District Court New South Wales Medium Neutral Citation: Hume Plasterboard Pty Ltd v Best Interiors Aust Pty Ltd & Ors [2021] NSWDC 484 Hearing dates: 2, 3, 6, 7 September 2021 Date of orders: 15 September 2021 Decision date: 15 September 2021 Jurisdiction: Civil Before: Abadee DCJ Decision: See paragraph 165 Catchwords: EQUITY – husband and wife – credit facility in favour of company managed and controlled by the husband – credit facility secured by guarantee by the wife – whether guarantee enforceable against wife – whether wife understood the purport and effect of the transaction – whether wife in the position of being a volunteer – whether creditor took steps to have transaction explained Legislation Cited: Australian Securities and Investments Commission Act 2001 (Cth) ss 12CA, 12CB Competition and Consumer Act 2010 (Cth) Sch 2 – Australian Consumer Law ss 20, 21 Contracts Review Act 1980 (NSW) Part 2 Evidence Act 1995 (NSW) ss 97, 128 Cases Cited: Ankar v National Westminster Finance (Aust) Pty Ltd (1987) 162 CLR 549 CFMEU v Personnel Contracting Pty Ltd [2021] HCATrans 138 Dovuro Pty Ltd v Wilkins (2003) 215 CLR 317 Garcia v National Australia Bank Ltd (1998) 194 CLR 395 Hume Plasterboard Pty Ltd v Brilliant Interiors Pty Ltd [2019] NSWSC 679 National Australia Bank v Garcia (1996) 39 NSWLR 577 R v AN (2000) 117 A Crim R 176; [2000] NSWCCA 372 Radin v CBA [1998] FCA 1361 State Bank of NSW v Chia (2000) 50 NSWLR 587 Warburton v Whitely (1989) 5 BPR 11,628; (1989) NSW Conv R 55-453 Yerkey v Jones (1939) 63 CLR 649 Texts Cited: Seddon & Bigwood, Cheshire & Fifoot Law of Contract (11th Australian ed, 2017) Category: Principal judgment Parties: Hume Plasterboard Pty Ltd (plaintiff) Best Interiors Aust Pty Ltd (first defendant) Mr M Li (second defendant) Ms Y M Chu (third defendant) Representation: Counsel: Mr R Quickenden for the plaintiff No appearance by first defendant Mr M Li appeared in person Mr J Lee for the third defendant Solicitors: CBD Law for the plaintiff Fortis Law for the third defendant File Number(s): 2020/00179594 Publication restriction: Nil Judgment BACKGROUND Nature of dispute 1. The plaintiff ('Hume') is a supplier of building (principally plasterboard) products. The first defendant ('Best Interior') was a construction firm, supplying and installing plasterboard products to builders and developers. Best Interior was owned and controlled by the second defendant, Mr Ming Li. From 1994 until their divorce in October 2005, Mr Li was married to the third defendant, Ms Yim Mui Chu. However, they became reconciled from about 2009 or 2010. Although they have not officially re-married, at least Ms Chu regarded Mr Li as "her husband" and deposed to Ming Li referring to her as "his wife". They reside together, with their two adult children, in the suburb of Blakehurst. 2. Between 2013 and 2015, Hume supplied goods to Best Interior on the basis of cash on delivery. From, on 1 March 2015, payment for the supply of materials was put on a different basis. Best Interior applied to Hume in connection with the supply of such products on credit. On the same date, Ming Li and Yim Mui Chu each signed written guarantees for Best Interior's obligation to pay Hume. 3. Hume claims that between October 2019 and January 2020, it supplied goods to Best Interior, but says that it has not received payment from Best Interior. 4. By this proceeding, commenced on 16 June 2020, Hume sues Best Interior as debtor, and Mr Li and Ms Chu, as guarantors, as a result of what it contends was Best Interior's default in paying for the goods. The quantum of the debt claim was alleged to be $127,640.78, as at the date the pleading was filed. This quantum principally comprised the principal debt ($108,786.37), and interest and other fees calculated by reference to the terms of the agreement. 5. On 7 May 2021, Best Interior went into liquidation. Hume made no application for leave to proceed against Best Interior in liquidation, with the result that the proceeding against Best Interior was stayed. Hume now only pursues the guarantors. 6. By their common Defence to the claim, which they filed on 23 July 2020, the guarantors put Hume to proof of its case. Although this is not obvious from the Defence, Hume appeared to accept that both guarantors made a plea of non est factum; although it was not clear how that would apply to Ming Li having regard to Ms Chu's evidence. They also formally asserted in their Defence that the provision in the credit arrangement for interest was unenforceable for being a penalty. 7. In the case of Ms Chu, she formally pleaded separate additional and related defences. She cites the 'special wife's equity', or Yerkey v Jones defence [1] and also unconscionable conduct against Hume, relying upon certain circumstances in which she executed the contract for guarantee. She also relied upon the provisions in Part 2 the Contracts Review Act 1980 (NSW). 8. After the credit transaction was entered into in March 2015, there were increases in Best Interior's credit limit in 2017 and 2019. Ms Chu did not rely upon any principle derived from Ankar v National Westminster Finance (Aust) Pty Ltd (1987) 162 CLR 549 at 558-60 relating to the discharge of a surety on the basis of variations to the guarantee. Refining the issues at the hearing 1. At the hearing, Hume was represented by Mr Quickenden of Counsel. Ms Chu was represented by Mr Lee of Counsel. Mr Li represented himself. Both Mr Li and Ms Chu were assisted by an interpreter on days 1 & 2, who spoke Mandarin and an interpreter (on days 3 & 4), who spoke Cantonese and Mandarin. The significance of this difference will be indicated below when I address Ms Chu's credit as a witness. 2. When he was invited in the hearing to give an Opening Address, Mr Li indicated to the Court that he accepted that he owed a debt to Hume, though his position was that it was limited in quantum to $100,000. 3. In his opening, Counsel for Ms Chu accepted that the critical liability issue was the Yerkey v Jones defence, as more recently expounded by the High Court in Garcia v National Australia Bank Ltd [2] ("Garcia"). Mr Lee of Counsel accepted that if his client could not establish that defence, then she could not succeed with a non est factum defence. 4. In his closing written submissions, Mr Lee referred to certain legal principles in equity and statute relating to 'unconscionable dealing', but he did not raise any factual matters, in his written submissions or closing address which differentiated the outcome under that general law or statutory regime for unconscionability from the outcome under Ms Chu's Yerkey v Jones defence. In those circumstances, it was not clear what the statutory count of unconscionability added to the Yerkey v Jones defence. I note further that Mr Lee did not refer in his opening or closing addresses to a defence under the Contracts Review Act. I infer that at least that particular defence was abandoned. 5. Eventually, Ms Chu and Hume (but not Mr Li) accepted the quantum of the debt, as being $113,926.37. Ultimately, Hume altered its position so that it pressed only for a debt against Mr Li in the sum of $100,000. 6. The real and dispositive question, ultimately, is whether Ms Chu's position and circumstances engage the principles from Yerkey v Jones. HOW THE CREDIT TRANSACTIONS WERE ENTERED INTO – HUME'S PERSPECTIVE 1. Hume relied upon the affidavit of Ms Cindy Williams, dated 6 November 2020. The following facts emerge from her evidence, but also through the cross-examination of Mr Li. 2. On 1 March 2015, Best Interior completed a Credit Application Form for credit facilities with Hume, requiring an estimate of credit of $90,000. The Credit Application Form included a "Personal Guarantee & Indemnity Agreement". Both the Credit Application Form and the Personal Guarantee & Indemnity Agreement were signed by both the second and third defendants. 3. It emerged from Mr Li's cross-examination that he was the source of much of the detail contained in the credit application form. He said he gave the information to Mr John Yu. 4. Ms Williams was the credit manager for Hume who assessed the credit application. In evidence in chief, Ms Williams was directed to both the credit application form and the guarantee. Both forms indicated that Mr Jason Yu was a witness to Ms Chu's execution of the guarantee. Ms Williams said that she did not know who Mr Yu was and had no understanding of whether he had ever been employed by Hume. 5. An account was set up by the plaintiff permitting the first defendant to obtain goods and materials from the plaintiff on credit, up to a total credit limit of $90,000. 6. Letters were sent to both the second and third defendants confirming the account had been opened and enclosing a copy of the Account Terms & Conditions together with a copy of the Personal Guarantee & Indemnity Agreement signed by each of the defendants. 7. After establishing the account and providing goods on credit to the first defendant, a caveat was lodged over the third defendant's property at Bexley. 8. On 12 March 2015, the guarantors signed a credit card application and personal guarantee with plaintiff, although, of course, there is controversy as to the circumstances in which Ms Chu applied her signature; which I will return to later when considering her defence. 9. Under cross-examination, Ms Williams accepted that: * she was authorised by Hume to approve Best Interior's credit application; * aside from copies of drivers' licences for both guarantors, Hume did not receive, and did not seek, any other documentation indicating the financial position of Best Interior; * she understood that Ms Chu was Mr Li's wife, and that Mr Li was the sole director of Best Interior; and * she had never met Ms Chu, nor spoke to her, before approving Best Interior's application for credit. 1. From March 2015 to January 2020, Hume supplied Best Interior with plasterboard and associated products on credit. Increases to the credit facility 1. On 3 August 2017, a letter on the letterhead of Best Interior, signed by Mr Li and purportedly signed by Ms Chu, was received by the plaintiff, making a request to "increase our company Best Interior Aust Pty Ltd.'s credit limit to $100,000 with the plaintiff Plasterboard Pty Ltd." 2. Then on 15 August 2017, a request was made by the guarantors, on behalf of Best Interior, "to increase our credit limit to $200,000 with Hume Pty Ltd if possible". Again, the request was signed by Mr Li and purportedly signed by Ms Chu. 3. On 1 September 2017, Hume agreed to extend the limit to $100,000. That day, Hume sent letters to both the second and third defendants confirming the approval of an increase in credit limit to $100,000. Those letters enclosed a copy of the Account Terms & Conditions together with a copy of the Personal Guarantee & Indemnity Agreement signed by both defendants. 4. On 7 May 2019, the guarantors, on behalf of Best Interior, requested an increase in credit to the sum of $150,000. Again, the request was signed by Mr Li and purportedly signed by Ms Chu. 5. The next day, Hume granted that request. On 8 May 2019, Hume sent letters to both guarantors confirming the approval of an increase in credit limit to $150,000. Those letters enclosed a copy of the Account Terms & Conditions together with a copy of the Personal Guarantee & Indemnity Agreement signed by each of the defendants. 6. Under cross-examination, Ms Williams accepted that: * she had not received any additional documentation about Best Interior's financial position when deciding to approve the requests, in August 2017 and 7 May 2019, to increase the credit limit; * she had not attempted to contact Ms Chu to ascertain whether she understood that such requests had been made; and * she was not aware of anyone else, on behalf of Hume, acquiring such knowledge from Ms Chu. 1. In re-examination, Ms Williams explained that when she received the letters requesting increases in limits, she believed that both Mr Li and Ms Chu were making the requests. This was based on their signatures on the requests and discussions with Hume sales representatives; although the detail of such discussions was not indicated. 2. On 6 July 2019, there were various communications between the plaintiff and the first defendant regarding the account. A record of the communication is entered into the Hume "system". 3. In January 2020, Hume stopped supplying products to Best Interior. Quantification of debt 1. On 1 April 2020, Cindy Williams, on behalf of Hume, sent a final notice to Best Interior. Notices were also sent to the guarantors. A copy of the Statement of Account (a copy of the Statement of Accounts has been sent monthly since March 2015) showing $157,015.93 was owed by the first defendant as at the date supply ceased. 2. Ms Williams quantified Hume's claim as: (a) Supply of goods, materials and associated products: $108,786.37 (b) Interest claimed up until 31 May 2020 on the sum of $108,786.37 calculated in accordance with clause 2(A)of the Terms & Conditions of Sale forming part of the Application for Credit: $536.48 (c) Interest claimed from 12 June 2020 to 2 November 2020 in accordance with s 100 of the Civil Procedure Act (144 days @ $19.23 per day): $2,769.12 (d) Receivable management fees: $16,447.93 (e) Lodgement / Withdrawal of caveats: $1,540 Subtotal: $130,079.90 1. I refer to this itemisation of the debt notwithstanding that the quantum of the debt was agreed, as between Hume and Ms Chu, since Mr Li did not agree to the quantum. YIM CHU's DEFENCE – THE YERKEY v JONES DEFENCE 1. On 19 July 2005, Ms Chu applied for a credit card. 2. Prior to March 2015, Mr Li conducted his business as a self-employed plasterer through the use of Best Interior as his corporate vehicle. Prior to this time, he was paying Hume cash on delivery. In practical terms, however, that meant that Mr Li paid by credit card. He used a credit card in his wife's, (Ms Chu) name, for this purpose. 3. Bank account statements in the financial years ended 30 June 2014 and 30 June 2015 (Exhibit B) indicate that substantial sums of money were paid to Hume through the use of Ms Chu's credit card: $98,285 (FYE 30 June 2014) and $136,587 (FYE 30 June 2015). By the use of her credit card (whether that was for purchases for Hume or any other purposes) Ms Chu accrued points which could be redeemed and facilitate purchases for her own uses. Use of her credit card assisted Best Interior to delay payments to Hume, or at least delay payments relative to paying by cash. 4. Mr Li was cross-examined on Ms Chu's credit card statements. He accepted that he knew that when, on behalf of Best Interior, he used his wife's credit card to make payments to Hume, she was responsible for the repayments to the credit card merchant. Accordingly, to avert the possibility of her being exposed to a suit for defaulting on the repayments to the merchant, he arranged for Best Interior (through its St George Freedom account) to make payments to Ms Chu's credit card throughout the period from 2014 to 2020, as revealed by Exhibit B. 5. Ms Chu was also cross-examined about Mr Li's use of her credit card. Ms Chu: * accepted that she was responsible for debt accruing on the card even as it was being used by her husband; * knew, by 2014, that the credit merchant (Westpac) could sue her if she did not repay the debt on the credit card and this could expose her to the risk of her property at Bexley being sold; and did not wish to expose herself to these possibilities; * understood that to avert those possibilities, Mr Li arranged for Best Interior to pay her to facilitate her credit card repayments. Specifically, (a) it paid her for her services as a cleaner; and (b) payments enabled her to repay debt on the credit card arising from payments by Best Interior to Hume; * was aware from 2014, that her credit card statements indicated substantial expenditure on her credit card for the purchase – for the benefit of Best Interior – of materials and goods from Hume. However, Ms Chu said, more than once, that although she knew that an entity was providing materials to Best Interior, she was not actually aware of the name of the entity; * confirmed that, on several occasions, she told Mr Li that she needed money from Best Interior to meet her credit card repayment obligations; although this was done in general terms: she asked him to repay the amounts that Mr Li had spent and also recalled asking him not to exceed the $15,000 limit on the account; * indicated that she allowed Mr Li access to the credit card account statements; mainly in electronic form; * explained that the primary purpose of allowing Mr Li to use the credit card was because he was her husband and she wanted to help him with his business; whilst acknowledging that by permitting Mr Li to use the credit card, she also benefited: by her capacity to accrue and redeem 'loyalty' points from the use of the card. 1. Not all of the payments made by Best Interior to Ms Chu were simply to reimburse her for the expenditure on her credit card to Hume. Sometimes, Mr Li accepted, Ms Chu needed money for other purposes, when the need arose. Mr Li sometimes transferred money into his wife's account to ensure she was not indebted on her credit card account. Mr Li said that it was only "sometimes" that Ms Chu would tell him how much he needed to pay her. 2. Under cross-examination, Mr Li was shown a schedule (MFI 5) containing information for the financial years 2014-2020, regarding her taxable income, Ms Chu's credit card payments to Hume, Best Interior's payments to Ms Chu and deposits made into Ms Chu's accounts. The schedule contained information extracted from the documents that were, respectively, Exhibits F (Ms Chu's tax returns), B (the credit card statements), C (Best Interior's payments to Ms Chu's credit card account), and D (payments into Ms Chu's Westpac 'Rocket' and 'Choice' accounts). 3. Mr Li said that, at all times, he tried to ensure that Ms Chu had enough money in her account to enable her to make credit card repayments, but said that sometimes she might take monies from the loan account. He accepted that he tried to ensure Best Interior paid Ms Chu to reimburse her for payments to Hume on her credit card. 4. Ms Chu was asked whether she recalled that purchases on her credit card exceeded $100,000. She did not recall this, but accepted that Best Interior might have paid her that amount into her credit card account. 5. Ms Chu was also cross-examined about the payments made into two Westpac accounts (the 'Choice' and 'Rocket' accounts in Exhibit D) from 2014 to 2020. The general proposition put to Ms Chu was that these were cash payments which redressed the shortfall, or deficit, from payments made into her credit card account by Best Interior (represented in Exhibit C) to allow Ms Chu to discharge her indebtedness after Best Interior had used that credit card account to pay Hume (represented in Exhibit B). 6. Ms Chu did not however accept these propositions. She did not accept either that the source for the deposits was Best Interior or that if it was the source, that the purpose was to redress any such deficit or shortfall. For the 2015 financial year, she recalled that the total deposited sums of $300,000 represented partly what Mr Li paid to her because of a loan she gave him to cover his gambling debts and partly Mr Li providing money for materials purchased for Best Interior's business. For the financial year 2016, she recalled that the deposits of $420,000 were paid by an entity, Sydney Builder Pty Ltd, which had, as I understood Ms Chu's evidence, in repayment of a loan (advanced, in two instalments, 7 August 2015 and 5 February 2016) built a duplex. Ms Chu was unable to say whether they related to Best Interior. For the financial year 2017, she recalled that the $410,000 deposited sums which she received were from her mother-in-law following the sale of the latter's property for $900,000. 7. Hume relied upon evidence of Ms Chu's tax returns. These were in Exhibit F. A tax return for Ms Chu for the financial year ending 30 June 2015 indicated her receipt of business income in the sum of $32,678, but no salary. 8. A tax return for Ms Chu for the financial year ended 30 June 2016 indicated her receipt of business income in the sum of $42,150; again with no salary. The return also disclosed as loss of rent in the sum of $5,147. 9. A tax return for Ms Chu for the financial year ended 30 June 2017 indicated her receipt of business income in the sum of $41,620; again with no salary. The return also disclosed as loss of rent in the sum of $6,117. 10. On 3 August 2017, Best Interior sent a letter to Hume (to the attention of Cindy Williams) requesting an increase to the credit limit to $100,000. Then on 15 August 2017, Best Interior sent another letter to Hume, explaining that the company was starting a building project in Yagoona in 2 weeks' time and, for that reason, requested an increase of the credit limit to $200,000. The letters were (purportedly) signed by both guarantors. However, in her affidavit affirmed 31 August 2021, Ms Chu denied affixing her signature to either letter. 11. A tax return for Ms Chu for the financial year ended 30 June 2018 indicated her receipt of business income in the sum of $37,500; again with no salary. The return also disclosed as loss of rent in the sum of $2,912. 12. On 7 May 2019, Ming Li, on behalf of Best Interior, sent a letter to 'Alan'. In it, he explained that he had some jobs coming, starting in the next week. He sought an increase in the credit limit from $100,000 to $150,000. He signed the letter and the letter purportedly was signed by Ms Chu, but in her affidavit of 31 August 2021, Ms Chu denied affixing her signature to it. 13. A tax return for Ms Chu for the financial year ended 30 June 2019 indicated her receipt of business income in the sum of $36,140; again with no salary. The return also disclosed as loss of rent in the sum of $5,541. 14. A tax return for Ms Chu for the financial year ended 30 June 2020 indicated her receipt of business income in the sum of $26,954; again with no salary. The return also disclosed as loss of rent in the sum of $11,180. Ms Chu's affidavit of 22 March 2021 1. In this affidavit, Ms Chu identified her occupation as being a cleaner and that this was something she had done for 20 years. In cross-examination, she corrected this to acknowledge that it had been more like 32 years. Ms Chu deposed to being unable to read English. 2. By this affidavit, Ms Chu responded to Ms Williams' affidavit dated 6 November 2020. Some of its content, relating to her marriage, divorce and reconciliation with Ming Li, has already been referred to in the Background section of these reasons. She deposed to her belief that she worked as a cleaner for Ming Li's business; which she understood was named M & M Handy Services and to receiving about $7,000 a month before tax and other contractor costs. This was before the Covid-19 Pandemic struck. 3. Ms Chu deposed to the "trust" she reposed in Ming Li; not only in relation to her personal life, but also in connection with business and finance decisions. 4. She deposed to providing cleaning services in three properties owned by her uncle since she arrived in Australia in 1988. She deposed to Best Interior being a company solely run by Ming Li and asserted that she had no "involvement" in its operations. Despite that lack of involvement, she deposed that she believed that the business was successful; which she attributed to Ming Li having 'worked hard' and being capable of providing for her family; and outward expressions of confidence by Ming Li. 5. At this point, I interpolate some of the evidence of Mr Li. He accepted in cross-examination that: * he arranged for Ms Chu to sign the application form and guarantee; * he had told her that the transaction was necessary for Best Interior to purchase products; * he had told her that Best Interior needed to acquire products (for its business) on credit. 1. Mr Li denied explaining to Ms Chu that she would be liable to pay if Best Interior defaulted on its repayment obligations to Hume Plasterboard. 2. Ms Chu deposed to a conversation with Mr Li in or around March 2015 in which the latter asked her to sign 'these documents'. When she asked what they were for, she deposed to Mr Li saying that he needed them for materials for his business. In particular, she was presented with two pages, Mr Li pointed at them and asked her to sign them. She deposed to not recalling whether Mr Li had not (otherwise) advised her what they related to. She explained that she did not discuss the documents with anyone else. Accordingly, she did not obtain legal advice to sign the documents. 3. She deposed to not seeing any of the other pages. She also deposed to being unable to read English. She deposed to not understanding the true nature of the documents she signed since they were never explained to her. She explained that she signed the pages she was asked (being pages 13 and 15) in order to help Ming Li's business and because of her confidence in Ming Li. 4. In cross-examination, Ms Chu was challenged on her evidence about 'these documents'. She said that: * she understood that by signing them, she was helping Mr Li with his business; * she knew that by signing the documents this would help Mr Li get materials for Best Interior; and * she understood that by signing these documents, Mr Li was able to spend a lot more on getting materials for his business than he could by continuing to use her credit card and could obtain materials without having to pay for them straight away; 1. During her cross-examination, Ms Chu clarified that when she was referring to 'these documents' she was referring to the pages of the credit application and guarantee, which were part of a composite document. 2. It was put to Ms Chu that she understood, in March 2015, that by signing 'the documents', she knew that she had a responsibility to pay Hume. Ms Chu baulked at this proposition. She said she was not aware of this "back then". But asked why, in circumstances where she was not a member or director of Best Interior, she thought that Mr Li was asking her to sign the documents, she answered that he had asked for her help; she did not understand the legal implications and no one else explained them for her. Eventually, she accepted that she did not care what obligations she may have acquired – it was enough reason for her to sign the documents because Mr Li asked her to. 3. But Ms Chu went on to say that she did not think about any legal obligations. She did not think she was taking on any big responsibility. It was suggested that she could have asked her daughter, Jessica Li, to read the document if she wished. Ms Chu disputed this (according to Ms Chu's statement of her age as at the date of her main affidavit Jessica Li appears to have been about 19 years old at the time). 4. Ms Chu was referred to the circumstance of her having acquired two properties in her name by March 2015 – in Rockdale and Bexley – and she accepted that she obtained legal assistance to enable those acquisitions. It was put to her that she could also have obtained legal assistance in March 2015. It was also put to her that by March 2015, she was familiar with contracts and more specifically, loan applications engaged in for the purposes of acquiring real property. Ms Chu accepted this, but said that the position in March 2015 was different: she did not know that she was signing a legal agreement and signed the document because she trusted Mr Li after he had asked her to sign it. 5. In one exchange in cross-examination, Ms Chu's evidence was as follows: "Q. Mrs Chu, you knew, when you signed that document in March 2015, that you were committing yourself, potentially, to legal obligations, didn't you? A. INTERPRETER: I truly don't know. I truly don't know. I didn't know my house will be involved in this. Q. When you signed the document, you knew you had legal obligations, but you didn't think your house would be at risk, is that right? A. INTERPRETER: Right. I didn't know. Q. Didn't know what? HIS HONOUR Q. You didn't know that you had obligations, or you didn't know that your house would be at risk? A. INTERPRETER: I understood there are legal obligations, but my husband promised to me that he will pay the money back soon, and it will be all good, so I trusted him." 1. There were, however, as Ms Chu accepted, occasions throughout her entire relationship (inferentially, the period she was divorced from him) with Mr Li that she did not trust him. 2. Ms Chu deposed that no one else was present when she signed the pages Mr Li had asked her to sign. This was so despite one of those pages, page 13, bearing the signature of a witness, 'Jason Yu'. She deposed to Mr Yu not being present. 3. Other than the response she received from Mr Li, in answer to her simple inquiry as to why she should sign the documents (his need to get materials for the business), as indicated, she made no further inquiry as to the nature and effect of the documents. 4. On 14 March 2017, Ms Chu received a notice from the Land Titles Office that a caveat had been placed on her property (at Bexley). Hume had been responsible for the caveat. 5. She raised the matter with Ming Li and he told her that he just needed to pay some money and that the caveat would come off. Ms Chu was not satisfied with that assurance, and deposed to consulting Ms Alice Yang of the law firm Alice Yang & Associates, a firm in Chinatown. Ms Yang explained the effect of the caveat. 6. In cross-examination, Ms Chu said that she did not refer the correspondence from the state authority to her daughters for interpretation since she believed she needed legal assistance. She said she did not ask Mr Li to read it to her since he could not read English. Nevertheless, she said that she asked him what it was about because she thought he might indicate what was going on. She accepted that she did not trust him enough to dissuade her from seeking professional advice. 7. Ms Chu was cross-examined about the assistance she received from Ms Yang. Ms Yang explained to her that the caveat meant that she could not sell her property and when Ms Chu asked why, Ms Yang explained that she had signed a document which she later (but not in March 2015) understood to be her guarantee to Hume. She did not provide a copy of the guarantee to Ms Yang on the occasion the latter advised her or subsequently. 8. Armed with that explanation, Ms Chu told Ming Li that he needed to "pay this off" and indicated that she did not want "anything" against the house. She deposed to him assuring her that he would pay it off as soon as he could. A short time later, she deposed, he actually assured her that the debt had been paid off. In fact, on 22 and 23 March 2017, Ming Li and Ms Chu sent correspondence to Hume requesting that the caveat be removed; although it was represented (inaccurately) that Mr Li was the owner of the property. The caveat was removed on 27 March 2017. 9. Mr Li was cross-examined on the caveat and its removal. His evidence was, to a degree, implausible. He accepted that Ms Chu was very concerned about the notice of the caveat; and said that he could not read the document but nevertheless, did not take steps to speak to anyone who could explain it. He could not explain why, if he could not read the document, he did not ask for anyone to explain it. It was put to Mr Li that he did not make inquiry since he knew what was being said and he, rather weakly, agreed that he roughly understood what was conveyed "but not 100%." In fact, Mr Li was aware that a caveat had been imposed and he accepted that he told Ms Chu that there would be no problem since he could ensure that payments were made to Hume. 10. Ms Chu deposed to having an unrelated loan application to the NAB in May 2017 explained to her by her solicitor (assisted by a translator) when preparing her affidavit. She did not recall whether she signed this document. She deposed that the details regarding her employment, identified earlier, were false. She deposed that she did not prepare the loan application. She understood that a mortgage broker had. She accepts however, that she provided information to the broker (who she did not identify) to the effect that she received between $6,000 and $7,000 a month. Jessica Li's affidavit of 31 August 2021 1. Jessica Li is the daughter of the second and third defendants. She is a student and deposed to being fluent in the English language. Her affidavit was read, over the plaintiff's objection. 2. She corroborated Ms Chu's evidence about her electronic signature being stored on Ms Li's laptop computer. This was done to assist Ms Chu to complete forms from time to time. 3. Further, in reference to the letter from Best Interior to 'Alan' on 7 May 2019, Ms Li deposed to affixing Ms Chu's electronic signature on the letter under the instruction of her father, Ming Li and doing so without discussing the matter with Ms Chu. 4. Ms Li also deposed to hearing a conversation between Ming Li and Ms Chu in May 2019 and hearing her mother ask her father whether he had been putting her signature on documents. She deposed to not recalling her father's response. 5. Ms Li was shown the correspondence from Best Interior to Hume on 3 & 15 August 2017. She did not "specifically" recall anyone asking her to place Ms Chu's signature on those two letters or drafting them; but she recognised the signature as one that was stored on her laptop as at 2017. She was unaware of the purposes of those letters. She also deposed to her father, Ming Li, telling her, from time to time, to put her mother's signature on documents from 2017. 6. Ms Li was not challenged on the correctness of any of this evidence. 7. Ms Li indicated, when she was cross-examined by the plaintiff's Counsel, Mr Li asked her – in English – to draft the correspondence in August 2017 and asked her – again in English – to apply Ms Chu's signature. Indeed, contrary to her father's evidence, Ms Li indicated that she regularly spoke to her father in English in 2017 and 2019. 8. The cross-examination of Ms Li was otherwise revealing for matters other than correspondence in 2017 and 2019. Ms Li confirmed that: * Ms Chu was able to speak some basic English; * She had seen her mother attempt to read and in some cases perceived her mother as understanding, documents written in English; and * she was available, in March 2015, to assist Ms Chu to read and understand documents written in English. Ms Chu's affidavit of 31 August 2021 1. This affidavit was read over the objection of the plaintiff; the objections having been the same as the objections to Ms Jessica Li's affidavit which had been overruled. 2. I have previously noted Ms Chu's denials of affixing her signature in correspondence sent by Best Interior to Hume on 3 & 15 August 2017 and to 'Alan' on 7 May 2019. 3. In this affidavit, she deposed that she did not authorise Ming Li or anyone else to affix her signature to those documents. 4. Curiously, unlike her first affidavit, she specifically deposed to this affidavit being translated to her prior to her affirming its contents. For this affidavit, the documents she was asked to review were translated for her in Mandarin. 5. She also added that, from 2017, she had an electronic signature stored on her daughter (Jessica Li's) computer and did not authorise her to affix her signature. 6. Further, she deposed that in or around August 2017, she had a conversation with Ming Li in which she asked him whether he had put her signature on documents. She did not indicate any reply to that question. Ming Li's evidence 1. When he gave evidence, after I administered a warning to him and with the benefit of a certificate under s 128 of the Evidence Act 1995 (NSW), Ming Li corroborated Ms Chu's evidence that she was unaware of the content of that correspondence of August 2017 and May 2019 and did not apply, or authorise anyone else to apply, her signature to the correspondence. Ming Li said he instructed Jessica Li to place Ms Chu's signature to each item of correspondence. This he did without ever asking Ms Chu whether he could place her signature on each item of correspondence. LEGAL PRINCIPLES 1. The basic principle from Yerkey v Jones is that when a lender deals with a wife through the husband, it may be affected by any equity, as between the wife and husband, which might arise from his conduct. Whatever controversy there may have been about the status of this decision was dispelled in Garcia. 2. In Garcia, the plurality stated (at 409 [31]): "The principles applied in Yerkey v Jones do not depend upon the creditor having, at the time the guarantee is taken, notice of some unconscionable dealing between the husband as borrower and the wife as surety. Yerkey v Jones begins with the recognition that the surety is a volunteer: a person who obtained no financial benefit from the transaction, performance of the obligations of which she agreed to guarantee. It holds, in what we have called the first kind of case, that to enforce that voluntary transaction against her when in fact she did not bring a free will to its execution would be unconscionable. It holds further, in the second kind of case, that to enforce it against her if it later emerges that she did not understand the purport and effect of the transaction of suretyship would be unconscionable (even though she is a willing party to it) if the lender took no steps itself to explain its purport and effect to her or did not reasonably believe that its purport and effect had been explained to her by a competent, independent and disinterested stranger. And what makes it unconscionable to enforce it in the second kind of case is the combination of circumstances that: (a) in fact the surety did not understand the purport and effect of the transaction; (b) the transaction was voluntary (in the sense that the surety obtained no gain from the contract the performance of which was guaranteed); (c) the lender is to be taken to have understood that, as a wife, the surety may repose trust and confidence in her husband in matters of business and therefore to have understood that the husband may not fully and accurately explain the purport and effect of the transaction to his wife; and yet (d) the lender did not itself take steps to explain the transaction to the wife or find out that a stranger had explained it to her." (emphasis supplied) 1. At 404 ([22]), the joint judgment left undecided the question of whether the principles could apply to long term and publicly declared relationships, short of marriage, between members of the same or opposite sex (in his Honour's dissenting judgment, Kirby J considered that if the principles properly endured, they should extend more broadly to intimate relationships of all kinds). At [43], the joint judgment found on the facts that although the surety in that case was a director of the borrower, and although some benefit flowed to the family from the (multiple) companies (which were completely controlled by the husband), the surety had no "financial interest in the fortunes of the company". 2. As the observations in the joint judgment in Garcia confirmed (following on from the classification of Dixon J) there are two categories of case. In the absence of any suggestion that Mr Li actually exerted undue influence upon her, Ms Chu relies upon the second category. The joint judgment (at 409 ([39]-[40])) observed that the defence did not require the guarantor to demonstrate that the creditor had notice (actual or constructive) of any unconscionable or improper dealing between the husband (on behalf of the borrower) and wife; it being sufficient, for the purpose of the doctrine, that the creditor had notice of the marriage. 3. Counsel for the plaintiff drew the Court's attention to the decision of Einstein J in State Bank of NSW v Chia (2000) 50 NSWLR 587 ("Chia") where, at [169], his Honour elucidated the requirements identified in Garcia. Regarding the first, second and fourth of those requirements, his Honour observed (citations omitted): "169 …. (1) The first requirement is that the wife does not understand the 'purport and effect' (or, as it is put by Dixon J in Yerkey v Jones (at 689), the 'general nature and effect') of the transaction. An understanding of the 'purport and effect' of the transaction includes, at least, an understanding of the fact of liability, the general extent of liability and the possible consequences of default …. However, it is not productive of an equity that the wife misunderstood or failed to appreciate the degree of risk associated in the transaction, or the improvidence or unwisdom of the uses to which the money so secured will be put …. Further, the wife's misapprehension must be of a material matter …; that is, material to the liability the creditor wishes to impose upon the wife. (2) The second requirement is that the wife is a volunteer. It is not sufficient that the wife has received consideration as would be recognised in the law of contract ... The consideration for the guarantee must be of 'real benefit' to the wife.. Incidental benefit which accrues generally to the family of which the wife is a member is not sufficient benefit to render a transaction which does not otherwise contain a 'real benefit,' non-voluntary... Where the wife expects to reap direct profit from the transaction, the transaction cannot be said to be voluntary. Neither can it be said to be voluntary where the monies secured by the guarantee are used to purchase an asset in which the wife is equally interested with her husband... However, where the interest of the wife is a shareholding in the company through which her husband conducted his business and in which she has no real involvement, then a guarantee given by the wife over that company's debts will be voluntary... But where the wife has an active and substantial interest in the conduct of, and the fortunes of, the business run by her husband, she will not be a volunteer in relation to any guarantee over the debts of that business... Where the transaction is not ex facie for the benefit for the wife, then the onus will lie on the party seeking to enforce the security to show that the wife was not, relevantly, a volunteer... … (4) In the absence of any explanation by the creditor or an independent third party to the wife or any other steps by the creditor to ensure that the wife understood the nature and purport of the transaction, the wife will have a prima facie right to set the transaction aside ... The explanation need only go to the purport and effect of the transaction... But the extent of the explanation necessary must depend the nature of the transaction, the degree of risk involved, the sophistication of the wife and the nature of the relationship she enjoys with her husband... The explanation provided by the creditor or a third party need not, in fact, successfully disabuse the wife of her misapprehensions. It need only give the creditor reasonable grounds for believing that the wife does have an adequate understanding of the nature and purport of the transaction... (emphasis supplied) 1. On the requirement that the surety be a volunteer, it has been argued that whether the surety is a volunteer is to be treated as a matter of substance and not of form, and that an important indication is the extent to which the surety is actually involved in the (debtor's) business (Seddon & Bigwood, Cheshire & Fifoot Law of Contract (11th Australian ed, 2017) [14.19], pp 818-19). 2. In a case with some factual similarity to the present, in Hume Plasterboard Pty Ltd v Brilliant Interiors Pty Ltd [2019] NSWSC 679 ('Brilliant Interiors') Hoeben CJ at CL determined (at [169]) the circumstance that a guarantor may be an employee of the primary debtor does not disqualify the person from being a volunteer. The question of fact remained whether the guarantor received any direct financial benefit to her in signing the guarantee. His Honour found that the circumstance that, by acting as guarantor, the debtor company could continue to pay her for her work was too remote and not a benefit of the kind identified by the High Court in Garcia. PARTIES' SUBMISSIONS Ms Chu's submissions 1. Ms Chu submitted principally that she did not understand the purport and effect of the transaction. She was supplied with only the two pages she was asked to sign. She could not read or speak English beyond the most basic level. The only explanation she received was from her husband, who said he needed her to sign two pages (which he did not describe or identify) so as to enable him to get more materials for his business. There was a material distinction between her consenting to Best Interior's use of her credit card and understanding a guarantee given in its favour. She did not know that she was executing a guarantee, or the content of the guarantee. She had no knowledge of any specific term of the contract. That she knew that there were legal obligations did not establish her awareness of the content of those obligations. The evidence indicated she only knew that her house was on the line in March 2017 when notified of the caveat on the property. 2. Ms Chu submitted that she was a volunteer. The payments made on her credit card indicated a net liability and not gain. At any rate, once the credit facility was in place in March 2015, the goods that Best Interior acquired from Hume did not require (or should not have required) use of a credit card. Ms Chu submitted that for the Court to conclude that she obtained a direct benefit from the credit transaction secured by guarantee, it was necessary for the Court to know of what goods had been acquired by Best Interior with the credit, what use had been made of them and the extent to which, if at all, benefits were realised in Ms Chu's favour. None of this was established. The circumstance that she might have been an employee of Best Interior (a proposition not put to Ms Chu) did not disqualify her from being a volunteer. Even if she was, as Hume argued, a 'contractor' to Best Interior, this only made her connection with and 'interest' in that business even more remote. The issue on whether she was a volunteer is not determined from any indirect benefit she obtained, by means of a suite of other arrangements with the borrower, including the impugned arrangement. It is whether she directly benefited from the impugned transaction. At any rate, the evidence did not go so far as to prove that she did receive any indirect benefit from the credit extended to Best Interior secured by her guarantee. It did not assist Hume to show that the credit facility was intended to be used, by Best Interior, to reduce Ms Chu's indebtedness (itself caused by its recourse to that card) on her credit card. Apart from the circumstance that the debt on the credit card was not actually reduced, even if it was reduced, that was regarded as immaterial, from the point of view of establishing whether the surety was a volunteer, in not dissimilar circumstances in Brilliant Interiors at [172]. The result of the guarantee was that she was exposed to additional liability. The substantial deposits made to Ms Chu into her Westpac accounts were not shown to be all made by Best Interior and even if they were, there was no evidence as to what they were for or how much better or worse off Ms Chu became. 3. Ms Chu submitted that Hume did nothing, prior to her executing the guarantee, being the relevant date, to explain the transaction or inquire whether explanation had been supplied by a third party independent to Mr Li. Hume's submissions 1. Hume made a very strong attack upon the honesty, credibility and reliability of Ms Chu, without which, it submitted, her defence could not succeed. It was deliberately false for her to depose in her affidavit that she did not know of the plaintiff prior to the proceeding. She later admitted that she did know of that entity before the proceeding commenced. Contrary to her protestations about an inability to speak and understand English, there were points during the hearing when she appeared to understand the spoken English word. It was curious that, on days 1 & 2 of the hearing, she obtained the services of an interpreter who spoke in Mandarin, but on the third day, she indicated a preference for an interpreter who spoke Cantonese. Her evidence about the source of deposits paid into her account was inconsistent. Her evidence about the circumstances in March 2017 when she consulted Ms Yang, and what she was advised, after being notified of a caveat on her property was objectively implausible. Her general protestations of ignorance about commercial transactions were at odds with evidence that she had made substantial loans. 2. In this context, Hume submitted that Ms Chu did not discharge her onus of proving that she did not know of the purport and effect of the transaction, in the sense of understanding the fact of her liability, the general extent of her liability and the possible consequences of default. She was not a 'commercial babe in the wood', having been a borrower and owner of property. She was even, on her evidence, a lender of monies. She understood that the pages she signed were out of a document which entailed legal obligations and she signed it to help Mr Li in circumstances where he promised to make payments to her and she trusted him in that promise. Because of that trust, and the need for her husband to get back to work to meet the couple's home loan repayments, she did not care about the content of her obligation. Her motivation was to help Best Interior so that it could succeed. But she knew that she was guaranteeing Best Interior's costs of obtaining materials and that there were legal consequences attached to signing the document: that her house might potentially be at stake in case of default. She knew, for example, her obligations in relation to credit card debt; which she authorised Mr Li to use for the benefit of Best Interior. She signed the guarantee knowing that the limit on her credit card was not sufficient to enable Best Interior to obtain the materials Best Interior needed to purchase from Hume. There was no real or practical difference to a person in her position between obligations under a credit card and acting as surety for her husband's business. 3. Further, she was not a volunteer since she benefitted from the transaction. Ensuring that Best Interior could obtain building materials so that it could carry on its business enabled it to repay to her: the credit card debt Ms Chu incurred on Best Interior's behalf; loans Ms Chu made to Best Interior and her husband; home loans on Ms Chu's real properties; for her cleaning services and household needs. All of this indicated that Ms Chu had an active and substantial interest in the conduct of and fortunes of her husband's business. It was no less a benefit to her that, by reason of entry into the guarantee, Best Interior was able to reduce its prior indebtedness to Ms Chu, for its indirect use of her credit card. Further, it was not the case that she was an employee of Best Interior. She was, in fact, a contractor. This is what she understood and this is what her tax returns revealed. 4. Finally, Hume argued that by reason of the circumstances of Ms Williams posting the credit contract and guarantee to Ms Chu's residential address and her evidence that Hume did not receive 'return to sender' mail, Hume satisfied the final requirement, being that it explained, or took reasonable steps to explain, the guarantee to Ms Chu. CONSIDERATION Credit Ms Williams 1. Ms Williams gave her evidence honestly and reliably. She made many concessions. I accept her as a witness of credit. Mr Ming Li 1. I did not regard Mr Li as being a witness of credit. His admitted conduct in procuring his daughter to apply Ms Chu's signature to correspondence after the main transaction was entered into in March 2015 was plainly discreditable in itself. 2. I considered that he was evasive when answering questions and was preoccupied by the consequences of his answers to his overall position; and very likely, the position of his wife. An example of the latter was when he changed his evidence when asked to identify his wife's signature on a document supplied to the ANZ bank in 2016. Many of his answers were non-responsive. 3. I did not unreservedly accept his protestations about the extent of his incapacity in the ability to understand English. Not only were they at odds with the evidence of his daughter, who, I found to be a witness of credit, but there also indications even during the hearing where he appeared to understand what was being said in English. Further, it would be a remarkable situation that a man who has run a small business in this country for over 30 years and who has had extensive involvement with financiers could have gotten by, for so long, without some rudimentary understanding of the language of his adopted country. 4. I am extremely cautious in accepting evidence unless it is disinterested, is corroborated or is otherwise consistent with contemporaneous documents and the underlying probabilities. Ms Jessica Li 1. I regarded Ms Li's evidence to be both credible and reliable. Ms Chu 1. Since a substantial part of Hume's case in opposition to Ms Chu's Yerkey v Jones defence centred upon the proposition that the Court could not "believe a word she said", it is appropriate to consider, in some detail, that challenge to her credit as a witness. 2. I formed the impression that Ms Chu was not unintelligent. I reject Best Interior's submission that she gave her evidence dishonestly even if there were instances where there was reasonable basis for rejecting parts of her evidence. In his submissions on this particular aspect of his challenge to Ms Chu's credibility, reference was made by Counsel for Hume to a statement in Ms Chu's affidavit of 22 March 2021 (paragraph 47) that prior to the proceeding she had not heard of Hume when her credit card statements (which became Exhibit B) contained many references to that entity. But if her statement was wrong, the cross-examiner did not suggest to Ms Chu that, in the light of the content of the credit card statements, her statement was not only false but deliberately so. Further, Ms Chu was not really scrutinised as to the extent of her avidity in reviewing credit card account statements and, if she did, whether she could even comprehend what was signified by them. Ms Chu was not invited to consider whether her evidence in paragraph 47 should be qualified. Further, there was nothing else in Ms Chu's affidavit that Counsel for Hume suggested was deliberately false. This included paragraphs 48-50 of the affidavit, where Ms Chu deposed to never having met or spoken with anyone from Hume or receiving business materials from it, nor having any other dealings with it. In view of that evidence, it is not inherently surprising that when she swore her first affidavit she believed, if inaccurately and even carelessly, that she had not heard of Hume. Relevant in this regard, also, is the impression I formed from the evidence as a whole, that Mr Li was not altogether communicative with Ms Chu about the goings on or day to day requirements of Best Interior's business and its relationship with Hume in particular. Having regard to the gravity of the allegations, on the probabilities, I regard Ms Chu's statement in paragraph 47, as an exaggeration; not a lie. 3. I agree, further, with the submission of Ms Chu's Counsel that by not being shown documents, Ms Chu was effectively subjected to certain memory tests about transactions that had occurred up to 6 or 7 years before and that elementary fairness required that if it was to be suggested that she gave evidence about these transactions dishonestly, that proposition should have been squarely put to her. It is no answer to this to suggest, as Counsel for Hume did, that Ms Chu was conscious that Hume had access to documents she (and perhaps other defendants) had produced before the hearing, was apprehensive and perhaps had tried to prepare to give evidence in anticipation of what she might be asked, in circumstances where, at no stage, was anything put to her to disprove what she ultimately said. In particular, although Counsel for Hume extensively cross-examined Ms Chu about the deposits into her two Westpac bank accounts (Exhibit D), statements of which were individually voluminous and, in combination, tended to indicate substantial numbers of transactions, she was not referred to a single page within that exhibit. Perhaps that was no coincidence: I was not taken by Counsel for Hume to any of the Westpac statements in Counsel's written submissions or closing argument myself. To the extent that I was implicitly invited to work out matters for myself, through the supposed aid of spreadsheets, from my own brief review of those bank account statements, they do not readily identify payments by Best Interior to Ms Chu. Relevant also, in this regard, is that although in MFI 5, Hume tallied the deposits made into Ms Chu's Westpac accounts, Hume did not engage any forensic accounting or other expert to engage in any tracing exercise: to identify from the deposits she received in her Westpac accounts those sourced from Best Interior generally, and, more particularly, those which were contributed to by its use of Best Interior's facility secured by Ms Chu's guarantee. Indeed, it almost appeared that Counsel expected Ms Chu to provide her own accounting in cross-examination, on the run, as it were, to make up for the deficiency in Hume's own proof. 4. The submission that she was dishonest was overblown and, in my opinion, should not have been made. 5. It appeared implicit in Hume's attack on Ms Chu that I was also invited to reject her evidence that she had difficulty speaking, reading or understanding the English language. What Hume effectively contends is that she feigned ignorance. I reject that contention. Ms Chu's expressed difficulty was substantially corroborated by her daughter, Jessica, even if there was acknowledgement that she may have had a 'basic' level of understanding. Ms Chu's employment status, throughout her working life has been as a cleaner. She did not depose to, and she was not asked about, what the level, if any of her educational attainment was. The particular points raised against her in this respect were unconvincing. If it was true, at one point, that Ms Chu appeared to understand, without an interpreter's assistance, an intervention by me following a non-responsive answer, that was neither here nor there in a context where there were more than one interventions and I consider it likely that Ms Chu, who I have indicated was not unintelligent, would likely have sensed my dissatisfaction with her answer without a perfect comprehension or understanding of what I actually said to her. The suggested juxtaposition between Ms Chu's expressed preference for speaking in Cantonese whilst receiving the assistance, in the early part of the trial, of an interpreter who spoke Mandarin, went nowhere in the circumstance where, in her second affidavit (31 August 2021), Ms Chu deposed to being fluent in both Cantonese and Mandarin; which evidence was unchallenged. 6. I did not regard Ms Chu's evidence about the circumstances in which she obtained legal assistance in March 2017 to be inherently implausible. To the contrary, I regarded the evidence as consistent with her account, which was that she was taken by surprise when she received notice of a caveat. It was consistent since it showed, up to that point, that she had reposed trust and confidence in Mr Li and that he had indicated that all would be well if she signed the pages he asked her to sign in March 2015. This was correspondence which emerged not only from a third party, independent from the first and second defendants, but from a state instrumentality. It was understandable that she would consult a Chinese-speaking firm in Chinatown. Counsel for Hume's criticism of what Ms Yang advised Ms Chu, accepting the latter's account of what the former said to her, was beside the point. Further, the circumstance that Ms Chu did not, when initially consulting Ms Yang, or thereafter, actually show Ms Yang the credit contract or guarantee is also beside the point. Finally, as to the doubt which Counsel expressed about the veracity of Ms Chu's evidence of what Ms Yang advised her, it was open to Hume to call evidence to disprove that account, but it did not ultimately do so. 7. This is not to say that I did not entertain certain reservations about her reliability. Multiple answers that she gave to questions were non-responsive to the actual question, during the course of which, I formed the impression that she was striving, too hard, to emphasise her ignorance of certain events; for the purpose of assisting her case. Some of her answers were replete with explanations which were gratuitous. That said, I acknowledge party witnesses are often anxious about giving evidence, especially where the personal stakes are high for them. In her favour, she did, however, make many concessions about the extent of her knowledge which were not obviously to be expected. 8. Given the importance of her evidence to the outcome of the case, I have naturally tried to assess evidence with some care and particularly in the light of the objective facts and the inherent probabilities. I do not, however, accept Hume's broad submission that no faith can be reposed in her evidence. Ms Chu's Yerkey v Jones defence 1. I have already noted the parties' agreement that Hume understood that Ms Chu was Mr Li's wife (even if that was in a de facto sense). Although the question was left unresolved by the High Court in Garcia, in my view, even if Ms Chu was not legally married to Mr Li in March 2015, the circumstance that each of the creditor, the borrower (effectively Mr Li) and the guarantor commonly regarded Ms Chu as being married to Mr Li, in addition to the evidence that they practically lived as husband and wife, is sufficient to engage the principles. The credit application form had identified Ms Chu as Mr Li's 'spouse'. I respectfully agree with Hoeben CJ's holding in Brilliant Interiors at [174] that what matters is the creditor's belief or understanding that the surety was a wife. Counsel for Hume conceded, I consider correctly, that the third requirement in Yerkey v Jones was established. Onus of proof on remaining requirements 1. It was common ground that Ms Chu bore the onus of proving that she did not know and understand the purport of the transaction which she seeks to impugn. 2. The parties disputed the issue of onus on the second (the volunteer question) and fourth requirements (the steps to ascertain the surety's understanding question). Ms Chu submitted that Hume carried the onus of proving that she was not a volunteer and also that it took steps to ensure she understood the nature and purport of the transaction. Hume submitted that Ms Chu bore the onus of proving that she was a volunteer and that she also bore the ultimate onus that Hume did not take steps to ensure she understood the nature and purport of the transaction. 3. In Chia, Einstein J noted (at [170]) the guarantor's concession that the guarantor carried the onus of proof in respect to the volunteer question. However, in Warburton v Whitely (1989) 5 BPR 11,628; (1989) NSW Conv R 55-453, a majority of the Court of Appeal considered that on the issue of whether the surety was a volunteer, the onus fell on the creditor to show that the surety held a substantial interest so as to displace the operation of Yerkey v Jones principle. McHugh J said (at 11,634) that the legal onus was not on the surety to affirmatively establish her interests in the secured transaction. Although Kirby P disagreed that Yerkey v Jones applied (foreshadowing his later rejection of the doctrine in Garcia), his Honour said that if the principle continued to exist, as McHugh JA and Clarke JA both agreed it should, his Honour agreed with McHugh JA's reasoning. On this basis, in my view, although an evidentiary onus may fall on the surety, the ultimate onus on proof on this issue is on the creditor. As will be seen however, in my view, the issue of who bears the ultimate onus is not determinative. 4. As to the fourth requirement, when the Garcia litigation was before the Court of Appeal [3] , Sheller JA (Meagher JA agreeing and Mahoney P concurring) considered (at 593) that once it was found that a surety did not understand its nature and effect, unless the creditor could show that the wife was fully advised of its nature and effect, the onus was on the creditor to establish that it took steps to see that the transaction was explained to the surety. 5. In Chia, Einstein J at [172] expressed difficulty in following Sheller JA's view about the onus of proof on this requirement; whilst also noting that when the matter went to the High Court, the issue of onus was not addressed. There is, with respect, a natural difficulty in a trial judge adhering to an observation made in an intermediate appellate court decision which has been overturned, on other grounds, in the High Court. Nevertheless, and with respect to Einstein J's opinion, I consider that as a trial judge, it is appropriate to follow Sheller JA's view in Garcia about the onus of proof on this requirement. Further, I consider it accords with the underlying equitable principle. To recall, this is the fourth (and last of) the requirements in Yerkey v Jones. That requirement is to be considered after building upon earlier findings that the surety (who the creditor knew was a wife of the borrower, or the husband whose business procured the borrowing) was procured to give the guarantee without the surety knowing and understanding the purport of the transaction and was a volunteer. It strikes me that it flows from those anterior findings that it is appropriate for the creditor to prove steps it took steps to explain it. It would be somewhat incongruous to require the surety to prove not only that she did not know and understand the transaction, but, further, that the creditor did not take steps to see to it that she knew and understood the transaction. Proof that steps were taken would inherently undermine assertions as to the former. 6. I accept, therefore, Ms Chu's submission that Hume bears the ultimate burden of proving that she was not a volunteer and that Hume did not take steps to ensure explanation was given to her about the transaction. Did Ms Chu understand the purport and effect of the guarantee? (The first requirement) 1. On the question whether she understood purport and effect of the transaction, I start by finding that Ms Chu scarcely speaks or reads English. She has been a cleaner all her working life: an occupation which does not necessitate, in terms of her interaction with clients, any real fluency or comprehension of the English language. There was no evidence of any particular social circles throughout her life, since she arrived in this country, in which Ms Chu mixed with English speaking people. I also accept her uncontradicted evidence that she has never spoken to anyone from Hume. Further, there was no exploration in cross-examination of her that might have suggested that, to the extent that she dealt with financial institutions at all, she did so independently of her husband. Generally, I find that to the extent it was necessary for her to speak in or read the English language, she depended upon Mr Li and her daughters. 2. It was not demonstrated that Ms Chu had a formal interest in Best Interior, such as a shareholding, or office within that company. 3. Although I formed a negative view of Mr Li as a witness, I accept his evidence at least to the extent of the circumstances in which he explained the transaction in March 2015 to Ms Chu. It was consistent with, and corroborated by Ms Chu's own account and, in the circumstances that I have already alluded to, it accorded with the objective probabilities of a husband getting on with his small business, with a supportive wife whilst using the latter (I say that in a non-pejorative sense) only to the extent that she might prop up the financial operations of the business. Contrary to what Hume effectively submitted, it is not inconsistent with that mindset that he would try to take the benefit of her assistance to his business whilst not being fully frank or forthcoming in his communications with her as to the purposes for which he could utilise her aid as a financial resource for the business. 4. Accordingly, I substantially accept Ms Chu's account of the extent of the circumstances, including without limitation, the explanation she received, as she deposed in her affidavit. That is, her husband presented two pages – not the entirety of the document – but the only pages that Ms Chu needed to sign. I find that his explanation was that he needed her to sign the two pages so as to enable him to get materials for the business. I also think it likely that Mr Li explained that his company did need to obtain credit. Further, although this was not specifically mentioned by her, I find that Ms Chu was aware that Mr Li had hitherto used her credit card to help delay payments for her business and had arranged to have Best Interior make repayments to her, so as not to leave her stranded with debt on her credit card. I consider it likely that she appreciated that, in March 2015, she was being asked to provide different support to what she had previously supplied, via the use of her credit card. Had she thought of the matter, it may be that it might have dawned on her that her husband's request might have indicated a problem with the status quo to that point: that it was not enough for her husband to dip into her credit card. However, beyond recognising that possibility, I am not satisfied that it is probable. The impression I had of Ms Chu and my assessment of the probabilities as at March 2015, is that she was not so inquisitive. 5. However, I find that Mr Li said nothing to Ms Chu about Best Interior's obligations under the facility; that she would only become liable in the event that Best Interior defaulted on its primary obligation that the limit of Best Interior's borrowing secured by the guarantee was $90,000 and the extent of her liability. I further find that nothing was said to Ms Li about her rights under the security arrangement. 6. It is not to the point that Ms Chu was negligent in failing to protect her own interests, by any or all of the means of: getting her daughters to translate the documents; obtaining legal advice herself, or when shortly after she received correspondence from Ms Williams enclosing the contracts, that she did not make inquiry. Yerkey v Jones does not impliedly import an additional requirement of the surety having to act reasonably [4] . Those matters could only be relevant to the extent that they illuminate other facts suggesting that she did know and understand the transaction. But the suggested negligence – failing to inquire – only underscores the probability of ignorance. 7. As to later events and circumstances more generally, I do not think it is right to reason from the circumstance that Mr Li effectively procured the affixing of Ms Chu's signature upon correspondence in 2017 and 2019 without her permission as proof of the likelihood of anything done by him in terms of any explanation he supplied to Ms Chu about the transaction in 2015. This evidence was objected to by Hume, but only on the grounds of relevance and the late notice of it and those particular objections were overruled. The Court could not infer that because Mr Li went behind his wife's back in 2017 or 2019 to procure her signature on correspondence designed to financially benefit Best Interior (directly) and himself (indirectly), this had a bearing upon the probability of whether she knew and understood the transaction in March 2015. That might be a form of tendency reasoning (under s 97 of the Evidence Act 1995 (NSW)) in circumstances where it was not proven that notice was given of Ms Chu's intention to rely upon such tendency. Perhaps it might be argued for Ms Chu that the conduct was probative of the state of the relationship between Mr Li and Ms Chu; to demonstrate that the former was not willing to take the latter into his confidence in connection with the operations of the company. But again it seems to me that this is a different kind of tendency. However, for all the Court knows, there may have been reasons why Mr Li acted dishonestly in 2017 and 2019 that were not inconsistent with his acting honestly in March 2015; and there may have been reasons why he chose to confide in her in the latter times which might have been different at the critical time, being March 2015. In my view, the evidence does not amount to 'relationship evidence' which distinguishes it from tendency evidence, since the conduct relied upon to establish the relationship between Mr Li and Ms Chu occurred years after the critical transaction occurring in 2015, so that in this way, in effect, the 'relationship' evidence relied upon is reached via tendency reasoning [5] . To the extent that this evidence is relevant to the cardinal question of what Ms Chu knew about the guarantee in 2015, the weight of the evidence is tenuous. As indicated, however, the evidence is relevant to Mr Li's credibility and that is the way that the evidence has been weighed by me. 8. I find that Ms Chu knew that legal responsibility attached to her by signing the 'documents' in March 2015 and that she had a general sense that her house might be at risk. In this sense, her knowledge of risk was no different to her knowledge of the risk of allowing her husband to use her credit card for the company's benefit. 9. However, as Dixon J determined in Yerkey v Jones, in terms applied by Einstein J in Chia, there is nothing to show any understanding on her part of, "the general extent of her liability". Garcia demonstrated that there is real content to this requirement. In that case, the joint judgment (at [42]) noted the trial judge's finding on the facts, in that litigation, that although the guarantor knew the transaction was a guarantee, she thought it was a guarantee of limited overdraft accommodation applicable only to the borrower's purchase of gold. This was sufficient to indicate a lack of understanding, for the purpose of engaging the first requirement. 10. In this case, there is nothing to show that Ms Chu had any appreciation that she was exposed on a guarantee; or even what a guarantee actually was. Contrary to Hume's submission, there is a qualitative difference between exposure on a credit card and exposure to liability on a guarantee; and it is not just of interest to lawyers. There was nothing to indicate that Ms Chu was aware that by reason of her execution of a guarantee in March 2015, she would be responsible for the default of the obligations of a third party – Best Interior. That is plainly materially different to her direct liability upon default in paying off the debt on her credit card. For one thing, she had the theoretical capacity to stop payments on her credit card; irrespective of her husband's wishes. She had no control, in contrast, with how Best Interior utilised the credit facility entered in 2015. In the former she had the capacity, she could turn off the tap of credit; but not the latter. This is not to say that she knew of such capacity, or was likely to exercise it. It serves to indicate the differences between rights and liabilities under a credit card, as distinct from a guarantee which, among other things, a guarantor might be advised about by an independent advisor. 11. There was little or no cross-examination of Ms Chu on any part of the actual terms of the document. Specific reference was made to her entitlement to withdraw from the guarantee (although there was nothing to show that right was drawn to her attention before she provided the guarantee), but nothing else was drawn to her attention. 12. Nor does the circumstance that Ms Chu had prior experience in obtaining loan finance secured by a mortgage over the home take Hume very far. Aside from there being no exploration as to the circumstances in which she procured a loan or loans, in such case, Ms Chu was deriving a clear benefit – the acquisition of an asset (jointly or severally). Here the security that she was providing was of a qualitatively different nature. It was not put to Ms Chu, nor proven, that she had previously given any guarantee for Mr Li, or Mr Li's business. 13. Moreover, there was nothing to show, for example, that Ms Chu was aware that she had provided security for Best Interior's entitlement to the actual amount of the loan monies advanced ($90,000). The risk associated with Ms Chu's willingness to permit her credit card to be utilised, with a credit limit of $15,000, topped up with regular deposits by Best Interior into her account, was of a different order to a guarantee for repayment by Best Interior of the sum of $90,000. There was no tangible indication that, beyond any vague prediction that the company would likely be able to pay her should the need arise, Mr Li indicated to Ms Chu the company's likely capacity to ensure that she was not personally exposed. There was no evidence of any communication in which Mr Li stipulated how much Best Interior proposed to spend with the credit provided for by the transaction. As at March 2015, she entirely reposed trust and confidence in Mr Li that she would not suffer economic harm. 14. The suggestion that Ms Chu must have known and understood the extent of her liability because of her inaction in invoking a right to withdraw when she was notified of the caveat in March 2017 went nowhere in the circumstance where it was not shown that she ever knew of such right. It matters not, for this purpose, that she did not then seek advice from her solicitor (or translation) of the wording of the document from her English-speaking daughters. If anything, her inaction in March 2017, and the content of her conversation with Mr Li that she deposed to (which was not challenged and which I accept) was consistent with her ignorance in March 2015. 15. Accordingly, I am satisfied that Ms Chu did not understand the purport and effect of the guarantee she entered. Was Ms Chu a volunteer? (The second requirement) 1. On the question whether she was a volunteer, I take that concept to be construed in a sense broader than the technical question of whether, pursuant to a contract, she received legal consideration. The question is whether, in substance, she stood to gain from her entry into the transaction. 2. I do not place significant weight upon Ms Chu's subjective belief or assertion that she was not involved in the affairs of Best Interior. It is the objective facts betokening involvement which count and, more specifically, it is the objective level of her involvement in the company financing itself that is material. 3. The circumstance that the underlying commercial reason for Best Interior to enter the facility was to expand its scope to obtain credit from Hume from its existing practice of utilising Ms Chu's credit card does not assist Hume. It was not the case that acquiring the credit facility in March 2015 obviated Best Interior's need to use Ms Chu's credit card. To the contrary, as Counsel for Ms Chu pointed out, there never was any real reduction in indebtedness on Ms Chu's credit card. Ms Chu's credit card continued to be used by Mr Li for Best Interior's benefit even after March 2015 when it obtained the credit facility secured by Ms Chu's guarantee. In real terms, what Ms Li acquired was an additional contingent liability (which ultimately materialised) heaped upon Ms Chu's continuing indebtedness on her credit card. 4. The circumstance that she may have obtained 'loyalty' reward points from the use of the credit card, capable of being redeemed so that she could acquire retail benefits, was immaterial set against her actual indebtedness and prospective liability on the guarantee. At any rate, since Ms Chu's credit card was being used before and after March 2015 for Best Interior's benefit, it could not be said that it was the entry into the credit transaction in March 2015, secured by Ms Chu's guarantee, which yielded this supposed benefit. The benefits accrued, in this limited sense, before March 2015. It was not established how much more Best Interior used Ms Chu's credit card as a result of the credit facility being in place from March 2015, in comparison with the extent of its usage of her credit card before the facility was in place. This is the type of evidence that might have been considered by a forensic accountant. Ms Chu certainly did not obtain loyalty reward points on her credit card from Best Interior drawing upon the credit facility from March 2015 which Ms Chu's guarantee secured. 5. As intimated earlier in these reasons, I am not convinced that the circumstance that there were many deposits made into Ms Chu's two Westpac accounts shows that she received a benefit from Best Interior's utilisation of the credit facility. As indicated, Hume Plasterboard did not attempt to trace any connection between Best Interior's use of its credit facility and those deposits. 6. I was similarly not convinced that any benefit was obtained by Ms Chu through the repayment of her home loan. Again, there was an absence of proof of the factual connection between Best Interior's use of the credit facility and reduction in repayments of principal, or interest, on the home loan. 7. Generally, I agree with Counsel for Ms Chu's submission that Hume did not establish any objective evidentiary trail between Best Interior's use of the credit facility and any realised benefits to Ms Chu. It is not enough, in my view, that Ms Chu vaguely benefited, by supporting her husband's business, as it was hoped that if his business prospered, it would put bread on the kitchen table and otherwise support the family as a whole. As Einstein J said in Chia, at [169(2)], an incidental benefit which accrues generally to the family of which the wife is a member is not sufficient benefit to render a transaction which does not otherwise contain a 'real benefit,' non-voluntary. 8. I also agree, with respect, with the view expressed by Hoeben CJ at CL, that it is not usually enough to render a surety a volunteer that she is an employee to the business of the debtor. Hume sought to distinguish Ms Chu's position and relied upon what it regarded as an admission that she was an independent contractor rather than an employee. In my view, the admission was not very probative. The distinction is notoriously difficult to draw [6] and, at any rate, I consider that the admission relates to a matter of mixed fact and law [7] . All the more so, it could not render her a volunteer if the services she supplied as a cleaner were as an independent contractor. 9. Ms Chu was not a shareholder of the company. In the latter respect, Hume's position is worse than the creditor's position in Garcia, where the wife was a director, but was still found to be a volunteer. 10. I do not find that Hume Plasterboard is able to rely upon the various categories of circumstance cited by Einstein J in Chia at [169(2)] to establish that Ms Chu was not a volunteer. In particular, I do not consider that Ms Chu played an active and substantial role in the affairs of the company analogous to the guarantor in Radin v CBA [1998] FCA 1361, a decision of the Federal Court upon which Hume relied; even if she did facilitate her husband's raising of finance for his business. Merely to provide credit, even through different means, does not betoken active involvement in a company's affairs. The 'active and substantial interests in the company' is properly to be construed in a more "hands-on" managerial sense and, in relation to credit, a developed understanding of what the credit is for and how it is to be deployed. In Radin, the guarantor obtained a benefit from the loan by enabling her to build up a real estate portfolio, in addition to the benefit to her husband's legal practice. Ms Chu was not involved in running Best Interior or its management. She did not obtain a profit from the transaction and the credit was not utilised to acquire an asset in which she obtained an interest. 11. I am not persuaded that Hume has established that Ms Chu is not a volunteer. Alternatively, I find, on the probabilities, that she was a volunteer. Did Hume take steps to explain? (the fourth requirement) 1. I do not accept Hume's contention that it is sufficient discharge of its onus in relation to this requirement to prove that the credit contract and guarantee were simply left in the possession of the surety upon the assumption that the surety would indicate to the creditor if she did not understand the transaction before executing the guarantee. 2. I agree with the submission made by Ms Chu that the relevant time is the steps taken by the creditor prior to the execution. That being so, confirmatory conduct by Ms Williams in sending out full versions of the credit contract and guarantee after they were executed (or the times when requests to extensions of the credit limit were sought) were not enough. It is not just the case that there was an absence of reasonable grounds for believing that she understood. It is more accurate to say that Hume took no steps to ascertain that she understood. It supplied no explanation nor arranged for, nor inquired, whether a third party, who was independent from Mr Li, explained the transaction to her. 3. I find that Ms Chu's Yerkey v Jones defence succeeds. It is unnecessary to consider any defence of unconscionability under general equitable principles or ss 20 or 21 of the Australian Consumer Law [8] and whether or not the Contracts Review Act would apply to avoid the guarantee. The guarantee is void and unenforceable against her. MING LI's DEFENCE – QUANTUM OF THE DEBT 1. Mr Li represented himself in the proceeding. As indicated, at the hearing, Mr Li conceded that he owed a debt to Hume, but said it was only $100,000, not the quantum, as agreed between Hume and Ms Chu, being $113,926.37. 2. Ultimately, Hume did not press its case for quantum for any amount beyond the figure which Mr Li conceded. 3. I find that the quantum of the debt in Hume's case against him is in the sum of $100,000. COSTS 1. The usual rule is that costs follow the event, which, if that rule applied, would see Mr Li (an unsuccessful defendant) pay Hume's the latter's costs and Hume pay Ms Chu's costs (as a successful defendant), being two separate and discrete 'events'. 2. However, in anticipation of the circumstance that the Court found that Ms Chu succeeded in her defence, Counsel for Hume submitted that, in that contingency, Mr Li should be subject to a Bullock order. Counsel for Ms Chu did not address this point in his closing written submissions and oral address. Nor is there any indication that Mr Li is aware of this submission; notwithstanding that he would be directly affected by it. 3. Both Ms Chu and Mr Li should have the opportunity of responding to Hume's submission on costs in relation to Hume's claim against Ms Lu. Mr Li may also wish to say something about the costs of Hume's successful claim against him. ORDERS 1. The Court orders: 1. Judgment for the plaintiff against the second defendant for the sum of $100,000. 2. Judgment for the third defendant against the plaintiff. 3. The questions of costs of both proceedings are reserved. 1. The Court directs that: 1. The second and third defendants are to serve any submissions on costs (not exceeding 3 pages, excluding any relevant attachments), and copy those submissions in to my Associate (in pdf and Word form), by 20 September 2021. 2. The plaintiff is to serve any submissions on costs (not exceeding 3 pages, excluding any relevant attachments), and copy those submissions in to my Associate (in pdf and Word form), in response by 23 September 2021. 3. The questions relating to costs will thereafter be determined on the papers. 4. Liberty to apply is granted on 2 days' notice. ********** Endnotes 1. (1939) 63 CLR 649 per Dixon J at 675-678 2. (1998) 194 CLR 395 at [31] 3. National Australia Bank v Garcia (1996) 39 NSWLR 577 4. It will be unnecessary to consider whether this issue may be relevant to alternative claims of unconscionable conduct or are part of the consideration of whether the contract was 'unjust' under the Contracts Review Act 1980 (NSW) 5. R v AN (2000) 117 A Crim R 176; [2000] NSWCCA 372 per Adams J (Priestley JA and Greg James J agreeing) at [45] 6. It is currently the subject of review by the High Court: see CFMEU v Personnel Contracting Pty Ltd [2021] HCATrans 138 (31 August 2021) 7. Dovuro Pty Ltd v Wilkins (2003) 215 CLR 317 8. Or ss 12CA, 12CB of the Australian Securities and Investments Commission Act 2001 (Cth) DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 15 September 2021