Xiao v Sun
[2018] NZHC 536
•26 March 2018
IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
CIV-2015-404-2872
[2018] NZHC 536
UNDER the Credit Contracts and Consumer Finance Act 2003 BETWEEN
HANYUE XIAO
Plaintiff
AND
XIUFANG SUN
Defendant
Hearing: 24-31 July, 1-18 August and 28-29 November 2017 Appearances:
AJB Holmes and L E Mannis for the Plaintiff B OʼCallahan and M Chen for the Defendant
Judgment:
26 March 2018
JUDGMENT OF GORDON J
This judgment was delivered by me
on 26 March 2018 at 3.30 pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors: Loo & Koo, Auckland
K3 Legal Limited, Auckland
Counsel: AJB Holmes, Auckland
XIAO v SUN [2018] NZHC 536 [26 March 2018]
TABLE OF CONTENTS
Introduction............................................................................................................... [1]
Ms Xiao’s position..................................................................................................... [8]
Ms Sun’s position................................................................................................... [113]
Ms Xiao and Ms Sun – a credibility contest.......................................................... [169]
The evidence of Ye Shinkarenko........................................................................... [173]
SkyCity records..................................................................................................... [195]
Financial analysis................................................................................................... [240]
Evidence of Mr White........................................................................................... [241]
Evidence of Mr Browning..................................................................................... [275]
Cash available to Ms Sun...................................................................................... [285]
Other evidence regarding charging of interest....................................................... [312]
WeChat messages – allegations of fabrication and deletion................................. [327]
WINZ application forms........................................................................................ [349]
Ms Xiao’s evidence............................................................................................... [380]
Ms Sun’s involvement with others at SkyCity...................................................... [387]
Amount received by Ms Xiao from Ms Sun.......................................................... [389]
Causes of action..................................................................................................... [392]
Illegal contracts..................................................................................................... [395]
CCCFA non-disclosure.......................................................................................... [459]
CCCFA oppression................................................................................................ [480]
Counterclaim.......................................................................................................... [491]
Conclusion............................................................................................................. [492]
Orders and declarations......................................................................................... [494]
Costs...................................................................................................................... [498]
Introduction
[1] Ms Xiao and Ms Sun met at the SkyCity Casino where they both gambled as members of SkyCity Casino’s VIP programme. Ms Sun loaned money to Ms Xiao over an 11-month period between April 2014 and March 2015. The total loan amount documented was $800,000. A written loan agreement was entered into on 7 October 2014 (the Term Loan Agreement). From that date, further advances were recorded by way of addenda to the Term Loan Agreement.
[2] A key factual dispute is whether Ms Sun charged interest. Ms Xiao says that interest was deducted from the sums advanced to her. Her position is that she received approximately $133,000 in principal, of which $100,000 has been repaid. The balance of the $800,000 represents capitalised interest.
[3]Ms Sun denies that interest was charged and says that the full loan amount of
$800,000 was given to Ms Xiao.
[4] Ms Xiao seeks relief on the basis that the Term Loan Agreement and the addenda to that agreement are consumer credit contracts under the Credit Contracts and Consumer Finance Act 2003 (CCCFA), and that as the requisite disclosure was not provided, the loan agreements are unenforceable. Ms Xiao also seeks to have the loan agreements reopened under the CCCFA on the basis that they are oppressive and were entered into by oppressive means. Finally, Ms Xiao seeks a declaration that the various loan agreements are illegal contracts and unenforceable, being contracts for the provision of credit for gambling by a person conducting gambling, in contravention of s 15 of the Gambling Act 2003.
[5] For her part, Ms Sun denies that the loan agreements are consumer credit contracts and says they are not oppressive, nor were they entered into by oppressive means. She further says that she was not ‘conducting gambling’ for the purposes of the Gambling Act. As an affirmative defence, Ms Sun seeks relief under s 76(1) of the Contract and Commercial Law Act 2017 (CCLA) validating the Term Loan Agreement of 7 October 2014 and the addenda to that agreement in the event the Court determines that they are illegal contracts.
[6]Ms Sun has also issued a counter-claim alleging that she advanced the sum of
$800,000, that Ms Xiao has only repaid $100,000 and that the balance of $700,000 is therefore due and payable.
[7] A determination as to whether interest was charged will inform a number of other issues I need to decide. I will first set out the respective positions of Ms Xiao and Ms Sun in relation to the dealings between them, the amounts loaned and whether interest was charged and deducted. Both gave their evidence-in-chief by direct examination. Both did so in the Mandarin language using an interpreter. However, it was clear that each of them understood both spoken and written English reasonably well.
Ms Xiao’s position
[8] Ms Xiao was born in China and moved to New Zealand at the end of 2002. She is known by the English name, Candy. She married Yang (Ray) Pan in 2009. They have three children born in 2009, 2013 and 2015. She does not work and is supported financially by her husband and by their families in China, who sometimes transfer money to them.
[9] Ms Xiao and Mr Pan own two properties together as joint tenants; an apartment located at 513/149 Nelson Street (the Apartment), and the family home located at 21 Loughros Place, Pinehill (the Home).
[10] Before 2014, Ms Xiao went to the SkyCity casino from time to time, treating gambling as a social activity for entertainment. She accepted that during 2012 and 2013 she went to the casino on 130 and 196 days respectively. She says she lost overall during those years. If she had the money, she would play. If she did not have the money, she would not play. She did not tell her husband that she was going to the casino as he disliked her gambling.
[11] She says she met Ms Sun (known as Lily) properly at the casino in about late 2013.
[12] Ms Xiao went to China with her family over Christmas in 2013 and returned to New Zealand in early February 2014. For the first month after her return, Sky City’s records show that she experienced relative success, winning some $18,575 between 12 February 2014 and 14 March 2014. At that stage, she could fund her gambling by using her own funds. The funds were held in ASB accounts in Ms Xiao’s name. These accounts were separate from the joint accounts she held with her husband.
[13] During this period, Ms Xiao became more closely acquainted with Ms Sun. SkyCity gaming records show Ms Xiao and Ms Sun playing on the same tables from 7 March 2014. Blackjack was their favoured game, although they sometimes played baccarat.
[14] SkyCity records show that Ms Xiao suffered substantial gambling losses around this time. In the course of three days between 17 and 19 March 2014, Ms Xiao lost some $35,800. Her available funds in her ASB accounts were largely depleted.
[15] Ms Xiao also had a Chinese bank account with a balance equivalent to more than $100,000. The Chinese bank account was connected to a Union Pay card. The Union Pay card could not be used at ATMs or for cash withdrawals for amounts over approximately $800. However, Ms Sun introduced Ms Xiao to a finance company near SkyCity where Ms Xiao could withdraw money from her Union Pay card in large amounts. Ms Xiao made her first withdrawal on 24 March 2014. Her spending and gambling losses began to increase.
[16] As the two women came to know each other, Ms Xiao told Ms Sun about her family background, including the fact that her husband was quite rich. Ms Xiao told Ms Sun that she was hiding her gambling from her family and was scared to tell them about it. She told Ms Sun that if her husband found out that she was spending so much time gambling at SkyCity, they would probably end up divorced.
[17] In turn, Ms Sun told Ms Xiao that basically she won every time she went to the casino because she was a professional and she knew how to count cards. She also told Ms Xiao that she had been a dealer at SkyCity. Ms Sun gave Ms Xiao advice about gambling techniques.
[18] Ms Sun also told Ms Xiao about Zhang Hui, whom she described as her husband and the father of her daughter. She said that he ran a restaurant and was very rich. She later told Ms Xiao that Mr Zhang had been arrested and had gone to prison on drug charges.
[19] At some point early on in their friendship, Ms Sun and Ms Xiao exchanged phone numbers and WeChat1 contact information so they could exchange messages. They communicated through WeChat frequently but Ms Xiao would delete her messages on a daily basis to avoid her family finding out about her gambling.
First oral ‘loan agreement’
[20] By April 2014, Ms Xiao had lost a significant amount of money at the casino. On 8 April 2014, she was playing with Ms Sun, who was due to travel to China later that day. Ms Xiao said Ms Sun offered to leave her $10,000 worth of chips in a single chip (a chocolate chip) to gamble with while Ms Sun was away. Ms Sun left her a further $5,000 to deposit into the account of Shang Hong Li (also known as Elder Sister Li), who also gambled with Ms Sun. Ms Xiao made the deposit of $5,000 a few days later.
[21] While Ms Sun was away, Ms Xiao continued to lose money at the casino and had withdrawn virtually all the money in her ASB accounts and on her Union Pay card. She says she was in communication with Ms Sun in China, who arranged for Ms Xiao to borrow money from Ms Sun’s friend in New Zealand, Wenbo (Steven) Liu. This resulted in a $7,000 deposit into Ms Xiao’s account on 1 May 2014. Ms Xiao lost this money gambling.
[22] On Ms Sun’s return from China on 19 May 2014, she contacted Ms Xiao and asked for immediate repayment of the $10,000. Ms Xiao told her that she was unable to make the repayment immediately and asked for a few days’ grace. She said Ms Sun was very angry. Ms Sun said that she could not wait and that she would go to
1 WeChat is an application that can be used on smart phones to send messages and images between two or more persons.
Ms Xiao’s home. Ms Sun told her that she needed the money to win money at the casino, asking “how else could I live”?
[23] Later that day, Ms Sun contacted Ms Xiao again and told her that she had a friend (lender friend)2 who could lend Ms Xiao the money. Ms Sun did not name her lender friend but said he was in Dalian in China. The initial proposal by Ms Sun was that the amount of the loan would be $20,000 and that her lender friend would charge four per cent interest per week, payable in advance. However, Ms Sun said, after Ms Xiao had paid the interest of four per cent, repaid Ms Sun the $10,000 and given Ms Sun chips to repay Mr Liu, the money left over might not be sufficient for Ms Xiao to gamble with. Ms Sun then said her lender friend could instead lend Ms Xiao
$30,000.
[24]The agreement reached, Ms Xiao said, was:
(a)The loan amount was $30,000;
(b)Interest was payable in advance at the rate of four per cent per week ($1,200 per week);
(c)The interest payment for the first week would be deducted from the loan amount to be advanced; and
(d)Ms Xiao would repay Ms Sun the $10,000 she owed her from the loan amount to be advanced.
[25] Ms Xiao and Ms Sun arranged to meet at SkyCity on 21 May 2014 for Ms Sun to deliver the money. Ms Xiao said that Ms Sun drafted a handwritten note (a loan slip) which Ms Xiao was required to copy out and sign, recording the loan amount of
$30,000. That note has not been produced. Ms Sun directed Ms Xiao to write the note as if Ms Xiao owed the money to either Ms Sun or to her friend Mr Liu (although Ms Sun told Ms Xiao that Mr Liu was not the lender).
[26] Ms Xiao said that she received only $28,800 after the deduction of interest. She said she then repaid the $10,000 owing to Ms Sun and gave money to Ms Sun for
2 For the purposes of this judgment, a reference to Ms Sun’s “lender friend” is a reference to the unnamed friend who was said to be the source of funds loaned to Ms Xiao.
her to repay Mr Liu the $7,000 she had borrowed from him, using either cash or chips to do so.
[27]The next day she lost money gambling once again.
Second oral ‘loan agreement’
[28] Ms Xiao said that she continued to gamble with Ms Sun each day and within a week, she had lost the amount of the loan that she had received. She said that she did not know what to do as she had no money to pay the following week’s interest due on 28 May 2014. The only thing she could think of was to borrow more money to first pay the interest and then use the remaining amount to try and earn a profit from gambling. She discussed this with Ms Sun, who told her that if she could not come up with the interest payment, then they would both be in trouble. Ms Sun said her lender friend had a powerful background and that ‘they’ were all associated with gangs. She had got to know ‘these people’ through Mr Zhang.
[29] It was agreed that Ms Sun would approach her lender friend to borrow more money. Ms Sun reported back that the lender friend had agreed to loan a further
$20,000 but the interest rate would have to be five per cent per week. Ms Xiao agreed to this and accepted the loan on the basis that:
(a)$1,200 would be deducted to meet the interest due on the (first)
$30,000 loan; and
(b)A further $1,000 would be deducted as the first week’s interest on the
$20,000 new loan.
[30] Ms Xiao said that, in accordance with the arrangement, she received $17,800. She also signed a loan slip for $20,000, which was kept by Ms Sun.
[31] Thereafter, Ms Xiao said she paid Ms Sun on a weekly basis an amount of four per cent interest per week on the $30,000 and five per cent per week on the $20,000. These transactions were usually in the toilets in SkyCity as Ms Sun had said that there were cameras elsewhere. If they were seen, Ms Sun said they would be in trouble. For Ms Xiao, that meant that ‘the operation of usury’ would be dealt with by the casino
and she would have nowhere to go to make a profit and so would not be able to pay interest.
Third oral ‘loan agreement’
[32] By the beginning of June 2014, Ms Xiao had lost the balance of the $20,000 loan that she had received. She said she asked Ms Sun if Ms Sun would borrow again from her lender friend. She said Ms Sun responded in the same way as on the previous occasions: at first, she was angry, but she then agreed to borrow more money, provided the interest was deducted first.
[33] The amount of the loan on this occasion was $20,000, again with interest at five per cent per week. Ms Xiao said she received around $16,800 of the $20,000. Ms Xiao again signed a loan slip, which was kept by Ms Sun.
[34] Ms Xiao said that the three loans were not necessarily given to her on the same day of the week, so she had different week days on which she was required to pay the interest. On a day when interest was due, Ms Sun would remind her either by WeChat or in person as they were meeting at SkyCity every day apart from Sundays.
[35] As noted above, Ms Xiao deleted her WeChat messages after receiving them as she was worried that her husband would find out about her gambling. For the same reason, she did not keep any of the loan slips and did not have any independent record of the loans.
[36] By early June 2014, the total amount borrowed by Ms Xiao from Ms Sun’s lender friend was $70,000 but with interest deducted, as referred to above. In other words, the $70,000 was a “paper total”.
The 7 June 2014 incident
[37] On 7 June 2014, there was an incident at SkyCity when Ms Xiao was playing blackjack with Ms Sun. According to SkyCity records, Ms Xiao was seen by a staff member to have thrown a chip onto the table after the winning hand had been dealt. She received an overpayment of $400. An investigation was made by SkyCity in
relation to Ms Xiao’s conduct. She was spoken to by a staff member and was told that the incident could be a symptom of a gambling problem. Ms Xiao returned the money. The staff member told Ms Xiao that she would be stood down and could not go back to SkyCity until they contacted her. Ms Xiao said that she did not think it was cheating at the time but later on she realised the severity of it. However, she did not accept the description of the event as recorded in SkyCity’s records.
[38] Ms Xiao said the inability to go to SkyCity was a real problem for her, as she still had a large amount of interest to pay every week and she could not think of any way to pay that amount other than from gambling profits at SkyCity. So, on 10 and 13 June 2014, she and Ms Sun drove to Hamilton to gamble at the casino there. However, as the Hamilton casino is also owned by SkyCity, her presence at the Hamilton casino came to the attention of the staff at SkyCity Auckland.
[39] After being spoken to further by casino staff, Ms Xiao identified herself as a problem gambler and voluntarily excluded herself for three months from 20 June 2014.3 The exclusion applied only to the gaming areas of SkyCity and not the entire premises.
Self-exclusion period (20 June 2014 to 2 October 2014)
[40] After her exclusion from SkyCity, Ms Xiao discussed her options with Ms Sun, who told her that one option was for Ms Xiao to repay the $70,000 in one go so that they did not get into trouble. Another option was to pay weekly interest until Ms Xiao had repaid all the principal amounts. Ms Sun again told her that if the interest was not paid, then they would both be in trouble as the people associated with the lender friend had ‘very powerful backgrounds’.
[41] Ms Xiao said she thought about approaching her parents for the $70,000 but she said it would have been quite daunting to tell them. She said the outcome of the discussion with Ms Sun was that she could only get the necessary amount of money by winning at the casino. Ms Xiao therefore agreed with Ms Sun’s other proposal that
3 See Gambling Act 2003, s 310.
Ms Sun would gamble on Ms Xiao’s behalf at SkyCity during the self-exclusion period.
[42] At that time, Ms Xiao said she needed to pay “about over $4,000” in interest each week. Initially, they calculated that Ms Sun would need to win between $500 and $700 per day for Ms Xiao to be able to make the interest payments and so Ms Sun set a target of $1,000 a day (five days a week). When that target was reached Ms Sun would stop for the day. This target later increased as Ms Sun reported losses on Ms Xiao’s behalf and Ms Xiao’s borrowing, and weekly interest payments, increased.
[43] During the period when Ms Sun was gambling on Ms Xiao’s behalf, Ms Xiao would come to the SkyCity complex most days (apart from Sundays) to meet up with Ms Sun. Ms Xiao would position herself on level three of the complex at a place where she could look down onto the gambling area on level two. Although she could see Ms Sun playing blackjack, she was not able to identify individual chips or cards. However, Ms Xiao could see the general run of play and whether Ms Sun was on a winning or losing streak, as she could see whether the dealer was paying out chips to Ms Sun or collecting them when she lost. For the most part, however, Ms Xiao was reliant on what Ms Sun reported to her when they met up.
[44] After Ms Sun had completed her play for the day, the two women would meet on level three and go to the toilets to divide the money. Ms Xiao would give Ms Sun anything above the target and gave the example that if Ms Sun had won $1,650, then she would give $1,500 (the target) to Ms Xiao and Ms Sun would keep the extra $150. Ms Xiao was required to use her share of the winnings to pay the weekly interest instalment to Ms Sun for her to pass on to her lender friend.
[45] On some days, Ms Sun would tell Ms Xiao that she had lost the bank roll (which was effectively Ms Xiao’s money). On other occasions, Ms Sun would tell Ms Xiao that she had not only lost the bank roll, but had continued to gamble using her own money or her lender friend’s money in order to try to recoup the losses, without having asked Ms Xiao first whether she should do so. Ms Sun would then report that this additional money was also lost. This occurred on occasions both when Ms Xiao was present on level three and also when she was not at the SkyCity complex. For
example, on one occasion, Ms Sun told Ms Xiao that she had lost $20,000 and because she was gambling for Ms Xiao, Ms Xiao had to repay it to her. Ms Xiao said she believed her at the time. She thought that Ms Sun was trying to keep her out of trouble with Ms Sun’s lender friend.
[46] When Ms Sun reported having lost her own money when gambling for Ms Xiao in addition to the bank roll she was using to gamble for Ms Xiao, she would tell Ms Xiao that she needed to repay Ms Sun’s own money first, as she needed it to gamble for herself. If Ms Xiao had sufficient funds remaining from previous advances, she would use those to pay Ms Sun. Usually she would need to borrow more. This was not only to pay Ms Sun and to pay interest to Ms Sun for her lender friend, but to have a sufficient bank roll so that Ms Sun could continue to gamble for her in order to meet future interest payments. However, Ms Xiao said this additional borrowing only made things worse. Ms Xiao said “… up until the end I remember I had to pay interest every day, and I remember Ms Sun told me in a very forceful manner that she has to see me, she must get that part of the interest off me.”
[47] At the time of each advance, Ms Xiao signed a new loan slip, which recorded the new total of the “on-paper” advances (without taking into account the deductions for interest and gambling losses). Ms Sun retained the loan slips.
[48] At this point in the narrative, I refer briefly to Ms Sun’s evidence to give context. Ms Sun said that she gave each old loan slip to Ms Xiao once a new loan slip with the updated (cumulative) total was signed. In fact, Ms Sun appears to have kept at least two of the old loan slips. She produced photographs of those. Ms Xiao accepted that she wrote out these loan slips as directed by Ms Sun. Those loan slips indicate as follows:
(a)By 5 August 2014, the “on-paper” advances had doubled from
$70,000 to $140,000 over a seven-and-a-half-week period.
(b)By 20 October 2014, the day before Ms Xiao’s three-month self- exclusion period ended, the “on-paper” loan amount had reached
$225,000. This was an increase of $85,000 over an eight-week period.
Ms Xiao said the increase was due to Ms Sun’s gambling on her behalf, plus the interest repayments due in respect of the loan.
[49] In addition to signing the loan slips, Ms Xiao said that in mid-July 2014 Ms Sun told her that her lender friend required Ms Xiao to sign a formal written loan agreement for $100,000, which was the “on-paper” borrowing at that point. There was no copy of this document produced in evidence. However, Ms Xiao said that both she and Ms Sun signed the document.
[50] Ms Xiao also said that before she signed the agreement, she telephoned some law firms. She said she was told by some that they “couldn’t take the case” because of the interest rate. She said the lawyers told her “it’s not legal, it’s loan shark … So, no lawyer could represent me on it”. I add at this point that there was then some uncertainty on Ms Xiao’s part as to whether these phone calls occurred at this time or prior to the Term Loan Agreement of 7 October 2014 which I refer to below.
Other borrowings by Ms Xiao during self-exclusion period
[51] In order to keep up with the interest payments to Ms Sun for Ms Sun’s lender friend, Ms Xiao resorted to borrowing money from friends. But that was not enough to cover the weekly interest payments. She said she was under extreme stress every week and as she had not told anyone about her borrowing, Ms Sun was the only person she could turn to. Ms Xiao would plead with Ms Sun to help her, Ms Sun would get upset and then later in the day would agree to get more money for Ms Xiao from her lender friend. Ms Xiao would hand any loaned money to Ms Sun for Ms Sun to manage.
[52] One of the other friends was Gao Wei Wei, a friend in China, who helped Ms Xiao to obtain three bank loans of RMB90,000, RMB30,000 and RMB50,000. Ms Xiao received those amounts through Dong Ping International, a foreign exchange company, between 3 and 28 July 2014. The total amount of the loan was around NZ$30,000.4
4 The parties used an approximate conversion rate of RMB5 to $1.
[53] A second person was Ms Sun’s friend, Mr Liu. This was the second instance of lending from Mr Liu and it was again arranged by Ms Sun. Ms Sun told Ms Xiao that they could borrow money against the car that Ms Sun drove, which was owned by Mr Liu. Ms Sun asked Mr Liu, as the legal owner of the car, to sign a loan contract with a finance company as the borrower, which he did on 8 July 2014. Mr Liu received just over $12,000 from the financier that day. There were two separate amounts of
$10,000 and $2,000 advanced. Neither amount was given to Ms Xiao. The $10,000 withdrawal was taken by Ms Sun for either interest or further gambling.
[54] To give context, I refer to Mr Liu’s evidence. He said he was required to make weekly payments of $135.22 to the finance company. Ms Sun, Ms Xiao and Mr Liu agreed that Ms Xiao would pay him $150 per week to ensure that he also benefited from the arrangement.
[55]In addition, Ms Sun arranged for one of her friends, Ting Ting Lu, to deposit
$10,000 into Ms Xiao’s bank account on 4 September 2014. This deposit was treated by Ms Sun and Ms Xiao as an advance by Ms Sun to Ms Xiao. Ms Xiao later repaid this amount in full.
Ms Xiao’s return to SkyCity
[56] On 29 September 2014, Ms Xiao met with SkyCity staff to arrange the lifting of the exclusion order. They agreed that she could return but told Ms Xiao that it could take a few days to arrange for the lifting of the order.
[57] On the same day, Ms Sun’s mobile phone was stolen. Ms Sun was angry at the loss of her phone and blamed Ms Xiao (even though Ms Xiao was not with her when it was stolen) because it was stolen while she was gambling on Ms Xiao’s behalf. Ms Xiao agreed to buy her a new phone as a replacement. The loss of Ms Sun’s phone explains why the WeChat messages (referred to later in the judgment) are only available from 29 September 2014.
[58] When Ms Xiao returned to SkyCity on 3 October 2014, she needed money to finance her gambling. She first turned to Ms Sun but Ms Sun told her she could not get any more money from her lender friend.
[59] Ms Xiao and her husband, Mr Pan, had a safe in their home in which they kept cash, including money from Mr Pan’s family. On occasion, the amounts were substantial. From October 2014, Ms Xiao started taking money from the safe to use to gamble at SkyCity, to make interest payments to Ms Sun for Ms Sun’s lender friend and also to make payments to Mr Liu. For example, on 5 October 2014, Ms Xiao took
$5,000 from the safe and the next day she deposited $4,000 into Mr Liu’s bank account.
The Term Loan Agreement of 7 October 2014
[60] On 6 October 2014, Ms Xiao received a WeChat message from Ms Sun saying her lender friend was unable to loan more funds. Later the same day, Ms Sun messaged Ms Xiao saying:
He has replied … Said have to sign a mortgage contract. Go to the lawyer’s office to sign … Car and house, however the car is apparently not enough … The car is not enough … he is firm in signing a contract … it has to be done no matter if you borrow or not … no matter if it is the last time a contract has to be signed.
[61] By this stage, the “on-paper” loan was $225,000. The available WeChat records indicate that Ms Xiao asked whether it was okay to directly sign for $250,000, incorporating a further loan amount of $25,000.
[62] Ms Xiao said Ms Sun told her that as Ms Xiao’s husband was a joint owner of the Apartment, but was not to be party to the proposed loan agreement, Ms Sun could not register a mortgage over the Apartment. Instead, she told Ms Xiao it would be necessary to register a caveat over the property. Ms Sun told Ms Xiao that the purpose of doing this was to show her lender friend, as it was her friend who said that this document must be prepared.
[63] Ms Xiao signed the Term Loan Agreement dated 7 October 2014 at the offices of Focus Law. Margaret Chen of Focus Law acted for Ms Sun.5 The agreement was not signed by Ms Sun. The terms included the following:
5 I note that after 7 October 2014, Focus Law was incorporated into the law firm Kirkland Morrison O’Callahan & Ho (now known as K3 Legal). For ease of reference, I will use the name Focus Law throughout this judgment.
(a)Ms Sun was the lender (although Ms Xiao understood Ms Sun was representing someone else) and Ms Xiao was the borrower;
(b)The principal sum was $250,000, comprising of loan advances of “… various sums from May 2014 to date”;
(c)The term of the loan was six months with the principal repayable in April 2015;
(d)The interest rate was left blank;
(e)The interest commencement date and interest dates were described as “N/A” (i.e. not applicable);
(f)Ms Xiao agreed to give security (through a separate instrument which Ms Xiao did not sign) over the Apartment which was jointly owned by Ms Xiao and her husband; and
(g)The loan was conditional upon Ms Xiao signing the Term Loan Agreement, “together with all of the securities”.
[64] Ms Xiao explained that the reason the interest rate was left blank was because both she and Ms Sun were aware that the amount of interest being charged (between 200 and 300 per cent per annum) would be unlawful.
[65] Ms Xiao said that the six-month term was only nominal and that Ms Sun had told her that, as long as the interest was paid, the Term Loan Agreement could be extended. Ms Xiao did not take a copy of the Term Loan Agreement out of fear of her husband finding out about her gambling.
[66] At the same time, Ms Xiao signed a form releasing Focus Law from all liability. The form relevantly provides:
1. Xiufang SUN has instructed us to prepare a Term Loan Agreement for her and you.
2. You have come to our offices to execute the Term Loan Agreement.
3. We have explained to you that we do not act for you and that you should obtain independent legal advice prior to the signing of the Term Loan Agreement.
4. Despite our advice above, you have elected not to obtain independent legal advice.
5. Please sign and return this letter in acknowledgement of our advice to you and release us from all liability on your decision.
[67] Ms Xiao did not receive any disclosure documents from Ms Sun. Nor did she take any legal advice before signing the Term Loan Agreement.
[68] After signing the Term Loan Agreement, Ms Sun delivered the further advance to Ms Xiao, who received around $10,000 (out of $25,000) in her hand. This was quickly used up. Ms Xiao’s interest payments to Ms Sun were now over $12,500 per week.
[69] Ms Xiao was unable to recall the exact dates or amounts of advances from this date, but said that each and every advance was used to make interest payments, with any remainder used to gamble to try and win more money to pay the following week’s interest.
[70] Ms Xiao also continued to take money from the safe at home. By 21 October 2014, Ms Xiao sent a WeChat message to Ms Sun saying that she would be in big trouble if it were discovered that she owed her husband “$20,000 plus”.
Further advances and travel to Hong Kong
[71] Ms Xiao was planning to travel to Hong Kong in October 2014. In the days leading up to this travel, Ms Xiao and Ms Sun discussed how she could make $25,000, which would be enough to cover her interest payments while she was away. Ms Sun arranged for her lender friend to lend another $30,000 to Ms Xiao. Ms Xiao says she received about $16,000 of that, the rest being deducted for interest repayments. On 23 October 2014, Ms Xiao went to Hong Kong for five days.
[72]Ms Xiao’s recollection was that while she was in Hong Kong, Ms Sun lost
$10,000 gambling on her behalf.
Dealings with Ye Shinkarenko
[73] By 7 November 2014, a new person had entered the picture, Ye Shinkarenko. Ms Shinkarenko worked at SkyCity as a blackjack dealer until 30 October 2014 and was known to Ms Sun. Ms Shinkarenko was called as a witness for Ms Xiao and her evidence is an important part of Ms Xiao’s case. I address Ms Shinkarenko’s evidence in more detail later in this judgment.
[74] Ms Xiao’s evidence was that Ms Sun arranged for Ms Shinkarenko to lend money to Ms Xiao. This would be used to pay the interest on the $250,000 recorded in the Term Loan Agreement, plus the interest on the subsequent $30,000 borrowed before Ms Xiao’s trip to Hong Kong.
[75] The first amount loaned by Ms Shinkarenko on 7 November 2014 was $70,000. However, as with the loans Ms Sun had arranged, interest at four per cent per week was deducted from the amount advanced by Ms Shinkarenko. Ms Shinkarenko did not give the money to Ms Xiao, but rather gave it to Ms Sun who deducted a further one per cent interest for herself before giving the balance to Ms Xiao.
[76] Further loans from Ms Shinkarenko followed the same pattern, with the total “on-paper” amount loaned by Ms Shinkarenko to Ms Xiao (via Ms Sun) coming to
$380,000 by 11 February 2015.
Ms Sun introduces Ms Xiao to another money lender
[77]Ms Xiao was unable to keep up with her interest payments.
[78] Ms Sun knew a person by the name of Lin Feng as a friend or associate of Mr Zhang. Through Ms Sun, Ms Xiao made arrangements to borrow approximately
$20,000 from Mr Lin in late October or early November 2014, paying an interest rate of three to four per cent per week. This was less than the amount she was charged by Ms Sun’s lender friend, so Ms Xiao considered it could be a better option.
[79] Ms Xiao also borrowed money from family in China and friends in order to make the interest payments, although she did not pay any interest to those people. She also sought to borrow money from a person by the name of Dong Yuan by way of Ms Dong borrowing from a bank in China at a much lower interest rate to enable her to clear her loan from Ms Sun’s lender friend. However, that borrowing did not eventuate.
First addendum to the Term Loan Agreement dated 21 January 2015
[80] Around the middle of January 2015, Ms Sun told Ms Xiao that the total amount borrowed was now $530,000 ($250,000 as documented in the Term Loan Agreement, plus another $280,000 since then). Ms Sun said that her lender friend required Ms Xiao to sign an addendum to the Term Loan Agreement to record the further
$280,000 allegedly advanced.
[81] On 21 January 2015, the Term Loan Agreement was varied by means of an additional addendum which both Ms Sun and Ms Xiao signed, again at the offices of Focus Law in the presence of Ms Chen who witnessed their signatures. The additional addendum:
(a)Extended the term expiry date for the Term Loan Agreement by six months to 21 July 2015;
(b)Recorded that Ms Xiao was to borrow an additional amount of
$280,000 from Ms Sun on the same terms and conditions as set out in the Term Loan Agreement; and
(c)Deemed the further advance to be part of the principal sum to be secured by the Apartment.
[82]Ms Xiao again signed a release form which stated:
1.Xiufang SUN has instructed us to prepare an Addendum Term Loan Agreement for her and you.
2.You have come to our offices to execute the Addendum.
3.We have explained to you that we do not act for you and that you should obtain independent legal advice prior to the signing of the Addendum.
4.Despite our advice above, you have elected not to obtain independent legal advice.
5.Please sign and return this letter in acknowledgement of our advice to you and release us from all liability on your decision.
[83] Ms Xiao did not take legal advice before signing the addendum. Nor did she receive any disclosure documents.
[84] Ms Xiao’s position is that, as with the earlier advances, she had not received the full amount of $280,000 from Ms Sun between 7 October 2014 and 21 January 2015, as that sum included interest deducted in advance and gambling losses incurred by Ms Sun while Ms Xiao was in Hong Kong. Interest payments for Ms Sun’s lender friend were now just under $26,500 per week.
[85]Ms Xiao did not give details of the individual loan amounts that made up the
$280,000. However, she said that the advances were made after 7 October 2014, but prior to 21 January 2015. During that period, she gambled “basically five days a week” with Ms Sun. She also continued to pay interest on a weekly basis. She tried to borrow from friends or took money surreptitiously from her husband’s safe at home. If she had no other options, Ms Xiao would beg Ms Sun to borrow from her lender friend.
Second addendum to the Term Loan Agreement dated 23 February 2015
[86] In late January and early February 2015, Ms Sun arranged for Ms Xiao to borrow further amounts from her lender friend so that Ms Xiao could make her interest payments and continue to gamble.
[87] Ms Xiao made direct deposits into the BNZ account which Ms Sun was using (but which was in fact one of Ms Shinkarenko’s accounts) in the amounts of $5,000 on 26 January 2015 and $3,400 on 12 February 2015.
[88] On 11 February 2015, Ms Xiao received money from her family in China by way of a transfer of $59,975 into her ASB account. Ms Xiao withdrew most of that amount on 17 and 18 February 2015 and used it for gambling.
[89] Ms Sun also gambled on Ms Xiao’s behalf on two occasions during February 2015, the first on 5 February and the second on 20 February 2015.
[90] On 23 February 2015, Ms Xiao and Ms Sun signed a second additional addendum to the Term Loan Agreement. Again, it was signed at Focus Law and their signatures were witnessed by Ms Chen. The second additional addendum provided that Ms Xiao was to borrow an additional $100,000 from Ms Sun on the same terms and conditions as the Term Loan Agreement on the basis that:
(a)It would be repayable within three weeks of being advanced;
(b)Ms Xiao agreed to pledge the Home which she owned jointly with her husband as additional security to secure all sums advanced to that date or in the future; and
(c)The security over the Apartment and the Home were “all obligation” mortgages securing all obligations, defined as “principle [sic] sum, any interest and any loss, costs (including legal costs) or otherwise that the Lender suffers as a result of the Borrower’s breach of the TLA, AA and this Second Additional Addendum”.
[91]Again, Ms Xiao signed a release form which stated:
2.You have come to our offices to execute the Second Addendum to the Term Loan Agreement.
3.We have explained to you that we do not act for you and that you should obtain independent legal advice prior to the signing of the Second Addendum to the Term Loan Agreement.
4.You have had sufficient time and opportunity to engage independent legal advice before deciding to enter into the Second Addendum to the Term Loan Agreement.
5.Despite our advice above, you have elected not to obtain independent legal advice.
6.Please sign and return this letter in acknowledgement of our advice to you and release us from all liability on your decision.
[92] Again, Ms Xiao did not take legal advice before signing the second additional addendum. Nor did she receive any disclosure documents.
[93] When asked why the Home was added as a security in addition to the Apartment, Ms Xiao said:
A.At that time I didn’t have any other options because if I didn’t sign it I wasn’t able to get more money to repay the interest and to gamble, I wouldn’t have additional money. Also Ms Sun kept on telling me, “It wouldn’t matter provided that I didn’t sell this property, your husband won’t find it out.” That is why I was willing to get more money to cover this interest, or we [use] small amount which was left after covering interest and to use this small amount for gambling.
Q. What would happen if you just stop paying the interest?
A.I never thought of stopping paying interest because Ms Sun was with me every day and what I was thinking is that if I stop making payment of the interest I would be in trouble and she would be in trouble as well and it was also possible that this thing would be found out by family members.
Q. Who would you be in trouble with?
A. At that time Ms Sun told me both myself and she would be in trouble, given this was the money she helped me to borrow. That is why she would be responsible to collect the interest each day.
Q. And my question was, who would you and Ms Sun be in trouble with?
A. The lender.
Q.If you could turn to 448 and that is a letter from Focus Law to you dated 20 February, just before I – I just want to go back and you’ve said that you’d be in trouble with the lender, what sort of trouble would that be?
A. I didn’t dare to think about it because these lenders are the people that were involved in the drug deals or they were the gangs, that’s why I didn’t dare to think about it given I didn’t want any trouble.
[94] By that stage, Ms Xiao was paying around $31,500 per week in interest to Ms Sun. As with previous advances, Ms Xiao’s evidence was that interest payable was deducted in advance from the $100,000 documented in the second additional addendum. She said that Ms Sun might also have made deductions for money that Ms Sun had lost while gambling on Ms Xiao’s behalf.
Third addendum to the Term Loan Agreement dated 24 March 2015
[95] In around February or March 2015, Ms Xiao had borrowed a sum of $20,000 from another money lender, whom she knew as Terry. However, she was concerned that he would tell someone from SkyCity about the loan and she was accordingly looking for a way to repay him.
[96] On around 17 March 2015, Ms Xiao’s husband discovered money was missing from the safe in their home. Ms Xiao admitted to her husband that she had been gambling and that she had lost a lot of money, including the money from her Union Pay card account. Ms Xiao says that she did not feel able to tell him the full extent of her gambling losses but confessed to losing $150,000. Mr Pan telephoned Ms Xiao’s parents in China and told them of Ms Xiao’s losses.
[97] By this stage, Ms Xiao could not pay the interest on the loans from Ms Sun’s lender friend. On around 19 March 2015, Ms Sun offered to arrange for her lender friend to lend Ms Xiao a further $100,000. Ms Xiao accepted that offer but only received around $60,000 from Ms Sun in cash with interest deducted in advance.
[98] On 24 March 2015, Ms Xiao and Ms Sun signed a third additional addendum to the Term Loan Agreement, again at the offices of Focus Law. Ms Chen, again, witnessed their signatures. The terms included the following:
(a)Ms Xiao was to borrow an additional sum of $170,0006 from Ms Sun on the same terms and conditions as the Term Loan Agreement;
(b)The principal was to be repaid on or before 21 July 2015;
(c)The Term Loan Agreement, first and second Addenda had created all obligation mortgages over the Apartment and Home; and
(d)All other sums mentioned in the previous documents had been advanced.
6 See [157] to [161] below for Ms Sun’s account.
[99]The release form signed by Ms Xiao was as follows:
2.You have come to our offices to execute the Third Addendum to the Term Loan Agreement.
3.We have explained to you that we do not act for you and that you should obtain independent legal advice prior to the signing of the Third Addendum to the Term Loan Agreement.
4.You have had sufficient time and opportunity to engage independent legal advice before deciding to enter into the Third Addendum to the Term Loan Agreement.
5.Despite our advice above, you have elected not to obtain independent legal advice.
6.Please sign and return this letter in acknowledgement of our advice to you and release us from all liability on your decision.
[100] Ms Xiao said she had to sign the third additional addendum, otherwise she would be in trouble. She did not want the lenders to find out where her home was, in case they caused trouble with her family.
[101] As on the previous occasions, Ms Xiao did not take independent legal advice before signing the third additional addendum. Nor did she receive any disclosure documents.
[102]The interest was by then around $40,0007 per week.
Subsequent events
[103] In late April 2015, Ms Shinkarenko made a complaint to SkyCity about Ms Sun’s lending activities.
[104] Not long after Ms Shinkarenko’s complaint, Ms Xiao and Ms Sun fell out. Ms Xiao could not afford her interest payments and stopped making payments. It is not clear precisely when Ms Xiao stopped paying interest. This led to arguments.
7 This amount is based on a total loan amount of $800,000. For an explanation of the total amount, refer [158] to [161] below.
[105] One of the arguments between Ms Sun and Ms Xiao occurred in April 2015 when Ms Sun demanded that if Ms Xiao could not make a payment to her, then Ms Xiao would need to give Ms Sun her Rolex watch, which was a gift from Ms Xiao’s husband. Ms Xiao had previously allowed Ms Sun to hold her watch as security but was not willing to do so on this occasion as she was concerned that her husband would find out. The argument was resolved by the intervention of Ms Sun’s friend, Shuqin Zheng, who agreed to pay $9,000 or $10,000 to Ms Sun for Ms Xiao. Ms Xiao repaid Mrs Zheng the following day.
[106] Another argument occurred in April or May 2015 when Ms Sun saw Ms Xiao gambling and took Ms Xiao’s handbag, which contained cash. Ms Sun ran into the carpark and Ms Xiao followed her. They then argued in Ms Xiao’s car and the argument ended with Ms Sun slapping Ms Xiao. A security officer saw this. When questioned, Ms Xiao did not tell him what had happened as she was afraid she would not be able to come back to SkyCity and she would therefore have no way to earn money to pay interest. Ms Sun agreed to accept a lower rate of interest, which Ms Xiao thought was around $20,000 per month.
[107]On 18 April 2015, Ms Xiao made a payment of RMB50,000 (approximately
$10,000) into a Chinese bank account belonging to Ms Sun’s mother. In a WeChat message, Ms Xiao said to Ms Sun that it was a payment of interest for Ms Sun’s lender friend.
[108] Ms Xiao gave birth to her third child on 11 May 2015. By that stage, she had discussed her problems with her mother (although she had not disclosed the full extent of her borrowing) and her mother gave her some money to pay Ms Sun. On 18 May 2015, Ms Xiao went to Ms Sun’s lawyer’s office to make a payment of $90,000 in reduction of the principal owing. The earlier $10,000 payment to Ms Sun’s mother was treated as a principal payment. Accordingly, by 18 May 2015, Ms Xiao had repaid
$100,000 to Ms Sun.
Involvement of lawyers
[109] On 3 June 2015, a lawyer, whom Ms Xiao had engaged, emailed Ms Sun’s lawyer and asked for copies of documents and disclosure documents. There followed
an exchange of solicitors’ correspondence in the course of which Ms Sun asserted that Ms Xiao had granted security over the Apartment and the Home to Ms Sun under cl 5(g) of the mortgage memorandum 2011/4300. On 20 July 2015, Ms Sun, through her solicitors, wrote to Ms Xiao’s former solicitors stating that Ms Sun required Ms Xiao to execute documents giving her solicitors authority and instructions to sever her joint tenancy interest in both the Apartment and the Home (this would convert her joint tenancy interest into an interest as a tenancy in common), and to register Ms Sun’s mortgages over the Apartment and the Home. Ms Xiao did not execute those documents.
[110] On 15 September 2015, Ms Sun’s solicitors lodged instruments with Land Information New Zealand certifying that they had authority to act for Ms Xiao to sever Ms Xiao and her husband’s joint interest in the Apartment and the Home into tenancies in common, and then to register a mortgage over Ms Xiao’s interest in the Apartment and the Home.
[111]On 22 September 2015, Ms Sun’s solicitors made demand for payment of
$746,809.32 and advised Ms Xiao’s solicitors of the severance of the title.
[112] On 12 October 2015, Ms Sun issued notices of default under s 119 of the Property Law Act 2007 (PLA) in respect of the principal of $700,000 allegedly owed to Ms Sun (secured by a mortgage against the Apartment and the Home), as well as interest and costs of enforcement. That caused Ms Xiao to file the present proceeding, with an accompanying application for interim relief. Davison J granted the application for interim relief on 16 March 2016 and issued orders restraining Ms Sun from taking any steps to enforce compliance with the PLA notices.8
Ms Sun’s position
[113]The following is a summary of events from Ms Sun’s perspective.
[114] Ms Sun was born in China and came to New Zealand in April 2002 for the purposes of study. She had a partner, Mr Zhang, whom she met in 2002 or 2003 and
8 Xiao v Sun [2016] NZHC 454.
who is the father of her child, Mandy, born in July 2012. Mr Zhang is presently serving a 20-year sentence of imprisonment in New Zealand on charges of importation of methamphetamine, having been arrested on 4 December 2013.9 Ms Sun said she had no knowledge of Mr Zhang’s illegal activities. His arrest came as a shock to her, as did the news, which emerged after his arrest, that he had other relationships and children.
[115] After Ms Sun completed her studies in New Zealand in 2005, she worked for three years as a dealer at SkyCity. As a dealer, she often worked at the blackjack tables. In 2008, after leaving her job as a dealer, Ms Sun began gambling at SkyCity, mostly playing blackjack.
[116] After Mandy’s birth, Ms Sun travelled to China in September 2012, returning to New Zealand in late September 2013. Upon her return, she immediately began gambling at the casino again.
[117] Ms Sun had met Ms Xiao previously but came to know her better once she returned from China. They became quite close.
[118] Ms Sun described a typical day gambling with Ms Xiao in this way. She would go to the casino at around 9 or 10 am after dropping her child off at day-care and would start gambling. Ms Sun would stop gambling after meeting her target for the day. She said she was disciplined in this regard. She would then sit next to Ms Xiao and sometimes would ‘double-down’ on Ms Xiao’s cards to make some extra winnings. They would remain at SkyCity until they both had to leave to pick up their children.
[119] If Ms Xiao lost money in the course of play, she would ask Ms Sun whether she could use her chips to play, to save Ms Xiao from having to leave the table to withdraw funds. Ms Sun always agreed. Ms Xiao would then pay her back the same day. This happened almost every day.
[120] On 8 April 2014, Ms Sun was due to travel to China in the evening. She went to the casino during the day. She finished playing but stayed with Ms Xiao to see if
9 R v Zhang [2015] NZHC 2325.
there were any opportunities to ‘double-down’. Ms Sun said Ms Xiao then used
$13,000 worth of Ms Sun’s chips. Ms Sun urged Ms Xiao to go downstairs to withdraw $13,000 to pay her for the chips, but Ms Xiao said that she would instead repay Ms Sun on her return from China. Ms Sun said she told Ms Xiao that a few days earlier Ms Li had asked Ms Sun to make a deposit of $5,000 to Ms Li’s credit card. Ms Sun said she asked for at least $5,000 from Ms Xiao that day so Ms Sun could make the promised deposit into Ms Li’s account. However, Ms Xiao said she would make the deposit instead. Ms Sun then had to leave. Ms Sun does not accept Ms Xiao’s version of events that she left Ms Xiao with a single “chocolate chip” valued at $10,000.
[121] Ms Sun agreed with Ms Xiao’s evidence that while Ms Sun was in China, Mr Liu loaned $7,000 to Ms Xiao. While both parties agreed that it was Ms Sun’s relationship with Mr Liu that allowed the lending to occur, Ms Sun disagreed with Ms Xiao’s evidence that Ms Xiao made the repayment to Mr Liu through Ms Sun. Ms Sun’s evidence was that Ms Xiao repaid Mr Liu directly at his construction site in cash, around the time that Ms Sun returned to New Zealand in May 2014.
[122] Ms Sun returned to New Zealand on 19 May 2014 and for the first week lived at the SkyCity Grand Hotel (a hotel associated with SkyCity). She said Ms Li repaid her the $5,000 that Ms Xiao had paid into Ms Li’s account for Ms Sun while she was in China, but Ms Sun then lost the $5,000 gambling. She wanted to “chase it back” so she contacted Ms Xiao to ask for her $8,000 back (the $13,000 which had been loaned to Ms Xiao, less $5,000 paid to Ms Li). Ms Xiao told her that she could not repay her at that point. Ms Sun denied making any threats to go to Ms Xiao’s home but did agree that she was frustrated because she needed the money to play with. Ms Sun said she asked Ms Xiao to borrow money from someone else to repay Ms Sun but Ms Xiao said she had exhausted all possibilities.
[123] Ms Sun’s evidence was that it was in fact Ms Xiao who asked if Ms Sun knew anyone with money, suggesting that she, Ms Xiao, borrow the money from a third party so she could repay Ms Sun and also have a balance remaining, so that the two could play together. Ms Sun said that Ms Xiao told her that when she, Ms Xiao, gained
access to her mother’s Union Pay card, she would be able to make repayments and have more money for the both of them to play with.
[124] Ms Sun’s position was that she had funds available in China and believed that Ms Xiao had the ability to repay her. However, to avoid giving Ms Xiao the impression that she had money to spare, she told Ms Xiao that the money would be borrowed from an unnamed friend. Ms Sun continued to adopt the ‘friend’ strategy throughout the lending period. Ms Sun said she adopted this strategy as she believed it would simplify matters and (later) that it would make it less awkward for her to ask Ms Xiao for formal loan documents and security.
[125] The initial amount borrowed was $20,000 (not $30,000 as stated by Ms Xiao) and Ms Xiao signed a loan slip to that effect. That meant the debt of $8,000 between her and Ms Xiao would be extinguished and the balance handed over to Ms Xiao. Ms Xiao would then owe $20,000 to Ms Sun’s “lender friend”, which Ms Sun believed would be repaid in the near future
[126] Ms Sun referred to her BNZ account records in support of her evidence. The records show $25,709.02 was remitted to her on 20 May 2014. The records then show a withdrawal of $25,000 on 21 May 2014. Ms Sun said she gave $12,000 of this money to Ms Xiao, being $20,000 less the $8,000 owed to her. No interest was charged or deducted. Ms Sun used the balance to gamble with.
[127] Ms Sun said that within about a week Ms Xiao had lost the $12,000 and Ms Xiao approached her again wanting to borrow another $20,000 or $30,000. Ms Sun refused, saying it was difficult for her to borrow money, but Ms Xiao begged her. She told Ms Sun that the money would be repaid very quickly after her parents came back from travelling, which would be soon. Ms Sun said she believed there would be no problem with repayment.
[128]So, on 28 May 2014, Ms Sun loaned Ms Xiao $30,000 (as opposed to the
$20,000 asserted by Ms Xiao). There was no requirement for interest to be paid, nor was any interest deducted. The amount was made up of $20,000 borrowed from her
friend Mr Liu and $10,000 of her own money on hand from her winnings. There is no supporting documentation for these two amounts.
[129] Ms Sun then had Ms Xiao sign a loan slip for $50,000. According to Ms Sun, it is usual practice when money is loaned to incorporate the total of all loans to date in a new loan slip. The previous loan slip for $20,000 which Ms Sun had retained was, following the usual practice, given to Ms Xiao. Ms Sun retained the new loan slip for
$50,000, again following usual practice.
[130] Ms Sun said Mr Liu’s name was recorded on the loan slip as lender. She told Ms Xiao she did this because she was receiving child support as a single mother and would not be able to explain the presence of her name on the slip. She did not, however, tell Ms Xiao of the source of the money. She said it was her (unnamed) lender friend’s money.
[131] Ms Xiao then lost all of this money. Ms Sun said it was at this point Ms Xiao was also bringing some of her own money to gamble, which she told Ms Sun she had taken from her husband’s safe (Ms Xiao in her evidence acknowledged taking money from her husband’s safe, but said that this occurred later on).
[497] I order that Ms Xiao is not required to repay Ms Sun the outstanding (approximately) $33,000 borrowed from Ms Sun and which remains unpaid.
Costs
[498] My present view is that Ms Xiao is entitled to costs and that costs should be on a category 2B basis. I encourage the parties to agree costs and to file a joint memorandum. In the event that the parties are not able to agree, counsel for Ms Xiao may file a memorandum within 15 working days of delivery of this judgment. Counsel for Ms Sun may file a memorandum in reply within a further 10 working days thereafter. Memoranda should not exceed five pages.
Gordon J
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