John Hudak & Anor v Rhys Adams & Anor

Supreme Court of NSW|2013-09-27|Before: Rein J, Mr J

Property Management Authority (second defendant/ cross claimant) File Number(s): 2013/153338

Judgment 1REIN J: The first plaintiff (Mr John Hudak) is 91 years of age. He is, and was, at all material times, a director and the secretary of the second plaintiff J.H. Enterprises Pty Ltd ("JHE"). Mr J. Bartos of counsel appears for the plaintiffs. 2JHE was, until 26 July 2012, the registered proprietor of two semi-detached cottages at 80-82 Gale Road Maroubra, also known as 80-80A Gale Road Maroubra. I shall refer to both lots as the Maroubra semis. 3The only other director of JHE is Mr Hudak's daughter Ms Debbie Dexter ("Ms Dexter"). 4The first defendant, Mr Rhys Adams ("Mr Adams"), on 27 July 2012 became the registered proprietor of the Maroubra semis. Registration of the semis in the name of Mr Adams was effected by means of a transfer purporting to be signed by Mr Hudak as "sole director" of JHE: see Exhibit B, p 19. A transfer for Lot 1 alone also bears a signature purporting to be that of Mr Hudak is in evidence: see Exhibit C. I shall refer to "the transfer" in the singular but both semis were transferred. Mr Lloyd QC appears with Mr Accoto for Mr Adams. 5Mr Hudak (and JHE) assert that Mr Hudak's signatures on the two transfers is not his and were forged and that Mr Adams has obtained title to the Maroubra semis by fraud. 6Mr Adams obtained a loan from Westpac using the Maroubra semis as security for the loan. There is presently owing to Westpac approximately $920K secured by a mortgage on the semis granted by Mr Adams to Westpac Banking Corporation ("Westpac"). 7JHE also claims against the second defendant, the Register General, that it is entitled to compensation from the Torrens Fund established under the Real Property Act 1900 (NSW) ("RPA") by reason of Mr Adam's fraudulent conduct: see s 129(1)(e) of the RPA. Mr H. Altan of counsel appears for the Registrar General. Section 129(1)(e) provides that a person who has suffered loss or damage as a result of operation of the RPA arising from the person having been deprived of land or any estate or interest in the land as a consequence of fraud is entitled to payment of compensation from the Torrens Assurance Fund. 8The Registrar General accepts that if fraud is established in this case, JHE is entitled to compensation from the Fund (T36). The Registrar General has cross claimed against Mr Adams asserting that Mr Adams is liable to indemnify the Fund for any payment required to be made to JHE. Mr Adams accepts that if fraud is established against him he will be liable to repay any money paid by the Registrar General to JHE to the Registrar General (T37.19). 9In support of their case the plaintiffs rely on: (1)An affidavit of Mr Hudak of 12 May 2013 (2)An affidavit of Mr Hudak dated 3 September 2013 (3)An affidavit dated 1 September 2013 of Ms Lydia West (Mr Hudak's wife) (4)An affidavit dated 3 September 2013 of Ms Dexter. (5)A joint export report of Mr Paul Westwood, forensic examiner, dated 1 August 2013 (see Exhibit C). (6)A number of documents, contained in Exhibit B, to which I shall return. 10Mr Adams did not call any evidence at the hearing and his decision not to do so was communicated to the plaintiff's solicitor and the Court a few days before the hearing and reiterated by Mr Lloyd at the commencement of the hearing. 11Mr Hudak's evidence is that he, JHE and other companies controlled by Mr Hudak used the services of Mr Adams as a builder and handyman through Mr Adam's company CDS Commercial Pty Ltd ("CDS") on a number of properties. CDS would render invoices for that work which Mr Hudak or Mr Hudak's company paid by cheque. Mr Hudak says he became acquainted with Mr Adams but only in the context of the jobs and says that he told Mr Adams about the properties and companies he owned. Mr Hudak says that he had a cordial but professional relationship with Mr Adams but did not socialise with him and would not describe him as a friend. 12Mr Hudak says that on 13 September 2012 he was informed by his solicitor, Ms Edita Berntsen, that Mr Adams had become the registered proprietor of the property and on the basis of a transfer which described the consideration of the transfer for the Maroubra semis as the amount of $1.67M. Mr Hudak says neither he nor JHE entered into any such transaction and received no money from Mr Adams for the transfer of the properties. Mr Hudak says that he never had any discussions with Mr Adams relating to the transfer or possible transfer of the Maroubra semis to Mr Adams. 13Mr Hudak describes a conversation on 27 September 2012 he and Ms West had with Mr Adams after Mr Hudak had learnt of the registration of the transfer in the following terms: Sometime later, Rhys as [sic] was about to leave and walking out of the apartment, a conversation to the following effect took place: Lydia: What is going on with 80 and 82 Gale Road, Maroubra? Rhys: What are you talking about?" Lydia: Our solicitor told us that you now own the properties. Rhys: [Looking shocked and surprised] What do you mean? [Pause] John and I did a lease together. I: We did not do a lease together. Do you have any documents? Show them to me. Rhys: Yes I will bring them tomorrow. 14Mr Hudak says that after a number of delays between 27 September and 3 October 2012, Mr Adams on 4 October 2012 provided him with documents referred to in the discussion on 27 September 2012. The three documents included a copy of a transfer of Lot 2 in deposited plan 216547 (80 Gale Road) which document was not signed. Mr Adams then asked Mr Hudak to sign the documents which Mr Hudak refused to do and Mr Hudak asked Mr Adams to leave the documents with him so he could look at them. Mr Adams left the documents with Mr Hudak and the three documents are found at pp 21, 23-28 and 30-31 of Exhibit B. Those documents bore no signatures of Mr Hudak, or anyone else. 15Mr Westwood in his report (see Exhibit E) concludes that: (1)The signature purporting to be that of Mr Hudak on the transfer for Lot 1 (Q2) is not that of Mr Hudak. (2)The signature purporting to be that of Mr Hudak on the transfer for Lot 2 and for lots 1 and 2 (see Q3) is not that of Mr Hudak. (3)The signatures on the first 5 pages of a document headed: Pretestamentary disposition of The Property known as 80-80A Gale road Maroubra In the State of New South Wales from JH Enterprises Pty Ltd (ACN 000 205 890) to Rhys Adams. Binding also My [sic] John Hudak which I shall refer to as "the pre-testamentary disposition document", purporting to be that of Mr Hudak are not those of Mr Hudak. (4)The signatures on page 6 of the pre-testamentary disposition document which I shall refer to as "the signature page" are those of Mr Hudak. Mr Hudak's signature appears twice on the signature page, once purportedly as director of the company and once purportedly in his own right. (5)That the forged signatures on pages 1-5 of the pre-testamentary disposition document are highly consistent and appear to have been the subject of a tracing exercise and have all been written by the same person and probably using the same pen on all pages of the pre-testamentary disposition document. (6)The inconsistencies which he found between pages 1 to 5 of the pre-testamentary disposition when compared with page 6 (the signature page of the pre-testamentary disposition): ...give rise to the distinct possibility that ink jet printed on page 6 originally formed part of some other ink jet printed document and was substituted into ink jet printed document Q1. (see para 53, Exhibit E). (7)The signature of Mr Hudak on an application for discharge of a mortgage made to the Australian and New Zealand Banking Group Ltd ("ANZ") by Mr Adams purporting to act as JHE's agent (see Q4) is a forgery. 16 Mr Hudak denies ever having seen the pre-testamentary disposition document or any form of it, until 4 October 2012 when Mr Adams handed him an unsigned copy of the document. He does not dispute that the signatures on the signature page are his but says he did not put his signatures on that page as part of what is now presented by Mr Adams, I infer, as the pre-testamentary disposition document. Mr Hudak seeks declaratory relief against Mr Adams in connection with the pre-testamentary disposition document. 17Given that Mr Hudak says he did not agree to the terms of the pre-testamentary disposition document or even discuss the transfer or gifting of the Maroubra semis with Mr Adams, that Mr Adams has not given evidence and that Mr Hudak's signature has been forged on the transfers and on the ANZ discharge application and on pages 1-5 of the pre-testamentary disposition document, the conclusion that Mr Adams has fraudulently obtained the transfer of the property from JHE's name into his name is, the plaintiffs submit, inescapable. 18Mr Adams however seeks to make out a case that has these elements: (1)That Mr Hudak's signature on the signature page of the pre-testamentary disposition document is genuine (2)That Mr Hudak's evidence is that he reads documents before he signs them and inferentially it should be concluded that the signature page was attached to pages 1-5 of the pre-testamentary disposition document at the time that Mr Hudak signed the signature page. (3)That the plaintiffs "have received the benefits of the improvements carried out by the First Defendant or organised by him to the properties referred to in paragraph 7 of the Statement of claim" see para 20 of Mr Adams' defence. The reference to paragraph 7of the statement of claim is presumably meant to be paragraph 1 of the statement of claim in which the Maroubra semis are described. The defence was amended and the contents of paragraph 20 were deleted in the Amended Defence filed on 19 August 2013 but the submissions of Mr Lloyd were to the same effect. (4)The plaintiffs bear the onus of proof - Mr Adams need not prove anything and that, for reasons I shall outline, Mr Hudak's evidence is unreliable. (5)The forging of signatures of itself is not necessarily indicative of fraud. Mr Lloyd relied on Elfar v Registrar General of New South Wales [2010] NSWSC 539 and submits that if Mr Hudak agreed to the transfer of the Maroubra semis, as his client contends, there could be no fraud. 19The pre-testamentary disposition document describes itself as having been prepared by Hall Partners, a firm of solicitors located at Strathfield Plaza. It is clear that Mr Trevor Hall, the principal of the practice, was involved in its drafting and acted for Mr Adams. Mr Hudak has never met or had any discussions with Mr Hall. No evidence was called by Mr Adams from Mr Hall. Until very recently Mr Hall was acting as Mr Adams' solicitor in these proceedings. 20The pre-testamentary disposition document is a strange document. By its recitals it records that Mr Hudak wishes to cause JHE to transfer the property to Mr Adams. It records as a condition of the transfer that "for a period of 25 years, the Transferor will continue to receive the benefit of rental receipts derived upon and from the letting of the property for a period of 25 years". It states: (v) the parties wish to enter into this agreement which is intended to also be in the nature of a gifting, by way of pre-testamentary disposition. 21The pre-testamentary disposition document, by clause 3, records that Mr Adams is to retain Century 21 and to appoint Mr George Mihaelidis of that real estate agency as listing agent. 22The document in its terms permits JHE to mortgage the semis but does not provide that Mr Adams is able to do so. 23Another curious feature of the document is that the Maroubra semis which are purportedly transferred by the document are owned by JHE and not Mr Hudak and yet the document speaks of a "pre-testamentary disposition". 24In I made reference to one of the limbs of Mr Adams' defence. At the commencement of the case Mr Lloyd indicated that his instructing solicitor had issued a subpoena to two Waverly Council officers and that he wished to have an opportunity to speak with those witnesses before calling them to give evidence. He explained that the evidence which he hoped to lead from them would be to the effect that some Bondi units owned by Mr Hudak had been in a dilapidated condition. The relevance of that, he contended, was that, coupled with the plaintiff's concession that the Bondi units in question were now yielding $29K per month in rents (see T14.42), it would demonstrate that Mr Adams' work on the Bondi units had been extensive and produced a significant benefit to Mr Hudak so that Mr Hudak would be willing to transfer the Maroubra semis worth $1.67M. 25Mr Bartos objected to such evidence being relied on since no such case had been pleaded, that an attempt had previously been made to amend the defence which had been rejected by Pembroke J, that such evidence would not be relevant to any issue in the case and that there was no evidence from Mr Adams to support such a case. 26I ruled that Mr Adams could not rely on the anticipated evidence of the Council officers because, there being no evidence to be called from Mr Adams, the evidence of the Council officers would have no context. The fact, even if established, that the Bondi units were at one time in a state of disrepair (of which there is, in any event, some evidence in Exhibit 1D3), says nothing about: (1)The work that Mr Adams carried out (2)The value of the work that he carried out (3)Whether he or CDS invoiced Mr Hudak or JHE for all the work performed (4)Whether he or CDS was paid for all the work performed. Without positive evidence from Mr Adams that he had conversations with Mr Hudak leading to the execution of the pre-testamentary disposition document by Mr Hudak, the evidence which Mr Lloyd hoped to be able to lead from the Council officers would not be relevant to establish that Mr Hudak or JHE had benefited from the work of Mr Adams beyond the value of the work carried out and paid for by JHE and that this was the reason that Mr Hudak agreed to transfer the Maroubra semis to Mr Adams. 27The work carried out by CDS included work on the Maroubra semis with an invoice rendered by CDS for $74, 052 (see Annexure "D" to Exhibit 1D3) and there is evidence that invoices in the order of $550K were rendered by CDS for work on the Bondi units (see Q64-68, pp 9-10, Exhibit 1D3). Mr Hudak says that all of the invoices rendered by CDS were paid and there was no suggestion made by Mr Adams to the contrary.

Mr Hudak's Credibility 28Given that Mr Hudak was not cross examined by Mr Lloyd, and that no evidence was given by Mr Adams about the circumstances in which Mr Hudak is said to have signed the pre-testamentary disposition document, or any part of it, or as to any discussions between them on the subject of the Maroubra semis and their transfer, or as to any discussions after the transfer was effected prior to 13 September 2012, Mr Hudak's credibility would appear, on first impression, to be unassailed and unimpeachable. There were however several matters to which Mr Lloyd drew attention which he submitted should lead the Court to conclude that Mr Hudak was not a reliable witness although he expressly eschewed any assertion that Mr Hudak was lying: T66.47-50. Mr Lloyd contended that I should, in effect, give myself a warning pursuant to s 165 of the Evidence Act 1995 (NSW) that Mr Hudak's evidence was unreliable and that the Court could not be satisfied to the requisite degree that Mr Adams had engaged in fraud. 29The matters to which attention was drawn by Mr Lloyd were: (1)By the time of the meeting with Adams on 27 September 2012 and the conversation which I have set out in [13] (see para 32 and 33 of Mr Hudak's first affidavit), Mr Hudak, Mr Lloyd submitted, was "well aware of the documents involved in the case" yet on his evidence he has a general conversation and does not raise fraud. It is only when Mr Adams is about to leave that Ms West raises the question of the Maroubra semis. The failure of Mr Hudak to confront Mr Adams himself is, says Mr Lloyd, an indication that Mr Hudak did not think that there had been any fraud committed. (2)In paragraph 47 of his first affidavit Mr Hudak said on oath that The first document was six (6) pages. I saw that the document was signed on the bottom right hand side on each page except on page six (6) where it was signed twice (2). This signature was similar to mine except it was not my signature. I did not sign the document In his second affidavit Mr Hudak said at para 12: I have again looked at that document. I can categorically say that I had not seen the document prior to October 2012 when an unsigned copy was given to me by Mr Adams and when he asked me to sign it. I certainly did not sign pages 1 to 5. The signatures on page 6, that is page 38 of my affidavit, appear to be similar to my signatures and may be my signatures, although I am not sure. However if I signed that page, and when I did sign it, it did not form a part of the Pre testamentary disposition My Lloyd submitted that by the time of that affidavit Mr Hudak had knowledge that Mr Westwood had concluded that the signatures on the last page were not forgeries and that his categoric denial was now qualified (see T67.15, T68.21) which, Mr Lloyd contended, impugned Mr Hudak's reliability. (3)Mr Hudak said in his affidavit that "I do not recall that I obtained any quotes prior to retaining Mr Adams" (affidavit of Mr Hudak dated 3 September 2013, para 6) but in his answer to questions asked of him he said (see Exhibit 1D3, 7, [43]-[43A]): 43. That some of the contractors and tradesman that Mr Hudak spoke to had wanted to be paid between $1 to $1.5 million for all the work that was required to be carried out and that Mr Hudak had not wanted to spend that kind of money on fixing the apartments? 43A. I talked to other builders. I may have obtained quotes, although I do not have specific recollection of what work they involved and the price. I don't think it was as high as $1m. This was said to demonstrate Mr Hudak's unreliability. (4)Mr Hudak's advanced years and ill health (see Exhibit A) 30Mr Lloyd referred to s 165 of the Evidence Act 1995 (NSW) which is in these terms: 165 Unreliable evidence (1) This section applies to evidence of a kind that may be unreliable, including the following kinds of evidence: (a) evidence in relation to which Part 3.2 (hearsay evidence) or 3.4 (admissions) applies, (b) identification evidence, (c) evidence the reliability of which may be affected by age, ill health (whether physical or mental), injury or the like, (d) evidence given in a criminal proceeding by a witness, being a witness who might reasonably be supposed to have been criminally concerned in the events giving rise to the proceeding, (e) evidence given in a criminal proceeding by a witness who is a prison informer, (f) oral evidence of questioning by an investigating official of a defendant that is questioning recorded in writing that has not been signed, or otherwise acknowledged in writing, by the defendant, (g) in a proceeding against the estate of a deceased person-evidence adduced by or on behalf of a person seeking relief in the proceeding that is evidence about a matter about which the deceased person could have given evidence if he or she were alive. (2) If there is a jury and a party so requests, the judge is to: (a) warn the jury that the evidence may be unreliable, and (b) inform the jury of matters that may cause it to be unreliable, and (c) warn the jury of the need for caution in determining whether to accept the evidence and the weight to be given to it. (3) The judge need not comply with subsection (2) if there are good reasons for not doing so. (4) It is not necessary that a particular form of words be used in giving the warning or information. (5) This section does not affect any other power of the judge to give a warning to, or to inform, the jury. (6) Subsection (2) does not permit a judge to warn or inform a jury in proceedings before it in which a child gives evidence that the reliability of the child's evidence may be affected by the age of the child. Any such warning or information may be given only in accordance with section 165A (2) and (3). Note. The Commonwealth Act does not include subsection (6). 31Mr Lloyd cited R v Mok [2003] NSWSC 424 per Sully J in support of his contention that s 165 does apply to civil trials. 32None of the points raised by Mr Lloyd lead me to doubt the veracity and credibility of Mr Hudak. The pre-testamentary disposition document was a document which, on his evidence, he had never seen before and had not signed. None of the signatures on pages 1 to 5 purporting to be his were in fact his. He was entitled to say that he had not signed the document and it is not surprising that he did not focus on the two signatures on the last page to observe and comment that those particular signatures were his or not. 33So far as the claimed discrepancy between saying that he did not recall obtaining quotes before retaining Mr Adams and saying that he talked to other builders and may have obtained quotes, I do not see the difference as significant. In both cases, Mr Hudak qualifies his comment by "I do not recall" or "I may have" and it appears that quotes from builders may have been for more extensive work than Mr Adams (or CDS in fact) was engaged to perform. 34In relation to the conversation on 27 September 2012 there are a number of possible reasons why Mr Hudak did not raise the matter immediately and then left it to Ms West to raise it. Since Mr Hudak has not been cross examined (or even asked questions on it by means of Exhibit 1D3) as to his reasons for not raising it himself notwithstanding that he had asked Mr Adams to visit him following unsuccessful attempts by Ms Berntsen to obtain information from Mr Hall about the transfer of the semis have not been explored. I do not think it can be inferred that the fact that he left it to Ms West to raise the matter was due to a lack of concern on his part that he had been deprived of his property. It is not at all inconsistent with the claim of fraud that a person deprived of his property in such unusual circumstances would not know how to deal with the suspected fraudster. 35In Mok the NSW Crimes Commission sought an order under s 27 of the Criminal Asset Recovery Act 1990 (NSW) for the defendant to pay money over to the Treasurer. In considering the evidence of a police informant relied on by the Crime Commission Sully J said: The Court of Criminal Appeal has recognised that in a jury trial upon indictment the evidence of a police informer is a class of evidence apt to attract a warning pursuant to s165 of the Evidence Act 1995 (NSW): Reg v Lau (1998) 105 A Crim R 167 per Kirby J at 176, Priestley JA and Abadee J concurring. S165 is not limited to jury trial in criminal cases. Even in civil proceedings, therefore, the evidence of a police informer needs to be approached with prudence and caution. 36Section 165 recognises that the reliability of evidence "may be affected by age, ill health (whether physical or mental), injury or the like" Section 165(2), (3), (4), (5) and (6) which are the operative parts of s 165 are clearly dealing with jury trials and warnings to be given to juries. I am unable to accept that s 165 has any application to civil cases heard without a jury and I think that what Sully J should be taken to mean is that even in civil trials without a jury a judge needs to consider whether there are reasons (such as the fact that the evidence is that of a police informant) which tend to make the evidence unreliable. Mr Lloyd also referred to s 20 of the Evidence Act but sub-s 20(1) makes it clear that the section applies only to a criminal proceeding. 37I take into account that Mr Hudak is 91 years of age and that he is suffering from the end stage of renal failure, diabetes and heart disease (see Exhibit A which although marked as a plaintiff's exhibit was tendered by the plaintiffs at the request of Mr Lloyd: see T4). I accept that Mr Hudak's memory may not be as good as it once was but I do not regard his evidence as unreliable. His affidavit evidence is cogent as are his answers to the 107 questions directed to him in writing by the first defendant's solicitors (see Exhibit 1D3). Mr Hudak's evidence of Mr Adams' assertion, in a phone conversation between 5th and 11th of October, that Mr Hudak had already signed the document was itself an indicator of Mr Hudak's veracity as a witness as is the fact that he did not claim that he had initiated the conversation about the transfer. Further there are matters independent of Mr Hudak's evidence which corroborate his case that Mr Adams is a fraudster, namely: (1)The transfers of the Maroubra semis both contain a forged signature of Mr Hudak (2)The pre-testamentary disposition contains forged signatures of Mr Hudak on pages 1-5. (3)I infer that the forged signatures were placed on pages 1-5 by Mr Adams since: (a)Mr Adams in his defence admits that he had Mr Hall prepare the pre-testamentary disposition and transfer: see para 7 of the statement of claim and para 7 of the defence. (b)Mr Adams was sent the pre-testamentary disposition by Mr Hall and told to have it signed by Mr Hudak on every page and witnessed by Mr Hudak's wife (see p 98 of Exhibit B) (c)Mr Hall told Mr Adams in a curious email of 5 June 2012: Please proceed to see John and get this second transfer signed. You should have a witness. James has the pen as I understand. (see Exhibit B, p 105) (d)Mr Westwood was of the view that the same hand wrote all of the forgeries, and that a tracing exercise was involved. (e)The person who presented the pre-testamentary disposition document with the forged signatures to Mr Hall (from whose provenance, I was informed at T40.31-40, Exhibit C, Q1 has come) is very likely the same person who forged the signatures on the transfers, (f)Mr Adams informed Westpac that he had purchased the Maroubra semis (see 37 below). (g)Mr Adams had an unsigned copy of the transfer for Lot 2 and handed that to Mr Hudak on 4 October 2012 (see page 21 of Exhibit B) and attempted to have Mr Hudak sign it and the transfer on the 4 October 2012 and asserted in a phone conversation that Mr Hudak had previously signed the documents. (h)Mr Adams was the only person who benefited from becoming the registered proprietor and he mortgaged the properties (i)see also (4) below which is relevant to this point as well (4)An application was made to the ANZ Bank (which was JHE's and Mr Hudak's bank) for discharge of the existing mortgage over the semis to ANZ and for the handing over the title deeds and the signature of Mr Hudak on that document (Q4) was forged: see Mr Westwood's report and pp 131- 137 of Exhibit B. That document described Mr Adams as the representative for correspondence purposes of JHE and gave Mr Adam's phone number and email address and requested the delivery of the Discharge and Certificate of Title to Mr Adams' home address (see page 107 of Exhibit B for confirmation of Mr Adams home address and email) and the Certificate of Title must have been provided to Mr Adams by ANZ and by Mr Adams to Mr Hall as registration of the transfer was obtained. I infer that discharge document was prepared and lodged by Mr Adams, or at his direction. (5)There is evidence that Westpac was informed in June 2012 by Mr Adams that he had $1.5M in a NAB savings account (see pp 107-120 and in particular p 150, Exhibit B) when in fact Mr Adams had no account with NAB between 1 May 2012 and 1 July 2013 and CDS was not a customer of NAB: see p 237 of Exhibit B. Mr Adams' financial position as at 23 June 2011 (see pp 66-85 of Exhibit B) did not include any substantial assets. (6)Mr Hall informed Westpac that the consideration for the transfer was as recorded on one of the transfers (see Exhibit B, page 153, item 80) and there are two pages of an unsigned contract of sale sent to Westpac (see Exhibit B, pp 121-122) and a Notice of Sale/Transfer Report by which Mr Hall informed the Land and Property Information NSW that the purchase price of the Maroubra semis was $1.67M (see Exhibit B, p 155) and that the Maroubra semis were acquired by sale. Mr Adams is named as the transferee of the properties and he admits that he had Mr Hall prepare the pre-testamentary disposition document and the transfer. The transfer like the ANZ discharge was part of the process by which Mr Adams became registered as the proprietor of the semis and the fiction of the Contract of Sale was part of the process and of obtaining a loan from Westpac. (7)Mr Adams informed Westpac that his business was so profitable that it "had allowed him to purchase three residential properties at 80 & 80a Gale street, Maroubra NSW and 50 Currawong St, Concord West NSW" Exhibit B, p 220. That assertion was, even on Mr Adams' case, false. (8)It appears that Mr Adams provided rental information about the Maroubra semis to support his application: see Exhibit B, p 222 and told Westpac that his 2012 personal tax returns would not show rental returns "as properties were bought in the second half of 2012" see Exhibit B, p 222. He informed Westpac that he would be renting the Maroubra semis for $5,100 per month: see p 114. (9)The transfers for the lodgement at the Land Property Information office ("LPI") described Mr Hudak as a sole director which was itself a false statement. As Mr Altan explained a director's signature does not need to be witnessed if he is a sole director: see s 127(2)(c) and s 129(5) of the Corporations Act 2001 (Cth). The word "sole" was, I find, added to ensure that the absence of a witness to the forged signature of Mr Hudak on the transfer would not preclude its acceptance by the LPI. It is not clear whether it was Mr Adams or someone else (possibly Mr Hall) who added the word but I infer that it was added by, or with the connivance of, Mr Adams. (10)There is evidence that Mr Adams was describing himself as the owner of one of the semis even before the transfer had been forged and lodged: see pp 87-89 and p 146 of Exhibit B. In this same context, notwithstanding what is contained in the pre-testamentary disposition document Mr Adams initially had Mr Mihaledis pay the rent to him although he then told Mr Mihaeldis that it had to be paid to Spot Realty (the account of LJ Hooker which firm was managing the other semi) "for now" (see T20.42-48)

Onus of Proof 38Mr Lloyd emphasised the need for the Court to take into account the standard of proof articulated in Briginshaw v Briginshaw (1938) 60 CLR 336. It is clear from Briginshaw and Rejfek v McElroy (1965) 112 CLR 517, 521-522 per Barwick CJ, Kitto, Taylor, Menzies and Windeyer JJ that the Court must bear in mind the seriousness of what is alleged against Mr Adams in determining whether the plaintiffs have made out their case that the transfer was effected by the fraud of Mr Adams. I have had regard to that requirement in determining the outcome of this matter.

Jones v Dunkel Inference 39The failure of a party to give evidence in his own defence clearly gives rise to an inference that his evidence would not assist him in the case: see Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298, 312 per Menzies J, 308 per Kitto J, 319-332 per Windeyer J discussed in Manly Council v Byrne [2004] NSWCA 123; see also Cullen (Executor of Lascelles) v Welsbach Light Co of Australasia Ltd [1907] HCA 3, (1907) 4 CLR 990 at (1002) per Griffith CJ and SS Pharmaceuticals Co Ltd v Qantas Airways Co Ltd [1991] 1 Lloyd's Rep 288 and Adler v ASIC; Williams v ASIC [2003] NSWCA 131, [651] per Giles JA with whom Mason P and Beazley concurred. Mr Lloyd pointed out that rule is subject to there not being an explanation for why the witness or, in this case, the party, has not given evidence and submitted that the fact that Mr Adams is under investigation in relation to this matter (see COPS Event Summary at Exhibit 1D1) is a valid explanation. Mr Lloyd cited Adler v ASIC; Williams v ASIC in which the Court of Appeal rejected an appeal from the trial judge's decision that concerns Mr Adler and Mr Williams claimed to have about the impending Royal Commission were not a sufficient or valid explanation to preclude an adverse inference being drawn in civil penalty proceedings. Mr Lloyd contended that the reasoning of the Court of Appeal from [648] of the judgment supported his contention because the Court concluded that generalised assertion by Mr Adler and Mr Williams that the evidence would "in an unelucidated way redound to their disadvantage" was not sufficient rather than holding that a Jones v Dunkel inference would not be precluded in a civil case because of a concern about consequences in other proceedings. 40Mr Bartos relied on a decision of Rowell v Larter (1986) 6 NSWLR 21 in which Young J (as his Honour was) held that the prospect of criminal proceedings was not a sufficient reason to preclude an inference being drawn against the person for failing to give evidence. In Rowell it was the plaintiff, who was the defendant in criminal proceedings, and who did not give evidence. 41Although I accept that Adler does indirectly provide some support for Mr Lloyd's contention, it does not expressly hold that a Jones v Dunkel inference cannot be drawn in a civil case where a defendant chooses to give evidence because police have been notified of a complaint and have issued a COPS Event Summary. In my view it would be surprising for a defendant against whom a claim of fraud is brought to be able to rely on a concern that criminal charges will be laid as a reason why an adverse inference could not be drawn if he fails to give evidence. First, because if his evidence would, if accepted, support his case that what had been done had been effected with the complete concurrence of the plaintiff, he would have no concern that he would thereby incriminate himself on a charge of obtaining property from the plaintiff by fraud. Second, because it strikes me as inherently unfair that a party who wants to put the plaintiff to proof can decline to give evidence and do so without an adverse inference being drawn. If criminal proceedings are feared, a defendant may take the chance that the plaintiff will not be able to adduce sufficient evidence to establish his case, or may admit liability or not defend the proceedings. The third reason is that even in criminal cases there is, in exceptional and rare circumstances, room for a Jones v Dunkel inference: see Azzopardi v The Queen [2001] HCA 25, (2001) 205 CLR 50 and Comptroller-General of Customs v Parker [2006] NSWSC 390, [89] - [94] in which Simpson J explains that where the accused who does not give evidence and has a personal involvement in the transaction in question, a Jones v Dunkel inference can be drawn. 42I do not need to resolve this interesting question. In my view the plaintiff has presented an overwhelmingly strong case supported not only by Mr Hudak's evidence, Mr Westwood's evidence but the matters set out at 37-(11). The fact that Mr Hudak's signature was forged on pages 1-5 of the pre-testamentary disposition, and on the ANZ discharge and that his genuine signature was not witnessed by any person coupled with the false description of him as a sole director are very telling matters. The fact that Mr Adams did not advise Westpac that he had acquired the Maroubra semis by means of the pre-testamentary disposition rather than a sale and his positive assertion that he had purchased the semis for $1.67M are also indications of the lack of genuineness of the claimed transaction. If Mr Hudak voluntarily transferred the Maroubra semis it is difficult to see why he would not sign each page and why his genuine signature could not have been witnessed as Mr Hall told Mr Adams it should be. If Mr Hudak wished JHE to transfer the semis it would not be necessary to forge his signature on the transfer. The initial production by Mr Adams of unsigned copies of the pre-testamentary disposition and transfer on 4 October 2012 and the request on 4 October 2012 that Mr Hudak sign the documents further undermines the contention that Mr Hudak had, on a prior occasion, signed the documents notwithstanding Mr Adams assertion to Mr Hudak that he had. The plaintiff does not require the assistance of a Jones v Dunkel inference to persuade me that Mr Adams has engaged in fraud. 43I have earlier referred to what may be described as an assertion by Mr Adams of "benefit" to Mr Hudak and JHE. The defence of "benefit" from work done has no content as it is not supported by any evidence from Mr Adams. Not only that, the claim that there was a benefit for which Mr Hudak or JHE was agreeing to compensate Mr Adams is undermined by: (1)The absence of any reference to such a benefit as the basis for the transfer (2)The supposed "gifting" (3)It is inconsistent with any sale as advised to the LTI and as reflected in the forged transfers (4)The use of the forged signatures 44A further and significant matter is that the defence does not even assert that the work which was carried out or "organised" by Mr Adams was not paid for by JHE or Mr Hudak and the evidence contradicts such a suggestion. The defence appears to assert that even if JHE had paid Mr Adams for the work he or CDS had performed the "benefit" of the work so performed produced rental which is a benefit and a reason for which plausibly Mr Hudak would be willing to transfer properties worth a very considerable amount of money. That in my view is entirely implausible and could only be a possibility if Mr Hudak had lost his mental faculties which he clearly has not. 45There are some further comments to be made about what emerged as strands in Mr Adam's defence: (1)The pre-testamentary disposition document uses the language of "gift". The document Defendant's Questions for Mr Hudak, tendered by the defendant (Exhibit 1D3), is itself an unusual document. It contains many questions the answers to which only confirm Mr Hudak's evidence for example that he has paid every invoice rendered by CDS to him or his companies and that he did not agree to transfer the semis to Mr Adams. The exhibit contains the following question at 101 and answer at 101A: 101. That Mr Hudak appreciates that in so far as concerned the Maroubra property because of the work that Mr Adams had done for him, he was not in fact being asked to give anything away? 101A. I don't understand the question. All the work that Mr Adams did was paid for. I don't feel that I owe him anything more. The suggestion that on top of his payments he would be entitled to the Gale Road property is absurd. The question appears to contain a statement about Mr Adams' position to the effect that there was no gift involved in the pre-testamentary disposition but rather a payment for past services not fully remunerated through the invoices rendered by CDS and paid by Mr Hudak or JHE. (2)Mr Lloyd sought to advance a case that Mr Hudak was not careful with his assets because he allowed the Bondi apartments to run down significantly. Mr Hudak explains in his answer to that he had a manager who mismanaged the property: see 19/19A of the Defendant's Questions for Mr Hudak. Further reference is made to the fact that Mr Hudak allowed the tenant in one of the Maroubra semis to pay a low rent and the other to get away with sporadic payments (see 88/88A and 77/77A of the Defendant's Questions for Mr Hudak. Whilst Mr Hudak's lack of concern about the level of rentals achieved is suggestive of a landlord lacking in close commercial focus they do not support the contention that he would be likely to give the properties away to an unrelated third party. (3)The implicit contention that Mr Adams had done more for Mr Hudak then all of the paid invoices would reveal for which Mr Hudak, it should be inferred, was so grateful that he would make what Mr Lloyd describes as "a very generous offer" (T75.35). This ignores that all the work that was carried out by CDS was the subject of invoices for which CDS was paid and involved a considerable amount of money. It is highly implausible as I have said previously. There is no evidence of any "offer" or any consideration passing to JHE or Mr Hudak for the transfer. Permitting JHE to obtain rent from the semis to which it was already entitled could not possibly constitute consideration for the transfer. 46Mr Lloyd in his written submissions referred to the words "Adams collected" which appears on page 2 of the pre-testamentary disposition document as an imprint discovered by Electrostatic Detection Apparatus by Mr Westwood. The submission contended that the existence of those words is supportive of Mr Adams' case but how is not made clear at all. Mr Lloyd said that "it may well have been written by the plaintiff or by somebody associated with him" (see T64.35-50). It is not clear to what document the words "Adams Collected" are referring and no note containing such words was produced by Mr Adams. There is nothing to suggest that Mr Hudak wrote the words "Adams Collected" or that Mr Hudak has any document containing those words which have come through on the pre-testamentary disposition document. The existence of those words as an imprint do not appear to me to undermine Mr Hudak's case at all. 47As mentioned in 18 above, Mr Lloyd relied on Elfar to submit that there is no fraud if Mr Hudak agreed to the transfer of the semis. In Elfar, the Court was concerned with a discharge of mortgage effected by means of a signature which Mr Elfar asserted was not his. The Court was not satisfied that Mr Elfar had not signed the document or that if he had not done so that what had occurred had not occurred without his knowledge consent or acquiescence. Ward J, as her Honour then was, said in respect of the principles: [194] Mr Elfar clearly bears the onus of proving that, as a consequence of the existence of fraud, he is deprived of an interest in land which causes him loss or damage (Behn v Registrar General [1979] 2 NSWLR 496, at 509, this issue not being questioned on appeal in Registrar General v Behn [1980] 1 NSWLR 589 ; (1980) NSW ConvR [55-002], nor Registrar General v Behn (1981) 148 CLR 562 ; (1981) 35 ALR 633). [195] There is authority (Brott v R (1992) 173 CLR 426 ; (1992) 105 ALR 189 ; [1992] HCA 5; R v Forbes (1835) 7 Car & P 224 ; 173 ER 99; R v Beard (1837) 8 Car & P 143 ; 173 ER 434; R v Parish (1837) 8 Car & P 94 ; 173 ER 413; R v Beardsall (1859) 1 F & F 529 ; 175 ER 839; R v Hartshorn (1853) 6 Cox CC 395) to the effect that there can be no fraud or forgery where the alleged victim is complicit in or consents to the alleged forgery, on the basis that the necessary elements to establish the forgery will not have been made out. [196] As Mr Elfar's complicity or consent to the "forged" discharge of mortgage speaks to the existence of fraud itself, as opposed to operating as a defence once the existence of fraud is established, Mr Elfar bears the onus of proving not only that the document was forged but that he did not consent to the forgery and was not complicit in the fraud, to the extent this is necessary to establish the existence of the fraud in the first place. 48I accept that if Mr Hudak had permitted Mr Adams to execute the transfers signing as if he was Mr Hudak there would be no fraud on Mr Hudak or JHE. However, unlike Elfar, there is not a shred of evidence to support the contention that Mr Hudak knew that anybody was signing or intending to sign any document in his name, nor has any motive been established as to why he would agree to such a course. 49Mr Bartos outlined a theory of what occurred which I must say had a convincing ring to it. The theory is as follows. Mr Adams wanted to obtain the title to the Maroubra properties so that he could mortgage them and obtain a loan. It was useful for him for that purpose that the rents from the Maroubra properties were paid to JHE because the receipt of rents by JHE would not alert Mr Hudak to the loss of his properties. The pre-testamentary disposition document was, in a sense, reverse engineered because it purported to explain the transfer of the properties without the rents disappearing from Mr Hudak's control. The pre-testamentary disposition deed was a "cover" for Mr Adam's actions which could be produced after Mr Hudak's demise but it did not itself lead to loss of the properties. Mr Adams knew that Mr Hudak would not sign the pre-testamentary disposition so he presented only the signature page as an attachment to something else. Mr Hudak is not able to identify what document was to which the signature page was attached although he does say at paragraphs 17-19 of his affidavit of 3 September 2012 that he may have signed the Century 21 Agency Agreement. The original of that document is not held by Century 21 (see T22.37-49 and Exhibit B, pp 89-90 for copies) and neither the original nor any copy were produced by Mr Adams in answer to a Notice to Produce: see Exhibit G. Since Mr Hudak's signature has very likely been traced on the first five pages of the pre-testamentary disposition document it is obvious that a genuine signature had to be and was obtained by some, almost certainly dishonest, means. 50Mr Bartos drew attention to the fact that the original of the signature page of the pre-testamentary disposition (found as part of Exhibit C) does appear to have more staple holes than pages 1 to 5. Another relevant matter is that the signature page bears no imprint from the previous pages whereas each of pages 1-5 does bear such an imprint. It is true that Mr Hudak might have turned over the signature page, placed it on a surface as a single page still attached to the other pages but not underneath the signature page and signed it as Mr Lloyd contended but there is no evidence to suggest that did occur and the fact that no imprint has come through from writing on page 5 to page 6 points to page 6 not having been attached when the forged signatures were added to pages 1-5. Mr Adams' request that Mr Hudak sign the documents on 4 October 2012 is itself inconsistent with them having been signed before, notwithstanding Mr Adams assertion by Mr Hudak to the contrary. 51Mr Westwood's comment that it is a distinct possibility that page 6 was not part of the pre-testamentary disposition document when it was signed provides further support for Mr Hudak's position. This was based on the absence of any impressions of the forged Hudak signatures on previous pages particular page 5 and the fact that the two signatures on page 6 are genuine and those on the previous pages are not. I do not regard Mr Westwood's comment as mere speculation, as Mr Lloyd contended. 52Once Mr Hudak's evidence that he never signed the pre-testamentary disposition and never signed page 6 attached to pages 1-5 is accepted, as I do, it does not matter to what page 6 was attached because any possible basis for the assertion that he intended to transfer as a gift or otherwise the Maroubra properties is removed. 53The response of Mr Adams to Ms West's question as deposed to by Mr Hudak (set out in [13] above) which I accept, is a response inconsistent with the claim that Mr Hudak agreed to transfer the property to Mr Adams. If Mr Adams had believed that Mr Hudak had gifted him the semis or sold him the semis the conversation on 27 September 2012 was the time for him to so assert but he did not do so rather he asserted that they had "done a lease together" which, whatever it means, is not an assertion that Mr Hudak had agreed to transfer the semis to Mr Adams. His request that Mr Hudak sign documents on 4 October 2012 is also inconsistent with Mr Hudak having signed them before as his failure to produce a complete version of the pre-testamentary disposition document with the signature page (bearing signatures) attached.

Conclusion 54I am satisfied, having regard to the serious nature of the allegations and the significant consequences of such a findings, that Mr Adams has engaged in fraud upon JHE and Mr Hudak. It follows that JHE is entitled to the declaration it seeks and that Mr Adams must indemnify JHE for the loss occasioned by the Westpac mortgage. It follows that JHE is also entitled to compensation out of the Torrens Fund and that to the extent that the Registrar General has compensated JHE, Mr Adams must indemnify the Fund. There is a small amount of money held in a joint bank account following orders previously made by this Court which will need to be paid to JHE in partial reduction of the liability which both Mr Adams and the Registrar-General have to JHE. Further Mr Hudak is entitled to the declaration he seeks that the pre-testamentary disposition is a forgery and of no validity.

Referral 55I am aware that the Police Department has been informed of Mr Hudak's allegations and that to date no action has been taken. A copy of these reasons should be forwarded to the Director of Public Prosecutions so that urgent consideration can be given as to what action should be taken not only in relation to what I have found, to the civil standard, to be a fraud practised on JHE and Mr Hudak by Mr Adams but also the circumstances leading to the Westpac loan and to the discharge of the ANZ mortgage and the issue of a Certificate of Title to Mr Adams. I will direct the Registrar to write to the Director of Public Prosecutions enclosing a copy of these reasons and advising him that the Exhibits will be retained by the Court until further order. 56There are aspects of the evidence which raise questions as to the conduct of Mr Hall. He is not a party and has given no evidence and may be able to give satisfactory explanations as to how it came about that he: (1)Advised the LPI that there had been a sale of the Maroubra semis of $1.67M, and (2)Drafted the pre-testamentary disposition document and the contract for sale and prepared the transfers. (3)How the words "sole" came to be written on the transfer lodged with the LPI. (4)What he meant by "James has the pen" in his email of 5 June 2012 to Mr Adams (see Exhibit B, p 105) but these matters may warrant a more detailed scrutiny of Mr Hall's role in what has occurred than has been necessary to determine the outcome of these proceedings. For the same reason, and as Mr Hall is a practising solicitor, I will also direct the Registrar in Equity to forward a copy of these reasons to the Legal Services Commissioner for his consideration.

Orders and Costs 57I will hear the parties on the precise form of orders and on the issue of 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: 03 October 2013

Criminal Asset Recovery Act 1990(NSW)

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