Ms Yi Fen Gu was a friend of Ms Zhou and was treated as family. Ms Zhou was also friends with Ms Qiaofen Ji. Ms Zhou needed to raise money and turned to Ms Ji. In January 2024, a $250,000 facility agreement was entered into by Ms Gu and Ms Ji, secured by a mortgage over Ms Gu’s home in Campsie, NSW. The agreement provided funds to Ms Zhou, less $30,000 paid to Ms Ji as interest. The facility agreement and mortgage were set aside in July 2026 because of the undue influence exerted on Ms Gu, and also because it was found to be unconscionable and an unjust contract under the Contracts Review Act (Ji v Gu [2026] NSWSC 796).
Ms Ji was aware of the close relationship between Ms Gu and Ms Zhou, as well as Ms Zhou’s financial need. Ms Gu had told Ms Zhou that she was unable to assist her further.
At a dinner in early January 2024, Ms Zhou convinced Ms Gu to help her by providing her home as security for a loan being offered by Ms Ji. Late in the evening, Ms Zhou arranged for Ms Gu to see a solicitor, Mr Wong, who signed a certificate saying that he had advised Ms Gu. The court was not satisfied that this was proper or competent advice. Ms Gu intended by the agreement that Ms Zhou would be obliged to repay all the advances, as well as interest. Ms Zhou did neither.
Ms Zhou had asked Ms Gu to provide her home as security until Ms Zhou’s own home was sold, at which time she would repay the loan. Ms Zhou had told Ms Gu that she had $2.6 million equity in her own home. Ms Ji knew this to be untrue.
Before the agreement in January 2024, Ms Ji had advanced $250,000 to Ms Zhou, secured only by an IOU. Ms Ji failed to tell Ms Gu that Ms Zhou had not made the agreed repayments on this earlier loan. Ms Ji arranged for the security that Ms Gu provided to secure this advance, as well as the $250,000 that Ms Gu knew of. When Ms Gu signed the documents late at night, she did not read them. After she returned home, she saw that she was securing the additional advance and immediately asked Ms Zhou for it to be removed. Ms Zhou reassured her that it would be, but that in any event all debts would be repaid following the sale of her home. The additional $250,000 was not removed from the agreement and was not repaid on the sale of Ms Zhou’s property.
As part of the pressure Ms Zhou exerted on her friend to provide the security, she said she would go to prison if she did not have the additional funds.
The court held that Ms Ji knew of the pressure on Ms Gu, and that her knowledge made her liable. Ms Ji and Ms Zhou benefited significantly from the transaction, while Ms Gu gained nothing.
The court found that the pressure from Ms Zhou, with the assistance of Ms Ji, amounted to undue influence. The undue influence was established by the close relationship between Ms Gu and Ms Zhou, which the judge described as knowing and predatory behaviour to get Ms Gu to sign late at night after a promise at dinner that the loan would be repaid from the $2.6 million equity that would be available after the sale of Ms Zhou’s home. The documents were executed in the presence of a solicitor who had been arranged by Ms Zhou.
The judge accepted that when Ms Gu signed the agreement, she did not understand it, and that had the risks been explained to her, she would not have signed.