Judgment
1The plaintiff, Mr Hao Chen ( "Mr Chen" ), brings these proceedings against his former wife, Ms Hui Qin Gu ( "Ms Gu" ), Mr Van Uu (Warren) Nguyen ( "Mr Nguyen" ) who is a solicitor, and the Registrar-General of NSW ( "Registrar-General" ) in connection with the sale of a property at Penshurst ( "the Penshurst Property" ) owned by him and Ms Gu. The Penshurst Property was sold to a Mr and Mrs Dapcevic ( "the Purchasers" ) for $269,000 on 17 September 2003. Mr Chen alleges that Ms Gu acted fraudulently and without his authority in appointing Mr Nguyen, organising the sale with consequent transfer of the Penshurst Property to the Purchasers and in obtaining for herself all the proceeds of sale. Mr Chen alleges that Ms Gu forged his signature on the contract for sale of the Penshurst Property to the Purchasers, on the transfer and on two authorities provided to Mr Nguyen by Ms Gu. The first authority (Exhibit D) purported to authorise Ms Gu, on behalf of Mr Chen, to sell the Penshurst Property; and the second authority (Exhibit 3D1) purportedly authorised all of the proceeds of sale to be paid to Ms Gu. Both authorities purported to be given by Mr Chen and signed by him. Ms Gu admits now that they were not signed by Mr Chen. I shall refer to the contract of sale, the transfer and the two authorities collectively as " the forged documents ".
2Mr Chen claims that Ms Gu and Mr Nguyen have deprived him of his interest in the Penshurst Property. As against Ms Gu, the claim is one based in fraud and s 120 of the Real Property Act 1900 (NSW)( "the RPA" ). An allegation of fraud is of a most serious kind and that is a matter which must be borne in mind if findings are to be made in support of such a conclusion: see Briginshaw v Briginshaw (1938) 60 CLR 336 and Rejfek v McElroy (1965) 112 CLR 517 at 521. As against Mr Nguyen, the claim is one based firstly in negligence. The second basis of claim against Mr Nguyen is in conversion of the cheques of the sale proceeds of the Penshurst Property and of the certificate of title. As against the Registrar-General, the claim is for compensation from the Torrens Assurance Fund based on s 129(1)(e) of the RPA which is in the following terms:
"(1) Any person who suffers loss or damage as a result of the operation of this Act in respect of any land, where the loss or damage arises from:
...
(e) the person having been deprived of the land, or of any estate or interest in the land, as a consequence of fraud,
...
is entitled to payment of compensation from the Torrens Assurance Fund."
3Ms Gu does not dispute that she engaged Mr Nguyen to act for her on the transaction and she admits that she signed in Mr Chen's name on the contract for sale, the transfer and the authorities. Ms Gu asserts that Mr Chen had, in 2000, agreed that in return for Mr Chen being able to keep a property in Beverly Hills ( "Beverly Hills Property" ) for himself, she could keep the Penshurst Property for herself and further that he would pay her $500 per week in connection with a partnership business which they had operated together. I shall refer to this alleged agreement as " the 2000 Agreement ". The net proceeds received by Ms Gu from the sale of the Penshurst Property were approximately $266,000 obtained on 31 October 2003. Mr Chen's claim is for $134,500 plus interest pursuant to s 100 of the Civil Procedure Act 2005 (NSW). With interest, the amount claimed is $234,547.73 (see MFI 6) up to and including 15 November 2011. There is no dispute as to the amount claimed or the interest component should Mr Chen otherwise make out his case against Ms Gu and Mr Nguyen.
4Ms Gu has brought a cross-claim against Mr Chen which has three disparate elements. First, she seeks a declaration that she owned the whole of the Penshurst Property. Secondly she claims that Mr Chen agreed to pay her $500 per week indefinitely from the business which they had operated together provided the business was not closed: see page 176 of Exhibit A1. Thirdly, Ms Gu claims that Mr Chen is liable to her for malicious prosecution. Ms Gu was charged by the NSW police with fraud in respect of the sale of the Penshurst Property and defended herself in Local Court proceedings. The charges were dismissed and Ms Gu claims, inter alia , as damages for the allegedly malicious prosecution, the costs of defending herself in an amount of $86,000. Mr Chen disputes that it was he who prosecuted Ms Gu, but in any event asserts that any complaints made by him to the NSW Police and upon which the prosecution proceeded were justified.
5Mr D A Smallbone of counsel appears for Mr Chen with Ms S Cirillo of counsel. Mr C Moschoudis of counsel appears for Mr Gu. Mr M Dicker of counsel appears for Mr Nguyen. Mr G Sirtes SC of counsel appears for the Registrar-General. I have received extensive written submissions from Mr Smallbone, Mr Moschoudis, Mr Dicker and Mr Sirtes. I shall refer to the written submissions received from Mr Smallbone dated 18 September 2011 as "the Chen submissions" , the (revised) written submissions from Mr Moschoudis dated 14 October 2011 (received 20 October 2011) as " the Gu submissions", the written submissions from Mr Dicker dated 7 October 2011 as "the Nguyen submissions", and the written submissions from Mr Sirtes as "the Registrar-General submissions" (undated, received 12 October 2011). I received written submissions in reply from Mr Smallbone dated 7 November 2011 ( "the Chen submissions in reply" ), from Mr Dicker dated 19 October 2011 ( "the Nguyen submissions in reply" ) and from Mr Sirtes (undated, received 2 November 2011) ( "the Registrar-General submissions in reply" ). I also heard oral submissions on 15 and 16 November 2011.
Facts not in dispute
6I shall endeavour first to summarise the matters which are not in dispute.
7Ms Gu was born in China in 1951 and came to Australia in March 1989. Mr Chen was born in China in 1960 and came to Australia in December 1989. They met in 1990, commenced cohabitation in 1991 and were married in 1992. They purchased the Penshurst Property in 1992, and were described as tenants-in-common in equal share on the Torrens Title Register and the certificate of title.
8Mr Chen and Ms Gu, for a number of years, operated a business together which I shall describe in more detail later.
9There were difficulties in the matrimonial relationship between Ms Gu and Mr Chen and it seems that in 1999 they agreed to separate after Mr Chen commenced living with a girlfriend. Ms Gu and Mr Chen obtained separate legal advice and consent orders were executed by both of them and those orders were made by the Family Court of Australia on 7 July 1999 (see pages 342-344 of Exhibit A2). The orders were in the following terms:
" BY CONSENT:
- That, except as otherwise provided in these orders, each party be solely entitled to the exclusion of the other to all other property and chattels of whatsoever nature and kind in the possession of such party as at the date of these orders and that for this purpose bank accounts are deemed to be in the possession of the person whose name appears on the bank record thereof and superannuation entitlements are deemed to be in the possession of the person who is named as the worker.
- That each party be and is hereby declared the sole legal and beneficial owner as to one-half of the property situate at and known as 8/33 Nelson Street, Penshurst, in the State of New South Wales, being the whole of the land comprised in Certificate of Title Folio Identifier 8/SP7829 ("the property").
- That the husband and the wife be and are hereby restrained from disposing of, encumbering or dealing in any way with the property or their respective interest in the property except as set out in these orders for a period of 5 years from the date thereof ("the period") unless both parties agree to do so.
- At the expiration of the period either party shall co-operate and join with the other party to effect a sale of the property if requested by that party to do so AND upon completion of the sale of the property the net proceeds thereof after deduction of legal costs and selling fees shall be divided equally between the parties.
- That the wife be and is hereby granted sole occupation of the property to the exclusion of the husband for the period PROVIDED HOWEVER that any person nominated by the husband shall be entitled to occupy a bedroom and generally to use the facilities of the property in the nature of a boarder on the following condition:
(a) that the husband shall first have given the wife 14 days' notice of such proposed occupation; and
(b) that the husband shall contribute to one-half of Council rates, Water rates, Strata Levies and electricity for the period of such occupation.
- Subject to order no. 5, the wife shall during the period be at liberty to rent out the remainder of the property and retain all rental income for her absolute use and benefit.
- Subject to order no. 5, the wife shall be solely responsible for the payment of all outgoings in respect of the property.
- That the husband be and is hereby declared the sole legal and beneficial owner of the computer and the facsimile machine presently located in the property.
- That the husband do within 7 days of the making of these orders pay to the wife the sum of $6,000.
- That the husband is declared to be the sole legal and beneficial owner of all amounts of money owed to either the husband or the wife or both the husband and the wife by any one or more of the husband's father, mother, brothers, brothers' wives, sisters, sisters' husbands, uncles, uncles' wives, aunts, aunts' husbands, nephews, nephews' wives, nieces and nieces' husbands."
10Mr Chen's relationship with the girlfriend ended in around mid-July 1999 and he returned to reside at the Penshurst Property. He and Ms Gu discussed Ms Gu's desire to bear a child. Mr Chen and Ms Gu spent time together on holidays in August 1999 and in December 1999 they went to China where they signed up for an IVF program. Mr Chen provided sperm for this program. He also provided $3,000 cash to Ms Gu before she left for China to help her with her expenses (see paragraph 99 of Mr Chen's affidavit of 10 December 2009 and T289.8-9) and he gave her another USD$3,000 when he later joined her in China (see paragraph 101 of Mr Chen's affidavit of 10 December 2009). Ms Gu did not fall pregnant. She remained in China until 8 September 2000.
11Following his return to Sydney in January 2000, Mr Chen commenced a relationship with Helen, his current wife, in March 2000, and on 11 April 2000 he filed for a divorce from Ms Gu. Mr Chen's application was not opposed; a decree nisi was made on 1 August 2000 and a decree absolute was made on 2 September 2000. In that divorce application, Mr Chen stated that he and Ms Gu had not lived together under the same roof since April 1999: see page 437 of Exhibit A2.
12Mr Chen moved into the Penshurst Property with Helen in or about April 2000. They moved out in early September 2000 to live with Helen's parents prior to Ms Gu's return from China, and took up residence in the Beverly Hills Property in late September 2000.
13Ms Gu returned to the Penshurst Property in September 2000 and continued to reside there with boarders until 2004, although following settlement in October 2003 she remained there as a tenant from the Purchasers.
14Mr Chen married Helen in 2004 and they have had two children, one born in 2001 and one born in 2003.
15In relation to the partnership business which Mr Chen and Ms Gu operated, this involved the production of polystyrene beer holders using machinery to fulfil orders under a subcontract for Coldy Holder Product Pty Ltd. Coldy Holder Product Pty Ltd is an entirely separate company owned or controlled by a Mr Stephen Thomson. I shall refer to that subcontract production business as " the Coldy Holder business" . The Coldy Holder business was operated by Ms Gu and Mr Chen as a partnership under the name QHA Trading Company ( "QHA" ). The partnership itself engaged subcontractors to make the beer holders and the work was done from various places, including (until 2000) the garage at the Penshurst Property. The Coldy Holder business had been commenced originally by Ms Gu. In July 2000, Mr Chen established Auspro Pty Ltd ( "Auspro" ) and it continued the Coldy Holder business.
16At some time in either 1999 (on Mr Chen's case) or in 2000 (on Ms Gu's case), Mr Chen paid Ms Gu $500 per week in connection with the Coldy Holder business. The last payment was made by Mr Chen (through Auspro) in February 2004 but there is no dispute that there were periods in which Mr Chen (or Auspro) stopped paying. On Mr Chen's case, that was because Ms Gu was not working in the business when she was in China from December 1999 to September 2000 (see paragraph 115 of Mr Chen's affidavit of 10 December 2009); and then because Ms Gu had attempted to take business away from him (see paragraphs 125-127 and 133 of Mr Chen's affidavit of 10 December 2009 and T250.11-17); and because Ms Gu had sent to Helen and him unsigned and unpleasant letters (see T219.17-22 and T259.19-21). Mr Chen had resumed payment in late June 2001 because he said he wished to avoid further unpleasantness and was concerned about the welfare of his family after Ms Gu told him that if he did not give her money she would kill him: see paragraphs 134-140 of Mr Chen's affidavit of 10 December 2009.
Credibility of the main witnesses
17The issue of Mr Chen and Ms Gu's credibility loomed large in the case. A considerable amount of time was devoted to the attack on the other's credibility and witnesses were called to support the evidence of the two protagonists on a number of issues, most importantly in relation to alleged admissions made by Mr Chen said to support the 2000 Agreement or Mr Chen's authorisation of Ms Gu to sign in his name on the forged documents. The credibility of these witnesses was also the subject of strong attack.
Mr Nguyen
18So far as Mr Nguyen is concerned, no submissions were made that he was not an honest witness doing his best to recall events that occurred eight years ago, although it was conceded by Mr Dicker that Mr Nguyen did not have a detailed recollection of all of the facts and circumstances surrounding the matters the subject of these proceedings (paragraph 40 of the Nguyen submissions) and Mr Smallbone agreed that Mr Nguyen was not extremely accurate in his recollection. Very little was said in the Gu submissions concerning Mr Nguyen's reliability (see paragraph 96 of the Gu submissions) and Mr Moschoudis said nothing about this topic in his oral closing submissions on 15-16 November.
Mr Chen
19The submissions on behalf of Ms Gu and Mr Nguyen set out a number of matters which, it is said, establish that Mr Chen is not a reliable witness. Paragraphs 18 (a)-(d), (k) and (o) of the Nguyen submissions and pages 23-30, 49-50 and 51-53 of the Gu submissions all relate to the state of the relationship between Ms Gu and Mr Chen in the period between April 1999 to January 2000 and to the evidence that Mr Chen gave to the Local Court and in a statement that he gave to the NSW Police in 2004 (see pages 769-771 of Exhibit A3) by which he sought to present as minimal his contact with Ms Gu after he left the Penshurst Property in March/April 1999. Mr Chen admitted that parts of his 2004 statement to the police and answers given in the Local Court to the effect that he had met with Ms Gu only two or three times in chance meetings after March/April 1999 were false. Mr Chen stated in his affidavit in reply that he had returned to the Penshurst Property in July 1999, and in cross-examination he conceded he had contemplated staying with Ms Gu if she fell pregnant with the assistance of the IVF program (see T164.20-28) and had attended a family function with Ms Gu. Mr Chen's earlier untruthfulness about this topic is certainly an important matter in considering his credibility, but the question of whether he did or did not resume cohabitation with Ms Gu from July 1999 to January 2000 is not the core issue. The core factual issue is whether or not he and Ms Gu reached an agreement in 2000 in relation to the Penshurst Property (as Ms Gu alleges) and whether or not Mr Chen authorised Ms Gu to deal with the Penshurst Property. Leaving aside the evidence of Ms Gu and the witnesses she called, I do not think that Mr Chen was shown to have been untruthful about any matter directly relevant to that core issue; and a key aspect, namely the fact that Ms Gu made no contribution to the purchase of the Beverly Hills Property, was demonstrated beyond doubt.
20Some of the matters which are relied on in the Nguyen submissions, for example paragraph 18 (c), (d), (e), (f), (g), (m) and (n), are contentious and cannot be relied on to establish that Mr Chen is not a credible witness without accepting the veracity of Ms Gu and the witnesses she called. The same can be said of much of the Gu submissions. Item (j) of paragraph 18 in the Nguyen submissions is not a matter relevant to credit, and item (l), which assumes Ms Gu's version of events is correct, is not relevant to credit either. This leaves the following matters in paragraph 18 of the Nguyen submissions:
(1)that Mr Chen falsely used Ms Gu's signature for American International Assurance Company (Australia) Ltd ( "AIA" ) proposals without Ms Gu's permission to sign her name: T153.49-154.4 (see sub-paragraph (h));
(2)that Mr Chen falsely signed Ms Gu's signature without her approval to withdraw funds from her St George bank account including after he had served divorce papers: T154.6-154.17 (see sub-paragraph (i));
(3)that Mr Chen failed to declare $30,000 of pizza delivery income: T199.15-43 (see sub-paragraph (p)); and
(4)that Mr Chen filed partnership tax returns in 2000 and 2001 asserting a partnership existed in circumstances where he claimed he did not believe that to be the case: Exhibit 1D1 and T297-298.25 (see sub-paragraph (q)).
21Mr Smallbone objected to the evidence in respect of St George bank account and AIA. He submitted that the question of whether Mr Chen had obtained money from Ms Gu's St George account without her approval could not be relevant to any fact in issue in these proceedings and that its only relevance was as to credit. I decided to admit the evidence provisionally and to rule on this subsequently. Mr Moschoudis argued that if Mr Chen signed documents in Ms Gu's name this made it more likely that he agreed she could sign in his. Since it is not Ms Gu's evidence that she agreed to Mr Chen signing her name on the St George bank account and on AIA proposals, I do not think there is any relevant connection. Mr Chen's propensity to sign two documents in Ms Gu's name without her authority in circumstances where she does not dispute that he was entitled to the monies because he, and not her, had earned the commissions does not establish a propensity to permit Ms Gu to sign in his name to effectively deprive himself of half-interest in land. In my view, it is not relevant to any issue other than Mr Chen's credit and I would reject it.
22If, contrary to my view, the St George bank account and AIA material are admissible, it is important to recognise that Mr Chen took no more from AIA and the St George bank account than that which he had earned and which Ms Gu accepts he was entitled.
23Mr Smallbone made the point in relation to these and other matters that Mr Chen did admit to them in cross-examination and that needed to be taken into account in relation to his credibility. Mr Dicker contended (see paragraphs 22-23 of the Nguyen submissions) that the admissions of Mr Chen only came after extensive cross-examination and attempts to avoid giving the answer: see T120.17-T125.27, T153-T158, T163.30-.43, and T319.12-.27. Overall, I think Mr Chen did admit to his past conduct unevasively and he admitted to some matters that may have been difficult to establish. I think these admissions go some way to assisting his credit.
24Mr Chen's failure to disclose $30,000 of earnings to the Australian Taxation Office from his job in pizza delivery is something which does not reflect well on Mr Chen, but he admitted this and whilst it reflects on his general probity it does not really undermine his credibility on the core issues in this case.
25The Nguyen and Gu submissions claim that Mr Chen submitted false partnership tax returns. Mr Smallbone points out that the returns related to the period up to about September 2000, ie up to the cessation of the partnership. The references to the partnership returns in the transcript are T233.28-T235, T246.50-T247.22, T248.5-28, T248.41-T249.11 and T297.18-T298.49 and the picture that emerges is opaque. Exhibit 1D1 contains partnership returns for the years ending June 2000 and June 2001. It is clear that the partnership had greatly reduced earnings and the explanation is that Auspro was formed only in July 2000. I am not satisfied that Mr Chen has been guilty of any dishonesty in relation to the partnership tax returns.
26One of the matters relied on by the Gu and Nguyen submissions is that Mr Chen signed a false application to the Family Court because he stated in April 2000 that he and Ms Gu had not lived under the same roof with her since April 1999 when this was false.
27Mr Chen and Ms Gu did live under the same roof in the period of July 1999 to January 2000 and the answer Mr Chen made in his divorce application was false and he knew that the Family Court would act on that false answer. It was also false to the knowledge of Ms Gu; and whilst she did not formally consent to the divorce she did not contest it nor challenge the application. Indeed, it is her case that she agreed to the divorce in April 2000 and she was in a sense complicit with Mr Chen in achieving that outcome. The circumstances of the matter are very unusual - Mr Chen having left to live with a girlfriend then returning to the Penshurst Property and even participating in an IVF program with Ms Gu but saying that he would only be staying with Ms Gu if she fell pregnant; both he and Ms Gu believing she had little prospect of falling pregnant; Ms Gu residing in China at the time of the application for divorce; and Mr Chen having found a new girlfriend after Ms Gu advised Mr Chen in February 2000 of her inability to fall pregnant. Ms Gu conceded at T639.39-T640.8 that they were in effect separated under one roof. I think it is entirely likely that Mr Chen's return to the matrimonial home was in his own mind a very qualified return. It is clear that after Mr Chen's return to Australia in January 2000 and after Ms Gu informed him that the IVF treatment was unsuccessful in February 2000, his marital relationship with Ms Gu was completely at an end.
28Having regard to Mr Chen's attempt in the Local Court criminal proceedings to present his contact with Ms Gu as far more limited than it was in fact, and notwithstanding the fact that he now admits that his evidence was in effect false and having regard to his false answer in the Family Court application (see question 13(a) at page 437 of Exhibit A2), I approach Mr Chen's evidence with a substantial degree of caution. For reasons which I will explain, I did not, however, find his credibility to be impugned to anywhere the degree of Ms Gu.
Ms Gu
29In my view, Ms Gu's credibility was comprehensively destroyed and for the following reasons:
(1)She was a very poor witness, giving many answers that were non-responsive or, if responsive, followed by a speech. She became heated and impassioned in giving answers in Mandarin and very frequently repeating her version of events when the question did not call for that.
(2)Leaving out of account the contest of facts between Mr Chen and Ms Gu, her version of her dealings with Mr Nguyen was contradicted by Mr Nguyen and also by Mr Nguyen's contemporaneous record of his dealings with her.
(3)Whilst she admits that she signed the forged documents in Mr Chen's name and endeavoured to copy his signature, not only does she assert that she had a legitimate reason for so doing but she denies that she had any intention to deceive Mr Nguyen, the Registrar-General and the Purchasers when it is clear that she did. The fact that she was willing to forge Mr Chen's signature on the forged documents and present a falsely attested transfer is of itself a significant indication of a lack of honesty.
(4)Her explanations of how the authorities were written or contributed to by a lodger lacked any credibility as did her explanation of how "Mr Tom Lu", also said to be a lodger at the Penshurst Property, came to write his former address on the transfer when he purported to witness her signature and Mr Chen's signature on the transfer and certify that he knew both of them and had witnessed their signatures when he had not done so: see T391 and more generally T388-T393 on this topic. Also see T362-T363, T603, T608.29-37, and T609.3-5. The address given for Mr Lu on the transfer was "10 Hill St Campsie" which is, on Mr Chen's unchallenged evidence (see paragraph 47 of Mr Chen's affidavit of 14 May 2009), a block of units.
(5)Her explanation for how her cousin, Mr Rui Ping Xu, came to be with her when she visited Mr Nguyen was not credible and her assertion that Mr Xu was left out of earshot of Mr Nguyen seemed to bespeak fabrication even without Mr Nguyen's version of events and Mr Nguyen's evidence that Ms Gu was accompanied by a man on two occasions, once in April 2003 and once in August 2003, who was presented to him as Mr Chen. This is even more so when regard is paid to the forged documents.
(6)Her denial at T602.43-45 that Mr Nguyen told her that Mr Chen needed to sign both the contract of sale and the transfer is difficult to believe, particularly in light of the contents of the forged authority of 12 June 2003.
(7)Ms Gu did not engage a real estate agent; she did not advertise the Penshurst Property by a sign or in a newspaper or on the internet (see T438.14-22). Ms Gu approached a person who she saw leaving an inspection at another advertised unit close to her home. Ms Gu denied that she had set about selling the Penshurst Property quietly (see T438.11-12) but it is clear that that is exactly what she did. Her supposed reason for being outside the advertised unit was to inspect it to assist her to obtain information relevant to price but she did not actually venture into the premises then or at any time: T439-T440. Having approached Mr Dapcevic, she took him to her unit, told him what price she wanted and he said to her (T441.19-20):
"I'll take it. Don't sell it to anyone else."
The only other "marketing" Ms Gu did prior to that occasion was to mention her wish to sell the Penshurst Property to six or seven of her friends (see T443.21-22). I think Ms Gu's conduct was entirely consistent with her wishing to ensure that Mr Chen did not find out about the sale.
(8)Ms Gu told Mr Dapcevic that her husband was out at work and was a taxi driver (see T446-T447) and her explanation for saying that was not credible, including that she "was very fearful" (see T446.24-25).
(9)I agree with Mr Smallbone's contention that it is of significance that the conversations which Ms Gu alleges she had with Mr Chen in relation to execution of the sale contract are all "chance" meetings (see pages 179-182 of Exhibit A1); namely Mr Chen, on Ms Gu's evidence, was looking for something in the Penshurst Property's garage, or he came over to the Penshurst Property to give her a tax return, or she meets him in the doctor's surgery. She does not assert that she rang him to arrange a meeting to discuss the execution of the sale documents. In another context, Ms Gu relies on a chance meeting in a vegetable shop: see page 181 of Exhibit A1.
(10)Mr Smallbone draws attention to the fact that there are different accounts of what Mr Chen is supposed to have said when Ms Gu asked him about signing "documents for the sale of the property" in the presence of Ms Zhu in the garage of the Penshurst Property in "about May 2003" (see page 180 of Exhibit A1):
(a)"[i]t is not necessary for me to sign" (see page 180 of Exhibit A1 but not repeated at page 209 of Exhibit A1), but Ms Gu denied in cross-examination at T494.16-18 that Mr Chen had said that;
(b)"sign on my behalf" (see pages 180 and 229 of Exhibit A1), but Ms Gu denied in cross-examination at T494.13-14 that Mr Chen had said that;
(c)that he "would not sign" (see Exhibit C at line 40 which is evidence to the Local Court); see also Ms Gu's affidavit dated 5 August 2010 where she attributed to Mr Chen the words, "No I'm not signing anything, you sign it for me" (see page 209 of Exhibit A1);
(d)that he didn't have time to sign (see page 180 of Exhibit A1, but not repeated at page 209 of Exhibit A1); in cross examination at T494.20-23 Ms Gu denied that that phrase was used, but said rather that at the end of the conversation when she asked him to write down a statement that he was overseas, Mr Chen had said, "Look, I'm busy. You go and write it out.";
(e)tell the solicitor that he was overseas (see page 180 of Exhibit A1 and T493.5-7);
(f)"You sign it for me I am going overseas" (see T764.37);
and all at a time when, on the evidence, no contract had yet been exchanged or even prepared (it was prepared in August 2003 (see paragraphs 22-24 at page 235 of Exhibit A1) and Ms Gu provided an authority in June 2003 that said Mr Chen would sign the contract. Ms Gu's evidence about these matters was inconsistent. Her recollection of whether things were said at the garage of the Penshurst Property or at the doctor's clinic was confusing. Ms. Gu at T492.48-493.3 suggested that it was at the doctor's surgery that Mr. Chen invited her to tell the solicitor he was overseas. However, at T493.5-7 she corrected herself and said it was at the garage that he said this, then later at T578.20-27, Ms. Gu said that she really could not recall whether this conversation with Mr Chen occurred at the garage or when they met at the clinic; also compare pages 180 and 229 of Exhibit A1 and T494.13-14. There are also inconsistencies between what Ms Gu said in cross-examination and what Ms Zhu said: see Chen submissions at paragraphs 238 -260, Exhibit J which contains Ms Zhu's answers in the Local Court proceedings, and the cross-examination of Ms Zhu at T764-T765.
I interpolate here that even if Ms Gu were otherwise an honest witness, it would not be surprising that there would be a difficulty of precision in recalling what was said and when in respect of conversations that, if they occurred, occurred eight years ago. Mr Dicker made a submission to a similar effect at paragraph 52 of the Nguyen submissions. However, there is no reliable contemporaneous record of an agreement or some action consistent with the 2000 Agreement having been made and a refusal by Mr Chen to honour the alleged agreement, such as contact by Ms Gu with the solicitor who acted for her in the Family Court settlement.
(11)Ms Gu's assertion that she had asked Mr Chen to ring the Purchasers to discuss a deposit and that he did so not only was not corroborated by any evidence but is contradicted by the letter from the Purchasers' solicitors at page 631 of Exhibit A2. It is also somewhat inconsistent with the supposed unwillingness of Mr Chen to assist her in the sale and transfer of the Penshurst Property. It also invokes, as Mr Smallbone pointed out, Mr Chen disparaging her level of English, her not understanding what he said to Mr or Mrs Dapcevic about the price in a context where we know that Ms Gu had negotiated a price with Mr Dapcevic herself and negotiated a lease following sale including the finalisation of bond terms (see page 732 of Exhibit A3), and that she was able to converse with Mr Nguyen in English without any difficulty and had indicated to Mr Nguyen that she would obtain and did obtain a certificate pursuant to s 149 of the Environmental Planning and Assessment Act 1979 (NSW) which Mr Nguyen required for the contract of sale.
(12)One particular problem is timing. Ms Gu's evidence is that the call she says she made to Mr Chen on 18 August 2003 (which is recorded as a 30-second charge which is the minimum charge for calls on Ms Gu's account: see page 629 of Exhibit A2) in which she told Mr Chen that he needed to sign for her to receive the proceeds preceded her visit to Mr Nguyen on 22 August 2003 (T625.14-19 and T626.18-21) which is when she says she was first informed that she needed an authority from Mr Chen if she was to receive all the proceeds.
(13)Ms Gu, like Mr Chen, gave evidence mainly through an interpreter. Ms Gu admits that she can speak basic English. She professed not to know how to say "ex-husband" in English (T482.43-44) and said that is why she had said to Mr Nguyen that she and Mr Chen were separated. Mr Nguyen denied that she said that. She said that she did not tell Mr Nguyen about the 2000 Agreement she claims she reached with Mr Chen in part because she does not speak English very well and it would take too long: see T482.24-37. Mr Nguyen's evidence is that he does not speak either Mandarin or Cantonese and that Ms Gu spoke English quite well. It is clear that Ms Gu was able to speak English well enough to induce interest by Mr Dapcevic and then negotiate a sale to him and his wife and also negotiate a deposit of 5% and a lease back of the Penshurst Property from the Purchasers. Mr Nguyen told Ms Gu that he did not speak Chinese. As far as Mr Nguyen is concerned, he did not have any difficulty in conversing in English with Ms Gu, and if he had any difficulty he could have called for assistance to understand Ms Gu because he had Chinese-speaking assistants in the office which he explained to Ms Gu: see page 208 of Exhibit A1.
(14)Mr Smallbone contends that it was no coincidence that Ms Gu chose Mr Nguyen, a Vietnamese solicitor who did not speak Chinese, to conduct the conveyance when there were Chinese-speaking solicitors available even in the same building. He submits that it should be inferred that Ms Gu conscientiously avoided using a Chinese-speaking solicitor (in contrast to what she had done on her property settlement in the Family Court proceeding) because that would reduce the prospect of Mr Xu's identity being found out. I think this is a plausible explanation. I note that Mr Dicker submitted that Ms Gu's evidence (see page 208 of Exhibit A1) that she told Mr Nguyen that she would go to a Chinese-speaking solicitor when Mr Nguyen told her that he did not speak Mandarin and that when he told her that he had Mandarin-speaking assistants she decided to stay undercuts Mr Smallbone's "theory". Mr Dicker's submission is based on Ms Gu's version of the conversation, not Mr Nguyen's. It is true that Mr Nguyen did not dispute in his affidavit in reply that he had told Ms Gu that he had Chinese-speaking assistants (as in fact he did), but I think it is unlikely that Ms Gu did indicate she would go elsewhere if Mr Nguyen could not speak Mandarin because she had, according to Mr Nguyen, no difficulty communicating with him in English.
(15)Ms Gu says that she told Mr Nguyen that the Penshurst Property was hers at their first meeting (see paragraph 6 at pages 207-208 of Exhibit A1) and at the second meeting she told him she and Mr Chen were separated (see paragraph 7 at page 208 of Exhibit A1 and T348.47-T349.3) which Mr Nguyen denies (see T792.30-41). If Ms Gu had told Mr Nguyen that she was separated from Mr Chen, Mr Nguyen says he would have investigated matters further (see T792.30-T793.13) which evidence was not challenged.
(16)Ms Gu's evidence as to why Mr Xu was not called in her case (at T615) was implausible.
(17)At paragraphs 68-69 of her affidavit of 18 May 2010, Ms Gu deposes to having a conversation with Mr Chen at the Penshurst Property in April 2000 about the $500 payments, and yet at paragraph 62 of her affidavit of 1 November 2009, Ms Gu says she was in China during that time and did not return to Australia until 8 September 2000.
30Ms Gu's submissions made no effort at all to rebut the detailed and extensive attack on her credit by the Chen submissions. Mr Dicker's oral submissions conceded the existence of significant problems with Ms Gu's credit: see T918.49-T919.3; and at T923.41-45 where Mr Dicker described her as "the heavily damaged and battered Ms Gu, with aspects of her evidence being incorrect".
31Mr Dicker, who embraces Ms Gu's version of her conversation with Mr Chen to support the contention of there having been an oral 2000 Agreement, asks the Court to accept Ms Gu's version of events wherever it is in conflict with Mr Chen's evidence. There are two aspects about this which deserve comment. The first is that these submissions are put together with submissions by Mr Nguyen that Ms Gu's version of events as between herself and Mr Nguyen ought be rejected. Mr Dicker, at paragraph 29 of the Nguyen submissions, puts forward a number of points as to why I should find that Ms Gu's version of her dealings with Mr Nguyen should be rejected. I set these out below:
"Ms Gu claims that she informed Mr Nguyen that she was separated from her husband. See Gu affidavit 5 August 2010 paragraph 7; CB 1/208. She says she used "separated" because she did not know the English word for "divorce". However, this was unlikely. First , by this time Ms Gu was not merely separated but divorced. Secondly , she was aware that there were Chinese speaking persons in Mr Nguyen's office who could translate the word. Thirdly , she was aware of the word "divorce" as she had seen it before on the divorce application served on her: CB 2/436. Why would she have indicated an erroneous status to Mr Nguyen? Fourthly , the two authorities dated 12 June 2003 and 27 August 2003 (Nguyen Exhibit pages 25 and 33 (CB 2/622 and 2/640)) both refer to "my wife". This was clearly used by Ms Gu to mislead Mr Nguyen. If she had written or allowed a document to be presented which said "my former wife" it is likely that this would have excited Mr Nguyen's suspicion in relation to the whole transaction. Fifthly , Mr Nguyen's file is carefully prepared and documented and the recitation of facts in it should be accepted. His file notes clearly suggest that he believed the couple to be husband and wife: CB 2/621 and 2/635. On balance, it is submitted that Ms Gu's account of her dealings with Mr Nguyen should be rejected. This is particularly in the light of the file note at CB 2/635 referring to "husband and wife"."
32The second matter is that at the outset of the hearing and in written submissions, Mr Dicker put forward a theory about Ms Gu's deception of Mr Nguyen. He submits at paragraph 28 of the Nguyen submissions:
" However, Ms Gu should not be regarded as a witness of truth in relation to her alleged dealings with Mr Nguyen. To some extent, the dealings of Ms Gu with Mr Nguyen, on Mr Nguyen's account, are understandable even though they were dishonest. Ms Gu had agreed with Mr Chen in 2000 that she should own the Penshurst Property. Ms Gu had no doubt considered the matter carefully and believed that it was likely that any solicitor would require Mr Chen to sign the contract for sale because he was still a registered proprietor of the property on the certificate of title which she had in her possession from at least September 2000. Therefore, Ms Gu devised a scheme to mislead Mr Nguyen into believing that the male person who accompanied Ms Gu was Mr Chen."
33Of course, this "theory" embraces Ms Gu's version that there was the 2000 Agreement. Ms Gu did not come to this Court admitting that she had misled Mr Nguyen, the Purchasers and the Registrar-General and that she had no choice because she was worried that if she told Mr Nguyen and the Purchasers the truth that would make it difficult to sell the Penshurst Property. She did not give evidence as to the belief that Mr Dicker asserts as part of his theory. On the contrary, Ms Gu denied that her cousin had sat with her and Mr Nguyen, denied that she had said anything with the intention of misleading Mr Nguyen or the Purchasers, asserted that others had suggested the wording of the false authorities and even asserted that her lodger Mr Lu had come up with the idea of inserting his previous address for his then current address (see T391.25-39). In short, Ms Gu's case did not embrace or support this "theory" advanced by Mr Dicker. If she had realised at any time after she met with Mr Nguyen in April 2003 that Mr Chen would not sign as she says, she could have raised it with Mr Nguyen, but on Ms Gu's own evidence she did not have a reason to engage in deception of Mr Nguyen from the outset.
34There is a certain irony about the submissions made on behalf of Mr Nguyen. They accept that Mr Nguyen never had instructions from Mr Chen to act for him, although Mr Nguyen thought he did because of Ms Gu's lies and deception; and in answer to Mr Chen's claim, the submissions not only deny negligence (as Mr Nguyen is entitled to do) but actually promote a defence of "no loss" based on acceptance of Ms Gu as a truthful witness in respect of her dealings with Mr Chen.
35I accept Mr Dicker's submissions quoted at [31] above and I accept, without hesitation, the evidence of Mr Nguyen where it is in conflict with Ms Gu. That acceptance only reinforces the lack of credibility of Ms Gu on issues other than her meetings with Mr Nguyen. In particular, it undermines her contention that she was, as it were, acting on the oral 2000 Agreement she and Mr Chen had reached and renders it more implausible for the following reasons:
(1)Since Ms Gu's evidence is that when she met Mr Nguyen in April 2003 she did not think that Mr Chen would not sign whatever documents had to be signed to effect the sale, she had no reason to bring Mr Xu to Mr Nguyen's office and pretend that he was Mr Chen. That step was taken, I infer, because Ms Gu knew that Mr Chen was not going to be involved in the transaction and that was because she knew that Mr Chen had no reason to agree to execute any documents that would give the proceeds of sale exclusively to her. It is linked also to the inclusion of the words "I shall sign" in the forged authority of 12 June 2003 in circumstances where even on Ms Gu's own evidence she knew that Mr Chen would not sign the sale documents.
(2)Ms Gu could easily and readily have told Mr Nguyen that she and Mr Chen were divorced and that he had orally agreed to her having the whole interest in the Penshurst Property. Ms Gu said she did tell Mr Nguyen that she and Mr Chen were separated (see T461.8-18) which I find was never said.
(3)I accept Mr Smallbone's submission that everything Ms Gu did was done in an endeavour to take for herself by stealth what she could not achieve at the Family Court property settlement, namely:
(a)she did not appoint a real estate agent for the sale;
(b)she tried to sell the Penshurst Property to her friends and when that failed she approached a potential buyer outside an open inspection of another unit , ie Mr Dapcevic;
(c)she lied to the Purchasers about her husband why he was never at home;
(d)she brought her cousin to masquerade as Mr Chen;
(e)she enquired of Mr Nguyen whether Mr Chen needed to sign anything and when she was told he did, she set about forging his signature and obtaining a false certification and execution of the transfer;
(f)she arranged for a lease back of the Penshurst Property after sale for three months; and
(g)she departed for China at the end of the lease period.
36In my view it is important to an assessment of Ms Gu's credibility that she has made the assertions and denials in relation to Mr Nguyen, which I have found to be false. Those falsehoods and the conduct described in [35] are also relevant because they are inconsistent with the underlying premise of Ms Gu's case that Mr Chen had agreed to give her his half-share of the Penshurst Property in 2000 and had not indicated that he would not assist her to achieve transfer in accordance with this agreement: see Steinberg v Federal Commissioner of Taxation (1975) 134 CLR 640 at 694-695 per Gibbs J and Raso v NRMA Insurance Ltd (unreported, Court of Appeal, NSW, CA 40353 of 1990, Mahoney CJ, Priestley and Handley JJA, 14 December 1992); see also R v Heyde (1990) 20 NSWLR 234 at 236-237 which recognises the availability in criminal proceedings but warning of the need for caution in the inference that can be drawn from established lies.
Credibility of the other witnesses
Ms Qingyi Wang ( "Ms Wang ")
37Ms Wang was called by Mr Chen to establish that:
(1)She informed Mr Chen that there were persons other than Ms Gu residing in the Penshurst Property, (she having been informed by her son-in-law of that fact) and that "Mr Chen appeared to be shocked and surprised, he was speechless for a second or so then repeatedly said :
'Impossible. This is impossible. Impossible.'"
and that Mr Chen then said:
"I will go and find out now"
(see paragraph 10 of Ms Wang's affidavit of 14 May 2009).
(2)She was told by Ms Gu that Mr Chen wanted a copy of council and water rates for the Penshurst Property, and was asked by Ms Gu to hand an envelope with documents inside to Mr Chen (see paragraph 2 of Ms Wang's affidavit of 10 December 2009).
(3)She had a conversation with Ms Gu, it seems, before Mr Chen had moved to the Beverly Hills Property (ie before September 2000 it would appear) in which Ms Gu said:
"I am very angry. I am so lonely by myself and he has a family. I want to pay someone to kill him."
(see paragraph 2 of Ms Wang's affidavit of 13 April 2010 and T282.47-T284).
38Ms Wang's credit was attacked by the Gu and Nguyen submissions on the basis that she had agreed in cross-examination on 24 August 2011 (see T263.24-T264.1) that she had received work from Mr Chen and that she worked and still works for him. It was put to her the next day that that was why she was keen to help Mr Chen (see T284.40-43) but she said that it was her daughter who received work from Mr Chen and worked for him, not her (see T284.44-50). Ms Wang said that she "probably misunderstood" the question the day before, it was a "mistake" and that she "did not hear properly" (see T284.49-T285.11). Her answers were clear on 24 August (see T263-T264) and the change on 25 August is surprising, but it should be noted that she had in paragraph 5 of her affidavit of 14 May 2009 said that it was her daughter who received the work. There may be some taxation implications which led her to alter her evidence from 24 August to 25 August to restate that her daughter was the recipient of the work. Although it was put to Ms Wang that she was partial because Mr Chen was a source of income for her or her daughter, her evidence was that she regarded both Mr Chen and Ms Gu as friends (see T266.31-32, T278.15-17 and T283.29-37) which was not challenged and she emphasized that although Ms Gu had made the threat to kill Mr Chen, Ms Gu had then said that she had said that because she was angry (see T282.47-T283.5 and T283.40-47). This amelioration supports Ms Wang being seen as impartial.
39I accept Ms Wang's evidence. I note that the anger and desire for revenge which is evidenced by the comments Ms Gu made to Ms Wang (albeit that the threat to kill Mr Chen was quickly withdrawn) is consistent with other evidence - the anonymous letters which I deal with below and the attempt by Ms Gu to take away the Coldy Holder business.
40I think that Ms Wang's evidence about Mr Chen's reaction or learning that "Caucasians" had moved into the Penshurst Property supports Mr Chen's case that he did not have any reason to believe that Ms Gu was selling or had sold the Penshurst Property. Mr Dicker contends that it was consistent with Mr Chen thinking that Ms Gu could not achieve a sale without his execution of documents. I think it is consistent with that but Mr Dicker's reliance on it here is to propound another theory, which is that Mr Chen told Ms Gu that she could sign in his name not believing that she would be able to do so, which is far-fetched and inconsistent with Ms Gu's contention that Mr Chen told her she could sign in his name intending that she could do so.
Ms Ina Wang ( "Ina" )
41Ina was called in Ms Gu's case. Her affidavit of 30 October 2009 can be found at pages 220-223 of Exhibit A1. Ina says that she worked for Ms Gu and Mr Chen in the Coldy Holder business commencing July or August 1999.
42Ina says that after Helen had given birth, Mr Chen asked her if she would be willing to look after the child at the Beverly Hills Property, which she did for 2 to 3 days. Whilst at the Beverly Hills Property, Ina says she had a conversation with Mr Chen as follows (see page 222 of Exhibit A1):
"Myself: Did you rent or purchase this new unit?
Mr Chen: I purchased it.
Myself: What happened to the old property in Nelson St?
Mr Chen: I gave it to Amy (Mrs Gu's English name). That property now belongs to her. This new property belongs to me."
43I think that cross-examination demonstrated that Ina was not a reliable witness:
(1)Many of her answers were not responsive.
(2)She first admitted that Mr Chen had sacked her and then denied that he had, asserting that he had told her he was moving the factory to China (T701.14-31). She had, before the Local Court, admitted that Mr Chen had sacked her and said that he had given her no reason (see Exhibit H at page 61 lines 3-5).
(3)Her evidence about how she had first been asked by Ms Gu to recall her conversation with Mr Chen was very confusing (see T700.38-T701.1, T709.26-37 and T710.8-29); and I gained the impression that she was very reluctant to reveal what Ms Gu had said to her in seeking her assistance in defending the criminal proceedings.
(4)She said at T699.25 that Mr Chen had said that Ms Gu lives in the Penshurst Property, but at T699.31-36 denied that he had said that, and also denied that she had said that he did.
(5)Mr Thomson's unchallenged evidence at page 136 of Exhibit A1 is that he was visited by Ms Gu in 2001, and later, by a woman who introduced herself as Ina Wang who gave him a letter and photograph (Exhibit G). Ina's evidence of itself, and having regard to Mr Thomson's evidence and to the contents of the letter in Exhibit G, lacked credibility. Ina asserts that she had gone to Mr Thomson's factory because her son's classmate had told her about it and that she had taken the photograph (forming part of Exhibit G) with the classmate's camera (see T704-T705). It was accepted in submissions that Ms Gu had tried to cut Mr Chen out of the Coldy Holder business and Ms Gu says she had a "neighbour" help her write a letter to Mr Thomson and that she went to Mr Thomson's factory with her cousin (see paragraphs 70-71 of Ms Gu's affidavit of 1 November 2009), so the notion that Ina's visit to Mr Thomson was unconnected with Ms Gu's efforts to remove the business from Auspro is difficult to accept.
(6)I set out part of the cross examination of Ina at T713.20-T713.33:
"Q. It is the case, isn't it, that when Ms Gu asked you to give evidence in the Local Court she suggested to you that you had had a conversation with Mr Chen in 2001 along the lines that you set out in your affidavit, didn't she?
A. INTERPRETER: Yes.
Q. And you could not remember that conversation, could you, when she asked you about it?
A. INTERPRETER: It all happened such a long time ago, it's not my own affair. How could I possibly remember all the details?
Q. And you don't remember the words spoken in the conversation that you had with Mr Chen at Beverly Hills in 2001, do you?
A. INTERPRETER: Well, some conversations I can't remember but some sentences I can remember."
That evidence makes it difficult to place any reliance on the accuracy of her recollection.
(7)In the Local Court Ina was very vague about whether she had told Ms Gu about the conversation she had with Mr Chen: see Exhibit H. I set out part of her cross-examination in the Local Court:
"PROSECUTOR
Q: When you say you forgot, do you have any recollection of a conversation between you and Amy about what Mr Chen said? A: Can you repeat?
Q: Do you recall exactly what you said to Amy about what Mr Chen said in relation to the Penshurst property? Do you recall what you actually said to her?
A: It's a long time and it was not my affairs and I don't remember so clearly."
44I do not think that Ina is a reliable witness and I regard her evidence with considerable caution. Mr Moschoudis said nothing in answer to the attack on her credit at paragraphs 88-95 of the Chen submissions in reply. Mr Dicker did not descend into the detail of the attack on Ina and he conceded at T920.7-8 that Ina (and Ms Zhu) "were not entirely impressive". I think it is significant that Ina says that when Ms Gu asked her to give evidence in the Local Court, Ms Gu suggested to her that she had had a conversation with Mr Chen in 2001 "along the lines that [Ina] set out in [her] affidavit" (see T713.20-23), not only because of the impact on this witness' credibility, but also because the same pattern emerges with the other two witnesses called for Ms Gu. If Mr Chen told Ina that Ms Gu had possession of the Penshurst Property and he had bought the Beverly Hills Property that would have been entirely accurate. Even if Ina were attempting to give an honest account of the conversation, the difference between the two propositions is a highly nuanced one. The need for caution in relation to accounts of conversations a number of years after they have occurred was adverted to in an often cited passage in Watson v Foxman (1995) 49 NSWLR 315 at 318-319 per McLelland CJ in Equity in the context of a case based on misleading and deceptive conduct but of wider relevance:
"Where, in civil proceedings, a party alleges that the conduct of another was misleading or deceptive, or likely to mislead or deceive (which I will compendiously described as "misleading") within the meaning of s 52 of the Trade Practices Act 1974 (Cth) (or s 42 of the Fair Trading Act ), it is ordinarily necessary for that party to prove to the reasonable satisfaction of the court: (1) what the alleged conduct was; and (2) circumstances which rendered the conduct misleading. Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but
not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a
conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience."
45In Pennimpede v Pennimpede [2010] NSWCA 121 , the application of the warning in Watson v Foxman was referred to without criticism at [20] where Hodgson JA (with whom Tobias and Macfarlan JJA agreed) said:
"In his decision the primary judge referred to Watson v Foxman (1995) 49 NSWLR 315 at 318-319, and he said that the observations of McLelland CJ in Eq in that case on problems of proof of oral representations applied well to a case where there were allegations of oral agreements or arrangements to deal with property in a way different from what appears on the written record."
Ms Wei Shi ( "Ms Shi" )
46Ms Shi was called in Ms Gu's case. She was, from March 2001 to the end of 2002, a lodger of Ms Gu's at the Penshurst Property. In her affidavit of 1 November 2009, Ms Shi describes a visit to the Penshurst Property by a man who she did not know who spoke to Ms Gu about a tax return and handed a piece of paper to Ms Gu. Ms Shi says she then went to her room but heard an argument and the following conversation:
"Ms Gu: 'I want you to write down what we have agreed between ourselves. Each of us will have our own property. You have one and I have one. You would give me money every week from the business. I want those things in writing from you.'
The man: 'You live in this place, you have the possession of the certificate of title, the place is yours. It is not necessary to write it down anymore.'
Ms Gu: 'I don't trust you. You do not give me money from the business.'
The man: 'I do give the money.'
Ms Gu: 'I don't trust you. If you do not write it down now, we should go to a solicitor and write these agreements down.'
The man: 'I talk to you later about it.'"
47Ms Shi says that after the man had left, she asked Ms Gu who he was and Ms Gu told her it was her ex-husband Mr Chen. Ms Shi identified the person in a photograph (Exhibit 3D2) as the man she saw on that occasion. Ms Shi said she did see Mr Chen on three to five occasions coming to the Penshurst Property in a white van.
48Ms Shi says she did not tell Ms Gu at the time of the conversation between Mr Chen and Ms Gu that she heard anything. Her recital of Ms Gu's first conversation with her about the overheard conversation at T740-T751 is not credible. At T748.21-T751.41, the following was said when Ms Shi was asked to recount a conversation she had with Ms Gu concerning the overheard conversation:
"SMALLBONE
Q. In that 15 or 20 minutes that you were talking about the case, does that include the time you spent talking about her feelings about the case?
A. WITNESS: It's about both.
Q. About both together?
A. WITNESS: Yes.
Q. What events in that 15 to 20 minutes did you and she discuss?
A. WITNESS: She just sell off the property.
Q. That took about 15 seconds, is that so?
A. WITNESS: And her feeling about the case. I mean, about the the police treat her, thing.
Q. Did she tell you that she had had a conversation with Mr Chen in 2001 in which he said, "The deed is in your hands so the property is yours do you remember that conversation?"?
A. WITNESS: She didn't say that.
Q. So did she say to you, "Do you remember hearing a conversation between me and Mr Chen about the property at any time?"?
A. WITNESS: No, not that question.
Q. Did she say to you, "Do you remember a time when Mr Chen came to the unit and you went out into your room"?
A. WITNESS: She said, "I remember you were there when she came once".
HIS HONOUR
Q. She or he?
A. WITNESS: She. Oh, sorry. He, he came once.
SMALLBONE
Q. So she said, "You were there when he came once"?
A. WITNESS: Yes. She said she remember she said, "I remember you were there when he came once".
Q. Yes?
A. WITNESS: "And have you heard anything". Yeah, that was the question.
Q. And what was your response to that question?
A. WITNESS: I said, "I need to go home". I said, "It's a long time ago and I need to go home, think more about it".
Q. Did you say you could remember or that you couldn't remember?
A. WITNESS: I said I said I remembered seeing him, but "I need to I need to go home and think about the whole conversation", I think.
Q. You couldn't remember it easily at that point in time?
A. WITNESS: I I do remember but I didn't I didn't say to her I remembered the whole thing because I think it's a serious thing, matter now, so I got to think about what I heard.
Q. And was it the case that you couldn't remember everything at that point in time?
A. WITNESS: Not word by word, no.
Q. What was it that you could not remember?
A. WITNESS: I couldn't remember what was I couldn't remember? At that time. I don't know. What was I couldn't remember? I don't know.
Q. Could you remember at that point in time Mr Chen having said, "What else do you say and why do I have to write it down?". Could you remember that at that time?
A. WITNESS: At that time I just didn't think deeply. I just think, "Oh, yes". You know, it it was a conversation but didn't think the details. That's why I told Ms Gu, "I got to go home and think".
Q. You still can't remember today the exact words that he used in the conversation, can you?
A. WITNESS: I can because I I thought about it over time.
Q. And do you understand the difference between memory and reconstruction?
A. WITNESS: Memory is what I remembered. Reconstruction, that means not truth, is that right?
Q. Do you understand the concept of going over the same old ground in your mind and perhaps hearing somebody else's version and that influencing your recollection?
A. WITNESS: No one has influenced me.
Q. Do you understand that that is something that can sometimes happen to people?
A. WITNESS: Yes.
Q. Do you think that that has happened to you in this case?
A. WITNESS: I don't think so.
Q. You have discussed Ms Gu's views about what she believes her entitlement to be in the Penshurst property whilst you were still living there, didn't you?
A. WITNESS: Sorry?
Q. Did you ever have a conversation with Ms Gu about what she felt her rights were in relation to the Penshurst property at a time when you were still living there?
A. WITNESS: Yes, she told me when I was living there, yes.
Q. And it is possible that that has influenced your recollection of the conversation in 2001, isn't it?
A. WITNESS: No.
Q. Why not?
A. WITNESS: It's why do you think it's influenced me?
Q. You can't say today that you recall each and every word that was said in the exact order that it was said, can you?
A. WITNESS: It it's not exact the words but it's just the contents. It's what they say.
Q. And when you were speaking to Ms Gu about the police matter
A. WITNESS: Mmm mmm.
Q. you couldn't remember then the substance and effect of what had been said, could you?
A. WITNESS: I need it took me a while to remember the whole thing.
Q. You weren't sure about the effect of the words that had been said, were you?
A. WITNESS: That's just okay, what I said what I remember is just my best in my best memory. That's what I remember.
Q. And what you were trying to do is interpret in your mind the effect of things that you could not clearly remember, weren't you?
OBJECTION (MOSCHOUDIS)
A. WITNESS: No.
MOSCHOUDIS: That's not what she said.
HIS HONOUR: He is putting it to her, not saying that is a summary of her evidence, I don't think.
SMALLBONE: That's right, your Honour.
QUESTION ALLOWED
A. WITNESS: No.
SMALLBONE
Q. You disagree with that, do you?
A. (No verbal answer).
Q. But you couldn't say to her then and there on the day, "Yes, I have a clear recollection of that conversation, I can tell you exactly what happened", could you?
A. WITNESS: At that time I remember but I'm not that I wasn't that confident, I should say that. It's not like normal conversation you can say, you know, you can just say it but it's a police it's a court case. It's very serious.
Q. Were you worried about what might happen to Ms Gu?
A. WITNESS: I don't know what's going to happen to her. I think it should be okay because that's her property.
Q. But you knew it was a police case?
A. WITNESS: Yes.
Q. You knew it was a serious matter?
A. WITNESS: Yes.
Q. And were you worried about what might happen to her?
A. WITNESS: A bit, yes.
Q. Do you think that might have influenced your memory?
A. WITNESS: No."
(emphasis added)
49Notwithstanding Mr Dicker's detailed submissions concerning Ms Shi's credibility, I am not convinced that Ms Shi's account of what she heard is reliable. She told Ms Gu that she remembered seeing Mr Chen but it was a long time ago and she would need to go home and think about it more (see T749.15-16). That, even assuming that Ms Shi is an honest witness, is not an auspicious start to a recollection of a conversation four or five years earlier (then) that she had overheard through a crack in the door and where the conversation is being led as an admission by Mr Chen that he had agreed to the Penshurst Property being Ms Gu's not only in the sense that she could live and control it but had given away his interest in it. That concern is amplified by Ms Shi's evidence at T740.48-T742.31. There is also the fact that Ms Shi lived with Ms Gu for two years and may well have been told things by Ms Gu then or later that made it hard to distinguish between what she had been told and what she had heard. I did not gain the impression that Ms Shi was deliberately giving false evidence, but I did gain the impression that she had, in 2007, been heavily influenced by a desire to assist Ms Gu in her criminal case and that repetition of what she said in those criminal proceedings and the long period of time which has elapsed have led her to believe in the version of events which she put forward in the criminal proceedings.
Ms Huazhen Zhu ( "Ms Zhu" )
50Ms Zhu was called in Ms Gu's case and an affidavit of hers dated 8 May 2009 was read: see pages 227-229 of Exhibit A1. Ms Zhu is a friend of Ms Gu's and plays mahjong with her and other friends on a regular basis. Her evidence is that she went over to the Penshurst Property at Ms Gu's suggestion to look at some timbers for her mahjong table. Whilst in the garage (where incidentally Ms Zhu did not see any timber: see T767.10-12), a man (who she later identified as Mr Chen) came to the garage and she says there then ensured a conversation in the following terms:
"Huiqin Gu: 'What are you doing here?'
The man: 'I am looking for something here.'
Huiqin Gu: 'I am going to sell the unit, you need to sign your name.'
The man: 'No, it is not necessary. You can sign on my behalf.'
Huiqin Gu: 'No, I want you to sign. My solicitor said it had to be signed by you as well.'
The man: 'Just say to him that I am not here or I went overseas. You just sign it on my behalf.'"
51Ms Zhu was vague about the details of where she was standing and which direction she was facing when she heard this conversation and when precisely it was, but I do not find that at all surprising given the passage of time.
52Ms Zhu was, more importantly, also very vague about how Ms Gu had broached the question of the evidence she might give in the Local Court about what had happened in the garage (see T765-T770) - Ms Zhu said that when Ms Gu first asked her about the conversation as set out above in [50], she was "surprised" (see T767.36-37), and said that "When [Ms Gu] first ask me I couldn't remember, but then she said, 'A long time ago you had - you have a good think about it' and then I remembered." (see T768.6-8). On Ms Zhu's evidence, Mr Chen knew that Ms Gu was selling the Penshurst Property, which is inconsistent with what appears from Ms Qingyi Wang's evidence. As Mr Smallbone points out, some of what Ms Zhu asserts, although originally consistent with what was put forward by Ms Gu, was inconsistent with what was later asserted by Ms Gu. Ms Zhu's evidence (see T759.41-T760.24) about the block of units across the road from where she lives (which, incidentally, is the address which was given for Mr Tom Lu on the transfer), including that her poor English was an explanation for not knowing that block of units on the street where she lives, had an unconvincing air; she was able to estimate Mr Chen's height to the centimetre but could only provide a range for the estimate of my Tipstaff's height and her explanation for that (see T770), and her failure to answer the direction question from Mr Smallbone "Has Ms Gu ever told you that Mr Chen is 175 centimetres tall?" (T770.14) are also, albeit lesser, matters which lead me to further doubt her veracity. I gained the impression that Ms Zhu was doing her best to continue assisting Ms Gu as she had done in the criminal proceedings.
Conclusion in respect of Ina, Ms Shi and Ms Zhu
53Ms Zhu and Ms Shi identified Mr Chen as the person they had seen. Mr Chen does not dispute that Ms Shi was present at the Penshurst Property when he went there. He does dispute that he had any conversation with Ms Gu at which Ms Zhu was present. Given that Ms Zhu gave evidence in Ms Gu's defence in the Local Court, it is likely that she could identify him from that occasion even if she had not seen him before that date.
54These three witnesses are all persons with whom Ms Gu has connections and who each purport to attest to what are, in effect, three separate admissions made by Mr Chen about the arrangements made in relation to the 2000 Agreement. I think Ina, Ms Zhu and Ms Shi, have been coy about the circumstances in which Ms Gu approached them to give evidence and I am not convinced that what they present as recollections of conversations many years earlier are genuine recollections as opposed to reconstructions that would assist Ms Gu in her criminal case and now in her civil case.
The poison pen letters
55There are in evidence six letters written in Chinese characters (translated at pages 151, 153, 155, 157, 161-162 of Exhibit A1 and Exhibit E) which, except for Exhibit E, bespeak of considerable ill will to Mr Chen and Helen. They are not signed. Five are in Mandarin and addressed to Mr Chen and one is written in Cantonese and addressed to Helen. Mr Chen asserts that they were sent by Ms Gu (which Ms Gu denies) and that he believed that they were sent by her. There are a number of reasons why I think on the balance of probabilities they were written by Ms Gu:
(1)They are personal and bespeak a knowledge of Mr Chen's activities and habits such that they must have been written by someone who knew Mr Chen well. The letter in Exhibit E refers to the lawsuit and encourages Mr Chen to desist with it.
(2)They (except for Exhibit E) are vitriolic in tone and reflect great animosity to Mr Chen and to Helen. Ms Gu did on at least one occasion express herself in strong language to Mrs Qingyi Wang as I have found.
(3)The first of the letters was received in 2001 and the last in 2008.
(4)In the letter to Helen (see pages 158-162 of Exhibit A1), there is a warning to Helen that Mr Chen may dump her, that she is being used as a "birth machine", that he "had adultery [sic] relationships with many women before he met you" and that he "even cohabitated with some women". Ms Gu is mentioned in the letter as Mr Chen's "wife" and Helen is informed that she was seduced while Ms Gu was not in Australia. The author is clearly aware that Helen speaks Cantonese as it is written in the Cantonese dialect.
(5)Some of the letters contain a theme of divine retribution to Mr Chen.
(6)In the letter to Mr Chen at pages 152-153 of Exhibit A1, the author attacks Mr Chen as a "rat" and contrasts Helen with his "wife".
(7)The letter at pages 152-153 of Exhibit A1 concludes with:
"...do not ever expect that a woman who was deceived and hurt by you will forgive you."
(8)The cumulative impression from the letters is that they were written by a person:
(a)who has been scorned or rejected by Mr Chen;
(b)who knows about the circumstances in which Helen met Mr Chen;
(c)who was envious and upset by the fact that Helen has had children by Mr Chen; and
(d)who hoped that Mr Chen would suffer retribution for disloyalty and infidelity committed by Mr Chen and who is very bitter towards him.
56It would be a surprising thing for a jilted paramour of Mr Chen's (other than Ms Gu) to harbour such positive feelings about Ms Gu and to discourage Mr Chen from taking proceedings against his ex-wife as the author did in the letter contained in Exhibit E.
57The letters commenced after Mr Chen had commenced a de facto relationship with Helen and had a child with her, and continued until 2008.
58I take into account that the letter addressed to Helen was written in the Cantonese dialect and that Ms Gu says that she does not speak Cantonese (see paragraph 74 of her affidavit of 1 November 2009), but even accepting that she does not, there would be a good reason for writing in Cantonese to Helen since Helen is Cantonese and I doubt that it would have been difficult for Ms Gu to enlist a friend to write it for her. There is, in any event, evidence from Mr Chen about Ms Gu having met and spoken in Cantonese with the girlfriend who he lived with in the first half of 1999: see paragraphs 47-49 at page 97 of Exhibit A1.
59Mr Moschoudis, in oral submissions, asserted that the letters may have been written by Mr Chen and/or someone connected with Mr Chen to make Ms Gu look bad: see T904.29-T905.2. Apart from the fact that it was not put to Mr Chen that he had written the letters himself or had someone write them on his behalf, the submission is groundless. Further, if Mr Chen had written the letters to bolster his case, it is surprising that he did not include an admission by the author that she knew there was nothing in Ms Gu's claim. No evidence supports a suggestion from Mr Moschoudis that Helen may have written the letters (see T905.1-2).
60I accept that Mr Chen believed these letters had been written by Ms Gu and that he had good reasons to believe they were, even if, contrary to my finding, they were not sent by Ms Gu.
61The relevance of the finding that Ms Gu wrote the letters is that:
(1)it reinforces my view that Ms Gu is not an honest witness since she denied having sent the letters;
(2)it confirms that Ms Gu was vindictive to Mr Chen and wished to harm him and was extremely hurt by his having found someone else;
(3)it confirms that Ms Gu is a person who was prepared to take active steps to harm Mr Chen;
(4)items (2) and (3) are also relevant to Ms Gu's credibility because she denied that she was angry over his having left her: see T409.34-35 and T410.18-19; and
(5)it also provides an alternative and plausible explanation for the steps that Ms Gu did take in depriving Mr Chen of his half-interest in the Penshurst Property rather than Ms Gu's explanation for what she did, ie the alleged 2000 Agreement.
62The relevance of a finding that Mr Chen believed that Ms Gu sent the letters is that his evidence was that in 2002 he was keen to stop Ms Gu sending the letters of the kind he had received and that that is one of the reasons he agreed to pay her $500 per week. It also, coupled with Ms Qingyi Wang's evidence (see paragraph 2 of her affidavit of 13 April 2010), reinforces Mr Chen's evidence (see paragraphs 134-139 of his affidavit of 10 December 2009) that Ms Gu threatened in a conversation in 2001 that she would kill Mr Chen if he did not recommence making payments to her.
Findings of fact in relation to Ms Gu's dealings with Mr Nguyen
63I make the following findings of fact:
(1)Ms Gu attended on Mr Nguyen without an appointment in early April 2003 with her cousin Mr Xu. Either Ms Gu, or less likely her cousin, told Mr Nguyen that Mr Xu was Mr Chen, Ms Gu's husband. Mr Nguyen believed that Mr Xu was Mr Chen and believed that Mr Chen and Ms Gu were married.
(2)Ms Gu attended on Mr Nguyen by appointment on 22 August 2003 with Mr Xu.
(3)I find on the balance of probabilities that it was Ms Gu who said that Mr Xu was Mr Chen because Mr Nguyen spoke with Ms Gu in English and there is no evidence that Mr Xu said anything in either of the two meetings other than salutation.
(4)Ms Gu, either with Mr Xu's connivance or without, set about to falsely present Mr Xu as her husband, Mr Chen.
(5)Ms Gu told Mr Nguyen that her husband is away a lot in China. Mr Chen was not her husband at that time and was not way a lot in China, if he was away at all.
(6)Ms Gu declined the offer of a preparation of a power of attorney by Mr Nguyen because she knew that Mr Chen would not give one and that the reason she had stated for its need was false.
(7)Ms Gu prepared and signed the two authorities and signed them in Mr Chen's name. One of the authorities contained the lie that Mr Chen lived at the Penshurst Property and that she and Mr Chen were still married and that Mr Chen had agreed to sign the contract for sale.
(8)Ms Gu forged Mr Chen's signature on the two authorities, the contract for sale and the transfer.
(9)Ms Gu either wrote the name of a witness "Tom Lu" to the execution of the transfer when she forged Mr Chen's signature on the transfer, or procured Mr Lu to falsely certify that he had witnessed execution of the transfer by Ms Gu and Mr Chen and that he knew Mr Chen and to state a false address (there is evidence that 10 Hill St, Campsie, which is the address purportedly written by Mr Lu, is a block of units rather than a house). The only evidence that Mr Lu exists and was a lodger with Ms Gu at the time and wrote anything on the transfer is from Ms Gu. I am not persuaded that "Mr Lu" exists, or if he does, had anything to do with the transfer.
(10)Ms Gu handed to Mr Nguyen what she knew was a falsely certified transfer.
(11)Ms Gu took the steps (1) to (10) above so that she could obtain for herself the benefit of the Penshurst Property and all proceeds of sale of that property.
64I find the steps taken by Ms Gu were of a most dishonest and calculating nature and of themselves lead me to view anything that she says with the highest degree of suspicion. When coupled with the other matters to which I have referred, I would not accept anything said by Ms Gu unless it was corroborated by a genuinely independent and credible witness whose evidence was not tainted by discussion with Ms Gu.
Did Mr Chen agree to give Ms Gu his half interest in the Penshurst Property?
65The alleged 2000 Agreement is not in writing. Ms Gu's version of the conversation said to found the 2000 Agreement is found at pages 175-176 of Exhibit A1.
"Chen: 'We have to separate our assets away. It is very easy to separate and to divorce. We have two properties. You take the Penshurst property, I take the Beverley Hill property. Although we will be divorced, I will look after you for life.'
Myself: 'The Penshurst property is a two bedroom property. The Beverley Hill property is a three bedroom property. Why are you taking the three bedroom property?'
Chen: 'Now I have to tell you frankly that I did not place your name on the Beverley Hills property. That property is under my sole name. My proposal is that you can have the Penshurst property and I will have the Beverley Hills property. I think it is fair to you and me as there is no mortgage on the Penshurst property but there is mortgage on the Beverley Hills property.'
Myself: 'What about the business? I do not want to come back to Australia now. Apart from my cousins, I do not have anyone in Australia. My close family members are here and they can support me emotionally. I can not come back in the short term.'
Chen: 'The business will still be running as a partnership and owned by both of us. I will trade in the business, but I will give you $500.00 per week from the business as your share of the income of the business. Unless the business is closed and I am not in the business anymore, I will continue to give you $500.00 week. If you agree to the divorce, I will immediately deposit $500.00 a week to your bank account.'
Myself: 'I want you to write those terms in writing and post it to me.'
Chen: 'Wait until you come back to Australia and I will give it to you.'"
66I think that it is most unlikely that Mr Chen, having obtained the benefit of the agreement contained in the Family Court consent orders, would give away his half interest in the Penshurst Property, unless Ms Gu did have an equal interest in the Beverley Hills Property so that there was in fact a trade-off in respect of their respective interests.
67The evidence (see Exhibit L) establishes that the Beverly Hills Property was purchased in 2000 for $269,000 (excluding stamp duty and legal costs) and after the 5% deposit was paid by Mr Chen, the remaining balance of $255,550 was sourced from:
(1)a loan from by Permanent Custodians Ltd ( "Permanent Custodians" ) to Mr Chen, which appears to have been organised by AIMS Home Loans, in the sum of $204,000 (see Exhibits L and N); and
(2)a bank cheque from the Bank of China for the amount of $52,047.72 to fund the remaining $51,550 (see page 427 of Exhibit A2).
68The source of the $52,047.72 was a $54,175.65 in Mr Chen's Bank of China Haymarket account (see pages 406 and 433 of Exhibit A2). The source of these funds was the sum of $61,302.03 paid into Mr Chen's Bank of China Haymarket account from the Bank of China in Shanghai (see paragraph 365 of the Chen submissions and pages 395-402 of Exhibit A1).
69So far as the loan from Permanent Custodians is concerned, it was obtained by Mr Chen in his own name without any involvement of Ms Gu.
70It follows that as at the date of the conversation said to establish the 2000 Agreement, Ms Gu had no interest in the Beverly Hills Property. Ms Gu does assert that Mr Chen told her that he was buying the Beverly Hills Property as an investment for both of them, but that is denied by Mr Chen and Ms Gu has no corroboration of that alleged conversation. I do not accept that Mr Chen did say so and it is inconsistent with his having taken out the loan in his own name and sought no contribution from Ms Gu. Mr Chen did take Ms Gu with him to see the Beverly Hills Property but he said that that was because he wanted her opinion (see paragraphs 78-81 at page 103 of Exhibit A1).
71Another problem with Ms Gu's evidence is that the conversation she alleges she had with Mr Chen to the effect of "we have to separate our assets" proceeds without reference to the Family Court settlement in April 1999 and as if it had never occurred.
72I find that Ms Gu had no interest in the Beverly Hills Property and had no belief that she did and that Mr Chen had no reason to believe that Ms Gu had any interest in the Beverly Hills Property.
73Given the finding that Ms Gu had no interest in the Beverly Hills Property or had any reason to believe that she did, the central content of the alleged 2000 Agreement is removed and renders it highly improbable that the agreement asserted was reached. The evidence from Ina and Ms Shi which had Mr Chen admitting to an agreement that did not have any foundation reinforces my view that their evidence is unreliable. I have made clear my views about Ms Gu's lack of credibility, but again the absence of the bargaining chip on which she relies to found the alleged 2000 Agreement is itself compelling in determining that the 2000 Agreement was not made. That conclusion is reinforced by the fact that the Family Court consent orders in April 1999 confirms Mr Chen's half-interest in the Penshurst Property. In cross-examination (see T412.43-T414.6 and T415.18-21), Ms Gu denies instructing her then solicitor to seek 100% of the Penshurst Property, but at paragraph 2 on page 311 of Exhibit A2, it can be seen that Ms Gu did seek ownership of the entire Penshurst Property.
74There was, in the submissions of Mr Dicker and Mr Moschoudis, an attempt to explain why Mr Chen would agree to give away his half-interest in the Penshurst Property. Mr Dicker submitted that I could conclude that Mr Chen had decided that he should buy peace from Ms Gu. Mr Moschoudis submitted that I should conclude that Mr Chen felt guilty over having left Ms Gu, although I think that was more focused on the position in 2003: see T896.27-T897.5. Mr Moschoudis also submitted that Mr Chen would want to protect his standing in the Chinese community (see T923.30-34). None of these theories were put to Mr Chen; but more importantly, all of these explanations abandon the theory of the 2000 Agreement advanced by Ms Gu herself, namely that she had a half-interest in the Beverly Hills Property and was receiving something in return for its relinquishment. Another problem with Ms Gu's contention is the assertion that as at April 2000 she did not accept that there would be a divorce - that is her evidence but not Mr Chen's (see pages 107-108 of Exhibit A1).
75Whilst accepting that Ms Gu's credit was seriously impugned, Mr Dicker and Mr Moschoudis submitted that the Court could be confident about the combined evidence of Ms Shi, Ina and Ms Zhu. I have indicated why I am not confident about their testimony and their submissions ignore the fact that the evidence from Ms Shi and Ina has Mr Chen admitting to having made an agreement which was based on a premise that has been comprehensively established to be false.
76I do not accept that there was a 2000 Agreement as Ms Gu asserts. I accept Mr Chen's evidence that he did not agree to transfer his half interest in the Penshurst Property to Ms Gu and that he did not tell her that she could sign documents in his name to achieve that effect. I find that Ms Gu forged and presented the authorities and forged Mr Chen's signature on the contract of sale and transfer and presented these documents to Mr Nguyen because she knew that Mr Chen would not consent to her obtaining the whole of the Penshurst Property and its proceeds for herself in fraud of Mr Chen. What Ms Gu did was also in contempt of the orders made by the Family Court. I do not need to consider whether s 120 of the RPA provides a remedy to Mr Chen (see Challenger Managed Investments Ltd v Direct Money Corporation Pty Ltd (2003) 59 NSWLR 452 per Bryson J which provides authority to the contrary as Mr Smallbone conceded).
77It follows that:
(1)Ms Gu has not established that the 2000 Agreement was made;
(2)her defence based on her having reached such an agreement with Mr Chen fails; and
(3)her claim that Mr Chen is estopped in some fashion in relation to what was said or done in 2000 must also fail.
78In relation to the alternative claim that even assuming the 2000 Agreement is not made out Mr Chen had authorised Ms Gu to execute the contract of sale in his name, this is dependent on Ms Gu's evidence and Ms Zhu's evidence. For the reasons previously identified, I am unable to accept anything Ms Gu says. For reasons previously given, I do not think Ms Zhu is a reliable witness, but I should note that on her version of the conversation with Mr Chen, Ms Gu did not tell Mr Chen that the contract she was asking him to execute involved her receiving the entire proceeds of sale. The conversation that Ms Zhu deposes to having heard is also inconsistent with Ms Qingyi Wang's evidence that in the following year Mr Chen was shocked to learn that Ms Gu had sold the Penshurst Property. Given the absence of any prior agreement, the proposition that Mr Chen would authorise Ms Gu to sign in his name and to obtain all of the proceeds of sale for herself is unrealistic and I do not accept that he did.
Other arguments
79There were a number of other arguments which were advanced by Ms Gu and Mr Nguyen in support of the contention that Ms Gu was entitled to do what she did, and that even if she was not, Mr Chen did not suffer any loss. These arguments can be categorised as:
(1)Reliance on the 2000 Agreement between Ms Gu and Mr Chen for the transfer of Mr Chen's interest in the Penshurst Property to her by him, although with a recognition of the absence of writing and the effect of s 54 of the Conveyancing Act 1919 (NSW).
(2)An assertion of an intentional trust of the type in Allen v Snyder [1977] 2 NSWLR 685 or constructive trust arising out of the alleged 2000 Agreement even if this alleged agreement was unenforceable by reason of s 54 of the Conveyancing Act.
(3)An assertion of an estoppel of encouragement either arising out of the alleged 2000 Agreement (see Delaforce v Simpson-Cook [2010] NSWCA 84 and Evans v Evans [2011] NSWCA 92) or arising out of Mr Chen's encouragement of Ms Gu to sign documentation on his behalf.
80The arguments and the responses to them are quite complex (at least in relation to the second and third categories) but, as Mr Moschoudis and Mr Dicker recognised, all three are dependent on findings of fact in Ms Gu's favour. For the reasons I have already explained, I am unable to make such findings and these alternative arguments must fail.
Malicious prosecution
81The prosecution of Ms Gu by the police was based on the charge of (see Exhibit 1D4 and Exhibit Q):
"obtain money/valuable security/financial advantage by false/misleading statement...with intent to obtain for the said, Hui Qin GU a financial advantage to wit (the proceeds of the sale of [the Penshurst Property]) make a statement, to wit (that the said Hui Qin GU and Hao CHEN had jointly agreed to the sale of [the Penshurst Property]) which she knew to be false or misleading in a material particular and was made with reckless disregard as to whether it was true or false in a material particular"
82The requirements for a claim of malicious prosecution to be established are set out in A v State of New South Wales [2007] HCA 10; (2007) 230 CLR 500.
83I am satisfied on the balance of probabilities that Ms Gu did represent to Mr Nguyen that Mr Chen had agreed to the sale of the Penshurst Property and that Mr Chen had executed the sale contract when he had not in fact done so. It follows that Mr Chen was entitled to bring the matter to the attention of police and that the claim of malicious prosecution must fail. Mr Moschoudis accepted that if I do not accept Ms Gu's evidence, that conclusion must follow.
Ms Gu's cross-claim for declaration
84In view of my conclusion concerning Mr Chen's claim against Ms Gu, it follows that Ms Gu's cross-claim seeking a declaration that she was the beneficial owner of the whole of the Penshurst Property must fail.
The issue of the $500 payment per week
85This claim is based upon the alleged 2000 Agreement. Mr Chen agrees that he did agree to pay Ms Gu $500 per week as a fixed amount in return for her work for the Coldy Holder business and there is evidence that he did pay her substantial amounts pursuant to invoices rendered by her to Auspro. Auspro paid approximately $86,000 to Ms Gu from 3 October 2000 to February 2004.
86Mr Chen asserts that the agreement to pay Ms Gu $500 per week was based on Ms Gu working in the Coldy Holder business and the fact that invoices were rendered by Ms Gu supports his claim. What is less clear is the timing - Mr Chen claims that he reached agreement with Ms Gu in 1999 but he did not produce any documents that established that he had paid her any money in 1999. Another problem is that on Ms Gu's case the $500 payments should have started from early 2000, and yet the first record of payment is in October 2000; and although she claims that Mr Chen was to pay her money there is no evidence of any attempt to have the money she was, on her case, expecting paid to her in Shanghai (where she was staying until September 2000); nor is there any evidence of a demand for unpaid amounts after March 2004 and prior to the cross-claim being filed in March 2008.
87The Gu submissions dealt with this cross-claim (at paragraph 12) by, in effect, assuming that the 2000 Agreement alleged in the pleadings was made and make no attempt to support the $500 per week aspect of the alleged 2000 Agreement as a separate element. In oral submissions (T1002), Mr Smallbone submitted that, given the absence of any meaningful submissions from Ms Gu, I should ignore this issue. That submission has much force, particularly in the context of a claim by Ms Gu where the evidence is conflicting and the circumstances complicated. I am not persuaded that Mr Chen agreed to pay Ms Gu any money out of earnings from QHA or Auspro other than in consideration of Ms Gu working for the Coldy Holder business, and later in return for her desisting from attempts to siphon work away from Auspro and from forwarding letters of the type I have described above as poison pen letters.
Was Mr Nguyen negligent?
88There is no question that Mr Nguyen purported to act for Mr Chen when in fact Mr Chen had given him no instructions to do so. There is no question that Mr Nguyen forwarded the transfer to the Registrar-General and that as a result the Registrar-General transferred the Penshurst Property to the Purchasers. I have found Ms Gu told Mr Nguyen that Mr Xu was Mr Chen. I find that Mr Nguyen accepted what he was told by Ms Gu. The question is whether Mr Nguyen breached a duty owed to the real Mr Chen to investigate the identity of the person presented to him as Mr Chen. There is also an issue as to whether Mr Nguyen failed to ensure that the person he thought was Mr Chen understood the effect and consented to Ms Gu's direction to Mr Nguyen to pay all of the net proceeds of sale to her.
89To establish his case in negligence Mr Chen must establish that:
(1)Mr Nguyen owed him a duty of care;
(2)Mr Nguyen breached that duty; and
(3)by reason of the breach of the duty owed to him he suffered a loss.
90Mr Nguyen, by his defence, admitted that he owed Mr Chen a duty of care. As Mr Smallbone pointed out in his written submissions, it is not totally clear as to the content of the duty admitted.
91The principal matter in dispute is whether Mr Nguyen should have sought identification from Ms Gu and "Mr Chen" as new clients unknown to him either when he first met them or when subsequently Ms Gu asked him to direct all of the net proceeds from the sale to herself rather than Mr Chen. It assists Mr Nguyen if there was no practice for solicitors of good standing to seek photographic identification from clients unknown to them.
92Expert evidence was called on behalf of both the plaintiff and Mr Nguyen. Mr Peter Carkagis was called to give evidence on behalf of Mr Chen. He is a property solicitor of many years standing and he expressed the view that a solicitor, who receives instructions from clients who are unknown to him and not referred to him by anyone, should require photographic identification so that the solicitor can be satisfied that the clients are who they say they are. Mr Carkagis accepted that there was no rule of practice, legislative enactment or service which indicated in 2003 (or even now) that such a step is required, except in relation to mortgagors, which is not this case. Mr Carkagis conceded that the requirement to obtain photo identification is not referred to in any checklist in use in his office, however he held firm to his view that a prudent solicitor would take such a step. He admitted that his experience was principally in acting for lenders but he has done work for vendors and purchasers as well. Mr Carkagis also said that it is standard and usual practice for a prudent solicitor in the position of Mr Nguyen, where one of his clients has limited proficiency in English, to arrange for a translator to be present during a meeting where the solicitor is giving advice on the contract of sale. Mr Carkagis also said that a prudent solicitor acting for two vendors would have sought unequivocal instructions from the vendor who was not receiving the funds and satisfy himself or herself of those instructions: see pages 250-251 of Exhibit A1.
93Mr Peter Rosier was called to give evidence on behalf of Mr Nguyen. Mr Rosier is a solicitor with extensive conveyancing experience and he has been involved in various roles on the Property Law Committee of the Law Society. Objection was taken by the plaintiff to the first two sentences of paragraph 11, the last two sentences of paragraph 12, the whole of paragraph 13, the whole of paragraph 14, the first two sentences of paragraph 15, the last sentence of paragraph 21, and the third and last sentences of paragraph 24 in Mr Rosier's affidavit sworn 10 March 2011 tendered on behalf of Mr Nguyen. I will not set all of these out but give two examples. The last sentence of paragraph 21 says:
"In circumstances such as the Events, based on my experience, a competent solicitor of good repute would not have verified the identity of the client as a matter of course, but would have taken reasonable steps to check that the certificate of title was genuine."
The third sentence of paragraph 24 says:
"In my opinion, based upon my experience, any change in practice in relation to client identity verification, which was not the subject of the Warnings, would have been more gradual."
94Mr Smallbone submits that all of the passages objected to do not meet the criteria for admission. He relies on what was said in Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (No.6) (1996) 64 FCR 79 at 85 per Lindgren J, Midland Bank Trust Co Ltd. v Hett Stubbs & Kemp [1979] 1 Ch 384 at 402, Permanent Trustee Australia Ltd v Boulton (1994) 33 NSWLR 735 at 738, Australian Cement Holdings Pty Ltd v Adelaide Brighton Ltd [2001] NSWSC 645, ULV Pty Ltd v Scott (1990) 19 NSWLR 190 at 204-205 per Priestley JA, Dean-Willcocks v Commonwealth Bank of Australia [2003] NSWSC 466; (2003) 45 ACSR 564 especially at 568-571, R v Hally [1962] Qd R 214 at 228-230 and HG v R [1999] HCA 2; (1999) 197 CLR 414. Mr Dicker relies on Australian Securities and Investments Commission v Vines [2003] NSWSC 1095 and Edwards v Anderson [2009] NSWSC 373.
95The issue was comprehensively discussed in ASIC v Vines by Austin J. I note that his Honour set out a series of propositions of which the following are relevant:
(1)that s 79 of the Evidence Act 1995 (NSW) permits a professional expert to give evidence about what professionals generally do in stated circumstances;
(2)a professional can express an opinion about the practice of competent and careful professionals in specified circumstances which are recurring or typical;
(3)a professional can give evidence of what, in stated circumstances which are out of the ordinary and not amenable to observations about a developed practice, a competent and careful professional "would be expected to do " and "would do";
(4)expert evidence directed to answering a question of fact or law that is directly before the Court for decision is inadmissible; and
(5)evidence by the expert as to what he or she would do in the stated circumstances is inadmissible.
96Mr Rosier's evidence is formulated as what he would have done had new clients come to him. When he described what was or was not considered prudent practice, I take him to be endeavouring to state an opinion about what a prudent solicitor would have done in 2003 (or later) or be expected to have done. I do not think in substance what he is doing is any different from what the plaintiff's expert, Mr Carkagis, was doing in his report and to which no objection was taken. I have therefore determined to admit the evidence of Mr Rosier.
97The plaintiff's case against Mr Nguyen was not conducted on the basis that the mere failure to seek and obtain instructions from Mr Chen was a breach of duty, but rather it was asserted that Mr Nguyen was negligent, first in not seeking photographic identification from the person presented as Mr Chen, and secondly in not ensuring that this person understood what was being asked of Mr Nguyen by Ms Gu.
98The first question is what steps, if any, should a solicitor take to ensure that the person who presents himself (or is presented as) an owner or co-owner listed on title is in fact that person; and the second is what steps should a solicitor take to ensure a client whose interests are adversely affected by instructions given by another client understands the existence of a conflict and the effect of the instructions and consents to that course notwithstanding that it is against his or her interests.
99I will deal with the second question first. There can be no doubt that Ms Gu's instructions to Mr Nguyen that she receive all of the proceeds of sale was inimical to the interests of Mr Chen (whether or not he was the person who had sat in Mr Nguyen's office). In my view, there was imposed on Mr Nguyen a clear duty to ensure that the person who he thought was Mr Chen understood the effect of what Ms Gu was asking Mr Nguyen to do and that if acted on, it would deprive "Mr Chen" of money to which he was entitled and that he consented to that course: see Vukmurica v Betyounan [2008] NSWCA 16 at [48]-[49] , Farrer v Copley Singleton [1998] PNLR 22 per Leggatt, Morritt and Brooke LJJ which is cited in Vukmurica v Betyounan and Council of Law Institute of Victoria v Martin (a Solicitor) [1993] 1 VR 361 at 368. Mr Rosier agreed that it was important for Mr Nguyen to ensure that Mr Chen (or the person Mr Nguyen understood to be Mr Chen) fully understood that he was giving away his entitlement.
100I set out three portions of the cross-examination of Mr Nguyen (with emphasis added) relevant to the question of whether Mr Nguyen ensured that the person he thought was Mr Chen understood what Ms Gu had said to Mr Nguyen in English and its effect:
(1)At T809.1-T810.48:
"Q. Yes, of course. You had no reason to believe that the gentleman was able to speak English, did you?
A. No reason to believe, it means did I believe?
Q. Perhaps I won't put it in such lawyer speak. Did you think he spoke English?
A. Let me answer counsel in a long way. In my practice I very rarely see a couple that both of them talk to me. Normally one party does the talking, especially when the other party has a business overseas. I got a case when the wife is driving the proceedings but the person doesn't talk, they both appear to me to sell a house, but the wife does the talking.
Q. Mr Nguyen, that may give an explanation as to why it would be that you may not wish to necessarily engage in a discussion with a non talking party, but I really want to address your attention as to whether or not you had any basis to believe that the gentleman she was with spoke English?
A. I don't remember that. I do not remember what went on in my mind at that time.
Q. Would you agree with the proposition that if he said nothing to you in the meeting other than a single greeting that you would have had no reason to believe that he was able to speak or not speak English?
A. It didn't enter my mind, sorry.
Q. Even though you say that Miss Gu did all the talking, you readily accept the proposition that in acting for them in the sale of their house you were acting for both Miss Gu and the person you thought was the other co owner; correct?
A. That's correct, yes.
Q. So it would have been important for you to believe that what you were telling them in terms of the procedures or the precautions or the aspects of the conveyance was something that was understood by both of them?
A. Yes, normally, yes.
Q. You said in paragraph 8 of your affidavit that Miss Gu spoke occasionally to the person you describe as Chen in what you understood to be Chinese, so I take it whilst you were talking to her or to both of them in English occasionally she would turn to the male companion and say something to him in Chinese?
A. Yes.
Q. And again that's your recollection as opposed to a reconstruction?
A. That's my recollection, yes.
Q. Are you able to say as you sit in the witness box today whether you believed back in that first meeting that what she was doing was translating things that you were saying?
A. No, I couldn't speculate on that.
Q. So you don't know what she was saying to him in your presence?
A. Let me answer you in a longer way. It's very, very common for my non English speaking clients to chat to each other in Chinese or in Hindi I have my clients in Hindi, in Vietnamese, they talk to each other.
Q. When you just gave the answer then it's quite common for your non English speaking clients to talk like that, is that an acceptance by you, because I want to be fair to you, is that an acceptance by you that you understood that at least one of those clients was non English speaking?
A. It didn't really come to my mind clearly the boundary, but that I understood this, that I understood that, no, sorry.
Q. If you were to think about this matter again and you came to the realisation that the male person had no ability to comprehend what you were saying, would you have organised one of your assistants to translate?
A. Yes, yes.
Q. But you can't recall that happening here; correct?
A. Let me say to you counsel, in all my nearly 30 years of practice I never got any complaint to the Law Society or to LawCover about my non ability to speak Chinese or my assistant didn't help me fully about legal matters. I am very proud of that.
Q. Is what you are saying that because there was no complaints over the years you didn't see there was any reason to change the practice that you had adopted?
A. Not that, but the facts of the conveyancing is not centred on that unless there is some sort of trick to be put on me, which as an integrity lawyer I would not suspect from the clients.
Q. What you are saying, if I can interpolate, is that you had no reason to assume that clients who came and saw you were trying to hoodwink you in any way?
A. That's right.
Q. So when they sat down in your chair in your office, you had a certain level of trust?
A. That's right.
Q. That the persons there to see you were legitimately there representing themselves?
A. That's right, yes.
Q. And you would have made that assumption so far as you can recall in this situation?
A. Yes. Also, in my experience if there is anything that they don't know they either sort it out at home. It's the Asian family unit matter, you know, and if they don't, the husband doesn't understand, he can ring me later or he can ask my assistant, well, why the lawyer didn't explain and explain to my wife. It come up very quickly."
(2)At T815.30-T817.17:
"Q. When Ms Gu said to you words to the effect we have agreed that all the money should go to her you responded, and this is in paragraph 24 of your affidavit, words to this effect, "I will need a written authority from Mr Chen authorising me to direct all of the funds to you". Now, the person who you then believed was Mr Chen was sitting in front of you, wasn't he?
A. That's right.
Q. Was there any reason why expedience didn't dictate that whilst he was there sitting in front of you you quickly drafted up this written authority and had him sign it in your presence?
A. Oh yes. I had a lot of experience about that sort of thing. As I mention on Friday, there was a case immediately before this that the male person transfer all his property to a girlfriend he met in the street, and he concocted a contract of sale drafted by me, but he say that he received 20 per cent deposit from the lady.
And I showed him how to do that but I didn't do it. I couldn't witness or draft it. That authority I received, of 20 per cent deposit, in my office, because I found it a liability for me to do, to witness or to help people on that kind of thing.
Q. Can I just explain to you how I understand what you've just said, and just explain to me, just correct me if I'm wrong. Is what you said words to the effect, or what you intended to say, you didn't want to involve yourself in doing something that would be unlawful or be tricking someone so you chose not to do that kind of transaction in your office?
A. Especially yes, especially first time clients. I have to be cautious.
Q. I understand. I just want to then go back to this particular situation?
A. Yeah.
Q. You would have only adopted that kind of approach, would you, had you believed there was something fishy or tricky going on?
A. No. I develop that sometime before that, that is, I notice my, I kept abreast of development, you see.
Initially we I started practice a contract of sale always got witnessed from the vendors and the purchasers on the contract of sale, but about five years on, after my practice, I started to see that the witness signature started to disappear altogether, and every time I witnessed something people ask me, "Did you witness this and that." So I became nervous about witnessing or drafting for people, unless, unless I know the clients well, so this is not anything unusual.
Q. But this is the situation, wasn't it, that was, I think from your affidavit, the first meeting you had with Ms Gu and the second meeting you had with her and the male companion you thought was Mr Chen, correct?
A. Mm.
Q. And this was, so far as I understand your evidence both orally and in your affidavit, this was what you perceived to be a relatively straightforward sale of a property?
A. Yes.
Q. And even though you did not know these people, because they walked in off the street, there was, so far as you were concerned, as I understand it, nothing irregular about this transaction?
A. That's right.
Q. And so when Ms Gu said to you in the context of a meeting that the purchase money would be paid to her only, and you responded, "There will need to be a written authority"
A. Yeah.
Q. That that could have been something that Mr Chen could have signed in front of you, couldn't it?
A. It could.
Q. It could have been a simple matter of you writing out some kind of written authority on a piece of paper, showing it to him and having him sign it in your presence?
A. I could, yes, but
Q. And that would have been prudent thing to do, wouldn't it?
A. I don't think so because, with this sort of thing, an authority, it started way back when I was working with another firm. When the settlement come up the husband may not, I may not see the husband. The husband came in and give the authority to my secretary at that time, and I just saw it and then see the instruction and just act on it.
Q. It would have been safer, wouldn't it, had you seen the written authority signed in your presence so that you could, A, see the person you understood to be Mr Chen sign the document and, B, so you had the opportunity of explaining the document to him?
A. Oh, I don't think it's my obligation as a lawyer.
Q. But you have indicated already today, haven't you, that you saw your role as helping people?
A. Oh yes, I have in drafting the terms, so it has legal effect."
(3)At T824.3-14:
"Q. Would you accept with this proposition, that it was your obligation to explain to the person who you thought was Mr Chen the effect of the authority which it was proposed that each would give so that you could be sure that he understood that that's what he would be giving?
A. Yes and no. Yes in the sense that it is a duty of a solicitor to explain to the client and no because most of my experience tell me that the client they know what they want in their affairs to do with money.
Q. It's right in this case that you didn't give such an explanation to the person who you thought was Mr Chen, is that right?
A. In my mind when people came to me with such an instruction they must have known thoroughly what they wanted to do."
101In Eade v Vogiazopoulos [1999] 3 VR 889, a husband forged his wife's signature on the mortgage given in support of a loan for the purchase of a business. The Court held that the solicitor who handled the transaction was liable to the wife to whom he owed a duty of care which he breached by failing to consult the wife personally and by failing to ensure that the mortgage documents were properly executed. Smith J in the course of the judgment noted at [141] that the solicitor did not know whether Mrs Vogiazopoulos read or spoke English. At [145]-[146], Smith J said:
"145 I have indicated in dealing with the claim by Mr. Eade against Mr. Stergiou that I preferred the evidence of other experts to that of Mr. Shattock on the matters referred to in that context. I must also confess to finding Mr. Shattock's description of the other details of the usual practice and obligations of a mortgagors' solicitor difficult to accept. The effect of his evidence was that a solicitor, engaged by lay borrowers to apply his professional knowledge, skill and experience for a fee in a mortgage transaction for them, can discharge his duties by passing on documents to them and, if legal advice is needed, give it in writing without knowing whether the clients are capable of reading or understanding it and without attempting to meet them. This cannot be right. In addition, it cannot be decisive in all cases that there is no unequal detriment or no third party benefit. I note, however, that Mr. Shattock conceded that a point could be reached where the transaction looked so bad that a solicitor should satisfy himself that both mortgagors were fully informed. He also appeared, after earlier qualifications, to accept that if the solicitor for the purchasers thought that the business to be purchased was not economically viable, he would want to have them before him to advise them about the imprudence of the proposed purchase and that that would probably lead to the cancelling of the imminent mortgage advance.
146 It may be that a solicitor can assume a spouse has authority and can proceed initially on that basis provided that before settlement he has conferred with both. It is, however, unwise to generalise. Ultimately a view has to be formed about whether in the circumstances of the particular case the solicitor was negligent."
102Smith J also noted at , as one of the relevant circumstances, that:
"Mrs. Vogiazopoulos may have had a poor command of the English language. Mr. Stergiou did not know. Further, Mr. Stergiou was relying on Mr. Vogiazopoulos to communicate information and advice to Mrs. Vogiazopoulos but Mr. Vogiazopoulos was not a lawyer and while intelligent could not be expected to communicate the necessary advice adequately to Mrs. Vogiazopoulos."
103Smith J then observed at [149]-[151]:
"149 His obligation to protect his "clients" obliged him to discuss the whole transaction with both "clients". In addition, the circumstances known to Mr. Stergiou raised a number of possibilities which made it imperative to speak to Mrs. Vogiazopoulos to protect her interests. First, if he assumed that Mr. Vogiazopoulos had spoken to his wife about the mortgage, Mr. Stergiou should have been concerned of at least the following possibilities:
· if Mrs. Vogiazopoulos was agreeable to the transaction, whether she understood it and its dangers and difficulties and, if not, whether she had been misled;
· if she understood the dangers associated with the transaction, whether she was opposing it.
Secondly and alternatively, there was a real risk that Mr. Vogiazopoulos had failed to inform her of the details. In either case Mr. Stergiou should have spoken to her personally shortly after the transaction was revived in July 1988 and not later than 10 August 1988. After the transaction was revived, he had some two weeks prior to writing to Nicholas O'Donohue on 2 August 1988 in which to make contact with her. The revival of the transaction would have revived his concerns and properly so.
150 His obligation to speak to her continued up to the settlement of the mortgage and at least to the settlement of the purchase, if not beyond. On the evidence, however, Mr. Stergiou made no serious attempt to contact Mrs. Vogiazopoulos and made no attempt to ensure that she had been made aware of his concerns. He saw Mr. Vogiazopoulos several times. One occasion of particular importance was the conference with counsel in June 1988 on the preference question. Mr. Stergiou made no attempt then to have Mrs. Vogiazopoulos attend although he was very concerned to have Mr. Vogiazopoulos attend. He appears to me throughout the transaction to have totally ignored Mrs. Vogiazopoulos. He may well have assumed that she would simply do what her husband told her to do but had no proper basis for such an assumption. He gave evidence that he treated Mr. Vogiazopoulos as having her authority to handle the transaction. He gave no evidence of any basis for this assumption and it appears to have been based on an assumption about the authority of husbands to handle the legal and business affairs of their wives. A solicitor could not in the 1980s proceed on the mere assumption that a spouse has authority to act for the other spouse: Mercantile Mutual Life Insurance Co. Ltd. v Gosper (1991) 25 N.S.W.L.R. 32 at 36.
151 Mr. Stergiou cannot satisfy the duty of care on the basis that in speaking to Mr. Vogiazopoulos he was speaking to Mrs. Vogiazopoulos. If he relied on Mr. Vogiazopoulos to brief her on the transaction, he would then have been relying on a lay person to explain legal matters. The transaction and its problems were too complex for such a course of action to be acceptable."
104Mr Dicker argued that there was no evidence that Mr Xu did not speak English; at the very least there was no evidence that he did. Mr Nguyen said it did not enter his mind whether the man in front of him spoke English or not (see T809.20-23 and T837.49-T838.1) and had he thought about it and realised that the male person could not comprehend what he was saying he would have organised translation (see T810.11-14).
105Mr Nguyen's evidence was that he did not offer to prepare the authority that he told Ms Gu she needed because he did not like preparing such authorities as he believed that contests about the validity of his drafting or attestation might lead to claims against him: see T815-T818 and T822-T823. At T817.2, Mr Nguyen said it would not be prudent for a solicitor to prepare the authority when the client was present and he did not think that he was obliged to explain and see that his client understood their written authorities (see T817.9-13); but rather, it was his obligation to ensure that the document has legal effect (see T817.15-17). Mr Nguyen admitted that he had no communication and took no instructions from the person he thought was Mr Chen (T811.12-16). Not only that, Mr Nguyen never saw the person he thought was Mr Chen sign anything and he was wholly reliant on Ms Gu's implicit assertion that Mr Chen had signed the contract of sale and the two authorities.
106The authority dated 12 June 2003 (Exhibit D) stated that Mr Chen would be available to sign the contract of sale, and on the face of matters as they appeared to Mr Nguyen, Mr Chen was available to sign the completed contract - yet the authority to pay all the proceeds to Ms Gu (Exhibit 3D1) was said to be based on her husband being overseas a lot: see paragraphs 20-24 of Mr Nguyen's affidavit of 16 April 2010. Mr Nguyen made no enquiries about Mr Chen's occupation or Mr Chen's need to be overseas, nor did he query the link between Mr Chen's being overseas and the need for all of the proceeds to be paid to Ms Gu.
107Mr Nguyen says, at paragraph 9 of his affidavit of 16 April 2010, that he spoke in English to both Ms Gu and "Mr Chen" and that to his recollection Ms Gu did most of the talking. He offered no view of the level of English of "Mr Chen" but did do so in respect of Ms Gu. At the second meeting the only words that Mr Nguyen can recall being spoken are those spoken by Ms Gu: see paragraph 24 of his affidavit of 16 April 2010 and T809.20-23.
108Mr Dicker also relied on Mr Carkagis' evidence that a solicitor need only ensure translation by an independent person if there was a suspicion that the client did not understand what was being said (see T521.34-48). I take Mr Carkagis to be saying that where a solicitor who does not speak, say, Chinese, but converses with a Chinese client in English and has no suspicion that the client is unable to understand what the solicitor is saying or that the client cannot express his or her wishes, there is no requirement to organise an interpreter. That is not the case here because Mr Nguyen could not recall having any conversation with the person he thought was Mr Chen.
109Obviously, the case of Eade v Vogiazopoulos involves quite different circumstances from those here because the solicitor in Eade v Vogiazopoulos did not meet Mrs Vogiazopoulos or anyone purporting to be Mrs Vogiazopoulos. However, the person who Mr Nguyen thought was Mr Chen was not demonstrated to speak or read English, which is the language in which Mr Nguyen communicated with Ms Gu, and I think that the approach taken by Smith J is instructive.
110I think it was Mr Nguyen's role to ensure that the person who he thought was one of his two clients did understand what he was saying.
111I think it is clear on the evidence that Mr Nguyen did not take adequate steps to ensure that the person he understood was Mr Chen understood that Ms Gu wanted all of the proceeds paid to her. Mr Nguyen did not know if "Mr Chen" understood English at all and he did not arrange for a separate conference with "Mr Chen" with or without a Chinese speaker present. It would have been a simple matter and appropriate (as I think Mr Rosier agreed at T554.14-31) for Mr Nguyen to have prepared an authority and have "Mr Chen" sign it in front of him following a clear explanation of its effect and after ensuring that "Mr Chen" wanted all of the proceeds to go to Ms Gu. Mr Nguyen's explanation for why he did not have "Mr Chen" execute the authority in front of him was quite strange. His explanation for not discussing the matter with "Mr Chen" was that he expected "Mr Chen" to receive an adequate explanation from Ms Gu or family members (see T820.10-26) - this was in my view a clear breach of duty by Mr Nguyen.
112I turn now to deal with the question of identification.
113Mr Rosier resisted the proposition that there was, in 2003, a practice for solicitors to seek photo identification where clients were not known to the solicitor. Mr Rosier did accept that there are circumstances where a solicitor would ask for photo identification and said for example that he had done so when a client who was not known to him instructed him in a conveyance of vacant land owned by the client. Mr Rosier did say, however, that to seek photo identification was not a difficult task or problematic: see T542.8-10.
114In 2002-2003, the Law Society published a newsletter called Caveat in which warnings were issued to the profession. I set out portions of what appeared in the January 2003 edition of Caveat :
"It has been reported that persons have produced conterfeit [sic] Certificates of Title, fraudulently adopted the name of the registered proprietor, produced apparently authentic identification and evidence of employment, made available to their solicitors satisfactory evidence of identification and then purported to give a mortgage over a parcel of land to unsuspecting corporate mortgagees.
...
Solicitors accepting instructions from new clients should always take steps to ensure the prospective clients' correct identity.
To date the identified transactions have all related to those involving the purchase of unencumbered unoccupied house properties for investment purposes. Apparently each of the clients directed their solicitor to pay the proceeds of the mortgage to persons other than themselves (the named registered proprietor)."
and the March 2003 edition of Caveat :
"The most abundant care should be taken in establishing the identity of new clients and parties to a transaction. Forged passports, drivers licences, credit cards, letterheads etc are available to fraudsters, and they clearly have no inhibitions in falsely signing documents as a solicitor, justice of the peace or otherwise. If a client has not been known to you personally for some time, do not witness their signature."
115Mr Rosier agreed that the circumstances of this case were somewhat unusual. I thought that Mr Rosier did not really explain why it was not imprudent of Mr Nguyen to fail to ask for identification in circumstances where Ms Gu and Mr Chen were completely unknown to him and were not referred to him by someone he knew, and further, having regard to the fact that the certificate of title described Ms Gu and Mr Chen as tenants-in-common and not join tenants which Mr Rosier thought was indicative that they were not husband and wife, especially after Ms Gu had indicated that she wanted all of the proceeds to be paid to her.
116In Chandra v Perpetual Trustees Victoria Ltd [2007] NSWSC 694 ("the first Chandra decision" ) and Chandra v Perpetual Trustees Victoria Ltd [2008] NSWSC 178 ("the second Chandra decision"), a fraudster by the name of Mr Pan obtained a fresh certificate of title from the Registrar-General in respect of land owned by Mr and Mrs Chandra. Mr Pan represented himself to a solicitor, Mr Miller, as agent for the Chandras and Mr Miller accepted that Mr Pan had authority so to act. Mr Pan forged the signatures of the Chandras on both the application for a fresh certificate of title and in relation to applications for loans totalling $750,000 on the fact that the Chandras' property was otherwise unencumbered.
117Bryson AJ found that the mortgages were ineffective as between the lender, Perpetual Trustees Victoria Ltd ( "Perpetual" ), and the Chandras. In relation to the Chandras' claim against Mr Miller and the Registrar-General, his Honour held that Mr Miller had breached his duty of care to the Chandras (it having been conceded that a duty of care was owed), and that the Registrar-General would have been liable to the Chandras by reason of the registration of the mortgages save for the fact that Mr Miller had indemnity for any liability to the Chandras. However, because the mortgages were ineffective, the Chandras had suffered no loss, and hence Mr Miller's negligence had not caused the Chadras any loss nor was any claim available against the Torrens Assurance Fund by the Chandras. Bryson AJ held that the Registrar-General was liable to Perpetual by virtue of s 120 of the RPA and that s 129(2) of the RPA did not avail the Registrar-General. His Honour held that Mr Miller did not owe a duty of care to Perpetual.
118There are important observations of Bryson AJ in respect of the duty of care of a solicitor and its breach. I have noted that Mr Nguyen accepts (as did the solicitor in Chandra ) that he owed Mr Chen a duty of care, but I think it is worth noting several passages in Bryson AJ's judgment in the first Chandra decision that led his Honour to conclude at [100]-[102], after referring to recent authority on the issue of duty of care including Wyong Shire Council v Shirt (1980) 146 CLR 40, Sullivan v Moody [2001] HCA 59; (2001) 207 CLR 562, Hill v Van Erp [1997] HCA 9; (1997) 188 CLR 159 and Hawkins v Clayton [1988] HCA 15; (1988) 164 CLR 539, that a duty was owed:
"100 Where a solicitor acts for the registered proprietor of land under a contractual retainer, as Mr Miller thought he was acting, implied contractual duties deprive the question of whether there is a concurrent duty to the registered proprietors under tort law of some of its importance. There can, in my opinion, be no doubt about the existence of a duty of care under tort law where a solicitor conducts legal business on behalf of or in the interests of a person who is unable to enter into a contract of retainer because of some disability or incapacity. Mr Miller thought he had a contract of retainer but did not; and he thought that the legal business he did was done in the interest of the plaintiffs. In all respects, except that they did not know what Mr Miller was doing, the plaintiffs and their interests stood to be affected by negligence of Mr Miller as much as and perhaps even more than they would have been affected had Mr Miller actually had a retainer from the plaintiffs.
101 The weaknesses and vulnerability of the plaintiffs' situation was related to the weakness of Mr Miller's situation in that he accepted that Mr Pan had authority from the plaintiffs. The plaintiffs' vulnerability to an event or loss such as the one which in fact occurred was very high; indeed I cannot see how it could be any higher, as the plaintiffs had no means of preventing Mr Pan from getting his hands on a new Certificate of Title and no means of knowing that he was doing so, and the ordinary measure available to a registered proprietor of seeing that his own Certificate of Title is in a safe place could not protect the plaintiffs.
102 The control which Mr Miller had over the risk that the plaintiffs would incur economic loss in the way which they did was not complete, because if Mr Miller had refused to act, Mr Pan could have gone elsewhere. Although Mr Miller's control was not complete it was real and it was effective inasmuch as he did not exercise it. No economic burden or risk worked against his exercising the degree of control that was available to him by taking some measure to ascertain, independently of Mr Pan, whether or not the registered proprietors were actually involved. Mr Miller could have attempted to reach the plaintiffs, independently of Mr Pan, by telephone or by letter; or by asking Mr Pan to arrange for them to come in and see him; or by independently asking them to come in and see him. The risk of loss was great and the burden on Mr Miller of exercising a degree of control would have been slight. It was clear and known to Mr Miller that the plaintiffs were the registered proprietors, and the scale of the risk of loss which imposing a duty of care would protect them against is not indeterminate but relates to the value of their property. There is no risk of creating liability to a wide or unascertained class or liability in unascertained amounts. In these circumstances, I have no difficulty in accepting the concession that Mr Miller was under a duty of care to the plaintiffs."
119In dealing with breach of duty, Bryson AJ noted at [104]:
"104 There were several circumstances, to which Mr Miller referred, which could be seen as indications of regularity, and there was no positive indication that Mr Pan did not really represent the registered proprietors or was engaged in fraud. Nor was there any indication that the signatures on the documents were false. The fact that Mr Pan was referred to Mr Miller by Michael, a person Mr Miller knew in a business context, was, at least to some degree, an indication of regularity; however Michael gave very little information, and did not indicate the name of the client or refer to the fact that the man who was to attend Mr Miller was not the client but was someone who was purportedly helping the clients. Mr Pan's having a file and producing documents from it, including rate notices, a form of mortgage and a letter on a First Title letterhead, which were consistent with what he had told Mr Miller, also had some effect of confirming the apparent regularity of what was taking place. Possession of rate notices specific to the property is I suppose some indication that the bearer has some connection with the property. Everything that Mr Miller knew and saw depended on the sincerity of Mr Pan."
and that the indications of regularity were slight: see [105].
120His Honour then said at [106]-[107]:
"106 For a solicitor, handling the title documents of a client or of a supposed client calls for vigilance. Possession of a Certificate of Title is charged with economic significance: loans are made on their mere deposit, even without writing. Mr Pan did not bring a title document to Mr Miller, yet Mr Miller did not even ask Mr Pan to produce a written authority to collect the new Certificate of Title. There was not a shred of confirmation of authority, not a line of writing nor a voice on the telephone. When Mr Pan came to Mr Miller, completely unknown to him, with only the briefest of introductions from Michael and with nothing of substance to indicate that he was a person to be trusted, the reasonable course for Mr Miller as a solicitor would have been to establish why the clients were not attending to their own business about their loan and their lost Certificate of Title, who they were and where they were: a reasonable solicitor would have wanted to see the clients and would have wanted them to establish their identities, or would have got a much better story than Mr Pan gave as to why they were not consulting a solicitor themselves. A reasonable solicitor would have seen the new Certificate of Title into their hands, or with their written authority would have seen it into the hands of someone who was likely to have been an appropriate recipient, such as a bank, finance house or another solicitor. It is possible for a careful solicitor to be deceived, but Mr Miller did not act with appropriate care, and if he had, it is very improbable that Mr Joey Pan would have got his hands on a new Certificate of Title.
107 In my finding, on any available view of the standard of care or scope of duty, Mr Miller did not conform to a reasonable standard for the professional work of a solicitor in accepting that Mr Pan actually had the authority of the registered proprietors to give instructions to obtain a new duplicate Certificate of Title, and to receive the new Certificate of Title when it was issued. Mr Miller put himself entirely in the hands of Mr Pan, and everything Mr Miller did depended on Mr Pan being sincere and actually being what he purported to be; Mr Miller had, for practical purposes, no knowledge whatever of whether Mr Pan was worthy of his trust and the positive indications which I have already referred to are of very slight weight in relation to the importance of the way in which a duplicate Certificate of Title can be used and the mischief it can cause in the wrong hands. Apart from recent experience of frauds involving wrongly obtained duplicate Certificate of Titles, referred to in publications accessible to solicitors, the need for a solicitor to consider fully what he is doing and obtain appropriate authority when handling Certificates of Title is quite obvious."
(emphasis added)
121I should note that Bryson AJ, in dealing with the question of duty of care and breach in the first Chandra decision, was expressly considering s 5B and s 5C of the Civil Liability Act 2002 (NSW) but his Honour noted at [74]:
"I have not observed that giving effect to ss 5B and 5C requires any departure from considerations which would arise under the general law."
122It was not suggested that anything said by Bryson AJ was not applicable to a claim in negligence governed by the Civil Liability Act , although it was argued by Mr Dicker that Chandra was distinguishable from the present case.
123The facts in Chandra were quite different from those here, but I think it is clear, particularly in the highlighted passages, that Bryson AJ accepted that there was a duty on a solicitor to take reasonable care to establish the identity and authority of those instructing him to receive and deal with a new certificate of title and that a solicitor has a duty to be vigilant in dealing with the documents of title of a client or supposed client and has a duty to make reasonable enquiry in relation to the authority of the person who is instructing him and not to simply accept the sincerity and genuineness of a person who is unknown to him or her. I think this case is within a similar framework to that which was addressed by Bryson AJ in Chandra and in my view, a similar duty should be accepted in relation to an existing certificate of title and the proceeds of sale of the property, including cheques payable on settlement.
124In Penn v Bristol and West Building Society [1995] 2 FLR 938, a solicitor who acted for a husband and wife in circumstances where the wife had not authorised the husband to instruct the solicitor on her behalf and where the husband forged the wife's signature on a mortgage was held liable to the wife in negligence (see particularly page 949 of the judgment). The solicitor never met the wife and no impostor was involved (and the solicitor had had some suspicions that mortgage fraud might be involved), but he assumed that he had the authority of both the husband and wife to act on the transaction and did not take any steps whatsoever to ascertain or confirm whether he had the wife's authority to act for her in the transaction.
125The view that I have come to is that Mr Nguyen did have an obligation to Mr Chen, as the co-owner of the Penshurst Property which Mr Nguyen was being asked to convey, to make an enquiry about the identity of Ms Gu and the person presented to him as Mr Chen for the following reasons:
(1)Ms Gu came to Mr Nguyen without an appointment and in effect off the street. She and the person who accompanied her on that day or the following day were completely unknown to Mr Nguyen.
(2)Ms Gu brought with her a copy of the certificate of title. That certificate of title listed a Hui Qin Gu and Hao Chen as tenants-in-common which suggested that Ms Gu and Mr Chen were not husband and wife (see Mr Rosier's evidence at T567.39-T568.19).
(3)Ms Gu said that she and Mr Chen were married and said that Mr Xu was Mr Chen, but Mr Nguyen took no steps to confirm that either person was who they said they were.
(4)Ms Gu told Mr Nguyen that her husband travelled a lot to China and Mr Nguyen told her that a power of attorney could be prepared which would cost $200 and Ms Gu declined that suggestion. Mr Nguyen then recommended that Ms Gu obtain an authority from Mr Chen. Ms Gu told Mr Nguyen at the meeting attended by Mr Xu on 22 August 2003 that she and "Mr Chen" had decided that the sale proceeds should be made payable to her because her "husband is in China a lot of the time" (see page 236 of Exhibit A1). Later Ms Gu sought payment of all the net proceeds of sale to her by providing an authority purportedly from Mr Chen: see Exhibit 3D1. There was no logical connection between the fact, if it were a fact, that Mr Chen travelled a lot to China, and the payment of all of the proceeds to only one co-owner. Mr Nguyen said in cross-examination that it is not uncommon for two clients, who he thinks are married, to pay all of the proceeds of sale to only one of those parties: see T814.49-T815.28
(5)It is true that Mr Nguyen checked that the certificate of title was not forged and correctly discerned that it was genuine, but whilst necessary, that was only one part of the inquiry required to determine that the persons presenting themselves as the registered owners were in fact the persons named on the certificate of title.
(6)Mr Nguyen says that he did compare the signature on the transfer with the signature on the authorities, but Mr Nguyen had no signature from the real Mr Chen (and in fact all of the signatures purportedly of Mr Chen were in fact affixed by Ms Gu) and he had not seen the person he thought was Mr Chen sign anything in his presence.
(7)Mr Nguyen said he would have asked for identification if he had been asked to prepare an authority: see T821.48-T823.2. This establishes that a request for identification was at least thought by Mr Nguyen to be warranted in some circumstances.
(8)The Law Society was, through Caveat, encouraging solicitors to ensure that they obtained identification from clients who were not known to them. Whilst the focus of the articles is a particular form of forgery, the advice or recommendation is far more general and in clear terms. These publications were issued for the purpose of ensuring that practitioners maintain a high standard of conduct and were guidance for how professionals engage in competent professional practice: see Mr Rosier's evidence at T567.8-11.
(9)I accept Mr Carkagis' evidence that a prudent solicitor in April 2003 would have followed the recommendation contained in the January 2003 edition of Caveat that solicitors accepting instructions from new clients should always take steps to ensure the prospective client's identity.
(10)I respectfully accept and adopt the approach which Bryson AJ took in Chandra which saw the importance of a solicitor being conscious of the significance of his action vis--vis persons who he purports to represent.
(11)As Mr Smallbone points out at paragraph 26 of the Chen submissions, it was not unknown, as at April 2003, for spouses and parents and children to falsely deal with certificates of title; see also Ratcliffe v Watters (1969) 89 WN (Pt 1) (NSW) 497 at 502 per Street J, Eade v Vogiazopoulos, Grgic v Australian & New Zealand Banking Group Ltd (1994) 33 NSWLR 202, Australian Guarantee Corporation Ltd v De Jager [1984] VR 483 and National Commercial Banking Corporation of Australia Ltd v Hedley (1984) 3 BPR 9477.
(12)Mr Nguyen was not vigilant. He assumed that the persons were who they said they were and he asked no questions relevant to this: see T810.29-40.
(13)The request for identification would not have placed any particularly onerous obligation on the solicitor (and Mr Rosier agreed at T542.8-10).
(14)I recognise that fraudsters can be persuasive but the fact is that Mr Chen has been wrongfully deprived of his interest in the Penshurst Property by Ms Gu, and Mr Nguyen was purporting to act for Mr Chen in the conveyance and provided the certificate of title to the Purchasers' solicitors when he had no authority from Mr Chen to do so. I accept the submission of Mr Smallbone and Mr Sirtes that Mr Nguyen was insufficiently aware of the risk and did very little to guard against it.
126The form of identification, which in my view Mr Nguyen ought to have sought, was photographic identification by way of a current driver's license, or better still, a passport.
127Mr Dicker submitted that s 5B of the Civil Liability Act was relevant in a case involving a claim of professional negligence notwithstanding the existence of s 5O in Division 6 which has the heading "Professional negligence". Mr Dicker pointed to professional negligence cases in which s 5B has been considered: King v Western Sydney Local Health Network [2011] NSWSC 1025 at [62]-[96], Wallace v Ramsay Health Care Ltd [2010] NSWSC 518 at [12]-[36], and Sydney South West Area Health Service v MD [2009] NSWCA 343 at [27]. Nothing was said in reply by Mr Smallbone on this point and I proceed on the basis that both s 5B and s 5O apply here.
128For a person to be held negligent under the Civil Liability Act by reason of a failure to take precautions against a risk, the risk must be one which was not insignificant and one which the person knew or ought to have known. The Court is required to consider the probability that harm would occur if care was not taken, the likely seriousness of the harm, the burden of taking precautions to avoid the risk of harm and the social utility of the activity that created the risk (see s 5B).
129Mr Dicker pointed out that a requirement for a solicitor to obtain photographic identification of identity for a new client unknown to him (at least where not referred to him by a person well known to the solicitor) would have wide-reaching implications and effect. It may do and I take that into account, but there are a number of points to be made:
(1)The context is conveyancing and the handling of important documents of title in the framework of a system of registration of title that can deprive an owner of title by force of statute if the purchaser has no knowledge of a fraud committed by a vendor or someone purporting to act on behalf of a vendor: see s 42 of the RPA. I am not dealing here with the question of whether professional persons other than solicitors (such as barristers) ought seek evidence of identity when dealing with a client who is unknown to them.
(2)The capacity for harm to a real owner of real estate is, as Bryson AJ noted in Chandra, considerable.
(3)The task of seeking photographic identification is short and effective in dealing with the problem, especially if what is sought is a passport or at least a current driver's licence. I do not think it is a particularly onerous requirement upon a solicitor to seek confirmation of a client's identity (Mr Rosier agreed at T542.8-10). Banks require proof of identity as a matter of course before an account can be opened and it is not uncommon in consumer contracts.
(4)There has long been authority that imposes on a solicitor who conducts a case without authority of the party whom he or she purportedly represents (but from whom in fact he or she does not have authority) a liability for the costs of the other party: see Yonge v Toynbee [1910] 1 KB 215, F M B Reynolds, Bowstead and Reynolds on Agency, 18 th ed (2006) at 548 and AW & LM Forrest Pty Ltd v Beamish (1998) 146 FLR 450 at 458-460 per Young J.
130In my view, the requirements of s 5B of the Civil Liability Act are met in this case. Mr Nguyen ought to have appreciated that Ms Gu and Mr Xu might not be who they said they were and that there was a risk of significant harm, ie that by failing to check their identity he would assist those persons to deprive the real owners of their title to the Penshurst Property. Of course, Ms Gu would have been able to establish that she was one of the two co-owners. The requirements of s 5B are also met in relation to the requirement to properly advise the person Mr Nguyen thought was Mr Chen.
Causation
131Mr Nguyen's submissions make the following points:
(1)Mr Chen bears the onus of proof on causation, referring to Gore v Montague Mining Pty Ltd [2000] FCA 1214 at [34]-[41]; Ibrahim v Pham [2005] NSWSC 246 at [225] and [290]; s 5E of the Civil Liability Act; and Nguyen v Cosmopolitan Homes [2008] NSWCA 246 at [56]-[70].
(2)In determining whether the claimed losses were caused by the relevant conduct, the Court is required to take a commonsense view of causation: March v E & MH Stramare Pty Ltd (1991) 171 CLR 506; the Civil Liability Act ; and Nguyen v Cosmopolitan Homes at [70].
(3)The conduct of Mr Lu in purporting to witness Mr Chen's signature on the transfer when he clearly did not do so is a novus actus interveniens (or new intervening cause) which breaks the chain of causation: March v Stramare at 517; Mahony v Kruschich (Demolitions) Pty Ltd (1985) 156 CLR 522 at 528; Bennett v Minister (1992) 176 CLR 408 at 429-430; and State of NSW v Nominal Defendant [2009] NSWCA 225 at [25]-[35].
(4)Mr Nguyen was not required to witness Mr Chen's signature on the transfer and was entitled, at that stage, to rely on the apparently correctly witnessed transfer.
(5)Causation is therefore not established.
(6)In relation to the failure by Mr Nguyen to ensure that the person he believed was Mr Chen accepted that Ms Gu should obtain all of the net proceeds for herself, that is irrelevant because had Mr Nguyen done what it is said he should have in this regard, Mr Xu very likely would have said that he fully agreed with that course.
132When dealing with causation, Bryson AJ said at [109] of the first Chandra decision:
"The provisions of ss 5D and 5E of the Civil Liability Act apply in relation to deciding causation. Determination of causation of the plaintiffs' loss by negligence of Mr Miller is, in my opinion, simple and obvious and beyond any need for exposition."
133I accept (1), (2) and (4) as set out in [131] above. In respect of (3), I am not persuaded that Mr Lu actually exists; but even if he does, he, like Mr Xu, was clearly a tool in the hands of Ms Gu, brought in to dupe Mr Nguyen and obtain, for Ms Gu, a benefit by deceit. The plaintiff's case is that Mr Nguyen should have sought photo identification well prior to receipt of the transfer. If, on the probabilities, that would have prevented Ms Gu from proceeding with the transaction with Mr Nguyen, as in my view it would, it is not to the point that Mr Nguyen was not required to check the authenticity of the attesting witness and execution by Mr Chen of that document. As Mr Smallbone points out, that may be described as a second contributory cause of the loss since if Mr Lu (if he does exist) had not actively assisted Ms Gu in her endeavours the transfer would not have been registered as it was, but that occurred well subsequent to the time that the negligence occurred.
134Mr Dicker submitted that:
(1)it was likely that Mr Xu would have produced false but convincing identification; and
(2)if Mr Xu could not do so, Ms Gu would have gone elsewhere and duped someone else.
135There can be no doubt that Mr Nguyen facilitated Ms Gu's fraud on Mr Chen by forwarding the contract of sale to the Purchasers' solicitors and by facilitating the forwarding of the certificate of title and the false transfer to the Registrar-General. I am satisfied on the balance of probabilities that had Mr Nguyen asked for identification in August 2003 or earlier in April 2003, Mr Xu would not have been able to produce legitimate identification that he was Mr Chen and I am not satisfied on the balance of probabilities that he would have produced false identification. I think the strong likelihood is that had Mr Nguyen sought identification from the person who was presented to him as Mr Chen (or who represented himself as Mr Chen), Ms Gu would have withdrawn her instructions to proceed.
136So far as is concerned, I do not accept that it is likely. First, even accepting that Mr Xu was privy to Ms Gu's deception, it is one thing to "play dumb" and another to actively present false documentation. I think there is some room for doubt that Mr Xu was privy to the deception - if he did not speak English then he did not know what Ms Gu was saying. I think it more likely than not that he was aware that Ms Gu was endeavouring to deceive Mr Nguyen.
137So far as is concerned, I do not think the Court can be satisfied that Ms Gu would have been successful in duping another solicitor acting prudently. The argument involved seems to be akin to the argument advanced by the unsuccessful bank in National Commercial Banking Co of Australia Ltd v Robert Bushby Ltd [1984] 1 NSWLR 559 at 575 per Priestly JA (with whom Glass and Mahoney JJA concurred); see also in a different context Anderson v Edwards [2009] NSWCA 375 per Young JA at [15] and [19]-[21] with whom Tobias and Macfarlan JJA concurred .
138In Penn, Kolbert J dealt with a causation argument put by the solicitor that any act or omission on his part did not cause the plaintiff's loss as the fraud would have been perpetrated anyway based on Mr Penn's evidence. This is essentially the argument run on behalf of Mr Nguyen, although there was no evidence from Ms Gu as to what she would have done had Mr Nguyen sought photo identification from herself and/or Mr Xu. Kolbert J, in rejecting the argument of the solicitor, said at 949:
"...but in my judgment that cannot be right - it would have been frustrated by any solicitor instructed by Mr Penn following the Law Society's guide and taking steps to ensure that he had the authority of both co-owners. Mr Lawrence submitted that instructions to act in a conveyance are not unusual and so do not raise the need to 'probe like a detective' and he therefore argued that [the solicitor] would have sufficiently discharged his duty by writing to Mrs Penn on her own, setting out the instructions that he had received and asking her to confirm them. Although Mr Penn's evidence was that he would have intercepted such a letter it was plainly [the solicitor's] duty to write and send it or to take other steps to contact Mrs Penn to ensure that he had her authority - such as for example to ask her to call at his office. Had he done so, the fraud would have been stopped dead in its tracks. He did not."
139I agree with the Chen submissions that the conclusion in Chandra that the negligence of the solicitor would have caused loss to the Chandras were it not for the fact that the mortgage was ineffective is inconsistent with the contention that the forgery by Ms Gu on the transfer and its purported witnessing and false certification by Mr Lu breaks the causal connection. Penn is in the same category. I do not think the causal link was broken but in any event, on the balance of probabilities, if the identity enquiry which should have been made by Mr Nguyen either at the outset or at least once Ms Gu had directed the payment of monies to her directly had been undertaken, the transaction for which Mr Nguyen was engaged would not have proceeded.
140Further, I think if Mr Nguyen had sought to ensure that the person who he thought was Mr Chen did understand what was transpiring, there is a real and significant prospect that Mr Xu would either have demonstrated that he did not know what was going on, or if he did, would have become nervous and concerned that he would have to do more than act as Ms Gu's stooge and it may well have become obvious that he was not Mr Chen or sufficient doubt induced as to his identity which would then have brought the retainer to an end or have prompted a request for a passport or some other form of photographic identification. Ms Gu may have been wily but there is nothing to indicate that Mr Xu was or that he would have been able to withstand simple questioning in Chinese by one of Mr Nguyen's assistants.
Conversion
141In view of the conclusion which I have reached on the claim in negligence, it is not strictly necessary to determine whether Mr Chen also has a claim against Mr Nguyen in conversion. Mr Chen's case in conversion is that Mr Nguyen wrongfully converted property jointly owned by Mr Chen and Ms Gu, ie the certificate of title, and wrongly converted the cheques representing the proceeds of sale of the Penshurst Property due to be paid to Mr Chen and Ms Gu jointly by acting on the forged authority given by Ms Gu to him and giving those cheques to Ms Gu alone. Paragraph 511 of the Chen submissions refers to the following statement of principle found in Halsbury's Laws of Australia Vol. 1(2) at [15-350] and Halsbury's Laws of England , 5th ed (2008), Vol. 1 at [165]:
"An agent who, while acting on the principal's behalf, acquires the actual possession of goods or securities which are not in fact the property of his principal, and deals with them in any manner which is obviously wrongful if the principal were not their owner or duly authorised by the owner, by selling and delivering them to a stranger, or otherwise purporting to dispose of the property in them, is guilty of conversion and is liable to the true owner for their value. The agent's liability is not affected by the fact that he or she received them in good faith as the property of the principal, and dealt with them in accordance with the principal's instructions and in ignorance of the true owner's claim, unless the true owner is estopped from denying the principal's authority to dispose of them ..."
142Bunnings Group Ltd v CHEP Australia Ltd [2011] NSWCA 342 is a case involving use of pallets by a chain of hardware store amounting to the exercise of acts of ownership or dominion over the pallets owned by CHEP and known by Bunnings to be owned by CHEP. A summary of the tort of conversion is found in the judgment of Allsop P (with whom the other members of the Court agreed) at [124]-[125] and [130]:
"124 The framing of a precise definition of the tort of conversion has been described as "well nigh impossible": Lord Nicholls of Birkenhead in Kuwait Airways Corporation v Iraqi Airways Co (Nos 4 and 5) [2002] UKHL 19 ; [2002] 2 AC 883 at 1084 [39]; and see also Hiort v London & North Western Railway Co (1878-1879) LR 4 Ex D 188 at 194 per Bramwell LJ The essential elements, or basic features, involve an intentional act or dealing with goods inconsistent with or repugnant to the rights of the owner, including possession and any right to possession. Such an act or dealing will amount to such an infringement of the possessory or proprietary rights of the owner if it is an intended act of dominion or assertion of rights over the goods: see generally Penfolds Wines Pty Ltd v Elliott [1946] HCA 46 ; 74 CLR 204 at 217-221 (Latham CJ), 228-230 (Dixon J, with whose statements of principle Starke J agreed at 221), 234-235 (McTiernan J), and 239-244 (Williams J); and Kuwait Airways at 1084 [39]-[42] (Lord Nicholls of Birkenhead), 1104 [119] (Lord Steyn) and 1106 [129] (Lord Hoffmann).
125 The tort is one of strict liability and thus a mental element in knowing that a wrong is being committed is not required. Nevertheless, intention is not irrelevant. The act or dealing in question must be intentional; further, the intention must be the exercise of such dominion as is repugnant to the rights of the owner. Thus, in Fouldes v Willoughby (1841) 8 M & W 540 ; 151 ER 1153 the ferry manager did not commit trover by taking the plaintiff's horses off the ferry and putting them ashore after the plaintiff had refused to remove them. This was so because the acts were to take the horses to the river bank, not to take them to his own use or some other person's, but merely to remove them from his ferry. Whilst there can be a conversion for a limited period of time, this would occur only if there was an intention to exercise dominion over the goods inconsistent with the rights of the owner, including the right to possession. As Rolfe B said in Fouldes at M & W 550; ER 1157:
'In every case of trover, there must be a taking with the intent of exercising over the chattel an ownership inconsistent with the real owner's right of possession.'
...
130 It is clear that taking and asportation may be a conversion, especially if taken from the possession of the owner without authority and thereafter used. Such conduct may be, of its very character, repugnant to the dominion of the owner in possession (though the facts and context may not permit this conclusion to be drawn: see Sanderson v Marsden & Jones ). If one finds a party in possession after an apparently lawful transfer of possession, not involving the purported transfer of title or proprietary interest, some care must be taken before a conclusion of conversion can be drawn from subsequent use by that party. In Hollins v Fowler (1875) LR 7 HL 757 at 766 in a passage cited by McTiernan J in Penfolds Wines at 234-235, Blackburn J, in explaining the fundamental elements of the tort, said at 766-767:
'It is generally laid down that any act which is an interference with the dominion and right of property of the plaintiff is a conversion, but this requires some qualification. From the nature of the action, as explained by Lord Mansfield, it follows that it must be an interference with the property which would not, as against the true owner, be justified, or at least excused, in one who came lawfully into the possession of the goods ... I cannot find it anywhere distinctly laid down, but I submit to your Lordships that on principle, one who deals with goods at the request of the person who has the actual custody of them, in the bona fide belief that the custodier is the true owner, or has the authority of the true owner, should be excused for what he does if the act is of such a nature as would be excused if done by the authority of the person in possession, if he was a finder of the goods, or entrusted with their custody.'"
143My attention was drawn to Bunnings v CHEP after the close of submissions in an email to my Associate sent by Mr Dicker on 2 December 2011 (and in accordance with Rules 31-33 of the NSW Bar Rules no submissions accompanied the reference).
144The Nguyen submissions raise arguments specific to the certificate of title and the cheques and one argument relevant to both. The argument relevant to both is the argument based on acceptance of Ms Gu's case that Mr Chen agreed to, or is estopped from denying, that he had agreed to transfer his half-interest in the Penshurst Property to her or that there was a constructive trust.
145In view of the conclusion which I have reached concerning the alleged 2000 Agreement, the overarching defence is not available to Mr Nguyen. Mr Dicker conceded that in the absence of any such agreement or trust, Mr Nguyen would "struggle in seeing a defence to conversion" of the cheques (see T934.8-9) because "the cheque that was handed over was only made out to Ms Gu" (see T934.13-15). This would also dispose of any issue of the right to plead a jus tertii .
146So far as the cheques are concerned, they were made out to Ms Gu in her name (as requested by Mr Nguyen of the solicitor for the Purchasers) as a result of her fraudulent conduct. Clearly, Mr Chen never had possession of the cheques and if he has a claim in conversion it can only be based on the proposition that he had, as owner, an immediate right to possession.
147According to Elliott, Odgers & Phillips, Byles on Bills of Exchange and Cheques, 28 th ed (2007) at 26-008 , a cheque is treated as any other piece of movable property and the true owner may bring an action in conversion against any person wrongfully dealing with it: see also Hounslow LBC v Jenkins [2004] EWHC 315. Mr Chen was not the owner of the cheques and he did not have possession of the cheques. Since conversion is directed to protecting the right of an owner in possession or as owner who has an immediate right to possession, it does not appear that Mr Chen can sue Mr Nguyen in conversion. Mr Smallbone sought to overcome this problem by contending that Mr Chen had a right to immediate possession of the cheques but no authority was cited for that proposition and I am not persuaded that it is correct. Mr Chen would have been entitled to injunct Mr Nguyen from handing over the cheques to Ms Gu without at least providing him with a bank cheque for his share of the proceeds, but that is not the same thing. Even a person with a beneficial interest in property cannot sue in conversion: see Hounslow LBC v Jenkins as cited at 26-008 in Byles on Bills of Exchange and Cheques.
148So far as the certificate of title is concerned, the specific argument advanced by the Nguyen submissions was that the certificate of title had no value. Whilst a certificate of title is not the same as a title deed, the certificate of title has some value and, for example, has been held to be a form of "goods" for the purpose of seizure under drug trafficking legislation: see Kanbur Pty Ltd v Adams (1984) 3 FCR 192 per McGregor J. I accept that the certificate of title is not equivalent to the property to which it relates so that destruction of the document would not of itself entitle the owners to receive the value of the land as damages (as used to be the position in relation to title deeds: see Clerk & Lindsell on Torts, 19 th ed (2006) at [17-36].
149Mr Dicker raised, in oral submissions, the issue of whether, in relation to the certificate of title, Mr Nguyen was acting in a mere "ministerial capacity" and he made reference to In re Samuel (No 2) [1945] Ch 408. In that case, a Mrs Samuel had been made bankrupt and had, two years earlier, given jewellery to her husband, Major Samuel, as security for a loan he had made to her. Mrs Samuel arranged for her solicitors to receive a letter from her husband authorising the delivery of the jewellery to her solicitors. The solicitors received the authority, presented it to the bank and on 26 November 1943 received the jewellery. By a further letter, Mrs Samuel instructed the solicitor to hand over the jewellery to a Mrs Maple for her son's education. The solicitor handed over the jewellery to Mrs Maple who, in the presence of Mrs Samuel, then asked the solicitor to hold the jewellery in safe custody. At a later date, on the instructions of the bankrupt Mrs Samuel, the solicitor handed the jewellery to Mrs Maple who later sold it. It was held on appeal by Lord Greene MR, du Parcq & Morton LJJ (affirming Evershed J at first instance) that there was no conversion by the solicitor and the Court said at 416:
"All that he did was to transfer the goods, on the instructions of that principal, to another agent of that principal with a view to a sale. At no time, during the series of events which resulted in the sale of the jewellery, was any person in wrongful possession of the jewellery. It seems to us quite impossible to hold that Mr. Kerman, who merely did the one ministerial act already described, was thereby guilty of a conversion of the goods."
150The issue of ministerial acts is discussed in Bowstead and Reynolds on Agency at 9-136 and there is also discussion of the conversion by an innocent agent at 9-123 to 9-128. What is set out at 9-123 of Bowstead and Reynolds on Agency is quite consistent with the passage from Halsbury's Laws of Australia and Halsbury's Laws of England set out above at [141], but at 9-126 in Bowstead and Reynolds on Agency the learned author states (omitting footnotes):
" Rule (2). Merely to hold goods is however no conversion unless there is refusal to deliver up, or a dealing with the goods inconsistent with the owner's right. And an agent may refuse to deliver goods while he makes reasonable inquiries, without rendering himself liable in conversion. Further, there are some cases where, although there is a dealing with the goods to which the agent is a party, he is said to have acted as a mere conduit pipe and therefore not to have performed any act amounting to a conversion. Thus an agent who negotiates a sale of goods of which he has neither possession nor control between two persons who contract directly does not himself interfere with the goods and so cannot be held liable for conversion. So also an agent who performs acts with relation to goods, authorised by his principal, which are no more than a bailee or finder of goods could lawfully authorise, does not commit acts of conversion, e.g. where he merely stores or carries goods, transfers them to another agent, or, not knowing of any adverse claim, returns them to his principal. It is also probable that he does not convert if he performs acts in a transaction that actually transfers the title, provided that he does not know that such a transaction is involved; and even if he does know of it, there is authority that he does not commit conversion provided he does not himself participate in the transaction, but acts only ministerially . The general rule is significant as an analogy in other contexts where it is sought to argue that an agent only acted ministerially."
(emphasis added)
151There may be some degree of harshness in the rule relating to an agent, when the agent does not appreciate that he does not have the consent of one of the true owners of a certificate of title and hands it over to the purchaser in accordance with instructions in fact given to him by only one of the co-owners. However, unless what Mr Nguyen did can be described as a "ministerial act" as that expression was used in Re Samuel, it appears that he is liable to the co-owner (whose consent was not in fact given) and not only for the value of the piece of paper but for what that co-owner has lost as a consequence: see Bodley v Reynolds (1846) 8 QB 779. No point was raised that Mr Chen was only a co-owner of the Penshurst Property and hence of the certificate of title. It has been held that conversion can be brought at the instance of a co-owner of a ship: see Kitano v Commonwealth (1973) 129 CLR 151 at 172 per Mason J; see also the cases cited in Trindade & Cane, The Law of Torts in Australia, 3 rd ed (2000) at 144 and see Clerk & Lindsell on Torts at [17-41] where it is said a part owner should be able to recover proportionately with his interest.
152The facts of Re Samuel are quite different from those here (as Mr Dicker conceded). It was accepted by Mr Dicker that Mr Nguyen was not the agent of Mr Chen and Mr Nguyen did not receive the certificate of title from the true owners (both Ms Gu an Mr Chen) and Mr Nguyen did not merely transfer the certificate of title from himself to another agent of the true owners. I do not think that Mr Nguyen's act of providing the certificate of title to the Purchasers' solicitors was a "ministerial act" of the type described in Re Samuel.
153I conclude that Mr Nguyen is also liable to Mr Chen in conversion of the certificate of title and the natural consequence of his providing the certificate of title to the Purchasers was to assist them to obtain registration of their title adverse to Mr Chen's interest. I accept that the provision of the certificate of title was not the only factor in the Purchasers obtaining registration but it was a factor, and no doubt had it not been provided, the Purchasers' solicitors would have pressed for it.
154It follows, in my view, that Mr Nguyen is liable to Mr Chen in conversion in respect of the certificate of title.
The plaintiff's claim against the Registrar-General
155Given my conclusion that Mr Nguyen is liable to Mr Chen in negligence, the bulk of the claim against the Registrar-General dissolves unless LawCover is not required to indemnify Mr Nguyen. LawCover has agreed to indemnify Mr Nguyen (except for the excess of $5,000: see Exhibit 2D1) unless I find that Mr Nguyen acted dishonestly or fraudulently: see T861.35-36. The plaintiff does not propound such a case and no finding of that kind is warranted.
156There is a significant dispute between Mr Chen and the Registrar-General concerning whether s 129(2)(a) of the RPA can be relied on by the Registrar-General in resisting Mr Chen's claim for compensation to the extent that s 129(2)(b) is available, that is, to the extent that Mr Nguyen is liable to Mr Chen and is indemnified by LawCover. Sections 129(2)(a) and (b) of the RPA provide as follows:
"(2) Compensation is not payable in relation to any loss or damage suffered by any person:
(a) to the extent to which the loss or damage is a consequence of any act or omission by that person, or
(b) to the extent to which the loss or damage:
(i) is a consequence of any fraudulent, wilful or negligent act or omission by any solicitor, licensed conveyancer, real estate agent or information broker, and
(ii) is compensable under an indemnity given by a professional indemnity insurer,..."
157The only significance of the issue, in the light of my conclusion on the issue of negligence, is as to the agreed excess in the LawCover policy of $5,000. It was agreed between Mr Smallbone and Mr Sirtes (who have both provided detailed written and oral submissions on the topic) that it would be preferable to defer a ruling from the Court on this issue until after the Court has ruled on the question of whether Mr Nguyen was negligent and is liable to Mr Chen, and has given an indication of the Court's view on the costs consequences of its decision in respect of the plaintiff's claim, Mr Nguyen's defence and Ms Gu's cross-claim, following which there may be room for agreement between them on whether or not the $5,000 point needs to be determined.
Conclusion
158Mr Chen is entitled to succeed against Ms Gu and Mr Nguyen in the amount of $235,514.93 (including interest calculated up to and including today).
Costs consequences
159Ms Gu did not offer any reason as to why she would not be liable for costs if she was held liable on Mr Chen's claim and was unsuccessful on her cross-claim. Mr Nguyen does resist an order that he be required to pay any costs associated with the plaintiff's claim against the Registrar-General. The argument advanced by Mr Dicker is that Mr Chen commenced separate proceedings against the Registrar-General (and Ms Gu) in 2007 and only commenced separate proceedings against Mr Nguyen in 2009. The proceedings were later consolidated (over the opposition of Mr Nguyen).
160Given that:
(1)Mr Nguyen's solicitors denied liability by letter of 6 April 2004 and suggested that Mr Chen bring a claim against the Torrens Assurance Fund (see pages 760-761 and 783 of Exhibit A3);
(2)the Registrar-General had a defence to the claim on the Torrens Assurance Fund if Mr Nguyen was negligent thereby causing loss to Mr Chen and was to be indemnified by LawCover;
(3)Mr Nguyen has maintained, prior to the commencement of proceedings against the Registrar-General and since then, that he was not negligent and did not cause the plaintiff's loss: see pages 760-761 and 783 of Exhibit A3;
(4)two of the issues in the case against the Registrar-General are identical to that in the case of the claim against Mr Nguyen (ie was Mr Nguyen negligent, and if so, did his negligence cause loss to Mr Chen);
(5)the loss of title which led to a claim on the Torrens Assurance Fund and against Mr Nguyen arose entirely without any fault or error or omission on the part of the Registrar-General and did arise by reason of a breach of duty to Mr Chen by Mr Nguyen (in addition to the fraudulent conduct of Ms Gu); and
(6)the active adoption (and even expansion) by Mr Nguyen of Ms Gu's defence against Mr Chen's claim;
my preliminary view is that Mr Chen is entitled to an order for all of his costs of the proceedings, including his case against the Registrar-General.
161In reaching this preliminary view, I have taken into account Mr Dicker and Mr Smallbone's submissions, but I will give each an opportunity to:
(1)present any further submissions on the topic of costs;
(2)provide any evidence in support of an order for costs other than the usual order for costs;
and give Mr Smallbone and Mr Sirtes an opportunity (and those instructing them) to consider whether there needs to be any determination in respect of s 129(2)(a) of the RPA.