Supreme Court New South Wales Medium Neutral Citation: Xijie Cao v Shumiao Zhu [2020] NSWSC 321 Hearing dates: 30 September, 1, 2 October, 21, 22 and 27 November 2019; written submissions 21 November, 10 and 18 December 2019 Decision date: 30 March 2020 Jurisdiction: Equity Before: Kunc J Decision: Judgment for $500,000 with interest and costs; rectification not ordered Catchwords: CONTRACTS — Construction — Interpretation — Natural and ordinary meaning CONTRACTS — Rectification — Intention — Common intention Legislation Cited: Australian Consumer Law 2010 (Cth) Civil Procedure Act 2005 (NSW) Oaths Act 1900 (NSW) Uniform Civil Procedure Rules (NSW) Cases Cited: ACCC v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51; [2003] HCA 18 BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 Rinehart v Hancock Prospecting Pty Ltd; Rinehart v Rinehart [2019] HCA 13 Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (In liquidation) [2019] NSWCA 11 Category: Principal judgment Parties: Ziejie Cao (Plaintiff) Shumiao Zhu (Defendant) Representation: Counsel: F Santisi (Plaintiff) P Bolster (Defendant) Solicitors: GOH Lawyers (Plaintiff) CS Lawyers (Defendant) File Number(s): 2017/109702 Publication restriction: No Judgment Summary 1. Even experienced businessmen can enter into contracts which turn out to be "unfair" to, or improvident for, one of the parties. That outcome does not guarantee legal redress for the party who claims to have come off second best. The law does not always relieve against what, with hindsight, turn out to be bad commercial bargains. These proceedings are an example of such a case. 2. The plaintiff ("Mr Cao") is an investor and property developer. The defendant ("Mr Zhu") is a real estate agent. Mr Zhu had a longstanding relationship with Mr Sam Fayad as the exclusive selling agent for properties developed by Mr Fayad. Mr Zhu persuaded Mr Cao to invest $2,400,000 in a project of Mr Fayad's at Baulkham Hills (the "Baulkham Hills Project"). 3. As a further incentive to Mr Cao to invest in the Baulkham Hills Project, Mr Zhu promised to pay Mr Cao $500,000. Although presented in a number of juridical guises, the only real issue in this case was whether that promise – said to have been made both orally and in writing – was unconditional or whether, as Mr Zhu contended, it was conditional upon Mr Zhu being the exclusive selling agent for the units which comprised the Baulkham Hills Project. In the events which happened, Mr Zhu was not able to fulfil that role because the Baulkham Hills Project was sold, incomplete, to another developer. 4. Mr Cao sues Mr Zhu in contract and under the Australian Consumer Law ("ACL") and also makes a claim, in reply, for rectification. Mr Zhu responds, including by cross-claim, raising by way of defence issues of construction, rectification, and unconscionability under the ACL. In summary Mr Cao simply succeeds on the facts. Mr Zhu's various legal defences fail because Mr Zhu bound himself by deed (the "13 June Deed") to pay the $500,000 unconditionally and "regardless of whether any of the units in the [Baulkham Hills Project] have been sold or not". 5. Mr Cao and Mr Zhu gave evidence of their various conversations that was often in complete disagreement. There were also internal inconsistencies in the evidence of each of them. The case was complicated by their evidence having to be given in Mandarin. I have been left with the impression that at least some, but not all, of those inconsistencies may well have been the result of matters being "lost in translation". Nevertheless, even after allowing for that, I came to the view that I could not rely on the evidence of either of them unless it was corroborated by contemporaneous documents or independent witnesses, was inherently likely or against interest. 6. However, two things were pellucidly clear. First, Mr Cao steadfastly maintained that Mr Zhu's promise was never agreed between them as conditional in the way Mr Zhu alleged. That position was supported by Mr Cao's solicitor, Mr Ngo. Critically, that position was corroborated by the second matter, being that Mr Zhu could not offer any persuasive explanation why two, contemporaneous solemn documents, one of which he (Mr Zhu) prepared and both of which he signed in the course of his dealings with Mr Cao, recorded Mr Zhu's obligation to pay the $500,000 unconditionally. The best Mr Zhu could say was that he had been "negligent" of his own interests. 7. The Court relies primarily on those two documents to conclude as a matter of fact that Mr Zhu's obligation to pay Mr Cao was not conditional upon Mr Zhu being appointed the exclusive selling agent for the Baulkham Hills Project. That factual conclusion fortifies the Court in its fundamental legal conclusion that there is no basis to find that the 13 June Deed should be construed or rectified to give effect to such a conclusion, or to find that Mr Cao's reliance on it is unconscionable. 8. There will be judgment for Mr Cao for $500,000, together with interest and – subject to giving the parties an opportunity to be heard if they wish – costs. Mr Zhu's cross-claim will be dismissed with costs. 9. Mr F Santisi of Counsel appeared for Mr Cao. Mr P Bolster of Counsel appeared for Mr Zhu. Procedural issues 1. The case had been fixed as a three day hearing. At the opening of the case, in response to my question, I was assured by both counsel that they had prepared trial plans and that they believed the case would be finished within the allocated three days. This was said to be so notwithstanding that each of Messrs Cao and Zhu would be giving their evidence through interpreters. 2. At the conclusion of the second day, I again inquired whether the case would be finished within the allocated time. I was informed by both parties that they were optimistic to finish within the three days, and at the very least that by the end of the three day hearing, all of the evidence would have been given. This would then allow the parties to make extensive written submissions. 3. Unfortunately, and without being critical of anyone, this did not come to pass. It took two days to cross-examine Mr Cao, and more than a full day to cross-examine Mr Zhu. The Court made itself available to sit late on the final allocated day of the hearing in October to ensure cross-examination of Mr Zhu was completed. Despite this, at the end of the third day of the hearing, the cross-examination of Mr Zhu had not been finalised. Mr Zhu also still had to be re-examined, and three further witnesses had to give evidence. 4. At the conclusion of the third day of the hearing, I inquired how much longer the parties needed to complete the case. I was informed two more days were required. The hearing was subsequently relisted for further hearing on 21 and 22 November 2019. At the conclusion of the fifth day of the hearing, the Court was informed that Mr Cao intended to call his solicitor, Mr Frank Ngo, to give evidence. In fairness to Mr Zhu, I adjourned the hearing to allow his counsel to prepare to cross-examine Mr Ngo, which took place on 27 November 2019, when I was sitting as Duty Judge. 5. At the end of the hearing, I made directions for written submission to be made by 10 December 2019, with submissions in reply being due on 18 December 2019. Given the length of time the case had already taken, the parties accepted that no further hearing time should be allocated for the making of oral submissions. 6. In addition to the length of time taken with the interpreted evidence, there was also an issue with the parties' affidavits. They bore no indication that they had been interpreted to the parties, both of whom are native Mandarin speakers, and neither of whom is fluent in written or spoken English to the level required to participate in legal proceedings. The affidavits had been prepared by the parties' respective bilingual solicitors. However, neither of those solicitors was a qualified or accredited interpreter, although apparently one of the solicitor's staff members was accredited. Furthermore, I also noted that one affidavit was expressed to have been "witnessed via WeChat" (a messaging application popular in the Chinese community), a practice which is entirely unacceptable and without legal foundation. 7. It is desirable that I record that since the conclusion of the hearing, Part 31 Div 3 has been added to the Uniform Civil Procedure Rules together with Practice Note SC Gen 21. These deal with working with interpreters in civil proceedings. At least two things would have been different had these applied to this case. First, even if the affidavits had been prepared by bilingual solicitors, the final English versions of the affidavits would have had to have been interpreted to the witnesses from English into Mandarin by a certified NAATI interpreter, and the interpreter would then have sworn that the witness had indicated that they (the witness) understood and agreed with the contents of their affidavit. Second, time estimates would have been given allowing at least 2.5 hours for the interpreted evidence for every hour that might have been expected to have been required if the witness had been giving their evidence in English. I take this opportunity to observe that the Court will expect the profession to be familiar with these provisions and apply them. Facts 1. I will now set out the facts. Except where I have indicated disagreements, they may be taken to have been uncontroversial either or both because they appeared in contemporary documents or were not seriously in dispute. 2. Mr Zhu is a real estate agent and operates through his company Be100 Property Pty Ltd ("Be100"). Mr Zhu's wife, Ms Li, is the licensee in charge of Be100. 3. Mr Cao is a businessman with experience in property investment and development in China. Mr Cao moved to Australia and attained permanent residency in 2002. 4. Mr Cao first met Mr Zhu when Mr Cao purchased an apartment in Burwood at the end of 2011. Mr Zhu acted as the agent for the transaction. 5. Merfad Projects Pty Limited ("Merfad") was registered on 28 February 2011. One of its directors was Mr Fayad, who was originally a 50% shareholder and subsequently became an 83% shareholder. 6. On 1 August 2011, Merfad entered into a contract to purchase what became part of the land comprising the Baulkham Hills Project for $8,500,000. The completion date was 16 December 2011 but the transfer did not take place until 13 June 2012, being around the time of the events in question in these proceedings. 7. On 8 February 2012, Merfad entered into a contract to purchase what became the balance of the land comprising the Baulkham Hills Project for $1,125,000. The completion date was 1 August 2012 but the transfer did not take place until 15 October 2012. 8. Even the question of who began the discussions between them is contested, but nothing turns on it. Sometime in May 2012, Mr Cao and Mr Zhu had a discussion in which, according to Mr Cao's affidavit evidence, Mr Zhu said words to the effect: "I have many projects with Sam [Fayad] and Dyldam [Dyldam Development Group associated with Mr Fayad], as I have mentioned, I am also the sales agent for them. They carry out the development projects and I am the exclusive sales agent for them, and now I am also an investor with them and we have worked together with them on many projects, from the day that you purchased the property at Burwood I have a feeling that we can work together with you also. There is at present a very good project that we are working on together with Sam and Dyldam and at present this project requires major funding. I am putting money in and Sam is also we need funding from a third party to put together." 1. Mr Zhu accepted the above conversation happened, however refuted the suggestion that he made representations that he was the sales agent for Sam and Dyldam. Again, nothing turns on this. As Mr Fayad's evidence made clear, there was no doubt that even if Mr Zhu at the relevant time had not been formally appointed as sales agent for the Baulkham Hills Project, he was going to be, and Mr Zhu was equally certain that would be the case. 2. Mr Zhu told Mr Cao that $2.4 million was required to be invested in the Baulkham Hills Project. Mr Zhu told the Court (T189:33-35): "From a commercial point of view, my duty was to help the developing company to proceed with the project and so that I could sell the properties. That's the business of my company." 1. Mr Zhu's evidence was that he was also hoping to invest in the Baulkham Hills Project. 2. At some point in the discussions, Mr Cao said he was happy to invest the money in the Baulkham Hills Project, however his investment was conditional on him receiving a rate of return of 36% per annum for his venture. He said this was the rate he was accustomed to receiving on his investments in China. 3. Much about the initial discussion or discussions was disputed. Mr Zhu's evidence was that he initially suggested that Mr Cao would loan $2.4 million to him, and he would subsequently on-lend that money to Merfad. This would mean that Mr Cao would not be part of a transaction with Merfad directly. Mr Cao said that Mr Zhu immediately offered to guarantee him (Mr Cao) a 36% rate of return, however Mr Zhu stated he only guaranteed a 20% per annum return if the money was loaned to him. Given the view I have taken of the protagonists' credit (see paragraphs [115] to [120] below), it is neither possible nor necessary for me to attempt to make findings about all of the disputed aspects of their conversations. No notes were kept. As the documentary record (such as it is) to which I refer below demonstrates, the likelihood is that the negotiations were fluid in the sense of various proposals being discussed from time to time. Having seen both of them give their evidence, I do not accept – and would not expect – that either Mr Cao or Mr Zhu had a reliable recollection of what proposals were being discussed at any particular time. 4. On 17 May 2012, Mr Zhu took Mr Cao to inspect the site of the Baulkham Hills Project. 5. At some stage after inspecting the Baulkham Hills Project, Mr Zhu gave Mr Cao a feasibility report for the project. Mr Zhu accepted that he provided Mr Cao with the feasibility report, however was unsure when he did so. This report was not put into evidence before the Court. 6. Between about 22 May 2012 and the settlement of the first purchase of land for the Baulkham Hills Project on 13 June 2012, Mr Zhu and Mr Cao had meetings with Mr Fayad in relation to the Baulkham Hills Project. What was discussed at those meetings was also in dispute. 7. Upon reviewing the feasibility report, Mr Cao decided to invest in the Baulkham Hills Project, however he had numerous conditions. His evidence was those conditions included: 1. A minimum return of 36% per annum for any money loaned; 2. A personal guarantee from Mr Fayad and Mr Zhu to make good any short fall on the rate of return; 3. Full disclosure of Mr Fayad's and Mr Zhu's assets; 4. Any money loaned must be used to settle the purchase and not otherwise; and 5. An interest of 15% in Merfad while the loan remained unpaid. 1. Mr Cao's evidence was that it was only upon those conditions being met that he agreed to invest $2.4 million. 2. On the other hand, Mr Zhu said that instead of promising a 36% return rate, he guaranteed a 20% return on any investment, whether the project was successful or not. Furthermore, if Mr Cao wanted a higher return on his investment, he would have to speak to the developer, Mr Fayad, to negotiate that return. 3. Between 22 May 2012 and 1 June 2012, Mr Cao arranged for six monetary transfers to occur, whereby funds totalling $2.1 million were transferred from China to Australia. 4. On or about 3 June 2012 (which I infer because that is the date it bears), Mr Zhu gave Mr Cao a document written in Mandarin in Mr Zhu's own hand on Be100 letterhead and signed by Mr Zhu. Mr Cao said this was in accordance with his conditions as outlined in paragraph [33] above. The translation of the document is: "To Mr Zijie Cao, I have a 50% share in the property development project located at XX XXXX St, Parramatta. The project is currently under planning application (120-130 units) process and the land has been settled. I own 75% share in the property development project located at XX XXXX Ave, Wolli Creek that is being sold. The land exchanged has completed and will be settled within half a year, so has the construction (this project includes 176 units). I also have 55% share in the project located at X XXXX Drive, Homebush. There are 38 sets of townhouse which are expected to settle in this September. Shumiao Zhu" 1. On or about 5 June 2012 (which I infer because that is the date it bears), Mr Zhu gave Mr Cao a document written in Mandarin in Mr Zhu's own hand on Be100 letterhead and signed by Mr Zhu (the "5 June Zhu Guarantee"). It was in the same terms as the 3 June 2012 document, except it concluded with this additional sentence, which in translation reads: "I personally guarantee Mr Cao's 2.4 million investment and 20% annual return in XX XXXX Road Baulkham Hills with the aforementioned shareholding and equity." 1. The 5 June Zhu Guarantee was not expressed to be conditional on Mr Zhu being appointed the exclusive selling agent for the Baulkham Hills Project. 2. At the same time (because it is dated the same date) the Court finds that Mr Zhu gave Mr Cao the document set out in paragraph [58] below (the "5 June Memorandum"). 3. Although dated 1 May 2012, I infer from the dates of the preceding two documents that at around the same time as those two documents came into existence, Mr Cao was also provided with a list of the assets of Mr Fayad. It is unnecessary to resolve who provided it. Mr Cao again said that this list of assets was provided to him in accordance with his conditions outlined in paragraph [33] above. The list was on the letterhead of, and signed by, Mr Fayad's accountant and included: "TO WHOM IT MAY CONCERN I certify that Mr Sam Fayad has net assets in shares as shareholder in the following company's [sic] in excess of $40 Million, based on the book value net worth of properties. Sam Fayad Rainbowforce Pty Ltd 20% Lexing House 88 Pty Ltd 20% Stamford House 88 Pty Ltd 20% Hills Shoppingtown Pty Ltd 20% Sterling House 88 Pty Ltd 20% Merfad Pty Ltd 35% The group have been invested in more than 30 suburbs within the investment portfolio and represented in more than 89 companies and trust entities having the principle beneficiary and shareholder to be personally Sam Fayad. The net ratio of the debt/equity at each project would be around 60/40 and that has been the case for over 2 decades bringing the group to the top five companies within the industry in private companies. The book value in many cases means the purchase price of the property without the added appreciation in value of land, being more than 80% of the total land purchased between 1995-2002. …" 1. I next record, but unless otherwise stated, do not make any finding in terms of the parties' various versions of the conversations said to relate to the documents that passed between them. 2. Mr Cao said he requested the list of Mr Fayad's assets because he "want[ed] security" if he was going to loan money. 3. Mr Cao subsequently asked Mr Zhu to introduce him to Mr Fayad directly. Mr Zhu agreed to make the introduction, however on the condition that should an agreement to invest directly with Merfad arise, that agreement would be separate to any agreement between Mr Zhu and Mr Cao. 4. Mr Zhu organised for Mr Cao to meet with Mr Fayad personally and discuss making the $2.4 million loan. This discussion occurred through an interpreter. Mr Cao was informed that Merfad could not provide a return of 36%, with the highest rate of return it could offer being between 24% and 26%. Additionally, Mr Cao was informed he would not be issued with voting shares in Merfad, however could be given non-voting shares after the construction loan was secured. 5. As the information provided by Mr Fayad differed from that provided by Mr Zhu in relation to the rate of return of the investment, Mr Cao said he decided not to continue because of the lower return and the high risk of the investment. 6. Consequently, in order to ensure Mr Cao invested in the Baulkham Hills Project, Mr Cao said, and the Court accepts, that Mr Zhu offered to pay the difference between the 36% and the 26% which Merfad was offering. This was calculated to be approximately $500,000. In the alternative, if $500,000 could not be given to Mr Cao, Mr Zhu said he would offer Mr Cao an apartment of similar value. That evidence is accepted because it is corroborated by the plain terms of the 5 June Memorandum set out in paragraph [58] below. 7. Mr Cao said that the $500,000 payment from Mr Zhu was unconditional on Be100 being retained as the exclusive sales agent for the Baulkham Hills Property. 8. Alternatively, Mr Zhu said that Mr Cao was happy to continue investing with Merfad directly and a meeting was had with Mr Fayad and his lawyer, Mr Bounassif. Even though Mr Cao was investing directly with Merfad, he wanted Mr Zhu to provide a guarantee for the funds invested. This was despite Mr Zhu not being party to the agreement between Mr Cao and Merfad. Mr Zhu agreed to do so. 9. Furthermore, Mr Zhu submitted that he had a conversation with Mr Cao where following Mr Cao investing directly with Merfad, rather than loaning money to Mr Zhu to on-lend to Merfad, the only benefit Mr Zhu would have in the Baulkham Hills Project would be if Be100 received the exclusive selling rights for the project. Consequently, he would only provide Mr Cao with $500,000 should he acquire the exclusive rights as sales agent for the Baulkham Hills Project. The Court does not accept this submission, both because of the view I have taken as to the credibility of the protagonists and the fact that Mr Zhu had at least two opportunities to make that term express in the documents which he signed (and, in the case of the 5 June Memorandum set out in paragraph [58] below, which he himself prepared). 10. Mr Zhu said the $500,000 figure was derived from usual practice in the industry to give a referral fee between $2,000 and $5,000 per unit, and with there being more than 90 units, a flat rate of $500,000 was agreed. 11. Referring to the 5 June Zhu Guarantee, Mr Cao's affidavit evidence was "I observed that Mr Zhu was very eager and wanted me to sign and lend the money to Merfad … as security on my proposed loan to Merfad, I caused Mr Zhu to re-write [the document] but added a further sentence on the document [relating to security]". 12. Alternatively, Mr Zhu said it was he who inserted the additional sentence in the 5 June Zhu Guarantee of his own volition. When questioned as to why he provided Mr Cao with a list of his properties, Mr Zhu replied the purpose of this was just listing his assets so Mr Cao "could understand and know more" (T231:7) and that this just related to his "background information" (T230:45). This explanation was not elaborated upon. Mr Zhu also said that the additional sentence referring to a guarantee was inserted by him as an offer in the process of negotiations (T265:23-31). None of these explanations is convincing, not least given the formality of the 5 June Zhu Guarantee, even if it is handwritten. 13. Mr Zhu also provided Mr Cao with a copy of all the certificates of title of the properties which were owned by Mr Zhu and Zhu and Li Investment Pty Ltd, a company owned by Mr Zhu and his wife. Mr Cao's evidence was that he was informed that he would also be indemnified by Mr Zhu and Zhu and Li Investment Pty Ltd. As a result of being shown the assets held by both Mr Zhu and his family company, Mr Cao said he was comfortable they had the assets to secure him making $2.4 million loan. 14. The last asset listed by Mr Zhu in the document was a "55% share in the project located at X XXXX Drive Homebush." Mr Zhu was the exclusive selling agent for that project with Mr Fayad. 15. Additionally, on 5 June 2012 (which I infer because that is the date it bears), the 5 June Memorandum was provided by Mr Zhu to Mr Cao in which Mr Zhu agreed to pay Mr Cao $500,000 upon the completion of the Baulkham Hills Project. Mr Cao said that this document reflected the agreement referred to above in paragraph [33]. 16. Alternatively, Mr Zhu said that the 5 June Memorandum was prepared pursuant to his version of events, as outlined in paragraph [53] above. Furthermore, Mr Zhu explained that he did not expressly state the $500,000 payment was conditional upon Be100 being the exclusive selling agent, because he said this was clear from the discussions they had previously had. Without Be100 acquiring the sale rights for the Baulkham Hills Project, there would be no benefit to Mr Zhu. 17. The 5 June Memorandum said in translation: "Memorandum Party A: Name: SHUMIAO ZHU Address: XX XXXX Ave, Pagewood NSW Party B: Name: XIJIE CAO Address: XX XXXXX St, Burwood NSW Party A agrees to give Party B $500,000 AUD or existing property with equivalent value after the project at XX XXXX Road + XX XXXX Avenue, Baulkham Hills is completed. Party A Signature of Zhumiao Zhu Date: 05/06/2012 Party B Signature of Xijie Cao Date: 05/06/12" 1. The 5 June Memorandum was in a mixture of English and Mandarin. It was in typescript, except for the words reproduced in italics above. It was signed and dated by both Mr Cao and Mr Zhu. 2. Mr Cao's affidavit evidence was Mr Zhu said: "I will pay you the difference as between 36% per cent [sic] and 25% per cent [sic] which on my calculations is about $500,000. I will give you either $500,000 cash or an apartment if we proceed with the constructions stage otherwise it will be cash, if you proceed with the deal and agree to what Sam is offering and lend the company money on its terms." I said, "I want the company to agree to this as there is more security involved rather than a personal guarantee from you that you will pay me a further $500,000." Mr Zhu continued saying, "Do not be concerned with Sam. I will guarantee the difference as to the rate of return I will given [sic] you $500,000 or an apartment if we construct one or the other you will get your 36 per cent and my company will guarantee the loan amount for you." I said, "I need that in writing if you put it in writing I will think about it." Mr Zhu then proceeded to draft a document in Chinese. I agreed and signed it." 1. Mr Cao said that the 5 June Memorandum was their agreement reduced to writing. 2. Mr Cao gave further evidence in cross-examination in answer to a question I posed (T65:24-66:5): "Q. If that's right, did you think to yourself, "Why is this man promising to give me half a million dollars?" A. INTERPRETER: That's a very good question, your Honour. I was thinking about that as well. I thought there may be couple of reasons as below, as follows. And first it is Sam's company purchased this piece of land, they, they, they didn't have money to pay that 2.4 million and payment is due. Because they were unable to pay the fund on time, there was a overdue payment, and also interest accumulated, the delayed payment. And with respect to that, you can see the - you can check the, the loan of agreement, the due date. And Mr Zhu had, has kept saying that Dyldam company had helped him a lot, and he - and they help him make a lot of money. And he really keen to drag me in to help Sam to solve these difficulties. And they also have many joint projects together. And before we signed the agreement for this project, Zhu had three joint projects with Dyldam company. Even though Sam did, didn't - wouldn't agree to the 36%, and he agreed to make up the difference to make a good impression to, to Sam for the future projects. And also Zhu is the shareholder of this project, and if payment they - if they're not able to meet payment for this project and if they incur loss, and Zhu is going to incur a heavy loss as well. And at that time he also told me he's the exclusive sale agent of this project and if he is exclusive sales agent of this project he's going to make a lot of money. As regard whether he is, he was a sale, exclusive agent of this, sales agent of this project, I have no idea. With regard to the $500,000, we not only have an oral, a promise, and we also sign two agreed agreements afterwards. One, one dated 5 June and on that agreement he promised to undertake to pay me $500,000 and on that agreement there was no mention whatsoever of the exclusive sales agent. Had he, that been spoken about, that would have reflected in the agreement. On that agreement dated 5 June, the only condition was that as long as the project is completed, he would pay me $500,000." 1. At the time of signing the 5 June Memorandum, Mr Cao said that he was under the impression that Mr Zhu also had an interest in the Baulkham Hills Project through an investment of $2.4 million with Merfad. He said he was shown a copy of a loan agreement dated 7 June 2012 (which is set out in paragraph [70] below) between Mr Zhu and Merfad as proof that Mr Zhu had also invested money in the Baulkham Hills Project. If he was shown it, presumably it cannot have been the copy dated 7 June 2012. 2. When I asked him why the payment, as expressed in the 5 June Memorandum, was unconditional Mr Zhu said (T245:22-247:7): "A. INTERPRETER: Firstly, I was really negligent about this. The second I'd consider Mr Cao was a very, very sophisticated entrepreneur. He fully understood the contents of the $500,000, otherwise it should have been reflected in the percentage figure. SANTISI: If I could note for the record that that was necessarily responsive to what-- HIS HONOUR: No, I'm just going to ask this question. Q. What do you mean by he fully understood it was reflected in the, I think you said, the percentage figure? A. WITNESS: It was because - how to explain - anyway it's because-- A. INTERPRETER: The return from the project is represented by percentage. That means the percentage is the return from the whole project. So it was always talking about a percentage, being the return of the investment in the project. About 20%, 30% or 15%, but however, this one is a fixed figure. So this one is a fixed number, so this must be, this must be from another channel of another investment. Sorry. A. WITNESS: Another channel to get the return. A. INTERPRETER: So this should be the-- A. WITNESS: I need another source to get the money. A. INTERPRETER: From another source to get the money. So for Mr Cao and me myself, so the money we made was from only two channels. One, the return was from the project, from the development. A. WITNESS: Another channel come from commission. A. INTERPRETER: Another channel was from the commission. Therefore-- Q. Have you finished? A. INTERPRETER: Therefore, so on that day there were two documents produced. So, so I would give Mr Cao a guarantee to have 20% return from his investment in the project. A. WITNESS: From the project development. A. INTERPRETER: From the project development. A. WITNESS: Yeah, that is one of the source of the money and Mr Cao not happy. He wanted to get more, okay? And then we talk about another source, another channel can gave him some, some money. Only one channel is my commission. Q. Do I understand you correctly then to be telling me that at least as you understood it the $500,000 referred to in the document on page 109 in the Chinese, at least as you understood it, was intended to come from your commission? A. WITNESS: Yes. Q. Do you agree with me that there is no reference to that in the document? A. WITNESS: I agree. Q. And I'm going to ask you, just to be fair, is there any other explanation that you can give as to why it doesn't refer to the commission being the channel from which that money is to come? A. INTERPRETER: So I always thought that, that between us we have been talking about a business for many times. We talk about this 500,000 many times, and Mr Cao knew that I was an agent, I was a real estate agent. So that therefore he wanted to have a share from the profit of the agent. It was very normal. A. WITNESS: For me, to the land make things happen, make the project move forward. For me have very good opportunity to do the exclusive agent. Q. Yes I understand. A. WITNESS: Yeah, and I also can make a lot of money because the DA has changed from 90 unit, change to 150 something. From the, from the small project-- Q. Just to be clear, so that I understand, therefore your thinking, you're telling me, I just want to know what you think, was that Mr Cao was putting money into the actual development project by lending the money to Merfad with a 20% return. A. WITNESS: On that day, I gave him the promise that guarantees something. Q. Yes. A. WITNESS: Yes. Q. And that at least as you understood what was going on, whatever that may be worth, that if that meant the project went ahead, you were going to pay him half a million dollars out of the commissions you were going to earn because the project was going to be-- A. WITNESS: Yes. Q. --very big. A. WITNESS: Yes, and also I can make a lot of money, yeah. Because for the agent is - the agent ability to get the stock, to get stock from the development, our company is a project of money so I just wanted to do some good things for the developer and make the, this opportunity for me. And whatever the developer - sorry, yes, I, I think I show my, this opinion is clear." 1. Mr Zhu's evidence was that at the time of the 5 June Memorandum, he understood that he was the exclusive selling agent for the Baulkham Hills Project. During cross-examination, Mr Zhu said (T273:47-274:8): "Q. As at May and June 2012, you had an oral agreement to be the exclusive agent for Sam Fayad regarding the Baulkham Hills project? A. INTERPRETER: Yes. Verbally, we had discussed about this. Q. Not only verbally, there was an oral agreement based on your own version of events? A. INTERPRETER: Yes. Q. As far as you were concerned, you wanted Mr Cao to lend the 2.4 million so the project could go ahead and you could make your commission or profit on the sale of each unit? A. INTERPRETER: This was my commercial consideration." 1. Mr Zhu elaborated further upon this (T275:50-277:26): "Q. In early June, you understood that you were the sole selling agent for the Baulkham Hills property, is that correct or incorrect? A. INTERPRETER: Correct. Q. You expected to make a lot of money out of that project if you were the sole selling agent, didn't you? A. INTERPRETER: Yes. Q. You understood in early June that if Mr Cao did not invest in the project, there was a very real risk that the project would not go ahead, is that correct? A. INTERPRETER: So yeah, it would be more difficult for this project to continue, but for Mr Cao, he was not the only factor to be - to be a fact in this. Q. Isn't it the case that, to your knowledge in early June, if Mr Cao did not invest in the project, then Dyldam was not going to be able to complete on purchasing the property? A. INTERPRETER: So this is not what I'd - what I thought, I do not agree to, to - I do not agree that this was the case. Q. What did you think in early June was going to happen if Mr Cao didn't invest in the project? A. INTERPRETER: So yes, it would be - the, the normal fundraising process would be that Dyldam would be looking for other channels to raise the fund and I would continue to look for other, other sources for the fund. Q. At that time the only source that you knew about was Mr Cao, isn't that correct? A. INTERPRETER: So he was one of the people that I, I approached to, to talk about the business. Q. I understand that, but at that time he was the only person who was actively negotiating towards investing in the project, isn't that correct? A. INTERPRETER: Yes, that was correct. Q. And it was in your commercial interest that he invest in the project, wasn't it? A. INTERPRETER: Yes. Q. Because it was in your commercial interest for him to invest in the project, firstly you offered to personally guarantee the return up to the 20%, is that correct? A. INTERPRETER: Yes. Q. And the second thing you did to advance your commercial interest was also to promise to pay him half a million dollars or an equivalent property, is that correct? A. INTERPRETER: So he, he requested and I agreed. But this 500,000 was from the money that I earned from the commission. Q. Did you know how the $500,000 figure was calculated? A. INTERPRETER: Regarding this I had a detailed description given to Mr Cao. So because he kept saying that if this project could go ahead, then I would be able to make a lot of commission. Based on this, he'd wanted to ask me for more money. And how this money was calculated, I explained to him. So I said to him that as an agent and - for a project, we would be paid referral fee. For each unit it would be about 2,005 and 5,000 - around 2,005 and 5,000. And there were over 100 units, so roughly I'd calculated it would, it would be between the 400,000 to 500,000. So then I said "I will give you a round figure", that was 500,000 and it would be easier to remember. Q. Are you telling me that the 500,000 was your rough calculation for the referral fees you were expected to receive? A. INTERPRETER: So that was the money I gave him as a referral. Q. I'm just trying to understand, you're saying you did a rough calculation of the amount you expected to receive in referral fees and that was what you were going to pay? BOLSTER: Your Honour, I think that's not the case. HIS HONOUR: He can tell me that. INTERPRETER: No, that was not. Because I knew that the commission that I would earn would be more than this 500,000. So because for about 140 odd units on the market at that time, I would be able to earn between 1.4 to 2 mil as commission. So from this amount in commission I was willing to give him 500,000, for commercial consideration." 1. Mr Fayad, whose evidence I accept as that of an independent witness with no interest in the outcome of this litigation, also confirmed without hesitation that in early June 2012, it was his intention to appoint Mr Zhu as the exclusive sales agent for the Baulkham Hills Project (T369:7-44). 2. On 7 June 2012, a loan agreement was entered into between Mr Zhu and Merfad, whereby Mr Zhu would loan $2.4 million to Merfad (the "Zhu/Merfad Loan Agreement"). Mr Zhu accepts that he signed this agreement with Merfad, however is unsure whether the agreement was signed on 7 June 2012. The date on the front of the agreement is 7 June 2012, however this is not Mr Zhu's handwriting. It was common ground that Mr Cao was shown this agreement between Mr Zhu and Merfad. 3. While the Zhu/Merfad Loan Agreement included what might be called boilerplate conditions precedent to Mr Zhu's obligation to advance the loan, it said nothing about Mr Zhu being appointed the exclusive selling agent (whether as a condition precedent or otherwise). 4. The loan agreement between Mr Zhu and Merfad included: "THIS LOAN AGREEMENT is dated the 7th day of June 2012. PARTIES: Shumiao Zhu of XX XXXX Avenue, Pagewood, in the State of New South Wales (the 'lender'); Merfad Projects Pty Limited (ABN 91 149 582 070) of XXX Macquarie Street, Parramatta in the State of New South Wales (the 'borrower'). RECITALS: A. The lender has agreed at the request of the borrower, to provide a loan facility to the borrower, the principal amount of which is not to exceed Two Million Four Hundred Thousand Dollars ($2,400,000.00). B. The lender and the borrower have agreed to enter into this agreement to set out the terms and conditions of the loan facility. Definitions and interpretation (1) Definitions In this agreement, unless the contrary attention appears: 'Advance' means an amount of Two Million Four Hundred Thousand Dollars ($2,400,000.00) provided or, where the context requires, to be provided under this agreement by the lender to, or at the direction of the borrower on a drawdown date; … 'Fixed Return' means an agreed amount which will be calculated based on a fixed minimum amount of One Million Two Hundred Thousand Dollars $1,200,000.00 and a maximum amount of One Million Five Hundred and Eighty Four Thousand Dollar $1,584,000.00 which will be calculated on the fixed maximum profit of $10,558,000.00 on the Security payable at the end of the term; … 'Repayment date' means two (2) years and six(6) calendar months from the date of this Agreement or such other date as the lender and the borrower agree in writing, subject to the provisions of this agreement relating to accelerated repayment of the loan; … (3) Sole agreement The covenants and provisions contained in this agreement exclusively and completely state the rights of the borrower with respect to the loan. This agreement supersedes all negotiations and prior agreements, whether written or oral, in respect of the loan. If there is any conflict or inconsistency between the terms, conditions and provisions of this agreement and the security, the terms, conditions and provisions of this agreement will prevail." 1. Despite entering into this agreement, Mr Zhu never loaned the money to Merfad. He conceded this during cross-examination (T298:22-300:14): "Q. Yes, just one last question. Did you have $2.4 million in the bank ready to loan? A. INTERPRETER: So during that time I haven't had that prepared yet, but I had the confidence. Q. So what, you were confident that you would be able to find $2.4 million? A. INTERPRETER: Yes, yes. Q. Was that money that was going to come from Mr Cao or was it going to come from somewhere else? A. INTERPRETER: Including Mr Cao and also other sources. SANTISI Q. What I'm suggesting to you is that you signed this document, having no intention to lend any money to Merfad? A. INTERPRETER: So I signed this document, of course I have the intention of lending. Q. You had no capability to lend 2.4 million and I suggest to you, you had no intention of lending 2.4 million? A. INTERPRETER: So during that time I absolutely had the ability. I showed him - so I showed him the document about my assets that was more than that and whether to keep the asset as the fixed asset or cash, so it's another story, but I was absolutely having the ability to do so. So I signed that, it was because I had that intention. Otherwise, otherwise why I sign it - did I sign it as a joke? Q. What I'm suggesting to you is the only reason you signed it is to mislead Mr Cao so that he would lend his $2.4 million? A. INTERPRETER: So if they can help him to have confidence and - what's wrong with that? Q. You're agreeing that you signed it to mislead Mr Cao, so that he would lend $2.4 million? A. INTERPRETER: I don't understand what you mean by that? Q. You've just given an answer that so what, what's wrong if I told him, I gave him a document that suggested I was going to lend, but then I had no intention of lending, that's as I understood your evidence, sir? BOLSTER: I think that's a very unfair characterisation of his evidence, your Honour, and that's not his evidence. SANTISI Q. You've told his Honour you didn't have $2.4 million in cash, correct? A. INTERPRETER: So I think the 2.4 mil at that time-- A. WITNESS: The cash, the cash. A. INTERPRETER: The 2.4 mil cash - so I didn't - probably I didn't have that amount during that time. Q. You signed the document and you never lent any money. Why not? A. INTERPRETER: So this happened only later, maybe the developer had the money to settle the, the land, then this money of mine would not be-- Q. So you're saying Merfad told you they don't need your loan any more, is that what you're saying? A. INTERPRETER: I cannot remember clearly. HIS HONOUR Q. Well, didn't Mr Fayad come to your one day and say, please now we want the $2.4 million? INTERPRETER: Please? HIS HONOUR Q. Didn't Mr Fayad come to you one day and say, no, where is the $2.4 million that you offered to lend? SANTISI: He had agreed to lend. HIS HONOUR Q. Agreed to lend? A. INTERPRETER: I don't have this recollection. Q. What Mr Santisi asked you was, having agreed to lend $2.4 million to Merfad - I withdraw that. You agree that you agreed to lend $2.4 million to Merfad? A. WITNESS: Yep. Q. Why didn't you end up advancing $2.4 million to Merfad? A. INTERPRETER: So when the, when the land was settled, when the purchase was settled, they did not ask me for the money. A. WITNESS: Yeah. A. INTERPRETER: Because Sam - for Sam Fayad, how he arranged his money, it was not clear to me. So therefore it was - so if they could not ask me for this money, then I, I did not give the money to him, because in my, in my world I thought that they must have already solved the problem or they have settled the problem. Because during that time we also had other joint - other ventures being cooperated in." 1. Despite not having loaned any money to Merfad, Mr Zhu later lodged a caveat over the Baulkham Hills Project. I have taken this conduct into account in forming my view that Mr Zhu was not a witness whose evidence could be relied upon. The caveatable interest claimed by Mr Zhu was pursuant to the loan agreement of 7 June 2012. Mr Zhu's caveat claimed the following interest in the land: "Equitable charge created over the properties in favour of Shumiao Zhu as security for the Loan. Loan agreement 7/6/12 Shumiao Zhu (as lender) and Merfad Projects Pty Ltd (as borrower)" 1. On 11 June 2012, Mr Cao's solicitor, Mr Frank Ngo, emailed Mr Zhu attaching "the draft proposed amendments to the loan and deed of guarantee as instructed by Mr Cao". Those amendments included a revised (and now certain) definition of "Fixed Return" which was ultimately included in the loan agreement between Mr Cao and Merfad. 2. On 12 June 2012, Mr Cao entered into an agreement to loan $2.4 million to Merfad (the "Cao/Merfad Loan Agreement"). This loan agreement was largely identical to the Zhu/Merfad Loan Agreement. The key difference was the adoption of the revised definition of "Fixed Return" proposed in the email referred to in the preceding paragraph. This was: "'Fixed Return' means an agreed amount which will be calculated based on the following: (i) In the event the Borrower has obtained a construction certificate and a construction loan on or before the Repayment Date, then the agreed fixed return shall be $1,584,000.00; or (ii) In the event the Borrower is unable to obtain or has not obtained a construction certificate and construction loan on or before the Repayment Date, the agreed fixed return shall be $1,250,000.00" 1. Both Mr Zhu and Mr Fayad also entered into a deed of guarantee dated 12 June 2012 (the "Zhu/Fayad Guarantee"), which guaranteed Merfad's obligations to Mr Cao under the Cao/Merfad Loan Agreement between Mr Cao and Merfad. The Zhu/Fayad Guarantee did not make Mr Zhu's obligations conditional on his appointment as the exclusive selling agent. 2. On 13 June 2012, Mr Zhu and later his wife Ms Li attended Mr Ngo's office. What happened when they did so was also a matter of complete controversy. Mr Zhu's evidence was that Mr Ngo handed him a deed of guarantee and indemnity, and explained the contents of the agreement. 3. The deed of guarantee and indemnity was prepared by Mr Ngo in English and entered into on 13 June 2012 between Zhu and Li Investment Pty Ltd as guarantor and Mr Cao as beneficiary (the Zhu and Li Guarantee"). Under that deed Zhu and Li Investment Pty Ltd guaranteed to Mr Cao Merfad's obligations, inter alia, to repay the loan of $2.4 million and the "Fixed Return". The deed set out the following: "RECITALS: A. At the request of the Guarantor, the Beneficiary has agreed to enter into the Agreement [being the Cao/Merfad Loan Agreement]. B. The Guarantor acknowledges that the Beneficiary is entering into the Agreement because of the granting of this Guarantee. C. The Guarantor expects to derive a commercial benefit from this Guarantee. 1. The Zhu and Li Guarantee did not make the guarantors' obligations conditional on Mr Zhu being appointed the exclusive selling agent. 2. Mr Cao's affidavit evidence was: "My lawyer also recommended a deed of guarantee and that was drafted and executed with Zhu and Li Investment Pty Ltd … Mr Zhu signed that as other representatives of his company. I gave the document to Mr Zhu and said, "You should see a lawyer." Mr Zhu said "I am a real estate agent I understand the document and sign these every day I do not need a lawyer." 1. Furthermore, on 13 June 2012 a deed of agreement in English was entered into between Mr Zhu (whose signature was witnessed by Ms Li) and Mr Cao (whose signature was witnessed by Mr Ngo) (the "13 June Deed"). The 13 June Deed was drafted by Mr Ngo upon the instructions of Mr Cao and is the document on which Mr Cao sues in these proceedings in contract. (Mr Cao's pleading asserts other causes of action and relies on other documents for reasons which are not readily apparent. It is sufficient to deal with his claim as one in contract on the 13 June Deed.) 2. The 13 June Deed provided: "THIS DEED OF AGREEMENT is made this 13th day of June 2012. BETWEEN 1. Shumiao ZHU of XX XXXX Avenue, Pagewood in the State of New South Wales (hereafter referred to as "ZHU"); and 2. Zijie CAO of XX XXXX St, Burwood 2134 in the State of New South Wales (hereafter referred to as "CAO"). RECITALS A. At the request of ZHU, CAO had lent Merfad Projects Pty Ltd ACN 149 582 070 ("MPPL") an amount of $2,400,000.00 to assist in the funding with respect to the acquisition of XX XXXX Road, Baulkham Hills and XX XXXX Road and XX XXXX Avenue, Baulkham Hills for the purpose of strata subdivision development ("the Property Development"). B. ZHU expects to derive a financial benefit from the proposed Property Development. C. The parties wish to enter into this Deed in order to formalise and acknowledge the terms of the agreements reached between them. NOW THIS DEED WITNESSES AS FOLLOWS 1. In consideration of the financial facility provided by CAO to Merfad Projects Pty Ltd to fund the Property Development, ZHU has agreed (in addition to the guaranteed financial return already provided by MPPL to CAO), to pay CAO an amount of five hundred thousand dollars (AUD$500,000) within three months from the date of the registration of the strata subdivision of the proposed Property Development, time being of the essence. 2. ZHU is liable to pay CAO the amount referred to in clause 1 regardless of whether any of the units of the registered strata subdivision Property Development have been sold or not." 1. Pausing at this point of the narrative, I observe that it is difficult to imagine clearer terms. Moreover, as I will develop below, clause 2 is a complete answer to all of the contractual defences raised by Mr Zhu and, at least in part, to the defence of unconscionability. 2. Mr Cao's evidence was that the 13 June Deed initially had the $500,000 payment being due at the same time as Mr Cao was to be paid the return on his loan. Mr Cao's evidence (corroborated by Mr Ngo) was that Mr Zhu asked for the 13 June Deed to be amended, so the payment of the $500,000 fell at a later date. Mr Zhu denied any such change was ever sought. 3. Mr Cao's affidavit evidence was: "My lawyer also recommended a further document in the form of a Deed to further record the agreement as to the $500,000. I gave this document to Mr Zhu at the same time as [deed of guarantee and indemnity] having said that he should see a lawyer. The reply he gave … was in respect of both documents so I assumed he did not need a lawyer. With this further document Mr Zhu said, "With the $500,000, I will pay you regardless but can I have some time provisions in it also, so if it proceeds to construction I can pay you as some money starts coming in or give you an apartment. If the project comes to end, I will pay you $500,000 at that time as I promised already. I just need some time if the project proceeds to construction, so once the Strata Plan is registered the purchasers need to settle so if it goes to that stage of the project I just want some time for the money to come in before I pay you the $500,000 otherwise as I promised I give you the $500,000 when and if the project otherwise comes to an end as I have already promised." I recall we made some changes on the rush and it was signed." 1. Mr Cao's evidence was that the terms of the 13 June Deed were agreed upon between Mr Cao and Mr Zhu, and then Mr Cao informed Mr Ngo of the terms, and the document was drafted accordingly. 2. On the other hand, Mr Zhu's evidence was that he told Mr Ngo that "This money of $500,000 I agreed to give to my friend is from the commission if I sell the units. It is nothing to do with the project and land" and that it was to be paid "when I get commission". Mr Zhu also said that he told Mr Ngo that he (Mr Zhu) didn't have a lawyer and "I will have to trust you [Mr Ngo]. Mr Cao does not understand English and my English is pretty poor. You are the lawyer for both of us". He also said he queried clause 2 with Mr Ngo asking "Does it mean what we discussed?" (referring to the funds coming from his commission and there being a possibility of giving Mr Cao a unit in lieu) to which Mr Ngo replied in the affirmative. Ms Li gave evidence that Mr Ngo told her "I am helping both parties, not only Mr Cao". 3. Mr Ngo denied these allegations. His evidence was that other than pleasantries he told Mr Zhu and Ms Li "I can't be involved, you need to get your own lawyer. I have asked Mr Cao to tell you that". 4. Whether or not Mr Ngo told Mr Zhu that he should get his own lawyer is not relevant. I do not accept Mr Zhu's account for the reasons I have set out in paragraphs [115] to [120]. Ms Li is not an independent witness, so I do not accept her evidence as corroborative of Mr Zhu's. Furthermore, Mr Zhu's evidence about his interactions with Mr Ngo, especially his alleged querying the meaning of clause 2, is fanciful. In the course of giving his evidence, it was apparent that Mr Zhu had good conversational English (answering questions before they were interpreted and sometimes correcting the interpreter's interpretation of his (Mr Zhu's) evidence) and that he could read English. I have no doubt that if he had read clause 2 – which presumably he must have because his evidence was he said to Mr Ngo "I had difficulty understanding point 2" – he would have understood it and seen that it was silent about the very thing he is now telling the Court concerned him most, being that the $500,000 was (according to him) only payable out of commission if he was appointed exclusive selling agent. I also regard it as inherently unlikely that a solicitor in the position of Mr Ngo, who by then had been in practice for 14 years providing commercial and conveyancing advice to the Chinese community, would have simply volunteered to act for Mr Zhu or allowed himself to be "verballed" into becoming Mr Zhu's solicitor as well as Mr Cao's. 5. As has already been recorded in paragraph [22] above, the purchase of the first tranche of the Baulkham Hills Project land was completed on 13 June 2012. By reference to the settlement sheet that was in evidence, Merfad paid $8,422,076.18, of which $4,900,000 was provided by a loan from Westpac. There was no suggestion by any party that the $2.4 million loaned by Mr Cao to Merfad was not also part of the funds used to complete the purchase. 6. During 2013, Mr Zhu became aware that Merfad was intending to sell the incomplete Baulkham Hills Project to a third party. On 31 October 2013 Mr Zhu lodged a caveat over the land comprising the Baulkham Hills Project. I have already referred to this caveat in paragraph [72] above. 7. On 6 November 2013, Mr Cao similarly lodged a caveat, in his case relying on the Cao/Merfad Loan Agreement. 8. On 18 November 2013, Mr Zhu withdrew his caveat. 9. In or about May 2014, Mr Zhu entered into a document with Mr Fayad and Merfad entitled "Deed of Settlement – Ancillary Matters" whereby Mr Zhu received $1,000,000 in respect of a dispute which apparently included claims by Mr Zhu for services rendered in connection with the Baulkham Hills Project. This settlement is referred to further in paragraph [112] below. 10. On 14 September 2014, Merfad entered into a contract to sell the land comprising the Baulkham Hills Project to a third party for $26,900,000. 11. On 12 December 2014, Mr Cao was repaid in full both the principal of $2.4 million and the fixed return of $1.584 million. Mr Cao withdrew his caveat. The guarantees which had been given in his favour by Mr Zhu and Mr Fayad did not have to be called on. 12. On 23 September 2016, the strata plan for the Baulkham Hills Project site was registered. Credit – the protagonists 1. This case involves two obviously astute and experienced businessmen asserting completely different accounts of what was really a straightforward commercial transaction. Mr Cao has maintained he was to be paid $500,000 from Mr Zhu to supplement the 26% return he would receive from Merfad. This payment was to be unconditional. 2. Alternatively, Mr Zhu has submitted that the $500,000 payment was conditional upon him being made the exclusive selling agent for the Baulkham Hills Project. Mr Zhu has maintained that conversations were had with Mr Cao to this effect, and that the only role he would have in the Baulkham Hills Project would be if he were appointed the agent for the site. 3. Given the gulf between their respective accounts, credit is an important issue. Mr Cao 1. Mr Bolster submitted that Mr Cao was not a reliable witness and where there was conflicting testimony between the plaintiff and defendant, the evidence of Mr Zhu should be preferred. It was submitted that Mr Cao's evidence in relation to the following matters was incorrect, inconsistent or implausible, and as such his evidence should be given little weight. 2. Mr Zhu's submissions in relation to Mr Cao's evidence can be summarised as follows: 1. Mr Cao asserted during his cross-examination that during his first meeting with Mr Zhu, Mr Zhu had personally promised him (Mr Cao) a 36% per annum return (T50:9-51:22). This evidence was not put in either of his affidavits, and the notion that during their first meeting an exorbitant return was personally guaranteed is absurd. The suggestion that Mr Zhu immediately guaranteed that return rate should be rejected because: 1. It does not make commercial sense for Mr Zhu to guarantee a rate the first time it was suggested; 2. Mr Cao's offer is not put as a final offer or as an ultimatum. There was evidence that Mr Cao would invest in ventures for less than a 36% return; and 3. Subsequent documentation, such as the 5 June Zhu Guarantee, does not bear out a guarantee in those terms. For example, the 5 June Zhu Guarantee guaranteed a return of 20% 1. There were inconsistencies in relation to Mr Cao's status as an investor. For example, Mr Cao referred to himself as an investor in both of his affidavits but, during cross-examination, denied that he was looking for business opportunities from which he could "derive a profit" (T21.18). Furthermore, Mr Cao initially gave evidence that the Baulkham Hills Project was his first property development, however he later conceded that he had previously invested in property developments in China (T26:9-30). Despite his experience as a property developer, Mr Cao maintained that he was informed there was zero risk in investing in the Baulkham Hills Project. As an experienced developer, he should have known that to be wrong; 2. Despite Mr Cao's consistent evidence that he would only invest if he was guaranteed a return of 36% per annum, he later conceded during cross-examination that he had previously invested in a Melbourne seafood company which did not yield a 36% return (T28:9-20); 3. Mr Cao's evidence in relation to various matters was vague or inconsistent. It was accepted that a site visit occurred on 17 May 2012 and photos were taken during that site visit, including as to the size of the Baulkham Hills Project. Despite this, Mr Cao submitted he did not know how large the site was and he did not pay attention to the size of the site (T35:25). Given Mr Cao wanted to understand the potential investment he was making, this is highly unlikely; 4. Despite Mr Cao being told by Merfad that they could only offer a 26% per annum return on the investment, he proceeded to transfer money from China on 22 May, suggesting he intended to advance those funds as a loan despite the return of 36% not being offered; 5. The evidence Mr Cao gave about being interested in Mr Zhu's return on the Baulkham Hills Project was inconsistent. Mr Cao at one point stated there was no need for "me to discuss how much money he's going to make; it has nothing to do with me. Why do I care?" (T43:7-8). Despite this, Mr Cao said in cross-examination (T44:6-16): "Q. No, I just asked him to read it. Now I'm going to ask you a question about it. I want to suggest to you that it was critically important to you what Mr Zhu was telling you that he would be paid, because it had a bearing on whether he could repay your loan. Correct? A. INTERPRETER: Yes. Q. You were vitally interested in how much he was going to make from this project, weren't you? A. INTERPRETER: Yes, that's what Mr Zhu told me. He told me about the building cost, the range of the building costs. It's 230,000. And then he talk about the selling price, 480,000, and how he's going to get paid. But I don't know what, whether that was going to happen or not, whether it was true or not." 1. Mr Cao's evidence was that the $500,000 payment was to supplement the 26% return offered by Merfad, to fulfil the 36% return he desired. That should be rejected because: 1. If the payment was to guarantee a 36% return, it never reached that amount. The difference between 26% and 36% per annum return over two years and six months is significant, being approximately $600,000. The $500,000 therefore did not make up the difference; 2. The $500,000 was not payable at the end of the two years and six months. There was no certainty as to when it would be paid, as it was tied to the registration of the strata subdivision and there was no provision that interest on that sum was payable until the payment was due. It is clear there would have been a delay beyond the two years and six months of the loan agreements; 3. The payment was conditional in any event, meaning if there was no registration of the strata plan, there was no obligation to pay; 4. There was no security for the $500,000, unlike the loan which provided a return of 26% per annum; 5. No document provided for Mr Cao to receive his 36% return in the event no construction certificate and construction loan were achieved; and 6. Mr Zhu's evidence was that the $500,000 was to come from his commission as exclusive sales agent. Given the factors listed above, this is much more plausible than Mr Cao's version of events. Mr Cao also acknowledged he was told that Mr Zhu was going to be the exclusive sale agent for the Baulkham Hills Project (T65:45-47), suggesting even Mr Cao believed there was a link between the payment of the $500,000 and Mr Zhu being appointed the exclusive sales agent. 1. Mr Cao's evidence in relation to the return of $1,584,000 was inconsistent. Mr Cao asserted that he first heard of the return of $1,584,000 around 12 June 2012 when he entered into the Cao/Merfad Loan Agreement, and that Mr Fayad came up with the figure. Mr Cao said the figure was agreed after Mr Zhu offered to pay the $500,000 as a means to supplement the $1,584,000, being the 26% per annum return. This was incorrect for the following reasons: 1. Mr Cao was given a copy of the Zhu/Merfad Loan Agreement either on or shortly after 7 June 2012. Mr Cao acknowledged the agreement was for two years and six months and for a return of $1,584,000. Mr Cao also acknowledged he had the term explained to him when he read the agreement; 2. Mr Fayad had consistently made it clear that the most he was prepared to offer was a 26% return, which amounted to $1,584,000; and 3. Mr Ngo's evidence is that Mr Cao must have discussed the figure with him (Mr Ngo) before Mr Cao signed the Cao/Merfad Loan Agreement. Mr Cao's own evidence is that he looked to Mr Zhu to make up the difference between the 26% return offered by Merfad, and the 36% return he wanted. Therefore Mr Cao must have known about the $1,584,000 figure before 12 June 2012 as he had turned to Mr Zhu to make up the difference. 1. Mr Cao submitted that he believed Mr Zhu had also loaned $2.4 million, as recorded in the Zhu/Merfad Loan Agreement. The facts did not support this belief for the following reasons: 1. Mr Zhu did not have the capacity to loan $2.4 million at that time; 2. The return of $1,584,000 was clearly a figure negotiated with Mr Cao, being a return of 26% per annum over two years and six months and the highest amount Merfad was prepared to offer Mr Cao. Mr Zhu was not looking for a return of 36%, or even 26%: that was what Mr Cao was seeking; 3. If Mr Cao believed Mr Zhu had loaned $2.4 million to Merfad, with the loan being repayable on 7 December 2014, this would mean Mr Zhu was being repaid five days sooner than when Mr Cao was to be repaid. However, Mr Zhu was not to pay the $500,000 to Mr Cao until three months after the registration of the strata plan, despite having his supposed $1,584,000 on 7 December 2014. Having a separate date to pay Mr Cao the $500,000 does not make commercial sense. Mr Cao conceded he wanted to be paid the funds as soon as possible, so it does not make sense why Mr Cao would agree for a delay in payment of the $500,000 from Mr Zhu. The only explanation is that Mr Cao thought the payment would come from Mr Zhu's commission; 4. Mr Cao's evidence in relation to his reliance upon the Zhu/Merfad Loan Agreement was inconsistent. Mr Cao suggested he was not interested in the loan agreement between Mr Zhu and Merfad, stating that any repayment was "out of my control" (T94:50) and that he was "not important to me" (T97:15); 5. Mr Cao stated that he did not think he had provided the Zhu/Merfad Loan Agreement to his lawyer Mr Ngo, a fact with which Mr Ngo agreed. However, had the agreement between Mr Zhu and Merfad been as important to Mr Cao as he asserts it was, it is highly unlikely he would not have provided that contract to Mr Ngo for advice; and 6. Mr Cao conceded he had not loaned any money to Mr Zhu because Mr Zhu had no capacity to repay (T73:4-5). If Mr Zhu had no capacity to repay, then Mr Cao could not have made the assumption that Mr Zhu made a $2.4 million loan to Merfad. 1. Under the Cao/Merfad Loan Agreement, had the construction certificate not been obtained by the repayment date, the return was going to be the lesser amount of $1.25 million. If this were the case, there was no discussion of Mr Zhu making up the difference of the return of $1.2 million (being approximately 20%) and the 36% that Mr Cao demanded. The difference was only to be paid in the event that the construction certificate was obtained. It does not make commercial sense that Mr Zhu was to pay the difference between the $1.2 million and 36% return if the certificate were not obtained, as he could not be the sales agent; 2. Mr Cao provided the funds to Merfad on 12 June 2012, the date before a guarantee was provided by Mr Zhu and his family company. The following day, the 13 June Deed was signed at Mr Ngo's office. Mr Cao said that Mr Ngo did not interact with Mr Zhu at Mr Ngo's office on 13 June 2012. It was unclear why Mr Ngo would have refused to have dealt with Mr Zhu on this occasion, as prior to 13 June Mr Ngo had spoken with Mr Zhu. Additionally, Ms Li's evidence was that Mr Ngo spoke with Mr Zhu on 13 June, contradicting Mr Cao's evidence. 3. Mr Cao's affidavit evidence was: 4. "With this further document Mr Zhu said, "With the $500,000, I will pay you regardless but can I have some time provisions in it also, so if it proceeds to constructions I can pay you as some money starts coming in or give you an apartment. If the project comes to an end, I will pay you $500,000 at that time as I promised already. I just need some time if the project proceeds to construction, so once the Strata Plan is registered the purchasers need to settle if it goes to that stage of the project I just want some time for the money to come in before I pay you the $500,000 otherwise as I promised I give you the $500,000 when and if the project otherwise comes to an end as I have already promised" I recall we made some changes on the rush and it was signed." 5. Both the repetition of needing time and making the promise to pay regardless, three times, does not have the ring of truth and should be rejected. Furthermore, as outlined in [101](10) above, there was no discussion between Mr Cao and Mr Zhu regarding the payment should the construction certificate not be obtained. Therefore, any suggestion that Mr Zhu would pay the $500,000 regardless should not be accepted. 1. There were also apparent inconsistencies in some of Mr Cao's evidence. I say "apparent" because in some cases those inconsistencies may be the product of interpretation issues, subtleties being "lost in translation" (see paragraph [116] below). For example, Mr Cao's evidence appeared to differ in relation to who proposed to pay the shortfall of the 36%. On the first day of the trial, Mr Cao gave the following evidence (T64:20-23) "Q. Once it became clear to you that Mr Fayed was only prepared to give you give you a return of $1,584,000, you looked to Mr Zhu to make up the difference, didn't you? A. INTERPRETER: Correct." 1. However, on the second day of the trial Mr Cao was again asked whether he approached Mr Zhu to supplement the shortfall of the 36% return and he provided a different answer (T82:33-36): "Q. You say, don't you, that you only looked to Mr Zhu to make up the difference between $1.584 million as interest and the 36% that you were after once Mr Fayed told you that $1.584 million was all he was prepared to pay? A. INTERPRETER: No. Q. Do you say that you asked for $500,000 before Mr Fayed told you that he would only pay $1,584,000? A. INTERPRETER: I have never asked Mr Zhu to pay the difference. It was Mr Zhu offer to pay the difference." 1. Mr Cao maintained he was of the belief that he did not think Mr Zhu was able to repay him had he lent money directly to Mr Zhu (T74:37-75:23): "Q. You knew that this was a loan agreement that had been prepared on the basis of you supplying Mr Zhu with money to lend to Merfad. Correct? A. INTERPRETER: No, not at all. Q. And the figure of 1.584 was a figure that was discussed by you and Mr Fayed before 7 June, wasn't it? A. INTERPRETER: The amount was confirmed one or two days before signing the agreement, namely on 12 June. Q. I'll just finish with this. If Mr Fayed‑‑ HIS HONOUR Q. Sorry, did the witness want to add something? A. INTERPRETER: Also, with - when I lent the amount to Sam, I have made sure I get all these checking - the guarantee, personal guarantees, all these, all other procedures. And for me to lend the money to Zhu, who has no ability to repay, it's impossible for me to lend this amount to him. BOLSTER Q. Mr Zhu had no ability to repay? That was your view of him at the time? … A. INTERPRETER: He never asked me - approached me or asked me to borrow money. Even if, even if he had asked me to borrow money, I wouldn't borrow - lend money to him. He had no ability to make the repayment." 1. Given Mr Cao's admission that he did not believe Mr Zhu could make any repayments, it is unclear why he would have believed the contract between himself and Mr Zhu to pay $500,000 was not conditional upon Mr Zhu becoming the exclusive selling agent of the Baulkham Hills Project. 2. Similarly, Mr Cao's evidence in relation to whom he was lending the $2.4 million was at times contradictory. Mr Zhu asserted that the initial plan was for Mr Cao to lend the money to Mr Zhu, and for Mr Zhu to then lend the money to Merfad. Mr Cao both accepted and rejected this version of events, as noted below during his cross-examination (T74:26-39): "Q. Let me wrap up on this point. This document represented the discussions up to 7 June that involved a loan from you to Mr Zhu, and a loan then from Mr Zhu to Merfad. Correct? A. INTERPRETER: Yes. … Q. You knew that this was a loan agreement that had been prepared on the basis of you supplying Mr Zhu with money to lend to Merfad. Correct? A. INTERPRETER: No, not at all." 1. Mr Bolster submitted that the matters set out in the preceding paragraphs demonstrated that Mr Cao was prepared to do and say anything to embellish his case. Furthermore, given the commercial probabilities, the only explanation is that Mr Cao is not telling the truth about the $500,000 payment and that it was agreed by both parties that the payment was conditional upon Mr Zhu being appointed the agent for the Baulkham Hills Project. 2. Finally, it was submitted that Mr Cao was an argumentative and unsatisfactory witness. The Court should therefore prefer the version of events put forward by Mr Zhu. Mr Zhu 1. Mr Santisi submitted for Mr Cao that it was Mr Zhu who was the unreliable witness whose evidence was not to be given any weight. His arguments may be summarised as follows: 1. Neither the 5 June Memorandum nor the 13 June Deed expressly placed a condition on the payment. Therefore, there was no evidence to support Mr Zhu's claim that both parties intended the payment to be conditional, and his claim is contradicted by the contemporaneous documentary evidence; 2. Mr Zhu did receive a benefit from the Baulkham Hills Project, despite consistently submitting he did not. The subpoenaed material from Merfad showed Mr Zhu received $1 million pursuant to a deed of settlement, which directly contradicted his previous evidence that he received no financial benefit from the Baulkham Hills Project. Mr Zhu sought to submit that the payment was not related to the Baulkham Hills Project, however this directly contradicts the terms of the document. It is clear that the deed of settlement related to the Baulkham Hills Project, given it refers to "Zhu and Merfad entered into a Loan Agreement by which Zhu agreed to provide a loan facility to Merfad not exceeding $2,400,000". Moreover, the settlement defines "Deed of Guarantee" to mean "the Deed of Guarantee entered into between Fayad and Zhu on the one part and Zijie Cao on the other part". On its face, the settlement (see paragraph [112] below) was clearly connected to the Baulkham Hills Project; 3. The fact that Mr Zhu successfully reached a settlement of $1 million with Mr Fayad in relation to the Baulkham Hills Project suggests he was the exclusive selling agent for the project. No other grounds for why he would be offered the settlement were put before the Court; 4. Mr Zhu submitted Mr Cao was a new resident in Australia, however Mr Cao had been a permanent resident in Australia since 2002; 5. Mr Zhu was vague in his answers. It was submitted that Mr Zhu remained silent on questions he did not want to answer, he claimed he could not recall, he would revert to claims that it has been too long to recall, he would advance claims that there had been too many discussions, and he otherwise would engage in abstract and hypothetical points to avoid answering matters. For example, Mr Zhu claimed be integrally involved in the finance of the Baulkham Hills Project and then avoided answering questions in relation to what amount was needed for the Baulkham Hills Project to continue; 6. Mr Zhu signed the Zhu/Merfad Loan Agreement suggesting he wanted to lend money to the Baulkham Hills Project. This was not the case. Mr Zhu signed the agreement to mislead the Plaintiff into lending, with Mr Zhu having no intention to ever lend, despite claiming to the contrary. Ultimately Mr Zhu could not provide a satisfactory explanation as to why he did not lend; 7. Mr Zhu stated he had every intention to loan the money to Merfad, however later conceded he did not have $2.4 million to lend. It does not make commercial sense why he signed the Zhu/Merfad Loan Agreement and then provided it to Mr Cao. The only explanation was to deceive Mr Cao, despite now seeking equitable relief; 8. The caveat lodged by Mr Zhu over the Baulkham Hills Project, as set out in paragraph [72] above, claimed he had an interest in the land, when he knew he did not; 9. Mr Zhu made numerous concessions during cross-examination which contradicted his affidavit evidence. These concessions went to the nature of the relationship between Mr Zhu and Mr Fayad and their history of working together on past projects. For example, Mr Zhu's affidavit expressly stated he was not the exclusive sales agent, however Mr Zhu in cross-examination conceded he had been told that he was the sales agent (T195:45-T196:6). Similarly, Mr Zhu's affidavit expressly stated that Mr Zhu was going to borrow money from Mr Cao, and then lend that money to Merfad. Despite this assertion in his affidavit, Mr Zhu conceded in cross-examination (229:31-33): 1. "Q. The discussions concerning you borrowing money first of all I put to you never happened. 2. A. INTERPRETER: It didn't happen." 1. Mr Zhu's explanation about the 5 June Memorandum and being "negligent" for not putting a condition into the agreement about it being payable upon him being appointed the exclusive sales agent are inconsistent with his later evidence that he already believed he had been appointed the sales agent. 1. The Court also notes that Mr Zhu's explanation as to how the $500,000 payment was derived was not consistent: 1. Mr Zhu initially explained the $500,000 was to be paid out of his commission for the Baulkham Hills Project. He described it as "another channel" to pay the $500,000 (T245:32-246:9). 2. Mr Zhu later explained the $500,000 was derived by reference to a referral fee he would usually pay. His evidence in cross-examination was (T276:49-277:8): "Q. Did you know how the $500,000 figure was calculated? A. INTERPRETER: Regarding this I had a detailed description given to Mr Cao. So because he kept saying that if this project could go ahead, then I would be able to make a lot of commission. Based on this, he'd wanted to ask me for more money. And how this money was calculated, I explained to him. So I said to him that as an agent and - for a project, we would be paid referral fee. For each unit it would be about 2,005 and 5,000 - around 2,005 and 5,000. And there were over 100 units, so roughly I'd calculated it would, it would be between the 400,000 to 500,000. So then I said "I will give you a round figure", that was 500,000 and it would be easier to remember." 1. A third version appeared in a letter from Mr Zhu's solicitors to Merfad's solicitors dated 8 November 2013 in relation to the caveat which Mr Zhu had lodged (see paragraph [72] above). The letter included: "The obligation on our client [Mr Zhu] was to provide a commitment of $2.4 million to enable your client [Mr Fayad] to complete the purchase of the property at Baulkham Hills. In return for this commitment, your client agreed to provide a fixed return totalling 30% of a maximum profit. This return was to be shared equally between our client and Xijie Cao. Accordingly, there is a loan agreement executed by both our client and Xijie Cao." 1. Furthermore, Mr Zhu consistently submitted that in the absence of him being appointed the exclusive sales agent for the Baulkham Hills Project, he received no benefit from the project. His affidavit evidence was "I never got anything out of this project." 2. Despite this constant assertion, evidence was put before the Court that a settlement was reached between Mr Zhu and Mr Fayad. A deed of settlement was entered into, which included (emphases added): "Background A. Zhu through a related or associated entity loaned $600,000 to Fayad or to a related or associated entity of Fayad pursuant to an oral agreement whereby no interest was required to be paid on the loaned amount. B. From time to time, Zhu provided various consultancy services and real estate services to Fayad or his related or associated entities. C. In or around early 2014, Zhu: called for the repayment of $600,000.00. made a demand to Fayad for payment in respect of services rendered by Zhu or his related or associated entities for the benefit of Fayad and/or his related or associated entities in respect of the development of land at Baulkham Hills. (collectively the Dispute). D. The Dispute arose in the context of a larger dispute between Zhu and Fayad, either directly or through associated entities, in relation to various property development ventures (Larger Dispute). E. Zhu and Merfad entered into a Loan Agreement by which Zhu agreed to provide a loan facility to Merfad not exceeding $2,400,000. F. Without any admission as to liability in relation to the Dispute, the Parties, have agreed that it be resolved on the terms set out in this Deed. General terms 1. Definitions and interpretation 1.1 Definitions In this deed: … Deed of Guarantee means the Deed of Guarantee entered into between Fayad and Zhu on the on part and Xijie Cao on the other part; … Loan Agreement means the loan agreement entered into between Zhu as lender and Merfad as borrower dated 7 June 2012; … 2. Operative Provisions 2.1 Repayment of Existing Loan Without admission, Fayad agrees to repay the sum of $600,000 to, or at the direction of, Zhu upon the earlier of:- The initial drawdown of the construction loan for the purposes of the development of the Land being advanced; or 3 months of the date of this Deed 2.2 Payment for services a) Without admission, in addition to the payment provided at 2.1 above, in consideration for services rendered by Zhu or his related or associated entities, Fayad agrees to pay Zhu the sum of $1,000,000 exclusive of GST to, or at the direction of, Zhu by no later than 30 November 2014. b) Notwithstanding anything in this Deed to the contrary, Fayad is not obliged to make any payment to Zhu or his related or associated entity until a valid tax invoice in the amount of $1,000,000 exclusive of GST has been provided to Fayad. c) Zhu agrees that Fayad may nominate a related or associated entity to be the payer of the amount referred to in Clause 2.2(a) of this Deed, but that the obligation to pay remains with Fayad." 1. It was submitted that the terms of that deed made it clear that, at least as to part, it was directly connected with the events of the Baulkham Hills Project. 2. Given that none of the contemporaneous documents supported Mr Zhu's claim, and in fact disproved numerous statements made by him, it was submitted for Mr Cao that Mr Zhu's evidence should be given no weight and be treated as being unreliable. As such, the Court was invited to make adverse credit findings about Mr Zhu. Credit findings – resolution concerning the protagonists 1. There is a great deal of force in the parties' respective criticisms of each other as witnesses. It is clear that there were inconsistencies and exaggerations in the evidence of both Mr Cao and Mr Zhu. 2. Before going further, the Court acknowledges that the case was complicated by their evidence having to be given in Mandarin. I have been left with the impression that at least some, but far from all, of those inconsistencies may well have been the result of matters being "lost in translation". There were clearly difficulties in translating some of counsels' questions, particularly where they were put emphatically, used Australian colloquialisms or double negatives. I endeavoured to clear up some of the obvious misunderstandings as the evidence was given, but a review of the transcript reveals that ambiguities and obscurities remain. Cultural factors, including exaggerations as a means of emphasis, may also have played a part in some of the answers. 3. However, even when those matters are allowed for, I have no hesitation in finding that neither of the protagonists was a reliable witness. 4. Mr Cao, whether from frustration or otherwise, given the essential simplicity of his case, was prone to what I perceived as exaggeration and embellishment. For example, his evidence that three times in the one conversation Mr Zhu affirmed the $500,000 was unconditional struck me as, at best, an exaggeration (see paragraph [101(12)] above). 5. On the other hand, Mr Zhu was even more unsatisfactory. His answers were often discursive and evasive. As will be apparent from some of the extracts of his cross-examination set out above, he was prone to long explanations in an apparent attempt to reconcile the irreconcilable. I came to the view that he was prepared to say anything that he thought at the time might assist his case. His attempts to explain away the clear language of both the 5 June Memorandum and the 13 June Deed struck me as completely unpersuasive. 6. I therefore came to the view that I could not rely on the evidence of either Mr Cao or Mr Zhu unless it was corroborated by contemporaneous documents or independent witnesses, was inherently likely or against interest. The Court has primarily relied on the contemporaneous documents and what was inherently likely in assessing the facts. Credit findings – other witnesses 1. The other witnesses played a much smaller role. 2. Mr Fayad was a witness with no interest in the outcome. The Court accepts him as a reliable witness. 3. Mr Ngo was a witness called at the end of the case (see paragraph [13] above). He had been instructing Mr Santisi throughout the hearing and was Mr Cao's solicitor on the record in the case. As the case went on, it became obvious that if Mr Ngo was not called, the Court would be invited by Mr Bolster to draw a Jones v Dunkel inference. Even allowing for the facts of Mr Ngo's closeness to the proceedings, his presence throughout the hearing and that he had very few contemporaneous notes, I formed the view that in giving his evidence I could regard him as a professional person with no interest in the outcome who was doing his best to assist the Court with a truthful account of the events. I accept his evidence as reliable. 4. Ms Li was not an independent witness and gave every impression of being very much in her husband's camp. The only evidence she could give was of what she said occurred at Mr Ngo's office. Significantly, she did not suggest she was present when Mr Zhu's alleged explanation to Mr Ngo occurred or during their later alleged conversation about the meaning of clause 2 of the 13 June Deed (see paragraph [86] above). I have proceeded on the basis that I could not rely on her evidence unless it was corroborated by contemporaneous documents or independent witnesses, was inherently likely or against Mr Zhu's interest. Some overall factual conclusions 1. Before turning to the parties' submissions, it is convenient to set out my overall factual conclusions, in addition to the findings that I have made above. Despite the protagonists' obfuscations and exaggerations, by reference to the uncontested facts, the commercial likelihood and, most importantly, the various documents entered into by the parties up to and including the 13 June Deed, I am well satisfied, and certainly on the balance of probabilities, of what follows and find accordingly. 2. The story of the dealings between Mr Zhu and Mr Cao is one of a very willing and anxious party in the form of Mr Zhu and a counterparty (Mr Cao) who, as a result, was able to drive a tough bargain to obtain a well secured and significant return on his investment. 3. In May and June 2012 Mr Zhu was in no doubt that he was the exclusive selling agent for the Baulkham Hills Project. He was correct in that, because Mr Fayad agreed in his evidence that would be the case. Mr Fayad described his working relationship with Mr Zhu as "perfect" (T369:40-41). The fact that a formal (in the legal sense) appointment may not yet have occurred is irrelevant. The commercial reality was clear. 4. Mr Zhu expected to make a great deal of money from his role in the Baulkham Hills Project. This was the expected "financial benefit" recited in the 13 June Deed. To make that money he needed the project to go ahead. Merfad had been unable to find the money to complete the contract to purchase the first tranche of land for the project. Mr Zhu was prepared to say and do whatever he could to find a financier. He found Mr Cao. 5. Mr Cao was an astute and determined business man. He knew that he held the commercial whip hand. He was determined to get a 36% return on his investment with maximum security. He was able to get that primarily from Merfad and, as to the balance, from Mr Zhu. 6. Whether the various steps in achieving that goal were volunteered by Mr Zhu or first suggested by Mr Cao is also irrelevant. Those steps included: 1. Mr Zhu was prepared to borrow the money from Mr Cao and lend it on to Merfad, hence Mr Zhu entered into the Zhu/Merfad Loan Agreement. However, Mr Zhu was also content for Mr Cao to lend the money directly to Merfad. Whichever it was, Mr Zhu then did the following things to obtain Mr Cao's involvement on the terms demanded by Mr Cao. 2. Mr Zhu verbally offered and then gave Mr Cao the 5 June Zhu Guarantee. 3. Mr Zhu verbally offered to pay Mr Cao the difference between his return from Merfad and the 36%, represented by the sum of $500,000. 4. Mr Zhu entered into the 5 June Memorandum. 5. Mr Zhu entered into the Zhu/Fayad Guarantee in favour of Mr Cao. 6. On 13 June 2012, Mr Zhu and his family company entered into the Zhu and Li Guarantee in favour of Mr Cao. 7. Mr Zhu entered into the 13 June Deed to pay Mr Cao the $500,000 "regardless of whether any of the units in the [Baulkham Hills Project] have been sold or not". 1. Importantly, none of the documents entered into by Mr Zhu set out in the preceding paragraph, especially the 5 June Memorandum (which Mr Zhu drafted) and the 13 June Deed, were expressed to be conditional on Mr Zhu being appointed the exclusive selling agent for the Baulkham Hills Project. 2. Mr Zhu understood exactly what he was agreeing to. He did so willingly. He was confident he could meet his obligations to Mr Cao out of the money he would make from the Baulkham Hills Project. He told Mr Cao that he would be paid from the commissions he (Mr Zhu) expected to make. However, at no time did he suggest that his obligation to pay Mr Cao was conditional on him (Mr Zhu) being appointed exclusive selling agent. There is no reason for him to have required such a condition precedent when he was in no doubt that he was the exclusive selling agent. He was willing to agree to pay Mr Cao "regardless of whether any of the units in the [Baulkham Hills Project] have been sold or not" presumably because, knowing he was the exclusive sales agent, he had no doubt that he would make more than enough from his commissions to pay Mr Cao. 3. Similarly, I readily infer from Mr Cao's evident determination to achieve the 36% return, the course of the negotiations and the terms of the various documents entered into (especially clause 2 of the 13 June Deed), that had Mr Zhu sought to introduce any element of conditionality into his obligation to pay the $500,000, it would have been rejected by Mr Cao. Mr Cao prima facie succeeds 1. In an endeavour to give legal significance to the various conversations and documents which came into existence between 5 and 13 June 2012, Mr Cao's case was argued in a number of different ways. The simplest of these (described in paragraph 12 of Mr Santisi's closing written submissions dated 21 November 2019 as "an alternate and further claim") is an action in contract on the 13 June Deed. That is all Mr Cao needs and all the Court needs to consider. The 13 June Deed is a deed, therefore no issue of adequacy of consideration arises. In its terms the obligation to pay the $500,000 is unconditional. Mr Zhu did not dispute that the registration of the plan of subdivision required to enliven that obligation occurred on 23 September 2016. Subject to determining the defences raised by Mr Zhu, the Court concludes that by reason of the 13 June Deed, Mr Zhu became liable to pay Mr Cao $500,000 no later than 23 December 2016 and is entitled to judgment accordingly. 2. The defences raised by Mr Zhu are: 1. On its proper construction or by implying a term to this effect, Mr Zhu's obligation to pay the $500,000 under the 13 June Deed was conditional upon Mr Zhu (by himself or by Be100) being appointed exclusive selling agent for the Baulkham Hills Project; 2. A claim that the 13 June Deed should be rectified so that clause 1 would read (the additional words proposed are in italics): 1. In consideration of the financial facility provided by CAO to Merfad Projects Pty Ltd to fund the Property Development, ZHU has agreed (in addition to the guaranteed financial return already provided by MPPL to CAO), to pay CAO an amount of five hundred thousand dollars (AUD$500,000) conditionally upon ZHU or any company controlled by him being appointed as MPPL's exclusive selling agent in respect of the Property Development within three months from the date of the registration of the strata subdivision of the proposed Property Development, time being of the essence. 1. By seeking to enforce the 13 June Deed, Mr Cao was engaging in conduct that was unconscionable within the meaning of the unwritten law from time to time for the purposes of section 20 of the Australian Consumer Law 2010 (Cth) (the "ACL"). 1. I should record that there was also pleaded a claim that Mr Cao was engaging in misleading and deceptive conduct pursuant to s 18 of the ACL by seeking to enforce the 13 June Deed in the face of what was pleaded as an agreement allegedly reached between the parties on 13 June 2012 that "conditional upon his real estate business securing the right to sell the units in the development, [Mr Zhu] would pay the plaintiff $500,000 from any commission received by him referable to the sale of units in the Baulkham Hill development" (Amended Defence, paragraph 7(b)). This claim was not addressed in Mr Zhu's closing submissions. In any event, I record that I would dismiss it because it depends upon the Court accepting Mr Zhu's version of what was said between him and Mr Cao on that day. Given the view I have taken of Mr Zhu's credit and the fact that the alleged agreement is contrary to the terms of both the 5 June Memorandum and the 13 June Deed, I do not accept Mr Zhu's version of events and reject the claim that on 13 June 2012 the parties made the alleged agreement. To the extent it continued to be pressed by Mr Zhu, this claim under the ACL fails. 2. Construction or implication 3. The relevant legal principles were not in doubt. Mr Bolster relied on this statement of the High Court in Rinehart v Hancock Prospecting Pty Ltd; Rinehart v Rinehart [2019] HCA 13 at [44], in which Kiefel CJ, Gageler, Nettle and Gordon JJ stated: "It is well established that a commercial contract should be construed by reference to the language used by the parties, the surrounding circumstances, and the purposes and objects to be secured by the contract …" 1. The surrounding circumstances Mr Zhu submitted that needed to be considered by Court when construing the 13 June Deed were: 1. Mr Zhu was a real estate agent with a connection to Mr Fayad; 2. Mr Zhu was interested in the Baulkham Hills Project; 3. Mr Cao had lent Merfad $2.4 million; 4. The purpose of the loan was to enable Merfad to acquire property for the Baulkham Hills Project; 5. The term of the loan was two years and six months; 6. Interest was to be paid at a fixed rate of 26% per annum; 7. The interest was less than the 36% Mr Cao initially wanted; 8. The loan was guaranteed by Mr Zhu, Mr Fayad and his company Zhu and Li Investment Pty Ltd; 9. Mr Zhu had been told his company would be appointed the exclusive sales agent for the Baulkham Hills Project; 10. If Mr Zhu was the exclusive sales agent, he was set to make a considerable profit; 11. If Mr Zhu was not appointed, he had no commercial interest in the Baulkham Hills Project, despite guaranteeing Mr Cao's loan; 12. If the construction certificate were not obtained by Merfad, the loan would be repaid at a lower rate; and 13. Mr Zhu offered to pay Mr Cao $500,000 for investing in the Baulkham Hills Project. 1. With these surrounding circumstances in mind, it was submitted that no reasonable businessperson in the position of the parties would have objectively concluded that Mr Zhu was required to pay Mr Cao $500,000 if he were not appointed the exclusive sales agent. 2. The difficulty with the argument put for Mr Zhu is that it does not start with the requirement to construe the 13 June Deed as a whole and therefore does not address the significance of clause 2. Proper effect must also be given to clause 2 of the 13 June Deed, which it will be recalled provides: "ZHU is liable to pay CAO the amount referred to in clause 1 regardless of whether any of the units of the registered strata subdivision Property Development have been sold or not". The language is clear. When the surrounding circumstances relied upon by Mr Zhu are taken into account, the proper construction only becomes more certain: Mr Zhu's obligation to pay did not depend upon him having received any commission from sales. The same result obtains if clause 2 is construed by adding at the end "Mr Zhu" or "by anyone". Mr Zhu's proposed construction of the 13 June Deed cannot stand in the face of clause 2. 3. The same clause means that Mr Zhu's implication argument must fail. Mr Bolster relied on the well-known test for implication of contractual terms set out in the decision of the Privy Council in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283. Three of the criteria for implication identified in that decision are not met in the present case. Most obviously, the term sought to be implied contradicts clause 2, which makes it clear that Mr Zhu's obligation is not conditional on him having received any commissions. Whether the reason for him not having received commission is that he was not appointed selling agent or, having been so appointed, he failed to sell any units is irrelevant to the analysis. Nor is the Court satisfied that the 13 June Deed is not effective without the proposed implication or that the proposed implication is so obvious "that it goes without saying". Rectification 1. With respect, Mr Bolster's own written closing submissions dated 10 December 2019 make it clear why Mr Zhu's rectification claim also fails. Those submissions (correctly, in my respectful view) state (emphasis added): 2. "188. Similarly, there is no evidence to suggest that there was any discussion that the $500,000 was payable in the event that Merfad sold the project and an agent other than Mr Zhu was appointed. 3. 189. The discussions of Mr Zhu and Mr Cao all assumed, indeed they took it for granted, that once the time came for the marketing of the project, it would be Mr Zhu's company that would be formally appointed the exclusive real estate agent of Merfad and be engaged in the act of selling however many units were finally approved. 4. 190. Their common intention only extended in so far as what was to happen in this eventuality. Put simply, the evidence does not suggest that Messrs Zhu and Cao actually turned their minds to the events that actually transpired, namely that the development site would be sold with the purchaser engaging another agent to sell the units." 5. The difficulty with Mr Zhu's case for rectification is that, as his own counsel's submissions accept, it is an attempt to rewrite the 13 June Deed by adding a provision to deal with something the parties had not considered and about which, therefore, they did not have any common intention at the time they executed the 13 June Deed. 6. The law in relation to rectification was recently summarised by the Court of Appeal in Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (In liquidation) [2019] NSWCA 11. I respectfully adopt the legal principles as set out in that case by Sackville AJA, with whom Leeming, Payne, White JJA and Emmett AJA agreed (citations omitted): "121. There is no dispute as to the principles to be applied in a suit for rectification of a contract. They were recently restated by the plurality in Simic: "103 Rectification is an equitable remedy, the purpose of which is to make a written instrument 'conform to the true agreement of the parties where the writing by common mistake fails to express that agreement accurately'. For relief by rectification, it must be demonstrated that, at the time of the execution of the written instrument sought to be rectified, there was an 'agreement' between the parties in the sense that the parties had a 'common intention', and that the written instrument was to conform to that agreement. Critically, it must also be demonstrated that the written instrument does not reflect the 'agreement' because of a common mistake. Unless those elements are established, the 'hypothesis arising from execution of the written instrument, namely, that it is the true agreement of the parties' cannot be displaced. 104 The issue may be approached by asking – what was the actual or true common intention of the parties? There is no requirement for communication of that common intention by express statement, but it must at least be the parties' actual intentions, viewed objectively from their words or actions, and must be correspondingly held by each party." (Emphasis added.) 122. As Kiefel J explained in Simic, the focus in a rectification suit is on "the common intention of the parties up to the time the relevant instrument was made". That intention must be proved by admissible evidence to a high standard. Her Honour quoted a passage from the judgment of Lord Chelmsford LC in Fowler v Fowles that has been cited in other High Court authorities. A fuller version of that passage is as follows: "It is clear that a person who seeks to rectify a deed upon the ground of mistake must be required to establish, in the clearest and most satisfactory manner, that the alleged intention to which he desires it to be made conformable continued concurrently in the minds of all parties down to the time of its execution, and also must be able to shew exactly and precisely the form to which the deed ought to be brought. For there is a material difference between setting aside an instrument and rectifying it on the ground of mistake. In the latter case you can only act upon the mutual and concurrent intention of all parties for whom the Court is virtually making a new written agreement." 1. Mr Bolster's submissions acknowledge that there was no common intention to the effect of the provision sought to be inserted by the proposed rectification. The claim therefore fails at the first hurdle. Insofar as rectification may involve consideration of the parties' subjective intentions as manifested to each other, I repeat the observation made in paragraph [133] above that the Court is satisfied that, for his part, Mr Cao was determined to have maximum security for his return on investment and would have rejected any suggestion that Mr Zhu's obligation to pay should be conditional on anything. Clause 2 of the 13 June Deed demonstrates as much. Unconscionability 1. Section 20 of the ACL provides that "a person must not, in trade or commerce, engage in conduct that is unconscionable, within the meaning of the unwritten law from time to time". 2. Mr Bolster submitted that the unconscionability in Mr Cao attempting to enforce the 13 June Deed arose from the fact that "both parties proceeded upon the consensus, or alternatively assumption, that once Mr Zhu was taken out of the loan transaction (other than as a guarantor) and Mr Cao lent directly to Merfad, Mr Zhu's only interest or expectation of financial gain" was from the Baulkham Hills Project (closing written submissions dated 10 December 2019, paragraph 210). As will be apparent from the Court's factual findings set out above, Mr Zhu has failed to prove that both parties proceeded upon any such consensus or assumption. Assuming in Mr Zhu's favour that he told Mr Cao he expected to pay Mr Cao from commissions, that does not establish that they proceeded on any such joint basis. Clause 2 of the 13 June Deed stands as objective contemporaneous evidence to the contrary. 3. Mr Bolster submitted that other factors which give rise to unconscionability include: 1. The 13 June Deed was prepared in English by Mr Ngo; 2. Mr Zhu was not represented when the 13 June Deed was signed; 3. The 13 June Deed was deficient as it was not conditional upon Mr Zhu being appointed the agent; 4. There was no identification of the financial benefit that the recital to the 13 June Deed referred to Mr Zhu expecting to receive; 5. Mr Zhu has poor English and difficulty reading English. The 13 June Deed was presented to him in English and not translated for him into Mandarin; 6. The effect of the 13 June Deed was Mr Zhu promised to pay $500,000 without getting anything in return; and 7. Mr Zhu ultimately obtained no benefit from the transaction. 1. None of these matters is sufficient to bring Mr Cao's conduct within s 20 of the ACL. Nor is the fact that to enforce the 13 June Deed in the events which have happened (Mr Zhu not having had the opportunity to earn commissions on the sale of units in the Baulkham Hills Project) now seems somehow unfair. Mr Cao clearly wanted to ensure he received his required return come what may. 2. The matters identified by Mr Bolster do not, for example, amount to a special disadvantage which seriously affected Mr Zhu's ability to make a judgment as to his own best interests. Mr Zhu had solemnly promised to pay Mr Cao the $500,000 as early as the 5 June Memorandum which he prepared and signed. There is no suggestion that he could not have sought legal advice at any time between 5 and 13 June. The Court is satisfied that Mr Zhu's English proficiency was sufficient for him to read and understand the 13 June Deed. 3. Mr Zhu has not proven that he had no choice but to sign the 13 June Deed there and then, or that his will was somehow overborne to sign it then. Given that Mr Cao had already entered into the Cao/Merfad Loan Agreement (something known to Mr Zhu as a guarantor of that agreement), there was in fact no commercial compulsion that might otherwise have been the case if Mr Cao was saying he would not sign the Cao/Merfad Loan Agreement unless Mr Zhu entered into the 13 June Deed. Nor were Mr Cao's obligations under the Cao/Merfad Loan Agreement expressed to be conditional upon Mr Zhu executing the 13 June Deed. By 13 June, Mr Cao was legally liable to advance the loan whether or not Mr Zhu signed the 13 June Deed. 4. As I have set out in paragraphs [125] to [133] above, Mr Cao was in a strong bargaining position vis-à-vis Mr Zhu and Merfad. He used it to ensure he had agreements in place which gave him the maximum prospect of receiving the return he insisted upon making. Using a superior bargaining position in arms' length commercial negotiations does not engage s 20 of the ACL: ACCC v CG Berbatis Holdings Pty Ltd (2003) 214 CLR 51; [2003] HCA 18. Conclusion 1. Mr Zhu has not made out any of the defences he has sought to raise in answer to Mr Cao's suit on the 13 June Deed. There will be judgment for Mr Cao for $500,000, together with interest calculated from 23 December 2016 and – subject to giving the parties an opportunity to be heard if they wish – costs. Mr Zhu's cross-claim will be dismissed with costs. ********** 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: 30 March 2020