Jin v St George Bank Limited

Judgment Introduction 1Mr Jin is a Chinese/ Australian businessman who, at all material times, was unable to speak or read English without the assistance of a translator. His former accountant was Mr Li. Mr Li and Mr Jin were involved, in ways that no longer matter, in two apartment developments in Parramatta. Various sums were advanced by Mr Jin to Mr Li and to entities related to the latter during the course of the developments. In substance, the dispute between Mr Jin and Mr Li was whether the amounts advanced were loans or investments and the extent to which Mr Jin was repaid. In addition, Mr Li procured finance from St George Bank Limited to fund part of the developments. Mr Jin is recorded as a party to a number of these agreements with the bank. 2In 2007 proceedings were commenced by Mr Jin against the bank seeking various declarations and ancillary orders in respect of a mortgage registered on the titles of two strata units belonging to him. The bank denied or did not admit the circumstances upon which Mr Jin relied for claiming relief and cross-claimed against Mr Jin and Mr Li and his associated entities (the Li parties) in respect of their obligations under the bank's security and also sought orders for possession of the mortgaged units. 3 On 27 February 2012, at the commencement of the hearing, the bank, by its solicitor, appeared to submit to the orders of the court except as to costs. He was excused from any further attendance. 4The trial then proceeded as between Mr Jin and the Li parties. Mr Jin gave evidence, as did a handwriting expert, Dr Strach as to the impugned signatures. There was also a joint report by him and another handwriting expert, Mr Heath, retained by the Li parties, in which Mr Heath agreed with Dr Strach's opinions as contained in his reports. Mr Li called two witnesses, in addition to giving evidence himself. Those witnesses were former employees. As it happened, Mr Li was called on the fourth day of the trial. After extensive cross-examination I indicated, at the end of the day's proceedings that I had formed a very adverse view about Mr Li's credibility. On the morning of the fifth day I was informed by counsel for Mr Jin and the Li parties that they had been able to resolve the matters which were in dispute between them and orders were made by consent in that respect. Declarations were also made in favour of Mr Jin against the bank but, of course, these could not be made by consent. I set out below the way in which these were resolved. In respect of the bank, the question of costs was reserved. 5Mr Jin now seeks an order for costs against the bank on the conventional ground that his action succeeded and costs should follow the event. The course of the litigation 6By his further amended statement of claim Mr Jin sought a number of declarations. The first was that a guarantee of 2001 between the bank, Mr Jin and the Li parties did not, on its true construction, guarantee payment by Mr Jin to the bank of amounts owing under mortgage agreements or accounts dated in 2003, 2004 and 2005 (which involved advances to the Li parties). In the alternative, declarations were sought that the guarantee of 2001 was unjust pursuant to the Contracts Review Act 1980 or was otherwise executed in circumstances that rendered reliance on the guarantee unconscionable. He also sought declarations that the bank was not entitled to exercise any statutory power of sale under s 58 of the Real Property Act 1900 in respect of two mortgaged properties and that there was no amount owed by him to the bank which was secured by registered mortgage. An order for delivery up of a duly executed discharge of the mortgage was also sought. In respect of the claim under the Contracts Review Act, Mr Jin alleged that, at the time he executed the guarantee, he was unable to speak or understand English and relied upon Mr Li to explain the documents to him and that, in the circumstances, Mr Li acted as the agent of the bank to procure his signature and, by virtue of that agency was aware, amongst other things, that Mr Jin mistakenly believed that the guarantee concerned only a loan that had been made in July 2001 and not subsequent advances. So far as the 2003 transaction was concerned, which involved a loan agreement and a mortgage, Mr Jin's signatures on the security documents were forged by Mr Li or an unknown person on his behalf and were entered into in Mr Jin's name without his knowledge or consent. Consequently, the bank was not entitled to enforce any covenants for repayment under the forged loan agreement, there were no amounts owing by Mr Jin to the bank pursuant to it or secured by the mortgage and thus Mr Jin was entitled to have the mortgage removed from the title or discharged. 7The bank filed a defence to the further amended statement of claim denying that Mr Jin's liability under the guarantee expired in October 2003 and that it did not extend to the further advances. It did not admit that any of the circumstances rendered the guarantee unjust within the meaning of the Contracts Review Act 1980. The bank did not admit any of the matters relied on by Mr Jin in respect of his unconscionability claim. The bank also alleged that the loan agreement and the mortgage were indeed executed by Mr Jin and denied any forged signatures. 8The bank also cross-claimed against Mr Jin. Firstly, in the event that the mortgage was set aside, the bank claimed payment of $360,750 plus interest, alternatively verdict and judgment against Mr Jin for a sum in excess of $3 million plus interest and costs under the 2001 guarantee, in addition verdict and judgment in an amount in excess of $1.6 million under the 2003 agreement and an order for possession of the mortgaged property. 9Mr Jin's statement of claim was filed on 8 May 2007 and the bank's defence filed on 1 August 2007. On 30 August 2007 a status conference was stood over for two weeks at the bank's request, it not being in a position to agree to orders to progress the matter. On 13 September 2007 orders were made for the service of evidence by the bank by 8 November 2007. The bank failed to comply with this order. On 29 November 2007 the bank was granted a further extension of time to serve its evidence by 31 January 2008 and also leave to amend its defence. On this occasion, the bank was also granted leave to adduce expert evidence at the final hearing. The bank did not serve its evidence in accordance with these orders. It obtained a further extension of time on 28 February 2008 to serve its evidence by 24 April 2008 and failed also to comply with these orders. On 16 May 2008 the bank obtained leave to file a cross-claim by 23 May 2008, the costs wasted as a result of the filing of the cross-claim being reserved. The Court noted that the bank did not propose to serve any expert evidence and required the bank to have served its outstanding evidence by the next occasion. On 23 May 2008 the bank served its cross-claim, seeking relief only against Mr Jin and also to be subrogated to the rights of the Li parties in respect of payments allegedly made to Mr Jin with the bank's money, namely the $1.6 million advanced in 2003. Mr Jin's defence to the cross-claim was filed on 20 June 2008. By 13 June 2008 the bank's outstanding evidence had not been served and orders were made requiring this to be done by 27 June 2008, with the proceedings listed for final hearing on 9 and 10 September 2008. The bank served affidavits in respect of the transactions, including the forged signatures, sworn 27 June 2008, 17 July 2008, 29 July 2008, 30 July 2008 and 4 September 2008. It is clear that this evidence required a response by Mr Jin and it is obvious that substantial costs were involved in doing so. On 5 September 2008, on the application of the bank, Hoeben J (as his Honour then was) vacated the hearing dates on the bank's application and ordered that the bank pay Mr Jin's costs of that date and those costs thrown away as a result of the vacation of the hearing dates. On 9 September 2008 the bank obtained leave to file the amended cross-claim which had been foreshadowed before Hoeben J. The bank did not comply with the ordered filing date of 7 October 2008 and the matter was re-listed later that month. On 15 October 2008 the bank filed its amended pleading, which brought into the proceedings the Li parties as parties to the litigation, the earlier cross-claim having been brought only against Mr Jin. On 8 May 2009 Mr Jin amended his claim against the bank to include relief in respect of the 2001 guarantee. On 31 July 2009, in a directions hearing before Harrison J, Mr Newton of counsel for the bank, informed the Court that there were "many securities" involved in the litigation and sales were underway. He said that, in respect of one remaining property, contracts had yet to be exchanged, with settlement following within the ensuing five to six weeks and it was expected that the bank's debt, interest and costs would be paid out with some surplus. (Although the submission on Mr Jin's behalf in respect of costs states that during this hearing the bank indicated as a result of the realisation of security it might file a submitting appearance, the transcript reveals that this was not in fact said, although perhaps it might have been indicated to Mr Jin's counsel at the time.) Counsel for the bank simply indicated a hoped outcome, without any expression of certainty. It was no doubt for this reason that the directions were made which, so far as the bank was concerned, were designed to move the proceedings forward in the ordinary way, upon the basis necessarily that the bank was still an active litigant. Accordingly, Harrison J, by consent, ordered the bank to file and serve its defence to the further amended statement of claim by 7 August 2009. The bank was also ordered, with its consent, to file and serve any further amended cross-claim by 7 August 2009. It did not do so and, accordingly, its case, so far as the cross-claim was concerned, depended upon the amended first cross-claim which had been filed on 15 October 2008. As I have said, that claim sought from Mr Jin moneys paid to him, which were derived from the bank. The bank relied on a loan facility agreement and guarantee executed by Mr Jin. Mr Jin did not dispute that he had indeed executed this agreement but claimed relief in respect of it because, in the circumstances, it was unjust to enforce it against him under the Contracts Review Act 1980. The bank also relied upon an agreement and supporting security documents entered into in June 2003. As I have mentioned these documents had not been executed by Mr Jin but were forged, probably by Mr Li or someone else on his instructions. The bank also relied upon a further agreement with associated securities entered into in 2004. Again, Mr Jin's signature on these documents was forged. Further agreements and securities which did not involve Mr Jin were also relied on. I note, for reasons that will become clear, that although the bank's case in the defence and its cross-claim refer to registration of the mortgage, there was no suggestion that the bank relied upon any indefeasibility by virtue of that fact. 10At no stage did the bank seek discontinuance of its claim against Mr Jin. Far from it. On 25 September 2009 the bank filed a defence to Mr Jin's further amended statement of claim, maintaining its position that he had indeed executed the relevant financial securities, and denying that his signatures were forgeries. 11On 15 December 2011 the matter was set down for hearing on 27 February 2012. It is said on behalf of Mr Jin, and I accept, that the bank was served by Mr Jin's solicitors with affidavits, further experts' reports (confirming Dr Strach's reports of 2006) and other documents connected with the proceedings, including a six volume court book, submissions, chronology and objections to evidence including to a number of the affidavits which had been served by the bank. During none of this period did the bank suggest that this was immaterial or unnecessary. On 20 February 2012, Mr Jin's solicitor informed the bank's solicitor that, in addition to seeking an order that the bank provide a duly executed discharge of the mortgages, a further order, which was not specifically pleaded would be sought that the bank deliver up the certificates of title for the relevant properties. Shortly later that day, the bank's solicitor responded succinctly, "Our client will submit to all orders of the court except as to costs" and did so, as mentioned above. Conclusion of the proceedings 12On 2 March 2012 the proceedings between Mr Jin and the Li parties were settled. The terms of the orders in that respect are immaterial. It was, however, necessary to deal with the proceedings between Mr Jin and the bank. I said - I am satisfied that I should make the declarations sought in the proceedings between the plaintiff and the defendant [bank] and I do so for the reasons set out in the plaintiff's closing outline of the claims relating to ... [the bank] from paragraphs 3 to 17, which seem to me to accurately and appropriately set out the evidence and its effect. That part of the submissions is as follows (omitting transcript and exhibit references) - 3. Although the Bank has, by its pleading, denied or not admitted the various allegations made against it in Mr Jin's claim, the Bank has confirmed that it will submit to orders made in the proceedings subject to the question of costs. Forgery claims 4. Mr Jin has given evidence that that his signatures on a registered mortgage no. 9802401H (Mortgage), an Executive Mortgage Account No. 1 Agreement dated 24 June 2003 (Loan Agreement), a Guarantee and Indemnity dated 17 July 2003 (2003 Guarantee) and various other related security documents were forged, and seeks orders declaring that the securities are unenforceable, that there be a discharge of the Mortgage and the delivery up of the relevant certificates of title in relation to folio identifiers 55/SP68569 and 56/SP68569. 5. In relation to the Mortgage, the Loan Agreement and the 2003 Guarantee, Mr Jin relied upon the evidence of a handwriting expert, Doctor Steven Strach. Dr Strach prepared two reports, a report dated 24 October 2006 and a final report dated 16 February 2012. 6. Dr Strach's investigation was comprehensive. Dr Strach was provided with the documents bearing the original questioned signatures including those contained within the Mortgage, the Loan Agreement and the 2003 Guarantee. In undertaking the examinations, Dr Strach compared the questioned signatures with 41 specimen signatures that had been provided by Mr Jin. Dr Strach's examination of the questioned signatures included examining the signatures both macroscopically and microscopically. The signatures were also examined for the possible presence of latent writing impressions using an electrostatic detection apparatus (ESDA). 7. Dr Strach's findings in relation to the six questioned signatures were that they were not written by Mr Jin. The degree of Dr Strach's conclusiveness was of the highest category. Dr Strach found the questioned signatures to be "so fundamentally different that the writer of the specimens is considered to be incapable of writing the questioned material", this being what Dr Strach described as a "definite negative conclusion". Dr Strach also found the questioned signatures had been written by one person. 8. Mr Li also obtained and served a report from a handwriting expert, Mr John Heath dated 19 June 2009. While Mr Heath expressed an opinion in his report concerning the genuineness of the signature contained in the Mortgage, Mr Heath was not called to give evidence, and Mr Heath's report was tendered only to give context to Dr Strach's final report. 9. Dr Strach and Mr Heath conferred and prepared a joint report in accordance with orders of the Court made in November 2011. At the conclusion of the joint conference, Mr Heath agreed with all of Dr Strach's opinions as contained in both of Dr Strach's reports. The agreement of the experts was set out in a joint report that was tendered in the proceedings. 10. Dr Strach was cross examined briefly during the hearing. A hypothesis was put to Dr Strach that Mr Jin had two signatures and that the questioned signatures comprised his second signature. Dr Strach rejected the proposition and considered the differences between both the questioned signatures and the specimen signatures to be "fundamental and pointing very strongly to two writers". There was no serious challenge in cross examination to any of Dr Strach's opinions. 11. Mr Jin also gave evidence. While it was put to Mr Jin in cross examination that it was his signatures that appeared on the transaction documents, none of the evidence concerning his knowledge of the transaction documents, and the circumstances of their execution was seriously challenged. When taken to examples of his various signatures (both questioned and genuine), he recognised those of the signatures that were his and those that were forged. 12. Both Mr Jin and Dr Strach presented credible and compelling evidence to the Court, and it is submitted that their evidence should be accepted. 13. It is submitted that Mr Jin has established on the balance of probabilities that his signatures on the various transaction documents, including the Mortgage, the Loan Agreement and the 2003 Guarantee, are forgeries. An acceptance of Mr Jin's evidence must result in a finding that the agreements are a nullity and unenforceable. 14. The Loan Agreement (which contains the covenant to pay) is extraneous to the registered Mortgage. Accordingly, the doctrine of indefeasibility will have no application to the Mortgage and it warrants being discharged immediately: see Provident Capital Ltd v Printy [2008] NSWCA 131 [39] - [53]; Yazgi v Permanent Custodians Ltd [2007] NSWCA 240. The 2001 Guarantee 15. Mr Jin also seeks a declaration that the Guarantee & Indemnity dated 27 June 2001 (2001 Guarantee) is unenforceable against him on various bases including that Mr Jin was not aware that the guarantee extended beyond the liability of Yelin Group Pty Limited under a particular facility. Mr Jin claims that he relied entirely upon Mr Li to explain the nature and effect of the agreement, and that Mr Li knew that Mr Jin misunderstood the nature and effect of the document. 16. None of the evidence given by Mr Jin in relation to the 2001 Guarantee has been contested by the Bank. The Bank's claim against Mr Jin 17. In not appearing to advance the claim, and in submitting to the orders of the Court, it is also appropriate that the Bank's Amended First Cross Claim be dismissed with costs in relation to this aspect of the proceedings being reserved. The bank's submissions on the question of costs 13The bank submits that the general rule that costs should follow the event does not apply in the present circumstances and relies upon four matters. 14The first matter is that there were "no findings in relation to the claims between Mr Jin and Westpac". This is incorrect. As the above makes clear, so far as the 2001 security is concerned, I accepted that Mr Jin was misled as to the effect of the transaction by Mr Li and that, in the circumstances, his liability was limited to the extent to which, as he understood it, he was liable. It was not necessary for me to deliver a judgment that explained why this was so, the Bank not being concerned to deny Mr Jin's claim or its basis. It is also argued under this head that the acceptance of Mr Jin's claims that his signature was forged on the relevant documents "does not determine Westpac's defence and claims, including that upon registration of the mortgage, it obtained an indefeasible interest in the plaintiff's property by virtue of section 42 of the Real Property Act 1900. Having declined to appear to put this argument at the hearing, I am unable to see how the bank supposes that it can do so now. At all events, for the reasons mentioned above, the argument is without merit. 15The second matter put forward by the bank is that, "because there are no findings in relation to the claims between Mr Jin and Westpac, the merits of those claims have not been determined ... [and thus] as between them, the court has not pronounced a successful and unsuccessful party". The bank did not appear to advance any case and expressly agreed to abide the result, plainly understanding that Mr Jin was seeking orders against it. I do not understand how it can now argue that, nevertheless, there must, in effect, be a trial of the issues raised in its pleadings, still less that the Court should construct a case that it declined to present. At all events, findings were made and orders pronounced against the bank. 16The third matter relied on is that "the declarations made by the consent of Mr Jin and Mr Li (and the other cross-defendants) ... were not claimed in the Further Amended Statement of Claim". First, the declarations were not made by consent. They had nothing do with Mr Li or the other cross defendants, as the transcript makes perfectly clear. So far as the pleading is concerned, the relevant declarations sought were to the effect that the 2001 securities did not guarantee the further obligations of the Li parties in respect of the 2003, 2004 and 2005 advances, that the bank had no entitlement to exercise any power of sale in respect of Mr Jin's property and that no monies were owing under the mortgage. An order was also sought that the bank deliver up a duly executed discharge of the mortgage. Leaving aside the effect of the 2001 guarantee, Mr Jin's case in respect of the further advances, as the pleading made clear, was that his signature on the security documents (other than those entered into in 2001) had been forged. A finding to this effect was made. The declaration was to the same effect and was in accord with the pleading. The complaint that the declaration was not specifically sought has no merit. The order for delivery of the duly executed discharge was sought in the pleading. The order for delivery of the certificate of title was ancillary, as registration of the discharge required production of the certificate. At all events, Mr Jin's solicitors informed the bank on 20 February 2012 that an order to this effect would be sought. 17Fourthly, the bank submits that the declaration concerning the 2001 security should not have been made since, "in effect Mr Jin's claims on the construction of the provisions of the Guarantee & Indemnity and the Mortgage and the claims that the circumstances in which ... [they] were entered into were unjust or unconscionable were withdrawn". The further amended statement of claim makes it clear that the unjust or unconscionability claims were limited to the additional advances claimed by the bank to have been covered by Mr Jin's guarantee. In that respect, they remained on foot. The bank concedes that the appropriate declaration was that the mortgage secured no debt. The declaration made was to the effect that the securities are unenforceable against Mr Jin. In the circumstances, this is substantially to the same effect as the proposed declaration. There is no merit in the bank's contention in respect of this matter. 18The bank has explained its reason for submitting to the orders of the court. This has no bearing on the issue of costs. 19The bank further submits that no order for costs should be made against it because "the protagonists to the dispute are Mr Jin and Mr Li", Mr Jin commenced his action against the bank when it had made no claim nor sought any orders, Mr Jin claimed that his signatures on the securities had been forged, there was no allegation that the bank was aware of this, the bank obtained affidavits to the effect that the signatures were genuine and, accordingly, the bank acted reasonably in defending the claims and its conduct continued to be reasonable throughout. 20It is obvious that the bank was also a protagonist, it does not matter that Mr Jin commenced his action proactively, since he had a right to do so, the mere fact that the bank had evidence - upon which it did not rely - that the signatures were genuine is immaterial, as is the reasonableness with which it defended Mr Jin's action. The fact that a party who loses acts reasonably in litigating the case might be material to the question of indemnity costs but it is not a basis for refusing the successful party an order for costs. It is therefore unnecessary for me to consider Mr Jin's submissions that the bank could have conceded at an earlier stage. 21The bank further submits that the Court should exercise its discretion not to order it to pay costs as well because, having regard to the payment of the relevant debts after commencement of the litigation, it was unnecessary for the bank to defend the claim or proceed with the cross claim. That may be so. However, as the chronology makes clear, the bank was an active litigant up to the day immediately before the trial. The fact that the bank had, as the circumstances turned out, no interest in the litigation, is not material to the question of the costs incurred by Mr Jin in vindicating his position vide the bank. The bank will not be responsible for his costs past the date it indicated it would abide the orders of the court. 22Penultimately, the bank refers to the history of the advances and transactions, including registration and contends that, in the circumstances, the bank's interest was protected by the indefeasibility provisions of the Real Property Act 1900. This argument is directed to establish the orders, which it undertook to abide, were wrong. I do not accept that the bank is entitled to mount such a case at this point. Nor do I accept at all events that my finding as to this issue is mistaken. 23Lastly, the bank seeks to demonstrate that the declaration as to the 2001 security is wrong, in part by relying on allegations as to the circumstances in which it was entered into, contending in effect that it was an innocent party. Mr Jin pleaded, in substance, that Mr Li was the bank's agent in relation to the transaction, hence that it was bound by his conduct. The bank declined to litigate the issue and cannot do so now. Conclusion 24The bank is to pay Mr Jin's costs in respect of his action and its cross claim up to and including 20 February 2012, including costs of and incidental to the question of costs.