JUDGMENT ( Professional negligence - solicitors - Froggy.com - limited retainer - fiduciary duty - managed investment schemes)
1 The causes of action by the three plaintiffs, Rima Ibrahim (Ibrahim), Sargon Badal (Badal) and Badal Investments Pty Ltd (Badal Investments) are pleaded in the Fourth Amended Statement of Claim filed in Court on 4 August 2004. The defence of the first and second defendants is that filed on 2 August 2004, and that of the remaining defendants is that filed on 27 July 2004.
2 The first defendant, Philip Pham (Pham), is a solicitor of this Court. The second defendant Pham Atic Pty Ltd (Pham Atic) is a company registered on 13 June 2001 and a solicitor corporation pursuant to the provisions of the Legal Profession Act 1987 (NSW) - collectively the Pham defendants. The third to sixth defendants are collectively a firm of solicitors known as Dominic David Stamfords (DDS).
3 The claim by the plaintiffs against the Pham defendants arises out of a $70,000 loan from the Bank of Adelaide, which led to a $50,000 investment agreement between Badal Investments and Karl Suleman Enterprises Pty Ltd (KSE) dated 11 September 2000.
4 As against the Pham defendants, the plaintiffs claim in negligence (paragraphs 3 - 31 of the pleadings); a Fair Trading Act 1987 claim against Pham (paragraph 32 of the Statement of Claim), a Trade Practices Act 1974 (Cth) claim against Pham Atic (paragraph 33 - 36 of the pleadings) and breach of fiduciary duty against the Pham defendants (paragraphs 48 - 54 of the Statement of Claim).
5 The plaintiffs' claim against the third to sixth defendants DDS is in negligence, breach of fiduciary duty and contravention of the Fair Trading Act. The allegations in respect of negligence are set out in paragraphs 37 - 46 of the Fourth Further Amended Statement of Claim; the allegations in respect of breach of fiduciary duty are set out in paragraphs 55 - 59 of that pleading, and the allegations in respect of the Fair Trading Act are contained in paragraphs 47 and 47A.
6 The claim against DDS arises out of the discharge of the loan from the Bank of Adelaide, and a refinancing with Perpetual involving a further $50,000 investment with KSE.
7 The sums of money are relatively small compared to the resources devoted to the litigation of the claims. The hearing lasted approximately 16 days with four days of submissions. The evidence in the usual fashion for this kind of case was constituted by many affidavits with substantial annexures and exhibits, by way of evidence-in-chief and lengthy cross-examination.
8 From the point of view of the plaintiffs, the strategic approach is identified as first being two factual bases upon which the plaintiffs must succeed: first, the evidence for the plaintiffs is correct and express representations were made to them by Pham, the solicitor in connection with the first transaction and Ms Jajoo, the solicitor in respect of the second. Secondly, it is contended, that on the defendants' own "scenario" and evidence, the defendants are nonetheless liable.
9 At the outset I should state that the strategic approach for the plaintiffs is flawed by my having quickly formed the view that neither Ibrahim nor Badal was a reliable or credible witness.
10 The nub of the case advanced by Ibrahim is set out in paragraph 15 of her affidavit sworn 17 August 2003. She swears that at the end of the first meeting between her, Badal, Pham and a Mr Varda, Badal asked Pham, "is this investment good?" to which Pham replied, "yes, I am a solicitor. I am involved in the investment. This is a good investment. Read the contract and there is a guarantee."
11 In his affidavit sworn 18 August 2003, Badal says, paragraph 13:
"Before we departed the office, I said to Pham words to the effect of: 'Pham, is this a good investment?' Pham responded with words to the effect of: 'Yes. There are solicitors involved in this investment. Read the contract and there is a guarantee.'"
12 As observed in the plaintiffs' summary of evidentiary material, there is no reference in Pham's affidavit to Mr Varda.
13 Mr Varda should have been called by the plaintiffs. That is the Jones v Dunkel ruling I make. He, more probably than not - indeed the evidence is almost overwhelming - was the person who made any representation in the interests of Mr Suleman, whose agent for the gathering together of members of the Assyrian community to invest, he appears to have been.
14 By way of the briefest of examples, Ibrahim was not aided in seeking to have her testimony as a whole accepted as reliable and honest by the elevation of a representation said to have been made by Pham to her in terms that "you will be a millionaire, rich" (T75.25).
15 Even making an allowance for the use of a translator, the emotional overlay associated with these proceedings and the financial self interest, Ibrahim was a poor and obviously unreliable witness. Ibrahim refused to answer direct questions (even through the translator), was unresponsive, forced evidence and made increasingly extravagant claims as exemplified above throughout the course of her cross examination.
16 Initially, Ibrahim said that before the events involving Pham she had not borrowed any money with Badal (with whom she had been residing since widowhood), that she did not provide any assistance to Badal in respect of the loan from the bank (Esanda Finance) for the purchase of the motor vehicle; that she did not sign any loan contract in respect of the motor vehicle in her own name as a borrower. When confronted with the loan document (exhibit 1), Ibrahim agreed that she was described as a borrower in that document, but she could not remember what happened when she signed the April 1999 loan document with Esanda because "It's a long time ago, 99". Notwithstanding that it was only 16 months prior to the events concerning Pham, Ibrahim said in respect of the Esanda loan (exhibit 3) that she could not remember properly. Ibrahim understood that she was signing the loan document with Esanda because she was actually sharing the motor vehicle with Badal; yet said that she did not know what the word "borrower" means now, notwithstanding that in these proceedings the words were being translated to her in her own language (T23.33-.40).
17 Further, before seeing Pham in August 2000, and with the exception of the Esanda loan document, she had made no applications for finance in her own name. Despite initially agreeing that she had made an application on 29 May 2000 to Community First Credit Union for a loan, Ibrahim then said that she had not placed an application. She said that she thought that she was being asked about the loan the subject of these proceedings. Ultimately, she agreed that she did make an application in May 2000 and on 25 May 2000 and also made an application to St George Bank (T26.30-.55) (exhibit 24).
18 There are extraordinary similarities in the precise words used in the affidavits of Ibrahim and Badal (T45.5-52.1). I am satisfied that Badal and Ibrahim could not have had materially identical recollections (that is, the exact same words, punctuation and the like) in relation to a series of conversations which occurred some 3 years prior to the swearing of their affidavits. The identical and incorrect use of the words "(pointing at Badal)" at paragraph 15 of Badal's affidavit and paragraph 20 of Ibrahim's affidavit make it a nonsense to suggest otherwise. I have no confidence in the reliability of the affidavit evidence of the plaintiffs. Inconsistencies in recollections (of the type which have occurred in affidavits in relation to peripheral aspects of the defendants' cases) are to be expected and is a hallmark of honest evidence giving. It is not to be expected that affidavits containing materially identical conversations (precise words, punctuation and the like) by different but financially interdependent witnesses be put before the Court.
19 Ibrahim was uncertain as to the duration of the first meeting with Pham; she gave various time estimates. Notwithstanding there was no reference in her affidavit, she said that Pham said that the whole loans had to be put into one so then he could actually get another loan for her. Notwithstanding being asked direct questions, through a translator, Ibrahim refused to agree that there was nothing in her affidavits concerning the allegation that Pham insisted on a consolidation of the loan.
20 Ibrahim appeared to refuse to be able to agree that in her affidavit, there was no reference to any translation by Mr Varda occurring during the meeting with Pham. The only explanation that Ibrahim could give as to why that matter does not appear in her affidavit was that she did actually say she had a problem in remembering things, but the more "I am asking her the more things are becoming real" (T64.20). After the question was re-read on 2 occasions, Ibrahim did acknowledge that she had said that she had a problem in remembering things (T65.49/64.17). She had a problem remembering things because of an operation she had "on a haemorrhage" in May 1993 which, as she understands it, affects her recollection. Sometimes, that is a reason for her forgetting things.
21 Ibrahim said that Pham did not give her an investment contract at the first meeting, acknowledged that Pham did not say "read the contract" at the first meeting, but immediately changed her evidence when her attention was drawn to paragraph 15 of her affidavit. Ibrahim alleged Pham in effect corroborated Mr Varda's pronouncements as to the investment being good. I did not believe her.
22 Quite unprompted, Ibrahim said that Pham said "You'll be a millionaire, rich", "I will give you my guarantee that this investment will go for 10 years, even more", "This will make you into a millionaire", "I've also done for other people apart from you and they're all very happy", "They're all happy with the amount of income that they're getting in, we'll all be millionaires." (T71.25-.45). Her only explanation as to why these extravagant remarks by Pham do not appear in her affidavit was because she was now being asked. Again I was unpersuaded by her efforts to extricate herself.
23 She said that a lot of people in the Assyrian community were saying "If you want more information, you go to Philip Pham" and they were also "giving him a very good reputation". Then, she said that people were only saying that after the transaction had gone ahead. She then said that people who had already done it said that it was a very good business and that you will succeed in it and Philip Pham is a very good solicitor. Ibrahim alleged that she said these things to Pham, namely, that other people had told her that they had gone with Philip Pham and that he was good and the people which he had done work for were happy.
24 Ibrahim at first did not recall Pham making a phone call in her presence at the meeting on 30 August 2000 (T88.2). She then said the phone call was actually made in a different language, so that is why she did not know if it was in relation to her and Badal or not. She said that he did not make a phone call in front of "us" but he did say "if you just hang on for a minute" and then he went out and came back and said he had made a call.
25 As to the meeting with Mr Nguyen, she said he did not say "Are you guys investing in the trolley businesses?" (T91.54). When shown paragraph 20 of her affidavit, Ibrahim then did say that that bit he was saying and then Sargon said yes then the other bit was if I was a guarantor and I said yes and that's it. These were the words which were being spoken. Ibrahim denied that Mr Nguyen asked her to produce her Medicare card to identify herself (T95.20). However, Mr Nguyen provided a photocopy of it from his file (exhibit 11).
26 Ibrahim alleges that she told Ms Jajoo in July 2001 that "we have done it once before with another solicitor who Jesse George had actually sent us and Jesse George is now sending us to you." (T98.50).
27 The evidence of Ibrahim was materially contradicted by the evidence of each of Pham, Nguyen and Ms Jajoo. Aspects of the evidence of Ibrahim were contradicted by the evidence of Badal.