Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Wu v Ling (No 3) [2016] NSWCA 381 Hearing dates: 22 December 2016 Date of orders: 23 December 2016 Decision date: 23 December 2016 Before: Macfarlan JA Decision: (1) That the judgment entered in this Court on 14 December 2016 is stayed to the extent of $1,824,800.58 until the hearing and determination of any application by Ms Wu for special leave to appeal to the High Court of Australia, and if special leave is granted, until the hearing and determination of her appeal. (2) For the avoidance of doubt I note that the balance of the judgment, that is $1,261,624.13, remains enforceable. (3) Grant liberty to Mr Ling to apply to this Court on three days' notice to vacate order (1) in the event that Ms Wu fails expeditiously to file an application for special leave to appeal to the High Court, to prosecute that application or to prosecute an appeal in the event that special leave to appeal is granted. (4) Order that the costs of the application for a stay be payable in the same way that the costs of Ms Wu's special leave application become payable. (5) If order (1) above is vacated due to a failure of Ms Wu to file, or Ms Wu delaying in filing, an application for special leave, Ms Wu must pay the costs of the stay application. Catchwords: APPEAL – stay of proceedings pending High Court special leave application – principles to be applied – equitable jurisdiction to intervene in relation to unconscionable bargains – partial stay granted Cases Cited: Jennings Construction Ltd v Burgundy Royale Investments Pty Ltd (1986) 161 CLR 681 Rhinehart v Welker (2012) 83 NSWLR 347; [2012] NSWCA 1 Category: Procedural and other rulings Parties: Yan Wu (Applicant) Albert Ling (Respondent) Representation: Counsel: Self-represented Applicant Mr A J Tudehope (Respondent) Solicitors: Self-represented Applicant Solomon Tudehope (Respondent) File Number(s): CA 2015/374448 [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Judgment 1. HIS HONOUR: This is an application by Ms Yan Wu, who is unrepresented, for a stay of the orders made by this Court on 14 December 2016 in consequence of its judgments of that date and of 24 November 2016 ([2016] NSWCA 356 and 322 respectively). The principal order provided for the entry of judgment against Ms Wu and in favour of Mr Albert Ling, the respondent, in the amount of $3,086,424.71. The stay is sought whilst Ms Wu seeks special leave to appeal to the High Court and, if leave is granted, pursues an appeal to that Court. 2. The decision of this Court in Rhinehart v Welker (2012) 83 NSWLR 347; [2012] NSWCA 1 established that the principles to be applied on an application such as the present are those stated by Brennan J in Jennings Construction Ltd v Burgundy Royale Investments Pty Ltd (1986) 161 CLR 681. In that case, Brennan J said that a stay to preserve the subject-matter of litigation pending an application for special leave to appeal is "an extraordinary jurisdiction and exceptional circumstances must be shown before its exercise is warranted" (at 684). His Honour referred with approval to earlier authority stating that "very strong and special grounds" must be shown and continued: "In exercising the extraordinary jurisdiction to stay, the following factors are material to the exercise of this Court's discretion. In each case when the Court is satisfied a stay is required to preserve the subject-matter of the litigation, it is relevant to consider: first, whether there is a substantial prospect that special leave to appeal will be granted; secondly, whether the applicant has failed to take whatever steps are necessary to seek a stay from the court in which the matter is pending; thirdly, whether the grant of a stay will cause loss to the respondent; and fourthly, where the balance of convenience lies" (at 685). 1. In Rhinehart v Welker this Court rejected the proposition that "it is an essential pre-requisite for the grant of a stay that the Court finds that there are substantial prospects of success on the special leave application". The Court acknowledged that there "may be cases, albeit rare, when the other factors material to the grant of a stay may be of such significance that a stay should be granted even if this Court is unable to reach the view that the application has substantial prospects of success" ([48]). 2. In light of these principles, it is necessary for me to turn to consider Ms Wu's prospects of obtaining special leave to appeal. 3. The proceedings at first instance were relevantly for the recovery by Mr Ling of five amounts lent by him to Ms Wu in 2009 or 2010. The first loan was of $350,000 for 12 months at an interest rate of 9% per annum (rising to 11% on default), secured over real property. The remaining loans were in the amounts of $50,000, $65,000, $115,000 and $90,000 for periods of two months or less at an interest rate of 5% (7% in default) per month in the case of the first loan for $50,000 and 10% per month in the case of the remainder. Ms Wu sought these loans from Mr Ling, with whom she had a friendship and had previously been in a romantic relationship, to obtain funds to pay to a person working in the Nigerian "oil trading business". She had met this person through the internet when seeking a romantic relationship and referred to him as her fiancé. He held out to her the prospect of a substantial profit. However it transpired that she was the subject of a scam. Begging and crying were ultimately features of her approaches to Mr Ling for loans to fund her investments in the scam venture. 4. Ms Wu has made only very limited repayments of the principal of the loans and has not paid any interest accrued in respect of them. 5. The primary judge, Button J, found that Ms Wu was a highly experienced business woman and that she was "by no means naïve with regard to financial matters; quite the contrary" ([2015] NSWSC 850 at [64]). His Honour considered that Mr Ling was "a very astute business person" and "from a very early stage … seriously doubted the wisdom of the putative investment in oil fields in Nigeria by a woman based in Sydney who was experienced in the provision of aged care" (at [66]). He continued: "67 I accept that [Mr Ling] believed that Ms Wu had found success in her business in Sydney, along with her real estate portfolio. But I also consider that, from the first moment that Ms Wu spoke of herself as entering into a joint venture with regard to oil in Africa with an eye to making a profit of something in the order of $16 million, alarm bells were ringing in the mind of Mr Ling. And I say that even accepting that, being an older gentleman, he may not be as familiar as others are with the notorious "Nigerian scams" that are common on the internet. 68 Certainly by the time of the provision of the fifth loan, I consider that Mr Ling affirmatively believed that Ms Wu was being defrauded … " 1. His Honour concluded as follows: "101 I consider that [Ms Wu] has established that, at the time of the second loan and thereafter, she was suffering from a special disadvantage that meant she was incapable of protecting her own best interests; namely, her complete inability to see that she was in the process of being defrauded in a very damaging way. I also find that, by the time of the second loan, Mr Ling had come to believe that that was what was occurring, or, at the very least, was deliberately shutting his eyes to the fact that that was what was occurring. The defendant was in a position of special disadvantage with regard to the plaintiff because she was blind to what was occurring whereas he was, at the least, wilfully blind to it. By charging a rate of interest of 60% per annum [on the $50,000 loan], I consider that Mr Ling took advantage of the debilitated position of the defendant. I consider that it would be unconscionable to permit Mr Ling to enforce that rate of interest against Ms Wu. That is because it would not be fair, just and reasonable for Mr Ling to have the benefit of that rate of interest." 1. His Honour found that it would be unconscionable to permit Mr Ling to enforce the second to fifth loan agreements beyond allowing him to recover their principal and interest at the rate of 20% per annum. 2. In this Court's decision of 24 November 2016, Bergin CJ in Eq (with whom Leeming and Payne JJA agreed) concluded that there had been no unconscionable conduct by Mr Ling that precluded him enforcing the five loan agreements. Her Honour found that Ms Wu had not been labouring under any "special disability or disadvantage" in the sense of an inability on her part to look after her own interests by reason of some attribute of age or lack of understanding of language ([95]-[97]). Moreover, her Honour found that even if a special disability or disadvantage had existed, Mr Ling did not take unconscientious advantage of Ms Wu, holding that the progressive increase in the rates of interest on Mr Ling's loans were due to Ms Wu's failure to repay the loans when due and did not amount to predatory conduct on his part. 3. Leeming JA added a number of observations, including that there was nothing surreptitious about Mr Ling's conduct and that "[k]nowledge or belief of a plaintiff's foolishness alone is not sufficient to affect the defendant's conscience" ([10] and [[11]). His Honour noted that there was no element of "victimisation" of Ms Wu by Mr Ling and concluded that "Ms Wu's commercial sophistication, receipt of independent advice and the absence of any taking advantage by Mr Ling combined to place the present facts outside the scope of equitable intervention" ([15]-[16]). He added that there was no proof of a "predatory state of mind" on Mr Ling's part ([19]). 4. As I have noted, the court directed entry of judgment in the amount of $3,086.424.71. This comprised a principal amount of $670,000 together with interest of $2,416,424.71. It is not clear from the papers before me whether that interest was calculated on a compounding basis. Certainly, Mr Ling had contended that there should be compounding on an annual basis (Judgment [89]). 5. I accept, as this Court held, that the present case is different in many important respects from those in which unconscionable conduct has been found and equity has intervened. However, it seems to me, on the basis of my necessarily brief consideration of the issues during the Court vacation, that it is reasonably arguable that, by reason of her apparent obsession with the man who sought her money for use in Nigeria and her desperation to provide it, Ms Wu suffered from a disability which affected her capacity to protect her own interests and that, knowing of that disability, Mr Ling took advantage of it to obtain the benefit of interest rates on loans he made to Ms Wu. These rates were extraordinarily high and, by inference, far beyond any reasonable remuneration for his loss of use of the money and the risk he took in lending it. In the case of the second loan, the default rate was 84% per annum and for the third, fourth and fifth loans it was 120% per annum. 6. As the primary judge held, "alarm bells were ringing in the mind of Mr Ling" even before the first loan and that his suspicions that Ms Wu was being defrauded rose to the level of affirmative belief, or at least wilful blindness, by the time that the fifth loan was made ([67], [68] and [101]). Although Mr Ling knew that Ms Wu was an experienced business woman, he also knew of her desperation to provide substantial funds to a venture that Mr Ling rapidly came to believe was a fraud on her. Despite the background of their friendship, and earlier relationship of intimacy, Mr Ling arguably sought to take advantage of Ms Wu's inability to identify the fraud by charging exorbitant rates of interest. Ms Wu's blindness to the fraud when, as an experienced businesswoman she should have been alive to it, was some evidence that she had, to Mr Ling's knowledge, been disabled from protecting her own interests by the blandishments of her "fiancé". 7. It follows that I consider Ms Wu to have a substantial prospect of obtaining a grant of special leave to appeal to the High Court in relation to the interest claimed by Mr Ling on the 2nd to 5th loans to the extent to which it exceeds that allowed by the primary judge. 8. I turn then to the balance of convenience. 9. Neither party adduced evidence as to what might happen if no stay were granted. That is perhaps not surprising in Ms Wu's case as she was unrepresented. On the other hand, Mr Ling, who was represented, did not adduce any evidence to suggest that his position would be prejudiced if he could not fully enforce his judgment prior to the High Court's disposition of a special leave application. The loans in question have been outstanding for over six years now, including four years since the commencement of proceedings. There is no evidence that there has been any urgency in Mr Ling's recovery efforts. Moreover, there does not appear from the evidence to have been any Mareva or other injunction granted to restrain Ms Wu disposing of assets, although the judgments refer to at least some security having been given to Mr Ling when the loans were made. The evidence on this application did not reveal the extent or state of that security. 10. I do not consider that the balance of convenience points strongly in either direction but I note, and take into account, Mr Ling's prima facie right to have the benefit of the judgment he has obtained in this Court. 11. Overall, I consider that Ms Wu has established sufficient exceptional circumstances to justify a stay being granted: the interest claimed by Mr Ling is quite remarkable in amount and there are reasonable grounds to believe that the High Court may entertain a challenge to the interest award. 12. In these circumstances, a stay should be granted in respect of the judgment to the extent to which it exceeds that entered by the primary judge, that is $1,824,800.58 ($3,086,424.71 less $1,261,624.13). Ms Wu did not proffer an undertaking to proceed expeditiously in the High Court but it is appropriate that the stay be made effectively conditional upon that occurring. 13. Accordingly, I order: 1. That the judgment entered in this Court on 14 December 2016 is stayed to the extent of $1,824,800.58 until the hearing and determination of any application by Ms Wu for special leave to appeal to the High Court of Australia, and if special leave is granted, until the hearing and determination of her appeal. 2. For the avoidance of doubt I note that the balance of the judgment, that is $1,261,624.13, remains enforceable. 3. Grant liberty to Mr Ling to apply to this Court on three days' notice to vacate order (1) in the event that Ms Wu fails expeditiously to file an application for special leave to appeal to the High Court, to prosecute that application or to prosecute an appeal in the event that special leave to appeal is granted. 4. Order that the costs of the application for a stay be payable in the same way that the costs of Ms Wu's special leave application become payable. 5. If order (1) above is vacated due to a failure of Ms Wu to file, or Ms Wu delaying in filing, an application for special leave, Ms Wu must pay the costs of the stay application. ********** 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: 23 December 2016