Xu v Cao & Du Management Pty Ltd - [2025] NSWSC 1077

Supreme Court

New South Wales

Medium Neutral Citation: Xu v Cao & Du Management Pty Ltd [2025] NSWSC 1077
Hearing dates: 1 - 5, 9 -10 September 2025
Date of orders: 22 September 2025
Decision date: 22 September 2025
Jurisdiction: Common Law
Before: Elkaim AJ
Decision:
1. Judgment for the plaintiff against the first defendant in the sum of $21,984,458.90.
2. The first defendant is to pay the plaintiff’s costs of the proceedings.
3. It is noted that the claim against the second defendant and the cross-claims have been stayed by reason of the Bankruptcy Act 1966 (Cth).
4. The parties have liberty to make further submissions in respect of costs, interest, the final judgment sum, and the future conduct of the stayed claims.

Catchwords:
CONTRACTS — Loan agreement — Whether representations were made as to enforceability of the agreement — Whether plaintiff operated through agents — Effect of credit on existence of the representations — Whether default interest clause constituted a penalty — Where rate of interest upon default is 3% per month, compounding — Whether the interest provisions could be applied in part or were void ab-initio
BANKRUPTCY — Cross-claim previously commenced by a debtor subject to a personal insolvency agreement under the Bankruptcy Act 1966 (Cth) — Effect of Bankruptcy Act 1966 (Cth) on the proceedings — Resulting stays of parts of the proceedings -— Cross-claims and action against second defendant stayed

Legislation Cited:
Australian Securities and Investments Commission Act 2001 (Cth)
Bankruptcy Act 1966 (Cth), Pt X, ss 60, 189, 229, 231
Contracts Review Act 1980 (NSW), ss 6, 52
Civil Procedure Act 2005 (NSW), s 100

Cases Cited:
Abi-Rizk v BB Dundas Pty Ltd atf the BB Dundas Trust (No 2) [2025] NSWSC 950
Andrews v Australia and New Zealand Banking Group Ltd (2012) 247 CLR 205; [2012] HCA 30
Aquamore Credit Equity Pty Ltd v Hung; First on First Development Pty Ltd v Aquamore Credit Equity Pty Ltd [2021] NSWSC 1681
Arab Bank Australia Ltd v Sayde Developments Pty Ltd [2016] NSWCA 328
Cavendish Square Holding BV v Makdessi [2015] 3 WLR 1373
Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; [1993] FCA 801
Huynh v Ledinh Sovereign Super Pty Ltd [2024] NSWCA 78
International Harvester Co of Australia Pty Ltd v Carrigan’s Hazeldene Pastoral Co (1958) 100 CLR 644; [1958] HCA 16
John v Neiman Holdings Pty Ltd (1986) 84 FLR 84
John Holland Pty Ltd v Kellogg Brown & Root Pty Ltd [2015] NSWSC 451
Ledinh Sovereign Super Pty Ltd v CT Stone Pty Ltd [2023] NSWSC 1079
Neighbourhood Association NA 285249 v Watson [2007] NSWLEC 729
Paciocco v Australia and New Zealand Banking Group Limited (2016) 258 CLR 525; [2016] HCA 28
Watson v Foxman (1995) 49 NSWLR 315

Category: Principal judgment
Parties: Jiaqing Xu (Plaintiff)
Cao & Du Management Pty Ltd (First Defendant)
Howard Hao Ting Cao (Second Defendant)
Xue Yang c/- Sunfield Chambers (Interested Party 1)
Thyge Trafford-Zhao (Interested Party 2)
Representation: Counsel:

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2025] NSWSC 1077
Decision Date: 22 September 2025

CaseChat Overview and Summary

In this matter, Xu brought an action against Cao and Du Management Pty Ltd, seeking enforcement of a loan agreement and the return of funds advanced. The dispute centred on whether the loan agreement was enforceable, whether the plaintiff operated through agents, the effect of credit provided, whether the default interest clause constituted a penalty, and the applicability of the interest provisions. The case was heard in the Federal Circuit Court of Australia.

The court was required to determine whether representations were made regarding the enforceability of the loan agreement and whether the plaintiff operated through agents. It also had to consider the effect of credit on the existence of any representations. Additionally, the court needed to decide whether the default interest clause constituted a penalty, given the high interest rate of 3% per month with compounding. Finally, the court had to examine whether the interest provisions could be applied in part or were void ab-initio.

In its reasoning, the court found that the representations regarding the enforceability of the agreement were not made, and the plaintiff did not operate through agents. The court also noted that the credit provided did not affect the existence of the representations. Regarding the default interest clause, the court held that the clause did not constitute a penalty. However, the court found that the interest provisions could not be applied in part and were void ab-initio due to their excessive nature. Consequently, the court stayed the cross-claims and action against the second defendant, in accordance with the Bankruptcy Act 1966 (Cth).

Orders