants for some monies spent on her behalf, thereby reducing the outstanding indebtedness to $162,164.

6. In their Defence filed on 24 August 2018, the defendants pleaded in relation to this First Agreement as follows:

1. The monies were advanced by the plaintiff not to the defendants personally, but to the defendants’ company G & Z (Aust) Pty Limited (G & Z);

2. The defendants were under no personal obligation to repay the money lent to G & Z;

3. Any work done by the defendants for the plaintiff would be deducted from any monies advanced to and owing by G & Z;

4. The defendants had undertaken work for the plaintiff to a value exceeding $40,000;

5. G & Z had repaid the plaintiff $100,000 of the monies advanced.

7. The Statement of Claim sued upon a Second Agreement dated 27 June 2016, by which the first defendant (but not the second defendant) agreed to repay to the plaintiff the sum of $103,000, which had already been advanced by the plaintiff to the defendants in 2013 and 2016.

8. In the Defence filed on 24 August 2018, the defendants pleaded in relation to the Second Agreement as follows:

1. The sum of $103,000 was the amount deemed to be owing as at that date by G & Z, taking into account the monies spent by the defendants for the plaintiff’s benefit, as well as the monies already repaid by G & Z;

2. The first defendant was under no personal obligation to repay the monies advanced to G & Z;

3. The funds were to be used and invested by a second company Café Bondi (Aust) Group Pty Ltd (Café Bondi);

4. The plaintiff would either take over the business of Café Bondi as repayment of the $103,000, or Café Bondi would sell the business and the plaintiff would receive the sale proceeds in full satisfaction of any amounts alleged to be owing.

The Advances

9. Particulars of the advances were given in the Statement of Claim. Further detail concerning the advances, and in particular the identity of the payees, were set out in the plaintiff’s affidavit filed on 14 February 2019 (PX 3). In relation to the First Agreement, the advances were made as follows:

Time of Advancement	Manner Advancement	Amount
1 October 2010	Electronic Funds Transfer to Bank Account No. 2125 1012 7719 in the name of G & Z Aust Pty Ltd (G & Z Account)	$30,000
28 October 2010	Cash given to First and Second Defendant	$30,000
22 December 2010	Electronic Funds Transfer to the G & Z Account	$50,000
17 January 2011	Electronic Funds Transfer to the G & Z Account	$5,000
27 April 2011	Cash given to the First Defendant	$25,000
19 December 2011	Electronic Funds Transfer to the G & Z Account	$30,000
TOTAL	$170,000

10. In relation to the Second Agreement, the advances totalling $103,000 were made as follows:

1. $30,000 in cash on 4 February 2013;

2. $65,000 by EFT on 7 February 2013;

3. $8,000 in cash in June 2016.

The First Agreement

11. It was common ground that the First Agreement was handwritten by the first defendant, in the Mandarin language. The affidavit of the plaintiff (PX 3) purported to provide an English translation of the First Agreement. For obvious reasons that evidence was rejected. Counsel for the plaintiff then tendered a typewritten document stamped and signed by a NAATI interpreter (PX 6), being an English version of the First Agreement, as well as the Second Agreement. It was unsatisfactory to present the evidence in that fashion. However, a NAATI certified interpreter in the Mandarin language was at court to enable the plaintiff to give her evidence. That interpreter was sworn and was asked to compare the Mandarin version of the First Agreement with the version in PX 6. Because the interpreter was present in court, and could have answered questions about her translation of the First Agreement, if any had been asked by the defendants, I proposed to adopt her evidence about the English translation of the First Agreement.

12. The original Mandarin document was tendered as Exhibit PX 4.

13. I find that the English translation of the First Agreement is as follows:

“I O U

Kerry (also known as Gu Rui) and Bruce (also known as Geng Yao) borrows from Limin Wang $162,164. Interest will accrue from November 2011 onwards for $132,164. For the remaining $30,000, interest will accrue from March 2012 onwards. If there are any loans the fee for running errands on behalf of Limin Wang should be calculated separately and then such monies will be taken out of the loan amount at the time of repayment.

Borrowers:   Bruce Geng Yao

Kerry Rui Gu

Dated:      23 April 2012”

14. The first defendant gave evidence that she never signed that document. The second defendant gave evidence that he did sign the document, which was in his handwriting, but that the second defendant did not sign it. I accept that evidence.

15. The second defendant gave evidence that he discussed the document with the first defendant at about the time of its creation. He also gave evidence that he took a photograph of the document on his mobile phone and showed the photograph of the First Agreement to the first defendant. He said that she made no particular comment at that time. I accept that evidence.

The Second Agreement

16. The Mandarin original of the Second Agreement was tendered as Exhibit PX 5. I accept the evidence of the interpreter that the English translation of the Second Agreement is as follows:

“I O U

$30,000 cash on 10 February 2013

$65,000 transfer on 7 February 2013

$8,000 cash on 27 June 2016

Borrowed the above amounts from Limin Wang for business operation use.

Borrower: Kerry Gu

27 June 2016”

17. The second defendant gave evidence that the Second Agreement was written out by her, when she and the plaintiff were sitting in a car. She said that at that time she desperately needed $8,000 to settle a company tax debt. The plaintiff handed $8,000 in cash to the second defendant at the time the agreement was written out by her in the car. I accept that evidence.

Evidence surrounding the Agreements

18. The plaintiff said (PX 3, paras 4-10) that she met the second defendant when he became a client of her business, in about early 2009. Through conversation with him she learned that they had a shared background, both having come from China. The plaintiff was told that the defendants had a restaurant near Bondi Beach and at the invitation of the second defendant, she met the first defendant, and also became friendly with her.

19. The plaintiff said (PX 3, para 15) that in about mid-2010 there was a conversation between the plaintiff and the defendants at the Bondi restaurant. The second defendant said that they were setting up a new café business and they needed to borrow money. He said that he and the first defendant would pay the money back in time once the business had done well. The plaintiff said that she trusted the defendants and so she told them she would lend them the money.

20. After that conversation, and before the First Agreement was created, the plaintiff advanced monies as set out in the table in para 9 above. Payments made by EFT were directed to the bank account of G & Z, pursuant to requests from the defendants to pay the monies to that account. The cash was handed directly to the defendants.

21. The plaintiff said (PX 3, para 17) that in August 2011 she sought repayment of the advances made to that date. She says that the first defendant told her that the plaintiff could operate the Rose Bay café of the defendants which had a value of about $250,000. The plaintiff said (PX 3, para 20) that she trusted the defendants, as she knew them personally, and they seemed to be successful business people. The plaintiff arranged for her son to work at the Rose Bay café and at a Bondi restaurant run by the defendants, between 2010 and 2013. The plaintiff had the defendants assist her in relation to conveyancing and a migration matter for her ex-husband.

22. The plaintiff said (PX 3, para 21) that because she felt some comfort about the value of the Rose Bay café, she allowed the defendants further time to repay the monies. Around 2016 the Rose Bay café closed down. The plaintiff said (PX 3, para 22) that the second defendant said to her:

“Unfortunately, you did not accept my offer to take over the Rose Bay café when you had the chance. The café is now sold, and you will not be able to operate it”.

23. The plaintiff said (PX 3, para 23) that she became concerned at what the second defendant had told her and then asked for a written agreement to be signed in order to document the loan arrangements she had with the defendants. She said that at that point she did not trust the defendants to repay the monies she had previously advanced.

24. The plaintiff received the Mandarin original of the First Agreement, when it was delivered to her.

25. The first defendant said in her affidavit (DX 1) that the loans came about in the following fashion. The second defendant and her husband the first defendant had an opportunity to purchase a business at Bondi for an advantageous price. The first defendant said (DX 1, para 5) that, while they spoke in Mandarin, the conversation in her English version was as follows:

“I said to her: ‘This café have the best location at Bondi, but trading went downhill. It was on market for $500,000 half year ago. Now it is on fire sale for $100,000. It is risk but worth to get it at such bargain price. We made offer and the landlord is considering. We possibly take over before the New Year. It will be operating under same company with café at Rose Bay. We will close the bistro soon’.

Ms Wang said to me and Geng: ‘I like to be part of the company developing. The money need for this just can be part of my investment for the company. After this café settlement we can talk about the partnership or give me one of them to operate’.

I said: ‘Let’s do it’.”

26. It is to be noted that in that version of the conversation there was no mention of the company G & Z being the borrower.

27. The second defendant affirmed an affidavit which became Exhibit DX 2. He gave no evidence about any particular conversation that led to the borrowing of the money. Rather, he said (DX 2, para 8) that the plaintiff said to him that she had agreed to handle all the financial matters directly with the second defendant. He said he had no involvement with the money transfers, receiving money or paying it back since then. He said that he did do some work for the benefit of the plaintiff: finding her family an English teacher for her son to learn English; maintaining her property and the kitchen stoves; changing a washing machine; building work in her apartment; and paying an immigration application fee in relation to the plaintiff’s ex-husband. The second defendant concluded his short affidavit as follows (DX 2, para 9):

“So, I think it best way to talk about this issue should be between Limin Wang and Rui Gu.”

28. It is to be noted that the second defendant therefore gave no evidence that any monies were to be advanced to the company, or that the company was to be the borrower.

29. In relation to the Second Agreement, the plaintiff said (PX 3, para 50) that the Second Agreement was written out by the second defendant while sitting in a car and that at the time the second defendant said: “If I don’t get further monies, my businesses are unable to continue to operate”. However, it should be noted that the only further monies advanced at that time was the $8,000 cash, which the first defendant said was to clear a tax debt of the company.

30. The first defendant gave no evidence in her affidavit concerning how the Second Agreement came about. She did say (DX 1, para 13):

“Since mid of 2013, the company planned to build another café called Café Randwick which is by the second company called Café Bondi Group P/L. At 2 February 2013 Ms [Wang] and me and Mr Geng seat down to calculation and agreed: the first “SUMMARY” almost paid off by first company, only $30,000 left. Then Ms Wang did agree advance another $65,000 at that month. The money needed as part of funds for the new project for Café Randwick. Ms Wang had been noticed all the developing and operating process. Her son moves on to work for the second company Café Randwick too. She said to me: ‘I like to take the Café Randwick when I and my son is ready’.”

31. From this version of the conversation it can be discerned that the first defendant was asserting:

1. that monies due under the First Agreement had been paid off, and that by the time of the Second Agreement only $30,000 was still owing under the First Agreement;

2. therefore the Second Agreement recorded only the obligation to repay the $30,000 remaining on the First Agreement, together with an additional $65,000 EFT and the $8,000 in cash made for the tax payment.

32. Again it is to be noted that there is nothing in the conversation put forward in the affidavit of the first defendant in which she asserted that the monies were borrowed by G & Z, or by the second company Café Bondi.

33. There was some later documentary evidence relevant to the identity of the borrowers on the First Agreement and the Second Agreement.

34. Exhibit PX 8 was a report to ASIC by the liquidator in relation to the financial status of G & Z, after the liquidator was appointed. Part of that ASIC report was a Statement of Assets and Liabilities of G & Z. This was signed by the first defendant, who certified that the particulars contained in the report as to the affairs of the company were true, to the best of her knowledge and belief. The report contained in Schedule H a list of unsecured creditors of G & Z. That list ran for one and a half pages. The plaintiff was not listed as an unsecured creditor of G & Z.

35. Exhibit PX 9 was a report to ASIC by the liquidator in relation to Café Bondi. It was signed as true and correct by the second defendant, as director. It contained a list of the unsecured creditors. The total amount owing was $204,447. The plaintiff was not listed as an unsecured creditor of Café Bondi.

Identity of the Borrower

36. All parties gave evidence, which I accept, that the lending of money arose initially out of a friendship which developed between the plaintiff and the second defendant, and later between the plaintiff and both defendants.

37. The plaintiff said that the initial conversations about borrowing money were in terms that the defendants themselves would be the borrowers. While the parties spoke about the monies being used for the defendants’ café businesses, no-one gave evidence that there was any conversation to the effect that the defendants’ company or companies would be the borrowers.

38. The payment of some of the loan amounts by EFT to the G & Z account is a neutral factor. Many loan arrangements involve the borrowers directing the lender to pay the money to a third party. The classic example is the purchasers of real estate who direct their bank, from whom they borrow the money, to pay the funds to the vendor to settle the purchase.

39. The First Agreement was handwritten by the second defendant, who himself nominated both defendants as the “Borrowers”. The Second Agreement was handwritten by the first defendant, who described herself as the “Borrower”. Since the defendants handwrote both agreements, it would have been open to them to specify that the borrower was G & Z, rather than the defendants personally. They did not do so.

40. Finally, the two ASIC documents show that the defendants themselves made no assertion in those official documents that G & Z, or Café Bondi, had borrowed monies from the plaintiff.

41. I find that the defendants personally were the borrowers of the funds, and not either of their companies. In relation to the First Agreement, both defendants were the borrowers. In relation to the Second Agreement, the first defendant alone was the borrower.

Monies paid by defendants for plaintiff’s benefit

42. Apart from the bare statement that $40,000 worth of payments were made by the defendants for the benefit of the plaintiff, there was no documentary evidence, or specific oral evidence, about particular payments. The first defendant said that these payments were made from the G & Z company account. While that company is in liquidation, no attempt had been made by the defendants to obtain documents from the liquidator to prove any of the asserted payments.

42. There was no specific evidence about the size of any payment for any particular purpose. The general description of the payments proved to be inaccurate. For example, the second defendant said that he paid money for a washing machine for the plaintiff. On further questioning, it transpired that the second defendant had assisted the plaintiff to choose a washing machine, and had himself paid a delivery fee of about $50. He did not pay for the washing machine. In relation to building work said to have be done, this was not done by the defendants themselves. Rather, the second defendant gave evidence that he was around to supervise the builders engaged by the plaintiff and to check on their progress. He did not actually spend money doing building work or do building work himself.

43. The bare assertion that over $40,000 had been spent by the defendants for the benefit of the plaintiff was unconvincing. Further, the First Agreement was a written acknowledgement, in effect, that the only monies spent to the date of the First Agreement by the defendants, was the difference between $170,000 which had been advanced and the amount of $162,164 which the First Agreement recorded as still being outstanding.

44. I find that $40,000 was not spent by the defendants for the benefit of the plaintiff. The amount which was spent, as at 23 April 2012, was the difference between $170,000 and $162,164 i.e. $7,836.

45. The parties did take expenditure by the defendants for the benefit of the plaintiff into account in drafting the First Agreement. If further monies had been expended for the benefit of the plaintiff, one would have expected that credit would have been given for such amounts, when the Second Agreement was written down. The Second Agreement does not give credit for any such payments.

46. I find that the only money spent by the defendants for the benefit of the plaintiff is the amount of $7,836, and that appropriate credit was given for this in coming to the figure the subject of the First Agreement.

Alleged repayments of the loans

48. The first defendant asserted that $100,000 had been repaid by G & Z to the plaintiff from the original loan. It is clear from the terms of the First Agreement that nothing had been repaid by the time of the creation of the First Agreement on 23 April 2012.

49. There was no evidence tendered by the defendants to establish that any payments were made, let alone payments totalling $100,000.

50. It is highly unlikely that payments totalling $100,000 were made between the date of the First Agreement being 23 April 2012, and the date of the next advance of $30,000 cash on 10 February 2013. The first defendant asserted that this figure of $30,000 on 10 February 2013 was not a further loan, but rather was a “Summary” of the amount still owing under the First Agreement. If that was right, then the $162,164 owing as at 23 April 2012 had been reduced by payments made in the 10 months between April 2012 and February 2013, so that there was by February 2013 only $30,000 owing. Given that, on the defendants’ own evidence, the defendants’ businesses had cash flow problems and were going through a hard financial period, it is highly unlikely that payments of that magnitude were made in those 10 months.

51. I am not satisfied that the defendants made the payments which they assert, and the surrounding evidence suggests that it was most improbable that any significant payments were made between 23 April 2012 when $162,164 was outstanding, and 10 February 2013 when, on the defendants’ case, only $30,000 was still owing. I accept the plaintiff’s evidence that she paid a further $30,000 in cash on 10 February 2013 and I reject the defendants’ contention that the figure of $30,000 recorded on the Second Agreement was merely the balance still owing under the First Agreement.

52. Further, if that was the situation, then the Second Defendant could have used words in creating the Mandarin document, which is the Second Agreement, to properly reflect the arrangement between the parties. Instead, the fact that the first defendant, in her own handwriting, recorded $30,000 in cash on 10 February 2013 suggests that that was a further advance rather than a statement of an outstanding balance. All of the surrounding circumstances lead me to reject the assertion by the defendants that they had repaid $100,000 of the advances made by the plaintiff.

Findings of fact

53. I make the following findings of fact:

1. In approximately October 2010 the plaintiff and the defendants verbally agreed that the plaintiff would lend money to the defendants;

2. The verbal agreement was for the defendants personally to be the borrowers;

3. The parties agreed that the loans would be used by the defendants in their café business;

4. The parties agreed that the defendants would instruct the plaintiff as to the bank account into which funds were to be paid;

5. The parties agreed that any monies spent by the defendants for the benefit of the plaintiff would be deducted from the amount owed by the defendants to the plaintiff;

6. On 1 October 2010 $30,000 was transferred to the G & Z by EFT;

7. On 28 October 2010 $30,000 in cash was handed by the plaintiff to the first and second defendants;

8. On 22 December 2010 $50,000 was transferred to the G & Z bank account by EFT;

9. On 17 January 2011 $5,000 was transferred to the G & Z bank account by EFT;

10. On 27 January 2011 $25,000 in cash was handed by the plaintiff to the first defendant;

11. On 19 December 2011 $30,000 was transferred to the G & Z account by EFT;

12. By the end of 2011 a total of $170,000 had been advanced by the plaintiff to the defendants personally;

13. On 23 April 2012 the second defendant hand wrote the First Agreement;

14. The second defendant signed that agreement but the first defendant did not;

15. The second defendant showed a copy of that agreement to the first defendant, and she did not raise complaint or comment about it;

16. The second defendant had the authority of the first defendant to create and execute the First Agreement;

17. The nomination in the First Agreement of both defendants as the “Borrowers” was simply a recording of, and was consistent with, what had been verbally agreed back in 2011;

18. The consideration for the First Agreement was:

1. the continuing advance of the monies by the plaintiff to the defendants;

2. the provision made for the payment of interest in the future;

19. By the time of the First Agreement, the defendants had paid a total amount of $7,836 for the plaintiff’s benefit;

20. At the time of the First Agreement, the amount still owing by the defendants personally to the plaintiff was $162,154;

21. On 10 February 2013 $30,000 in cash was handed by the plaintiff to the defendants;

22. On 7 February 2013 $65,000 was transferred by the plaintiff by EFT;

23. On 27 June 2016 the first defendant hand wrote the Second Agreement and delivered it to the plaintiff;

24. On that occasion the plaintiff handed $8,000 in cash to the first defendant;

25. The consideration for the Second Agreement was the continuing advance of the monies borrowed, as well as the additional $8,000 in cash handed over;

26. By the time of the Second Agreement, no further funds had been expended by the defendants for the benefit of the plaintiff;

27. By the time of the Second Agreement, no payments had been made by the defendants to reduce the amounts due under the First Agreement or the Second Agreement;

28. At the date of the trial, the first and second defendants were bound by the First Agreement to repay $162,154 to the plaintiff;

29. At the date of the trial, the first defendant was bound by the Second Agreement to repay the additional sum of $103,000 to the plaintiff.

Conclusion and Orders

54. Upon those findings of fact, the plaintiff is entitled to a judgment against the first defendant for $162,154 + $103,000 = $265,154 and a judgment against the second defendant for $162,154.

55. The plaintiff abandoned any claim for contractual or pre-judgment interest, and thus is entitled only to judgments for the principal amounts owing under the First Agreement and the Second Agreement.

56. The plaintiff is entitled to an order for costs against the defendants. During the hearing I indicated to counsel for the plaintiff that, subject to giving the plaintiff’s solicitor the opportunity to be heard, I was inclined to disallow that solicitor’s costs for and incidental to the affidavit of the plaintiff affirmed on 13 February 2019 (PX3), or of the attendance of that solicitor in court on the first day of the hearing (10 July 2019). I took this view because of the matters outlined in para 11 above. After taking instructions, counsel for the plaintiff indicated that his instructing solicitor did not wish to be heard to the contrary. My costs orders will be framed, pursuant to s 99 of the Civil Procedure Act 2005, so that neither the defendants nor the plaintiff has to pay those costs, for which the solicitor may not charge.

57. My orders are:

1. Judgment for the plaintiff against the first defendant for $265,164;

2. Judgment for the plaintiff against the second defendant for $162,164;

3. Order pursuant to s 99 of the Civil Procedure Act 2005 that the plaintiff’s solicitor is not entitled to charge the plaintiff any costs for or incidental to the plaintiff’s affidavit affirmed on 13 February 2019 or for attending court on 10 July 2019.

4. Order the defendants to pay the plaintiff’s costs, but that such costs are not to include any costs of the plaintiff’s solicitor for or incidental to the plaintiff’s affidavit affirmed on 13 February 2019 or for attending court on 10 July 2019.

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Decision last updated: 26 July 2019