New South Wales Court of Appeal CITATION : YAU v CHEUNG [1999] NSWCA 56 FILE NUMBER(S) : CA 40209/98 HEARING DATE(S) : 16 March 1999 JUDGMENT DATE : 25 March 1999 PARTIES : ANDY SUNG KIT YAU (Appellant) WING CHEUNG (Respondent) JUDGMENT OF : Mason P at 1; Powell JA at 2; Giles JA at 43 LOWER COURT JURISDICTION : District Court LOWER COURT FILE NUMBER(S) : DC 893/97 LOWER COURT JUDICIAL OFFICER : Tupman DCJ COUNSEL : A.J. Sullivan QC/P.L. Dodson (Appellant) M.D. Broun QC/L. Ma (Respondent) SOLICITORS : Koffels (Appellant) W. Chan & Co. (Respondent) CATCHWORDS : CONTRACT - Interpretation - Parol evidence - Written evidence - To add to terms of contract - Written contract - Scope and effect of writing - Whether writing complete contract DECISION : Appeal dismissed 24 IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40209/98 DC 893/97 MASON P POWELL JA GILES JA 25 March 1999 YAU v. CHEUNG REASONS FOR ORDER 1 MASON P. I agree with Powell JA. 2 POWELL JA: On 16 March 1999 the Court ordered that this appeal be dismissed with costs, at the same time indicating that the Court's reasons for making that order would be published later. These are my reasons for joining in that order. 3 The appeal related to a Judgment delivered by Tupman DCJ in the District Court on 17 March 1998 in proceedings which had been brought by the Respondent seeking to recover from the Appellant, or, alternatively, from the Appellant and his wife, the balance of moneys said to have been owed to the Respondent by a company, Mandarin Films (Australia) Pty. Limited ("the Company") payment of which, so it was alleged, had been guaranteed by the Appellant, or, alternatively, by the Appellant and his wife. In the Judgment which she delivered on 17 March 1998, Tupman DCJ found a verdict in favour of the Respondent against the Appellant, but found a verdict in favour of the Appellant's wife against the Respondent and, as well, found a verdict for the Respondent against the Appellant in respect of the Cross-Claim which had been raised by the Appellant against the Respondent seeking relief pursuant to the provisions of the Contracts Review Act 1980. The verdict which her Honour found in favour of the Respondent against the Appellant in the proceedings was in the sum of $165,000.00 representing $150,000.00, said to be the balance owing by the Company together with interest thereon in the sum of $15,000.00, that sum representing interest only for the year from the date of the commencement of the proceedings until the Judgment; while ordering that the Appellant pay the Respondent's costs of the proceedings, her Honour made no order as to the costs as between the Respondent and the Appellant's wife. 4 Although, in his Notice of Appeal, and in the Supplementary Notice of Appeal which was filed by leave on the hearing of the appeal, the Appellant claimed that her Honour had erred in a number of respects, during the course of the hearing of the appeal it was conceded by Mr. A.J. Sullivan QC who appeared with Mr. P. L. Dodson for the Appellant that, if it were open to her Honour to conclude that the Appellant had guaranteed the repayment of money originally owed by the Company to the Respondent, the appeal must be dismissed. 5 Such difficulties as attended the determination of the appeal were due in no small measure to what one can only describe as the decidedly informal way in which the parties went about ordering their affairs, including, in particular, their use of an accountant to draft the document which, so the Appellant would have it, was intended to record the agreement which had been made between them, and what can only be described as the totally inadequate way in which the parties' legal advisers appear to have prepared the proceedings for, and conducted the proceedings on, the hearing before Tupman DCJ. In the result, her Honour was left the unenviable task of attempting to reduce to order a great deal of confused material, a fact which no doubt accounts for her Honour's Judgment being open to a number of the criticisms which Mr. Sullivan directed to it. Nonetheless it seemed to me that, despite the deficiencies in her Honour's Judgment to which Mr. Sullivan sought to direct our attention, the ultimate conclusion to which she came was correct. 6 It appears (CAB 53) the Appellant was born in China in 1947, went to Hong Kong in 1957 or thereabouts and came to this country in about 1975. Although the native tongue of the province in which the Appellant lived until 1957 was otherwise, it would appear that, while in Hong Kong, where he worked for a time for a film maker known as Shaw Brothers, the Appellant learned both Cantonese and Mandarin. Later - in about 1972 - the Appellant commenced to make films on his own behalf. 7 The Appellant's wife was also born in China and she in her turn went to live in Hong Kong in about 1956. Although Cantonese appears to be the language which the Appellant and his wife speak at home, the Appellant's wife's command of the English language is far greater than is that of the Appellant, no doubt because, for some sixteen or seventeen years after she arrived in this country, she worked in the Haymarket Branch of the ANZ Bank. (CAB 46) 8 Although it is not entirely clear, it would seem, that some years after he arrived in this country the Appellant "established a company with a few of (his) friends. (They) started purchasing movies from Hong Kong to be shown here in Sydney". (CAB 54) Although it is not clear that this was so, it may be that the company to which the Appellant referred in this evidence was a company apparently known as Yau's Entertainment Pty. Limited ("Entertainment"). 9 Such evidence as there is reveals virtually nothing of the background of the Respondent other than that he was born in Vietnam in 1958 (CAB 126) - one assumes, of Chinese parents - or of the circumstances in which he came to meet the Appellant. Although it is suggested (CAB 1) that the Respondent became acquainted with the Appellant about ten years prior to the incorporation of the Company, the Appellant suggested (CAB 54) that he and the Respondent had no business dealings until approximately 1992. The Appellant's version of their first discussions was as follows (CAB 54): "Q. When did you first have business discussions with Mr. Cheung concerning Mandarin Films? A. Approximately '92. Q. And what was the business venture the two of you got into? A. We are to find a place in Chinatown and to build a cinema for Chinese movies to be shown. Q. And how did you get to know Mr. Cheung, what was his business at the time? A. I was thinking on the terms of going into business with a friend including people that were dealing in the movie business from Hong Kong and someone whose dealing in video cassette tapes in Australia, Mr. Fu. About a month or two later Mr. Fu introduced me to Mr. Cheung. He told me that he's very interested in doing movies and we were introduced. And I already explained to him then that we will not be able to make money immediately, movies, and we need to, because it takes a long time to renovate a cinema and then we gradually will make profit and I was told that would be no problem by him. During the negotiation and I couldn't find Mr. Cheung he went missing." 10 Quite what one is to make of this is a little difficult to understand. However, it may be - as the result of objection, the subject matter was not further pursued in the course of evidence - that the Appellant was seeking to indicate that after he had found a property capable of being converted into a cinema he was unable to contact the Respondent and accordingly he (the Appellant) - and, as it would seem, his wife (CAB 69,72) - decided to acquire the property in their names alone. 11 Whether that be so or not, it is the fact that, at some time, the Appellant and his wife acquired a property 6-12 Harbour Street in Chinatown, which property was later to be fitted out by the Company as a cinema. 12 Although it was said (CAB 1) that the Appellant and the Respondent incorporated the Company, the ASC search (CAB 126) suggests that the Company may have been incorporated by a shelf company service and the shares then acquired by the Appellant and the Respondent in July of 1993. However, nothing turns on this. At no time, so it seems, were more than two shares in the capital of the Company issued, those shares, between July 1993 and November 1994, being held by the Appellant and the Respondent. After the shares in the capital of the company came into the hands of the Appellant and the Respondent the registered office of the company was changed to 647 George Street, Sydney - an address which is close to Chinatown - that address also being the address of Entertainment and also of Joseph Leung, a chartered accountant, whose offices appear to be in close proximity to those occupied by Entertainment to which company - and also to the Appellant - Mr. Leung seems to have been accustomed to provide accountancy services. 13 The evidence discloses virtually nothing beyond the fact of some form of rent or licence fee as to the arrangements made between the Appellant and his wife and the Company for the use or occupation by the Company of the Harbour Street premises. Whatever may have been those arrangements however, it would seem that as between the Appellant and the Respondent it was agreed that each should contribute equally such funds as were needed to refurbish the premises and fit it out as a cinema (CAB 2-4,55). 14 Although it seems (CAB 3,55) to have been agreed that, in the first instance, each of the Appellant and the Respondent would contribute by way of loan funds $200,000.00 to enable the work of refurbishment and fitting out of the premises to proceed it would appear that those funds were insufficient to enable the work to be completed. Quite how much was ultimately contributed by the Respondent is open to doubt - the company's balance sheet as at 30 June 1994 (CAB 109) discloses loans totalling $220,000.00, while a document entitled Ledger Entries Report for the Year Ended 30 June 1995 (AB 119) revealed a total of $253,000.00, while the evidence to which I will later refer suggests that, by November 1994, sums advanced by the Respondent were of the order of $300,000.00. 15 It seems clear enough that, by October or November 1994, the work of refurbishment and fitting out was still not completed (CAB 4) - the cinema did not commence to operate until late 1994 or early 1995 - and relations between the Appellant and the Respondent had deteriorated to a significant degree (see AB 5, 56). 16 Despite the importance of what then occurred, the evidence which was led from the Respondent in chief was scanty in the extreme. It was little more than that, during the course of an argument some two or three days prior to 7 November 1994, the Appellant told the Respondent that he would "buy him out", to which the Respondent said that, as long as he received the return of the moneys which he had contributed - which moneys were agreed in the sum of $300,000.00 - he would transfer his share in capital of the Company to the Appellant's wife (CAB 4-6). 17 Thereafter, on 7 November 1994, so the Respondent said, he went to the office of Mr. Leung where he signed "the agreement" to which I will later refer, which "agreement" had been prepared by Mr. Leung on the instructions of the Appellant (see AB 6-7). At that meeting, so the Respondent said, (CAB 7-9) Mr. Leung explained the agreement in Cantonese to the Appellant, the Appellant's wife - who had come across the corridor from Entertainment - and the Respondent, at the conclusion of which he said to the Appellant (CAB 8) "Okay, the draft already and you - okay, agree. You both sign". Later in the course of his examination in chief (see AB 11) the Respondent seemed to suggest that at the time when it was agreed that the Appellant would buy him out, the Appellant said that he would pay the $300,000.00 in three months and that if he did not do so he would pay interest at the rate of 10%. 18 Nor was the evidence tendered on behalf of the Appellant left in any better state. According to the Appellant (CAB 58), the argument which led to the discussion, and ultimately to the execution, of "the agreement" occurred on the morning of 7 November 1994 when he and the Respondent were at the Harbour Street site. At that time, so the Appellant said, the Respondent said that he had lost interest in the project and that, if the Appellant would give him $300,000.00, he would leave the company, a proposal to which he, the Appellant, agreed, the Appellant then suggesting that "(they) should go and have an agreement". Then, so the Appellant said (CAB 61-64), they went together to Mr. Leung's office where they saw Mr. Leung. Although the Appellant sought later to resile from part of this evidence, it is to be noted that in his evidence in chief (CAB 61) the Appellant said: "… We entered the office together, and he was working then, Joe Leung. So I said to Joe Leung 'Would you prepare something for us, write something up for us?' He said 'Can't you see that I am very busy, what do I have to do?'. Then I said he wanted to leave the company and I'm to take back the company. And we have agreed that I will give him back $300,000.00. Can you do a witness thing for us, an agreement for us. He then said 'I'm not a solicitor.' He said 'If you want to prepare something like this you go and look for a lawyer'. And then we didn't know what to do then. And then we feel that is an urgent matter and you know, we couldn't find anybody and please help us. He then said okay I'll just do the translation." (my emphasis) 19 Then, according to the Appellant, he was called across to Entertainment's office and the Respondent was left with Mr. Leung. The Appellant denied that when "the agreement" had been prepared and before he signed it, Mr. Leung explained it to him in Cantonese. 20 Mr. Leung's evidence in chief provided some - but far from complete - support for the Appellant's version of what occurred. That evidence (CAB 33-34) was to the following effect: "It was a very busy day in office. We were trying to meet a deadline in the office and suddenly Mr. Yau and Mr. Cheung walk into my room saying that they want a loan agreement to be done in a hurry. At first I was a bit annoyed because to be called on to do a job in such a hurry and then, and also I told them straight away that it is - the loan agreement is a legal document which bears legal consequences and I'm only an accountant, I'm not supposed to do a legal document like that. And I have asked them to engage a solicitor to do the job. But then they told me they want to do in a great hurry and they want it to be done straight away because I believe they told me they also want to - want me to do a share transfer form at the same moment which I agree to do but on that loan agreement I told them I didn't want to do it. No even though they insisted, you know, me to do it, so finally I, very reluctantly I told them I will do it as a favour for friend and also is only just a translation of what they going to tell me to go into agreement and I'm not charging them a fee." (my emphasis) that discussion all being in Cantonese. 21 "The agreement" which was prepared by Mr. Leung took the following form (CAB 108): "THIS AGREEMENT is made this 7th day of November, One Thousand Nine Hundred and Ninety Four BETWEEN Wing CHEUNG of 8 Delamere Street, Canley Vale, N.S.W. (hereinafter called 'the Lender') of the one part and Mandarin Films (Australia) Pty. Ltd. of 6-12 Harbour Street, Sydney, N.S.W. (hereinafter called 'the Borrower') of the other part WHEREAS the Lender has to this date made a loan of Three Hundred Thousand Dollars Only ($300,000) to the Borrower for the purpose of financing the project of constructing a cinema known as the 'Harbour City Cinema' on the property at 6-12 Harbour Street, Sydney for exhibition purposes. NOW IT IS HEREBY AGREED between the parties as follows:- 1. The Borrower shall repay the said sum of Three Hundred Thousand Dollars Only to the Lender within three months from the date of this Agreement. 2. Interest at the rate of ten per centum (10%) per annum on the outstanding balance of the said sum of Three Hundred Thousand Dollars Only ($300,000) as from the expiry date of three months from the date of this Agreement shall be payable by the Borrower to the Lender. 3. The repayment of the aforementioned loan shall be guaranteed by Andy Sung Kit YAU. 4. The Borrower is in the process of procuring a loan from Hong Kong Bank. The total funds to be provided by such loan shall be made available for the repayment of the aforementioned loan. AS WITNESS the hands of the parties hereto the day and year first above written. The Common Seal of the Borrower was hereunto affixed in the presence of: Secretary Director Witness SIGNED BY THE LENDER in the presence of Witness " 22 A number of observations may be made about this "agreement" they being: 1. as will be apparent from what I have earlier recorded, it seems to have been agreed between the Appellant and the Respondent that the amounts which the Respondent had advanced to the Company were of the order of $300,000.00; 2. the Respondent's evidence, to which I have earlier (para. 16) referred, that it was agreed that the sum of $300,000.00 be repaid to the Respondent within three months was not disputed by the Appellant and is reflected in cl.1 of "the agreement"; 3. the Respondent's evidence (para 16) that, if the $300,000.00 was not paid within three months, it would bear interest at the rate of 10% from the date of "the agreement", was not disputed by the Appellant and is reflected in cl. 2 of the agreement; 4. although, during the course of his cross-examination (CAB 70), the Appellant claimed that he did not know what a guarantee was, and although, as I have earlier (para 17) recorded, the Appellant sought to resile from the evidence which he gave in chief, it is to be recalled, first, that, during his evidence in chief (see CAB 61), the Appellant said that he had told Mr. Leung "(Mr. Cheung) wanted to leave the company and I'm to take up the company. And we have agreed that I will give him back $300,000.00." and that, during the course of his cross-examination (see CAB 81) the Appellant gave the following further evidence: "Q. On the day that the agreement with Mr. Cheung was signed, it was you who asked Mr. Leung to draft up that agreement wasn't it. A. Both of us. Q. You told Mr. Leung what you wanted in it? A. I only told Mr. Leung that we had both agreed. That Mr. Cheung will leave the company and all the company will be transferred to us and we both agreed that I will give him back $300,000.00 . And further to that I went off to answer my telephone call. Q. You see you were buying from Mr. Cheung his interest in the company weren't you? A. Bought the shares of the company. Q. Well you were buying - you were giving Mr. Cheung back his money so he would leave the company ? A. Yes. Q. And your wife was taking his place? A. Yes. Q. And there was an agreement between you and Mr. Cheung personally. A. Yes ." (my emphasis) 5. despite the Appellant's assertion that he undertook no personal liability to the Respondent, the Appellant concluded his evidence in chief as follows (CAB 64): "Q. After execution of the agreement were there any demands made for money from Mr. Cheung? A. Yes. Q. And what was that? What demands were made? Can you recall what was said? A. He asked me when I will give him the money." In fact, the Appellant made two payments to the Respondent, one of $100,000.00 in March 1995 and the other of $50,000.00 in August 1995 (CAB 83), which amounts were then credited to the Appellant's loan account with the Company (CAB 119,124). 6. although the Appellant (CAB 82) denied having told Mr. Leung that the Company was in the process of procuring a loan from the Hong Kong Bank his evidence in the course of cross-examination (CAB 82) was that he had told the Respondent that "We have to borrow money from the Hong Kong Shanghai Banking Co" - it would, however, appear that no application was made to that bank for a loan to the Company, the Appellant asserting (see AB 83, 87) that, after "the agreement" was signed, he was made aware that the bank would not lend money to the Company. 23 As I have previously recorded (para. 16) the Respondent said (CAB 8-9) that when the agreement had been prepared, Mr. Leung explained it, in Cantonese, to the Appellant and the Appellant's wife who had walked across the corridor from Entertainment's office. As well, so the Respondent said (CAB 8-9), the Appellant discussed with his wife "the agreement" and the proposed transfer to her of the Respondent's share in the capital of the company. 24 That having been done, the Common Seal of the company was affixed to "the agreement", the Appellant's wife signing as a director and the Appellant signing as secretary, the Respondent then signing as lender and Mr. Leung signing as a witness in each case. The Respondent and the Appellant's wife then signed the share transfer, each signature being witnessed by Mr. Leung. There does not appear to have been any meeting of the directors of the Company authorising the execution of "the agreement", approving the share transfer or appointing the Appellant's wife as a director of the company, although it would appear (CAB 37-38) that Mr. Leung may have prepared a form of minute approving the share transfer and may later have lodged with the ASC a notification of change of directors. 25 As I have earlier recorded (para 20(5)), after the execution of "the agreement" the Respondent on at least two occasions made demand upon the Appellant for payment, to which demands the Appellant, during the course of 1995, responded by making payments totalling $150,000.00. 26 It would seem that, not having received any further payments, the Respondent, in either late 1995 or early 1996, retained Messrs. Allen Allen & Hemsley in an endeavour to recover the balance of the $300,000.00. Although it is not entirely clear that this was so, the probability (CAB 23-24) is that, in the first instance, a statutory notice was served on the Company and that, thereafter, there having been no compliance with that notice, a winding-up summons was served on the Company - the ASC search to which I have earlier referred would indicate (CAB 127) that an order for winding up the Company was made on 1 April 1996. 27 Although what is described as the Company's balance sheet as at 30 June 1996 (CAB 122-123) purports to record shareholders' equity of $18,102.00 odd, assets being said to total $610,646.00 odd, and liabilities $592,544.00 odd, the reality appears clearly to have been that the Company was, at the date of the making of the winding-up order, hopelessly insolvent, for the major asset would seem to have been furniture, fixtures and fittings, brought to account in the sum of $518,936.00 odd - presumably the improvements to the Harbour Street property, the title to which, one would have thought, would have passed to the Appellant and his wife as owners of the property - though virtually the whole of the Company's liabilities represented loans from the Appellant, from Entertainment, from the Respondent and from others (see also CAB 78). 28 The Statement of Liquidated Claim which was filed on behalf of the Respondent on 26 February 1997 to commence the proceedings is a thoroughly inept document which appears to reflect the fact that the draftsman of it had little understanding of the facts upon which the Respondent's claim was based. It was in the following terms: "1. The Defendant is and was at all material times a director and shareholder of Mandarin Films (Australia) Pty. Limited ACN 060 689 750 ('the Company'). 2. On or about 7 November 1994, the Plaintiff transferred to the First Defendant, Annie May Fun Yau, the wife of the Second Defendant for consideration of Three hundred thousand dollars ($300,000.00) all his shares in the Company. 3. On or about 7 November 1994, on the advice of accountant, Joseph Sik-Hung Leung of Joseph Leung & Co, Chartered Accountants, Room 14, 647 George Street, Sydney, the Plaintiff, the Company and the Second Defendant agreed orally to guarantee payment of the sum referred to in 2 above and agreed orally to execute an agreement in writing ('the Agreement') to secure the payment of the purchase price of the Plaintiff's interest in the company by the First Defendant. 4. In pursuance of the said oral agreement, on or about 7 November 1994, on the advice of accountant, Joseph Sik-Hung Leung of Joseph Leung & Co., Chartered Accountants, room 14, 647 George Street, Sydney, the Plaintiff, the Company and the Defendant executed an agreement in writing ('the Agreement') whereby: (a) The Plaintiff agreed to lend the Company the sum of $300,000.00 within 3 months of the date of the agreement; (b) Interest was payable at the rate of 10 per cent per annum on any outstanding balance as from three months from the date of the Agreement; (c) The Second Defendant guaranteed repayment of the Plaintiff's loan to the Company; (d) The Company would obtain funds to repay the Plaintiff's loan to the Company. 5. The Plaintiff has received the following sums: (a) the sum of $100,000.00 on or about 20 March, 1995; (b) the sum of $50,000.00 on or about 15 August, 19995. 6. The Plaintiff at all material times acted on the advice of accountant, Joseph Sik-Hung Leung of Joseph Leung & Co, Chartered Accountants, Room 14, 647 George Street, Sydney. 7. The Plaintiff at no material time before signing the agreement had independent financial or legal advice in respect to it. 8. In breach of the said Agreement the Company has not repaid the balance of the loan or any interest due thereon. 9. In breach of the said Agreement the Defendant has not repaid the balance of the loan or any interest due thereon. 10. On or about 2 April 1996 the Company was wound up pursuant to the Corporations Law in the Supreme Court of New South Wales. 11. The Plaintiff has made demand on the Defendant which demand has not been met. 12. Further or in the alternative, the Defendants by their words, deeds and actions guaranteed to the Plaintiff that they would repay the debt to the Plaintiff. The Plaintiff claims: 1. The sum of $150,000.00 2. Interest 3. Costs" 29 The Appellant and his wife filed a Defence which, in effect, put in issue all of the material matters alleged in the Statement of Liquidated Claim. In addition, the Appellant filed a Cross-Claim which, so far as is relevant, was in the following terms: " ……… 3. On or about 7 November 1994 the Cross-Claimant signed a document purporting to be an agreement between the Cross-Defendant and the Company ('the document'). PARTICULARS The Cross-Claimant refers to a document dated 7 November 1994 and which refers to a loan advance made up to that date by the Cross-Defendant to the Company for the purpose of financing the project of constructing a cinema known as the 'Harbour City Cinema'. 4. No monies were advanced to either the Cross-Claimant or the First Defendant pursuant to the execution of the document or otherwise. 5. The Cross-Defendant contends by way of the Statement of Liquidated Claim filed herein that the document constituted an agreement whereby the Cross-Claimant guaranteed repayment of the Cross-Defendant's loan to the Company. The Cross-Claimant denies this allegation. 6. In the event that it is held that the document constitutes an agreement whereby the Cross-Claimant guaranteed repayment of the Cross-Defendant's loan to the Company the document which was signed by the Cross-Claimant was unjust in the circumstances relating to the extension thereof at the time it was entered into. PARTICULARS (i) The Cross-Claimant was shown the document for the first time when he was asked to sign it; (ii) The provisions of the document were not subject to any negotiation prior to or at the time the agreement was entered into; (iii) It was not reasonably practicable for the Cross-Claimant to negotiate for alteration of or to reject any provisions of the said document; (iv) The Cross-Claimant did not receive any independent legal or other expert legal advice prior to, or at the time of signing the said document; (v) The Cross-Claimant was not given any explanation at all as to the provisions of the document or their legal and practical effect and had no understanding of the provisions of the document or the legal and practical effect prior to and at the time of execution of the said document; (vi) Nothing was done by the Cross-Defendant (or his agents) to advise the Cross-Claimant as to the risks he was running in entering into the document or to bring home to him that there was real risk that action would be commenced against his interests if there was a change in position with respect to the agreement between the Cross-Defendant and the Company. (vii) The Cross-Claimant was disadvantaged by his inability to read English and was unable to reasonably protect his interests. 7. By reason of the aforesaid the Cross-Claimant seeks the following Orders pursuant to the provisions of the Contracts Review Act 1980 (NSW): (i) That to the extent that the document constitutes an agreement whereby the Cross-Claimant guaranteed repayment of the Cross-Defendant's loan to the Company that the Court refuse to enforce the document; (ii) Further or in the alternative a declaration that the document, to the extent that it constitutes an agreement by the Cross-Claimant to guarantee repayment of the Cross-Defendant's loan to the company, is void from the time when it was entered into or from such time as the Court may specify; (iii) Further or in the alternative that the document, to the extent that it constitutes an agreement by the Cross-Claimant to guarantee repayment of the Cross-Defendant's loan to the company be varied with effect from the time that it was entered into or from such time as the Court may specify; (iv) That the Cross-Defendant pay the Cross-Claimants' costs of the proceedings herein." 30 Despite the form of the Statement of Liquidated Claim, the basis upon which the Respondent sought to establish his claim to payment appears to have undergone a sea change during the course of the hearing, although quite how the matter was ultimately put on behalf of the Respondent is not entirely clear to me despite the fact that what appear to have been the written submissions prepared on behalf of the Respondent are included among the appeal papers (CAB 92-100). In this respect, it is to be noted that, in the course of her Judgment (RAB 38), Tupman DCJ, having recorded her conclusions as to the facts, said: "The findings in this Judgment are largely in accordance with the submissions made on behalf of the plaintiff at the end of this hearing. those submissions both orally and in writing. The statement of claim, however, is not precisely drawn and particularly in relation to para 3 does not actually set out that the basis on which the agreement is sought to be enforced is that which was ultimately argued by the plaintiff. This was in fact referred to by counsel for the defendants at the end of submissions yesterday. I offered counsel for the defendants the opportunity to pursue that submission whilst indicating that it appeared to me that the whole of the evidence had been presented in a way consistent with the plaintiff's ultimate argument and thus I would entertain an application to amend the statement of claim to reflect this. Counsel for the defendant, after apparently seeking instructions, whilst arguing against such a construction of the evidence nonetheless agreed that he would not take the pleadings point." (see also CAB 88-91) 31 In the course of her Judgment, Tupman DCJ while acknowledging the difficulties involved in assessing the demeanour of witnesses whose evidence was given in a language which was not his, or her, first language and while indicating that her assessment of the credibility of the witnesses was based more on the content of their evidence and less on their demeanour (RAB 28), recorded her view that the Respondent was generally a witness of credit - in this respect noting that the Appellant and his wife did not challenge his credit except for some of the detail surrounding the meeting at the office of Mr. Leung on 7 November 1994 - and recording her view that where there were conflicts between the Respondent and the Appellant she preferred the evidence of the Respondent to that of the Appellant whom she described as less compelling as a witness (RAB 27-28). Further, her Honour said that she did not find Mr. Leung to be a compelling witness at all and, further, that some of the evidence given by him suggested to her that Mr. Leung was prepared to fashion his evidence in a manner which he thought would assist the Appellant (RAB 30). 32 Having recorded her views as to the credibility of the various witnesses, her Honour proceeded (RAB 31-33): "On the basis of these findings of credit then I prefer the evidence of the plaintiff as to how and when the oral agreement occurred. I accept that on 5 November 1994 the two men met at the cinema site and argued again, more probably than not over money. There are two versions of what was said but they are not, in my view, inconsistent and I am prepared to accept that in large part the conversations occurred in the way each of them contends. I accept that during this meeting the plaintiff probably made a complaint that he had followed the cinema project for over a year, had put in money, was losing interest and his own wages and had nothing to show for it. I accept that probably the second defendant put an ultimatum to the plaintiff that one or other of them should take the company. I accept that ultimately there was an agreement between them that the second defendant would take over the company. I accept that the plaintiff said something like 'you give me $300,000 and I'll leave' or perhaps additionally 'I'll take back what I put in and then leave' and that the two men agreed that this amounted to $300,000. I accept that the second defendant said to the plaintiff 'I'll give you $300,000 and you leave the company' and I further accept that during this conversation the parties agreed that the plaintiff would transfer his one share in the company to the second defendant's wife, the first defendant. I further accept that during this conversation the parties agreed that the sum of $300,000 would be repaid within three months and would attract interest at the rate of 10 per cent per annum if not repaid after that time. I accept, therefore, that by the end of that conversation there had been an oral agreement completed between the plaintiff and the second defendant by express words as follows: (1) that the second defendant would pay the plaintiff the sum of $300,000 within three months; (2) that there would be interest at the rate of 10 per cent per annum payable on that amount if unpaid after three months; (3) that the plaintiff would transfer his share in Mandarin Films to the second defendant's wife. I further accept that by inference from express words the agreement was further concluded that the plaintiff would relinquish his interest in Mandarin Films, that is not pursue any action for recovery of his loan account with the company. I accept that this is to be inferred by the words of each of the two men that the second defendant would buy out the plaintiff or that the plaintiff would leave the company. I also accept that during this conversation there were discussions between the parties about the fact that funds for such transaction were to be sought by the second defendant from the Hong Kong and Shanghai Bank and further that the second defendant would approach his accountant to draw up an agreement to put this oral agreement into effect. I accept that this was the end of the contract between the parties on that day." 33 Having done so, her Honour then turned to "the agreement", with which she dealt in the following terms (RAB 33-34): "In relation to that written agreement, which is exhibit C in these proceedings, I accept the evidence of the plaintiff that by arrangement with the second defendant he attended at the offices of Joseph Leung, accountant, on 7 November 1994 to sign the agreement. As I have said, I accept that those offices were across the corridor from the office of Mandarin Films Pty. Limited. I accept the plaintiff's evidence that the first time he had seen the written agreement, exhibit C, was when he attended the office of Mr. Leung that day. I accept the plaintiff's evidence that he, the second defendant, and Mr. Leung were in Mr. Leung's office and were speaking in Cantonese. I accept that Mr. Leung read out the contents of exhibit C in Cantonese, including clause 3, and explained in some brief detail the terms of the agreement. I accept that both men signed the document and their signatures were witnesses by Mr. Leung. I accept that the first defendant, Mrs. Yau, came into the office shortly afterwards and signed the document at the request of her husband with some, but not lengthy, explanation. I reject the version of this meeting given by the second defendant and Mr. Leung, that is with both the plaintiff and the second defendant arriving on the 7th seeking an urgent agreement to be prepared, that Mr. Leung did not want to do it but agreed to do it as a translation exercise only. On the face of it this document has considerable difficulties, not the least of which is that it is purported to be signed by the first defendant as director of Mandarin Films Pty. Limited which is simply not the case at the time it was in fact signed. She did not become a director until after the plaintiff had left the company, which he did when he transferred his share to her after this agreement was signed. Further, it appears to me that given the circumstances in which the agreement had been reached between the two men on 5 November 1994, this written document really represents an agreement on the part of Mandarin Films to finance the purchase of the plaintiff (sic) share which it is not entitled to do under the corporations law. It ought not, in my view, be seen as a legally enforceable document in the context of this litigation but rather as a written document evidencing the terms of the earlier oral agreement between the plaintiff and the second defendant." 34 When she came to deal with clause 3 of "the agreement", her Honour said (RAB 35-36): "Clause 3 of this written document is in the following terms, 'the repayment of the aforementioned loan shall be guaranteed by Andy Sun Kit Yau'. It is argued on behalf of the second defendant that this was not an express term of any oral agreement and cannot be implied into any oral agreement. I do not accept that the oral agreement is properly to be seen in those terms. As previously found, I accept that the oral agreement was between the two men personally and that part of the agreement was that the second defendant personally would pay the sum of $300,000 to the plaintiff. The fact that clause 3 finds its way into this badly drawn and probably unenforceable document appears to me to do nothing more than provide some written proof that this was the then intention of the parties when they concluded their oral agreement on 7 November 1994. Mr. Leung was unable to recall any of the detail of what he was told by either the second defendant or the plaintiff as to the actual terms of their agreement and, given that I accept the plaintiff's version of how the written document came into existence, I in fact accept that that instructions to draw it came from the second defendant including the content of clause 3. I do not accept that the plaintiff would have had his attention drawn to anything untoward or inconsistent between the terms of this written agreement and the terms of the oral agreement. It still remained the personal obligation of the second defendant to repay him his money. Even the second defendant and Mr. Leung, when not led, agreed that the agreement was between the two men personally. It seems to me, therefore, that the appropriate way to deal with this written agreement is as evidence supporting the existence of the oral agreement in the terms previously found, that is as evidence of their intention." 35 Her Honour then turned to deal with the Cross-Claim which had been filed on behalf of the Appellant and concluded that it ought to be dismissed. However, although in both the Notice of Appeal and the Supplementary Notice of Appeal which were filed on his behalf, the Appellant asserted that her Honour erred in so doing, no argument was on the hearing of the appeal directed toward that ground of appeal and, accordingly, I do not consider it necessary to record Tupman DCJ's conclusions in respect of the Cross-Claim. 36 As I have earlier recorded a number of grounds of appeal were taken by the Appellant in the Notice of Appeal and in the Supplementary Appeal which were filed on his behalf, not all of which grounds attracted submissions on the hearing. Despite the number of grounds which were taken, however, the submissions which were advanced by Mr. Sullivan on behalf of the Appellant on the appeal in reality came down to the following: 1. "the agreement" which was signed on 7 November 1994 was intended to embody, and in fact embodied, the whole of the agreement which had been reached in the discussions between the Appellant and the Respondent on 5 November 1994; 2. the Appellant was not a party to "the agreement" and he did not, by that "agreement", guarantee the performance of the obligations of the company; 3. by reason of the fact that "the agreement" signed on 7 November 1994 was intended to embody, and in fact embodied, the agreement made on 5 November 1994, it was not open to the Respondent to claim, nor open to her Honour to conclude, that, as the result of the conversation between the Appellant and the Respondent on 5 November 1994, the Appellant undertook any personal liability to pay to the Respondent the sum of $300,000.00 in consideration for the transfer by the Respondent to the Appellant's wife of his share in the capital of the Company. 37 As will be seen, it is essential to the success of the Appellant's submissions that it be found that it was intended that "the agreement" embody, and that "the agreement" in fact embodied, the whole agreement between the parties which was made on 5 November 1994, for unless it be so, it was open to the Respondent to argue - as he appears to have argued - at trial that the agreement between the parties was oral and partly evidenced in writing or, alternatively, that the agreement was partly oral and partly in writing, and that, in either event, part of that agreement was a promise on the part of the Appellant that he would be personally liable to repay, or to ensure the repayment of, the $300,000.00 said to have been lent to the Company. 38 In the course of his Judgment in State Rail Authority of New South Wales v. Heath Outdoor Pty. Limited (1986) 7 NSWLR 170 McHugh JA (as he then was) said supra at 191-192: "When a person alleges that an agreement was partly oral and partly written, it is not always easy to determine whether the writing is the exclusive repository of the bargain. Williston claims that, when a document appears on its face to be a complete record of the parties' contract, it is conclusively presumed to be the contract: Williston on Contracts (1961) s 633. However, Corbin takes a different view and says that the issue is whether the parties assented to a particular writing as the complete and accurate 'integration' of the contract: Corbin on Contracts (1960) vol 3 at 358-359. Support for Williston's approach is to be found in the Judgment of Street CJ in L.G. Thorne & Co. Pty. Ltd. v. Thomas Borthwick & Sons (A/asia) Ltd (1956) 56 SR (NSW) 81 at 88; 73 WN (NSW) 9 at 14. But in my opinion the correct rule is that the existence of writing which appears to represent a written contract between the parties is no more than an evidentiary foundation for a conclusion that their agreement is wholly in writing: Gillespie Bros & Co v. Cheney, Eggar & Co [1896] 2 QB 59 at 62; Turner v. Forwood [1951] 1 All ER 746 at 749; J. Evans & Son (Portsmith) Ltd v. Andrea Merzario Ltd [1976] 1 WLR 1078 at 1083; [1976] 2 All ER 930 at 935. In my opinion the English Law Commission correctly stated the law when it said: '… the mere production of a contractual document however complete it may look, cannot as a matter of law exclude evidence of oral terms if the other party asserts that such terms were agreed. If that assertion is proved, evidence of the oral terms cannot be excluded because the court will, by definition, have found that the contractual terms are partly to be found in what was agreed orally as well as the document in question. No parol evidence rule could apply. On the other hand, if that assertion is not proved, there can be no place for a parol evidence rule because the court will have found that all the terms of the contract were set out in the document in question and, by implication, will thereby have excluded evidence of terms being found elsewhere.' (The Law Commission, Law of Contract. The Parol Evidence Rule January 1986 Cmnd 9700, par 2.12 at 11) 39 In the course of his Judgment in Norwest Beef Industries Limited v. Peninsula & Oriental Steam Navigation Co. (1987) 8 NSWLR 568 Hope JA, with whom Samuels and Mahoney JJA agreed supra at 570, said: "In its pleadings, Norwest also alleged that the term it relies on was an express time of the contracts. It was once the received doctrine that a document which appeared on its face to be a complete record of the parties' contract was conclusively presumed to be the contract. This proposition was discussed by McHugh JA in State Rail Authority of New South Wales v. Heath Outdoor Pty. Ltd. (1986) 7 NSWLR 170. He concluded that the correct rule is that the existence of writing which appears to represent a written contract between the parties is no more than an evidentiary foundation for a conclusion that their agreement is wholly in writing. The tendering of evidence, whether oral or in writing, cannot be excluded until it is determined that any term in writing recorded the whole of the parties' agreement. I respectfully agree with his Honour's conclusions in this regard. It was thus open to Norwest to seek to prove that the relevant contracts contained terms other than those set out in the charterparty documents, whether by reference to telexes or by reference to the conversation between Mr. Scarr (the officer handling the transaction for the fixing broker) and Mr. MacGillivray (representing Norwest)." 40 It may be doubted whether "the agreement", insofar as it purported to record an agreement between the Respondent and the Company, had any legal effect, not because it involved an illegal provision of financial assistance and thus was void (see Dressy Frocks Pty. Limited v. Bock (1951) 51 SR 390; 68 WN 287; Shearer Transport Co. Pty. Limited v. McGrath [1956] VLR 316; E. H. Dey Pty. Limited (In Liquidation) v. Dey {1966] VR 464 Re Galpin; Ex parte Chowilla Timber Supply Co. Limited (1967) 11 FLR 155; cf Re Ferguson; Ex parte E. N. Thorne & Co. Pty. Limited (In Liquidation) (1969) 14 FLR 311 for s.205(5) of the Corporations Law provides that a company which contravenes s.205 is not guilty of offence although each officer of the company who is involved contravenes the sub-section, but because "the agreement" - since the Appellant's wife was not then a director - appears as if it may not have been executed in accordance with the Articles of Association (see, for example, Corporations Law Schedule 1 Table A cl. 84(2)). But even if it be assumed - as for this purpose I am prepared to assume - that "the agreement" had legal effect as between the Respondent and the Company, it does not follow either that "the agreement" was intended to embody, and that it in fact embodied, the whole of the agreement made between the parties on 5 November 1994 - thus excluding the evidence of any oral agreement to the effect of cl. 3 - or that it - being embodied in an agreement which had been read to and was signed by the Appellant - could not constitute evidence of, or an admission by the Appellant that he had entered into, an agreement to guarantee the repayment by the company of the Respondent's loan account (see Eltis Maritime Co Limited v. Marti Chatering Co Inc: The Maria D [1992] 1 AC 21; [1991] 3 All ER 758). 41 Having regard to the circumstances in which "the agreement" came to be drafted, the identity of the one who gave instructions as to the document, the draftsman of the document, the form of the document, and the undoubted fact that the document contained no reference to the transfer of the Respondent's share in the capital of the Company, which was undoubtedly a term of the arrangement between the parties, it seems to me that the proper conclusion is, first, that "the agreement" was not intended to embody, and in fact did not embody, the whole agreement between the parties; and, second, that cl. 3 in "the agreement" provided evidence that the overall agreement between the parties included a guarantee by the Appellant of the payment by the Company to the Respondent of $300,000.00, or the balance thereof, together, in the events which have happened, interest thereon. 42 In the result, therefore, although not agreeing completely with the manner in which Tupman DCJ determined that the Appellant was liable to the Respondent, I concluded that the verdict which she found in favour of the Respondent was, in law, justified and should stand. 43 GILES JA: I agree with Powell JA. ****** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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