Lam v Liu

1. [1]

   BELL CJ: I agree with the reasons of Free JA and the orders his Honour proposes. I would also expressly associate myself with his Honour’s observations in [32] below, and his criticism of the qualifications made by the parties in the Statement of Facts and Issues. Procedural directions, whether made, as in the present case, as part of case management, or made in applicable Practice Notes or rules of court, such as, for example, prescribing page limits for written submissions on appeal or the preparation of a chronology, are not optional and must be strictly adhered to. If a party seeks to depart from such directions, leave may be sought timeously and will be considered on the merits of the application. Otherwise, the Court expects compliance with its directions, procedural rules and the requirements of its Practice Notes. So much is necessary for the efficient and expeditious disposition of litigation in this Court. Compliance with procedural directions, court rules and Practice Notes is not only part of a practitioner’s professional obligations but also his or her statutory duty. Section 56 of the Civil Procedure Act 2005 (NSW) relevantly provides (with emphasis added):

2. [2]

   PAYNE JA: I agree with Free JA. I also agree with the additional observations of the Chief Justice.

3. [3]

   FREE JA: The appellant, Kin Lam (Mr Lam), and the respondent, Tuo Liu (Mr Liu) are parties to a written agreement formed on 14 May 2018 (May 2018 Agreement) under which Mr Lam promised that he would pay to Mr Liu certain amounts arising from debts that Mr Liu had been found to owe in litigation in The People’s Court of Tianjin Binhai New Area in China (Chinese Proceedings). The Chinese Proceedings arose out of a loan agreement involving Mr Lam as borrower, Hong Kong Jiayi International Trade Co Ltd (Jiayi) as lender and Mr Liu as guarantor (Jiayi Loan Agreement).

4. [4]

   Mr Lam did not pay the amounts due under the May 2018 Agreement by the due date of 31 December 2018. In April 2020 Mr Liu brought proceedings in the Common Law Division to enforce the May 2018 Agreement and recover the unpaid amounts. Mr Lam denied liability and raised a number of issues in defence of the claim. Among other things, he argued that the May 2018 Agreement was not enforceable because there had not been corresponding offer and acceptance and the parties had not intended by that agreement to create legal relations. On 18 October 2024, the trial judge Walton J delivered a comprehensive judgment, 814 paragraphs in length, in favour of Mr Liu.

5. [5]

   Mr Lam seeks to appeal from that judgment by raising a single issue which he contends is a complete answer to Mr Liu’s claim. It is that the promises given by Mr Lam under the May 2018 Agreement were not supported by consideration and the agreement is therefore unenforceable. Mr Lam concedes that he did not raise this issue below. He should not be allowed to do so now. The Court should therefore decline to entertain the new argument about consideration and dismiss the appeal.

Background

1. [6]

   The primary judgment provides a comprehensive survey of the background to this dispute. For the purposes of resolving the appeal, it is sufficient to provide only a brief overview drawn from his Honour’s findings.

2. [7]

   Mr Lam is ordinarily a resident of New South Wales, while Mr Liu resides in China. The two men met in 2011. In the years following 2011 they sought to cross-refer and collaborate on a variety of business opportunities.

3. [8]

   In around 2014, Mr Lam became involved in seeking funding for a Hong Kong company, CAN (HK) Co Ltd, that developed piping technology. Potential lenders were identified, but substantial fees needed to be paid to facilitate the lending. The Jiayi Loan Agreement was made in June 2014 in order for Mr Lam to obtain the funds to pay these fees. Under the Jiayi Loan Agreement, Mr Lam borrowed RMB 5 million: cl 2. Mr Liu gave a guarantee to Jiayi in respect of Mr Lam’s obligations: cl 4.2. The agreement specified that the proper law of the contract was Chinese law and the forum for dispute resolution would be the place of signing of the agreement (which was the Tianjin Economic Technological Development Area in China): cl 6.

4. [9]

   The business venture miscarried and Mr Lam defaulted under the Jiayi Loan Agreement. Jiayi made demands for repayment from around May 2015. On 8 October 2015, Mr Liu paid RMB 1 million to Jiayi.

5. [10]

   On 13 July 2016, Jiayi commenced proceedings in the People’s Court of Tianjin Binhai New Area against Mr Liu as guarantor under the Jiayi Loan Agreement for repayment of the balance of the loan outstanding. Mr Lam co-operated with Mr Liu and his representatives to provide affidavit evidence in the proceedings in support of Mr Liu. On 27 September 2017, judgment was delivered in favour of Jiayi against Mr Liu in the sum of RMB 6,635,516.64. One issue had been whether the guarantee was still on foot, in circumstances where more than two years had passed since the agreement. The Chinese Court found that it had been extended by the respondent’s intermediate payment of RMB 1 million.

6. [11]

   Mr Liu appealed to the Secondary Intermediate People’s Court of Tianjin. Mr Lam again assisted Mr Liu in the appeal proceedings. On 19 March 2018, judgment was delivered in the Chinese appeal proceeding. The appeal was dismissed and the total amount owed by Mr Liu to Jiayi was found to be RMB 9,469,485.52.

7. [12]

   On 7 May 2018, execution of the appeal judgment was commenced against the respondent’s assets. Mr Liu made payments in respect of part of the judgment debt and by 11 May 2018 he had paid RMB 4,314,930.73. He submitted a repayment schedule to the Chinese Court by 24 June 2018. The balance of the judgment debt was ultimately paid and on 24 January 2019 the Chinese Court issued a “Notice of Concluding a Case”, signifying resolution of the Chinese Proceedings.

8. [13]

   The May 2018 Agreement was formed during this process of payment of the judgment debt owed by Mr Liu as a result of the Chinese Proceedings. The May 2018 Agreement consists of three pages in Chinese script, with five additional pages attached which assume no particular operative significance. Clause IX provides that the contract is made in English and Chinese and if there are inconsistencies between the two versions the English version shall prevail. However, there was no proof of a signed English version of the agreement. The version of the May 2018 Agreement in evidence was a translation of the Chinese version.

9. [14]

   The 2018 agreement commences with five recitals, followed by ten operative clauses. The recitals describe the Chinese Proceedings and the judgment debt owed by Mr Liu as a consequence of those proceedings. The fifth recital (on which Mr Lam places some reliance for the purposes of his argument on consideration) states that Mr Lam “voluntarily becomes liable for the repayment of all and final liabilities assumed by [Mr Liu] in the above-mentioned cases”. The operative clauses are introduced by a statement that “through friendly negotiations, [Mr Lam and Mr Liu] formed the following agreements”.

10. [15]

    By clause I Mr Lam promised that he would bear all of the debts assumed by Mr Liu due to “the above-mentioned cases” (ie the Chinese Proceedings) and all “liabilities, fees and loss” incurred by Mr Liu. Mr Lam also promised to pay interest to Mr Liu from 13 July 2016 until the day all debts are paid off, with the principal being the amount of “all debts” and the interest rate being 0.02% per day.

11. [16]

    In clause II Mr Lam promised to “pay all debts and interests agreed in Clause I” to a specified account before 31 December 2018.

12. [17]

    Clause III provides that, if Mr Lam failed to “perform the obligation to pay [Mr Liu] within the period agreed in Clause II” then Mr Liu had the right to commence legal proceedings to request payment of “all debts mentioned above” together with interest and costs.

13. [18]

    Clause IV states that the appellant “voluntarily” offered a particular property in Australia by way of security. Pursuant to clause V Mr Liu was entitled to exercise his rights as a mortgagee if Mr Lam failed to “perform the obligation to pay … within the period agreed in Clause II”. Clauses VI-VIII deal with various specific obligations of Mr Lam in relation to the security granted over the property.

14. [19]

    Clause IX provides that the contract takes effect after being signed by the parties and, as noted above, describes there being two versions of the agreement.

15. [20]

    Clause X is a forum clause which relevantly provides that, if any dispute could not be negotiated, “the matter shall be administered exclusively by the courts of the State where [Mr Lam’s] land locates [sic]”, being New South Wales. Unlike the Jiayi Loan Agreement, the May 2018 Agreement did not contain a choice of law clause.

16. [21]

    As of May 2018 Mr Liu had a particular concern about being placed on what was referred to as the “bad credit list”. In the trial before Walton J, Mr Lam sought to characterise the May 2018 Agreement as having been a device to deceive the Chinese courts in the context of the ongoing enforcement action against Mr Liu. The May 2018 Agreement was prepared in contemplation that it would be provided to the enforcement division of the relevant Chinese court. This was relied on by Mr Lam in support of his argument that there had not been the requisite intention to create legal relations when the May 2018 Agreement was formed. The trial judge found that any attempts to delay Chinese enforcement were not inconsistent with there having been an intention to create legal relations between Mr Lam and Mr Liu, a conclusion from which there is no appeal.

17. [22]

    The argument raised by Mr Lam below about offer and acceptance turned on the various communications leading up to May 2018 and immediately thereafter. On 27 April 2018, Mr Liu sent a WeChat message to Mr Lam conveying advice received by Mr Liu from his Chinese lawyer who had reviewed a draft of the May 2018 Agreement. On 1 May 2018, Mr Liu sent Mr Lam a copy of the agreement via WeChat. On 8 May 2018, Mr Liu sent a WeChat message to Mr Lam stating that he needed to sign each page of the agreement urgently, so it could then be forwarded to the enforcement division of the Chinese Court. On 9 May 2018, Mr Lam signed the May 2018 Agreement with his English signature and sent it to Mr Liu. This was admitted by Mr Liu. The primary dispute turned on what happened thereafter. Mr Lam contended that there were no corresponding acts of offer and acceptance. Mr Liu’s case was that on 14 May 2018 the parties met at a hotel room in Shenzhen where a version of the 2018 Agreement was signed by both parties, with Mr Lam using his Chinese signature. That was disputed by Mr Lam. The trial judge accepted the account given by Mr Liu and found that there was offer and acceptance in the Shenzhen hotel room on 14 May 2018. Again, no challenge is made to this finding on appeal.

Supreme Court proceedings

1. [23]

   As the resolution of the appeal turns on Mr Lam’s failure to raise the issue of consideration below, it is necessary to set out in some detail the way in which the issues to be determined in the proceedings below came to be identified.

2. [24]

   On 20 April 2020, Mr Liu filed a statement of claim, pleading a claim solely in contract. In paragraph 3 of the statement of claim, Mr Liu pleaded that he and Mr Lam entered into a written agreement on 14 May 2018. In paragraph 16 Mr Liu pleaded that the effect of that agreement was that Mr Lam agreed to repay to Mr Liu the amounts which Mr Liu was required to pay under the judgments of the Chinese courts pursuant to Jiayi’s enforcement of the guarantee given by Mr Liu under the Jiayi Loan Agreement. There was no pleading as to the law governing this agreement.

3. [25]

   The statement of claim included allegations about the Jiayi Loan Agreement and the Chinese Proceedings, but only for the purpose of detailing the underlying debts alleged to have been made the subject of the promise to pay by Mr Lam in the May 2018 Agreement. Significantly, Mr Liu did not plead any claim in the alternative that Mr Lam was also liable under the Jiayi Loan Agreement to pay the same amounts to Mr Liu, whether by way of an implied right of indemnity or otherwise, for example by way of an equitable entitlement to subrogation.

4. [26]

   By the time of trial, Mr Lam relied on a further amended defence filed on 3 November 2023. In terms of a response to the relevant paragraphs of the statement of claim asserting that the parties had formed the May 2018 Agreement and that Mr Lam had made enforceable promises to pay under that agreement, the further amended defence was somewhat obscure. As explained above, paragraph 3 of the statement of claim alleged that the parties had made an agreement on 14 May 2018. Paragraph 2 of the further amended defence responded to that allegation in the following way:

5. [27]

   Paragraph 16 of the further amended defence provided:

6. [28]

   As can be seen, the further amended defence did squarely raise a contention that the agreement (if there was one) was unenforceable because Mr Lam denied that the parties had the intention that it should or would give rise to any enforceable legal obligations. The further amended defence was otherwise unclear as to any other issues Mr Lam was specifically seeking to raise concerning the formation of the alleged contract. Among other things, it was unclear what Mr Lam intended to signify by pleading specifically that he denied “entering into a written agreement dated 14 May 2018 on 14 May 2018”. As explained below, the position was clarified by senior counsel for Mr Lam at the commencement of the trial.

7. [29]

   Before the filing of the further amended defence, on 12 May 2023 Chen J had listed the matter for hearing in February 2024 and made associated procedural orders. Relevantly, the parties were ordered to file and serve by 26 July 2023 “an agreed statement of facts and issues in dispute with such schedule to be signed by counsel for each party”.

8. [30]

   On 13 October 2023 a document was filed in purported compliance with this order (Statement of Facts and Issues). The document, which is signed by counsel for Mr Lam and Mr Liu respectively, contains a list of “agreed facts” and a list of issues. As far as the formation and enforceability of the May 2018 Agreement is concerned, there were only two issues identified that were of significance:

9. [31]

   The Statement of Facts and Issues contains an introductory paragraph which includes significant qualifications:

10. [32]

    These are highly unsatisfactory qualifications. The parties had been ordered to file and serve an “agreed statement of facts and issues in dispute”. The obvious and important purpose of such a document is to provide a reliable guide to the real issues in dispute between the parties, as well as a statement of the facts that are truly agreed and apt to be admitted pursuant to s 191 of the Evidence Act 1995 (NSW). The utility of such a document is substantially undermined if parties purport to reserve the right to resile from the putatively agreed position. A trial judge should be entitled to rely on an agreed statement of issues as accurately and comprehensively identifying the issues that need to be resolved. That is not to deny the ongoing relevance of pleadings. But it is one thing to say that the parties may have recourse to the pleadings to explain the detailed contentions going to the issues described in an agreed list of issues. It is another thing altogether to say that the parties reserve the right to raise additional issues beyond those described in such a list.

11. [33]

    As events transpired in the proceedings below, there was only one relevant development in terms of expansion of the list of issues to be determined. Both parties filed written opening submissions. The written opening submissions for Mr Liu addressed the agreed issues. On the question of formation of a valid contract Mr Liu argued that the parties had intended to create legal relations when they entered into the May 2018 Agreement. The written opening submissions for Mr Lam also addressed that issue, including through the statement that “Lam’s case is that the version of the Agreement Sued Upon actually signed by him was not intended to give rise to enforceable legal obligations between Lam and Liu”.

12. [34]

    The written opening submissions for Mr Lam, under the heading “Formation of alleged contract sued upon”, also included submissions alluding to an alleged absence of offer and acceptance. That argument was further exposed in opening address by senior counsel then appearing for Mr Lam during the first day of trial. At that point counsel for Mr Liu took objection to the point being raised. He contended that it was a new point which was not pleaded. A debate ensued about whether the issue of offer and acceptance was within the scope of the pleadings and about the capacity of Mr Liu to meet the point. In response to that objection senior counsel for Mr Lam referred the Court to paragraph 2 of the further amended defence (set out above). He described paragraph 2(a) as a “very specific denial of entering into the written agreement dated 14 May on 14 May”, and referred to the pleading that Mr Lam had exchanged a particular document on 8 and 9 May. The essence of the submission was that Mr Liu’s intention in pleading matters in these terms had been to raise the issue of offer and acceptance.

13. [35]

    The trial judge appears not to have accepted that the issue of offer and acceptance had been properly pleaded, as his Honour eventually referred in the judgment at J[631] to senior counsel for Mr Lam having articulated “an unpleaded allegation concerning a contended deficiency in the offer and acceptance of the Agreement”. Nevertheless, Mr Lam was allowed to run the point after counsel for Mr Liu accepted that he was in a position to meet it, and the trial judge proceeded to determine it.

14. [36]

    As far as issues of contractual formation are concerned, the trial otherwise proceeded on the basis of the list of issues, effectively amended by way of addition of the issue of offer and acceptance. After the close of evidence, a question arose about the status of the Statement of Facts and Issues. Following a discussion about the evidentiary status of agreed facts, the trial judge confirmed with both parties that the statement of issues was reliable and comprehensive:

15. [37]

    In closing submissions both parties proceeded accordingly to address the issue of offer and acceptance, as well as intention to create legal relations. No issue was raised for determination by any party about the absence or presence of consideration for the May 2018 Agreement.

16. [38]

    In his written opening and written closing submissions, Mr Liu did make a passing reference to consideration. The submission made in writing was that Mr Lam agreed in the May 2018 Agreement to, in substance, indemnify Mr Liu for the judgment debt and other losses incurred in the Chinese Proceedings “in consideration for Mr Liu proffering a period of forbearance”. That submission appears in a section of the submissions which explains the “circumstances in which the parties entered into the Agreement”. Such a passing reference does not detract from the conclusion that neither party, at any stage of the trial, dealt with the issue of consideration on the basis that it was an issue in contest that required determination by the trial judge. The conclusion is confirmed by the approach of the trial judge. His Honour did not treat this as an issue requiring determination and made no specific findings in relation to consideration. That was undoubtedly the correct approach in light of the pleadings, the Statement of Facts and Issues, the confirmation of its continuing accuracy (see [36] above), the submissions of the parties and the conduct of the trial.

17. [39]

    The trial judge gave judgment for the respondent on 18 October 2024: Liu v Lam [2024] NSWSC 1306. On 27 March 2025, following further written submissions on the judgment sum and costs, his Honour gave judgment in the amount of $2,548,079.87, plus interest from 18 October 2024, with indemnity costs: Liu v Lam (No 2) [2025] NSWSC 264.

The argument raised on appeal

1. [40]

   By his notice of appeal Mr Lam seeks to raise, in substance, only one issue. He contends that the May 2018 Agreement is not a binding contract because Mr Liu gave no consideration for the promises given by Mr Lam. Mr Lam contends that on the proper construction of the May 2018 Agreement there was no forbearance to sue by Mr Liu in respect of a pre-existing debt owed by Mr Lam to him. Mr Lam further contends that there was not, in any event, a proper basis for such forbearance as there was no pre-existing debt owed by Mr Lam to Mr Liu. That involves a denial that Mr Liu has any implied right of indemnity under the Jiayi Loan Agreement.

2. [41]

   Mr Liu complains that the alleged absence of consideration is a new issue which Mr Lam ought not be allowed to raise for the first time on appeal. In the alternative, if the Court does entertain the point, Mr Liu submits that pursuant to clause II of the May 2018 Agreement there was consideration for the promises given by Mr Lam, in the form of a forbearance to sue, until 31 December 2018, in reliance on a pre-existing debt owed by Mr Lam to Mr Liu by virtue of the Jiayi Loan Agreement and the judgment debt that had been visited upon Mr Liu in his capacity as guarantor under that agreement.

3. [42]

   In written submissions to this Court, Mr Lam contended that the absence of consideration was not a new point but was within the scope of the issues arising below and that, in any event, the existence of consideration was a matter that had been required to be pleaded by Mr Liu as part of his contractual claim. At the commencement of oral address on the appeal, senior counsel for Mr Lam abandoned that contention and conceded that the point now being agitated was a new point that had not been in issue below. It was accepted that Mr Lam was not in a position to demonstrate any error in the stated findings and reasoning of the trial judge, in circumstances where the trial judge was not required to make any finding on the point. It was also frankly conceded that there was no sense in which it could be said that Mr Liu was responsible for the point not having been taken at trial.

4. [43]

   Those concessions were properly made. In determining whether a party is raising a new point on appeal it is “necessary to look to the actual conduct of the proceedings”: Water Board v Moustakas (1988) 180 CLR 491 at 497; [1988] HCA 12 (Water Board v Moustakas) quoted in Whisprun Pty Ltd v Dixon [2003] HCA 48; (2003) 77 ALJR 1598 at [52] (Whisprun v Dixon); see also, Park v Brothers [2005] HCA 73; (2005) 80 ALJR 317 at [34]. The “actual conduct” of the trial proceedings in this matter has been detailed above. There is no doubt that the issue of consideration is a new one being raised for the first time on appeal.

5. [44]

   This engages the strict principles which stand against allowing such new points to be run on appeal. In Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 438; [1950] HCA 35 (Suttor v Gundowda) Latham CJ, Williams and Fullagar JJ said:

6. [45]

   In Coulton v Holcombe (1986) 162 CLR 1 at 7-8; [1986] HCA 33 (Coulton v Holcombe) Gibbs CJ, Wilson, Brennan and Dawson JJ described the principles in these terms:

7. [46]

   In Water Board v Moustakas at 497 Mason CJ, Wilson, Brennan and Dawson JJ said:

8. [47]

   In Whisprun v Dixon Gleeson CJ, McHugh and Gummow JJ said:

9. [48]

   Having conceded that the issue of consideration was not raised below, Mr Lam took on the burden of demonstrating that this issue fell within the exceptional category of case, recognised in these authorities, where it is permissible to agitate a point for the first time on appeal. That is a heavy burden. It is fatal to Mr Lam’s argument if there is even a possibility that the point could have been met by evidence at trial. The language of possibility has been adopted consistently in the authorities referred to above. In Suttor v Gundowda the taking of a new point was said to be foreclosed if evidence relevant to the issue “could have been given” at trial “which by any possibility could have prevented the point from succeeding”. The same language was used in Coulton v Holcombe. In Water Board v Moustakas the contrast was drawn between an issue where “all the facts have been established beyond controversy” and a point which “could possibly have been met by calling evidence”. In Whisprun v Dixon the plurality in the passage quoted above likewise referred to a point that “could not possibly have been met by further evidence at the trial”.

10. [49]

    Mr Lam argues that the issue concerning consideration is one of law which falls to be resolved as a matter of construction of the May 2018 Agreement. Mr Lam relies in this regard on the statement of Mason J in O’Brien v Komesaroff (1982) 150 CLR 310; [1982] HCA 33 that an issue turning on construction of a document is an example of a question of law in respect of which it is expedient in the interests of justice that the question be argued and decided. Mr Lam submitted in writing that this Court is in as good a position as the trial judge to deal with this question.

11. [50]

    As the argument developed, Mr Lam appeared to accept that this is not a case where there is no prospect that evidence beyond the agreement itself might be capable of bearing on that question of construction. Indeed Mr Lam’s own submissions on the question included an analysis of the surrounding context, with various factual circumstances said to support Mr Lam’s construction of the May 2018 Agreement. Mr Lam’s argument thus implicitly conceded that the matter did not fall to be resolved solely by recourse to the terms of the May 2018 Agreement. Mr Lam nevertheless submits that the parties at trial comprehensively explored the circumstances surrounding the May 2018 Agreement, such that there is no realistic possibility that if the issue of consideration had been raised at trial further relevant evidence could have been adduced.

12. [51]

    There is a degree of support for this argument in the facts of the case. Both parties conducted the trial below on the basis that the circumstances surrounding the May 2018 Agreement were potentially relevant to one or more of the issues in dispute. That included Mr Lam’s contentions about the true nature of the relationship between him and Mr Liu having been one of partnership, and also his contentions about the absence of an intention to create legal relations. Detailed evidence directed to these matters was adduced and the trial judge made a large number of findings as a consequence. This included a finding that the first occasion on which Mr Liu made a threat to sue Mr Lam was on 20 December 2018.

13. [52]

    However, it does not follow that the parties must be taken to have exhausted all of the potential sources of evidence about the circumstances surrounding the May 2018 Agreement, including to the extent that they might have had a bearing on the particular issue of construction concerning consideration (had it been raised). In circumstances where no issue was raised about consideration, there was no reason for Mr Liu to consider the evidence of surrounding circumstances that might be relevant to the particular question of whether the agreement, on its proper construction, involved a forbearance to sue on a pre-existing right arising from the Jiayi Loan Agreement or under the doctrine of subrogation.

14. [53]

    Mr Lam submits that, in light of Mr Liu’s reference to consideration in his written submissions, he must be taken to have anticipated the issue was a live one and therefore marshalled all of the evidence that was potentially relevant to the matter. For the reasons explained above, that greatly overstates the significance of passing reference to consideration in the written submissions. The question of consideration was not treated by the parties or the trial judge as a disputed issue to be addressed in the evidence.

15. [54]

    The evidence that was in fact led in relation to the issues in dispute is therefore not a sure guide to the evidence that could possibly have been led if the issue of consideration had been raised. For the same reason, it cannot be assumed that the same finding would necessarily have been made about the first time Mr Liu threatened to sue Mr Lam if the question of forbearance to sue had been the subject of evidence directed to answering a contention that there was no consideration for the promises given by Mr Lam in the May 2018 Agreement.

16. [55]

    The point is reinforced by Mr Lam’s submissions to this Court directed to the substantive proposition that there was no consideration under the May 2018 Agreement in the form of a forbearance to sue. Mr Lam submits that three cumulative elements must be present before consideration in the form of forbearance to sue is established, namely:

    1. (1)

       forbearance must be sought or requested by the relevant party;

    2. (2)

       the forbearing party must have asserted the existence of liability and must offer or promise forbearance; and

    3. (3)

       there must be an existing obligation to pay at the time of entry into the relevant agreement.

17. [56]

    It is unnecessary to determine the ultimate correctness of that submission, noting that Mr Liu took issue with this description of the necessary elements. The key point for present purposes is that this signifies the scope of the contest that would have arisen had consideration been in dispute. Distinct issues of fact and law would have been put in play. As a result the forensic purpose of each party in adducing and dealing with the available evidence would have been quite different: see Yi v Park [2024] NSWCA 187 at [54]. It would have become significant to examine the extent to which Mr Liu had, prior to the May 2018 Agreement, asserted against Mr Lam any right to sue arising from the Jiayi Loan Agreement and the Chinese Proceedings. Likewise it would have become relevant to consider whether Mr Liu had offered to forbear from suing Mr Lam, or raised that possibility. A related question would have been the extent to which Mr Lam had acknowledged, explicitly or implicitly, a pre-existing obligation to reimburse Mr Liu for the liabilities that he had borne in the Chinese Proceedings. That could have included any express or implied request from Mr Lam for Mr Liu to forbear from suing him. If evidence going to any of these points had been adduced by Mr Liu, it could potentially have had a bearing on the question of the proper construction of the May 2018 Agreement, and whether it involved an implicit promise by Mr Liu to forbear from enforcing pre-existing rights against Mr Lam.

18. [57]

    It is unnecessary to find that evidence of surrounding circumstances of this kind would have been sufficient to displace the construction that would otherwise flow from the text of the May 2018 Agreement. It is enough to observe that it could have had a bearing on the proper construction of the agreement.

19. [58]

    It is not a matter of mere conjecture that evidence along these lines could have been adduced. Counsel for Mr Liu took the Court to the cross-examination of Mr Lam that occurred at trial to illustrate the point that if consideration had been in issue he could and would have asked questions of Mr Lam about his acceptance of a pre-existing obligation to share in the burden of the judgment debt flowing from the Chinese Proceedings, and also requests to Mr Liu to forbear from asserting rights against Mr Lam. Mr Lam’s case at trial was that he and Mr Liu were partners in respect of the venture to which the Jiayi Loan Agreement related and profits and losses were shared between them. He gave affidavit evidence to the effect that he and Mr Liu were equally liable for the loss on the Jiayi Loan Agreement. Particularly given the logical implications of that position, it is quite plausible that Mr Lam could have been cross-examined in a way that would have elicited useful evidence about his acceptance of a pre-existing obligation to reimburse Mr Liu. That in turn could have been relevant to any issue of construction concerning forbearance of an existing right to sue. On the issues that were raised at trial there was no need for these matters to be explored.

20. [59]

    There is also a choice of law dimension to these issues. If consideration had been a disputed issue, the question of whether the Jiayi Loan Agreement gave Mr Liu as guarantor a right of indemnity against Mr Lam as borrower would have assumed significance in circumstances where that otherwise does not appear to have been relevant to the issues in dispute. The Jiayi Loan Agreement was governed by Chinese law. To the extent that the right of indemnity under the Jiayi Loan Agreement was in issue, Mr Liu would have had a forensic decision to make about calling evidence of Chinese law, or otherwise relying on the presumption that Chinese law is the same as the law of New South Wales in this respect. There is a realistic possibility that evidence of Chinese law could have been adduced and could have assisted Mr Liu in this regard. Mr Lam did not seek to foreclose this as a possibility, for example by seeking leave to adduce evidence on the appeal to demonstrate that such evidence would not have assisted Mr Liu.

21. [60]

    A similar issue could potentially have arisen in those circumstances about the law governing the May 2018 Agreement. That agreement has a number of connections with New South Wales, including the location of the mortgaged property and the identification of New South Wales as the chosen forum for any disputes. However, the agreement was made in China and the subject matter was repayment of a judgment debt owed by a Chinese national as a result of Chinese Proceedings. At the trial neither party appears to have raised any suggestion that the May 2018 Agreement was governed by Chinese law. However, if the issue of consideration had been raised below, Mr Liu’s forensic judgments would have been made on a very different basis. If there was a basis to contend that the May 2018 Agreement was governed by Chinese law it may well have been forensically advantageous to consider the relevant content of Chinese law. There is authority that the question of whether consideration is essential for the formation of a contract is a matter to be determined by the proper law of the contract: M Davies, AS Bell, PLG Brereton and M Douglas Nygh’s Conflict of Laws in Australia (10th ed, 2020, LexisNexis) at [19.71].

22. [61]

    At the hearing of the appeal counsel for Mr Liu appeared to concede that the May 2018 Agreement was governed by the law of New South Wales. In light of that concession, the second of the choice of law complications may be put to one side. That nevertheless leaves a number of different respects in which evidence could have been called at trial which could possibly have provided an answer to Mr Lam’s case about the absence of consideration, if it had been raised.

23. [62]

    It follows that this is not a situation where Mr Lam can be allowed to run the point for the first time on appeal.

24. [63]

    There is another distinct aspect to the unfairness caused to Mr Liu by the taking of this point for the first time on appeal. Mr Liu chose the relatively straightforward option in April 2020 of suing to enforce his rights under the May 2018 Agreement. If Mr Liu had a proper basis to assert that Mr Lam was obliged to reimburse him for the judgment debt under the Chinese Proceedings, by virtue of an implied right of indemnity under the Jiayi Loan Agreement (and/or an equivalent entitlement arising from that agreement) it was always open to Mr Liu to seek to enforce his rights in that regard. For example, at the time of commencing proceedings in April 2020 to enforce the May 2018 Agreement, Mr Liu could have sought to rely in the alternative on his rights under the Jiayi Loan Agreement and/or through the doctrine of subrogation. It may be inferred that Mr Liu made an informed forensic decision not to do so. It may also be inferred that he chose to maintain that approach once he became aware of the defences relied upon by Mr Lam.

25. [64]

    However, the forensic choice to maintain exclusive reliance on the May 2018 Agreement was made in the particular context of an assessment of the strength of Mr Lam’s defence to those proceedings. If Mr Lam had raised in a timely way the issue of consideration, it is reasonable to infer that Mr Liu and his legal representatives would have had cause to reconsider the possibility of bringing a claim in the alternative under the Jiayi Loan Agreement or in equity.

26. [65]

    The point is in fact illustrated by what occurred in the appeal. Mr Liu filed a notice of contention by which he sought to maintain the substance of his victory below on the basis that he had an implied right of indemnity arising from the Jiayi Loan Agreement and the circumstances of his liabilities as guarantor. As a notice of contention, the claim was highly problematic given that the matter had not been pleaded. However, it does demonstrate that a rational forensic response by Mr Liu to the issue of consideration being raised was the assertion of alternative rights not dependent on the enforceability of the May 2018 Agreement. That reinforces the inference that if the point had been raised below Mr Liu could possibly have met the point in this way. That in turn would have entailed evidence relevant to the assertion of rights arising under the Jiayi Loan Agreement, including the possibility of evidence of Chinese Law on the nature of any rights of indemnity arising from that agreement. Mr Liu has effectively been denied the opportunity to pursue these alternatives. Again, Mr Lam has not sought to show that this was not an available option for Mr Liu under Chinese law, for example because such a claim would have been governed by a limitation period that had expired.

27. [66]

    Mr Lam does submit that it is implausible to posit a scenario in which Mr Liu would have raised such an alternative claim, and been allowed to do so as part of the proceedings below. He emphasises that if the claim was a sound one and it was prudent to bring it, it would always have made sense for Mr Liu to rely on it in the alternative. Mr Liu must be taken to have made an informed choice not to do so. When he made that choice at the commencement of proceedings, he did so in a context that was not informed by any forensic choices by the defendant, who was yet to respond to the claim.

28. [67]

    I do not find that response persuasive. It addresses the original form of the claim, but not the ongoing forensic assessment made by Mr Liu. The claim made under the May 2018 Agreement was, on its face, a straightforward one to enforce an express promise to pay. By contrast, the alternative claim raised potentially complex issues of Chinese law, conflict of laws, limitations and implied rights. As at the commencement of proceedings it was a forensically sensible choice in those circumstances to proceed on the basis of the May 2018 Agreement alone. The risks of that approach would then have needed to be reassessed in light of the strength of Mr Lam’s defence to the claim. If and when Mr Lam raised a defence that cast more of a shadow of doubt over the claim as brought, there would have been good cause to reassess the merits of bringing a further claim in the alternative under the Jiayi Loan Agreement. Mr Liu may well have perceived the point about absence of consideration to be a significantly stronger defence than any of the other points raised by Mr Lam. That could well have led him to take a different approach to the pleading of his claims and the evidence adduced.

29. [68]

    That raises the question of whether it is realistic to assume that Mr Liu would have been able to bring a claim in the alternative at some point after April 2020 and before trial. For these purposes it is appropriate to posit a scenario in which Mr Lam identified in a timely way that there was an issue about the absence of consideration. Given the form of the further amended defence that was ultimately filed, if Mr Lam raised the issue below in a timely way he would presumably have flagged the point in his defence in the same way as he did the contention that the parties did not intend to create legal relations. It would also have been incumbent on Mr Lam to identify this as one of the issues in dispute, following the direction on 12 May 2023 to file and serve an agreed list of issues. If the point about the absence of consideration had been raised in one or both of these ways, Mr Liu would still have had up to nine months before trial, if not longer, to consider bringing an application to amend to introduce an alternative claim under the Jiayi Loan Agreement.

30. [69]

    Any such application may well have been contentious, and it is not realistic in the abstract to determine how it is likely to have been resolved. In circumstances where Mr Lam is seeking to bring himself within the exceptional category of case in which he may agitate a new issue on appeal, it is enough for Mr Liu to demonstrate that there is a realistic possibility that he would have been permitted to introduce an alternative claim if the point had been raised properly below. I am satisfied that there would have been such a possibility. The fact that he was denied the opportunity to pursue his claim in this way provides an additional reason why the point cannot now be taken on appeal. It is a further aspect of why it would be inimical to the due administration of justice to allow Mr Lam to pursue the point.

Conclusion and orders

1. [70]

   For the reasons set out above, this Court should not entertain the argument concerning consideration that Mr Lam seeks to raise for the first time.

2. [71]

   The orders I would make are:

   1. (1)

      Appeal dismissed.

   2. (2)

      The appellant is to pay the respondent’s costs of the appeal.