Supreme Court New South Wales Medium Neutral Citation: Shao v Crown Global Capital Pty Limited [2023] NSWSC 820 Hearing dates: 26 and 27 June 2023 Decision date: 14 July 2023 Jurisdiction: Equity - Commercial List Before: Ball J Decision: (1) Summons dismissed; (2) The plaintiff pay the defendants' costs of the proceedings; (3) Liberty to either party to apply to vary order (2) within 21 days of the date of this judgment. Catchwords: CONTRACTS — Joint rights and obligations — Whether payment to one joint lender discharged a debt owed by the borrower — Whether repayment of a debt otherwise than in accordance with the terms of the loan agreement amounted to a breach of contract CONTRACTS — Implied terms — Whether there is a duty to exercise reasonable care in making repayments under a loan agreement AGENCY — Authority of agent — Actual authority —Ostensible authority — Whether actual authority impliedly terminated — Whether representation founding ostensible authority continued to be operative at the time of the agent's acts AGENCY — Creation of agency — Ratification — Where plaintiff sued her husband in previous proceedings for the money she now claims against the defendants — Whether the plaintiff ratified her husband's conduct by commencing proceedings against him — Held ratification implied where principal, knowing the facts, makes an unequivocal election to enforce rights that would only be available to the principal upon ratification Legislation Cited: Civil Liability Act 2002 (NSW) Family Law Act 1975 (Cth) Cases Cited: Australian Securities and Investments Commission v Getswift Ltd [2021] FCA 1384 Barclays Bank Plc v Quincecare Ltd [1992] 4 All ER 363 Barrett v Universal Island Records Ltd [2006] EWHC 1009 (Ch) Equiticorp Finance Ltd (in liq) v Bank of New Zealand (1993) 32 NSWLR 50 Farah Custodians Pty Limited v Commissioner of Taxation (No 2) [2019] FCA 1076 Freeman & Lockyer (a firm) v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 Harrisons & Crossfield Ltd v London and North-Western Railway Co [1917] 2 KB 755 HDI Global Specialty SE v Wonkana No 3 Pty Ltd (2020) 104 NSWLR 634; [2020] NSWCA 296 James Adam Pty Ltd v Fobeza Pty Ltd (2020) 103 NSWLR 850; [2020] NSWCA 311 Leybourne v Permanent Custodians Ltd [2010] NSWCA 78 McIntyre v Gye (1994) 51 FCR 472 Macquarie Generation v Peabody Resources Ltd [2000] NSWCA 361 Miller v Cameron (1936) 54 CLR 572 Philipp v Barclays Bank UK PLC [2023] UKSC 25 Powell v Brodhurst [1901] 2 Ch 160 Republic of Peru v Peruvian Guano Company (1887) 36 Ch D 489 Ryan v Bank of New South Wales [1978] VR 555 Scarf v Jardine (1882) 7 AC 345 Tuncel v Renown Plate Co Pty Ltd [1976] VR 501 Verchures Creameries, Limited v Hull and Netherlands Steamship Company, Limited [1921] 2 KB 608 Texts Cited: Peter G Watts and FMB Reynolds, Bowstead & Reynolds on Agency (22nd ed, 2020, Sweet & Maxwell) H McGregor, Mayne and McGregor on Damages (12th ed, 1963, Sweet & Maxwell) Category: Principal judgment Parties: Yakun Shao (Plaintiff) Crown Global Capital Pty Ltd (First Defendant) Crown Group Holdings Pty Ltd (Second Defendant) Representation: Counsel: J Horowitz (Plaintiff) SA Lawrance SC with C Ernst (Defendants) Solicitors: Yau & Wang, Lawyers (Plaintiff) Mangioni Biggs + Co (Defendants) File Number(s): 2022/48845 Publication restriction: None JUDGMENT Introduction 1. By a Note Facility Agreement dated 18 February 2015 (the Facility Agreement), the plaintiff, Yakun Shao (Ms Shao), and her then husband, Qian Peng (Mr Peng), agreed to lend the first defendant, Crown Global Capital Pty Ltd (Crown Global), the sum of $1,000,000, which in fact belonged to Ms Shao. The loan was guaranteed by the second defendant, Crown Group Holdings Pty Limited (Crown Group). It will be convenient in this judgment to refer to Crown Global and Crown Group together as "Crown". 2. On 25 February 2016, in accordance with instructions given by Mr Peng, and unbeknown to Ms Shao, Crown repaid the $1,000,000 plus outstanding interest to an account controlled by Mr Peng. Mr Peng then transferred the money to accounts held in the name of his father and stepmother in China. By that stage, Ms Shao and Mr Peng had separated. They were divorced on 8 August 2016. 3. On 3 March 2016, immediately after she became aware of what had happened, Ms Shao commenced proceedings (the 2016 Proceedings) initially for a freezing order against Mr Peng restraining him from dealing with the loan proceeds. Crown Global and Crown Group were joined as parties to the proceedings. However, the proceedings were not served on them, and the proceedings were discontinued against them on 10 March 2023. 4. On 10 October 2016, Ms Shao obtained judgment against Mr Peng for an amount that included the $1,000,000 plus interest together with a further amount of $140,000 that Mr Peng owed Ms Shao. Following a contested hearing, Mr Peng was made bankrupt on 12 December 2019. The trustee in bankruptcy admitted Ms Shao's proof of debt in the sum of $1,309,705, which included the $1,000,000. She had been paid a dividend of $9,716.48. She expects to be paid a final dividend in September 2023 in a similar amount. 5. On 18 February 2022, Ms Shao commenced these proceedings claiming from Crown the total amount of the loan plus interest together with the legal costs she incurred in pursuing Mr Peng less the amount she has recovered (and expects to recover). The claim is put in various ways, but principally it is alleged that Crown repaid the loan to Mr Peng in breach of the terms of the Facility Agreement and that Ms Shao is entitled to recover the amount claimed as damages for those breaches. Ms Shao also advances an alternative claim in negligence. 6. Crown seeks to answer the claim in various ways. Principally, it advances two contentions. First it submits that Mr Peng had actual or ostensible authority to give the instructions he did that led to the repayment of the loan and interest to an account controlled by him, with the result that that payment discharged any obligation Crown had under the Facility Agreement. Second, it submits that Ms Shao, by pursuing the claim against Mr Peng rather than Crown, made an election to pursue Mr Peng rather than Crown and in doing so ratified Mr Peng's conduct, again with the result that the claim against Crown must fail. Evidence 1. Before dealing with the factual background, it is necessary to say something about the evidence in the case. All relevant communications between Crown on the one hand and Mr Peng and Ms Shao on the other were conducted by Ms Prisca Edwards on behalf of Crown. Ms Edwards was Head of Private Clients at Crown between July 2014 and January 2017. Between January 2017 and January 2023 (when she resigned) she held a number of other positions at Crown. Both Ms Edwards and Ms Shao gave evidence. Neither was an entirely satisfactory witness. Ms Edwards was not a willing witness. Although she had sworn an affidavit in the proceedings (before she left Crown), it was necessary for Crown to subpoena her. At the time she gave evidence, she was about to go on holidays and plainly resented having to appear in court. She was argumentative and uncooperative when cross-examined. In her affidavit evidence, she gave detailed and precise evidence of her conversations with Mr Peng and Ms Shao, but in cross‑examination she frequently said she could not remember what was said. As a result, little weight can be placed on any of her evidence except to the extent it is corroborated. Ms Shao was a better witness, but it was apparent that on occasions she tailored her evidence to support her case. The clearest example was when she suggested in cross-examination that she had sent messages to Mr Peng withdrawing any authority he had to give directions in relation to the $1,000,000 loan whereas there is no evidence of any such communication. Ms Edwards corresponded with Mr Peng by email and on a few occasions with Ms Shao. She and Ms Shao also corresponded using the WeChat messaging service. Particularly having regard to the passage of time, the written communications provide a more reliable source of what happened than the oral evidence of either Ms Edwards or Ms Shao, and I have largely relied on those in setting out the relevant facts. Factual background 1. Ms Edwards was first introduced to Mr Peng in connection with the sale by Crown of units in a project it was developing in Clarence Street, Sydney known as "Arc". Following a meeting between Mr Peng and Ms Edwards, Mr Peng and Ms Shao signed an expression of interest document (EOI) and paid a $5,000 refundable deposit in respect of the project. It was part of Crown's standard practice to require a potential purchaser to sign a standard form EOI and to pay a $5,000 refundable deposit as a precondition to acquiring a unit in one of its developments. The EOI signed by Mr Peng and Ms Shao nominated an account for the return of the deposit which in fact was a joint account held by Mr Peng and Ms Shao with the Commonwealth Bank (the Joint Account), although the EOI stated that the accountholder was Mr Peng. 2. Mr Peng met with Ms Edwards on several other occasions and Mr Peng attended the launch of the Arc development on 22 November 2014, at which time he signed a contract to buy one of the units. He subsequently arranged for Ms Shao's name to be added to the contract. 3. Ms Edwards kept in contact with Mr Peng. During a conversation she had with him in early 2015, she asked him whether he was interested in a note facility offered by Crown which paid interest at the rate of 12 percent per annum. Mr Peng indicated that he was. On 30 January 2015, Ms Edwards sent Mr Peng a draft of the Facility Agreement. At about the same time, Mr Peng signed two EOIs in respect of a Crown development in Ashfield and paid two refundable deposits of $5,000 each in respect of those EOIs. 4. Following a number of other conversations between Ms Edwards and Mr Peng, on 18 February 2015, Ms Edwards sent Mr Peng by email the Facility Agreement to be signed by him and Ms Shao. The agreement was in the form of a letter addressed to Mr Peng and Ms Shao. The introductory paragraph of the letter states: We confirm that Qian Peng and Yakun Shao (Lender) has agreed to make available this facility on the following terms and conditions. Capitalised terms are defined in clause16 if not defined in context. 1. Paragraph 3 of the Facility Agreement provides: 3. Limit The maximum principal amount of cash advances to be made available under this facility is AUD1,000,000 or such other amount as agreed between the parties (Limit). 1. Paragraphs 7 and 8 of the Facility Agreement provide: 7. Notes (a) The Borrower must issue Notes to the Lender upon settlement of each cash advance made available under this facility pursuant to a Drawdown Notice. The Borrower must provide to the Lender a certificate substantially in the form of Annexure B upon the issue of the Notes. (b) The Borrower must establish and maintain a register of Note holders. In the register of note holders there must be entered the names and addresses of the Note holders whose Notes are carried on that register of Note holders, the number of the Notes held by each Note holder, the date of issue, transfer of such Notes and (as regards Notes no longer outstanding) particulars of redemption by the Borrower, and such other particulars as the Borrower thinks fit. 8. Repayment Drawings made available under this facility are repayable by redemption of Notes at any time in accordance with their terms and otherwise on the Expiry Date. "Notes" is defined to mean "notes issued, or to be issued, by the Borrower in accordance with the terms set out in Annexure B". "Expiry Date" is defined to mean the date set out in the terms and conditions of the Notes. 1. Annexure A to the Facility Agreement contained the form of a drawdown notice. Annexure B contained the form of the Note Certificate. The terms and conditions of the Note Certificate included the following: Drawdown Amount AUD1,000,000 Interest Rate 12% per annum Interest Payment Dates Quarterly on 30 September, 31 December, 31 March, 30 June Expiry Date 26 February 2016 1. By agreement between Ms Edwards and Mr Peng the expiry date was amended in hand to 5 March 2016. A corresponding amendment was made to the drawdown notice so that the notice was to take effect on 6 March 2015 rather than 27 February 2015. 2. The Note Certificate also contained the following terms: 3. Redemption (a) The Borrower may at any time by issuing a Redemption Notice to the Lender redeem any Notes, and on the Expiry Date must redeem all Notes, which have not previously been redeemed for cash at their Face Value and repay the Face Value and all interest accrued but unpaid on the Note to the date of payment. (b) If the Borrower redeems any Notes before the Expiry Date, the Borrower must issue to the Lender a new Note Certificate in respect of the remaining Notes held by the Lender. 4. Payment of money All money payable by the Borrower to the Lender under the Notes must be paid by cheque drawn by the Borrower and either delivered personally to the Lender on the due date for payment or deposited into the Lender's bank account as notified by the Lender to the Borrower from time to time. "Redemption Notice" is defined to mean "a notice substantially in the form of Annexure C duly completed and signed by or on behalf of the Borrower or in any other form (including verbal) as the Lender in its absolute discretion accepts". 1. Both Mr Peng and Ms Shao signed the Facility Agreement. The agreement was signed by Crown on 23 February 2015. 2. On 6 March 2015, Mr Peng provided Ms Edwards with two bank cheques totalling $1,000,000. Crown accepts that the money was provided by Ms Shao and that Mr Peng and Ms Shao held the rights in respect of it on trust for Ms Shao alone. There is no evidence that Crown was aware of that trust. 3. On 16 March 2015, Ms Edwards spoke to Mr Peng by telephone and asked him into which account he wanted the interest to be deposited. Mr Peng sent Ms Edwards an email later that day giving details of the Joint Account. Crown paid an amount of $8,219.18 into that account on 31 March 2015. 4. On 13 April 2015, Ms Edwards emailed Mr Peng an EOI in relation to a Crown development in Green Square, Sydney. It appears that Mr Peng provided Ms Edwards with two EOIs in relation to that development, although neither was in evidence. Mr Peng paid a deposit of $10,000 in respect of those EOIs on 20 April 2015. 5. On 11 June 2015, Ms Edwards sent to Mr Peng an email at his request enclosing an application form for the refund of the deposits paid in respect of the Ashfield development. Those amounts were refunded to an account nominated by Mr Peng on 16 June 2015. 6. On 23 June 2015, Ms Shao contacted Ms Edwards for the first time by sending Ms Edwards a WeChat message introducing herself and asking about the Ashfield development. Ms Edwards was overseas at the time. They arranged to meet on Ms Edwards return to Australia. 7. On 25 June 2015, Crown paid the second instalment of interest into the Joint Account. 8. On 2 July 2015, Ms Edwards sent Ms Shao a WeChat message saying that she had returned to Australia. She and Ms Shao arranged to meet that day. Following their meeting, Ms Edwards sent Ms Shao some information about what units were still available in the Ashfield development. It is also apparent from an exchange of WeChat messages that there was some discussion between them about what had happened to the deposits that had been paid in respect of the Ashfield development and that Ms Edwards had agreed to follow that up with Crown's accountant. 9. On 6 July 2015, Ms Edwards sent Ms Shao a further WeChat message asking Ms Shao whether she had yet had a chance to visit the Ashfield development. Ms Shao said that she would do so that day. She also asked again about the deposits. Ms Edwards replied that she was waiting to speak to the accountant. Sometime later, she confirmed to Ms Shao that the deposits had been refunded on 16 June 2015 (before Ms Shao had contacted Ms Edwards). Ms Shao asked to which account the refunds had been made. Ms Edwards responded by sending Ms Shao an extract from Crown's records showing that the amount had been refunded to an account held by Mr Peng, to which Ms Shao responded "Ok, thanks". 10. After inspecting the development, Ms Shao told Ms Edwards in a WeChat message that she did not think it was a good investment. During a subsequent exchange of messages, Ms Edwards told Ms Shao that Mr Peng had paid two deposits in respect of the Green Square development, which Ms Shao did not know about. At some stage, Ms Shao must have said something to Ms Edwards about her marital situation, since on the same day there was also a lengthy exchange of WeChat messages between them about the difficulties Ms Shao was having in dealing with Mr Peng. 11. On 6 August 2015, Ms Shao sent Ms Edwards a WeChat message asking Ms Edwards to email Ms Shao "the contract of the investment … coz the lawyer need it to take some actions". 12. On 24 August 2015, Ms Shao sent Ms Edwards a WeChat message asking when the Green Square development would be launched. Later in the exchange, Ms Shao told Ms Edwards that she and Mr Peng were still not talking and would divorce soon. There was further discussion in relation to Ms Shao's marital situation during which Ms Shao wrote "He transferred all my money away, just want to make me angry". That was a reference to the fact that on or about 5 August 2015, Ms Shao discovered that Mr Peng had withdrawn $600,000 from a mortgage interest saver account that they held jointly. It appears that all the money held in that account belonged to Ms Shao. On 7 August 2015, Ms Shao commenced proceedings against Mr Peng in this Court seeking a freezing order against him. Over the next few days, Mr Peng repaid $460,000 of the $600,000 he had withdrawn from the account. None of that detail was conveyed to Ms Edwards. The WeChat exchange concluded with an agreement that Ms Shao and Ms Edwards would meet the following day at the display for the Green Square development. 13. It is unclear what happened at that meeting, although it appears that Ms Shao told Ms Edwards that she would speak to Mr Peng about buying one of the units herself. The following day, in response to a query from Ms Edwards, Ms Shao said "He agreed last night, and he changed his mind this morning". Later, she said that she would buy one of the units "for sure", although she said it would be under hers and Mr Peng's name. There was then an exchange of messages between them on what would happen if Mr Peng did not attend to sign the contract of sale. Ultimately, on 29 August 2015, Ms Shao signed a contract to buy a unit in the Green Square development in her own name after Mr Peng had agreed on 26 August 2015 to transfer to her one of the EOIs he had signed. 14. On 25 September 2015, Crown made a third interest payment to the Joint account of $30,246.58. It made a further interest payment in the same amount to the same account on 23 December 2015. 15. On 17 February 2016, Ms Edwards sent an email to Mr Peng which relevantly said: I am writing as a kind reminder that your Loan Notes Facility dated 18 January 2015 will expire on 26 February 2016. In accordance to Clause 4 of the Note Certificate, please let us know if you would like to receive the repayment by way of cheque or transfer. … If by cheque, please confirm the name/s of addressee. If it is the latter, please provide the account details so that we can proceed accordingly. 1. Mr Peng replied to that email on the same day asking that the money be paid into an account with ANZ in his sole name. The payment (which included 57 days' worth of interest from 31 December 2015) was made to that account on 25 February 2016. 2. On or about 3 March 2016, Ms Shao telephoned Ms Edwards about the imminent expiry of the loan note. During that conversation, Ms Edwards informed Ms Shao that the loan note had already been redeemed by Mr Peng. In that or a later conversation, Ms Edwards suggested that Ms Shao speak to Mr Peng about what had happened. 3. On the same day, Ms Shao commenced the 2016 Proceedings initially seeking a freezing order. By that stage, the money had already been transferred to accounts in China. As I have explained, Crown was originally joined in those proceedings, but they were not served and the claim against Crown was subsequently discontinued. 4. On 24 March 2016, Ms Shao filed a statement of claim in the 2016 Proceedings. The relief claimed included an order that the defendant forthwith take all steps necessary to cause the sum of AUD1,000,000 which was transferred by him to his father and stepmother on or about 26 and 29 February 2016 to be transferred into her solicitor's trust account. The statement of claim relevantly pleaded in par 42 that "[t]he sum of $1,018,740 paid by Crown to Peng was beneficially owned by Shao". That pleading was consistent both with submissions made by Ms Shao and evidence she gave in the 2016 Proceedings. So, for example, in an affidavit made on 8 July 2016 Ms Shao deposed to the fact that her assets in Australia included "[t]he sum of $1,000,000, being monies I invested with Crown Global Capital Pty Limited on 6 March 2015 which were redeemed by the defendant without my authority on or around 25 February 2016". Similarly, in submissions filed in the 2016 Proceedings on 7 October 2016, Ms Shao contended that "when Mr Peng received from Crown $1 million plus interest, he held those funds on trust, if not for Ms Shao alone … then at least on trust for himself and Ms Shao". 5. Ultimately, Mr Peng did not defend the claim and Ms Shao was successful in obtaining a judgment against him for both the $1,018,740 and the $140,000 still owing in respect of Ms Shao's previous claim. Relevantly, on 10 October 2016, Sackar J made a declaration that "the amount of AUD $1 million (Fund) which formed part of the sum of AUD $1,018,740 paid by Crown Global Capital Pty Ltd on 25 February 2016 to the first defendant's account with Australia and New Zealand Banking Group … was received and held by the first defendant on trust for the plaintiff". As I have explained, Mr Peng was subsequently bankrupted on Ms Shao's application. Ms Shao's claim 1. The case in relation to liability essentially turns on two issues. The first is whether by paying the $1,018,740 in accordance with instructions given by Mr Peng, Crown discharged its obligations under the Facility Agreement. The second is whether, by pursuing proceedings against Mr Peng to recover an amount that included the $1,018,740, Ms Shao ratified Mr Peng's conduct and in doing so made an election from which she is not now entitled to resile. If both those issues are resolved in favour of Ms Shao, there is a further issue of what amount Ms Shao is entitled to recover. Some preliminary points 1. Before addressing the issues referred to in the previous paragraph directly, it is necessary to say something more about the way Ms Shao puts her case. Ms Shao seeks to characterise the terms of the Facility Agreement relating to the method and timing of repayment as placing obligations on Crown to repay the loan in accordance with those terms, with the consequence that a failure to comply with those terms is a breach of contract giving rise to a liability on the part of Crown in damages. As will become apparent, that characterisation is important in resisting Crown's defence based on ratification and election. 2. Looked at in that way, Ms Shao seeks to identify five breaches by Crown. First, it is said that Crown breached the obligation in cl 4 of the Note Certificate because it failed to pay the money payable under the Notes by cheque (which was either delivered to both Ms Shao and Mr Peng personally or which was paid into an account of theirs). The money was paid by electronic funds transfer. Second, in breach of cl 4 of the Note Certificate, Crown did not make the payment to an account notified by "the Borrower" – that is, by Ms Shao and Mr Peng. It paid the money into an account notified by Mr Peng. Third, in breach of cl 3 of the Note Certificate, Crown redeemed the Notes early without issuing a Redemption Notice that was either substantially in the form of Annexure C or was in a form accepted by Ms Shao and Mr Peng. The most that could be said was that it was in a form accepted by Mr Peng. Fourth, in breach of cl 3 of the Note Certificate, the Redemption Notice was not issued "to the Lender". It was issued to Mr Peng alone. Fifth, it is alleged that it was an implied term of the Facility Agreement that Crown would exercise reasonable skill and care when making payments under the Facility Agreement and Crown breached that term by paying the money to Mr Peng in circumstances where it knew that the money was to be paid to both of them and that the relationship between Ms Shao and Mr Peng had broken down. 3. In my opinion, Ms Shao's analysis is incorrect. The relationship between Ms Shao and Mr Peng on the one hand and Crown on the other was that of creditor and debtor governed by the terms of the contract between them. The terms of the Facility Agreement, and clauses 3 and 4 of the Note Certificate in particular, set out how repayment of the debt was to be made for Crown to obtain a good discharge for it. They do not set out obligations that Crown owed in relation to a sum of money in respect of which Ms Shao and Mr Peng had any pre-existing rights. It was not a breach by Crown of the Facility Agreement for it to pay away its own money in any way it considered appropriate. However, the risk it ran in making a payment that was not in accordance with the Facility Agreement was that it would not receive a good discharge for the debt it owed to Mr Peng and Ms Shao. 4. Ms Shao takes issue with the analysis of the previous paragraph, at least insofar as the provisions in the Facility Agreement relating to early repayment are concerned. In her written submissions in reply, she points out that early repayment was permitted, but only if Crown served a Redemption Notice. No Redemption Notice was served in this case, with the result that, although early repayment may have been accepted, Crown was still in breach of the Facility Agreement, and Ms Shao is entitled to damages for that breach: see Mackenzie v Albany Finance Limited [2004] WASCA 301 at [106] per Heenan J. 5. This analysis raises a number of issues. First, it raises the question whether Mr Peng was entitled as "Lender" to accept the form in which notice of redemption was given. If he was, then a valid redemption notice was given. Second, it raises the question whether Mr Peng was entitled to accept the early repayment as discharging the debt due under the Facility Agreement (reserving the right to sue for any loss suffered as a consequence of the early repayment). If he was not, then the payment to Mr Peng could not have been a valid discharge of Crown's obligation to repay the debt. Consequently, Ms Shao's analysis would only apply where Mr Peng was entitled to accept the payment as a discharge of the debt but was not entitled to or did not accept the notice of early redemption in the form proffered by Crown. Assuming those conditions are satisfied, it also raises the question of what loss Ms Shao suffered as a consequence of the early repayment. The decision of Mackenzie v Albany Finance Limited relied on by Ms Shao suggests the relevant loss is the amount of interest that would have been paid on the loan between the date that it was repaid and the date that it was due to be repaid. However, it is Ms Shao's contention that it is the total amount of the loan. It will be necessary to return to this issue in considering the question of loss. The point to be made in the present context is that Crown could only both obtain a valid discharge of the debt and still be liable for damages in the very specific circumstances just described. 6. For similar reasons, it cannot be an implied term of the Facility Agreement that Crown would exercise reasonable care when making payments under the Facility Agreement. Either the payment discharged the liability to repay the loan or it did not. There is no basis for implying a term that, in addition to repaying the loan in accordance with the express terms of the agreement, Crown had to exercise reasonable care in making the payment. Ms Shao does not explain the basis for implying such a term, and such a term would be inconsistent with the express terms of the Facility Agreement, which set out what was necessary for Crown to obtain a good discharge of its debt. 7. Ms Shao does submit that Crown owed her a duty of care in repaying the loan by analogy to cases in which it has been held that a bank owes a duty of care in acting on otherwise valid instructions where it was aware of the risk that the individual responsible for giving those instructions was perpetrating a fraud on the customer who held the account: see, for example, Barclays Bank Plc v Quincecare Ltd [1992] 4 All ER 363, referred to in Farah Custodians Pty Limited v Commissioner of Taxation (No 2) [2019] FCA 1076 at [79] per Wigney J. But in those cases, the existence of the duty depends on the relationship between the bank and its customer, the breach depends on knowledge of facts which might suggest fraud or dishonesty and the instructions are given not by the customer itself but by a person authorised to operate the account. In Philipp v Barclays Bank UK PLC [2023] UKSC 25, the Supreme Court of the United Kingdom unanimously held that a bank did not owe a customer a duty of care (and it was not an implied term of the contract between the bank and the customer that the bank would exercise reasonable care) in making a payment on the instructions of the customer rather than an agent. Whatever the precise scope of the principle in Quincecare, it has no application to the present case. The present case concerns a business loan governed by an agreement which sets out how and when the loan is to be repaid. There is no reason to overlay tortious obligations on those contractual rights and obligations. 8. In her written submissions in reply, Ms Shao also suggested that the present case was analogous to cases where a person has been entrusted to deliver goods or money in accordance with instructions given to the person. In cases of that type, it has been held that it is an implied term of the contract that the person act with reasonable care in complying with the instructions. As McGarvie J explained in Ryan v Bank of New South Wales [1978] VR 555 at 579 (in a passage relied on by Ms Shao): A person given an order by another with a contractual right to give it, is not in all circumstances free of liability if he complies literally with the order. A carrier carrying goods under contract and ordered to deposit them on a particular loading platform at the factory of destination would act unreasonably in complying with the order if, on arrival, the factory was on fire and the platform about to be consumed by the fire. A security officer ordered by his employer to deliver the employees' weekly pay to the paymaster would act unreasonably in complying with the order, if he knew from what the paymaster had told him, that the paymaster intended to steal it. A paymaster ordered by his employer to take the employees' weekly pay to the pay office would act unreasonably in complying with the order if, on the way, he learnt that the pay office was occupied by a gang of armed robbers. In those situations the person given the order would act unreasonably in complying with it, because a reasonable person in his position would know that the person giving the order would not desire that it be carried out if he were aware of the circumstances known to the person given the order. The law would there imply a term that the person given the order was to act reasonably in performing his part of the contract and he would be liable to the person giving the order if he acted unreasonably by complying literally with it. 1. However, those cases are not analogous. They concern a situation in which a third person agrees to deliver goods or money to another. In that case, the term is implied in the contract of delivery and the contractual duty to take reasonable care is owed to the person arranging the delivery, not to the person to whom the delivery is made. 2. For those reasons, the allegation that it was an implied term of the Facility Agreement that Crown would exercise reasonable care in making payments under it and the allegation that Crown owed Ms Shao a duty to exercise reasonable skill and care in making the payment can be put to one side. 3. There is also a suggestion in some of the submissions made by Ms Shao that she did have rights in respect of the $1,000,000 before it was paid to Mr Peng because the mechanism for repayment involved a sequence in which the notes were redeemed and the payment was made subsequently. On that analysis, Crown held the $1,000,000 on trust for the Lender between the time the notes were redeemed and the time the money was actually paid. In her written closing submissions in reply, Ms Shao appears to resile from that suggestion. In any event, I do not accept it. Clause 8 of the Facility Agreement states that "Drawings made available under this facility are repayable by redemption of Notes". It seems clear that the Notes are redeemed by payment of the face value of the notes in accordance with clauses 3 and 4 of the Note Certificate. Payment and redemption of the notes occurs simultaneously. Was the $1,018,740 paid in accordance with the terms of the Facility Agreement? 1. The question whether the $1,018,740 was paid in accordance with the terms of the Facility Agreement raises three issues. The first is whether cl 4 of the Note Certificate should be interpreted as only permitting payment by cheque. The second is whether Mr Peng was entitled to give instructions alone in relation to the payment. The third is whether, if he was not, he was acting as agent for Ms Shao in giving instructions. The correct construction of cl 4 of the Note Certificate 1. As to the first question, read literally, cl 4 of the Note Certificate requires the payment to be made by cheque drawn by the Borrower which is either delivered personally or deposited into an account notified by the Lender. However, in some circumstances, a Court will depart from the clear literal meaning of a clause where the drafting contains an obvious error and the (objective) intention of the parties is clear: see HDI Global Specialty SE v Wonkana No 3 Pty Ltd (2020) 104 NSWLR 634; [2020] NSWCA 296 at [50]-[52] per Meagher JA and Ball J; James Adam Pty Ltd v Fobeza Pty Ltd (2020) 103 NSWLR 850; [2020] NSWCA 311 at [55]-[56] per Leeming JA (with whom Bell P and Macfarlan JA agreed). 2. In my opinion, those requirements are satisfied in this case. The literal reading makes no commercial sense. If the payment was to be deposited into the Lender's bank account, it makes no sense to require that the deposit occur by way of cheque rather than, for example, electronic funds transfer, which was a common means of payment even in 2015, when the Facility Agreement was entered into. The parties could not have intended to limit the method of payment to a cheque in those circumstances. The clause should be read as if the word "either" did not appear in it or was inserted after the word "must". On that reading, payment could occur in one of two ways. It could occur by delivery to the Lender on the due date of a cheque drawn by the Borrower. Alternatively, it could occur by depositing the amount into the Lender's bank account as notified by the Lender to the Borrower. Although cl 4 does not expressly say so, it is apparent from cl 8 of the Facility Agreement that the deposit would have to occur on the due date. It is reasonable to assume that the parties expressly referred to delivery of the cheque on the due date to make it clear that it was delivery on that date that constituted payment and not, for example, the cheque being deposited or cleared on that date. 3. It follows that Crown was entitled to make the payment by electronic funds transfer to an account nominated by the "Lender". Was Mr Peng entitled to give instructions alone? 1. As to the second issue, Mr Peng relevantly gave instructions or acted in relation to three matters relevant to the question whether Crown repaid the debt in accordance with the Facility Agreement. First, he appears to have accepted Crown's email dated 17 February 2016 as a valid Redemption Notice. Second, he nominated an account for the purpose of cl 4 of the Note Certificate. Third, he appears to have accepted early repayment – that is, repayment on 25 February 2016, rather than 26 February 2016. 2. In my opinion, the last of these steps can be put to one side on the basis that it is de minimis. In any event, there is no suggestion that any rights claimed by Ms Shao stem from the fact that Crown made the payment on 25 February rather than 26 February and that Mr Peng apparently accepted that payment. 3. In relation to the other matters, Crown points out that at common law, payment to one of two joint creditors discharges a debt owed to them jointly: McIntyre v Gye (1994) 51 FCR 472 at 479 per Davies, Burchett and Gummow JJ; Powell v Brodhurst [1901] 2 Ch 160 at 164 per Farwell J; Barrett v Universal Island Records Ltd [2006] EWHC 1009 (Ch) at [246] per Lewison J. Relying on that principle, they submit that "Lender" as used in cl 4 of the Note Certificate should be interpreted as a reference to one or both of Ms Shao and Mr Peng. That conclusion is said to be reinforced by the fact that the parties could not have contemplated that the cheque would be personally delivered to both simultaneously, which is what the first limb of cl 4 ("either delivered personally to the Lender on the due date for payment") would require if "Lender" is interpreted to be a reference to both of them. 4. I do not accept that submission. In my opinion, the question is not to be resolved by asking whether "Lender" means either or both Mr Peng and Ms Shao. It is apparent that "Lender" is defined to mean both – it is defined as "Qian Peng and Yakun Shao" (emphasis added). The question is how a specific right or obligation in relation to both of them jointly is to be discharged or exercised. That depends on the precise right or obligation. Where the relevant right or obligation is a right or obligation on the part of the Lender to give notice of an account, it seems to me the notice must be given by both of them. If it were otherwise, there is a risk that Crown would be given inconsistent directions. It should not be up to Crown to resolve which direction it should follow. There is no mechanism by which it could do so. Rather, it should be up to Mr Peng and Ms Shao to resolve what direction should be given. The resolution of that issue would depend on the rights and obligations between them. It follows that Mr Peng alone was not entitled to give an effective notice nominating a different account to which the payment was to be made. The position is different in the case of the form of the Redemption Notice and service of it. It is apparent from the definition of "Redemption Notice" that the form of the notice is determined by Crown and the question is whether that form is accepted by the "Lender". Acceptance by one joint lender appears to be sufficient just as payment to one joint lender is sufficient to discharge the debt. For similar reasons, service of the Redemption Notice on one joint lender is sufficient. Did Mr Peng have authority to act on behalf of Ms Shao? 1. As to the third issue, the question is whether Mr Peng was acting as Ms Shao's agent in accepting the Redemption Notice, in nominating an account for the purposes of cl 4 of the Note Certificate and for the purpose of service of the Redemption Notice. It is common ground that the answer to that question turns on whether Mr Peng had actual or ostensible authority to do those things on behalf of Ms Shao. 2. The classic statement of the difference between actual and ostensible authority was given by Diplock LJ in these terms in Freeman & Lockyer (a firm) v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 at 502 (cited with approval by Clarke and Cripps JJA in Equiticorp Finance Ltd (in liq) v Bank of New Zealand (1993) 32 NSWLR 50 at 132-3): It is necessary at the outset to distinguish between an 'actual' authority of an agent on the one hand, and an 'apparent' or 'ostensible' authority on the other. Actual authority and apparent authority are quite independent of one another. Generally they co-exist and coincide, but either may exist without the other and their respective scopes may be different. As I shall endeavour to show, it is upon the apparent authority of the agent that the contractor normally relies in the ordinary course of business when entering into contracts. An 'actual' authority is a legal relationship between principal and agent created by a consensual agreement to which they alone are parties. Its scope is to be ascertained by applying ordinary principles of construction of contracts, including any proper implications from the express words used, the usages of the trade, or the course of business between the parties. To this agreement the contractor is a stranger; he may be totally ignorant of the existence of any authority on the part of the agent. Nevertheless, if the agent does enter into a contract pursuant to the 'actual' authority, it does create contractual rights and liabilities between the principal and the contractor …. An 'apparent' or 'ostensible' authority, on the other hand, is a legal relationship between the principal and the contractor created by a representation, made by the principal to the contractor, intended to be and in fact acted upon by the contractor, that the agent has authority to enter on behalf of the principal into a contract of a kind within the scope of the 'apparent' authority, so as to render the principal liable to perform any obligations imposed upon him by such contract. To the relationship so created the agent is a stranger. He need not be (although he generally is) aware of the existence of the representation but he must not purport to make the agreement as principal himself. The representation, when acted upon by the contractor by entering into a contract with the agent, operates as an estoppel, preventing the principal from asserting that he is not bound by the contract. It is irrelevant whether the agent had actual authority to enter into the contract. 1. Actual authority may be express or implied. Whether actual authority is to be implied turns on a close analysis of the facts, some of which may also be relevant to the question of ostensible authority. Even so, the focus of the two enquiries is different. Actual authority is concerned with the relationship between the alleged principal and agent. Ostensible or apparent authority is concerned with the relationship between the agent and third party. 2. Crown's primary position is that Mr Peng had actual authority to deal with Crown on behalf of both of them. In support of that submission, it relies principally on the following admission made by Ms Shao in cross-examination: Q. You were happy for Clement [Mr Peng] to tell Crown where to pay the interest under the Facility Agreement because, as far as you were concerned, you and Clement were operating on the basis that he could deal with Crown on behalf of both of you. Do you agree with that? A. Only other way ..(not transcribable).. Q. What I put to you was true at the beginning? A. Yes. Q. When you say, "at the beginning", you mean in early 2015? A. Yes, in February. Q. You never said anything to Clement, between early 2015 and February 2016, to say to him that he couldn't do on your behalf things with Crown that he'd been able to do up to then. Correct? A. Can you repeat, sorry? Q. I think you agreed with me that in early 2015, you and Clement were operating on the basis that he could deal with Crown on behalf of you? A. Yes. Q. What I'm putting to you, is that you never said to Clement, after early 2015, that he couldn't do that anymore, did you? A. I think she can't do it ‑ he can't do it. Q. You never said that to Clement, did you? A. I sent him messages. 1. As I have said, there is no evidence that Ms Shao sent Mr Peng messages withdrawing any authority he had to deal with Crown. In re-examination, Ms Shao gave the following evidence: Q. Ms Shao, you were asked by my friend whether in the beginning, that is in February/March, you were happy for Clement to deal with Crown on your behalf and you said yes. A. Mm. Yes. Q. Do you remember that? A. Yes. Q. Can I just ask when you said you were happy for Clement to deal with Crown on your behalf, did you mean by that you were happy for Clement to communicate with Crown on your behalf or to make decisions about the notes facilities on your behalf, or both of those things? A. Just communicating. 1. In my opinion, little weight can be placed on this response, given as it was in response to an obviously leading question. 2. I accept that it was likely that in February and March 2015, Mr Peng had actual authority to give instructions to Crown and to receive documents in relation to the Facility Agreement on behalf of both of them. If he did not have actual authority, he had ostensible authority. Ms Shao knew that Mr Peng was dealing with Crown on her behalf and she acted in a way that was consistent with those dealings. So, for example, she signed the EOI in respect of the Arc development and signed the Facility Agreement. She must have appreciated that the first interest payment under the Facility Agreement had been paid into the Joint Account on Mr Peng's instructions. She said nothing to suggest that Mr Peng was not entitled to give those instructions. These facts are consistent with the admission she made in cross-examination. By permitting Mr Peng to deal with Crown on behalf of both of them and acting consistently with those dealings, she also represented to Crown that Mr Peng had authority to act on her behalf. 3. The real question is whether any express authority Mr Peng had had been revoked by Ms Shao before 17 February 2016 and whether Crown was still entitled to rely on the earlier representations made by Ms Shao in relation to Mr Peng's authority at that time. 4. Although revocation of authority is normally express, there is no reason in principle why it could not be implied from the circumstances. In the present case, at the time Mr Peng gave instructions in relation to the repayment of the loan, he and Ms Shao had separated and were planning to divorce. More significantly, when Mr Peng transferred $600,000 out of a joint account without obtaining Ms Shao's authority, Ms Shao commenced proceedings against him, and those proceedings were resolved on the basis that Mr Peng agreed to repay the amount that had been transferred. Mr Peng knew that, like the $600,000, the $1,000,000 belonged to Ms Shao. He must have understood that at the time Ms Shao commenced court proceedings that she was withdrawing any authority he had to deal with her money. It follows that he did not have actual authority to give the instructions he did to Crown in relation to the repayment of the loan. 5. A representation concerning authority is a continuing representation. But like any continuing representation, it may become spent if the circumstances so change that it is no longer reasonable to rely on it: see, for example, Macquarie Generation v Peabody Resources Ltd [2000] NSWCA 361 at [3]ff per Mason P; at [125] per Beazley JA (with whom Giles JA agreed); Australian Securities and Investments Commission v Getswift Ltd [2021] FCA 1384 at [2117] per Lee J. 6. In my opinion, Crown could not reasonably have believed Mr Peng continued to have authority to give instructions or receive documents on behalf of Ms Shao at the time that it sought instructions in relation to the repayment of the loan. At the time the representations concerning Mr Peng's authority were made, Ms Shao did not have any dealings with Crown directly. That was one of the matters from which Crown was entitled to conclude that Mr Peng did have authority to act on Ms Shao's behalf. However, from 23 June 2015 all the dealings between Ms Shao and Crown were handled by Ms Shao personally. It is true that Crown continued to pay interest in accordance with instructions given by Mr Peng, but those instructions were given by Mr Peng on 16 March 2015 and were never changed. Moreover, by at least 6 July 2015, Crown knew that Ms Shao and Mr Peng had separated and that they rarely communicated with one another. By at least 24 August 2015, Crown knew that Ms Shao and Mr Peng would soon be divorced. It was not reasonable in those circumstances for Crown still to think that Mr Peng had authority to give instructions on Ms Shao's behalf or to receive documents on her behalf. Conclusion in relation to the question whether the $1,018,740 was paid in accordance with the Facility Agreement 1. It follows from what has been said that Crown gave a valid Redemption Notice because Mr Peng alone was entitled to and did accept the form in which it was given and the notice was validly served on him. Crown was also entitled to repay the amount owing under the Facility Agreement directly into a bank account. However, that account had to be nominated by both Mr Peng and Ms Shao. The account into which the money was paid did not satisfy that requirement. 2. If Mr Peng was not entitled alone to nominate the account into which the money was to be repaid and did not have authority to nominate that account on behalf of Ms Shao, he did not have authority to treat the payment into an account nominated by him as a valid discharge of the loan. On the other hand, on the conclusions I have reached, Mr Peng was able to accept the form of the Redemption Notice and service of that notice on him was sufficient service of the notice on both of them. It follows that, for the reasons given earlier, Crown did not breach the terms of the Facility Agreement by repaying the loan in the way that it did. However, by making the payment it did not receive a good discharge for the debt it owed. The question remains whether Ms Shao is entitled to sue Crown in respect of that debt. Is Ms Shao entitled to sue Crown to recover the $1,018,740? 1. One difficulty with Ms Shao's claim is that the obligations owed by Crown were owed to Ms Shao and Mr Peng jointly, although they were held on trust by them for Ms Shao. Following Mr Peng's bankruptcy, he was not fit to continue to act as a trustee and consequently became liable to be removed: Miller v Cameron (1936) 54 CLR 572. In the absence of his removal, there is a question whether he was, despite his bankruptcy, a necessary party to the proceedings. However, both parties were content to proceed on the basis that he was not. 2. As I have already explained, Crown contends that it is not liable to Ms Shao because Ms Shao elected to ratify Mr Peng's conduct. 3. The general principle relating to ratification is set out in these terms in Peter G Watts and FMB Reynolds, Bowstead & Reynolds on Agency (22nd ed, 2020, Sweet & Maxwell) at 2-047: Where an act is done purportedly in the name or on behalf of another by a person who has no actual authority to do that act, the person in whose name or on whose behalf the act is done may, if the third party had believed the act to be authorised, by ratifying the act, make it as valid and effectual … as if it had been originally done by his authority, whether the person doing the act was an agent exceeding his authority, or was a person having no authority to act for him at all. 1. Ratification operates retrospectively: Leybourne v Permanent Custodians Ltd [2010] NSWCA 78 at [131] per Giles and Tobias JJA and Sackville AJA. It may occur expressly but it may also be implied. One way in which it may be implied is where the principal, knowing the facts, makes an unequivocal election to enforce rights that would only be available to the principal upon ratification. In that case, the principal is taken to have ratified all the conduct that is necessary for the exercise of those rights, and the ratification arises from the exercise of the rights knowing the facts irrespective of the actual intention of the principal: Harrisons & Crossfield Ltd v London and North-Western Railway Co [1917] 2 KB 755 at 758 per Rowlatt J. Once ratification has occurred, the principal cannot then exercise rights that are inconsistent with the ratification. 2. An early illustration of this principle is the decision in Scarf v Jardine (1882) 7 AC 345. In that case, the respondent, Mr Jardine, had supplied goods to a partnership of two partners trading under the name "W H Rogers and Co". Unbeknown to Mr Jardine, at the time the goods were supplied, one of the partners had retired and had been replaced by another. Mr Jardine subsequently became aware of the change. He was not paid and chose to sue the new partners for the price of the goods he had delivered. Ultimately, the new partnership was dissolved and Mr Jardine proved in its winding-up. He then sought to sue the retired partner for the balance owing to him on the basis that he had delivered the goods to the partnership before receiving notice of the dissolution of the earlier partnership. The House of Lords, reversing the decision of the Court of Appeal, held that he was not entitled to do so. The House of Lords accepted that, as a matter of partnership law, the former partner was liable for the debt because it had been incurred before Mr Jardine had been given notice of the dissolution of the partnership. Nonetheless having made the decision to sue the new partnership rather than the old one, Mr Jardine was bound by that decision. As Lord Selbourne explained (at 353): I think that the plaintiff was bound by his election, and that after approbating the liability according to the facts, and taking as his debtors those who had actually given the order, he could not when it suited his convenience retract it, reprobate it, and go back upon the liability, by estoppel, of the man who never gave the order at all. 1. Scarf v Jardine was not a case of pure agency. The agency arose from the partnership, and the continuing partner remained an agent of the retiring partner because no notice had been given to Mr Jardine of the dissolution of the partnership and therefore of the termination of the agency. Moreover, in that case, Mr Jardine elected to sue the new partnership, not the old one. But those differences do not affect the principle, which has been applied in a number of cases since: see, for example, Republic of Peru v Peruvian Guano Company (1887) 36 Ch D 489 at 499 per Chitty J; Harrisons & Crossfield Ltd v London and North-Western Railway Co [1917] 2 KB 755; Verchures Creameries, Limited v Hull and Netherlands Steamship Company, Limited [1921] 2 KB 608. 2. In the last of these cases, the owners of goods instructed forwarding agents to deliver the goods to a customer in Manchester. When the goods arrived in Manchester, the owners instructed the agents not to deliver the goods. Contrary to those instructions, the agents delivered the goods. The owners sued the customer for the price of goods and, following his failure to pay, bankrupted him. The owners then sued the forwarding agents. The Court of Appeal rejected the claim. As Scrutton LJ explained (at 611-2): A plaintiff is not permitted to "approbate and reprobate". The phrase is apparently borrowed from the Scotch law, where it is used to express the principle embodied in our doctrine of election – namely, that no party can accept and reject the same instrument. … The doctrine of election is not however confined to instruments. A person cannot say at one time that a transaction is valid and thereby obtain some advantage, to which he could only be entitled on the footing that it is valid, and then turn round and say it is void for the purpose of securing some other advantage. That is to approbate and reprobate the transaction. 1. Similarly, Atkin LJ said (at 612): The owners treated the goods as having rightly come to his hands; they sued him for the price of them, recovered judgment against him, and made him a bankrupt. Thereby they affirmed and ratified the act of the forwarding agents. Having done that they cannot afterwards sue the agents as having acted in breach of their mandate. Their attempted reservation of rights against the agents was ineffective. They were renouncing by their act the rights they were professing to reserve. 1. In the present case, Ms Shao's claim against Mr Peng depended on acceptance of the proposition that she had rights in respect of the $1,018,740 that had been paid to Mr Peng. Ms Shao's rights to the money depended on her establishing that the money represented the repayment of a debt to which she was entitled. Consequently, by making the claim, obtaining judgment against Mr Peng and seeking to enforce that judgment, Ms Shao ratified those acts of Mr Peng that had that consequence. 2. Ms Shao does not seriously dispute the analysis of the previous paragraph. Instead, she maintains that ratification of Mr Peng's conduct does not affect her claim for damages for breach of contract. However, as I have explained, Crown did not breach the Facility Agreement in making the payment it did. It could not have breached the terms of the Facility Agreement by making the payment early because Mr Peng was entitled to and did accept Ms Edwards' 17 February 2016 email as a Redemption Notice. It was not a breach of the Facility Agreement for Crown to pay the money into an account nominated by Mr Peng. Rather, the position was that Crown did not obtain a good discharge of its debt by making that payment. That being the case, Ms Shao had a choice. She could have taken the view that the payment to Mr Peng was not a valid discharge of the debt owed by Crown and sued Crown for the debt, joining Mr Peng as a defendant if he was not willing to be joined as a plaintiff. Alternatively, she could have taken the view that Crown had discharged the debt and sued Mr Peng to recover it on the basis that, as between them, the money belonged to her. She chose the latter course and is now bound by that choice. Other issues 1. Crown raises a number of other defences to Ms Shao's claim, including conventional estoppel and a claim that the current proceedings are an abuse of process either because Crown was joined in the 2016 Proceedings but the claim against it in those proceedings was discontinued or because the case advanced in these proceedings is inconsistent with the case advanced in the 2016 Proceedings. Having regard to the conclusions I have reached, it is unnecessary to consider those additional defences. I should, however, say something about Ms Shao's claim for damages. 2. The question of damages would only have arisen if Ms Shao had been able to establish that the debt was discharged but that, in discharging the debt, Crown breached the terms of the Facility Agreement. Although Ms Shao identifies a number of breaches of the Facility Agreement by Crown, in her final written submissions in reply she focuses on two. One is said to arise from the fact that Crown repaid the debt without issuing a valid Redemption Notice. The other is that it did not exercise reasonable care in repaying the debt because it repaid the debt relying on Mr Peng's instructions alone. 3. Assuming for present purposes that one or other of those breaches had been made out, Ms Shao says that her loss is to be calculated as the total amount of the payment because the payment would not have been made to Mr Peng but for the breaches and therefore Mr Peng would not have been able to misappropriate the payment. It is difficult to understand how it could be said that the early repayment caused the losses claimed by Ms Shao. It was not the early repayment that caused those losses, but the payment to Mr Peng. The likelihood is that that payment would have been made to him whether or not it was made early. Ms Shao's real complaint in this regard is that Crown asked for instructions from Mr Peng alone on where to make the repayment and acted on those instructions. But neither of those matters involved a breach of the Facility Agreement. 4. If it was an implied term of the Facility Agreement that Crown was required to exercise reasonable care in repaying the loan and Crown breached that obligation by not obtaining instructions from Ms Shao as well as Mr Peng in relation to the account into which the payment was to be made, then I would have accepted that Ms Shao's loss was the total amount of the payment less the amount she recovered and is entitled to recover from Mr Peng. On that assumption, Crown failed to exercise reasonable care in paying the money to Mr Peng in circumstances where it knew that there was a risk that Mr Peng would misappropriate it. That was the very risk that came to fruition. 5. Crown submits that its liability should be reduced because Ms Shao was guilty of contributory negligence. It also submits that Ms Shao's claim was an apportionable one, that Mr Peng was a concurrent wrongdoer and that any recovery made by Ms Shao should be reduced to take account of those matters. The first point would only apply to a claim in negligence. It would not apply to a claim for breach of an implied term of the Facility Agreement. As to the second point, I accept that Mr Peng was a concurrent wrongdoer within the meaning of s 34(2) of the Civil Liability Act 2002 (NSW) because his acts or omissions (independently or with the acts or omissions of Crown) caused the loss claimed by Ms Shao. Although he was the primary cause of the loss because he misappropriated the payment, it is relevant to bear in mind that the duty Crown breached (assuming it owed one) was a duty to take reasonable care to avoid losses of that type. Precisely what reduction should be made would depend on the precise respects Crown was found to be negligent. 6. Ms Shao also seeks to recover the costs of pursuing Mr Peng to recover the misappropriated payment. In principle, Ms Shao would be entitled to recover those costs to the extent that they were reasonably incurred by her in seeking to mitigate her loss: Tuncel v Renown Plate Co Pty Ltd [1976] VR 501 at 504 citing H McGregor, Mayne and McGregor on Damages (12th ed, 1963, Sweet & Maxwell). Crown appears to accept that principle but takes issue with the quantum of the costs claimed by Ms Shao. 7. The costs include the costs of the 2016 Proceedings and the costs of bankrupting Mr Peng. In the 2016 Proceedings, Ms Shao made a claim for the $140,000 still owing to her. In addition, Mr Peng filed a crossclaim in those proceedings which he amended to assert claims under the Family Law Act 1975 (Cth). In all, Ms Shao's costs of the 2016 Proceedings total $288,810.33. Ms Shao's solicitor estimates that of that amount, $150,873.19 related to the defence of the claim under the Family Law Act. He estimates that $25,323.09 related exclusively to the claim to recover the $140,000. Ms Shao accepts that she should not be entitled to recover the $25,323.09. However, she submits that she should be entitled to recover the $150,873.19 on the basis that the family law claim was defensive in nature. 8. Crown takes issue with that approach on two bases. First, it submits that Ms Shao should not be entitled to recover the costs of the family law claim, since the costs of defending that claim were not reasonably incurred in seeking to recover the $1,018,740. Second, she submits that the total costs of the 2016 Proceedings (excluding the family law claim) should be apportioned between the claim for the $1,018,740 and the claim for $140,000 in the proportions that those amounts bear to the total claim. 9. I accept both these submissions. Even if the family law claim was prompted by the claim for the $1,018,740, there is not a sufficient connection between the two to make Crown liable for those costs. Whether or not Ms Shao would have pursued the claim for the $140,000 if she had not pursued the claim for the $1,018,740, she still obtained the benefit of pursuing the former claim by incurring the costs that she did. Accordingly, in my opinion the fairest approach is to apportion costs. For similar reasons, the costs of bankrupting Mr Peng should be apportioned between the two claims. Applying those principles, Crown calculates the total amount of costs that Ms Shao would have been entitled to recover if her claim had succeeded to be $113,567.04. I would have accepted that calculation. Orders and costs 1. It follows from what I have said the proceedings should be dismissed. There is no apparent reason why costs should not follow the event. However, the parties did not make submissions in relation to costs. In those circumstances, it is appropriate to make an order for costs but to reserve liberty to apply to vary that order. 2. Accordingly, the orders of the Court are: 1. Summons dismissed; 2. The plaintiff pay the defendants' costs of the proceedings; 3. Liberty to either party to apply to vary order (2) within 21 days of the date of this judgment. ********** 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: 14 July 2023