Mao v Bao [2023] NSWCA 278

Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Mao v Bao [2023] NSWCA 278 Hearing dates: 25 July 2023 Date of orders: 21 November 2023 Decision date: 21 November 2023 Before: Ward ACJ at [1]; White JA at [199]; Mitchelmore JA at [246] Decision: 1. Allow the appellant's appeal with costs. 2. Set aside the orders made by the primary judge on 16 December 2022 and in lieu thereof order that judgment be entered for the appellant against the respondent in the sum of $3,491,289.50, comprising: (i) the value of the appellant's claim as at 5 May 2014 ($2,069,020) plus interest on that claim at 24% per annum from 6 May 2014 to 12 December 2022, minus (ii) the value of the respondent's claim as at 5 May 2014 ($2,050,084) plus interest on that claim at the pre-judgment interest rate prescribed by the Supreme Court from 6 May 2014 to 12 December 2022. 3. Dismiss the cross-appeal with costs Catchwords: EQUITY – Set-off – Where the appellant had been ordered to account to the respondent in respect of moneys drawn under a mortgage facility secured over property held for the respondent's benefit and the respondent had been ordered to re-pay the appellant sums owing under a loan unrelated to the mortgaged property – Whether the two claims were sufficiently closely connected that one could be said to impeach the other in the sense required for an equitable set-off. EQUITY – Whether Brickenden principle (see Brickenden v London Loan & Savings Co [1934] 3 DLR 465) that prohibits speculation by defaulting fiduciaries as to counterfactuals had the default not occurred has application to the issues raised as to equitable set-off in the present case. Legislation Cited: Civil Procedure Act 2005 (NSW), ss 21, 100 Real Property Act 1900 (NSW), s 57(2)(b) Cases Cited: Active Adult Management Pty Ltd v Milstern Retirement Living Pty Ltd [2017] NSWSC 1238 Agricultural Land Management Ltd v Jackson (No 2) [2014] WASC 102; (2014) 98 ACSR 615 AIB Group (UK) Plc v Mark Redler & Co Solicitors [2014] UKSC 58 Alexander v Perpetual Trustees WA Ltd (2004) 216 CLR 109; [2004] HCA 7 Ancient Order of Foresters in Victoria Friendly Society Ltd v Lifeplan Australia Friendly Society Ltd (2018) 265 CLR 1; [2018] HCA 43 Australian Executor Trustees (SA) Ltd v Kerr [2021] NSWCA 5; (2021) 151 ACSR 204 Australian Securities and Investments Commission v Hellicar (2012) 247 CLR 345; [2012] HCA 17 AWA Ltd v Exicon Australia Pty Ltd (1990) 19 NSWLR 705 Beach Petroleum v Kennedy (1999) 48 NSWLR 1; [1999] NSWCA 408 Blacksheep Productions Pty Ltd v Waks [2008] NSWSC 488 Boardman v Phipps [1967] 2 AC 46 Boensch v Pascoe (2019) 268 CLR 593; [2019] HCA 49 Brickenden v London Loan & Savings Co [1934] 3 DLR 465 British Anzani (Felixstowe) Ltd v International Management (UK) Ltd [1980] QB 137 Browne v Dunn (1893) 6 R 67 (H.L.) Canson Enterprises Ltd v Boughton & Co [1991] 3 SCR 534; (1991) 85 DLR (4th) 129 Chamberlain Early Learning Centre Pty Limited v Precious 1 Pty Limited in its own right and as trustee for The 4 Chamberlain Holdings Family Trust [2017] NSWSC 189 Concrete Constructions v Dalma Formwork [1999] NSWCA 16 Coope v LCM Litigation Fund Pty Ltd [2016] NSWCA 37; (2016) 333 ALR 524 Forsyth v Gibbs [2009] 1 Qd R 403; [2008] QCA 103 Gerard Cassegrain & Co Pty Ltd v Cassegrain (2013) 87 NSWLR 284; [2013] NSWCA 453 Glazier Holdings Pty Ltd v Australian Men's Health Pty Ltd (No 2) [2001] NSWSC 6 Gray v New Augarita Porcupine Mines Ltd [1952] 3 DLR 1 Gwembe Valley Development Co Ltd & Anor v Koshy [2004] BCLC 131 Hanak v Green [1958] 2 QB 9 Hawes v Dean [2014] NSWCA 380 Hill v Ziymack (1908) 7 CLR 352; [1908] HCA 13 House v The King (1936) 55 CLR 499; [1936] HCA 40 HP Mercantile Pty Ltd v Dierickx [2013] NSWCA 479 James v Commonwealth Bank of Australia (1992) 37 FCR 445; [1992] FCA 617 Magnus v Queensland National Bank (1888) 37 Ch D 466 Maguire v Makaronis (1997) 188 CLR 449; [1997] HCA 23 Mao v Bao (No 2) [2022] NSWSC 1699 Mao v Bao [2021] NSWSC 1096 Mittiga v Community Corporation 20582 Inc (2012) 114 SASR 557; [2012] SASC 202 Miwa Pty Ltd v Siantan Properties Pte Ltd [2011] NSWCA 297 Murad v Al-Saraj [2005] EWCA Civ 959 Muscat v Smith [2003] 1 WLR 2853; [2003] EWCA Civ 962 Norman v FEA Plantation Ltd (2011) 195 FCR 97; [2011] FCAFC 99 O'Halloran v RT Thomas & Family Pty Ltd (1998) 45 NSWLR 262 Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 Popular Homes Ltd v Circuit Developments Ltd [1979] 2 NZLR 642 Product Development Solutions Australia Pty Ltd v Parametric Technology Corporation [2012] NSWCA 211 Ralston v South Greta Colliery Ltd (1912) 13 SR (NSW) 6 Rawson v Samuel (1841) Cr & Ph 161 Re Brogden; Billing v Brogden (1888) 38 Ch D 546 Re Dawson (dec'd) (1964) 84 WN (Pt 1) (NSW) 399 Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134 Roadshow Entertainment v (ACN 053 006 269) Pty Ltd Receiver & Manager Appointed (1997) 42 NSWLR 462 Short v Crawley (No 30) [2007] NSWSC 1322 Stephen James Rigg v Paul Sheridan [2008] NSWCA 79 Target Holdings Ltd v Redferns [1996] 1 AC 421; [1995] UKHL 10 Thomas v SMP International Pty Ltd (No 4) [2010] NSWSC 984 Union Fidelity Trustee Co Ltd v Perpetual Trustee Co Ltd [1966] 2 NSWR 211 Warman International Ltd v Dwyer (1995) 182 CLR 544 Watson v Ebsowrth & Ebsworth (Watson) [2010] VSCA 335 White v Illawarra Mutual Building Society Ltd [2002] NSWCA 164 Wollongong Coal Ltd v Gujarat NRE Properties Pty Ltd [2020] NSWSC 254 Wollongong Coal Ltd v Gujurat NRE India Pty Ltd (2019) 100 NSWLR 432; [2019] NSWCA 135 Youyang Pty Ltd v Minter Ellison Morris Fletcher (2003) 212 CLR 484; [2003] HCA 15 Texts Cited: M Conaglen, 'Brickenden' in S Degeling and JNE Varuhas (eds), Equitable Compensation and Disgorgement of Profit (Hart Publishing, 2017) 111 J D Heydon KC, "Causal Relationships between a Fiduciary's Default and the Principal's Loss" (1994) 110 Law Quarterly Review 328 J Glister, 'Breach of fiduciary duty: Brickenden lives on' (2011) 5 Journal of Equity 59, 66-67 J Glister, "Equitable Compensation" in J Glister and P Ridge (eds), Fault Lines in Equity (Hart Publishing, 2012) 143 S Harder, 'Equitable compensation for a fiduciary's non-disclosure and hypothetical courses of events' (2011) 5 Journal of Equity 22 Meagher, Gummow & Lehane's Equity Doctrines & Remedies (LexisNexis Butterworths, 5th ed, 2015) Rickett, "Equitable Compensation: the giant stirs" (1996) 112 Law Quarterly Review 27 Category: Principal judgment Parties: Duoxiang Mao (Appellant) Linchun Bao (Respondent) Representation: Counsel: H Stowe (Appellant) PM Knowles SC and DJ Delany (Respondent)