Successful Loan Recovery and Partial Dismissal of Counterclaim

The claimant sought recovery of a loan from the respondent, while the respondent counterclaimed for breach of contract and breach of trust. The court ruled in favour of the claimant on the loan recovery claim, but dismissed the respondent's counterclaim in part.

Supreme Court New South Wales

Medium Neutral Citation: [NAME] v [NAME] [2021] NSWSC 1096 Hearing dates: 25, 26, 27, 28, 29 May 2020; 1 September 2020; 16 March 2021; 18, 19 May 2021 Date of orders: 31 August 2021 Decision date: 31 August 2021 Jurisdiction: [NAME]: Parker J Decision: See [387]-[391] Catchwords: CONTRACTS – payment of sum of money by the plaintiff to the defendant – whether the payment constituted a loan repayable by the defendant – identity of borrower [NAME] – equitable remedies – account – purchase of the property funded in part by a [COMPANY] loan obtained by the cross-defendant and in part by remittances by the cross-claimant – cross-defendant borrows additional sum largely for his own purposes, and lets property to tenant – scope of account to which cross-claimant entitled LIMITATION OF ACTIONS – equitable [NAME] of laches and acquiescence – whether inordinate delay in commencing the cross-claim – prejudice to cross-defendant LIMITATION OF ACTIONS – statutes of limitation – Limitation Act 1969 (NSW), s 15 – whether s 15 applied directly or by analogy – whether the cross-claim was an action founded on a duty at common law to account – whether s 15 operated by analogy to claim for account in [NAME]'s exclusive jurisdiction – relation back of amendments to cross-claim – discretionary factors – effect on items in account prior to beginning of limitation period Legislation Cited: Civil Procedure Act 2005 (NSW), ss 56, 65 Judicature Act 1873 (Imp) (36 & 37 Vict, c 66), s 25 Limitation Act 1939 (Imp), ss 2, 28 Limitation Act 1969 (NSW), ss 15, 23, 47, 48, 54, 55, 74 Limitation of Actions Act 1958 (Vic), s 5 Mercantile Law Amendment Act 1856 (Imp) (19 & 20 Vict, c 97), s 9 Real Estate (Limitation of Actions) Act 1837 (NSW) (8 Wm IV, No 3) Real Property Act 1900 (NSW), s 57 Real Property Limitation Act 1833 (Imp) (3 & 4 Wm IV, c 27), ss 2, 24, 25 Statute of Limitations 1623 (Imp) (21 Jac I, c 16), s 3 Trustee Act 1888 (Imp) (51 & 52 Vict, c 59) Cases Cited: [NAME] v [COMPANY] of New South Wales [1984] 1 NSWLR 285 [COMPANY] v [NAME] (No 2) (2014) 48 WAR 1 Burdick v Garrick (1870) LR 5 Ch App 233 [COMPANY] v [COMPANY] (Court of Appeal (NSW), 24 August 1982, unrep) CSR Ltd v Amaca Pty Ltd [2016] VSCA 320 Dovuro Pty Ltd v Wilkins (2003) 215 CLR 317 Faitrouni v El Omar [1999] NSWSC 84 Feiglin v Ainsworth [2011] VSC 454 [NAME] v [NAME] (No 2) [2001] NSWSC 6 How v Earl Winterton [1896] 2 Ch 626 In the application of [NAME] and [NAME] [2014] NSWSC 821 Jane v Bob Jane Corporation Pty Ltd [2013] VSC 406 Knox v Gye (1872) LR 5 HL 656 [NAME] v [NAME] (No 3) (1889) 14 App Cas 437 [COMPANY] v [NAME] (Supreme Court (NSW), 5 March 1993, unrep) McDonnell & East Ltd v McGregor (1936) 56 CLR 50 at 57 McGee v Yeomans (1977) 1 NSWLR 273 Metropolitan Bank v Heiron (1880) 5 Ex D 319 Nelson v Rye [1996] 2 All ER 186 Paragon Finance PLC v DB Thakerar & Co [1999] 1 All ER 400 Re Sharpe [1892] 1 Ch 154 Soar v Ashwell [1893] 2 QB 390 Sze Tu v Lowe (2014) 89 NSWLR 317 Taylor v Davies [1920] AC 636 [NAME] v [NAME] (No 2) [1977] Ch 106 Weldon v Neal (1887) 19 QB 394 Wheatley v Bower [2001] WASCA 293 Xinfeng Australia International Investment Pty Ltd v GR Capital Group Pty Ltd [2021] NSWSC 614 Texts Cited: [NAME], J D, [NAME] and [NAME], Meagher, Gummow and Lehane's [NAME] (5th ed, 2015, LexisNexis Butterworths) New South Wales Law Reform Commission, First Report on the Limitation of Actions (Report No 3, October 1967) [NAME], S J, "The Transformations of Account" (1964) 80 LQR 203 [NAME], J A, The Duty to Account: Development and Principles (2016, [COMPANY]) Category: Principal judgment Parties: [NAME] (Plaintiff/Cross-Defendant) [NAME] (Defendant/Cross-Claimant) Representation: Counsel: [redacted] [NAME] (Defendant/Cross-Claimant)

Solicitors: [redacted] [NAME] (Defendant/Cross-Claimant) File Number(s): 2016/389706 Publication restriction: Nil

Judgment 1. These proceedings arise out of a dispute between two former business associates about property and [NAME] dealings between them. The plaintiff seeks judgment for the amount outstanding under an alleged loan to the defendant in 2011 of 11 million Chinese yuan (¥): about $1.6 million at the then exchange rate. The defendant cross-claims for several million dollars said to be owing with respect to the parties' dealings over a property at [NAME] which the plaintiff purchased with funds provided by the defendant and held until 2014.

2. Both the parties are businessmen of Chinese origin. The plaintiff, [NAME], has been an Australian citizen since 1998 and lives in Sydney. The defendant, [NAME], obtained Australian permanent residency in 2009 and then established a home in Melbourne for his wife and children. He himself spent considerable time in Sydney from mid-2010 until April 2011. Since then he appears to have been living back in China.

Claims and defences for determination 1. The dealings between the parties go back to 2004. It was in that year that [NAME] bought the [NAME]. The property was initially acquired as a home for [NAME], although as events transpired he appears not to have used it much, if at all. 2. [NAME] remitted about $2.1 million towards the purchase, which was supplemented with mortgage finance from the [COMPANY] ("[NAME]"). The amount borrowed from the [NAME] was $2.275 million. After the purchase was completed [NAME] continued to make remittances to finance the loan repayments and other expenses of holding the property.

3. Starting in 2010, [NAME] became involved in further dealings concerning the purchase, through Australian companies, of properties at [NAME] in Sydney for redevelopment purposes. [NAME] became a fifteen per cent shareholder in the [NAME].

4. The ¥11 million payment which is the subject of [NAME]'s claim was made in April 2011. By mid-2011 the relationship between the two men was under strain. [NAME]'s remittances for the [NAME] ceased in October. All communication ceased in 2012.

5. In 2007 and 2008, [NAME] had obtained increases in the [NAME] loan facility and had drawn down the funds, largely, if not entirely, for his own benefit. According to [NAME], he was unaware of this at the time. After the final rupture between the parties in 2012, [NAME] ceased to make payments on the loan. The [NAME] conducted a mortgagee sale of the property in 2014. The net proceeds amounted to $3.260 million, less than the amount outstanding under the loan. 6. [NAME] commenced these proceedings as plaintiff in late 2016. He alleged that the ¥11 million payment was a loan to [NAME] which carried interest at two per cent per month. [NAME] allowed a credit for $800,000 (¥5.2 million at the then exchange rate) received from the [COMPANY] in November 2011. 7. [NAME]'s response to [NAME]'s claim has developed over time. His initial [NAME] was filed in April 2017. That [NAME] simply put [NAME]'s allegations in issue. [NAME] denied any loan agreement. Indeed, he did not even admit that he had received the ¥11 million from [NAME].

8. When the time came for [NAME]'s affidavit evidence to be filed, his case expanded. [NAME] alleged that the ¥11 million payment was not a loan but a part-payment by [NAME] pursuant to an earlier agreement between the parties that [NAME] would buy [NAME] out of the [NAME]. In June 2018 [NAME]'s [NAME] was amended so as to reflect these allegations.

9. On [NAME]'s case, the ¥11 million had only partly discharged [NAME]'s obligations under the alleged purchase agreement. But it was not until later in 2018 that a cross-claim was foreshadowed. The proposed statement of cross-claim pleaded a case of breach of contract. Anticipating a [NAME] based on the statute of frauds, it also included an alternative claim for restitution.

10. By this time [NAME] had obtained access to documents from the Land Titles Office and from the [NAME]. On the basis of those documents, further claims were included in the proposed cross-claim. Those claims were independent of the claim based on the alleged agreement. It was alleged that [NAME] received the remittances, and held the [NAME], as trustee, or fiduciary agent, of [NAME]. The claims included allegations of breach of trust (or breach of fiduciary duty; for simplicity, I will refer only to breach of trust in the description which follows).

11. First, [NAME] alleged that not all of the money remitted in 2004 was actually applied to the purchase of the property. The sum of $480,000 was unaccounted for, which [NAME] alleged [NAME] must have stolen. [NAME] next claimed $1.226 million as monies received by [NAME] from the drawdowns in 2007 and 2008. In each case, this was said to have been a breach of trust. Thirdly, it was alleged that [NAME]'s conduct in allowing the [NAME] to sell the property was both a breach of contract and a breach of trust.

12. On behalf of [NAME], objection was taken to the introduction of these claims by way of cross-claim in the proceedings. Any cross-claim should have been filed at the same time as [NAME]'s [NAME], and [NAME] therefore needed an extension of time from the Court. That extension was resisted by [NAME].

13. The ground, or one of the grounds, for resistance was that limitation periods had expired in the meantime. Once the cross-claim had been filed, for limitation purposes the claims in it would relate back to the commencement of the proceedings (see Limitation Act 1969 (NSW), s 74, set out at [367] below). On [NAME]'s behalf it was contended that the Court should only allow the extension of time on terms that the cross-claim would operate for limitation purposes from the date on which it was filed. It was agreed between the parties that this question would be reserved for determination by the trial judge, and in November 2018, consent orders were made for the filing of the cross-claim on that basis.

14. As a result, the state of play when the case came on for hearing in May last year was as follows. [NAME] maintained his claim for the balance of the ¥11 million, plus interest at two per cent per month. [NAME]'s [NAME] to this claim was that the payment was not a loan but a payment on account of an alleged agreement by [NAME] to buy him out of the [NAME]. Alternatively, [NAME] contended that, if the payment was a loan, it was a loan to the [COMPANY] and not to him personally.

15. On his cross-claim, [NAME] sought judgment for the total amount remitted (said to be $3.45 million), based on breach of contract (or breach of trust). Alternatively, [NAME] sought judgment by way of restitution in that sum, less the ¥11 million paid by [NAME] in 2011. [NAME] also sought judgments against [NAME] for breach of trust in the sums of $480,000 and $1.226 million.

16. In his [NAME] denied the alleged purchase agreement. In response to the restitution claim, he alleged that he had applied the remittances by [NAME] to the purchase of the property and the making of loan repayments. [NAME] denied misappropriating the $480,000 remitted in 2004 for the purchase of the property. He admitted that he had drawn down $1.226 million from the loan increases in 2007 and 2008, but alleged that some of the monies had been applied to making loan repayments, or otherwise for [NAME]'s benefit, and should be set off. [NAME] denied liability for any loss suffered as a result of the mortgagee sale; he alleged that the sale was [NAME]'s responsibility because he had ceased to make remittances to cover the loan repayments.

17. As foreshadowed, [NAME] also contended that the claims were statute barred. In reply, [NAME] disputed that this was so. In particular, it was contended that one of the limitation periods upon which [NAME] relied only began to run when [NAME] discovered, or might with reasonable diligence have discovered, the cause of action: Limitation Act 1969, s 47(1)(e). Furthermore, other applicable limitation periods were extended because [NAME]'s conduct amounted to fraud or fraudulent concealment: s 55. There was also the issue about the relation back of the allegations in the cross-claim.

18. The hearing took place over five days between 25 and 29 May 2020. At the end of the hearing, issues arose as to how, if [NAME]'s claim concerning the additional mortgage drawdowns succeeded, the amount due would be quantified. Counsel for [NAME] accepted that [NAME] was still responsible for ongoing interest to the extent of the $2.275 million originally borrowed with his approval.

19. Counsel also raised further claims based on evidence given at the trial. [NAME]'s ex-wife gave evidence in cross-examination that she spent the missing $480,000 (she said she paid $400,000 to two other real estate agents involved in the transaction and kept the other $80,000 for herself). Evidence also emerged of [NAME] having received rent monies from a tenant he put into the property in 2011. Eventually counsel foreshadowed an application to amend the cross-claim so as to seek, in the alternative to specific sums by way of equitable compensation, the taking of a full account of all the monies paid over by [NAME] or derived by [NAME] from the property.

20. Unfortunately, this resulted in a protracted delay. [NAME]'s amendment application was opposed by [NAME]. His contention was that the further claims and new prayers for relief were statute barred. [NAME] countered that the subject matter of the amendments could not with reasonable diligence have been discovered before they emerged at the trial (or, at least, before the proceedings were instituted). [NAME] also expanded his plea of fraud and fraudulent concealment.

21. For [NAME] it was contended that the claims could, and should, have been raised earlier. It became apparent that if the amendments were permitted, that would give rise to further factual issues which would require both parties to reopen their cases. In itself, this was, so it was submitted, sufficient to refuse the application on discretionary grounds. For similar reasons, it was contended that if the Court would otherwise have been inclined to allow the amendments, they should only operate from the date on which they had been notified. Should the Court take that view, it was contended, the claims would be clearly out of time and therefore leave should be refused in any event.

22. Following a hearing on 1 September, I decided to allow [NAME] to amend his cross-claim even though it would require a reopening. I directed that an amended statement of cross-claim, and a [NAME], be filed, reserving leave to [NAME] to apply to disallow any amendments to the statement of cross-claim which went beyond those foreshadowed in [NAME]'s application. I also reserved for the final hearing the question about the relation back of the amendments.

23. The amended pleadings were filed. [NAME]'s statement of cross-claim was amended to include the foreshadowed claim for a full account, and to make specific claims for the rental monies allegedly received by [NAME]. The [NAME] disputed the further claims on the merits, and pleaded limitation defences to them and to the claim for an account. The [NAME] also pleaded the [NAME] of laches to the equitable claims. On behalf of [NAME] the application of the limitation and laches defences was disputed, including by reliance on s 55.

24. No application was made on [NAME]'s behalf to have any parts of the amended statement of cross-claim struck out. The parties agreed a timetable for the preparation of supplementary evidence.

25. But after that evidence had been prepared, an application was made on behalf of [NAME] to reagitate my decision to permit the amendments. I was asked to set aside the orders I had previously made. The parties agreed that there should be a formal hearing of this application, which took place on 16 March this year.

26. In presenting the application, counsel for [NAME] proceeded on the basis that my orders permitting amendment had been made on a provisional basis, so that they could be reconsidered once the revised pleadings and new evidence had been analysed. That was not reflected in the terms of my orders last September, and I am not sure that it is what I intended. But counsel for [NAME] did not object and I dealt with the application on its merits.

27. I decided to reject the application and reaffirm the approach I took last September. Set out below are the reasons which led me to this conclusion. I was influenced by five main factors.

28. First, it had become quite clear (and it was clear by the end of the hearing in May last year) that if [NAME]'s claims succeeded, some sort of accounting process would be required, covering at least the mortgage drawdowns and the subsequent dealings on the [NAME] loan account. It would have been unfair to [NAME] to order compensation in the full amounts drawn down when the evidence showed that at least some of the monies were not spent for his benefit. Equally it would have been intolerable to refuse relief entirely because [NAME] failed to prove an entitlement to the whole of the drawdown sums. [NAME]'s legal advisers could be criticised for failing to appreciate the need for an account earlier, it was clearly in both parties' interests that if the Court was to grant any relief, it should be the proper relief.

29. Second, there was clearly a substantial case that [NAME] did not know about the $480,000. Senior counsel for [NAME] himself described [NAME]'s ex-wife's evidence in cross-examination as having "come out of left field". [NAME] could with reasonable diligence have found out about the payments might have been debatable. But the issue could only be properly decided by looking at the evidence as a whole, including evidence from [NAME] himself. The same observations applied to [NAME]'s attempt to invoke s 55. It was not possible on the papers to dismiss [NAME]'s claims as being statute barred.

30. Third, [NAME]'s laches [NAME] gave rise to the same considerations. That too was going to require evidence, including, it would seem, from [NAME]. This [NAME] also could not be determined on the papers.

31. Fourth, there might have been stronger arguments against permitting [NAME] to claim the rental monies. But once the conclusion had been reached that at least some of the amendments should be permitted and a reopening should take place, the convenient course was to deal with all of the further claims in that way.

32. Fifth, there was force in [NAME]'s discretionary argument based on the protracted delays in the proceedings up to May last year. But this argument arose out of essentially the same factual background as would be canvassed in reopening. By permitting the amendments I was requiring [NAME] to face a further hearing which he said was unjustified. Orders for costs would go some way to curing the prejudice, but not the whole way. Nevertheless it was still open to [NAME] to rely on essentially the same discretionary grounds to argue that the limitation dates should run from the date of the amendment, and thus defeat, or arguably defeat, the claims. On balance, the prejudice to [NAME] was not a decisive factor.

33. In these circumstances, I considered that the objectives set out in s 56 of the Civil Procedure Act 2005 (NSW) ("CPA") were best reconciled by allowing [NAME]'s cross-claim to proceed in its amended form. At the same time, there were some deficiencies in the statement of cross-claim and I directed a further round of pleadings. I fixed the further hearing before me on 1 and 2 July. Later it proved possible to move the hearing forward to 18 and 19 May.

Summary and analysis of evidence

Chronology of events 1. [NAME] was originally from Ningbo in China. He was born in [DATE], and so was 44 or 45 years old in late 2003 or early 2004 when the dealings between the parties which are the subject of these proceedings began.

2. At the time, [NAME] was living in the Sydney suburb of Earlwood with his ex-wife, [NAME]. They had divorced in August 1999 but continued to live under the same roof. 3. [NAME] has been an Australian citizen since 1998. His business, or his main business, is exporting Australian food and wine to China. In the course of this business he makes frequent visits to China. 4. [NAME] and his wife, [NAME], are also from Ningbo. They are a few years younger than [NAME]. [NAME] was born in [DATE] and [NAME] was born in [DATE]. [NAME] was thus 36 or 37 years old when the dealings between the parties began. 5. [NAME] is a builder and property developer who specialises in residential properties in Ningbo. He operates through companies which are either wholly owned or majority owned by himself or his wife. According to [NAME], he has been very successful financially. In his affidavit he stated that in 2015 his income from property development was approximately ¥100 million, or $20 million.

6. The parties first met in Ningbo in 2002 or 2003 when [NAME] was on one of his visits to China. [NAME] and [NAME] were interested in establishing a home in Australia. In late 2003 or early 2004 they visited Australia and met up with [NAME] and his ex-wife, [NAME] (who apparently had some contacts among Chinese real estate agents). [NAME] wanted to buy a property in [ADDRESS], [NAME]. The property was apparently a townhouse, but a very extensive one. It is said to have had eight bedrooms, eight bathrooms, two garages and a downstairs flat.

7. There is no written evidence of the deal struck between the parties, but it appears to have been agreed that the property would be purchased in [NAME]'s name, but for [NAME]'s benefit. Mortgage finance was obtained in [NAME]'s name for $2.275 million on the basis that [NAME] would provide the additional funds required to complete the purchase and to cover the ongoing interest and holding costs.

8. The funds for the purchase were provided by [NAME] to [NAME] via an internet organisation called [NAME] (see Xinfeng Australia International Investment Pty Ltd v GR Capital Group Pty Ltd [2021] NSWSC 614 at [81]-[84] for a description of how [NAME] operates). Between March and May 2004 [NAME] sent ¥12.6 million (equating to $2.1 million) to [NAME] by this means.

9. The purchase was completed on 27 May 2004. A total of $2.275 million was drawn down from the [NAME]. In order to complete the purchase, the additional sum of approximately $200,000 was borrowed from [NAME]'s mother, [NAME].

10. The [NAME] loan was established as a loan account together with an associated offset account, the credit from which was set off against the principal owing on the loan for the purpose of calculating interest. Monthly loan repayments were, for most of the period, automatically debited to the offset account.

11. To cover the loan repayments, and other costs such as council rates, [NAME] sent remittances on an as-required basis, typically every few months. The first payment was made on 8 June 2004. The initial remittances were made in cash, often to [NAME] when he was visiting China. Later remittances were made by direct credit to [NAME]'s offset account.

12. In October 2007 the loan facility was varied so as to increase the limit by $950,000 to $3.25 million. At this point the amount drawn on the loan had been reduced to about $2.205 million. The capital repayment of about $70,000 was redrawn, with the result that [NAME] received (after payment of fees) approximately $1.41 million. Of this, $200,000 was used to repay [NAME]. About five months later, in March 2008, the loan facility was further varied to increase the limit by $190,000 to $3.44 million. A further $181,000 was drawn down by [NAME].

13. According to [NAME] he was never told about these borrowings. I discuss the evidence about the borrowings in more detail below. One thing which is clear is that [NAME] appropriated most of the resulting funds, apart from the money used to repay [NAME], for his own use. [NAME] received no benefit from those funds.

14. Early in 2009 [NAME] and [NAME] obtained residency visas for Australia. In April or May they bought a house at Balwyn in Melbourne and established a home there. They also bought (apparently so as to satisfy their visa requirements) a winery in rural Victoria.

15. At about the same time as they bought the house in Balwyn, [NAME] and [NAME] established an Australian company, [COMPANY] ("[NAME]"). Its issued share capital was $100,000, with [NAME] holding forty per cent of the shares and [NAME] sixty per cent. [NAME] and [NAME] were also the directors. 16. [NAME] had bought the house in Balwyn, [NAME] began making some of the regular payments for the [NAME] on his behalf, and there seems to have been contact between [NAME] and [NAME] for this purpose. By 2010, payments were being made approximately monthly. There seem to have been other dealings between the parties as well, involving liquor purchases, but the evidence does not contain any details about them, and generally speaking they seem to have been kept separate from the payments for the [NAME].

17. In the first half of 2010, [NAME] visited Sydney on several occasions (accompanied by [NAME]) looking for property to invest in. [NAME] put [NAME] in touch with contacts of his for this purpose. In June 2010 [NAME] looked at a property in [ADDRESS], Parramatta (referred to in the evidence as the "[NAME]" site), for development purposes. On 28 [NAME] exchanged contracts on the purchase of the property. The price was $2.92 million and the purchase was completed in August. 18. [NAME] appears to be an enthusiastic gambler. When in Sydney he would gamble at the [NAME] at Darling Harbour. [NAME]'s records for [NAME] from 1 July 2010 to 31 October 2011 are in evidence. They show visits to the gaming rooms over 92 days between the first visit on 16 July 2010 and the last visit on 28 April 2011. During these visits [NAME] would deposit $50,000 a time, and sometimes more, to gamble with.

19. Although the [NAME] would appear to have been available at least until it was let in March 2011 (see [62] below), [NAME] seems to have preferred to stay at the Casino itself. At one point he was prevented from staying at the Casino over an incident there, during which time he moved to a hotel nearby so he could continue to gamble at the Casino.

20. As well as taking on the [NAME] project through [NAME] also became interested in a development site at [ADDRESS], [NAME], which was being sold by [NAME]. Also involved were [NAME] and [NAME], a Vietnamese businessman who was an acquaintance of [NAME]. Contracts were exchanged with the Council to buy the property on 12 August 2010. The purchase price was $24.75 million.

21. The vehicle used for the purchase was a company called [COMPANY]. That company had originally been [NAME]'s: it was incorporated in February 2010 with [NAME] holding all of the shares then on issue and being the sole director.

22. The deal between the three participants was that [NAME] would have seventy per cent of the [NAME], and [NAME] and [NAME] fifteen per cent each. Additional shares were issued by [NAME]'s company so that the shareholdings were in these proportions. [NAME] and [NAME] were appointed as directors, and the company's name was changed to [COMPANY] ("[NAME]").

23. It was also agreed that the parties would contribute the $2.475 million deposit, and in due course the balance of the purchase price, in accordance with their shareholdings in [NAME]. [NAME]'s fifteen per cent share of the deposit was $371,025. There is a factual dispute about whether [NAME] actually contributed this amount from his own monies; [NAME] claims that he put the money in for [NAME] as a loan to him. I will refer to this in more detail below. 24. [NAME] experienced difficulties in raising the funds necessary to complete the purchase. On 26 October, [NAME] issued a notice to complete requiring payment to be made by 10 November. At this point, [NAME] pulled out of the project. He sold his 1,500 shares in [NAME] to [NAME], who now had eighty-five per cent of it. 25. [NAME] was unable to complete on 10 November, but an extension was agreed with the council to 25 January. In the meantime, on 10 January, [NAME] became a director of [NAME]. According to his evidence, he was asked to do so by [NAME] because of the need to have a resident director. 26. [NAME] was still unable to complete the purchase on 25 January. The purchase date was extended to 8 March, then to 30 March then to 8 June.

27. Meanwhile, [NAME] had been late with some of the regular monthly payments on the [NAME]. On 28 March, [NAME] leased the property to a tenant, [NAME]. The rent was about $8,700 per month. A formal residential tenancy agreement was entered into, beginning on 28 March 2011 and extending for twelve months.

28. Two days later, on 30 March, [NAME] obtained a signature from [NAME] on a handwritten document in which [NAME] undertook that, in the event of termination of the contract for the purchase of the [NAME] site, he would accept responsibility for all resulting "debts and compensation claims". The date of this document coincided with [NAME]' failure to complete on that day. On the following day the Council formally agreed to an extension until 20 April.

29. According to [NAME], the indemnity document was signed by [NAME] at the office of a solicitor, [NAME], who was acting for [NAME] (and [NAME]). This was not disputed by [NAME] or [NAME]. [NAME] in fact acts for [NAME] in these proceedings.

30. The payment of ¥11 million, which is the subject of [NAME]'s claim in these proceedings, was made twelve days later, on 11 April 2011. The payment was made by [NAME] from a [COMPANY] account of his to a [COMPANY] account of [NAME], also in China. [NAME] and [NAME] appear to have both been in China at the time.

31. According to [NAME] this payment was made as a loan to [NAME] following an agreement which had been made in Australia shortly beforehand. [NAME]'s version of events was quite different. He said the payment was made by [NAME] in effect to buy out his ([NAME]'s) interest in the [NAME]. I deal with the evidence on this issue in more detail below. 32. [NAME] again was unable to complete the purchase on 20 April. This resulted in a further extension granted by the Council to 8 June, but that date was not met either.

33. By now the relations between [NAME] and [NAME] appear to have become strained at best. On 18 [NAME] notified the Australian Securities and Investments Commission ("ASIC") that he had ceased to be a director and secretary of [NAME]. On 26 July, he prepared a memorandum of agreement between himself and [NAME]. The memorandum provided that [NAME] would transfer his fifteen per cent share of [NAME] to [NAME], would resign as secretary, would cease to be a signatory on the company's [COMPANY] accounts, and would be refunded the $371,250 paid towards the deposit. The memorandum also confirmed a promise by [NAME] to repay the ¥11 million. 34. [NAME] dated the memorandum 27 July and signed it. It was however never signed by [NAME]. According to [NAME], he showed the memorandum to [NAME] in China and [NAME] put him off on the basis that a more formal document should be drawn up in Australia in due course. [NAME] denies this conversation and contends that he was never shown the document or asked to sign it. I address this conflict in the evidence as part of my analysis below. 35. [NAME] still proved unable to complete the purchase of the [NAME] property. On 27 September the Council sent a further notice to complete which was not complied with. On 12 October the contract was formally terminated and the deposit forfeited. 36. [NAME] had earlier established a term deposit of $860,000 with the [NAME], apparently as a condition of the [NAME] providing a finance facility for the purchase of the [NAME] property. On 18 November the term deposit was redeemed, with the principal and accrued interest, totalling $894,000, being transferred to [NAME]' operating account. On 22 November $800,000 was transferred from the operating account to a company called [COMPANY] ("[NAME]"), which belonged to [NAME]. At the same time, four payments were made from the operating account for expenses associated with the project.

37. According to [NAME], the $800,000 transfer was agreed between himself and [NAME] as part repayment of the ¥11 million borrowed by [NAME] in April. [NAME] denies that he ever agreed to the transfer, and says it was made without his knowledge or approval. Again, I discuss this conflict in the evidence when resolving the issue as to the true nature of the April payment, below.

38. The withdrawals of the $800,000 and the other expenses left [NAME] with only $1,600 in its [COMPANY] account, and the account was closed on 29 November. Nothing further appears to have been done with the company, and it was eventually struck off in May 2013.

39. Meanwhile, the monthly payments by [NAME] on the [NAME] ceased. The last payment occurred at the end of October 2011. [NAME] sent text messages about this to [NAME] and [NAME], to which there was no reply. Over the months of December, [NAME] paid a total of $54,000 from his own money into the offset account. He also started to have the rent payments being made by [NAME] deposited directly to that account.

40. At this stage, [NAME] had possession of the certificate of title for one of the parcels of land making up the Parramatta property which had been acquired by [NAME] in August 2010 (see [52] above). The certificate had been provided to him on [NAME]'s instructions, apparently for safe keeping. On 13 February 2012, [NAME] lodged a caveat over the parcel. The caveat claimed an interest in the land in the nature of an equitable mortgage by a deposit of title deeds as security for monies (unspecified) allegedly borrowed from [NAME] by "the registered proprietor".

41. According to [NAME], he was later asked by [NAME] to return the certificate. [NAME] then gave it to [NAME] on the assurance that it would be returned, but it was not. This evidence was not contested by [NAME].

42. On 23 [NAME] placed a caveat on the [NAME]. The caveat was lodged by [NAME] on [NAME]'s behalf. It claimed an equitable interest in the property. It alleged that the property had been "purchased by" [NAME] and that [NAME] as registered proprietor held it on trust for [NAME].

43. On 9 March, [NAME] emailed a letter to [NAME] complaining about [NAME]'s conduct. He called on [NAME] to repay the remainder of the ¥11 million together with his $371,250 deposit on the [NAME] property, and $2 million representing his loan on the [NAME] (the loan balance at the time was actually over $3 million, owing to the additional borrowings by [NAME]).

44. On 12 April, an application was made to the Registrar-General to issue a lapsing notice against [NAME]'s caveat on the [NAME] land. It appears that the notice was issued and the caveat was removed. [NAME] said that he was in China for an extended period at the time and the lapsing notice did not come to his attention.

45. The lease of the [NAME] to [NAME] had expired at the end of March 2012. On 2 May, it was renewed for a two year period at a rent of $9,125 per month.

46. In the meantime, [NAME] had stopped paying monies into the offset account. The loan payments on the [NAME] had fallen into arrears of approximately $39,000. On 7 May, the [NAME] issued a formal demand and notice pursuant to s 57(2)(b) of the Real Property Act 1900 (NSW).

47. By now [NAME] saw himself as the victim of a fraud which had been perpetrated by [NAME]. On 28 June he complained to the police and signed a statement detailing his complaints against [NAME]. 48. [NAME] did not dispute the [NAME]'s enforcement action with respect to the [NAME]. On 20 July he submitted a hardship request form in which he asserted that he had been defrauded of about $2 million in 2011, and invited the [COMPANY] to sell the property.

49. On 30 August, the [NAME] began possession proceedings. The proceedings were not defended by [NAME] but they were defended by [NAME], who sought to remain in occupation of the property in accordance with his tenancy agreement.

50. Judgment was given against [NAME] for $3.42 million in December 2012 but it was not until September 2013 that a writ of possession was finally obtained. Then in February 2014, a last-minute caveat was lodged by [NAME]. It was lodged in the name of her mother, [NAME], and asserted that $200,000 which she had lent had not been repaid.

51. This did not in the end stop the sale which took place in March 2014. On 5 May the proceeds of settlement of the sale ($3.26 million) were received and on 27 May the [COMPANY] closed off the loan account. There was a shortfall of $338,000. It seems that the [COMPANY] has never pursued [NAME] for this amount.

52. According to [NAME], when he visited China in March and April 2012, he consulted a lawyer there about [NAME]'s conduct but was told that he would need to take action in Australia. It was not until June 2016 that [NAME]'s current solicitors sent a letter of demand to [NAME]. [NAME]'s statement of claim in these proceedings is dated 1 November but it was not filed until 29 December 2016. I have set out the course of the proceedings thereafter in the preceding part of this judgment.

Witnesses 1. At the hearing in May last year, the witnesses in [NAME]'s case were [NAME] and [NAME]. Both of them were cross-examined on their affidavits. [NAME] and [NAME] both gave evidence in [NAME]'s case, and were cross-examined. [NAME] also gave evidence in [NAME]'s case about [NAME]'s letter of 9 March 2012 (see [78] above). He was not cross-examined.

2. At the hearing in May this year, further affidavits were read from [NAME] in support of his cross-claim and from [NAME] in opposition to it. There was a brief further cross-examination of [NAME]. 3. [NAME] and [NAME] do not read or speak English. All of the communications between the four witnesses who gave evidence took place in Chinese. All four of the witnesses gave evidence through interpreters.

4. The witnesses were giving evidence years after the event about dealings which had largely been oral, with all of the frailties which that entails. In particular the witnesses could not be expected to be able to recall the precise words which were used in their conversations, and any evidence they did give about those conversations therefore involved the risk of misinterpretation. This risk would have been compounded by the need to translate the witnesses' evidence about conversations which were originally in Chinese into English.

5. The conditions under which the witnesses gave their oral evidence were challenging. All of the witnesses gave evidence remotely. [NAME] and [NAME] were accompanied by an interpreter, but [NAME] and [NAME] gave evidence from China with a remote interpreter in Australia. Naturally this made the task for the interpreters even more difficult than usual. I am sure the interpreters were doing their best but there were occasions on which I was informed through counsel that the lawyers on one side or another (who were bilingual) thought that the translation of questions or answers left something to be desired. 6. [NAME]'s evidence was peripheral and her cross-examination was brief. No challenge was made to her credit. But the credit of the other three witnesses was challenged at various points in cross-examination and some of the challenges were pursued in final submissions.

7. It is easy to understand why these challenges were made. As relayed by the interpreters, there were instances of answers which were non-responsive, sometimes repeatedly so. There were also contradictions between answers given orally and earlier affidavits and oral evidence.

8. These difficulties were particularly pronounced in the case of [NAME], whose cross-examination was the most extensive. Counsel took up some of his challenges with [NAME], putting to him on some occasions that he was refusing to answer questions and on other occasions that evidence he gave which contradicted earlier evidence was false. But the limitations in the process made it very difficult to be satisfied that this was deliberate, as opposed to being the result of difficulties in the translation process (or, in the case of contradictions between the oral evidence and the affidavit evidence, in the translation given to [NAME] when he made the affidavit).

9. As will be seen, I have preferred [NAME]'s evidence (supported in some instances by [NAME]) to that of [NAME] on the key factual issues in the case. I was left with the impression that [NAME] has little real recollection of the relevant events. Although I have not found it possible to decide whether [NAME] was actually trifling with the Court in the manner in which counsel for [NAME] suggested, I found the overall effect of his evidence so opaque that I was left with little confidence in the reliability of his evidence.

10. As I have indicated, there were similar, if not so extensive, difficulties with some of the evidence given by [NAME] and [NAME]. Although I have generally preferred their evidence to that of [NAME], I have not accepted it on every point, and I have generally treated it with circumspection.

Nature of ¥11 million payment by [NAME]

1. Documentary evidence: Although there are [COMPANY] records which confirm the making of the payment in April 2011, there are no contemporaneous records of the dealings between [NAME] and [NAME] which led to that payment. The first written record which refers to it is the memorandum of agreement prepared by [NAME] on 26 July 2011 (see [68] above).

2. The memorandum identified the parties as [NAME] (Party A) and [NAME] (Party B). The parties were identified by reference to their passport numbers and telephone numbers (presumably mobile numbers). [NAME]'s passport and telephone number were Chinese. [NAME]'s were Australian.

3. The operative provisions of the memorandum were (according to the translation provided; emphasis added):

1. Upon the agreement of Party A, Party B will proceed with the registered [NAME] transfer of the real estate development company originally established for the two lots, transferring 15% [NAME] of [COMPANY] to Party A and resigning his position as the secretary of the company. Hereafter, Party B will not own any entity in the cooperation of Party A and correspondently spare [sc will be spared] all the relative responsibilities and obligations.

2. The Agreement shall come into effect upon signing by both parties, after which Party A shall refund AU$371,250.00 invested by Party B within several days.

3. When the Agreement is effective, B will be eliminated from the [NAME] joint account of the two real estate development companies. In addition, Party B will not undertake any related financial or taxation responsibilities and obligations.

4. Upon withdrawing from the Company, Party B shall not seek any possible profits or distribution which might be gained during the later term of the two real estate development projects and not liable to any loans or creditor's rights regarding to the Company's operation.

5. Party A shall keep his original promise and repay RMB 11 million to Party B which was lent by Party A [sic] upon Party B's [sic] request, within several days after the Agreement coming into effect (See the [COMPANY] transfer voucher as evidence). Considering there is a cost for Party B's funds and Party B will not be involved in the two projects due to reasons of other than Party B's, Party A shall pay at a monthly interest rate of 2% as a return for the funds cost. Party B expects that Party A could repay the loan and the interest to Party B in a short time.

1. On 16 [NAME] sent [NAME] a text message stating (in translation): It's been changed again and again at your side. Until when do you intend to drag it? I would not keep waiting in such endless and boring manner. Yes, to this day, I won't kindly persuade you to stop gambling as a friend, as I am not that low. It's also not necessary. I just want to take back what belongs to me. I have my own business and my own choice for doing investment. I also need to support my family. I am absolute not liable for the current situation of [NAME]. I am just a victim and my time was wasted for nearly a year. I think you should be clearer about it. Public opinion is the best judge. As a partner, I have done my part of job. It's totally the choice of you in deciding to do the [NAME]. You cannot blame others. Did you know why the Vietnamese [[NAME]] determinedly withdrew? I have said enough. It's meaningless now. I just want you to give my investment amount back to me by September, including the interests per months. I will use this money to make other investments. I trust you can't go so far as to harm your friends. with no reasons considering your character and conduct. I also hope there are no other results happening between us. As it's a reasonable requirement from me which is also the amount payable by you, there should be no problem for you to pay it based on your strength. I am looking forward to your prompt reply.

1. On 20 August 2011 [NAME] sent [NAME] a text message stating (in translation; emphasis added): If it's not for the loan between you and me, I would have not sent you this message. There is no need to elaborate the reason for ending our cooperation at the end of March upon agreement. I am planning to invest [NAME] in Inner Mongolia with my friends in China. … We have pumped 10 million [sc RMB] into the project already. By the end of August, another 14 million needs to be pumped in from our side. I was supposed not to have financial pressure if you had returned me the money. I feel pity for your financial situation and won't push you too hard. We have been friends for over [illegible] years after all. So, I suggest you prepare [sc pay] half of this amount, i.e. 7 million and I will solve the other half in other ways. It should not be unreasonable request for you. You would be able to make it based on your strength. I trust that you would not make me to break my promise in front of my partners in China and give me a dilemma, right? As to the balance, I agree with your suggestion about settling it by November. Hope you could understand and give support.

1. Following the payment of $800,000 from [NAME] to [NAME]'s company, [NAME], on 22 November (see [71] above), [NAME] sent a text message to [NAME] on 6 December stating (in translation; emphasis added): I replied you in the morning. Please ask someone else about the refund and law suit. I will stop my involvement in this from now on and it's not related to me either for its cause or outcome. You promised to repay me RMB and the interest by the end of November, but today is already 6 December. I trust you, but I have my arrangement for the money for a long time. I could provide some help again with your matters in Melbourne. Meanwhile, I ask you to solve my RMB issues. You have arrangement for your money, so do I. I hope you could make a one-time settlement.

1. Also in evidence are three further text messages from [NAME] to [NAME] which stated (in translation; emphasis added): 13 December 2011: [NAME], who helped with your Parramatta building construction, called me several times and came to me yesterday. He said many people were pushing him and you. There is no insurance for the construction site for a long time. The site is full of puddles and garbage. Serious collapse occurred at the piling. The people of the neighborhood and the Council are looking for you. l suggest you'd better to face it. Once it's getting serious, I am afraid it may cause other effects. I have remitted the AUD800,000 returned [sc from the [NAME] term deposit] to China. As I said, I also have arrangement for my money. l heard from [NAME] that you have not paid the loan for your house in eastern Sydney. l have paid the [COMPANY] penalty for you several times for nothing. If the loan is failed to pay for over three months, the [COMPANY] will arrange an auction. Considering the downturn of the luxury house market in Australia recently, it'll bring a huge loss. 10 January 2012: In the past days, I have balanced the books with [NAME] for the wine cost. [NAME] should have a settlement for A$350,000. A$75,000 is payable to [NAME]. Deducting the refund from the [COMPANY] last time [sc the $800,000 from the term deposit], I want to know the when you could pay the balance duly refunded [sc refundable] by you to me. I have given enough understanding ethically. I cannot wait endlessly anymore. What is your plan for the loan of the house in eastern Sydney? The [COMPANY] is keeping sending me letters for inquiring about it. If it's dragged like this, my reputation will be damaged. 29 January 2012: How is it going? Have you arrived in Australia? I have been waiting for your message. You delayed it again and again. As I understood your situation, I patiently waited until the Chinese New Year. But we have to settle our books. I believe you are a man who keeps his promise. The Letter of Commitment signed by you [on 30 March 2011, concerning the [NAME]: [see [63] above] was still kept by [NAME]. I won't leave it for nothing. I have paid two months for the housing loan and soon it will be payable for another month. What do you want? How long and how much you will drag me down? I won't bear it for too long.

1. I have already referred to [NAME]'s caveat on one of the [NAME] properties which was lodged on 13 February 2012 (see [75] above) in which he claimed money was owing by the "registered proprietor" (that is, [NAME]). The loan issue was also raised in [NAME]'s letter to [NAME] of 9 March 2012. [NAME] stated (in translation; emphasis added): This is my opinion and principled stand on how to deal with those debts. If necessary, my solicitor will discuss details with you.

1. Before I deal with previous related matters with [NAME], he must settle the payable balance of the ¥ 11 million ([COMPANY] transfer statement is available) that I transferred to him in April 2011 including the 2% monthly interest of this ¥ 11 million. (It is requested by him and he also wrote a letter of commitment). He received 2.5% of the monthly interest from others. My capital also has a cost. I charge him 2%, which is absolutely justified and reasonable. 2. [NAME] must first return the $371,250 that I paid in proportion to my original shares for the "B" plot project (or offset the amount of money of liquor he exported). The reason and facts for the project's failure are obvious to all and have nothing to do with me. I have prepared the record of all legal proceedings and will not repeat them here today. Because his capital was not in place all the time and countless postponements caused by his wild gambling, the project was finally terminated by [NAME] and the land was reclaimed. Why did I transfer ¥ 11 million to him at the beginning by his request and promise? At the beginning, I also believed the assurances he gave me many times. He said that he was not in financial difficulty and the money was only a matter of time. I also wanted to complete the project wholeheartedly. Today, I have no obligation to accompany him to bear any unwarranted consequences, and I have his letter of commitment in writing. I also hope that you will keep the original written by him from the legal point of view. Today, he made irresponsible and untrue statements, which even made me unable to trust a gambler. (I had no intention to evaluate other people's private behavior). Today, he wants to rely on me, including his unreasonable demand that I share with him the interest penalty he pays to the [NAME] because his funds are not in place. This is just his unreasonable wishful thinking.

3. Regarding debt problems related to the property, [NAME] must pay off my [COMPANY] loan of $2 million and my money paid to [NAME]. Then I can make a deal and a decision regarding the sale of the property. Because of the above debt of ¥ 11 million yuan and interest payable, I am very tired of the repeated failure of recovery since July last year. At the same time, it also affects and disturbs my other investment plans. I can no longer trust him. He has repeatedly lied and delayed. Today, I can only seek notarization [clarified by the interpreter at the trial as meaning "justice" or "recourse"] through legal means. … 5. If the above debts are settled by [NAME] according to the agreement, I have the obligation to settle the balance of payment for exported red wine that [NAME] made part of payment previously due to some reasons, the balance of design fees for Parramatta Project and all balance settlement. Meanwhile I will distinguish which the new design cost is in the later period. I will not bear the additional expenses in the later period. … 7. I reserve the legal right to claim debt recovery and compensation from [NAME] through legal proceedings. These are my opinions. Please contact my solicitor if you have any suggestions.

1. Witness evidence: In the particulars to his November 2016 statement of claim (which he verified), [NAME] alleged that the oral agreement for him to lend [NAME] ¥11 million was reached at a meeting between himself and [NAME] at [NAME]'s house in Melbourne. The purpose was allegedly to assist with the [NAME] development. But in his initial affidavit, made in September 2017, he recounted a conversation between mimself and [NAME] in Sydney, after the meeting with [NAME] on 30 March at which [NAME] had signed the indemnity (see [63]-[64] above).

2. In an affidavit sworn at the beginning of last year's hearing, [NAME] corrected himself. He stated: The defendant and I had a conversation on 30 March 2011 at the office of his solicitor [NAME] in words to the following effect: [NAME]: [NAME], I am currently facing some difficulties with finance for the project at [NAME]. I would like to ask if you can lend my around 12 million Yuan for the purpose of funding the project. Otherwise, the project will be in great trouble. [NAME]: Well, I've gathered funds from China and originally intended for it to be used to fund the project at [NAME], but let me check my [COMPANY] account balance to ascertain how much I am able to lend to you. I'll let you know later. [NAME]: Alright. I can repay you 2.5% interest per month as this is the interest rate that I always charge. I will repay the money you lend together with all the interest on or before 1 August 2011. [NAME]: I will charge you 2% interest per month for the loan, but you must repay the money by 1 August. On the next day, I called the defendant and we had a phone conversation with words to the following effect: [NAME]: I am able to lend you around 11 million to you for a short term. As we agreed, I will charge 2% interest per month on the loan and you will need to repay me the money by 1 August 2011. [NAME]: Ok. Thank you. I agree with the terms.

1. At the time [NAME] was holding the certificate of title for one of the [NAME] parcels of land (see [75] above). In his initial affidavit [NAME] stated that once he agreed to make the loan he saw the certificate of title as operating as a form of security.

2. In his statement of claim, his initial affidavit and his correcting affidavit, [NAME] stated that [NAME]'s purpose in making the borrowing was to fund the [NAME] project. [NAME]'s version of the conversation, quoted above, has him suggesting that the monies might be made available out of monies he ([NAME]) had set aside for the [NAME] project. But this seems to be incorrect; the [NAME] project was entirely being carried out by [NAME] (through [NAME]) and there is no suggestion in the evidence that [NAME] was making any contribution to funding that project. [NAME]'s reference must have been to the [NAME] not the [NAME] project.

3. In his cross-examination, it was suggested to [NAME] that in his letter to [NAME] of 8 March 2012, he had stated that the purpose given by [NAME] for borrowing the money was to fund the [NAME], not the [NAME] project. I am not sure that [NAME] accepted there was a contradiction (and I do not think there clearly is). But in the end [NAME]'s evidence left the purpose of the borrowing unclear. [NAME] said that [NAME] sometimes said the money was for the [NAME] project, and sometimes for the [NAME].

4. Returning to [NAME]'s initial affidavit, he next referred to the July 2011 memorandum of agreement (see [68] above). [NAME] stated that he showed the memorandum to [NAME] at a meeting in Ningbo, but [NAME] replied: [NAME], I'll be back in Australia soon. Perhaps it'd be better for the lawyer to prepare a formal document and for us to sign it in his office.

1. In his affidavit [NAME] presented the $800,000 payment in November 2011 (see [71] above) as having been initiated by [NAME]. He said that he received a call from [NAME] and the following exchange took place: [NAME]: [NAME], I am paying you $800,000 right now as my term deposit with [NAME] has expired. I'll repay the rest of the Loan as soon as possible. [NAME]: Alright. Just make sure you do pay me back in full together with the outstanding interest.

1. Following this, no further repayments were made, despite requests, and [NAME] also stopped making payments towards the [NAME] loan (see [81] above).

2. In his initial affidavit, made in March 2018, [NAME] denied that he borrowed the ¥11 million from [NAME], or indeed that he borrowed any money from [NAME] at any time. According to [NAME], the origin of the payment lay in the arrangement which had originally been made for the purchase of the [NAME]. He said that it was part of the arrangement that if he decided in the future that he did not want the property, [NAME] would take it over and buy him out (the full version of [NAME]'s version of the conversation is set out at [186] below).

3. On [NAME]'s version of events, he decided not to continue with the [NAME] in August 2010. He said that following the exchange of contracts on the [NAME] redevelopment project on 12 August, he had the following conversation with [NAME]: [NAME]: I am now arranging funding for my share of the purchase price from China. Can you pay me back the money I paid for the [NAME] and your share of the deposit? [NAME]: OK, I will pay you in China but please give me a bit of time. I can't get two million on such short notice. [NAME]: Don't get me wrong, I only need it by the completion of the [NAME] purchase. You will have about 4 months from now to get the money. Please pay me Renminbi in China for the [NAME] and the Australian dollar for the [NAME] deposit.

1. According to [NAME], when no monies had been forthcoming, he spoke again to [NAME]. This was shortly after he agreed to purchase [NAME]'s share of the [NAME] in November 2010 (see [59] above). He said they had the following conversation: [NAME]: Can you repay me the money I put in the [NAME]? If you don't have the money, you can transfer the property back to me and I can sell it. I need that money to complete the [NAME] purchase. [NAME]: Can't you arrange funds from China? I am refinancing the property and once my refinance is done, I will have the money to pay you. [NAME]: In addition to [NAME], where is your money for the [NAME]? [NAME]: I am still working on it. 1. [NAME] stated that thereafter he continued to press [NAME] for the [NAME] monies, but [NAME] seemed to be avoiding him. Then, on 11 April 2011 or shortly afterwards, he received a call from [NAME] and the following exchange took place: [NAME]: I have transferred RMB ¥11 million to your [COMPANY] account in China for the house at [NAME]. Please check if you have received the money. I still owe you some interest repayments and I will transfer that over before the end of the year [NAME]: Alright.

1. According to [NAME], he was also waiting for [NAME]'s share of the monies required by [NAME] to complete the purchase of the [NAME] site. [NAME] stated that matters came to a head after [NAME] missed the deadline of 8 June 2011 (see [67] above). He spoke to [NAME] and the following conversation ensued: [NAME]: You still haven't repaid me all the money for the [NAME]. When do you intend to pay me the rest? [NAME]: I am organising it. I will finalise our accounts shortly. [NAME]: You are just a liar. I don't trust you anymore. You didn't even get your money ready when [NAME] was about to settle. I have been paying all the money to Council in order to get an extension of the settlement date. [NAME]: You are a gambler. You should be ashamed of what you did. You gambled away the entire project and everyone lost money. 1. [NAME] stated that he did not speak to [NAME] again after this conversation. He denied ever being shown the memorandum of agreement prepared by [NAME], or receiving any of [NAME]'s text messages. According to [NAME], he was still at the time using a phone with a numeric keypad and it could not be used (or at least he did not know how to use it) to write text messages in Chinese characters.

2. In his affidavit, [NAME] denied that he had anything to do with the transfer of the $800,000 to [NAME]'s company, [NAME], in November 2011. He noted that he had signed some cheques on [NAME]' operating account in blank to allow for the payment of expenses. [NAME] acknowledged that four of the payments were for expenses incurred in the [NAME], albeit that he had never been informed by [NAME] that the cheques were to be issued. The implication was that the fifth payment had been made (presumably by one of the pre-signed cheques) without [NAME]'s knowledge or approval. 3. [NAME] stated that he noticed the debits to [NAME]' account on the [COMPANY] statement and as a result obtained copies of the cheques. He then reported the matter to a police station "in central Sydney" but was told that the matter was a civil one and he should consult a lawyer. A few days later he had a meeting with a solicitor in the CBD of Sydney. This was not [NAME], who had acted for [NAME] on the [NAME] transaction. In his affidavit, [NAME] stated that he could not recall the name of the solicitor that he consulted. 4. [NAME] said he did not take legal action at the time as he "did not have sufficient time to provide proper instructions" and that he "believed I could always pursue the money at a later time if I intended to do so". He said he later returned to China and had "not been able to return to Australia for any significant period due to my work obligations". 5. [NAME] did not refer in his affidavit to [NAME]'s caveat over the [NAME] property, or his letter of 9 March 2012. But [NAME] confirmed in his evidence that he did receive the email from [NAME], although he no longer had a copy of the letter itself, which had been an attachment to the email. He continued: I did not send the attachment to the defendant [[NAME]]. However, it was my usual practice to inform the defendant that I received a letter and ask whether I needed to explain the letter to him. He never asked me to explain the letter or respond to it. I have very little contact with the defendant after the time that the $860,000 term deposit with [NAME] was paid to the plaintiff's [[NAME]'s] company. I believe the defendant suspected that I was working with the plaintiff in allowing that to happen, and the defendant's wife had previously queried about why I had given the Certificate of Title for the [NAME] property to the plaintiff.

1. This evidence from [NAME] appeared in an affidavit he made on the second day of the hearing in May last year. There was no further affidavit evidence about the letter from [NAME].

2. In reply to [NAME]'s evidence about the text messages, [NAME] stated that when he sent such messages to [NAME], it was [NAME]'s practice to ring him back to discuss them rather than to send a text message in response. [NAME] said however that he had on many occasions seen [NAME] reading text messages he received on his phone, and sending responses. In cross-examination [NAME] confirmed that [NAME] would read text messages, although it was less clear whether he actually sent any himself.

3. Conclusions: In evaluating the conflict of evidence between the parties, I think there are five features of the evidence which are of particular significance. I will deal with them in turn.

4. First, the objective evidence supports [NAME]'s contention that [NAME] was short of money in 2011. There was unchallenged evidence from [NAME] that work on the [NAME] site ceased and the site was left in a state of disarray. There is also the repeated failure of [NAME] to provide the money to settle the purchase of the [NAME] property, and the eventual termination of the purchase contract by [NAME].

5. There is also the indemnity document signed on 30 March 2011. The indemnity is consistent with [NAME] being under financial pressure and wishing to keep [NAME] in the [NAME] property transaction.

6. In his affidavit, [NAME] attempted to blame the failure of the [NAME] on [NAME]'s inability to raise his fifteen percent share, but as [NAME] was himself responsible for the other eighty-five percent I did not find this credible. It was not put to [NAME] in cross-examination. Nor did it explain the problems with the [NAME] project.

7. On his own admission in his affidavit, [NAME] set $17 million aside to fund the completion of the [NAME] property purchase but then lost some of it gambling at [NAME]. In cross-examination, it was put to him that he lost $43 million at [NAME] in the period up to March 2011. [NAME] did not directly answer this but did go on to give the following, rather startling, evidence: Q. Well, how much do you say you lost at [NAME] as at March 2011? … A. I haven't done the maths. I don't - I don't have the figure. So - [NAME] cannot give me the figure as well. But, thank you for the lawyers of the - both parties and you guys provided some figures to me. … Q. You lost over $17 million, didn't you, [NAME]? … A. If you add up everything, yes.

1. The second factor is that [NAME]'s dealings with [NAME] in 2011 are difficult to reconcile with [NAME] having agreed to pay [NAME] $2 million or more for to buy him out of the [NAME]. Counsel for [NAME] put to [NAME] in cross-examination that he would hardly have signed the indemnity document of 30 March 2011 if [NAME] owed him money, and [NAME] appeared to accept this.

2. More important still was the fact that [NAME]'s loan repayments on the [NAME] continued, even after April 2011 when [NAME] made what, according to him, was a major down-payment on the purchase of the property. When cross-examined about this, [NAME] could only say that he forgot to tell his wife about his deal with [NAME].

3. I did not find this at all credible. It is especially difficult to accept when the payments continued after [NAME]'s statement of 6 July 2011 (see [182] below). When challenged on this in cross-examination, [NAME] said he had not seen the statement. But this was contrary to his own affidavit, which had exhibited the document in the first place, and in which [NAME] expressly stated that he saw it when it was sent to him.

4. The third point is that both the memorandum of agreement prepared by [NAME] in July 2011 and the text messages from August support the existence of the loan. There was uncontested expert evidence which confirmed that the memorandum document had been created on 26 July 2011, the day before the date it bears, and that the text messages had indeed been generated and sent on the dates which they bear.

5. This in itself makes it difficult to accept that [NAME] would not have received the text messages. [NAME] was pressed on this in cross-examination, and denied counsel's suggestion that he must at least have received some form of notification that the text had arrived, even if he did not look at it. I did not find this evidence very persuasive but in the end, even if it were accepted, that would have only limited significance.

6. The memorandum and the texts were written only a few months after the event and provide strong corroboration for [NAME]'s evidence that the April 2011 payment was a loan. They also, incidentally, confirm [NAME]'s gambling problem as being the source of the problems with the [NAME], and in particular the cause of [NAME]'s withdrawal (contrary to affidavit evidence of [NAME] asserting that it was simply because [NAME] lacked money). The messages in December 2011 and January 2012 are also entirely consistent with [NAME] having had an ongoing obligation to finance the [NAME].

7. The fourth point is that what purports to be [NAME]'s signature appears on the 22 November transfer authorisation form which resulted in $800,000 being paid from [NAME] to [NAME]. This is consistent with [NAME]'s evidence that it was an agreed, partial, repayment of the monies advanced in April. [NAME] had no explanation for the payment except to say that the authorisation was a forgery.

8. In the face of a purported signature by a party, that party faces a significant evidentiary onus in asserting that the signature is false: see Kunc J in In the application of [NAME] and [NAME] [2014] NSWSC 821 at [62]-[67]. There was no expert evidence to support [NAME]'s assertion in this case, and his own evidence was unsatisfactory. 9. [NAME]'s initial affidavit was based on the inaccurate supposition that the money had been transferred by way of cheque withdrawal. When it emerged that there had been two signed transfers (see [71] above), [NAME] did not dispute that the signature on the transfer which terminated the term deposit and credited the proceeds to the operating account was his. It was only the second signature which he maintained was false. Of itself this demonstrated that there must have been some communication between [NAME] and [NAME] about the term deposit. [NAME] did not attempt in his evidence to explain how he had been so mistaken in his affidavit.

10. Furthermore, when asked in cross-examination why he agreed to the term deposit transfer, [NAME] said that he trusted [NAME]. This conflicted with the evidence in his affidavit that by June he thought that [NAME] was a liar and untrustworthy. When this conflict was put to [NAME] in cross-examination he had no real explanation.

11. The fifth important feature of the evidence is [NAME]'s lack of action to recover the $800,000 [NAME] payment (or to pursue the further money supposedly owing on the [NAME]). [NAME]'s evidence that he consulted some other solicitor about the payment was surprising, when [NAME] had acted for [NAME] on the transaction. [NAME]'s evidence of the consultation was unimpressively vague and his excuses for not taking action I thought were unconvincing.

12. There was also [NAME]'s lack of response to the letter of 9 March. It is clear from the evidence of his own solicitor, [NAME], that [NAME] would have been told about the letter and asked whether he wanted to have it explained to him. Clearly he took no notice of the letter. In cross-examination, [NAME] said only that he could not recall [NAME] telling him about the letter.

13. I suspect that, at least from [NAME]'s side, the friendship between the parties ended in June 2011 when [NAME] indicated that he no longer wished to be involved in the [NAME] or to assist with the management of the [NAME] project. That would explain [NAME]'s failure to respond both to [NAME]'s subsequent texts and to the letter of 9 March 2012. But if that is the explanation for what happened, it does nothing to undermine [NAME]'s version of events.

14. For his part, counsel for [NAME] said little if anything to counter these points. But counsel did advance several arguments of his own as to why [NAME]'s version of events should not be accepted overall.

15. First, counsel referred to the inconsistences in [NAME]'s account about where the alleged agreement to make the loan was made, and [NAME]'s stated purpose in borrowing. But in my view any inconsistency about the purpose of the loan is unimportant. Whether the monies were to be used to fund the [NAME] project or the [NAME] (or for any other purpose) was irrelevant to the nature of the payment. And the inconsistency about where the conversation took place, while not irrelevant, seems to me to be of little significance in the scheme of things.

16. Next, counsel submitted that the logic of events supported [NAME]'s case. Counsel submitted that [NAME] had invested a great deal of money in the [NAME]. Why, counsel asked, should [NAME] have borrowed when [NAME] had agreed to buy him out of the property? The first answer to this question is that I only have [NAME]'s word that [NAME] had promised to buy [NAME] out. As will be seen below, I do not accept that [NAME] ever agreed to buy the property from [NAME], let alone to pay [NAME] everything he had spent on it since 2004.

17. I suppose that, if he wished, [NAME] could have required [NAME] to sell the property and account to him for the difference between the amount received and the loan which he had authorised (which at that point would have been $2 million or so: see [269] below). But the fact that he continued to make repayments on the loan indicates that at the time [NAME] wished to continue to retain it under the then current arrangements.

18. Counsel for [NAME] also pointed to the claim in [NAME]'s caveat that he had lent money to [NAME]. But I think this is of no real assistance to [NAME] for present purposes. Indeed the caveat supports the assertion that the payment was a loan, rather than a payment for the [NAME]. I will refer to the issue about the identity of the borrower in the next part of this judgment.

19. The evidence in [NAME]'s initial affidavit about the transfer of the $800,000 in November 2011 also has its deficiencies. Clearly the impetus for the execution of the transfers and their lodgement with the [COMPANY] would have come from [NAME], not from [NAME] as [NAME] suggested in the affidavit. But while that is a reason to suspect reconstruction in the affidavit, it does not negate the fact of the transfer with what appears to be [NAME]'s signature on it.

20. There is also the fact that [NAME] was slow to bring his action against [NAME]. It is not implausible that [NAME] was advised by a Chinese lawyer in 2012 not to bring proceedings in China, but the further delay for more than four years is completely unexplained. However, this point was not the subject of cross-examination, and given the existence of contemporaneous, or near-contemporaneous, assertions of liability I think it has little weight.

21. On balance I think the evidence clearly favours [NAME]'s account over [NAME]'s. I am satisfied that the ¥11 million payment in April 2011 was a loan and not a partial repayment of monies owed pursuant to the arrangement concerning the [NAME].

Financial dealings concerning [NAME]

1. Remittances by [NAME]: As I set out in Xinfeng at [84], the way in which the [NAME] system operates is a form of barter. Where a [NAME] customer wishes to receive money in Australia from a payer in China, [NAME] nominates accounts in China to which the payer pays money in Chinese currency, and the Australian customer receives, in Australian currency, payments of an equivalent value organised by [NAME].

2. The records of the payments made in China by [NAME] were in evidence. They totalled ¥12,586,200. [NAME]'s cross-claim also contained an Australian dollar figure for each payment. Those figures totalled $2,106,300. But it is not clear where the figures came from. They may simply have been calculated according to prevailing exchange rates, without reference to the specific rates offered and fees charged by [NAME].

3. The documents included a copy of one [NAME] deal sheet, apparently issued in Sydney. This showed [NAME] as [NAME]'s "client", and a Sydney account in the name of her mother, [NAME], as the account to which payment would be credited. The Australian dollar amount was less than the corresponding figure in [NAME]'s cross-claim. Instead it reconciled with the figure in the July 2004 statement provided to [NAME] (see [174] below).

4. The July 2004 statement showed total receipts of ¥12,576,200, ¥10,000 less than the figure shown in the [COMPANY] transfer records. But counsel for [NAME] expressly took no point about this. Given that the Australian dollar figures in the statement appear to have been taken from the actual [NAME] deal sheets, I propose to adopt those figures for the purposes of this judgment. They total $2,076,113.

5. The [NAME] remittances are summarised in the following table: Date ¥ Payment $ Receipt 01/03/2004 2,466,200 380,000 16/03/2004 2,970,000 480,000 21/05/2004 2,950,000 500,426 24/05/2004 1,800,000 307,167 25/05/2004 1,800,000 307,426 26/05/2004 600,000 101,095 Total 12,586,200 2,076,113

1. As already noted, further remittances were sent by or on behalf of [NAME] from June 2004 until October 2011. Some of the payments were made by [NAME] and some by [NAME]. One payment was made by [NAME], who is the nephew of [NAME] and worked for him as an accountant or bookkeeper in China. Other payments were made by [NAME] and [NAME], who are not identified in the evidence, but there is no dispute that those payments were made on behalf of [NAME].

2. Some of the payments were made in cash to [NAME], who would write out and sign a receipt for them, and those receipts are in evidence. The other payments were made by direct credit to [NAME]'s offset account (or by cheque deposited to the offset account).

3. The remittances totalled $1,162,475 and are summarised in the following table: Date Payer Method $Amount 08/06/2004 [NAME] 50,000 15/08/2004 [NAME] 50,000 12/01/2005 [NAME] 50,000 30/04/2005 [NAME] 50,000 13/10/2005 [NAME] 20,000 23/03/2007 [NAME] 27,648 12/06/2007 [NAME] 25,300 17/08/2007 [NAME] 50,000 30/04/2008 [NAME] 50,000 23/06/2008 [NAME] 50,000 26/09/2008 [NAME] 54,985 09/10/2008 [NAME] 54,985 07/02/2009 [NAME] 70,000 18/02/2009 [NAME] 75,585 19/06/2009 [NAME] 63,987 27/11/2009 [NAME] 53,985 22/02/2010 [NAME] 20,000 31/05/2010 [NAME] 20,000 09/06/2010 [NAME] 20,000 12/07/2010 [NAME] 20,000 04/08/2010 [NAME] 20,000 02/09/2010 [NAME] 20,000 03/10/2010 [NAME] 18,000 08/11/2010 Cheque 20,000 06/12/2010 Cheque 18,000 10/01/2011 [NAME] 20,000 24/02/2011 Cash 18,000 23/03/2011 Cheque 18,000 18/05/2011 [NAME] 18,000 02/06/2011 [NAME] 18,000 01/07/2011 [NAME] 8,000 07/07/2011 [NAME] 18,000 01/08/2011 [NAME] 18,000 02/09/2011 [NAME] 18,000 03/10/2011 [NAME] 18,000 31/10/2011 [NAME] 18,000 Total 1,162,475

1. Loan payments to the [NAME]: The [NAME] loan account statements showed that initially the automatic monthly loan payments debited to the offset account were $13,755. This amount covered both interest and a relatively small principal repayment. Automatic monthly payments continued until December 2005 at which point they were suspended (but occasional credits appear and during this period the loan balance remained below the facility limit).

2. The automatic monthly loan payments resumed from January 2007. They increased following the drawdowns by [NAME] in September 2007 and March 2008. Immediately before the September 2007 drawdown the payments were $13,962 per month. Following the March 2008 drawdown, they were $26,280 per month. The payments were debited to the offset account on the 5th of the month or the following business day.

3. Offset account: The offset account was a conventional deposit account which could be used for regular banking transactions. Judging from the statements, not all of the cash remittances from [NAME] seem to have found their way into the account, and from time to time there were debits to the account which seem to have had nothing to do with the [NAME].

4. By the same token, the credits to the account are not all made up of remittances from [NAME]; some of them appear to have come from [NAME] himself, and increasingly so after the borrowings were increased in October 2007 and March 2008. And not all of the expenses associated with the [NAME] appear to have been debited to the account; these expenses were presumably paid by [NAME] from some other source.

5. It is therefore clear that the offset account was not exclusively used for income and expenditure on the [NAME]. As will be seen, a full reckoning of both credits and debits concerning the [NAME] appears to have been undertaken separately.

6. As already noted, no further remittances were made by [NAME] after the end of October 2011. For several months [NAME] used his own monies to keep the offset account in credit so that the automatic monthly payments were met. But from March 2012 onwards, there were insufficient funds to meet the automatic loan repayments from the offset account and they were dishonoured. As will be seen, some rental monies were paid into the offset account up until the end of May 2012, but early in June the then balance of $14,000 was transferred across to the loan account and thereafter the offset account remained inactive.

7. Rent receipts: The lease to [NAME] (see [62] above) was organised by an agent retained by [NAME], [COMPANY] ("[NAME]"). Under the terms of the lease, the rent was payable to [NAME]. From January 2012, [NAME] accounted monthly to [NAME] (after deduction of expenses and management fees) by way of direct credit to the offset account. These direct credits ceased after May 2012.

8. In late October 2012, the [NAME] served a statutory notice as mortgagee requiring [NAME] to pay for the rent payable under his lease directly to it as mortgagee. In compliance with this notice, [NAME] paid the monthly rent into the loan account with the [NAME] from November 2012 through until September 2013, which is when the [NAME] obtained a writ of possession (see [85] above).

9. The payments made by [NAME] for the period from March to December 2011 and for the period from June to October 2012 are thus unaccounted for in the evidence. In January this year, [NAME]'s solicitors wrote to [NAME] seeking records about the [NAME]. The response was that [NAME] did not hold any records, because records were not retained for more than seven years.

10. Expenses of [NAME]: In an affidavit of August 2019, [NAME] identified expenditure on the [NAME] totalling $11,903 between 2004 and 2008, and exhibited the supporting documents. They included: 1. rate notices from the local council; 2. bills covering water rates and water usage charges from the water authority; 3. electricity bills; and 4. a home insurance policy effected on 31 March 2004 in the name of [NAME] and [NAME].

1. These records appeared to be incomplete. In particular, the only insurance documents dated from 2004 and there were no records of payment of strata fees (referred to in the February 2010 statement provided by [NAME] to [NAME]: see [176] below).

2. At the hearing earlier this year there was evidence presented from [NAME]'s solicitors of attempts to obtain records of the payments to the local council and the water authority. A summary of receipts obtained from the council, which went back to 2004, was produced and tendered. The evidence showed that the water authority has receipt records going back to 1987 which could be produced if necessary, but no actual record was tendered for the purposes of the hearing. There was no evidence of any inquiries having been made to the electricity authority, the insurer or the body corporate.

3. The list of receipts produced by the council identified the rate payments made on the [NAME] from 2004 up to February 2011 as "agency payments". The early council rate notices produced by [NAME] show that payment was made over the counter at various different branches of the [COMPANY] of Australia, and presumably this continued up to February 2011, although the later rate notices are not in evidence.

4. The next few rate payments, which were made between November 2011 and September 2012, were made by direct credit through the [COMPANY] ("[NAME]"). These coincided with the period during which [NAME] was acting as agent, and may well have been paid by [NAME] out of the rent received from [NAME], but [NAME] was not asked about this. Then there are no payments until a final payment, apparently representing several years' rates, was made on 7 May 2014. This was the date on which the sale of the property settled, and the payment was presumably made directly out of the settlement proceeds.

5. Statements provided to [NAME]: Exhibited to [NAME]'s March 2018 affidavit was a fax sent around July 2004 (but wrongly dated 22 July 2002) which was an informal statement of account covering the purchase of the [NAME]. The statement recorded that the property had been purchased for $4.28 million and that additional fees and expenses of $212,000 had been incurred. The [COMPANY] loan was recorded at $2.47 million (presumably reflecting $2.275 million borrowed from the [NAME] and $200,000 borrowed through [NAME]). Taking into account the receipts via [NAME] ($2.076 million) [NAME] was in surplus $55,000.

6. Also exhibited to [NAME]'s affidavit were three handwritten documents which he said he received from [NAME], containing details of the payments [NAME] was making on the [NAME]. [NAME] did not dispute that he sent these documents to [NAME], and the second one was signed by him.

7. The first document was dated 17 February 2010 and headed "[NAME] and miscellaneous fees list" for the period from February 2009 to January 2010. It showed remittances received during the period in question of $193,558, with deductions for "[NAME]" of $215,335 (consisting of $130,651 in interest and $86,684 in principal) and "miscellaneous fees" of $3,013 (which included council rates, strata fees, water and electricity). Taking into account a remittance of $54,985 which had not been included in the prior calculation period, the result was a credit in [NAME]'s favour of $30,196.

8. Attached to the document was a breakdown of the "[NAME]" figures. It consisted of a pre-printed table under the heading "AUD 2,275,000 home loan monthly repayment list", with space for the date, which was filled out in handwriting as 10 February 2010.

9. The table itself contained handwritten entries for each month from February 2009 to January 2010. In each case there was a monthly "repayment" figure, an opening balance, an interest rate (apparently reflecting the rate being charged by the [COMPANY]), a figure for interest, and a reduced closing balance reflecting the amount by which the monthly repayment figure exceeded the interest calculated. The table also included the annual facility fee as a charge.

10. The opening balance as at 1 February 2009 was $2,157,054. The monthly repayments totalled $215,335 and the interest totalled $129,651 (as recorded in the covering document). The result was that the closing balance on 31 January 2010 had fallen to $2,071,764, a reduction of $85,290 (the disparity with the principal repayment figure shown in the covering document was that it omitted to take account of the facility fee of $395).

11. The "loan repayment" was given as $17,944.56 per month. Where this figure came from does not appear from the evidence. It bears no obvious relationship to the quantum of the automatic loan payments charged by the [NAME], either before or after the automatic payment amount was increased following the further borrowings in 2007 and 2008.

12. The second handwritten document was dated 5 June 2010 and headed "home loan preliminary verification". It recorded remittances and "loan repayments" for the four months from February to May, with the loan repayment debited to [NAME] again being $17,944.56 per month. Taking into account the opening balance of $30,196 in [NAME]'s favour, the document showed the net amount owing to [NAME] at the end of May as $22,998. It did not contain any interest and principal reduction calculations, or any record of other expenses such as rates.

13. The third handwritten document was dated 6 July 2011 and headed "records in relation to home loan". It began by stating (in translation):

1. The average monthly [NAME] should be $17,944.56. (I did not apply for any change because change in interest rate will only change the monthly principal repayment. For the actual final balance I shall arrange for a one-off payment to clear it up). This is only the Home Loan account and is not related to money for liquor. I do not want to mix them up.

2. According to records, we have settled payments between us in June 2010.

3. On 7 July 2010 you deposited $20,000, but that was returned [dishonoured]. On 12 July 2010 you deposited again this amount, but it was already one week late. As such the balance became $2,000 (At here I calculate based on $18,000 every month, and as to the exact figure I will use [COMPANY] statements to calculate just like what I did before). 1. [NAME] listed the further payments up to [NAME]'s payment of $8,000 on 1 July 2011, which, based on a requirement to pay $18,000 per month, left $18,000 owing. [NAME] asked [NAME], once he had "verified the above information", to transfer the amount payable. He reminded [NAME] that if payment was not made by the end of the week, there would be a late repayment fee. 2. [NAME] did in fact make a payment of $18,000 on 7 July, the day after the date of [NAME]'s document. This brought the account back into balance and further payments of $18,000 were made at the beginning of August, September and October. The final $18,000 payment was made on 31 October and was presumably intended as the repayment for November. 3. [NAME] seemed to indicate in July 2011 that he would undertake the calculations breaking the monthly repayments down into notional interest and notional repayments of principal, as had been done in February 2010, he seems never to have done so. Nor did the July 2011 document itself contain any details of rates and other expenses incurred on the property.

4. Witness evidence: According to [NAME], after he inspected the [NAME], a conversation took place in the following terms: [NAME]: This house is the best one I inspected today. It has a beautiful view. [NAME]: I also want to buy this property but I don't have enough money. [NAME]: How much is this property? [NAME]: $4.28 million. [NAME]: Tell the agent I will buy it. [NAME]: You are a tourist and you can't buy real estate property. However, you can buy it in under my name. A few years later, if you decide to migrate to Sydney, I will transfer the property into your name. All you need to do is to pay for all government charges during this period. [NAME]: What happens if I am not coming to Sydney? [NAME]: If you are not coming over to Sydney or if you don't want the property anymore, I will pay you the money and keep this house. [NAME]: OK. Let's do it that way then. My money is ready and we can settle the purchase in one month. Can I pay you the purchase money in China and you pay it here for me? [NAME]: I will make arrangements to have your money transferred to Sydney. Let me get the paperwork done for the purchase first.

1. In his affidavit, [NAME] presented the ensuing financial arrangements as having taken place between himself (or people in China acting on his behalf) and [NAME]. He stated that the details of the [COMPANY] transfers required by [NAME] were telephoned through by [NAME]. He also stated that initially he had intended to fund the entire purchase of the [NAME] himself, and it was [NAME]'s suggestion which resulted in the mortgage being taken out with the [NAME]. [NAME] asserted in his affidavit that the statement which he received in about July 2004 was sent to him by [NAME], although a successful objection was taken to the form of this part of the affidavit.

2. In the course of [NAME]'s cross-examination, it became apparent that the course of events had been more complicated than his affidavit suggested. [NAME] said that he and his wife travelled to Australia for a total of about ten days, of which they spent four or five days in Sydney. They also spent time on the Gold Coast. [NAME] said that he, [NAME] and [NAME] visited the [NAME] together, [NAME] being the driver. An agent was also apparently present. The conversation set out in [NAME]'s affidavit, which I have quoted at [186] above, took place in the car on the way back. [NAME] maintained that, although an agent had been present, he was told about the purchase price of $4.28 million by [NAME].

3. But later in his cross-examination, [NAME] said that he visited the [NAME] on several occasions, sometimes with an agent, and sometimes by himself. He also said that initially the purchase price had been higher than $4.28 million and had been negotiated down. He volunteered that [NAME] had conducted the negotiations with the agents on the price.

4. This was inconsistent in important respects with [NAME]'s affidavit, and [NAME] eventually described the conversation recounted in the affidavit as an amalgam of a number of different conversations at different times and in different places. [NAME]'s altered version of events had not been put to [NAME] or [NAME] when they gave their evidence. 5. [NAME] nevertheless maintained that [NAME] had provided him with at least some of the details required to make the [NAME] transfers, although he did say that these details would be provided either by [NAME] or [NAME]. [NAME] also maintained that it was [NAME] who had wanted for him to borrow money, whereas his preference, and practice, would have been to pay the whole of the purchase price himself. At another point in his evidence, he said that he was told by [NAME] that borrowing costs were low in Australia. 6. [NAME] was asked why he borrowed, and incurred the interest cost, at all. I did not find his response to this question, as relayed through the interpreter, clear. [NAME] professed to be unfamiliar with borrowing. He was cross-examined on the borrowing activities of companies with which he was associated. As relayed by the interpreter, his response seems to have been that borrowing for the purposes of buying residential property is not permitted in China and that while the companies with which he was associated had engaged in borrowing, this had been done by the management.

7. I did not find this evidence very plausible. In any event the borrowing arrangement with [NAME] was not complicated. I am sure that the concept of borrowing money and being obliged to pay it back, with interest payments in the meantime, would have been clearly understood by a man with [NAME]'s [NAME] experience.

8. On [NAME]'s account, his involvement was much more peripheral than that alleged by [NAME]. [NAME] stated that he did not attend the inspection of the [NAME] with [NAME] and [NAME]; that was handled by [NAME]. [NAME] stated that following the inspection he had a conversation with [NAME] to the following effect: [NAME]: I have found a property that I wish to buy in [NAME]. [NAME]: Okay. [NAME]: I understand that [NAME] and I cannot purchase real estate in Australia as we are not Australian residents. As you know, we intend to apply to migrate to Australia and will need a place to live once our migration application is successful. And so I want to ask your help for buying the property. [NAME]: What assistance do you need from me? [NAME]: Well, can the property first be put in your name. I will be responsible for all monies concerning its purchase and maintenance, including things such as loan and interest repayments and utility rates. [NAME] and I succeed in migrating to Australia, the property can be transferred from you to us. [NAME]: Ok. In that case, I agree. But you need to make sure you'll pay for all monies required and associated with the property as I am just holding it for you and [NAME]. I'll make sure to keep detailed records in relation to the property's expenses and fees so that there is a precise record of our arrangement and to avoid any future disputes. [NAME]: I understand and accept that. You'll have to sign the contract for the purchase of the property, but I'll arrange for all monies to be sent from China within my capacity. You should take out a loan for the remaining monies. [NAME]: I see. How much are you able to transfer? [NAME]: Around $2 million. Possibly a little less than that. So you'll probably need to take out a loan to cover the rest of the purchase monies. [NAME]: Alright. I agree on the condition that you are liable to make all payments in relation to the property. [NAME]: Ok, that's fine. I'll make arrangements with [NAME] [[NAME]] for the transfer of the required monies to Australia. 1. [NAME] denied that he was involved in making any of the arrangements for receipt of monies via [NAME]. He left this to [NAME]. He also stated that he did not send the July 2004 statement to [NAME]. In a later affidavit, he denied that he had ever seen the statement prior to it being produced by [NAME] for the purposes of the proceedings. 2. [NAME]'s affidavit account was consistent with [NAME]'s account. She stated that she attended the inspection of the [NAME] with [NAME]. She was also responsible for dealing with [NAME] on the purchase, including organising the [NAME] payments, which were received into her mother's [COMPANY] account. She was not party to any discussion about [NAME] being able to "put" the property to [NAME] in future. 3. [NAME] made no comment in her affidavit about the July 2004 statement. She stated that her relationship with [NAME] became strained in late 2008 or thereabouts, and that thereafter she did not deal with him about the [NAME] loan. This tended to suggest that she might have dealt with [NAME] on that issue before late 2008, but [NAME] did not go into any detail.

4. In cross-examination, both [NAME] and [NAME] said that it had been [NAME] alone who had dealt with [NAME] over the [NAME] remittances. It also appeared from their evidence that [NAME] provided all of the instructions to the conveyancer who was retained to act on the purchase, and [NAME]'s role was confined to signing the contract. It also seemed that [NAME] set up the loan and offset accounts with the [NAME]. [NAME] identified the handwriting on the July 2004 fax statement as being that of [NAME], and [NAME] expressly confirmed that she wrote the fax and sent it to [NAME].

5. Although the fax stated that the purchase price was $4.28 million, the transfer form records that the price received by the vendor of the [NAME] was in fact $3.8 million. [NAME] said that he would have been aware that the purchase price was $3.8 million in 2004, as a result of signing the contractual documentation. He denied that he was aware of the disparity between that figure and the amount reported to [NAME].

6. When she gave evidence [NAME] was cross-examined about the disparity. She said that she paid $400,000 to two agents involved in the transaction. She kept $80,000 for herself. 7. [NAME] was pressed about this by counsel for [NAME]. She said that she did not tell [NAME] about the $400,000 paid to the agents, and her cross-examination continued: Q. When you kept $80,000 of his money, you didn't ask him if you could do that, did you? A. Because, at that time, I didn't think that it was necessary to ask for his permission, because he agreed to pay $4.28 million for that property and it was the vendor who agreed that we keep his money as commission. Q. And, you didn't tell him that you had kept $80,000 of his money either, did you? A. It was not necessary. Q. And, you never told him that you had paid $400,000 in commissions to agents either, did you? A. Why should I tell him? 1. Moving to the later remittances, [NAME] accepted that he received the cash referred to in the receipts which he signed. In cross-examination, he was asked some questions about what he did with the money, as not all of it appears to have been paid into the offset account. These questions were expressly put on the basis that they went only to [NAME]'s credit, because at the time there was no claim for a general account. [NAME] said that some of the monies were spent on airfares and other Australian expenditure for [NAME]. Counsel for [NAME] challenged this, but it is consistent with the fact that one of the expense items in the February 2010 statement is a charge for an air ticket.

2. It appeared from [NAME]'s evidence that she was responsible for establishing the [NAME] accounts, and at least initially, for handling the deposit of money into them. It was not clear from the evidence how long this went on for. In cross-examination, [NAME] said that it ceased in 2004 or 2005, but as already noted, in her affidavit she said it was not until late 2008 that she ceased dealing with [NAME] (and even if she did cease dealing with [NAME], that does not necessarily mean that she ceased handling the money and doing the accounts behind the scenes).

3. One of the things which might have cast light on this question was what the living arrangements were between [NAME] and [NAME] over the period from 2004 to 2014. The Earlwood property where they were living in 2004 belonged to [NAME]'s mother, [NAME]. The ASIC forms lodged as late as 2011 showed that as [NAME]'s address. By the time he came to verify his statement of claim in November 2016, he was living at an address in Bexley. There was, however, no evidence of when he moved. 4. [NAME] said little in his affidavits about the increases in the facility limit, and the drawdown of the resulting funds, which took place in October 2007 and March 2008. He simply stated that he had been "offered" the October 2007 increase, and exhibited the formal [COMPANY] offer document. He stated that the idea had come from [NAME]. She had been frustrated by the amount of time required to repay the $200,000 borrowed through her mother and suggested to [NAME] that he keep the money so as to cover himself in case [NAME] proved unable to repay.

5. According to [NAME], he told [NAME] about the borrowing in about April 2008. He stated that they had a conversation to the following effect: [NAME]: I took out a further loan over the [NAME] in my name. I will repay the $200,000 you borrowed from my ex mother-in-law for the purchase of the [NAME] and the $70,000 cash that you borrowed from my ex-wife using the further loan. I will pay for the additional part of the repayments and interests of this further loan. [NAME]: I see. Thank you for letting me know.

1. In an affidavit made shortly before last year's hearing, [NAME] went into some further detail about the additional borrowing through her mother. She stated that this was necessary because the [COMPANY] would not advance any more than $2.275 million. She stated that she told [NAME] and [NAME] about the additional borrowing (twice) in about July 2004. In reply, both [NAME] and [NAME] denied that they were ever told anything about the loan, either in 2004 or in 2008, or about any further borrowing on the property.

2. It is clear from the terms of the February 2010 loan statement provided to [NAME] that there would have been earlier calculations of a similar nature undertaken. Somewhat surprisingly, [NAME] did not give any evidence about the preparation of the statement, and [NAME] was not asked in cross-examination what he made of it. 3. [NAME] did however state in his affidavit for the purposes of the resumed hearing this year that in about 2007 he sent a loan reconciliation (of an unspecified nature) by email to one of [NAME]'s employees. That email is now inaccessible because the address has been deregistered.

4. In the same affidavit, [NAME] stated that he paid his $371,250 share of the deposit on the purchase of the [NAME] site by means of a [COMPANY] cheque drawn on the account of his company, [NAME], in about August 2010 when contracts were exchanged. He said he no longer had the cheque book for the [NAME] account. This evidence was not the subject of cross-examination.

5. Recent searches by [NAME]'s solicitors have demonstrated that the real estate firm which received payment of the deposit has no extant records. The [NAME], which produced records of [NAME]' operating account for November 2011, did not become [NAME]' banker until March of that year.

6. Conclusions: I reject [NAME]'s evidence that the arrangements for the remittance of money via [NAME] for the purchase of the [NAME] were made with [NAME]. The documentary evidence supports [NAME]'s evidence that it was she who held the account with [NAME] and that the remittances were directed by her to her mother's account. Whether some of the payments were made in Australia in cash, as [NAME] claimed in cross-examination, is irrelevant for present purposes.

7. I also accept that [NAME] was not responsible for preparing the July 2004 statement. There is simply no reason to disbelieve his evidence on this point. Still less is there any reason to disbelieve [NAME], who, so far as appears, was a disinterested witness on this point.

8. The pattern of the [NAME] remittances is instructive. The first remittance, on 1 March 2004, was exactly $380,000, which was ten per cent of the purchase price and presumably represented the deposit, which would have been payable on exchange. The second remittance, on 16 March, was $480,000. This corresponds exactly with the sum of money [NAME] paid to the other agents and kept for herself, effectively as remuneration for their roles in the sale. It makes sense that this would have been paid at around the same time as the deposit. The remaining remittances came in late May, and would have been for the purposes of completion and payment of incidental expenses.

9. All of this is consistent with [NAME] being the person who was generally responsible for making the purchase arrangements and handling the associated monies. That conclusion is also consistent with the evidence about the negotiations with the vendor (see [189] above) and the retainer of the conveyancer who acted on the purchase (see [198] above). The pattern of remittances also supports [NAME]'s denial, which I accept, that he had anything to do with the payment of the $480,000 to the agents and Mr [NAME].

10. In the end, there is no objective evidence that [NAME] did anything more than allow [NAME] to put his name on the title and on the mortgage. I am not satisfied that he in fact did anything more. 11. [NAME]'s account of the conversation following his decision to buy the [NAME] is not easy to interpret. On his version it is unclear what was "the money" which [NAME] allegedly promised to repay if [NAME] decided to "put" the property to him (or, indeed, if [NAME] decided to "call" the property). In any event, the conclusions I have already reached lead me to prefer [NAME]'s version of events. I am not satisfied that he did anything more than agree with [NAME] to hold the property and to pay the expenses, provided that [NAME] contributed the necessary funds.

12. Given my findings, it is not necessary to consider whether there was any justification for the difference between the $3.8 million paid to the vendor and the $4.28 million purchase price reported to [NAME]. It is not impossible that the $400,000 payment to the agents resulted from some sort of bargain between the vendor, [NAME], and the agents, under which the vendor agreed to take a reduced price and have the agents remunerated out of the difference. [NAME] may have thought herself entitled to take the remaining $80,000 for her trouble, on the basis that [NAME] had been prepared to pay $4.28 million anyway. But what is sufficiently clear is that [NAME] did not disclose that to [NAME] (or [NAME]).

13. On the other hand, it was clearly disclosed in the July 2004 statement that the amount actually borrowed to complete the purchase was $200,000 more than the $2.275 million borrowed from the [NAME] (the difference between $2.475 million and the $2.47 million shown in the document is not material). There is no reason to doubt that the $200,000 was in fact borrowed: the statement shows that additional monies were required to complete the purchase, and [COMPANY] records show that on 19 May $194,000 was drawn down on [NAME]'s home loan facility. [NAME] specifically told [NAME] about the borrowing from her mother does not seem to me ultimately to matter for the purposes of these proceedings. It is not unlikely that the point would have come up between them, although she may not have told [NAME].

14. On my findings none of the [NAME] funds passed through [NAME]'s hands. The later remittances from June 2004 to October 2011 were different. It is tempting to speculate that [NAME] may have been responsible for handling the money and doing the accounting up until February 2010, but ultimately there is no evidence on this question and the answer does not matter for the purpose of resolving the disputes in this case. [NAME] was involved or not, the later remittances passed through [NAME]'s [COMPANY] account (or his hands, in the case of the cash) and he accepted responsibility for them in his reports to [NAME].

15. It is clear from the February 2010 statement that by the time that document was prepared (and probably going back to 2008: see [224] below) the parties were working on a total loan of $2.275 million, not $2.475 million. This makes it likely, in my opinion, that the repayment of the additional $200,000 would have come up in discussions with [NAME], but again that does not seem to me to be of much importance in the resolution of this case. What is clear is that the $200,000 was borrowed, and was repaid, and the accounting statements provided to [NAME] reflected that.

16. This, however, does not mean that [NAME] necessarily disclosed the additional borrowings in October 2007 and March 2008 to [NAME]. [NAME]'s explanation for these transactions is difficult to accept. In increasing the amount being lent he was increasing his exposure to the [COMPANY]. It did not make any [NAME] sense for him to do that simply to raise a fund against the possibility that [NAME] might later find it difficult to repay the [COMPANY] debt. Nor, on the evidence, was there any other liability against which would have made sense to take some form of security.

17. I think the more likely explanation is simply that [NAME] wished to raise funds for his own purposes and borrowing against the [NAME] was a convenient way of doing so. I see no reason not to accept [NAME]'s statement that he was never told about the additional borrowings. Even on [NAME]'s account, the explanation only referred to paying off [NAME]'s $200,000 loan and would have been incomplete. According to [NAME] the explanation was given following the second drawdown, but in fact [NAME] was paid off with the proceeds of the first drawdown, five months before.

18. It is clear from the terms of the February 2010 statement that previous reconciliations had been carried out between the parties. What is especially suggestive is that the interest payment calculation which was attached to the February 2010 statement contains a typed year entry of 2008 which has been crossed out and replaced with 2010. It is tempting to suppose that the schedule was first prepared (perhaps by [NAME]) once additional funds had been borrowed on the mortgage and it had become necessary to carry out a separate calculation of the interest liability, rather than relying on the figures in the [COMPANY] statements. But as I have noted, there was no evidence from [NAME] or [NAME] about the preparation of the schedule.

19. Having said that, however, the February 2010 statement shows that [NAME] was accounting to [NAME] on the basis that the loan for which [NAME] was responsible was a loan for $2.275 million. Although this was a purely notional exercise, and the actual liability of [NAME] to the [COMPANY] was higher, the important fact is that [NAME] was not being charged for the additional interest.

20. It seems likely that there would have been discussions between the parties about the accounting arrangements reflected in the February 2010 statement, but there was no evidence about that from either side. Even so, it would have been obvious to [NAME] that he was not actually making the monthly payments of $17,944.56 he was being credited with in the loan principal and interest calculation he received. Thus it would have been possible to deduce that the calculation was, at least to that extent, a notional one. [NAME] was actually curious enough to make the deduction himself, or to ask the question, is another matter, but again I do not think it matters. He had sufficient information to work it out.

21. The reference in the July 2011 statement to the account having been settled in June 2010 is curious. The June 2010 statement was expressed as being preliminary, subject to further calculations, and did not include any of the expenses such as rates. Nor is there any record of any "wash up" payment being made in or after June 2010. It seems that the last proper accounting between the parties is that which was undertaken for the year ended 31 January 2010, and that, for reasons unknown, [NAME] never conducted a further full accounting thereafter.

22. The evidence does not reveal why [NAME] decided to let the property to [NAME] in March 2011. In cross-examination, [NAME] appeared to concede that he knew at some stage about the lease, but he was vague about when. It hardly seems likely that [NAME] would have signed a lease if there had been a chance that [NAME] would want to use the property himself during the lease period. For this reason, it is logical to suppose that [NAME] would have sought [NAME]'s permission before proceeding with the lease. But in the end there was no evidence on the question.

23. One of the curiosities about this case is that the [NAME] should have stood empty from the time it was acquired for the benefit of [NAME] in 2004 right up until it was leased to [NAME] in March 2011. Admittedly, at one point in his evidence [NAME] indicated that there might have been a period of time after he bought the property before the vendor vacated. But it seems that neither [NAME] nor [NAME] ever lived at the property, even when [NAME] was spending much of his time in Sydney gambling at the [NAME] in 2010-2011. There was reference in the evidence to [NAME] and [NAME] having a daughter who lived in Sydney, but there was no evidence that she lived at the property either.

24. In the instrument of transfer (and the later caveat lodged by [NAME] over the [NAME] property) [NAME] gave his address as being at the [NAME]. The insurance policies, council rate notices and water and electricity bills were likewise addressed to [NAME] as the registered proprietor of the [NAME]. But other evidence showed that [NAME] continued to live at Earlwood (see [204] above) and counsel for [NAME] accepted that there was no evidence that [NAME] had ever lived at the property either.

25. In the end, I must deal with the case on the basis that [NAME] kept the property available for [NAME]'s use until he leased it, apparently with [NAME]'s knowledge, in March 2011. [NAME] continued to make regular remittances as requested from the time when he acquired the property up until November 2011, and on my findings he never asked [NAME] to hand the property over or sell it, but merely stood by while the [NAME] took enforcement action.

Debt claim by [NAME]

1. I have already found on the facts that the ¥11 million paid in April 2011 was a loan, not a payment under a supposed agreement to buy [NAME] out of the [NAME]. Counsel for [NAME] submitted that if I made this finding, I should conclude that the loan was a loan to [NAME] rather than to [NAME] personally. This is the remaining issue to be determined on the debt claim.

2. Counsel relied on the caveat lodged over one of the [NAME] properties in February 2012 by [NAME] in which [NAME] referred to the loan as having been made to the "registered proprietor" (that is, [NAME]). But I think that this "admission" is of little if any importance.

3. In the end, determining whether an agreement was made with an individual or a company with which the individual was connected is a matter of construction. It is a legal conclusion from the relevant facts. An out-of-court admission made by one of the parties on the issue can therefore only be of value to the extent that implicitly it conveys admissions of fact which support that legal conclusion: see Dovuro Pty Ltd v Wilkins (2003) 215 CLR 317 at 340-341 [68]-[71].

4. There was no evidence that [NAME] had any understanding of the legal issues which underlay the interest claimed in the caveat. He may simply have believed that the deposit of the certificate of title itself gave him a security interest in the property. But whatever [NAME]'s belief was, it was ultimately just his opinion. It is impossible to identify anything factual conveyed by his "admission" in the caveat which is not directly before the Court.

5.

For these reasons I put the "admission" on the caveat to one side and turn to the objective circumstances which bear on the legal identity of the borrower. In my view there are two considerations of significance.

6. The first is that the loan payment was made by way of deposit to a [COMPANY] account in the name of [NAME] in China. There is no evidence that the money ever went anywhere near [NAME]. Certainly no accounts were produced by [NAME] (which is apparently still functioning) recording receipt of the payment.

7. Incidentally, I incline to the view that the currency of account for the purposes of the loan agreement was Chinese yuan. The loan payment was, as I have just pointed out, made in yuan. It is also I think significant that after receiving the repayment of $800,000 [NAME] converted that amount into Chinese yuan. [NAME]'s text message on 6 December 2011, quoted at [103] above, suggests that at the time the contemplation was that the money would be not only advanced in yuan but repaid in yuan. I return further to this in my conclusions below.

8. The second important consideration is that all of the contemporaneous documentary evidence is consistent with [NAME] personally having been the borrower. [NAME]'s July memorandum confirming the loan showed [NAME] personally as the borrower; [NAME] was not mentioned. Nor was there any mention of [NAME] in any of the subsequent text messages in which [NAME] sought repayment.

9. In fact there was no mention of [NAME] either in the conversations recounted in the parties' affidavits. That includes [NAME]'s affidavits; his own case was that [NAME] made the payment in partial discharge of his obligation under the alleged agreement to buy [NAME] out of the [NAME]. [NAME]'s interest in the [NAME] was a personal one; it had nothing to do with [NAME], which had not even been incorporated at the time the property was acquired.

10. I am left with a loan which in fact was made to [NAME], and with nothing whatsoever to indicate that the parties intended that [NAME] was to be the party liable to repay. I reject the submission by counsel for [NAME]. I conclude that [NAME] personally was the borrower.

Account/compensation claims by [NAME] 1. [NAME]'s contractual claim concerning the [NAME] was based on an alleged agreement by [NAME] to repay all of the remittances made by [NAME]. An agreement in that form, which would in effect have required [NAME] to repay all [NAME]'s holding costs over the years during which the property had been kept available for him, would have been highly unlikely. It does not seem to be a reasonable construction even of the terms of the conversations between the parties alleged by [NAME].

2. In any event, on my findings, [NAME]'s contractual claim fails. I therefore turn to [NAME]'s claims for an account, or equitable compensation, based [NAME]'s duties as a trustee or agent. 3. [NAME] denied that he had any obligation at all to account to [NAME] for the [NAME] remittances. As already mentioned, he also relied upon statutory limitation. The scope of the statutory limitation defences was, of course, dependent in part on whether the Court should limit the relation back of the claims. 4. [NAME] also relied on the equitable doctrine of laches. In CSR Ltd v Amaca Pty Ltd [2016] VSCA 320, the [ADDRESS] of Appeal held that this is an independent equitable [NAME] which is capable of applying, if its constituent elements are made out, so as to bar equitable relief even if the statutory limitation period (applicable either directly or by analogy) has not expired: see at [261]. Counsel for [NAME] did not dispute that that was so.

5.

Accordingly, I propose to address the issues which arise with respect to [NAME]'s equitable claims in three stages. First, I will consider what prima face right [NAME] has to an account. Then I will consider the laches [NAME]. Finally, I will address the statutory limitation periods, including the relation back question.

Entitlement to account 1. The issues which arise on [NAME]'s claim for an account have to be understood in the light of the historical development of the remedy. The action of account is one of the oldest common law actions, going back at least as far as the beginning of the 13th century in England. If successful, it resulted in the appointment of auditors independent of the parties to carry out the account. The action flourished in later medieval times but was later supplanted by the equitable remedy of account which exists today. The process is summarised by [NAME] in "The Transformations of Account" (1964) 80 LQR 203, and described in detail by [NAME] in The Duty to Account: Development and Principles (2016, [COMPANY]).

2. The paradigm case of an equitable account was that which was required of a trustee. Typically the trustee would first be directed to prepare a statement of receipts and payments from the inception of the trust. Discovery would be available from the trustee to allow the beneficiary to evaluate the accuracy and completeness of the receipts admitted and the expenditure claimed. The beneficiary would then identify any expenditure items claimed by the trustee which were disputed and any income items which the trustee had not included but the beneficiary alleged should have been. Each disputed item was then the subject of a determination by the court in the usual way. The upshot would be a final balance due from the trustee to the beneficiary (this description assumes all of the assets in question were converted to cash; the same approach applied to assets held in specie).

3. An order for account by a trustee was made in [NAME]'s exclusive jurisdiction. But the remedy had procedural advantages over an account at law (particularly the availability of discovery). Over time [NAME] made the remedy available, in the exercise of its concurrent jurisdiction, in cases where an action of account would have been available at law. Examples were accounts between partners in a [NAME], or between principal and agent (see [348] below).

4. As I have said, an account of this type is the primary remedy now sought by [NAME]. Such an account was described by [NAME] in [NAME] v [NAME] (No 2) [2001] NSWSC 6 as an "account of administration".

5. A cardinal principle in undertaking an account is that all relevant debits and credits must be included, so as to produce a single final balance. As [NAME] once said, one cannot have "little bits of accounts": [COMPANY] v [COMPANY] (Court of Appeal (NSW), 24 August 1982, unrep) at 2, cited in [NAME] v [COMPANY] of New South Wales [1984] 1 NSWLR 285 at 296. Originally, therefore, to obtain an account of administration from a trustee it was necessary to bring an administration suit which would result in the trust being administered by the court.

6. One of the powerful elements of an account from a plaintiff's point of view is that it provides a way to deal comprehensively with a situation where there have been multiple breaches of duty by the trustee; indeed, an added strength is that the process allows for breaches to be uncovered of which the beneficiary may have been unaware.

7. But if the dispute was limited to a specific claim of breach of which the beneficiary was already aware, then the requirement to bring that claim in the context of a full account of administration could be unnecessarily cumbersome and expensive. From the 19th century onwards, the courts therefore began to permit beneficiaries to bring direct claims for compensation for breach of trust as separate stand-alone claims rather than as part of a full account of administration. The process is described in [NAME] and [NAME], Meagher, Gummow and Lehane's [NAME] (5th ed, 2015, LexisNexis Butterworths) at [23-030]. Such an approach also naturally lent itself to claims against non-trustee fiduciaries.

8. Rather than seeking equitable compensation for loss resulting from a specific breach of trust, the beneficiary could instead elect to obtain an account of profits made by the trustee from the breach. Such an account is limited to the profits derived from an identified breach of trust, and should be distinguished from a general account of administration: [NAME] at [44]; see also [COMPANY] v [NAME] (No 2) (2014) 48 WAR 1 at 64 [334].

9. As will be seen, the application of the relevant statutory limitation period depends upon whether any entitlement [NAME] may have to an account from [NAME] is an entitlement in the concurrent or the exclusive jurisdiction. In the remainder of this section of the judgment, I will consider [NAME]'s entitlement to an account generally, and if so, the scope of that account. I will return to the classification of the account later in the judgment, when considering statutory limitation. 10. [NAME] remittances: [NAME] formally sought an account covering all of the [NAME] remittances, counsel focused on the $400,000 paid to the agents involved in the sale of the property and the $80,000 kept by [NAME] herself. As pointed out at [214] above, it seems that these payments equate to the $480,000 remittance received on 16 March 2004. 11. [NAME]'s cross-claim alleged that the [NAME] remittances were received by [NAME], or [NAME] on his behalf, on trust for [NAME], and the payments in question were not properly incurred in carrying out the trust (that is, in effecting the purchase of the [NAME]).

12. On my findings, the payments were paid by [NAME] in China and the equivalent payments were received, via [NAME]'s [NAME] account, into her mother's [COMPANY] account (or, on [NAME]'s evidence, partly in cash). There is no evidence that the money in question ever came into [NAME]'s personal possession. The question is whether it was received by [NAME], and dealt with by her, as his agent.

13. Counsel for [NAME] pointed out that there was no dispute that [NAME] had agreed to act as the purchaser of the [NAME] and hold the property on behalf of [NAME]. Counsel added that [NAME] and [NAME], although divorced, continued to live in the same house, and [NAME] was aware that [NAME] was dealing with [NAME]. Counsel submitted that in effect [NAME] was giving directions to [NAME] on behalf of [NAME], with his knowledge and approval, and was therefore acting as his agent.

14. I do not accept this characterisation. It is true that in a general sense [NAME] was aware of what [NAME] was doing. But on my findings, he was not in any sense exercising any control over it. [NAME] dealt with [NAME] without prior reference to [NAME]. She also reported to [NAME] afterwards. It would be more accurate to see her as playing the primary role, with [NAME] in a supporting role as the nominal purchaser and holder of the property.

15. I appreciate that [NAME] himself received the later remittances and provided the accounting for those remittances to [NAME]; but these subsequent events cannot be telescoped backwards for the purpose of interpreting the earlier ones. In my view [NAME] was not an accounting party with respect to the [NAME] remittances.

16. The same conclusion applies a fortiori to the $480,000 received by [NAME] on 16 March 2004. These monies appear to have been paid out directly by [NAME], quite independently of the conveyancing transaction. On my findings, [NAME] had no knowledge whatever of the receipt or payment of the monies.

17. Title to [NAME] and remittances from June 2004: There is no dispute that the property was acquired in [NAME]'s name on the understanding that he would hold it on [NAME]'s behalf. Nor is there any dispute that the loan from the [NAME] was also obtained for [NAME]'s benefit.

18. Implicitly, if not expressly, this arrangement conferred rights and obligations on both parties. [NAME] was obliged to indemnify [NAME] against his liability to the [NAME] and the other costs of holding the property. The payment of the remittances reflected that liability. On the other hand, [NAME] was entitled to require [NAME] to hand the property over (or sell it on [NAME]'s behalf), thus benefiting from any increase in its value, upon indemnifying [NAME] against the outstanding amount of the loan and any other resulting costs.

19. Additional borrowings from the [NAME]: The additional borrowings in October 2007 and March 2008 complicated the position. They were not authorised by [NAME] and were largely for [NAME]'s personal benefit. To that extent they were not covered by [NAME]'s indemnity. Nor were the additional interest and fees attributable to the increased borrowings. [NAME] called on [NAME] to hand the property over, it would have been necessary for [NAME] to discharge the additional portion of the loan out of his own resources.

20. In my view, this was clearly recognised by [NAME]. It was the basis of the accounting to 31 January 2010 which [NAME] provided to [NAME] in February 2010 (even if [NAME] was in fact unaware of the additional borrowings at the time). That accounting effectively partitioned the [NAME] loan into a component authorised by [NAME] and an additional component which was [NAME]'s responsibility, and applied [NAME]'s remittances accordingly (see [177]-[178] above). The result was that the remittances were accounted for in part as payments of expenses and interest on [NAME]'s component of the loan, and in part as principal reductions of that loan component.

21. Implicit in this accounting approach is that, on sale of the property [NAME] was entitled to the proceeds, less his component of the loan at that point. The precise figure would require calculation, but given that as at 31 January 2010 [NAME]'s component of the loan was $2.157 million, and the net proceeds from the property amounted to $3.260 million, [NAME]'s liability was substantial.

22. On [NAME]'s behalf it was alleged that the additional borrowing was a form of "stealing", by which [NAME] used the [NAME] in the property to gain an advantage for himself to the tune of $1.226 million. But even if the additional borrowing was contrary to the express or implied terms of the arrangement between the parties, it is difficult to see that it resulted in any loss. As [NAME] was unaware of the additional borrowing, it cannot have affected his decision to abandon the property. And, as I have just explained, on sale of the property [NAME] came under an obligation to discharge his share of the loan.

23. Account stated to 31 January 2010: The account provided by [NAME] to [NAME] in February 2010 for the year to 31 January 2010 showed [NAME] in credit on the remittances in the sum of $30,000, and his share of the loan principal as $2.072 million (see [176] and [179] above). As I have noted, it is surprising that there was no evidence from the parties on this document. But clearly [NAME] received it and took no action to query or challenge it. I must infer that he accepted it as correct.

24. There is no reason why [NAME] should now be permitted to re-open the February 2010 account. It was not suggested that the remittances and expenses it showed, or the calculations it contained, were incorrect. It must be taken as having been settled: see Meagher, Gummow and Lehane at [26-100].

25. The February 2010 account only covered the year to 31 January 2010. But the form of the account suggests that it followed a pattern used in previous years, going back at least as far as the additional borrowings in 2007 and 2008. The opening balance for [NAME]'s share of the [NAME] loan in the February 2010 account ($2.157 million at 1 February 2009) is plausible in the light of the initial loan amount of $2.275 million. There is also evidence of at least one other account having been provided before the 2007 borrowing, a copy of which can no longer be retrieved (see [209] above).

26. I was not presented with any analysis of the chargeable interest and the other expenses incurred by [NAME] on [NAME]'s behalf (to the extent they can now be identified) over the period from June 2004 to January 2009. I therefore cannot say whether that expenditure was out of line with the remittances revealed by the evidence. [NAME] had ample opportunity to seek accounts over this period, if such accounts were not in fact provided. I do not think I should order an account for the period merely because of the uncertainties which now exist.

27. Remittances from February 2010: In the remittance reconciliation [NAME] sent [NAME] in July 2011, [NAME] foreshadowed a calculation of the type undertaken in February 2010 for the year ended 31 January 2010 (see [176]-[179] above). That calculation would have brought to account the interest on [NAME]'s share of the [NAME] loan and the additional expenses incurred by [NAME], and would have resulted in a new principal balance for [NAME]'s share of the loan. But [NAME] never provided it. [NAME] is prima facie entitled to have such calculations undertaken from 1 February 2010 forward.

28. Rent receipts: Before the [NAME] was let to [NAME], the parties dealt with each other on the basis that the [NAME] was being kept available for use by [NAME] or members of his family. I did not understand there to be any dispute that [NAME] was therefore prima facie entitled to have the net rent paid by [NAME] brought to account in his favour.

29. Proceeds of sale: In his pleaded case, [NAME] alleged that [NAME] was guilty of breach of contract (or trust) in allowing a situation to develop in which the [NAME] sold the [NAME]. But at no stage did [NAME] offer to discharge his share of the loan to the [NAME]. [NAME] offered to pay that amount, and had [NAME] been unable or unwilling to discharge his part of the loan, and had such an impasse resulted in the sale of the property at an undervalue, then there might have been an argument for [NAME] being entitled to compensation for the loss. But [NAME] was never put to the test. [NAME] ignored [NAME]'s requests for payment and cannot complain that in the face of this [NAME] threw up his hands and allowed the [NAME] to sell the property.

30. Nevertheless, as I have already foreshadowed, [NAME] must prima facie still account for the benefit that he received from sale of the property, in the form of a discharge of his own liabilities to the [NAME]. [NAME] is prima facie entitled to recover from [NAME] the difference between the net proceeds of sale and the principal amount of [NAME]'s share of the loan, determined in accordance with the accounting process described at [273]-[274] above.

31. In saying this, I have not forgotten that the proceeds were insufficient to discharge the whole of the loan. But [NAME] remains liable to the [NAME] for the shortfall, and [NAME] does not (there is nothing to suggest that the [NAME] could sue [NAME] directly, especially as the later borrowings were on any view unauthorised). If the [NAME] does not pursue [NAME] is no worse off and cannot complain.

32. Counsel for [NAME] referred to a potential claim by [NAME] for reimbursement of the $381,250 he said he had paid towards the deposit on the [NAME] property. Counsel contended that [NAME] was entitled to recover this amount pursuant to the indemnity document signed on 30 March 2011 (see [63] above).

33. Counsel submitted that this claim should be allowed in [NAME]'s favour in any account ordered in favour of [NAME]. But counsel's primary submission, as I understood it, was that because of the lack of evidence on this claim [NAME] was prejudiced and this was a reason why no account should be ordered in the first place.

34. I do not accept these submissions. Any claim to recover [NAME]'s share of the deposit on the [NAME] property is a contractual one which arises under the indemnity agreement of 30 March 2011. It has nothing to do with the [NAME]. [NAME] wished to pursue such a claim, he could have pleaded it as part of his case in his statement of claim. In my view it is irrelevant to [NAME]'s cross-claim with respect to the [NAME].

Laches 1. The elements of the equitable [NAME] of laches are usually stated as "inordinate" delay in pursuit of a claim which is known to, or ought to be known to, the plaintiff, coupled with prejudice to the defendant resulting from that delay.

2. I have already concluded that, by his conduct, [NAME] in effect accepted the account which he received in February 2010 which covered the period up to 31 January 2010, but he is prima facie entitled to an account from that point forward. No question of laches can arise until the end of November 2011 at the earliest. Up until that point [NAME] had made the monthly remittances which [NAME] had asked him to make, and [NAME] had indicated in his reconciliation of 6 July 2011 that he would undertake the necessary accounting in due course.

3. But once [NAME] decided that he would cease to make any payments to [NAME], which he evidently did by early December 2011, it would have been open to him to seek an account and call for the transfer of the [NAME]. Of course this would have required him to pay off his share of the loan (as determined through the account) and any other costs of discharging the mortgage. But even if [NAME] had been unwilling or unable to pay off his share of the loan, he could always have required [NAME] to sell the property and account to him for the balance.

4. Instead, by his caveat lodged in February 2012, [NAME] asserted equitable ownership of the property. The caveat was not challenged by [NAME] and [NAME] never abandoned the claim asserted in it; but he did nothing to pursue the claim. Instead he left it to [NAME] to pay the outgoings and, eventually, submit to a mortgagee sale by the [NAME].

5. There was no good reason for [NAME]'s failure to act from December 2011 onwards. I find the excuses which he offered for it in his affidavit insubstantial and unconvincing.

6. There was thus a delay of more than eight years between when [NAME]'s right to claim an account should have been known to him, and September 2020, when the claim for an account was first formally made. It is not necessary to decide whether, for the purpose of the laches [NAME], the relevant date of assertion of the claim should be placed somewhat earlier, perhaps when it was first foreshadowed in June 2020, or even in November 2018 when a claim was made about the sale of the property (see [13] above). On any view, there was an inordinate delay. The question is whether this delay resulted in any prejudice to [NAME].

7. The quantum of the remittances over the relevant period is clearly established by the documentary evidence and was not ultimately in dispute. Leaving aside the rent receipts for the moment, there can be no prejudice to [NAME] on the credit side of the ledger. On the debit side, all of the [COMPANY] statements are in evidence and the interest of [NAME]'s share of the loan can readily be calculated in the same manner as it was calculated in the period up to 31 January 2010. The only question is whether there is sufficient relevant prejudice to [NAME] so far as the expenses are concerned.

8. As I have mentioned, the evidence from [NAME] focused on expenses in the period from 2004 to 2008. It was not clear from the evidence that the records for expenditure from February 2010 onwards were missing, and if so, why. In fact, a list of council rate payments was in evidence (see [171] above); and although there was no equivalent list of payments to Sydney Water, the evidence before me indicated that such a list was available for the relevant period.

9. There was no evidence one way or another concerning other expenses such as electricity, strata fees, and insurance (if [NAME] was still insuring the property later in the relevant period). Records of those expenses may be available from the service providers. But even if they are not, the Court can make an estimate, erring, if there is uncertainty because of a lack of records, on the conservative side. In my view the prejudice to [NAME] from delay is insufficiently substantial to give rise to a [NAME] of laches.

10. This leaves the rental income from [NAME]. It appeared from [NAME]'s evidence that he was aware that the property had been let (as one would expect: see [228] above). It is not clear from the evidence when he became aware of that, but it seems likely that it would have been before June 2011, when he was still speaking with [NAME]. [NAME] would not necessarily have known the details of the tenant and the length of the tenancy, there is no evidence that he made any attempt to find out.

11. The rental payments began at the end of March 2011 and ended in early September 2013. They thus began nine years, and ended just more than seven years, before the claim for an account which included them was formally made. Again, the delay was inordinate and the question is whether it resulted in relevant prejudice to [NAME].

12. It is true that there is no record of the rental payments between March and December 2011 and again between June and October 2012, and that the records of the agent, [NAME], appear to have been destroyed. It is also likely that those records were destroyed seven years or so after the end of the relevant financial years. That would have followed the ends of the 2017/2018, 2018/2019 and 2019/2020 financial years, while the proceedings were in full swing.

13. Nevertheless copies of the leases to [NAME] are in evidence, and the gross rent is therefore known. The only doubts concern the extent of the commission and other expenses which may have been deducted by [NAME] during the missing months.

14. It may be that even if the actual records concerning this particular property have not survived, it is possible to obtain evidence from [NAME] of what the management fee would have been at the time. It may also be possible to marry up deductions for expenses from the service provider receipt details, as I have tentatively done for the council rates (see [173] above). But even if that is not practicable, I think that again it should be possible to estimate the relevant figures in a way which would do practical justice to [NAME]. The laches defences fail.

Statutory limitation 1. In answer to the claim for an account, [NAME] relies upon the Limitation Act 1969, s 15. That section provides: An action on a cause of action for an account founded on a liability at law to account is not maintainable in respect of any matter if brought after the expiration of a limitation period of six years running from the date on which the matter arises.

1. The section applies in its terms to an action "founded on a common law duty to account". Counsel for [NAME] contended that the provision applies directly to the claim made by [NAME] in these proceedings. Alternatively, counsel contended that the provision applies by analogy.

2. Legislative history: The original English Statute of Limitations 1623 (21 Jac I, c 16) ("1623 Act") dealt with accounts in s 3. The enactment provided that "all actions of account, and upon the case" were to be "commenced and sued… within six years next after the cause of such actions or suit, and not after", but excepted certain classes of mercantile account which thus remained free of any statutory limitation.

3. Clearly the effect of s 3 of the 1623 Act was to bar an action for an account at law except in the case of exempted mercantile accounts. In theory the statutory limitation was applicable by analogy to a claim for an account in [NAME]. Even so, it was not available to a trustee who was sued for an account.

4. The reason for this was that there was a general rule that [NAME] would not allow a trustee to plead the statute against a beneficiary. The rationale for this rule was that the trustee was seen as being under an affirmative obligation to carry out the terms of the trust until a discharge was obtained. [NAME] would not permit the trustee to rely on his own breach of trust to set the limitation period running.

5. Furthermore, for the purposes of the rule, a defendant owing fiduciary obligations with respect to property could be treated as a trustee, even if not formally appointed as such. [NAME]'s approach is illustrated by the Chancery appeal case of Burdick v Garrick (1870) LR 5 Ch App 233. The plaintiff's (first) husband was an Englishman who intended to go to the United States to live for an extended period of time. He executed a power of attorney in favour of his brother and a solicitor in London. The instrument granted them wide powers to call in, manage and invest his property in England. It was executed in June 1858. After he left, some of the assets were sold but an account was only made to him for part of those assets.

6. The plaintiff's husband died, in the United States, in November 1859. There was no executor and much later, in 1867, the plaintiff took out letters of administration. In February 1868 she commenced proceedings seeking an account. The defendants sought to rely on the statute. It was held that this was not permissible. 7. [NAME] LC said (at pages 239-240): It would indeed be a strange thing if this Court should be obliged to hold that if a person, for instance, were to deposit plate or jewels with his bankers intending to be absent from home for a great number of years, and those chattels were converted by his bankers to their own use in fraud of the owner, and the owner were to come back after the end of seven or eight years, he is utterly remediless either in the shape of an action at law or of a suit in this Court, because the dealing with his property has been in the nature of an agency.

1. Giffard LJ added (at page 243): where the duty of persons is to receive property, and to hold it for another, and to keep it until it is called for, they cannot discharge themselves from that trust by appealing to the lapse of time. They can only discharge themselves by handing over that property to somebody entitled to it.

1. The application of limitation periods to claims for an account in a more [NAME] context came before the House of Lords in Knox v Gye (1872) LR 5 HL 656. The United Kingdom Mercantile Law Amendment Act 1856 (19 & 20 Vict, c 97) ("1856 Act") had closed the gap in the 1623 Act for mercantile accounts. Section 9 provided: All Actions of account or for not accounting, and Suits for such Accounts, as concern the Trade of Merchandise between Merchant and Merchant, their Factors or Servants, shall be commenced and sued within Six Years after the Cause of such Actions or Suits, or when such Cause has already arisen then within Six Years after the passing of this Act; and no Claim in respect of a Matter which arose more than Six Years before the Commencement of such Action or Suit shall be enforceable by Action or Suit by reason only of some other Matter of Claim comprised in the same Account having arisen within Six Years next before the Commencement of such Action or Suit.

1. The defendant in [NAME] v [NAME], was an impresario in London whose business involved putting on operas. He became partners with [NAME], who put money into the venture. [NAME] died in November 1854, and left half of his share of the [NAME] to the plaintiff, [NAME].

2. At the time of [NAME]'s death, the [NAME] was owed £5,000 by a third party, [NAME]. It seems that the [NAME] had been trading unsuccessfully to that point, and no accounts appear to have been prepared. Then, some years after [NAME]'s death, his [NAME] partner, [NAME], was able to obtain a payment of £2,500 from [NAME]. In October 1864, [NAME], as [NAME]'s executor, filed a bill for an account of the [NAME] assets, including the sum recovered from [NAME]. The bill was filed within six years of the payment by [NAME], but almost ten years after the death of [NAME] had terminated the [NAME]. [NAME] relied upon the statutory limitation.

3. The claim came before [NAME] (as [NAME] then was) who decided that the limitation statute did not apply because the relationship between the parties was fiduciary in nature. [NAME] successfully appealed to the Lord Chancellor, then [NAME], who reversed the decision. [NAME] then appealed to the House of Lords. By then [NAME] had become Lord Chancellor. He sat on the appeal, as did [NAME]. [NAME] also sat.

4. Over the dissent of [NAME], the appeal was dismissed. All of the majority judges emphasised that what was being sought was a full account of all of the assets and liabilities of the [NAME] at the date of [NAME]'s death. That cause of action had accrued on [NAME]'s death, which was more than six years before the account had been sought.

5. The leading judgment was given by [NAME]. His Lordship said: Where the remedy in [NAME] is correspondent to the remedy at Law, and the latter is subject to a limit in point of time by the Statute of Limitations, a Court of [NAME] acts by analogy to the statute, and imposes on the remedy it affords the same limitation.

1. His Lordship continued, expanding on what he meant by saying that an equitable remedy was "correspondent to" a remedy at law: Where a Court of [NAME] frames its remedy upon the basis of the Common Law, and supplements the Common Law by extending the remedy to parties who cannot have an action at Common Law, there the Court of [NAME] acts in analogy to the statute; that is, it adopts the statute as the rule of procedure regulating the remedy it affords. 1. [NAME] observed that [NAME] was one of the situations where an action of account at law would lie. A claim for a [NAME] account was thus one in [NAME]'s concurrent jurisdiction, being made in aid of legal rights. The potential complication was whether an account could be obtained at law by the executor of a [NAME] partner against a [NAME] partner when there was no legal relationship of partner between them. His Lordship considered, however, that [NAME] would grant relief in its exclusive jurisdiction in such a case. 2. [NAME] accepted the proposition that if the defendant was a trustee, the statute could not be relied upon. But for this purpose the defendant had to be a trustee in a full and proper sense. His Lordship referred to the case of a vendor under a contract for the sale of land. He said that such a vendor had been described as a trustee, but that description was only metaphorical. He continued (at 675-676): In like manner here, the [NAME] partner may be called a trustee for the dead man, but the trust is limited to the discharge of the obligation, which is liable to be barred by lapse of time; as between the express trustee and the cestui que trust time will not run; but the [NAME] partner is not a trustee in that full and proper sense of the word. The application to a man who is improperly, and by metaphor only, called a trustee, of all the consequences which would follow if he were a trustee by express declaration – in other words a complete trustee – holding the property exclusively for the benefit of the cestui que trust, well illustrates the remark made by Lord Mansfield, that nothing in law is so apt to mislead as a metaphor. 1. [NAME] had protested that, on [NAME]'s argument, if money was recovered from a debtor to the [NAME] more than six years after the termination of the [NAME], it would be impossible to recover. [NAME] did not directly address this problem, but [NAME] said (at 687) that while claim for a full account of administration would be barred, that would not prevent a specific claim being pursued for a share of the amount recovered (to the extent not covered by [NAME] expenses). [NAME] (at 678) appears to have been of the same view.

2. The United Kingdom Judicature Act 1873 (36 & 37 Vict, c 66) ("1873 Act") put the equitable rule that limitation periods did not apply to claims against trustees on a statutory basis. Section 25(2) provided: No claim of a cestui que trust against his trustee for any property held on an express trust, or in respect of any breach of such trust, shall be held to be barred by any Statute of Limitations.

1. Section 25 of the 1873 Act referred to a claim against the trustee of an "express trust". This was seen as being merely declaratory of the previous rule in [NAME]. The result was that a fiduciary entrusted with property could be a "express" trustee; as for example in Re Sharpe [1892] 1 Ch 154 (a company director who had been party to paying dividends, contrary to the company's memorandum of association) and Soar v Ashwell [1893] 2 QB 390 (a solicitor who had acted for the trustees of a trust and thereby come into possession of some of the trust funds). The rule, however, did not apply to a "constructive" trustee who was treated as a trustee only for the purposes of granting relief against him, as in [NAME] (1880) 5 Ex D 319 (a company director who was sued by the company to recover an alleged bribe).

2. The 1623 and 1856 Acts were mainly concerned with actions and suits for accounts of personalty, and only incidentally with receipts from property. But from 1833 there was a separate limitation regime which applied specifically to real property and rents derived from such property.

3. The United Kingdom Real Property Limitation Act 1833 (3 & 4 Wm IV, c 27) ("1833 Act") imposed a twenty year limitation period on legal remedies (exercising a right of entry, distress, or bringing an action) to recover any land or rent (s 2). Section 24 imposed the same limitation on any suit in [NAME] "claiming land or rent". But the effect of s 25 was that in the case of an "express trust" time did not run under the Act against a trustee in a suit by a beneficiary.

4. The courts adopted the same test for determining whether a defendant was a trustee under an "express trust" for the purposes of the Act as they applied to determining whether a defendant could be required to account despite the statute of limitations. Thus an agent who had received rents in the name of the [NAME] owner of property was treated as a self-appointed trustee and was not entitled to rely upon the limitation in the 1833 Act: see [NAME] v [NAME] (No 3) (1889) 14 App Cas 437.

5. But the idea that there should be no limitation periods at all in claims against trustees, particularly in the case of breaches of trust which occurred without any personal fault on the part of the trustee, was not to survive for much longer. The United Kingdom Trustee Act 1888 (51 & 52 Vict, c 59) ("1888 Act") imposed a six year limitation period on claims for breach of trust against trustees. But this was subject to various exceptions where the period would not apply and there would be no limitation period. These included cases where the breach was fraudulent and where the trustee had appropriated assets of the trust to his or her own use.

6. The 1888 Act was interpreted consistently with the distinction previously drawn between express trusts and constructive trusts in [NAME]. Thus in Taylor v Davies [1920] AC 636, the Privy Council held that it applied to a claim by the beneficiaries of a trust against a third party defendant who had allegedly purchased an asset of the trust in breach of trust. If liable the defendant would have been a constructive trustee who could rely on the statute of limitations.

7. It was in this context that the United Kingdom Limitation Act 1939 ("1939 Act") was enacted. The Act was a consolidation of earlier limitation enactments and reflected a report by the Law Revision Committee.

8. One of the terms of reference had required the Law Revision Committee to look generally at the limitation provisions applicable to common law causes of action. This was dealt with in s 2 of the resulting Act. Although the report did not refer specifically to an account, the Act provided for the limitation periods for accounts in s 3 of the 1623 Act and s 9 of the 1856 Act to be re-enacted in subsection (2) in the following form: An action for an account shall not be brought in respect of any matter which arose more than six years before the commencement of the action.

1. Section 2 also contained a statutory recognition of the principle of limitation statutes by analogy. Subsection (7) provided: This section shall not apply to any claim for specific performance of a contract or for an injunction or for other equitable relief, except in so far as any provision thereof may be applied by the Court by analogy in like manner as the corresponding enactment repealed by this Act has heretofore been applied.

1. The operation of these provisions proved troublesome so far as they concerned accounts. They were discussed by [NAME] in [NAME] v [NAME] (No 2) [1977] Ch 106. His Lordship observed (at 250) that taken on its own s 2(2) would not be read as being confined to the long obsolete action at common law; it would apply directly to an account in [NAME] because of the width of the definition of the term "action" in the Act. But the first part of subsection (7) then expressly excluded the operation of subsection (2) so far as equitable claims were concerned, leaving them to be applied again, by analogy, by the second part of subsection (7). His Lordship described this (at 251) as a "tortuous scheme of indirection" which he was not prepared to attribute to Parliament. The upshot was that he concluded that claims for accounts against trustees remained outside the purview of the Act and consequently were not subject to any limitation period.

2. The current position in England was summarised in the decision of the Court of Appeal in Paragon Finance PLC v DB Thakerar & Co [1999] 1 All ER 400. In that case a financier who had lost money on a mortgage of property tried to pursue a claim against the solicitors who had acted on the transaction outside the six year period by presenting the claim as one for an account.

3. In the course of his decision, Millett LJ (as his Lordship then was) referred to an earlier case, Nelson v Rye [1996] 2 All ER 186. In that case the plaintiff was a musician who retained the defendant as his manager. The defendant was required to collect the plaintiff's earnings and account to him annually. The plaintiff's claim was brought more than six years after the relationship came to an end, but the judge concluded that because the defendant owed fiduciary duties, the limitation period for an action of account did not apply. Millett LJ considered that this was wrong. He said (at 415, citations omitted): The law on this subject has been settled for more than a hundred years. An action for an account brought by a principal against his agent is barred by the statutes of limitation unless the agent is more than a mere agent but is a trustee of the money which he received. A claim for an account in [NAME], absent any trust, has no equitable element; it is based on legal, not equitable rights. Where the agent's liability to account was contractual [NAME] acted in obedience to the statute. Where, as in [NAME] v [NAME], there was no contractual relationship between the parties, so that the liability was exclusively equitable, the court acted by analogy with statute.

1. In New South Wales, the 1623 Act applied from settlement. The provisions of the 1833 Act were reflected in a local statute passed in 1837 (Real Estate (Limitation of Actions) Act 1837 (NSW) (8 Wm IV, No 3), with the time limit being reduced from twenty years to twelve years in 1874. Thus matters stood at the time of the comprehensive reform effected by the Limitation Act 1969 ("NSW Act").

2. The enactment of the NSW Act followed a report from the Law Reform Commission: First Report on the Limitation of Actions (Report No 3, October 1967). For present purposes, three of the changes made in the Act should be referred to.

3. First there was the enactment of s 15, the text of which I have already set out. The report dealt with this at [109]-[112]. After observing at [109] that s 3 of the 1623 Act applied "primarily, and perhaps exclusively" to the obsolete common law action of account, the report continued (at [110]): Proceedings for accounts are now taken by suit in [NAME] and this is so whether the liability to account is a legal Iiability or an equitable liability. Where a suit for an account is brought on a legal liability to account a court of [NAME] applies a six-year period of limitation: it has, however, been a matter of controversy whether the six-year period of limitation is applied in direct obedience to section 3 of the Act of 1623, or by analogy to the requirements of that section. Where the liability to account is equitable, the court applies the six year period by analogy, for example, where the accounting party has a fiduciary duty.

1. The report continued at [111] by referring to the potential difficulties created by the wording of s 2(2) and 2(7) of the 1939 Act, discussing the views taken in different textbooks and thus anticipating the problem discussed by [NAME] in [NAME]. The report concluded (at [112]): We have attempted to draw what we think is the right line in section 15 of the Bill. It will apply directly to an action, whether at law or in [NAME], for an account founded on a legal liability to account: it will be applicable by analogy to an action in [NAME] for an account on an equitable liability to account. Section 23 of the Bill, the counterpart of section 2(7) of the Imperial Act of 1939, does not apply to section 15 of the Bill.

1. The second change was the enactment of s 23, just referred to. That section provides: Sections 14, 16, 17, 18, 20 and 21 do not apply, except so far as they may be applied by analogy, to a cause of action for specific performance of a contract or for an injunction or for other equitable relief.

1. The report explained (at [132]): Section 23 states the position reached by judicial decision on the enactments whose place is taken by the provisions mentioned in the section. We should give here a reference to the discussion in relation to section 15 of the application of the limitation period to an action in [NAME] for an account (paragraphs 109 to 112 above).

1. The third relevant change was to replace the convoluted law concerning limitations against trustees deriving from the 1888 Act with a more direct set of statutory rules. By s 48, the standard limitation period for an action against a trustee was fixed at six years. Then s 47 provided for certain classes of trust claims, including claims for fraudulent breach of trust and claims for appropriation by the trustee of the trust property, which were, despite the application of any other limitation period, to have a limitation period of twelve years from the date on which the plaintiff knew of, or might with reasonable diligence have discovered, the existence of the cause of action. 2. [COMPANY] v [NAME] (Supreme Court (NSW), 5 March 1993, unrep) the question before [NAME] was whether there was a limitation period applicable to a claim for contribution between insurers. [NAME] recognised that the claim was an equitable one but rights of contribution had historically been recognised at law also. He considered that there was no limitation period which applied to a contribution claim, whether directly or by analogy. 3. [NAME] went on to consider however whether there was a limitation which applied to an equitable claim for contribution. [NAME] was seemingly prepared to assume that a claim for contribution between insurers might be classified as a claim for an account, but even so he considered that s 15 did not apply to it directly or by analogy. This was based on the reasoning of [NAME] in [NAME] which I have summarised at [324] above.

4. On the other hand, in Faitrouni v El Omar [1999] NSWSC 84 Windeyer J was faced with an application for the taking of [NAME] accounts where the proceedings had been commenced more than six years after the dissolution of the [NAME]. [NAME] considered that s 15 (which had not formally been pleaded) did not directly apply, but held that it did apply by analogy. However, [NAME] does not appear to have been referred to authority. 5. [ADDRESS] of Appeal authoritatively considered the application of s 15 in [NAME] (2014) 89 NSWLR 317. That case arose out of a [NAME]. One of the partners effectively appropriated the [NAME] assets to himself. He did not account to the other partners for the income, and applied some of it to the purchase of property in the names of himself and some of his children. When the [NAME] ceased, he closed the [NAME] down without accounting to the partners for their share of the proceeds. More than six years later, [COMPANY] became aware of the use of the [NAME] monies to purchase the properties. They then instituted proceedings seeking a general account of all of the [NAME] dealings, including the proceeds of the sale of the [NAME] businesses, and a share of the properties in question, and the income which had been derived from them.

6. The leading judgment was given by Gleeson JA, with whom Meagher JA and Barrett JA agreed. [NAME] quoted with approval the passage from the judgment of Millett LJ in [NAME] which I have set out at [326] above. [NAME] stated (at [360]-[361]): [NAME] may be taken to establish two matters. First, a claim for an account in [NAME], absent any trust, has no equitable element. It is based on legal, not equitable rights.

Accordingly, where the liability to account is contractually based, [NAME] acts in obedience to the statute of limitations. However, if there is no contractual relationship between the parties, and the liability is exclusively equitable, the court acts by analogy with the statute. Secondly, there is a distinction between the liability of an agent to account and the liability of an agent for funds held as a constructive trustee. The same may be said in the case of partners. Thus the fact that someone is a fiduciary, that is, an agent or partner, does not make their failure to account a breach of fiduciary duty or make them liable to pay equitable compensation. This is because the simple duty to account is not a fiduciary duty: Coulthard v Disco Mix Club Ltd [1999] 2 All ER 457 at 477–478 (Jules Sher QC).

1. It followed that the claim for a general account (including the proceeds of sale of the businesses) was a claim founded "on a duty at law to account". Therefore s 15 applied directly so as to bar that claim. The conclusion reached by Windeyer J in [NAME] was thus upheld, albeit by a different route.

2. But this did not prevent the plaintiffs from litigating their specific claims with respect to the properties acquired by the defaulting partner, and the income derived from them. Gleeson JA characterised the claim as a purely equitable one. [NAME] acknowledged the possibility that the claim could be characterised as a claim for an account of profits, to which s 15 might apply by analogy, but reasoned that an attempt to rely on s 15 by analogy with respect to those specific claims would be unconscionable until the fraud had been revealed (at [387]-[388]). In any event, [NAME] preferred to analyse the claim as a claim to recover trust property, with the result that the time limit prescribed under s 47 had not expired (at [389]).

3. Application of s 15: This brings me to the application of s 15 in the current case. The first question is whether s 15 applies directly. That depends on whether these proceedings can be described as an action "founded on a duty at common law to account". As the Court of Appeal emphasised in [NAME], this wording is designed to include equitable relief as well as (obsolete) relief at law. If [NAME] is acting in its concurrent jurisdiction s 15 will apply directly.

4. Application of the reasoning in [NAME] would suggest that the question is to be resolved by asking whether there was a "trust element" to [NAME]'s obligations to account. I will address this first, before returning to the particular statutory language of s 15.

5. Looked at in the broad, the relationship between [NAME] and [NAME] bears resemblances to the circumstances of both [NAME] and [NAME]. The distinction between the two cases lies, it seems, on the fact that in [NAME] the property the subject of the power of attorney had to be separately held and accounted for on demand, whereas in [NAME] the arrangement allowed the defendant to account only at defined intervals and make use of any monies received as his own in the meantime.

6. This is a fine distinction, and the court must beware of falling into circular reasoning. A trustee is generally under a duty to keep trust property separate, so if the existence of such a duty is to make [NAME] a trustee, that duty must arise independently out of the arrangements between the parties.

7. In the present case, the arrangements were informal in the extreme, and may well have varied over time. There must have been discussions between [NAME] and [NAME] (or [NAME]) about the accounting procedure to be followed, but the evidence before me did not address those discussions.

8. What is clear from the evidence is that [NAME] did not in fact segregate the remittances from his own money: he used the offset account for his own purposes as well as to make the loan repayments. Nor did he segregate the loan account, in the sense of restricting the amount borrowed to the $2.275 million originally authorised by [NAME]. But he may not have been asked to do so. And he did not segregate the expenses either: it seems that the holding costs such as council rates were often if not invariably paid by [NAME] out of his own private account and only later recouped when an accounting was undertaken. Furthermore, the non-segregation of the loan (as I have described it) was something which was apparent, on analysis, from the way in which the accounts were presented to [NAME]: see [226] above.

9. I think there may be a shorter answer to the question, given the language of s 15. As we have seen at [338] above, Gleeson JA said if the relationship between the parties is "contractually based", then a claim for an account in [NAME] is made in the concurrent jurisdiction. As I have pointed out, the arrangement between [NAME] and [NAME] imposed obligations on both parties. It could readily be analysed as contractual, and thus as giving rise to a duty to account at law.

10. The same ultimate conclusion is supported by the historical analysis undertaken by [NAME] in The Duty to Account (cited at [247] above). Long before trust law had even developed, the medieval action of account was available against many classes of defendant who were in possession of property but were subject to obligations to deal with that property in the interests of someone else. These included bailiffs or stewards ([217]), receivers ([225]), and other mercantile agents such as factors ([274]). Significantly, although originally based on servitude, these categories of legal relationship came to be based on agency. And although [NAME] later came to see such relationships as fiduciary, exercise of its jurisdiction to order an account was not based on that characterisation but on the unavailability of relief at law, that is, as part of the concurrent jurisdiction: see at [387]-[388].

11. In its essence, the relationship between [NAME] and [NAME] was a relationship of the same type. [NAME] was effectively managing the [NAME] for [NAME]. As a matter of history, therefore, the claim for an account against [NAME] is indeed a claim "founded on a duty at law to account".

12. The alternative question is whether, if the claim for an account from [NAME] is properly characterised as a claim against a trustee, s 15 applies by analogy.

13. The report which preceded the introduction of s 15 contemplated explicitly that it would operate by analogy in claims in [NAME]'s exclusive jurisdiction. As I have already noted, the paradigm case of a claim for an account in [NAME]'s exclusive jurisdiction is a claim against a trustee for an account of administration. On the face of it, the application of s 15 by analogy to such a claim would have been the very thing which the authors of the report would have had in mind when framing the legislation.

14. Such an approach is completely consistent with the application of the doctrine of analogy. The wording of s 15, unlike the earlier United Kingdom provisions, applied directly to an equitable account. The analogy is exact between a claim in [NAME] for an account under a [NAME] (to which s 15 applies directly) and an account against a trustee in the exclusive jurisdiction. In fact, it might more accurately be said as a matter of history that the two claims are identical; they are simply applications in different jurisdictions of the same equitable remedy of account.

15. It is true that historically [NAME] did not apply statutes of limitation by analogy to a claim for account against the trustee of a trust. But as we have seen this was not so much because there was no analogy perceived, but because of a broader rule which prohibited the application of all equitable remedies against trustees. That rule has now been swept away and there is no reason why it should now be partially read back into s 15.

16. All the more is this so because the NSW Act was deliberately drafted so as to allow the doctrine of analogy to apply in an untrammelled way. It is notable that s 23 does away with the reference in s 2(7) of the 1939 Act to the doctrine of analogy being applied "in like manner" to the way in which previous statutes were applied. In the application of the doctrine of analogy under the NSW Act there is thus no need to pick up the distinctions developed in the case law under those earlier statutes.

17. More fundamentally still, there was a deliberate decision to omit reference to s 15 entirely from s 23. Presumably this was because, unlike the other legal remedies referred to by s 23, the legal remedy in s 15 was obsolete. The result is that there is no textual limitation whatever in the Act to applying the doctrine of analogy under s 15.

18. Interpreting s 15 in this way causes no difficulty with the established principles governing specific breaches of trust, or specific breaches of fiduciary duty by non-trustee fiduciaries. Instead a six year limitation period is entirely consistent with the general limitation period by s 48 with respect to such claims. Indeed, to allow a plaintiff who is unable to pursue a specific claim for breach of trust (say for an innocent breach) to pursue the same claim through an account would be completely unsatisfactory.

19. Nor is there any difficulty with a plaintiff being shut out of claims for fraudulent breaches of trust, or appropriation by the trustee of trust property. Because of the way s 47 is drafted, the limitation period prescribed by that section applies to such claims even if other provisions of the Act also apply. If the plaintiff can prove a specific breach of trust falling within s 47, it may still be pursued individually.

20.

For these reasons, if s 15 does not apply directly to [NAME]'s claim for an account, I think it applies by analogy.

21. These conclusions are contrary to the views expressed (in obiter) by [NAME] in [NAME]. But I do not think those views are now persuasive. [NAME]'s approach to the application of s 15 has been overtaken by the decision of the Court of Appeal in [NAME]. And in any event, the reasoning by [NAME] in [NAME] upon which [NAME] relied now appears questionable, at least in this country.

22. The reasoning in [NAME] was later considered by the [ADDRESS] of Appeal in Wheatley v Bower [2001] WASCA 293. [ADDRESS] (which was considering a statutory provision more closely modelled on the 1939 UK Act than the NSW Act) decided not to follow that reasoning. The same conclusion has been reached in Victoria: Feiglin v Ainsworth [2011] VSC 454 at [33].

23. Even more fundamentally, in adopting the [NAME] reasoning, [NAME] did not refer to the Law Reform Commission report. That report shows that the Commission was alive to the problem later discussed by [NAME] and took steps in formulating s 15 to deal with it. As the report itself states, the intention was that, in the exclusive jurisdiction, s 15 would apply by analogy. The historical analysis by [NAME] to which I have referred underlines how unsatisfactory it would be to decline to apply the statute by analogy (if it does not apply directly) in the present case.

24. Relation back: The next question is whether, in the exercise of my discretion, I should limit the relation back of the claim for an account to the date on which it was introduced by filing the relevant pleadings, that is, September 2020. Two separate types of relation back are in issue.

25. The first stems from the procedural rule that an amended pleading is deemed to relate back to the pleading which it replaces. If that relation back is applied, the account claim will be taken to have been made when the original cross-claim was filed, on 16 November 2018.

26. The second type of relation back comes from s 74 of the NSW Act. That section provides that for limitation purposes, a cross-claim back against the plaintiff is deemed to have been made at the time the plaintiff's action was commenced. Prima facie this has the result that [NAME]'s cross-claim relates back to when [NAME]'s statement of claim was filed, on 29 December 2016.

27. The procedural rule that a pleading relates back to the date of its predecessor means that a plaintiff can, by amendment, introduce a cause of action which has expired since the proceedings were begun, and that newly introduced cause of action will be deemed to have been brought within the limitation period. This was thought unsatisfactory and resulted in the rule in [NAME] (1887) 19 QB 394. That rule was that the court would not permit an amendment which would have the effect of introducing, by means of relation back, a statute barred cause of action.

28. A similar rule was adopted when considering whether to permit a defendant to raise a claim by way of [NAME] or counter-claim. A rigid distinction was drawn between set-off and a counter-claim. If the claim was purely defensive, and put forward by way of set-off, then it did not involve the introduction of any new claim against the plaintiff and was permitted. But a plaintiff would not be permitted to bring a separate cause of action by way of counter-claim if the limitation period had expired: [NAME] (1936) 56 CLR 50 at 57.

29. The counter-claim rule was reversed by s 28 of the 1939 UK Act. The equivalent provision in the NSW Act is s 74(1): Set off etc (1) Where, in an action (in this section called the principal action), a claim is made by way of set off, counterclaim or cross action, the claim, for the purposes of this Act— (a) is a separate action, and (b) is, as against a person against whom the claim is made, brought on the only or earlier of such of the following dates as are applicable— (i) the date on which the person becomes a party to the principal action, and (ii) the date on which the person becomes a party to the claim.

1. The rule in [NAME] v [NAME] has now been displaced as it applied to amendments as well. This first occurred in this State with rules of Court which were introduced in 1970: see McGee v Yeomans [1977] 1 NSWLR 273. Those rules are now reflected in CPA, s 65, which relevantly provides: Amendment of originating process after expiry of limitation period … (2) At any time after the expiration of the relevant limitation period, the plaintiff in any such proceedings may, with the leave of the court under section 64 (1) (b), amend the originating process so as— … (c) to add or substitute a new cause of action, together with a claim for relief on the new cause of action, being a new cause of action that, in the court's opinion, arises from the same (or substantially the same) facts as those giving rise to an existing cause of action and claim for relief set out in the originating process. (3) Unless the court otherwise orders, an amendment made under this section is taken to have had effect as from the date on which the proceedings were commenced.

1. But the power in s 65 to make an amendment which relates back is expressly made subject to a discretionary power to order otherwise under s 65(3). In the present case it was likewise accepted that a term might be imposed on the grant of leave to make an amendment under the court's general power in s 64 limiting the relation back of the amendments so made. It was also accepted that a similar term could be imposed as a condition for the grant of leave to file a cross-claim out of time.

2. I will deal first with the relation back of the amendments to the cross-claim introducing a claim for an account. The initial version of the cross-claim included specific claims of breach of duty on [NAME]'s part. The new "cause of action" depends on proof of facts making [NAME] liable to provide a full account of administration. Those facts had already been pleaded in the course of pleading the specific claims of breach of contract and breach of duty. The amendments thus fall within s 65(2)(c).

3. It would be contrary to the evident purpose of s 65 to exercise the power in s 65(3) merely because the amendment introduces a statute barred cause of action. For reasons I have given, there is no sufficient prejudice to [NAME] to refuse the amendment on that ground. Furthermore, in a general sense the amendment has been opened up by [NAME]'s [NAME] to the original cross-claim, in which he contended that payments for [NAME]'s benefit should be taken into account in reduction of any compensation awarded (see [18] above). I see no reason to order otherwise under s 65(3).

4. The second question is whether the institution of the cross-claim should relate back in accordance with the ordinary operation of s 74. I was not referred to any authority on the exercise of this particular discretion, and must deal with it as a question of principle.

5. It seems to me that the considerations at play are somewhat different from those which apply to relation back by way of amending an existing pleading. Section 74 deals with claims back against the plaintiff. Limitation may be seen as a means of preserving the peace by preventing stale claims. It is one thing to prevent a plaintiff from introducing a stale claim by amending the statement of claim to include a claim which has hitherto not been pursued, and has become statute barred in the meantime. But arguably, a counter-claim is belatedly made back against the plaintiff should not cause the same concern. After all the plaintiff has chosen to launch the proceedings in the first place. Although this is not stated in the report of the Law Revision Committee it seems that the rationale behind s 28 of the 1939 Act was (and thus the rationale behind s 74 is) that in such a situation there is no injustice to the plaintiff in allowing the defendant to bring any cross-claim back against the plaintiff that was in existence at the time the plaintiff began his action.

6. When he commenced the proceedings in December 2016, [NAME] would have been well aware that he had borrowed money for his own purposes on the security of the [NAME] and that he had received the benefit of a partial discharge of that liability out of the proceeds of sale of the property in May 2014. [NAME] could not have complained if, having brought a claim against [NAME], he was held to account for that gain. [NAME]'s delay in making a cross-claim may have led [NAME] to hope that he would not, after all, be required to do so, he suffered no significant prejudice as a result. I see no reason to limit the relation back effect of s 74.

7. Accrual of cause of action: Counsel for [NAME] submitted that his right to an account did not accrue until the [NAME] was sold, which was in March 2014. According to counsel's submission, if the claim was brought within six years of that date, [NAME] was entitled to an account going back to the beginning of the financial relationship between the two men, in 2004.

8. For their part, counsel for [NAME] relied upon what was said by Sifris J in Jane v Bob Jane Corporation Pty Ltd [2013] VSC 406. The plaintiff in that case, [NAME], had been the founder of the business conducted by the defendant and had been accustomed to depositing money with the defendant, [NAME], and then drawing on the money for personal expenditure. The relevant dealings between the parties took place between 1 July 2001 and 30 June 2008. In March 2012 the plaintiff brought a claim for an account. [NAME] contended that any "matter" pre-dating March 2006 was statute barred under s 5(2) of the Victorian Limitation of Actions Act 1958 (the wording of which was equivalent of s 2(2) of the 1939 Act).

9. The passage upon which counsel relied was at [78]: The accrual of the cause of action for account occurs when the accounting party receives money or property in respect of which he is liable to account. Relevantly, the first cause of action for an account accrued when [NAME]'s loan account was first credited. Each time that [NAME] received money by way of a credit to [NAME]'s loan account, a new cause of action accrued in respect of that credit.

1. I have already concluded that [NAME] is not on any view entitled to an account for the period up to 31 January 2010. I have also concluded that s 15 applies from six years prior to the commencement of [NAME]'s proceedings, namely 29 December 2010. The issue is therefore confined to the period from 1 February to 28 December 2010.

2. In the end, I do not find it necessary to decide between the parties' submissions on this issue. That is for two reasons.

3. First, I think that [NAME]'s reconciliation of 6 July 2011 implicitly undertook to provide an account of the same type as had been provided for the period up to 31 January 2010 (see [182] above). Arguably that was a written acknowledgement which set the limitation period running again: NSW Act, s 54. If so, the claim is wholly within time.

4. The second point is that, even if the right to an account was statute barred from 29 December 2010, for practical purposes it would still be necessary to determine the account balance at that date. This would require reference back to the previous transactions.

5. The point arose in How v Earl Winterton [1896] 2 Ch 626. The defendant was the trustee of a trust established under the will of a testatrix who died in 1875. A claim of breach of trust was made against him in August 1895. The claim was successful, but the defendant was held entitled to rely on the six year period of limitation under the 1888 Act.

6. Lindley LJ said (at 640): In the present case the action is maintainable in respect of the defendant's receipts since August 9, 1889, and in respect of rents then in his hands which he ought to have accumulated. It is said that the amount of what he then had cannot be ascertained without taking an account from the death of the testatrix. This, however, is not so. What the defendant had in his hands in 1889 can be ascertained by an inquiry. It is a mere question of fact to be ascertained by evidence, and in particular by the examination of the defendant on oath, and the production of his earlier accounts, which, of course, are evidence against him. But to take an account of his receipts and payments from 1875 is quite another matter. That involves the disallowance of every payment which the defendant cannot now prove that he is entitled to have allowed as against the plaintiff. Such an account is necessary to ascertain what the defendant ought to have had on August 9, 1889; but it is not necessary to ascertain what in fact he then had.

1. On this view the account against [NAME] would, strictly speaking, be limited to the period from 29 December 2010 onwards, but the balance as at that date would be determined by an enquiry going back to 31 January 2010. Although, for the reasons given by Lindley LJ, there is a distinction between an inquiry and a full account, in the circumstances of this case there is likely to be little if any practical difference.

2. The acknowledgement point I have outlined above was not pleaded. On the face of it, there would seem to be no relevant prejudice to [NAME], but I will entertain supplementary submissions from counsel on the point if they consider it worthwhile.

3. Other bases for claim: These conclusions on the application of s 15 make it unnecessary to consider whether [NAME] could have made individual claims concerning specific remittances or rent receipts which attract the longer limitation period under s 47. It was unclear to me whether any restitution claim was pursued if the contract claim failed, as it has, but even if so, it would also be unnecessary to consider that claim.

Conclusions and orders 1. I have concluded that: 1. [NAME]'s claim for repayment of the ¥11 million which he paid to [NAME] in April 2011 (less the $800,000 received in November of that year), together with interest at 2% per month, succeeds; 2. [NAME]'s cross-claim, to the extent based on an alleged agreement by [NAME] to buy [NAME] out of the [NAME], fails; 3. [NAME]'s claim for an account of the [NAME] remittances, or for equitable compensation for the $480,000 paid out by [NAME], fails; 4. [NAME] is entitled to an account incorporating the net proceeds of the [NAME] when it was sold in May 2014, the rent received from [NAME], and the remittances sent to [NAME], but only back to 31 January 2010 (or perhaps 29 December 2010, coupled with an enquiry going back to 31 January 2010).

1. As a result of conclusion (1) it will be necessary to calculate the amount to which [NAME] is entitled on the ¥11 million loan. The original payment was made in yuan and the repayment was made in Australian dollars, albeit that it was then converted to yuan. It will be necessary for the purpose of entering judgment to convert one or other of these payments into the other currency. The view I have expressed that the currency of account for the loan was yuan is a tentative one and either party is at liberty to make further submissions on that question. It will also be necessary to calculate the interest due.

2. As a result of conclusion (4), it will be necessary to proceed with the taking of the account (or account and enquiry) to which I have found that [NAME] is entitled. The parties will need to consider what further procedural steps, and what further evidence, will be required. If the task appears to be a fairly limited one I may be able to undertake it.

3. I will adjourn these proceedings for a short period to allow the parties to consider the judgment and address these procedural issues. It will also be necessary to consider whether costs should be dealt with at this stage or should await the outcome of the account.

4. The orders of the Court are:

1. Adjourn the proceedings to 9.15 am on 14 September 2021 or such other time as may be arranged with my Associate.

2. Direct that the parties confer on the form of orders to be made to give effect to this judgment and to deal with costs, and, no later than 24 hours before the adjourned hearing, submit proposed orders for this purpose.

********** 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: 31 August 2021