He v Wu [2017] NSWSC 1777

Supreme Court New South Wales

Medium Neutral Citation: He v Wu [2017] NSWSC 1777 Hearing dates: 30 November 2017 Date of orders: 18 December 2017 Decision date: 18 December 2017 Jurisdiction: Equity Before: Emmett AJA Decision: I direct the plaintiff to file short minutes of orders to reflect the conclusions reached in the reasons of 18 December 2017. Catchwords: REAL PROPERTY – Interest in property pursuant to deed of agreement – Whether undue influence or unconscionable conduct vitiated the deed – Whether the deed was unjust in the circumstances in which it was entered into – Whether the deed was repudiated by a failure to make payments required by the deed Legislation Cited: Contracts Review Act 1980 (NSW) Conveyancing Act 1919 (NSW), s 66G Cases Cited: Nil Texts Cited: Nil Category: Principal judgment Parties: Yizhe He (Plaintiff) Xi Wu (Defendant) Representation: Counsel: S Bell (Plaintiff) JT Johnson (Defendant)

Solicitors: Lloyd Truman Sadiq Solicitors (Plaintiff) Kazi Portolesi Lawyers (Defendant) File Number(s): 2015/156241 Publication restriction: Nil

Judgment 1. The question in these proceedings is whether the plaintiff, Mr Yizhe He (Mr He), has an interest in an apartment in a building located in Mountain Street, Ultimo (the Apartment), which is registered in the name of the defendant, Ms Xi Wu (Ms Wu). Mr He claims to have an interest in the Apartment pursuant to a deed of agreement dated 6 February 2015 (the Deed). 2. While there is no dispute that the Deed was executed, both by Mr He and by Ms Wu, Ms Wu contends that she executed the Deed as a result of undue influence on the part of Mr He and that it is therefore null and void. She also asserts that it would be unconscionable for Mr He to seek to rely upon the Deed because she was in a position of special disadvantage in relation to him. Thirdly, she contends that the Deed was unjust in the circumstances in which it was entered into and that she is entitled to orders under the Contracts Review Act 1980 (NSW). Finally, Ms Wu contends that, if the Deed is otherwise binding upon her, Mr He repudiated any entitlement that he may have had under the Deed and she accepted such repudiation or accepted the repudiation by her defence filed in the proceedings. 3. I consider that the Deed is binding upon Ms Wu. I do not consider that there was any undue influence or that Ms Wu was in a position of special disadvantage such that it would be unconscionable for Mr He to rely upon the Deed. Further, I do not consider that the Deed was unjust within the meaning of the Contracts Review Act. The real question in the proceedings turns on the allegation by Ms Wu that Mr He repudiated the Deed by failing to make payments required of him under the Deed. That question turns very much on the oral evidence of the parties, which was given in chief by affidavit and by such scant contemporaneous records as were tendered. 4. Both Mr He and Ms Wu swore two affidavits. The second sworn by each of them purported to supplement the evidence given in the first affidavits sworn. The procedure of having evidence in chief given by affidavit highlights the undesirability of such a procedure where there is a real dispute between witnesses. Apart from other deficiencies, material was admitted into evidence that, if objected to, would have been rejected. The task of the Court in resolving conflicts between witnesses becomes extraordinarily difficult. I was unimpressed by both Mr He and Ms Wu and would not be disposed to accept evidence given by either of them except to the extent that it might be corroborated by contemporaneous material. 5. Ms Wu sought to corroborate certain assertions made by her as to the source of funds that were applied towards the purchase of the Apartment, which, she said, were derived from gambling. Two affidavits by non-parties were read without objection in which the deponents purported to give evidence about Ms Wu's gambling habits that, if objected to, would not have been admitted. The so-called corroborating evidence was in such a form that it should be given virtually no weight. 6. Ms Wu was born in China in 1991. She grew up and was educated in China until she was 18 years of age, completing primary and high school education in China. Her primary language is Mandarin. However, starting from year 7 until year 11, she was taught English as a second language at both primary school and high school. Ms Wu came to Australia in September 2008 and graduated from Taylors College in January 2010. In June 2013, she graduated with the degree of Bachelor of Economics/Bachelor of Finance from the University of Sydney. 7. Ms Wu was cross-examined. She appeared to have no difficulty in understanding questions put in English in cross-examination and responding in English. She is presently employed as a finance manager. She speaks to customers in English and speaks to employees in Mandarin. She is a director of the company by which she is employed. The employer sells box trailers and camper trailers and employs approximately 15 people at three stores in Sydney, Brisbane and Perth. The employer has a turnover of some $5 million. Ms Wu is involved in the day-to-day running of the activities of the employer. 8. From about the start of 2013, Ms Wu and Mr He began a romantic relationship. However, while they spent nights together, they were not living together. 9. On 18 November 2014, Ms Wu entered into a contract for the purchase of the Apartment with the then owner (the Contract). The price payable under the Contract was $572,000. The Contract required the payment of a deposit of $57,200, which was paid by Ms Wu. Stamp duty was payable on the Contract in the sum of $21,250. It appears to be common ground that, in late December 2014, Ms Wu asked Mr He to advance the amount of the stamp duty. On 23 December 2014, Mr He gave Ms Wu a bank cheque for the amount of the stamp duty. On 6 January 2015, Ms Wu repaid the amount of the stamp duty to him. 10. Completion of the Contract took place on 23 January 2015. On 21 January 2015, Ms Wu borrowed the sum of $457,600 from Westpac Banking Corporation (Westpac). On 9 January 2015, she received the sum of $57,185 from her mother in China. On 22 January 2015, the sum of $61,144.15 was withdrawn from Ms Wu's account with Westpac to pay the balance of the purchase price payable on completion of the purchase. 11. There is a dispute between the parties concerning the circumstances in which an understanding was reached whereby Mr He would have an interest in the Apartment. Mr He asserted that, in early February 2015, Ms Wu said that she was facing financial problems since she needed, in addition to paying rent for where she lived at the time, "to pay the mortgage for the new property". Mr He asserted that he asked her if she wanted him to invest in the Apartment with her, saying that he would pay the 10% deposit and would give "the money equivalent to the stamp duty" and would help pay for renovations. 12. Ms Wu, on the other hand, asserts that, at the end of December 2014, Mr He said to her that he wanted to own half of the Apartment and would give her more than $50,000 and they would "pay the mortgage together". When Ms Wu said that she did not want that, Mr He said that he would pay for renovation costs as well. Ms Wu asserted that Mr He kept insisting that he pay for a half share in the Apartment but that she refused because she wanted to own it on her own. 13. The Deed is not an instrument of which its author should be particularly proud. It is expressed to be between Mr He and Ms Wu and begins with reciting their dates of birth in 1990 and 1991 respectively. It then recites that, in order to promote harmony between them, to reduce the possibility of resorting to litigation and to avoid and reduce any dispute between them about ownership, use and division of property, they had decided to enter into the Deed. By the Deed each of the parties acknowledged: * Their agreement was to the mutual advantage of each of them. * The provisions of their agreement were fair and reasonable. * At the time of the making of their agreement, no other agreement was in force between them with respect to any of those matters. 1. There were two operative provisions. By the first provision, Mr He and Ms Wu agreed and acknowledged that Ms Wu had purchased the Apartment recently and that Mr He was: "… to contribute money equivalent to stamp duty and 10% deposit for the purchase". By that provision, both parties agreed that Ms Wu was "to hold 50% share as agent or trustee of the [Apartment] for [Mr He]". 1. By the second provision, Ms Wu agreed and acknowledged that Mr He was to lodge a caveat on the title of the Apartment "to protect his 50% interests [sic]" in the Apartment. By that provision, Ms Wu also agreed and acknowledged that she was not entitled to sell or charge or mortgage the Apartment without written consent of Mr He. The provision then said as follows: "When both agree to sell [the Apartment], each party is to share equally the net sales proceeds after payment of sales agent commission (if any), mortgage and legal costs." [emphasis added] 1. While there appears to have been some dispute at an early stage in the proceedings as to the proper construction of the Deed, the parties are now ad idem as to its effect, in that they agree that it is to be construed on the basis that Mr He was to have a one-half interest in what might be described as the "equity" in the Apartment. That is to say, while Mr He had no personal liability for the repayment of the loan to Westpac, which was secured by a mortgage of the Apartment, to the extent that the Apartment had value over and above the amount secured by the mortgage to Westpac, he would be entitled to one half of that value. That is clear from the reference to "mortgage" in the extract quoted above. For that interest, Mr He was to pay to Ms Wu an amount equal to stamp duty of $21,250 and the deposit of $57,200, being a total of $78,450. 2. Of the total purchase price of $572,000, $457,600 was funded by the loan from Westpac, leaving $114,400 as the "equity". Thus, Mr He, in exchange for a payment of $78,450 was to receive half of the "equity", having a value at that time, of $57,200. 3. It is difficult to accept the contentions advanced on behalf of Ms Wu that there was something unconscionable about the Deed or that it was unjust in the circumstances in which it was entered into. There is dispute between Mr He and Ms Wu as to the circumstances in which the Deed was executed. Ms Wu asserts that, on 5 February 2015, she and Mr He had a conversation in which Mr He said that he still wanted to own half of the Apartment and that he would pay whatever she had paid for stamp duty and half of the deposit and he would pay for renovations. She said that she responded: "Fine. When will you give me the money?" and that Mr He said: "After we sign an agreement. I will get my lawyer to write the agreement. We will go see him together tomorrow." 1. Ms Wu said that she and Mr He went to the office of Diligence Lawyers & Migration Agents, where they met with Mr Ren Jiang. Mr Jiang had acted for Ms Wu in connection with the contract for the purchase of the Apartment and its completion. Ms Wu said that Mr He "explained our agreement" to Mr Jiang and that she did not say anything during the meeting. Mr Jiang then typed the Deed and she and Mr He signed it in front of Mr Jiang. She said that, before she signed the Deed, Mr Jiang said to her: "You will need to take this Deed to another Solicitor to have them sign it as a witness. I can only represent [Mr He]. I can recommend a solicitor for you." Ms Wu said that she responded "Okay" and that Mr Jiang then said: "Go to Ren Zhou Lawyers tomorrow morning and ask for Mr Ren Zhou. Take this agreement with you." 1. The date of the Deed, 6 February 2015, was a Friday. While Ms Wu said in her first affidavit that she went to the offices of Ren Zhou on 7 February 2015, in her second affidavit she said that she went to the offices of Ren Zhou at 9am on 9 February 2015. She said that she did not call Ren Zhou prior to attending the office. She said in her second affidavit that, while at the time of her first affidavit she did not recall her conversation with Mr Zhou, she now recalled a conversation in Mandarin with Mr Zhou to the following effect: "Ms Wu: Hi, I am here to have this agreement witnessed. I have parked downstairs in a loading zone. I can't be here for long. Let's make this quick. Mr Zhou: Okay but I still need to explain this deed to you. Ms Wu: Okay. Mr Zhou: Can you understand this deed? Ms Wu: Yes. Mr Zhou: Do you understand that if you sign this agreement, [Mr He] will own a 50% share in your property and he will put a caveat on your property. This will not allow you to sell unless [Mr He] signs as well. Ms Wu: Okay but [Mr He] has not paid me any money yet." Ms Wu said that Mr Zhou then signed the Deed as a witness and that she also signed a document in front of him, but could not recall whether that document was the Deed. 1. The Deed is not a complicated instrument. It consists of two pages. The substance is on the first page, together with eight lines on the second page, which also contains the attestation provisions. Ms Wu accepts that she reads English. As I have said, she is a graduate of Sydney University and is a finance manager for her employer. She accepts that Mr Zhou explained the effect of the Deed. No complaint was made about the accuracy of that explanation. The complaints by Ms Wu as to whether the Deed is binding on her are quite without foundation. There is no basis for any contention that the Deed was executed as the result of undue influence or that Ms Wu was in a position of special disadvantage. It was certainly not unjust in the circumstances in which it was entered into. 2. That leaves the question of the alleged repudiation of the Deed. Ms Wu contends that Mr He, by failing to make the payments required under the Deed, repudiated the Deed. 3. In his first affidavit affirmed on 25 May 2015, Mr He said that, on 6 February 2015, he paid Ms Wu a cash sum of $20,000 and that on 7 February 2015 he went to the Bank of China and retrieved a sum of $55,000 from a safety deposit box and gave that sum to Ms Wu. As will appear below, it is highly significant that Mr He mentioned the sum of $55,000. In his second affidavit affirmed on 16 September 2015, Mr He elaborated on the bare assertions made in his first affidavit. 4. In his second affidavit, Mr He said that, on 11 September 2014, he placed $83,000 cash in his safe deposit box at the Bank of China and that from time to time, from September 2014 to February 2015, he withdrew cash from that safe deposit box. On 10 September 2014, Churchill Lawyers wrote to HJ Liang & Co in connection with the sale of an apartment in Ultimo. The letter authorised HJ Liang & Co to draw bank cheques payable to various payees. The letter ended with the following: "Please note that your client is to pay additional [sic] $83,000.00 cash on settlement to [Mr He]." There is no reason to doubt the authenticity of that letter or the fact that Mr He received the sum of $83,000 in cash in September 2014 or that he placed that cash in a safe deposit box at the Bank of China. 1. In his second affidavit, Mr He said that, at some time in 2014, he purchased a home deposit box, which he kept in a wardrobe in Ms Wu's bedroom. He said that he set up the combination numbers on the box with Ms Wu and that the combination numbers were related to Ms Wu. Ms Wu confirmed in the witness box that they concerned her birthday. Mr He said that he saw Ms Wu open the box from time to time using the combination. Mr He said that he kept cash in the home deposit box and that when he had approximately $5,000 he used to roll the notes in a bundle of $5,000. He asserts in his second affidavit that, as at 6 February 2015, he had four rolls of $5,000 each and some other loose notes. 2. Mr He said that, after the meeting with Mr Jiang on the afternoon of 6 February 2015, he stayed at Ms Wu's apartment that evening. Mr He said that he said to Ms Wu "Take the money in the box. It is about $20,000" and that she responded "Okay". Mr He said that he did not see Ms Wu take money out of the box, although he saw the box in her apartment on the morning of 7 February 2015. He said that he has not had access to the box since that time. 3. In his second affidavit, Mr He said that on the morning of 7 February 2015, Ms Wu left her apartment and returned later. He said that he then drove with her to Sussex Street, Sydney at about 11am. He said that he went to the Bank of China and retrieved the sum of $55,000 cash from a safe deposit box and returned to his car and gave it to Ms Wu, who placed it in her bag. He claims to have said words to the effect of "here is $55,000" and that after he gave the money to Ms Wu, she left his car and walked to a branch of Westpac and entered the branch. He said that, about 15 minutes later, she came out of the branch and returned to his car. He said that he asked Ms Wu "Did you bank it?", to which she replied "Yes". Bank statements relating to accounts of Ms Wu with Westpac demonstrate that, at Haymarket on 9 February 2015, a deposit of $55,000 was made to the credit of an account in the name of Ms Wu. 4. In her first affidavit affirmed on 1 June 2015, Ms Wu denied receiving the sums of $20,000 and $55,000 from Mr He. In that affidavit, Ms Wu asserted that, on 7 February 2015, she asked Mr He to take her to the bank and that she had some money she needed to deposit. She said that Mr He replied "Okay, no problem" and asked if they could go to the Bank of China first because he had some things to do there. She replied "Okay, sure." 5. Ms Wu said that they then drove to the Bank of China and she waited in the car while Mr He went inside. She said that after he came back to the car, they drove to a branch of Westpac Bank in George Street, Sydney and she went inside and deposited $55,000 in cash. She asserted that the cash was money that she had won from the casino over time and had kept in her "safe at home". Significantly, she did not say in her first affidavit that she told Mr He how much she had deposited. Thus, he would not have known how much she deposited unless he had given her the cash. 6. Significantly, Ms Wu said in her second affidavit that Mr He asked her how much she needed to deposit and that she replied "$55,000". That exchange was not mentioned in Ms Wu's first affidavit. One might wonder why Mr He would ask. I consider that it is likely that the exchange mentioned in the first affidavit was elaborated on because, otherwise, Mr He could not have known that, on 7 February 2015, Ms Wu, in fact, deposited the sum of $55,000 to the credit of her account with Westpac. 7. In her second affidavit, affirmed on 5 November 2015, Ms Wu asserted that, on 13 February 2015, she deposited the sum of $20,000 into her account with Westpac and that those monies had been in her safe from winnings at the casino. She said in that affidavit that, on 25 November 2014, she spoke to Mr Yifan Zhou, a director of her employer. She said that she told him that her mother was helping her to buy the Apartment and that she had asked her mother to give $100,000 to Mr Zhou's father in China so that Mr Zhou could give her $100,000 in Sydney. She asserted that her mother transferred $60,000 to Mr Zhou's father and paid his father $40,000 in cash. 8. Ms Wu said that, later on 25 November 2015, Mr Zhou told her that his father had received the money from Ms Wu's mother and handed her $70,000 in cash and $30,000 in casino chips. She said that on the following day she went to the Star Casino and exchanged the casino chips for cash in the sum of $30,000. Mr Zhou swore an affidavit saying that he handed Ms Wu the sum of $70,000 in cash and $30,000 in casino chips after he received confirmation from his father that Ms Wu's mother has transferred $60,000 and paid $40,000 in cash to his father. 9. Ms Wu asserted in her second affidavit that the sum of $20,000 that was paid to the credit of her account with Westpac on 13 February 2015 was money that she had had in her safe from her winnings at the casino and the money that had been left over from the $70,000 that Mr Zhou had given her in cash. She said that on 7 February 2015 she wanted to deposit money in her account with Westpac so she could purchase a Mercedes motor vehicle. She said that she asked Mr He to take her to the bank and that she had some money she needed to deposit. 10. At Broadway on 13 February 2015, the sum of $20,000 was deposited to the credit of that account. On the same day, the sum of $20,000 was withdrawn by internet online banking and deposited to the credit of another account of Ms Wu with Westpac. On 17 February 2015, a withdrawal of $75,000 was made from that second account. An invoice addressed to Ms Wu for the purchase price of a motor vehicle of $75,000 is in evidence. The invoice is dated 25 February 2015. 11. As I have said, I have difficulty in accepting either of the parties as credible witnesses. However, I consider that it is more likely than not that the circumstances of the credits to Ms Wu's accounts are as asserted by Mr He. As I have said, it is highly significant that Ms Wu made no mention in her first affidavit of having told Mr He that she was going to deposit $55,000 in her account. There is no reason why Mr He would have asked her how much she was going to deposit, as she asserted in her second affidavit. I draw the inference that she supplemented her evidence by the second affidavit when she realised that Mr He would not otherwise have known that she had made a deposit of $55,000 unless he had given her that sum. 12. Ms Wu relied upon affidavit evidence of Ms Xinzheng Xu to the effect that she and Ms Wu liked to gamble at the casino and "gamble[d] a lot of money". Ms Xu said that when Ms Wu wins more than $10,000 at the casino, she sometimes gives the casino chips to her in exchange for cash. That evidence was given without objection. I would give very little weight to it having regard to the lack of specificity. I do not consider that it corroborates the assertion by Ms Wu that she kept cash of her own in the home deposit box. 13. In the circumstances, I consider that it is more likely than not that Mr He paid to Ms Wu the sums of $20,000 and $55,000 on the dates when those amounts were credited to her account with Westpac. It follows that there has been no repudiation of the Deed by Mr He and that he has performed his obligations under the Deed. It follows that Mr He is entitled to 50% of the "equity" held by Ms Wu in the Apartment, if any, after payment to Westpac of the amount secured by its mortgage of the Apartment to secure the loan referred to above. 14. It appears to be common ground that some renovation has been carried out in the Apartment. It is common ground that Mr He contributed some $15,000 towards that renovation. It is not clear who has been in occupation of the Apartment since it was acquired by Ms Wu. To the extent that she has had any benefit from occupation, it would be necessary for her to make an allowance in the taking of any accounts on the sale of the Apartment. 15. The primary relief sought by Mr He in the proceedings was the appointment of trustees for sale of the Apartment under s 66G of the Conveyancing Act 1919 (NSW). In the circumstances, appropriate orders should be made for the appointment of trustees for sale. Mr He has nominated two trustees who have indicated their consent in affidavits. There is no opposition to the appointment of those individuals as trustees if the Court is otherwise minded to make an order under s 66G. 16. I consider that Mr He would be entitled to his costs of the proceedings, except in so far as the costs related to questions in the proceedings concerning contributions towards renovations. Any costs incurred in relation to those matters ought to be dealt with on the taking of accounts. I propose to direct Mr He to bring in short minutes of orders to reflect the conclusions that I have reached. The orders should provide for the appointment of trustees for sale of the Apartment and for the taking of accounts, if Ms Wu so desires.