Gu v Kam & Beadman Pty Ltd

Background

1. In 1995, the plaintiff migrated to Australia from the People's Republic of China. On 18 December 1999, he married Annie who had, the previous year, also migrated to Australia from China. They both speak Mandarin and English. In Australia, the plaintiff became known as "David".
2. In 2001, the plaintiff and Annie engaged Mr Kam to act as their tax adviser and accountant. Mr Kam had migrated from Hong Kong and is fluent in Cantonese and English. At the time Mr Kam met them in 2001, the plaintiff and Annie, who was, and still is, a certified practising accountant, owned and operated an IT consulting business for which the plaintiff provided consulting services. When communicating with the plaintiff and Annie, Mr Kam spoke in English.
3. The plaintiff and Annie lived in a property which they owned in Archer Street, Burwood (the family home). They bought various investment properties, including a property in Stanley Street, Burwood (the Burwood property), which they purchased in 2008. They had two sons, who were born in 2002 and 2010 respectively.

The plaintiff's property development business

1. In about 2011, the plaintiff told Mr Kam that he intended to start a property development business with David Chen, a contact from China. In accordance with the plaintiff's instructions, Mr Kam retained a company registration agent, Corporate Network Ltd, to establish D&A, which was to be used as the corporate vehicle for the property development business. D&A, which was incorporated on 25 July 2011, retained Mr Kam to be its accountant. From 2011 to 2016, he prepared D&A's tax returns.
2. Of D&A's 200 shares, 100 were registered in the plaintiff's name and the remaining 100 shares were registered in the name of Mr Chen's wife, Yan Zhang. D&A had two directors: the plaintiff and Yan Zhang. Although Mr Chen's wife was a shareholder and director of D&A, Mr Chen was the person who, with the plaintiff, made decisions about D&A's business.
3. When D&A purchased real property in New South Wales, it became a "landholder" for the purposes of Ch 4 of the Duties Act 1997 (NSW), which meant that transfers of its shares attracted stamp duty, which was payable by the transferee. Further, such transfers could require the transferor to pay capital gains tax.

The Aster Project

1. One of D&A's projects, known as the Aster Project, involved the development of two lots in Crows Nest, which D&A purchased as follows. Date of exchange Property Purchase price Finance 26 July 2011 Lot 1, Crows Nest $4.25m NAB: $2.8m (1st registered mortgagee) Balance of $1.45m to be provided by D&A 16 April 2012 Lot 2, Crows Nest $4.228m NAB: $2.68m (1st registered mortgagee) Balance of $1.548m to be provided by D&A

1. In addition to the funds required to complete the purchase of the two lots, D&A needed funds for stamp duty, interest payments and the expenses associated with obtaining development approval. The plaintiff and Mr Chen calculated that they would need a total of $4m, or $2m each, for the Aster project.
2. From about 2012, Annie became concerned about the level of debt involved with the Aster project. This caused matrimonial tension. The couple did not want their discord to become known and also felt an obligation to their two sons to remain living under the same roof. It appears that, from about January 2013 until April or May 2014, the plaintiff and Annie slept in different bedrooms in the family home.
3. The plaintiff's financial position was not such as to meet the lending requirements of banks or other mainstream lending institutions. In order to raise funds for his $2m contribution to the Aster project, the plaintiff and Annie jointly borrowed the following funds from individuals. These funds were secured over properties which he owned jointly with Annie. Date of loan agreement Lender Amount Interest rate Security 8 March 2013 Xiaofeng Li $500,000 6% per annum Added to existing mortgage. 8 March 2013 Liming Zhu $700,000 15% per annum Unregistered second mortgage over properties owned with Annie, for which caveat lodged.

The Lux Project

1. In the meantime, the plaintiff identified a property in Hornsby, which he regarded as suitable for development. This project came to be known as the Lux Project. On 6 March 2013, he instructed Mr Kam to arrange for the incorporation of Sonar Investment Pty Ltd (Sonar). Sonar was to purchase land for the Lux Project, of which the plaintiff owned 50 shares, which amounted to a 25% share in Sonar. The total capital requirement for the Lux Project was $10m, of which the plaintiff was required to contribute $2.5m, in proportion to his 25% share. On 6 April 2013, contracts were exchanged for the Lux Project, with settlement to occur six months later. For this transaction, the plaintiff and his partners in the development retained Ming Lu, a solicitor from Luming Lawyers in Burwood.
2. In March 2013, the plaintiff, on behalf of Sonar, instructed Mr Kam to act on its behalf and to prepare and lodge its annual tax returns.
3. As the plaintiff had already exhausted his capacity to borrow from banks or other financial institutions, he approached a friend, Mr Lam, who agreed that his company, Sherryland Investments Pty Ltd (Sherryland), would lend him and Annie $2.5m at a rate of 24% compounded quarterly for 30 months. This loan was secured by an unregistered second mortgage over properties which the plaintiff and Annie owned in Campsie and Croydon. Despite her considerable reluctance, Annie personally guaranteed the loan. Sherryland lodged caveats over the Campsie and Croydon properties.
4. The plaintiff also granted a security interest to Sherryland over his 100 shares in D&A and his 50 shares in Sonar.

The creation of the family trust

1. In about 2013, Annie became increasingly concerned about the level of debt which the plaintiff and his companies had incurred through the Aster and Lux projects and the fact that it was secured over family properties. She was worried that if they divorced, she and their two sons would end up with nothing because the project assets were in the names of companies of which the plaintiff was a shareholder but in respect of which she had no interest. In response, the plaintiff suggested that they set up a family trust to protect the assets.

Advice given on 7 August 2013

1. On 7 August 2013, the plaintiff met with Mr Kam at the defendant's office. I accept Mr Kam's evidence that they had a conversation to the following effect: "David: My business friends are using family trusts to hold shares in their development businesses. I want you to set one up for me. Me [Mr Kam]: It is not beneficial for the transfer of existing assets as there will be capital gains tax and stamp duty is payable on the transfer at 5.5% on shares of the asset transferred. David: Just establish a family trust for me. I will be the trustee. Me and Annie will be the beneficiaries. I will be the nominator. I may also get you to establish family trusts for the other shareholders in my property development companies. I will speak to them."
2. When Mr Lloyd SC, who appeared with Ms Marsden for the defendant, put this conversation to the plaintiff, he reacted strongly against the proposition that Mr Kam had given the advice in the passage beginning, "It is not beneficial …". In his response, the plaintiff accused Mr Kam of "lying". However, it is noteworthy that the plaintiff's own affidavit evidence was that Mr Kam had given such advice to him on 7 August 2013. Mr Kam's evidence of this conversation is supported by a detailed file note which is dated 7 August 2013 and which included the following: "GU: All business friends use family trust Advantage vs disadvantage … 3. No good for principal resident No good for existing asset - capital gain - transfer stamp duty @5.5% on share of [asset] transfer. …"
3. Mr Kam's file note also contained explanations as to why the structure would be advantageous for Mr Chen and Mr Zhu (the plaintiff's business associates) because they were not residents of Australia but disadvantageous for the plaintiff, who was a resident of Australia and was therefore subject to the tax liabilities referred to above. Mr Kam considered himself to be qualified to advise the plaintiff that stamp duty would be payable on the transfer of shares in D&A (because D&A owned real estate worth about $8m, which was more than the $2m threshold) as he and his staff attended training which was conducted by the NSW Office of State Revenue (OSR). He regarded this aspect of his advice to the plaintiff as "general knowledge".
4. In the course of the meeting on 7 August 2013, the plaintiff instructed Mr Kam, who by that time was a principal with the defendant, to set up a family trust for his family. Mr Kam created the family trust on 3 September 2013. Initially, the plaintiff was its sole trustee and the plaintiff and Annie were its sole nominated beneficiaries (although family members were "eligible beneficiaries"). Mr Kam also created a trust for the Chen family, as he had been separately instructed to do so.
5. At some stage between 7 August 2013 and about April 2014, the plaintiff relayed to Annie what Mr Kam had told him. They had a conversation to the following effect: "Annie: 'We cannot afford that amount of duty but I still want to get the shares into the trust. I need to know that we are protected particularly if we are going to have property settlement. Me [Mr Gu]: Annie if we get divorced, all of our assets will go into a pool. The assets in my name and the assets in your name will be added together and then they are divided. Annie: Ok but what about in the meantime? If you decide to sell the shares I have no say in it. I am powerless. That is why I want the shares to go in the trust.'"
6. Settlement of the Hornsby properties for the Lux Project occurred in about October 2013. The stamp duty payable on those transactions was, to the plaintiff's knowledge, in excess of $425,000.

The 15 October 2013 conversation

1. On 15 October 2013, Mr Kam and the plaintiff had a conversation to the following effect: "David: Mr Chen says that he does not want to transfer his shares in D&A Property Group to a family trust because he will have to pay stamp duty and capital gains tax. Mr Chen and I will keep our family trusts for a future project. Me [Mr Kam]: Okay. David: Annie and I have looked at the draft trust deed for the Gu Family Trust. Annie has questioned why she is not a joint trustee."

Further events in the property development business

1. In about October 2013, a Development Application was filed for the Aster Project.

The Stanley Street Project and the replacement trust deed

1. In about 2014, the plaintiff decided to develop the Burwood property. However, in order to do so, it was necessary to buy the adjoining property. This development was described as the Stanley Street Project.

The conversation between Mr Kam and Annie on 28 February 2014

1. On 28 February 2014, Annie telephoned Mr Kam and told him that she and the plaintiff wanted to use the family trust to purchase shares in the Stanley Street Project. She asked him to amend the family trust document to make her a joint trustee and nominator with the plaintiff. Mr Kam raised with her whether their two sons ought be named as beneficiaries, since he regarded it as usual in family trusts for the children to be named as beneficiaries. She confirmed that they were not to be included as beneficiaries. In accordance with his usual practice, Mr Kam made a file note of this conversation which set out the main points.
2. Mr Lloyd put Mr Kam's evidence about this conversation to Annie in cross-examination in the following exchange: "Q. But you know that Mr Kam's version is that there was a conversation on 28 February 2014 between you and him? A. INTERPRETER: To my best recollection, I can't, I don't have, I can't recall this, and as far as I know, many of his documents are fake."
3. Annie's response to the cross-examiner was typical of her answers. I formed a strong impression, for the reasons given in more detail below, that Annie's sole concern was to answer Mr Lloyd's questions in a way that advanced the plaintiff's interests for the benefit of herself and her children. When Mr Lloyd explored her recollection of the conversation on 28 February 2014, her response was: "Where does this show on the affidavit?"
4. Following the conversation on 28 February 2014, after obtaining instructions from the plaintiff, Mr Kam arranged for a new (replacement) trust deed dated 18 March 2014. He also arranged for the incorporation of ZGG Holdings Pty Ltd (ZGG) which would own the Stanley Street Project. The family trust was issued with shares in ZGG.
5. In order to purchase the neighbouring property, it was necessary for the plaintiff to borrow $100,000 (being the 10% deposit for the purchase). He approached Fang Chen, a former employee, who lent this sum to him.

The first marriage counselling session on 8 April 2014

1. On 8 April 2014, the plaintiff and Annie attended their first marriage counselling session with Anglicare. They discussed their concern that the conflict between them was having a bad effect on their sons. In addition to seeking assistance from Anglicare, the couple also consulted a priest for marriage counselling and advice. From Annie's perspective, they were trying to "re-join" and attempt a "reconciliation".

The meeting between Mr Kam and Annie on 12 April 2014

1. I accept Mr Kam's evidence that on Saturday 12 April 2014, Annie phoned him and asked him to meet her urgently to discuss something "serious". Mr Kam sought his wife's permission to meet Annie, in accordance with his usual practice, as it was a weekend, which he regarded as family time. Mr Kam arranged to meet Annie at a café in Chatswood Chase rather than at his office opposite World Square in the city to minimise his travelling time (and therefore the time during which he would be absent from home on the weekend).
2. When he arrived at the café, Annie was "sobbing, almost crying". During the meeting at the café, Mr Kam and Annie had a conversation to the following effect: "Annie: I am thinking of divorcing David. David is very exposed in his businesses. He has too many debts. I am concerned that I will wake up one morning suddenly with nothing and that me and the children will be left on the street. I do not want to lose my life savings built up over years of hard work. I want all of David's shares in D&A Property Group to be transferred into the Gu Family Trust so that I can have equal control over the D&A Property Group. I am concerned that David has high debts at high interest rates and may use the shares of D&A Property Group to obtain more loans to put into more property developments. I do not want David to use the shares as collateral for borrowing without my knowledge and approval. I am a director of D&A Property Group and I want to review D&A Property Group's accounts in detail and want to be included in all future meetings of D&A Property Group. Me [Mr Kam]: There will be stamp duty payable on the share transfer and the property transfer rate will apply. There will also be capital gains tax implications. Then there would be other tax implications following the trust distributions at a later stage. … If David does transfer all of his shares into the Gu Family Trust then he will no longer be a shareholder of D&A Property Group and he may lose his rights to commissions that he may have negotiated as shareholder. So he might want to keep at least 1 share in the company."
3. The substance of the conversation set out above is reflected in Mr Kam's contemporaneous file note. I accept Mr Kam's evidence that once Annie had made it clear to him that she did not want further advice on the matter, he stopped making notes. I accept that his recollection went beyond what was recorded in his file note and that his independent recollection of what occurred included the following: "[Mr Kam] If it was my matter I would not do the transfer. It involves much unnecessary tax and duty. I do not know why you do not wait until the divorce is finalised so that when the assets are split they will not attract the duties and taxes. … [Annie]: You do not need to tell [me] what I should or should not do. I already have advice from my divorce lawyers about my money issues and my rights. I do not want your advice about whether I should make David make the transfer of shares or not. … [Mr Kam]: I will need to call David to tell him about our conversation. The shares are in his name and so you will need him to agree to the transfer. I need his agreement to be able to do the transfer. He will be affected by the transfer if it were to take place. Him especially because as transferor he will also be subject to the capital gains tax."
4. This meeting was the first indication to Mr Kam that there was any matrimonial disharmony between the plaintiff and Annie.
5. Annie denied that she had called Mr Kam on 12 April 2014 or that she had ever met him at Chatswood. She described his documents (his file notes) as "all lies" and "fakes". I regard her evidence to this effect as false and as substantially impugning her credit. For the reasons given in more detail later in these reasons, I consider that she tailored her evidence in order to assist the plaintiff's case, without regard to whether it was in fact the truth.
6. Mr Kam explained in his evidence why he had told Annie that, if the plaintiff were to transfer his shares in D&A, he should still retain at least one share. Mr Kam was familiar with the shareholders' agreements in respect of Sonar and the Stanley Street Project and knew that the plaintiff obtained some benefit under those agreements from being the lead shareholder. Mr Kam was concerned that if the plaintiff ceased to be a shareholder of D&A, he would lose whatever rights he had negotiated under the D&A shareholder agreement. Mr Kam's understanding was that the plaintiff was entitled to lead shareholder benefits of $600,000 from Sonar and $300,000 in respect of the Stanley Street project. I reject the plaintiff's affidavit evidence that he had never had any such arrangement in his business dealings.
7. Because Mr Kam tried not to make work calls on the weekend unless absolutely necessary, he waited until Monday 14 April 2014 to telephone the plaintiff about his conversation with Annie. He was, however, concerned to warn the plaintiff against making the transfer. On his way to his office in the city on Monday morning, he phoned the plaintiff from his car and had a conversation in words to the following effect: "Me [Mr Kam]: I met Annie on Saturday. She wants you to transfer your shares in D&A Property Group to the Gu Family Trust for her and your children's protection. She is very concerned that you are too aggressive with your property developments and that you have created too much debt. She thinks you will run her and the family into financial difficulties. David: Annie does not trust me anymore. Let her have the transfer. We are separated and I need her to co-operate so that I can get more loans in the future. I need her signature for future loan applications for my development projects. … Me [Mr Kam]: If you do the transfer, stamp duty at the normal property transfer of 5.5% will apply as D&A Property Group is a land rich company. Given the potential increase in land value, the transfer of shares could have capital gains consequences. So you better not do the transfer. David: There has been no increase in the property value. Me [Mr Kam]: If you decide to do the transfer you will need to get a valuation as the tax office would need proof whether there was or was not an increase in the value of the property so that it can assess capital gains tax as well as stamp duty, which is based on the value of the property at the time of transfer. David: I am a property developer. I know what I am doing. I will just obtain a valuation from somebody which says that there has been no increase in value. Me [Mr Kam]: You should seek advice from a divorce lawyer about your options for splitting assets with Annie. Annie told me that she has already been advices on these matters from her lawyers. If you need a referral to a lawyer there is a good one upstairs in our office building."
8. Mr Kam was surprised that the plaintiff's focus had changed so much since he and the plaintiff had first discussed the transfer on 7 August 2013. He appreciated from their conversation on 14 April 2014 that the plaintiff wanted (and needed) to keep Annie happy so that she would continue to allow their joint assets to be used as security for loans for the plaintiff's property development business.
9. As soon as Mr Kam arrived at his office on 14 April 2014, he made a file note of this conversation. I accept that his recollection of the exchange was still fresh in his memory when he made the file note and also that he still recalled the exchange when he gave his evidence.
10. I reject the plaintiff's account of a conversation with Mr Kam at this time, which was that Mr Kam told him that as long as he transferred only 49.5% of D&A's shares (99 out of the 100 which the plaintiff owned), no stamp duty would be payable because he was only transferring a minority interest. I accept Mr Kam's denial of the plaintiff's version. In the course of Mr Lloyd's cross-examination of the plaintiff about his conversation, the following exchange took place: "Q. Do you see that, do you see what Mr Kam says that you said to him [referring to Mr Kam's affidavit]? A. 'I need her, I need her signature for future loan for my development projects', right? Q. Do you agree that she said-- A. I totally disagree. Q. You totally disagree? A. Of course. Q. Just dealing with that, Mr Gu, this is a conversation that I'm putting to you in mid-April 2014. It was true, wasn't it, that you needed her cooperation to get more loans in the future. That was the position, wasn't it? A. She already signed a 2.5 million loan back to October 2013, that was the biggest she has a personal guarantor. Why wouldn't she sign more? She would always cooperate. She thinks I'm making money for the family, it's not, I'm not like doing anything. Eventually, she received enough assets through our divorce. She was happy. Q. The part here, that I've put to you on Mr Kam's version, you 'need her signature for future loan applications for my development projects', that was true in your mind, you did need her to help you-- A. For the sake of 230,000 stamp duty payable. You think I'm stupid?"
11. I infer that the sum of $230,000 was the calculation the plaintiff had performed to work out the stamp duty at a rate of 5.5% for his shares in D&A (based on a figure in excess of $8m for the land holdings of D&A in 2014). Although the plaintiff might not have had the cash flow at the time to pay that amount (assuming his valuations to be correct), the amount was relatively trivial by comparison with his ongoing interest expenses and the capital gain which he hoped to make. When Mr Lloyd put to the plaintiff that he had just incurred a liability to pay $300,000 in interest to borrow $1m for 18 months, the plaintiff responded in a supercilious manner: "Obviously, you don't know much about property development."
12. I formed the impression that the plaintiff was discomfited by these questions because they got to the nub of the matter: the plaintiff had to transfer the shares to Annie to keep all of the development projects going and that, in the scheme of things, the likely stamp duty exposure was cheap at the price. Ultimately, the plaintiff accepted that he had an interest in avoiding divorce, as appears from the following exchange with Mr Lloyd: "Q. You knew very well in the middle part of April 2014, that if that happened, that is, if you got divorced, that that would be something that would put these projects into very serious jeopardy? A. Divorce will cause problem, yes."
13. At some time between 14 April 2014 and 3 May 2014, the plaintiff went overseas.
14. In or about May 2014, the plaintiff needed to borrow $1m to help with his cashflow. He approached Fang Chen again. Fang Chen ultimately agreed to lend him the money on terms set out in a loan agreement dated 18 July 2014 (set out below).

The phone call on Saturday 3 May 2014 between the plaintiff and Mr Kam

1. On 23 April 2014, Mr Kam flew to Hong Kong. He returned to Sydney on Friday 2 May 2014.
2. The following day, Saturday, 3 May 2014, at about 11.16am, Mr Kam received a text message notifying him that he had a missed call from the plaintiff. He also received a text message from the plaintiff as follows: "Robert, Please call back, thanks Cheers, David GU"
3. The plaintiff's evidence was that he had tried to get hold of Mr Kam for a few days prior to 3 May 2014 but had been unable to speak to him as Mr Kam had been out of the country.
4. At about 11.22am, Mr Kam rang the plaintiff back and spoke to him for just over 16 minutes (973 seconds, according to the telecommunications record). The substance of the conversation was as follows: "[The plaintiff]: Annie has insisted that I transfer my shares in D&A to the Gu Family Trust. I have agreed to the transfer. Based on Annie's decision, you must prepare the transfer. [Mr Kam]: OK. But you have to get a valuation of D&A Property Group's properties done to calculate the capital gains tax and stamp duty payable on the transfer."
5. On Monday 5 May 2014, Mr Kam made a file note of the conversation he had with the plaintiff on Saturday, 3 May 2014, which supports his evidence set out above as to the content of the conversation.
6. Mr Priestley SC, who appeared on behalf of the plaintiff, sought to impugn Mr Kam's evidence by putting that if he had been given instructions which were contrary to his advice, he would have confirmed his advice in writing. Mr Kam rejected that suggestion in the following exchange: "Q. Can I ask you this question - did you think of sending him an email setting out your advice? Did you think of it? A. No, because it is a very direct instruction from - from them and we had several discussion beforehand on the matter. Q. And you didn't think of sending him a letter of advice, obviously, did you? A. There's no advice. My advice [is] not to go ahead with it."
7. It is not uncommon for legal practitioners, particularly those who are experienced litigators, to confirm in writing advice which is rejected by clients. Legal practitioners, especially those who act for accused persons, not infrequently require their clients to sign acknowledgements that they have received particular advice and decided to reject it. However, Mr Kam does not belong to the category of professionals who foresee that clients will seek to blame them for adverse financial or other consequences. The present claim is the only claim made against Mr Kam in over 30 years of practice. He is now retired. His practice was to provide written advice only to those clients who asked for it.
8. The plaintiff's evidence, which I reject, was that Mr Kam had initiated the call. This evidence is inconsistent with the incontrovertible evidence that the plaintiff sent a text to Mr Kam asking him to call him back and the phone records which record that Mr Kam rang him back. I also reject the plaintiff's version of his conversation with Mr Kam on 3 May 2014 which was to the effect that Mr Kam told the plaintiff that if he transferred only 99 of his 100 shares he would not be liable for stamp duty because he was only transferring a minority interest in the company. I regard the plaintiff's evidence of this conversation as a blatant attempt to verbal Mr Kam by (falsely) attributing to him words which, had they been uttered, would have amounted to incorrect advice. I also reject the evidence given by the plaintiff and Annie that the plaintiff passed on the "advice" which Mr Kam had given to Annie who regarded it as "good news". I regard this evidence as false.
9. I accept Mr Kam's evidence of the conversation and also his analysis of why the plaintiff made the transfer, which emerged in his cross-examination: "Well, [the plaintiff] has his, he has his difficulty. He has to work with what he, what his relationship with Annie. I cannot interfere with, with their private matter. If Annie insists on the transfer, I, I cannot tell David, I can only tell David so many times not to go ahead with it."
10. Although the plaintiff had instructed Mr Kam on 3 May 2014 to prepare the transfer, Mr Kam was "very reluctant" and "subconsciously … did not get onto it straight away on the following Monday." He received a message from Annie on Monday afternoon (5 May 2014) but did not have time to return her call.

The events of 6 May 2014

1. On Tuesday morning, 6 May 2014, Mr Kam's staff came in with a message and a working paper for the preparation of the transfer. The working paper recorded Annie's instructions that 99 (out of the plaintiff's total shareholding in D&A of 100 shares) were to be transferred to the family trust.
2. Mr Kam prepared the transfer documents on 6 May 2014. That day, he rang the plaintiff to confirm his agreement to the transfer and remind him to obtain a valuation for stamp duty purposes. He was still hopeful that they would not execute the documents and that they would seek advice from a family lawyer, await finalisation of their divorce and not continue with the transfer before then.

The execution of the transfer

1. The plaintiff and Annie executed the memorandum of transfer of 99 shares in D&A to the family trust. Mr Kam was not involved in the execution of the document. He did not know whether it had been posted to the plaintiff and Annie or whether they had come into the defendant's office to execute it. The plaintiff and Annie back-dated the memorandum to 18 March 2014 (which was the date of the replacement trust deed, see above). I accept Mr Kam's evidence that the usual practice in his office is not to date such documents, which are usually sent out in draft form to clients for them to execute as they see fit. I infer that the date was inserted by either the plaintiff or Annie but not by anyone from the defendant.

The marriage counselling session

1. On 6 May 2014, between 1 and 2pm, the plaintiff and Annie attended a second marriage counselling session conducted by Anglicare. Annie told the counsellor that the plaintiff had just returned from overseas and that she and the children "were peaceful without him". The case management report included the following: "Any new information emerging? [Annie] raised the issue around financial security, with the business being in [the plaintiff's] name. [The plaintiff] responded to her concerns with an offer to turn everything on [sic] her name. [Annie] wants her own career and her own money. Also wants her share of the businesses." [Emphasis added.]
2. It would appear that the plaintiff and Annie signed the transfer of the D&A shares from the plaintiff to the family trust before or at about the same time as the second marriage counselling session. I infer that the marriage counselling appointment at 1pm on 6 May 2014 was one of the reasons for the plaintiff's and Annie's concern that Mr Kam prepare the transfer for them to execute with a view to resolving the conflicts in their marriage.
3. On 13 June 2014, the defendant issued an invoice to D&A for professional services rendered as follows: "Transfer of shares $300 Stamp duty 10 GST 30 $340"
4. Mr Kam confirmed in cross-examination that this sum was for the preparation of the transfer of shares and that he did not charge for the meeting with Annie on 12 April 2014 or either of the phone conversations with the plaintiff on 14 April 2014 or 3 May 2014. It was not his practice to record all of his time and bill accordingly.

Further borrowings

1. On 18 July 2014, the plaintiff borrowed $1m from Fang Chen at an interest rate of 20% per annum paid yearly. The term of the loan was 18 months and was due to expire on 18 January 2016. The loan agreement provided that if the plaintiff could not repay the principal and interest on time, the loan could be renegotiated and extended for another 6-12 months. In this event, the interest rate would increase to 24% per annum. As referred to above, the negotiations regarding this loan had begun in May 2014. This loan was unsecured.

The breakdown of the marriage

1. In about July 2014 or August 2014, Annie found out that the plaintiff had a mistress in Shanghai. This discovery ended the period of reconciliation which had begun at about the time of the transfer of the shares in D&A to the family trust. From that time on they separated (initially under the same roof) and eventually divorced. The details of their initial separation (in about 2013), their reconciliation (from about April/May 2014 until about August 2014) and their final separation (in about August 2014) and the different versions they gave about this chronology are relevant to their credibility in advancing an argument to the OSR that the share transfer was part of a property settlement pending divorce rather than, as I have found, an act done by the plaintiff to preserve their marriage.

Further matters concerning the Aster project

1. A Construction Certificate for the Aster project was received in 2015. Between March and May 2015, the plaintiff marketed the residential units "off the plan". In about May 2015, the plaintiff obtained approval for construction finance from the Commonwealth Bank of Australia.

The liability for stamp duty

1. On 29 February 2016, Annie received a letter from the OSR informing her that it was conducting an investigation into whether she was liable to pay stamp duty for the family trust's recent acquisition of shares in D&A. The OSR sought production of various documents to assist with its investigation. The letter said in part: "From 1 July 2009 the provisions contained in Chapter 4 of the Duties Act 1997 apply to the acquisition of an interest in a landholder. Where a company or unit trust scheme holds land in New South Wales with a value of $2,000,000 or more, an acquisition of the shares in the company or units in the unit trust scheme may attract duty."
2. It is plain from the terms of the letter that neither the plaintiff nor Annie had lodged an acquisition statement in respect of the transfer. Mr Priestley submitted that their omission to lodge an acquisition statement was consistent with the plaintiff's and Annie's view (based on the advice he says that he received from Mr Kam) that they did not have to pay stamp duty on the transfer of the 99 shares to the family trust. While it may be consistent with this, it is also consistent with someone who has put his head in the sand because he has difficulties with cash flow and could do without another call on his funds. I consider the latter scenario to accord with the facts of the present case.
3. Annie spoke to the plaintiff about the letter. She forwarded it to Victor Wong, a chartered accountant who had been with the defendant for over 20 years. When Mr Kam learned of the letter, he asked Mr Wong to gather the information sought by the OSR in the letter. Mr Wong had not been involved in the transfer. His role was limited to gathering the information sought. On 21 March 2016, Mr Wong wrote to OSR informing it that Annie had approached the defendant to gather the information sought in the OSR's letter of 29 February 2016 and sought an extension until 30 March 2016 to provide the information. He subsequently explained that the client had only approached the defendant late in the previous week to provide the necessary information.
4. On 1 April 2016, Annie wrote to Mr Kam in the following terms: "Hi David, Could you please assist us to write a letter to clarify the fact that I represented D&A Property Group Pty Ltd to acquired second land of Aster project? You can charge the cost of writing this letter to D&A Property Group Pty Ltd. Please contact me if you have any query in relation to this. Kind regards, Annie ZHANG"
5. Annie admitted in cross-examination that the purpose of her request was to try to obtain material to help with making the case to the OSR on a separate matter relating to the stamp duty payable on the transfer of a second property.
6. By this time, the plaintiff and Annie had actually separated as the plaintiff had moved out of the former matrimonial home in March 2016.
7. On 5 May 2016, the plaintiff and Annie went to the defendant's office and signed statutory declarations relating to the transfer for the purpose of providing them to the OSR. Their statutory declarations made on that day were in relevantly identical terms and said: "I am in the process of applying for a dissolution of marriage … In January 2013 our marriage was broken down and we commence our separation. To secure family assets pending financial settlement, properties previously held in [the plaintiff's] name were transferred to the family trust. In July 2014, I engaged a lawyer to commence our divorce proceedings. We continue to be separated and there is no reasonable likelihood of cohabitation being resumed."
8. I regard these statutory declarations as materially untrue in that, at least for the period from April until August 2014, the plaintiff and Annie were cohabiting as husband and wife, and the plaintiff wanted the marriage to continue (as evidenced by their attendance at marriage counselling sessions conducted by Anglicare). The shares were transferred to the family trust in order to stop Annie from ending the marriage and not to secure the property pending financial settlement. The plaintiff and Annie were prepared to misrepresent the truth in order to get out of paying the stamp duty for which they knew they were liable (because Mr Kam had told them they would be) by reason of the transfer of 99 of the plaintiff's shares in D&A to the family trust.
9. On 9 May 2016, the OSR wrote to Mr Wong to inform him that the transfer of the 99 shares in D&A was a relevant acquisition and attracted stamp duty. The OSR also confirmed that the alleged exemption (based on the parties' separation) did not fall within the exemptions in s 68(1) or s 163B of the Duties Act. The OSR asked for the following by 23 May 2016: "- A valuation report by a 'suitably qualified' valuer of the unencumbered value of all the landholdings of [D&A] as at 18 March 2014 (acquisition date). … - A completed acquisition Statement in respect of the 49.5% interest [99 shares] acquired by the [family trust] on 18 March 2014."
10. At about this time, Mr Kam asked David Ip, a tax agent with the defendant, to deal with the letter which the OSR had sent to the plaintiff and Annie. Mr Ip had worked with Mr Kam since prior to 2000 and had previously worked as a senior manager with KPMG. Mr Ip had had no prior involvement with the matter. On 11 May 2016, Mr Ip sent an email to the plaintiff and Annie informing them that they were liable to pay stamp duty and that they should seek legal advice before responding to the OSR. Mr Ip also said: "Please attend to the further information as requested in the OSR email by obtaining a valuation report and completion of the Acquisition Statement."
11. The plaintiff and Annie instructed Mr Ip to prepare a letter to the OSR with a view to avoiding having to pay stamp duty. They told him what to put in the draft letter. In the first draft, Mr Ip included a reference to stamp duty not being payable for a transfer which occurred because a couple was divorced. After Mr Ip prepared this draft, Cicci Zhang, an employee of D&A, called him and told him that the plaintiff did not want the draft letter to refer to his divorce because the plaintiff did not want his separation from Annie to be a matter of public knowledge. Mr Ip prepared a second draft letter to the OSR which read as follows: "Re: Ying Zhang [Annie] We refer to your email sent to Victor Wong of this office on 9 May 2016 in connection with the completion of Acquisition Statement and arrangement for a valuation report in respect of all the landholdings of D&A Property Group Pty Ltd ('the landholder'). We however advise that the relevant interest acquired by Ying Zhang arising from the transfer of 49.5% from Qing Rong Gu to The Gu Family Trust does not amount to a significant interest in the landholder and accordingly there is no requirement to complete an Acquisition Statement and the need for a valuation report for stamp duty purposes. Should you have any queries please do not hesitate to contact us. Yours faithfully Robert Kam"
12. As soon as Mr Ip showed Mr Kam the draft letter, Mr Ip could see that Mr Kam was not happy with its contents and was not prepared to sign it. Mr Kam was surprised by what he saw in the draft letter. He had made no contribution to its contents. I accept Mr Kam's denial that he had ever given such advice and had never heard such a suggestion previously in relation to the transaction. He knew that it was incorrect and told Mr Ip that he disagreed with the content of the draft letter. Mr Kam instructed Mr Ip to stamp the letter with a "DRAFT" stamp.
13. After discussing the matter with Mr Kam, Mr Ip then drafted the following covering letter for Mr Kam to sign (as it was the defendant's practice to allow only Mr Kam or Mr Beadman to sign correspondence), which was addressed to the plaintiff and which attached the draft letter to the OSR: "Dear David Re: Reply letter to Office of State Revenue ('OSR') We enclose a copy of our letter in draft to Mr Bindu Jacob of OSR. Please arrange the letter to be reviewed by a solicitor/barrister who specialise[s] in stamp duty matters and let us have your confirmation so we may issue in its final form. We advise that this letter is required for submission to OSR by 23 May 2016. Should you have any queries please do not hesitate to contact us. Your[s] faithfully, Robert Kam cc Ying Zhang"
14. The letter and draft were sent to the plaintiff by email on 16 May 2016. The email said: "Dear David Please refer to our letter with attachment in draft and act accordingly. Should you have any queries please contact Robert Kam. Regards David Ip"
15. When asked in cross-examination whether the letter in the form of the draft had ever been sent to the OSR, Mr Kam answered, "[o]f course not." I understood his answer to signify that he would not have sent such a letter to the OSR because it contained an assertion which he knew to be incorrect.
16. I reject Mr Priestley's submission that the draft letter was powerful evidence that Mr Kam had given advice to the effect set out in the draft. Whatever would have been the position in the absence of the evidence of Mr Ip and Mr Kam, their evidence, which I accept, shed light on the provenance of what was in the draft letter (the plaintiff), who drafted it (Mr Ip on the plaintiff's instructions) and Mr Kam's reaction to the draft (he did not agree with it, had not given advice to that effect and not only believed, but knew, that it was wrong).
17. On 18 May 2016, the plaintiff came to Mr Kam's office for a meeting to discuss the property settlement with Annie. Mr Kam made a contemporaneous file note of the meeting, while the plaintiff was sitting across the table from him. The plaintiff asked Mr Kam "to help [him] with the numbers", with a view to the property settlement taking place in July 2016. Mr Kam's file note records the value of the assets and amount of the liabilities to come to a net figure of about $7m. He noted that Annie would get in the order of 60% and the plaintiff would be entitled to an amount in the order of 40%. Mr Kam also noted on his file note that the meeting had taken about 1¼ hours.
18. During the course of the meeting, Mr Kam referred to the liability for stamp duty (on the share transfer) and reminded him, "I told you that it is payable from day one." Mr Kam recorded in his file note: "[The plaintiff] acknowledge that [the defendant] warned Annie & [the plaintiff] of possible stamp duty charge at ad valorem."
19. Mr Kam acknowledged that his recollection of this meeting was not as good as his recollection of his meeting with Annie on 14 April 2014 or his phone conversations with the plaintiff on 16 April 2014 or 3 May 2014. He explained that the meeting on 18 May 2016 was a regular business meeting in his office whereas the other communications related to matters which had arisen over a weekend. I accept this explanation for the difference in recollection.
20. When Mr Priestley challenged Mr Kam's recollection of the plaintiff's acknowledgment noted on the file note of 18 May 2016, Mr Kam responded as follows in the exchange: "Q. Do you have a clear recollection of saying it? A. Yes, and if I, if I know there is a lawsuit coming, I would get it typed and ask him to sign to acknowledge it."
21. On or prior to 23 May 2016, the plaintiff consulted Angela Melick, a solicitor with expertise in stamp duty. I infer that Ms Melick told the plaintiff that the duty may not be payable if the transfer formed part of a family law settlement. In order to escape liability for stamp duty, they gave her instructions which they knew to be false (in that they omitted the significant detail that they had reconciled at the time of the transfer and that the transfer was made by the plaintiff as a sign of goodwill to Annie to preserve the marriage) and allowed her to prepare a letter (in the drafting of which they each had an involvement) to the OSR which misrepresented the facts.
22. Ms Melick retained Mark Richmond SC to advise the plaintiff and Annie whether they had grounds to challenge their liability to pay stamp duty. By email dated 23 May 2016, Ms Melick informed OSR that she had been engaged by the plaintiff and Annie to take over from the defendant the matter regarding the stamp duty alleged to be payable for the transfer of shares in D&A. She sought a further extension to provide a response on the basis that she wanted to brief Mr Richmond to advise as to which exemptions were arguable.
23. On 24 June 2016, Ms Melick wrote to the OSR, contending that, as the plaintiff's and Annie's marriage had broken down in February 2013, the transfer of 99 of the plaintiff's shares in D&A to the family trust did not attract stamp duty because it was part of a property settlement. Thus, Ms Melick, who was, relevantly an innocent conduit, informed the OSR that the shares had been transferred after the irretrievable breakdown of their marriage. She referred to the statutory declarations made by the plaintiff and Annie on 5 May 2016 (referred to above) in support of the claim for an exemption based on s 163B (Exemption - break-up of marriages and other relationships) of the Duties Act. An exemption was also claimed on the basis of s 163H (Discretion to grant exemption or concession) of the Duties Act.
24. Subsequently, on 9 August 2016, the plaintiff swore another statutory declaration which was submitted by Ms Melick to the OSR. He addressed the discrepancy between what he had put in his statutory declaration that he and Annie had separated in February 2013 and what he and Annie had put in their joint application to the Family Court, that their "official separation date" was 6 August 2014. I regard this statutory declaration as untrue in that it fails to include a reference to the period between April or May and August 2014, when the plaintiff and Annie were reconciled.
25. On the same day, 9 August 2016, Annie also swore a statutory declaration about their separation in which she outlined the difficulties in their marriage from January 2013, when she and the plaintiff had discussed living separately under one roof. In this statutory declaration, Annie said (and I accept): "3 [The plaintiff] and I reconciled in April 2014. 4 In July 2014 our marriage relationship got worse again. I found that [the plaintiff] has a girlfriend in Shanghai CHINA, this seriously damaged our relationship. David and I agreed to separate again (live under the same roof) in July 2014. However divorcing brought shame to my family and children so we hid the fact of divorcing from our friends and relatives."
26. I regard it as telling that when the plaintiff was cross-examined about the ultimate breakdown of his marriage to Annie (based on her affidavit extracted above), he was evasive and said: "I can't remember that for the best of my memory."
27. After he gave this answer, the following exchange ensued between him and Mr Lloyd: "Q. … Do you remember in about July 2014 your former wife, Annie, saying to you that she was upset because she found out you had a mistress in Shanghai? A. She always questioned all kinds of something. I treated as nonsense. …"
28. His answer is inconsistent with his concern to placate Annie by transferring the shares and to keep the marriage on foot by giving Annie what she wanted, so that she would continue to co-operate with his property development business.
29. On 14 September 2016, the plaintiff and Annie filed a joint application for divorce. In the application, which they each verified by affidavit, they nominated the date of separation as January 2013. They said that they had lived together in the same home after separation from January 2013 until March 2016. They answered the question, "since the date of separation, have you and your spouse lived together as husband and wife" in the affirmative and specified the period "April 2014 to August 2014".
30. This was the period in which the shares were transferred to the family trust and ended with Annie's discovery that the plaintiff had been unfaithful to her. Annie also swore to the truth of there being "a brief period of reconciliation between April 2014 and August 2014" in an affidavit sworn on 13 September 2016 which was filed in the Federal Circuit Court in support of the application for divorce. I accept the truth of their statements in the affidavits that, during this period, they lived together as husband and wife. In that context, they had no reason to say other than the truth since all that they were required to establish to obtain what they wanted (a divorce) was to prove that they had been separated for at least 12 months, a condition which was amply fulfilled as long as they had been separated since 14 September 2015. That they volunteered this period of reconciliation in this context speaks to its truth. Annie accepted in cross-examination that her affidavit concerning the brief period of reconciliation was true.
31. This matter of detail is not germane to the issues in the case, since it is common ground that stamp duty was payable on the transfer. However, it sheds light on the credibility of the plaintiff and Annie, each of whom was prepared to give different versions depending on their perception of what would advance their financial interests at the time.
32. On 31 October 2017, the OSR wrote to Annie setting out in detail its position that the duty was payable. It gave extensive reasons for its conclusion that neither of the exemptions advanced, s 163B or s 163H of the Duties Act, applied.
33. On 17 November 2017, the plaintiff and Annie met with Mr Kam at the defendant's offices. I accept that what occurred in the meeting accords with Mr Kam's contemporaneous file note, which read as follows: "MEETING NOTES David Gu [GU], Annie Zhang [YZ], William Hu & Gu Family Trust - 17.11.2017 GU: May claim stamp duty against our PI [Mr Kam's professional indemnity insurer]. RK [Mr Kam]: why & what basis? First time in 30 years [practice] GU: K&B did not advise them of such large amount payable RK: - Told Annie (YZ) from day one bad idea - advised you [GU] [YZ] not to transfer - advised you [GU] [YZ] of stamp duty @ property transfer rate - advised you [GU] [YZ] of CGT consequences - advised you [GU] [YZ] to do valuation for CGT if any & for stamp duty calculation No valuation can't calculate - you [GU] [YZ] went ahead despite all this W Hu: Negligence, not refer them to specialist RK: I only prepare transfer for D&A Annie [YZ] said she already have legal advice as to her right before transfer. She [YZ] should claim against her legal advisor. You W Hu?"
34. I reject the plaintiff's evidence that when he told Mr Kam that he intended to claim the duty from Mr Kam's professional indemnity insurer, Mr Kam responded: "I will help you both. This is such a big mistake which I never expected."
35. Once again, I regard the plaintiff's evidence to this effect as a verbal, designed to implicate Mr Kam in the alleged negligence. It is also significant that the plaintiff gave different versions in his evidence about whether Mr Hu was there (he denied that Mr Hu was there but also said that he could not recall). I accept that Mr Hu was there and infer that the plaintiff had arranged for him to attend the meeting.
36. I accept Mr Kam's evidence that, at the meeting, the plaintiff was unhappy at having to pay the stamp duty and that Annie was "less unhappy" than the plaintiff was.
37. On 19 February 2018, Annie and the plaintiff filed a joint application in the Family Court for financial orders concerning their property interests. They specified 6 August 2014 as their date of final separation.
38. On 23 April 2018, the OSR issued a notice of assessment which stated that the plaintiff and Annie were liable for stamp duty in the sum of $391,142.50 plus interest (of $152,231.91) and penalties (of $117,342.75), totalling $660,717.16. The duty was due and payable on 14 May 2018.
39. The plaintiff and Annie forwarded the letter to Mr Kam under cover of an email dated 24 April 2016, which said: "Dear Robert [Mr Kam], finally the OSR letter just came with a shocking figures of $660k. I believe there are errors of calculating those figures, however for PI [professional indemnity] insurers to sort out. We will cooperate. Cheers! David [the plaintiff] and Annie"
40. When Mr Kam read the notice of assessment, he was surprised to read that the initial duty was assessed at $391,142.50. This was almost double the original figure of $230,000 which the plaintiff had initially calculated (being 5.5% of half of the value of the shares in D&A). This indicated to Mr Kam that there had been a significant capital gain in the shares of D&A between their issue to Mr Kam and their transfer to the family trust. This was contrary to the plaintiff's representation to him that there had been no capital gain. Mr Kam realised that, on this basis, the plaintiff, as transferor, was also liable to pay capital gains tax on the transfer.
41. By email sent on 26 April 2018, Mr Kam wrote as follows to the plaintiff: "Subject: Re: Relevant Acquisition in D&A Property Group Pty Ltd. OSR Ref: 9318706 Date: Thursday, 26 April 2018 4:54:19pm Australian Eastern Standard Time From: Robert Kam To: David GU Dear David We refer to the letter dated 23 April 2018 from the NSW Revenue addressed to David Qing Rong Gu & Ying Zhang ('the Letter') together with a Duties Notice of Assessment ('the Assessment'). The Letter sets out, irrespective of repeated requests, that there is a failure in the provision of information required from transfer of shares in D&A Property Group Pty Ltd to the Gu Family Trust, comprising an acquisition statement and a valuation report of the Land held by D&A Property Group Pty Ltd. As a consequence, an Assessment has been raised by the Commissioner in relation to the share transfer since this results in an assessable significant interest of Land by The Gu Family Trust. The Assessment shows a duty of $391,142.50 payable on transfer shares in D&A Property Group Pty Ltd. Interest and penalty have also been charged bringing a total liability of $660,717.16, which is payable by the Trustees being David Qing Rong Gu and Ying Zhang jointly. In relation to this matter our position is as follows: In 2014 we were instructed by Ying Zhang to prepare a transfer of share document in the name of D&A Property Group Pty Ltd form David Gu to The Gu Family Trust. In that transaction, we neither advised Ying Zhang nor David Qing Rong Gu on the shares transfer that is the subject of the share transfer duty assessment. We did not receive any request verbally or in writing to provide advice which would have included the amount of stamp duty payable on the share transfer. We understand that at that time Ying Zhang and David Qing Rong Gu were going through separation leading to divorce. Ying Zhang told Mr Kam of our office that she was receiving advice in this matter from her own adviser as to her rights. When we are told that there are other advisers assisting clients in their affairs, we respect their professional independence and will not interfere. In this instance we processed the transaction on behalf of D&A Property Group Pty Ltd. We met with Ying Zhang and David Qing Rong Gu on 17 November 2017 at which time they raised the possibility of claiming the duty payable from our PI insurers. In that meeting Mr Kam of this office strongly denied any liability as we neither recommended, suggested nor advised that the share transfer transaction should take place. We would suggest if your adviser did not advise or caution Ying Zhang on the amount of stamp duty payable prior to the transaction, she should seek redress from her adviser. The Letter states that you can lodge an objection within 60 Days from 23 April 2018 if the trustees consider the duties are excessive. We believe you should act promptly within that time frame. We reiterate that a valuation report has not been provided to the NSW Revenue previously and we suggest this to be sent in case an objection is warranted. Should you have any queries please do not hesitate to contact us. Best regards, Robert Kam"
42. It is apparent from the correspondence that, as at 26 April 2018, the plaintiff had still not provided a valuation report to the OSR, notwithstanding Mr Kam's consistent advice, including in their conversation of 3 May 2014, that he was obliged to do so.
43. Mr Priestley cross-examined Mr Kam about why he had not followed up the payment of stamp duty with the plaintiff given that he knew that the shares had been transferred. Mr Kam's response, as follows, was an appropriate one: "It's not my duty to chase clients to pay tax."
44. The plaintiff and Annie instructed solicitors to challenge the notice of assessment in NCAT. They obtained advice from Ms Melick and Mr Richmond (as referred to above) as well as from Mr Hu and Mr Archibald. They challenged their liability on two bases: first, that the shares were transferred as part of the property settlement following their final separation (based on their misleading instructions); and, second, that the exemption under s 163H of the Duties Act applied.
45. The hearing in NCAT took place on 26 February 2019 and 27 March 2019. On 5 March 2020, NCAT ordered that they were liable to pay the duty, interest and penalties and gave reasons for its decision. Ultimately, the plaintiff represented himself and Annie was represented by Mr King, who was instructed by ClearSky Legal. The penalties payable were reduced by 20% (since NCAT did not accept the view of the Chief Commissioner of Stamp Duty that the penalties should be increased by 20% pursuant to s 50 of the Taxation Administration Act 1996 (Cth) on the basis of concealment by the plaintiff and Annie). Otherwise the original assessment was confirmed.
46. It was common ground, as referred to above, that stamp duty was payable on the transfer of the 99 shares in D&A to the family trust.
47. On 2 March 2020, this Court ordered that D&A be wound up.

Credibility of witnesses

1. As is plain from my findings set out above, where there is a conflict between the evidence of Mr Kam on the one hand and that of the plaintiff or Annie on the other, I prefer Mr Kam's evidence. My reasons for those findings appear in part above. However, the additional matters which pertain to the credibility of witnesses are set out below.

The plaintiff

1. The plaintiff was cross-examined for about a day. It was rare for him to answer a question without seeking to have regard to what he had said in his affidavit. He said, when asked for his recollection of a particular event: "Whatever I said in my affidavit is the truth."
2. He was unable to answer questions directly and repeatedly asserted that he was neither a lawyer nor an accountant. On several occasions when confronted with his own documents, he was quick to point out that the document had been drafted for him by his accountant or lawyer and insinuated that he could not be expected to be responsible for its contents. He exhibited a tendency to lay the blame on his advisers whenever he was confronted with such a document. When cross-examined as to prior inconsistent statements, he became angry and raised his voice. When a statement made by Mr Kam was put to him in cross-examination, he resorted to accusations, such as that Mr Kam was "totally a liar" or statements such as, "I wish there's a camera inside [Mr Kam's] office." This did not reflect well on the plaintiff's credit.
3. The following passage from Mr Lloyd's cross-examination is typical of the plaintiff's diffidence about answering questions: "Q. If the position was that you held onto one share, another advantage of that was that you and effectively Mr Chen would, to your way of thinking, effectively maintain control over the company? A. Chen control the company? Q. You and Mr Chen would, between you, own, or have the interest in, 101 of the 200 shares. That's obvious, isn't it? A. That's not obvious. This is the first time I heard this kind of story. I'll tell you one more thing. It's probably I just talk too much. Another project we purchased later used the family trust. Same thing. Equal share with Mr Chen. We didn't have this one share scenario at all. Or we can give the evidence later on, but I - I - I can say no to all your question because they make no sense because I never thought about that. Q. You, I suggest to you, to your knowledge, holding onto one share gave you an ability to have notice of company meetings? A. We didn't think about that. It's all Robert Kam's negligence. You know what happened. We-- HER HONOUR: Just a minute. You just need to answer the question. WITNESS: What's your question? HER HONOUR: Holding onto one share meant that you were entitled to notice of the meetings of the company. WITNESS: So - so, I'm aware of that. I didn't know. I didn't know. All I knew, Robert just transfer this one share stop - like I stated, this one share to not pay stamp duty. That's all. LLOYD: Thank you, your Honour. Q. In effect, in your mind, you holding onto one share meant that you and Mr Chen could effectively keep control of the company. That was right, isn't it? A. You're telling me now. I didn't know that. We never thought about that. That wasn't the purpose of this share transfer at all."
4. I formed the impression that the plaintiff was irritated by this cross-examination because he appreciated that it weakened his case that the only reason for his retaining one share was because Mr Kam had advised him to do so.
5. The plaintiff was evasive about the time of his separation from Annie and about the details of the breakdown of his marriage. One can accept that it may be difficult to pin-point a time when a marriage is over and distinguish it from a time when, although there are difficulties, the parties to the marriage hope that things will improve so that they can stay together, if only for the benefit of their offspring. However, I do not place great weight on the plaintiff's present recollection of the state of his marriage almost ten years ago when a better guide to what was occurring was what he was telling others at the time and the contemporaneous records of Anglicare.
6. My impression of the plaintiff was that he was a person for whom the truth is only ever a relative concept which he believed he could manipulate for his financial and personal benefit. I am satisfied on the basis of the evidence set out above, that he wanted to transfer the shares in D&A to Annie to placate her and assuage her concerns about the level of debt to which the family was subjected. He did so to address the immediate threat which she posed to his financial future: that she would divorce him and the development projects which were underway could not proceed because encumbered properties would have to be sold to meet her claims. He appreciated that, as long as Annie felt that her financial position and that of the children was safeguarded, she would be unlikely to make a present claim on him. However, if he had refused to transfer the shares, she may well have left him and commenced Family Court proceedings earlier than she in fact did. This had the potential to compromise, if not destroy, the capital gain which he hoped to make on the Aster Project, the Lux Project and the Stanley Street Project.
7. Thus, by agreeing to transfer 99 of his 100 shares in D&A, the plaintiff was acting rationally and in what he perceived to be his best financial interests. Further, his principal concern was to obtain cash to repay the loans he had taken out to fund the developments. He may have considered that the assessment of his stamp duty liability could be deferred for the short-term until the money he expected to gain from his projects came in. It was also an advantage to him that the interest rate on unpaid stamp duty was simple interest of 10%, which was significantly less than he was liable to pay on the loans set out above (which, at its highest, was 24%, compounded quarterly). In this context, unpaid stamp duty was a cheap source of finance.
8. Another significant difference between the plaintiff and Mr Kam concerned contemporaneous notes. The importance of contemporaneous notes when assessing credibility and making findings as to what occurred when is substantial: Onassis v Vergottis [1968] 2 Lloyds Rep 403 at 431 (Lord Pearce, Lord Wilberforce agreeing); Watson v Foxman (1995) 49 NSWLR 315 at 319 (McLelland CJ in Eq); and The Nominal Defendant v Cordin [2017] NSWCA 6 at [167] (Davies J).
9. Mr Kam kept detailed file notes of his interactions with the plaintiff in which he noted the date and type of interaction (meeting or phone call) and the substance of what was said. The plaintiff gave evidence that he made notes in a "scrapbook", to which he said he had regard when preparing his affidavit.
10. However, no such document was produced in answer to a call made on behalf of the defendant. Nor was any such document included in the affidavit of discovery sworn by the plaintiff on 21 August 2021. Indeed, Mr Priestley submitted orally as follows: "Your Honour will recall the evidence about the plaintiff possibly having notes that didn't emerge. There was a call and there was a description of a scrapbook. Your Honour, I went back through the transcript of the evidence, particularly at pp 25, 26, 34 and 35. My general submission, your Honour, is that when one reads that one could not confidently come to the conclusion that there was ever any particular scrapbook, let alone that there was, on the balance of probabilities, a scrapbook or notes available to the plaintiff at the time that he prepared his affidavit. And so there are answers that suggest very much that there were, but it's a garbled spaghetti bowl of answers, your Honour, that doesn't confidently lead to that conclusion at all. It's much more likely, your Honour, that he wanted to say, 'I'm a note‑taking person. I used to take notes.' But whether he kept anything or what it looked like, by the time he came to prepare his affidavit, your Honour, is something your Honour would not make a finding about, in my submission, and so it's unlikely that he has used notes for his affidavit and help him back."
11. It is difficult to accept the plaintiff's evidence that he actually made notes or that he had regard to any notes when he made his affidavit for the purposes of the proceedings. To that extent, I accept Mr Priestley's submission to that effect. However, I reject Mr Priestley's submission that the plaintiff's evidence was not sufficiently clear to make a finding that the plaintiff would have had me believe that he had made contemporaneous notes, since I regard this as the effect of the plaintiff's evidence. I formed the impression that he was prepared, in this respect, to make false or misleading statements in order to advance what he perceived to be his interests in the case.
12. I note for completeness that Mr Priestley submitted that I could take into account that NCAT did not find that the argument that the transfer of the shares was part of a family law settlement was dishonest or the evidence given in support of it by the plaintiff or Annie was dishonest. I reject that submission. There are significant constraints on the use to be made by one court, or decision-maker, of the findings of another court or decision-maker. These constraints arise, at least in part, from the principles of natural justice. Mr Kam was not a party to the NCAT proceedings and therefore had no opportunity to be heard or to cross-examine them in the proceedings. There is no basis in the rules of evidence or the Evidence Act 1995 (NSW) for Mr Priestley's submission, which I reject. Further, any such principle would be entirely at odds with the principles of issue estoppel (which bind parties) and abuse of process (which prevents one party who has failed on an issue from seeking to re-litigate that issue in proceedings against another party: see Rippon v Chilcotin (2001) 53 NSWLR 198; [2001] NSWCA 142 at [28]-[37] (Handley JA, Mason P and Heydon JA agreeing)).

Annie

1. Annie's affidavits were in English and bore no indication that they had been interpreted for her. She gave her evidence through a Mandarin interpreter. Annie described her spoken and written English as "ok". When her attention was drawn to passages in documents, she did not ask the interpreter to translate them for her and appeared to understand both the document and, with some exceptions (largely due to the sentence construction) the questions asked of her in cross-examination. I have made allowances for the circumstances that English is not her first language and the real prospect that her cultural background has not equipped her with any familiarity with the practices and procedure of adversarial litigation. However, certain aspects of the giving of her evidence, unrelated to her demeanour, undermined her credibility.
2. Annie was not forthcoming in her answers and repeatedly asked where Mr Lloyd was reading from. She was unprepared to answer questions from her memory and wanted to resort to documents, although she had no contemporaneous notes of events.
3. Annie was also cagey about the time at which her marriage with the plaintiff had broken down. My impression was that she appreciated that she had allowed Ms Melick and Mr Richmond to represent that the share transfer had been effected after the marriage had broken down (in the hope that this would enable them to avoid having to pay stamp duty) and therefore did not want to acknowledge the truth. On the basis of her statutory declaration made on 9 August 2016 in the Family Law proceedings, I accept that the marriage had not irretrievably broken down until about August 2014. During the period from April 2014 until August 2014, the plaintiff and Annie had reconciled and were living again as husband and wife. It was in the early part of this period when 99 of the plaintiff's 100 shares were transferred to the family trust.
4. I formed the view from Annie's evidence that she was motivated to assist the plaintiff and would give her answers with his interests in mind. As my findings recorded above indicate, I accepted her evidence in some respects but, largely, when it was corroborated or against her interest or that of the plaintiff.

Mr Kam

1. Mr Kam presented as a careful, conscientious accountant who had a clear idea of his professional responsibilities and role. I accept his evidence that he was diligent about making file notes of telephone conversations or meetings with clients and, if he was able, would make a contemporaneous file note in the course of the communication. He had the stationery for his file notes at home which meant that when Annie called him on 12 April 2014 to ask him if he would meet her, he took the stationery to Chatswood Chase so that he could make a note of their exchange. His file notes were not, and did not purport to be, a verbatim transcript of what was said. However, they were sufficiently detailed to refresh his recollection and support his evidence as to what occurred. I reject Mr Priestley's submission that the file notes did not, on proper analysis, support Mr Kam's version.
2. In cross-examination, Mr Priestley explored the extent of Mr Kam's recollection of the meetings and conversations to which he deposed in his affidavit evidence. He put that Mr Kam was merely reconstructing from his file notes. I formed the impression that Mr Kam had an actual recollection of these communications. I accept Mr Kam's evidence that the meeting with Annie at Chatswood Chase was an extraordinary encounter in that he did not usually meet clients on weekends. Further, it was the first time he had been informed of matrimonial difficulties between the plaintiff and Annie. In addition, Annie was proposing something which Mr Kam considered to be adverse to the family's financial interests because the transfer of the shares would attract not only stamp duty, but also capital gains tax. He regarded the second of these imposts as being potentially the more serious because the plaintiff was a property developer and operated a business the very purpose of which was to achieve a capital gain on land holdings.
3. The plaintiff's determination to reject Mr Kam's advice and transfer the shares to the family trust, thereby incurring a potentially substantial tax liability (to avoid what he, at the time, perceived to be the lesser evil of alienating Annie, whose co-operation was integral to his property development business) was something which, as Mr Kam said, and I accept, was "burned into [his] mind". Although he prepared the transfer documents (as he considered himself obliged to do, having been instructed to do so by his clients), he did so unwillingly because he was concerned that the transfer was not in the interests of either the plaintiff or Annie.
4. Mr Kam was clear about the limits of his role. Having advised both Annie and the plaintiff of the imprudence of the share transfer and the fact that, if they deferred the transfer until it could be incorporated into a property settlement upon their divorce, they would not be liable for duty, he nonetheless accepted the plaintiff's instructions to effect the transfer. He, properly, regarded himself as bound by his client's instructions, even if they were contrary to the warnings and advice he had given.

Matters no longer in dispute

1. Mr Lloyd confirmed, that the appropriate, and only relevant, defendant was the second defendant.
2. Mr Lloyd indicated at the outset and confirmed in his closing submissions that the defendant accepted that, if the plaintiff's versions of the conversation on 14 April 2014 and 3 May 2014 were accepted, the defendant was negligent. He also accepted that, in that event, factual causation within the meaning of s 5D(1)(a) of the Civil Liability Act 2002 (NSW) was established and that there was no issue about scope of liability causation. Mr Lloyd did not make submissions on the allegation of contributory negligence or the limitation defence, both of which were pleaded. In these circumstances, I understand them not to be pressed.
3. Mr Lloyd also confirmed that the only issue as to quantum related to the allegation that the plaintiff had failed to mitigate his loss by arguing in the NCAT proceedings that he was entitled to an exemption on the basis that the transfer had formed part of a property settlement and that the plaintiff had not proved the legal expenses which he claimed to have paid his advisers.

The plaintiff's primary case

1. As referred to above, the principal issue as to liability is a factual one.
2. Mr Priestley submitted that the only reasonable hypothesis to explain why the plaintiff would retain a single share in D&A and transfer the remaining 99 shares to the family trust was that Mr Kam had advised that the transfer of a minority interest would not attract duty. I reject this submission. As referred to above, there were sound commercial reasons for the plaintiff to retain at least one share. First, he can be taken to have appreciated that there were benefits to being a shareholder of D&A. Second, his position vis-à-vis D&A was substantially the same after the transfer as it was before the transfer. Prior to the transfer, the plaintiff could only cause the company to do anything if Mr Chen agreed (since they held equal shares in D&A). After the transfer, he and Mr Chen collectively would have a majority of shares (101 out of 200). Thus, if he and Mr Chen agreed, they could cause D&A to act. The plaintiff may have regarded it as unlikely that Mr Chen would vote with Annie and against him. Thus, the plaintiff's capacity to control D&A would remain the same after the transfer as it had been before the transfer. Although the plaintiff said in cross-examination that this was "the first time [he had] heard of this kind of story", I infer that the plaintiff (and Annie) appreciated this dynamic.
3. Mr Priestley submitted that the use of the word "possible" in Mr Kam's file note of his meeting with the plaintiff on 18 May 2016 indicated that Mr Kam had not in fact advised the plaintiff that stamp duty would be payable on the transfer since it was merely "possible". I do not consider that the use of the word "possible" in the notation on the file note undermines Mr Kam's evidence about the advice he consistently gave the plaintiff and Annie that a transfer of shares would attract stamp duty and capital gains tax. I consider that the word "possible" was intended to incorporate the concept that the stamp duty would not be quantified until it was assessed on an ad valorem basis. Thus, although stamp duty had to be paid, its amount was "possible" (or hypothetical, in the sense of being unquantified) until assessed.
4. For the reasons given above, I reject the plaintiff's version of what transpired between him and Mr Kam on 14 April 2014 and 3 May 2014 and accept Mr Kam's version. Mr Kam advised the plaintiff that stamp duty and capital gains tax would be payable on the transfer of the D&A shares to the family trust and that the only way of avoiding stamp duty and capital gains tax on the transaction was to wait until he and Annie divorced and then transfer them as part of the property settlement. As the defendant was intent, at that stage, on preserving his marriage with Annie (and her co-operation with the property development), he decided that it was in his interests to transfer the shares, notwithstanding that he had been advised that the family trust would incur a liability for stamp duty and capital gains tax.
5. I reject Mr Priestley's submission that Mr Kam was also obliged to refer the plaintiff, in terms to s 163B of the Duties Act. I consider that the advice Mr Kam gave was sufficient to inform the plaintiff that if the transfer was done as part of divorce proceedings, neither stamp duty nor capital gains tax would be payable. Further, he suggested that the plaintiff seek advice from a family lawyer.
6. Having regard to these findings, the plaintiff has failed to make out any of its particulars of negligence since Mr Kam gave him the advice which the plaintiff alleged he failed to give.

The alternative case

1. In written submissions dated 29 September 2022 (the last date of the hearing), Mr Priestley put what he described as an "alternative case" as follows: "The Plaintiff's case in the alternative if the court is not satisfied that the advice was given as pleaded. 11 If the court is not satisfied that the advice that a minority transfer would avoid duty was given, the Plaintiff submits that the court would nevertheless the [sic: be] satisfied that the Plaintiff proceeded for some reason on the understanding that duty would not be payable on a transfer of only 99 shares. Again this is supported by the objective probabilities. 12 On that basis the Defendant failed to take proper instructions, or advise that this was a misapprehension. Unlike a situation where it is concluded that the Plaintiff was fully aware of the obligation, in that scenario but for the failure the transaction would probably not have proceeded, as the Plaintiff was averse to paying the duty."
2. The so-called alternative case (which appeared to be based on a scenario that the plaintiff would have gone to others to get alternative advice) was not only not pleaded but it was also inconsistent with both the plaintiff's evidence as to the discussions between them on 14 April 2014 and 3 May 2014 and Mr Kam's evidence of those discussions. Further, I am unable to discern any foundation in the evidence for a relevant counterfactual based on the rejection of the plaintiff's evidence. Thus, I am not in a position to determine causation on the alternative case, as I am required to do by s 5D(1)(a) of the Civil Liability Act. For these reasons, I reject the alternative case theory for which Mr Priestley contended.

Damages

1. Notwithstanding my finding that the plaintiff has failed to make out his case on liability, I am obliged to determine all relevant issues, including as to damages. Mr Lloyd informed me that the only issue about damages related to the claim for the costs of the NCAT proceedings since the defendant otherwise accepted that the plaintiff, if he established that the defendant was liable, would be entitled to reimbursement of 50% of the liability for stamp duty. Thus, the defendant accepted the correctness of the figure in the schedule of damages which calculated damages to 19 September 2022 of $301,156.85 (total amount owing to OSR) plus $44,992.82 (being the amount by which Annie overpaid her share), together with interest. Accordingly, the only issue to be decided is the further item which the plaintiff claims, being the total amount of $137,261.21 alleged to have been paid for the costs of the NCAT proceedings.

Onus of proof

1. Mr Lloyd submitted that the plaintiff had not proved his loss by tendering invoices for legal advice since he was required, in order to discharge his onus of proof, to prove the amounts that he had in fact paid for legal costs. He also submitted that it ought not be inferred from the circumstance that Annie paid some of the legal costs, that the plaintiff was obliged to reimburse her since the evidence was not to that effect.
2. The evidence established the following payments of legal fees relating to the challenge to the OSR assessment and the NCAT proceedings: Date Amount Recipient 10 October 2018 $3,906.65 Ian Archibald 18 December 2018 $2,755.61 Ian Archibald

1. Mr Lloyd submitted that no assumption could be made that the plaintiff (as opposed to Annie) made any other payments with respect to the legal costs associated with the NCAT proceedings. I am not persuaded that the plaintiff has proved any other loss in respect of the costs of the proceedings, other than reflected in the table above. The plaintiff has failed to prove that he, rather than Annie, made those payments.

Alleged failure to mitigate loss

1. Mr Lloyd argued that it was not reasonable for the plaintiff to challenge the assessment on the first basis set out above (that the transfer formed part of a property settlement as the marriage had broken down) which was, to the plaintiff's knowledge, false. He submitted that, to the extent to which legal costs were incurred by the plaintiff in NCAT in advancing arguments on the first basis, they were unreasonably incurred and did not amount to a reasonable attempt to mitigate the plaintiff's loss.
2. I accept this submission. I am satisfied that when the plaintiff and Annie instructed the defendant and, subsequently, Ms Melick and Mr Richmond and the legal practitioners who acted for them in NCAT, that the transfer of shares in D&A had been made as part of a property settlement following the irretrievable breakdown of their marriage, they knew these instructions to be false. It was, accordingly, unreasonable for the plaintiff to put such a submission in NCAT.
3. Mr Lloyd accepted that it was difficult to dissect the costs associated with putting the arguments in favour of an exemption under s 163B (Exemption - break-up of marriages and other relationships) of the Duties Act and the costs associated with putting the other arguments in NCAT. He contended that a broad-brush approach would be appropriate and that I could infer that 50% of the costs were unreasonably incurred.
4. Having regard to my findings on liability, it is not necessary to quantify the damages precisely. I regard the findings set out above as sufficient to indicate to another court the integers by which any award of damages could be calculated if a different view were taken on liability.

Costs

1. The general rule is that costs follow the event: Uniform Civil Procedure Rules 2005 (NSW), r 42.1. Both Mr Lloyd and Mr Priestley confirmed that there was no reason in the present case to depart from the general rule.

Orders

1. At the conclusion of the hearing on 29 September 2022, I made the following orders, for the reasons set out above: 1. Judgment for the defendants. 2. Order the plaintiff to pay the defendants' costs of the proceedings, including any reserved costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 06 October 2022