Zhenxiang Huo v MK Property Funds Pty Ltd

1. [1]

   This is an application for summary judgment brought by the plaintiff under r 13.1 of the Uniform Civil Procedure Rules 2005 (NSW).

2. [2]

   The plaintiff sues on a loan agreement that was entered into between the plaintiff and the first defendant, and a guarantee given, or purportedly given, by the second defendant in respect of that loan. Matters that are pleaded in the statement of claim and admitted by the first and second defendants, at least in their defence filed 3 February 2026 include:

   1. (1)

      The plaintiff and the first and the second defendants entered into a Loan Agreement pursuant to which the plaintiff advanced $500,000.

   2. (2)

      The terms of the Loan Agreement are not disputed in the defence. I return to some clauses below. The Loan Agreement provided for repayment within 7 months after the loan date, and provided that $500,000 would be paid subject to a deduction of $37,916.67 for prepaid interest at 13% per annum over the 7 month period. (On the evidence before me, this amount was advanced on 25 or 26 September 2024 and was therefore overdue by 27 April 2025.)

   3. (3)

      The loan has not been repaid.

   4. (4)

      The current defence admits that the second defendant guaranteed the obligation of the first defendant and admits to the terms of a clause in which the first defendant promised to a grant a mortgage over certain property. I will return to those clauses shortly.

3. [3]

   In their filed defence, the first and second defendants advance so-called affirmative defences in equity, specifically:

   1. (1)

      unconscionable conduct and harsh enforcement;

   2. (2)

      equitable forbearance or relief against forfeiture;

   3. (3)

      no utility in the remedy sought; and

   4. (4)

      estoppel based on asserted mutual understanding as to the specific purpose of the loan (which is said to give rise to an estoppel preventing the plaintiff from insisting on strict adherence to the original timeline).

4. [4]

   The details provided in the filed defence as to the first three grounds of defence make it clear that they would not provide a defence to an obligation to repay the principal loan amount, although they might – and I stress might – be relevant to discretionary decisions this Court might make as to what relief might be granted, especially when it comes to enforcement orders. In part, I express this view because no facts are pleaded by the first and second defendants in the defence that could support relief against forfeiture, and the pleaded facts do not suggest there is no utility in the remedy, when it is viewed from the plaintiff’s perspective.

5. [5]

   In relation to the fourth ground in the currently pleaded defences, the first defendant, appearing with my leave through the second defendant who is its sole director and shareholder, asserted from the Bar Table that:

   1. (1)

      although the loan was due on a date in late April 2025, the plaintiff had agreed by exchange of emails to an extension of time to some date no later than October 2025; and

   2. (2)

      although the first defendant requested a further extension after October 2025, none was granted.

6. [6]

   I received this as a summary on behalf of the first defendant of what the first defendant would say if it were permitted a further opportunity to adduce evidence in relation to the claim for summary judgment in respect of the principal debt. Far from tending to demonstrate that the sum claimed is not due, to my mind this evidence reinforces a conclusion that the principal sum advanced is presently due and payable, and that the pleading in relation to estoppel does not provide a basis for resisting that claim.

7. [7]

   The Loan Agreement provided for interest payable at the higher rate of 20% per annum if the funds were not repaid in accordance with the agreement. Both the first and second defendants now contend that this rate is a penalty, but the second defendant confirmed before me today that she did not contend that the lower 13% interest rate was a penalty.

8. [8]

   I am satisfied on the material before me that the first defendant has no arguable defence to the plaintiff’s claim for judgment in an amount of $500,000, and that allowing the first defendant more time to adduce evidence in respect of that part of the plaintiff’s claim would be futile.

9. [9]

   Accordingly, I will grant summary judgment against the first defendant in an amount of $500,000.

10. [10]

    The position of the second defendant is different.

11. [11]

    At 7:24pm on 19 March 2026, the day before this notice of motion had been listed for hearing, the second defendant filed written submissions setting out the basis on which she resists the relief sought by the plaintiff. Following an opportunity to consider these assertions, the plaintiff did not press its application for summary judgment against the second defendant, but rather accepted that she should be given an opportunity to advance an amended defence.

12. [12]

    I am satisfied that the first defendant should also have that opportunity at least as regards the claim for interest at the higher rate of 20% per annum. While I offer no concluded view about this, I do not exclude the possibility that the first and second defendants might establish that this higher interest rate is a penalty.

13. [13]

    The more difficult question is whether the plaintiff should be granted the other relief pressed before me by way of summary judgment, that is, declaratory relief that the first defendant granted an equitable mortgage over the property which was the subject of the development (developed using the funds advanced by the plaintiff to first defendant under the Loan Agreement).

14. [14]

    Clause 10 of the Loan Agreement clearly provides for the creation of an equitable mortgage or charge.

15. [15]

    The second defendant submitted on behalf of the first defendant that if the first defendant were given an opportunity to adduce further evidence, the first defendant’s case would be based on discussions between the plaintiff, the second defendant on behalf of the first defendant and the “principal” unitholder in the unit trust of which the first defendant is the trustee. (I observe parenthetically that the Loan Agreement does provide that the first defendant contracted as trustee for a named trust. I understood the reference to a principal unit holder to be a reference to the majority unit holder.) The second defendant says that the first defendant’s case, if a defence is permitted to be advanced, will be that the discussions between the plaintiff, the principal unitholder and her were to the effect that the loan would not be secured, but rather the plaintiff would have the protection of receiving units in the trust. This is not supported by any of the documentary material before me. While it is not well articulated, I can see how these assertions, if proved, might conceivably provide a defence to the claim for declaratory relief as to the equitable mortgage.

16. [16]

    I would not wish it to be understood that assertions of this kind, advanced for the first time from the Bar Table, would generally provide a basis for refusing summary judgment. However, I am mindful that, in the particular circumstances of this case, the contested litigation will proceed between the plaintiff and both the first and second defendants regardless – in relation to the second defendant as to all allegations, and in relation to the first defendant at least in relation to the question of interest.

17. [17]

    I am also mindful that the matters sought to be raised by the second defendant may well be relevant to discretionary considerations that would arise if this Court came to consider granting substantive equitable relief to enforce the charge such as orders for judicial sale, or specific performance of the promise to grant a mortgage. Although the plaintiff’s amended statement of claim includes prayers for relief of this kind, the plaintiff – appropriately in my view – did not press for summary judgment that included orders of that kind. In those circumstances, it strikes me as inappropriate to grant declaratory relief now, at this interlocutory hearing, in circumstances where the underlying matters – which the first defendant asserts provides a defence to the declaratory relief sought – may be litigated in any event in the context of an application for substantive relief to enforce the equitable mortgage or charge in due course. Any declaratory relief if given would be final: see, eg, MIR Holdings Pty Ltd & Anor v Marina Square Retail Pty Ltd [2020] NSWCA 286 at [38] to [40]. In circumstances where it appears that matters are likely to be ventilated in these proceedings subsequently which could conceivably undermine the plaintiff’s claim to an equitable mortgage, the preferable course is to refuse the application for summary judgment so far as it concerns declaratory relief.

18. [18]

    I will make orders for leave to be granted for the filing of amended defences, although that leave to the first defendant will be limited to matters other than the matter for which I have granted summary judgment.

19. [19]

    While I do not propose to make an order for summary judgment in relation to the declaratory relief sought, nothing in this judgment is intended to prevent the plaintiff from seeking such other relief as it may appear entitled to seek, especially once the issues in dispute have been clarified by the filing of amended defences.

20. [20]

    Accordingly, I make the following orders in respect of the plaintiff’s notice of motion:

    1. (1)

       Pursuant to r 13.1 of the Uniform Civil Procedure Rules 2005 (NSW), the court orders summary judgment for the plaintiff against the first defendant in the sum of $500,000;

    2. (2)

       Leave to be granted to the defendants to file and serve amended defences by no later than 8 April 2026;

    3. (3)

       The leave granted to the first defendant to file an amended defence is limited to the plaintiff’s claim for interest and to the relief sought in prayers 3 to 9 of the amended statement of claim filed 2 December 2025.

Costs

1. [21]

   On the material as it appeared before the second defendant filed her submissions on the evening before the hearing today, the plaintiff had a proper basis for seeking summary judgment against both the first and second defendants. As for the first defendant, the leave to replead which I have granted is in large part referable to matters that emerged during the hearing today.

2. [22]

   Since there has been an order that the first and second defendants have leave to file amended defences, the plaintiff should as a matter of ordinary course have costs thrown away by reason of the amendment. The plaintiff should also have its costs of bringing its motion having regard to the circumstances in which the first and second defendants put basis for resisting that motion. There will, of course, be some overlap between the two costs orders.

3. [23]

   The second defendant, on behalf of the first and second defendants, resists the order on the basis of financial hardship, some suggestion that she was busy working on other matters and an assertion that she could not afford a lawyer. I am not persuaded that those matters provide a basis for resisting the costs order that would otherwise ordinarily follow.

4. [24]

   Accordingly, I make the following costs orders: