Lien v Huang

Supreme Court of NSW|2024-06-14|Before: Hmelnitsky J, Williams J

B Le Plastrier/L Muir (Plaintiff) A Green (First Defendant on 7 June 2024) A Cheshire SC (First Defendant on 14 June 2024) R Chen (Second Defendant)

Madison Marcus (Plaintiff) Long Saad Woodbridge (First Defendant) CMI Legal (Second Defendant) File Number(s): 2024/202316

JUDGMENT

These proceedings were commenced by summons filed in Court before the duty judge on 31 May 2024. The plaintiff, who resides in Taiwan, was the registered proprietor of a property at 21 Hercules Street, Chatswood until 28 June 2023. On that day, in circumstances which I describe in more detail below, title to the Chatswood property was transferred into the name of the first defendant, who is the plaintiff's former daughter-in-law, for consideration of $1. The plaintiff's case is that this transfer was fraudulent and that he was unaware of it until the day prior to commencement of these proceedings.
The circumstances giving rise to urgency are as follows. On 24 March 2024, the first defendant entered into a contract to sell the Chatswood property to the second defendant, who is an innocent third party who had no notice of the plaintiff's claims as at the time of contract. Settlement of that contract is due to occur on 24 June. A special condition of the contract for sale allowed the first defendant to obtain a release of the deposit, which she has in turn used to enter into a contract to purchase a property in Artarmon from yet another innocent third party. Settlement of that contract is due to occur on 25 June.
Upon learning of the impending sale of the Chatswood property, which was advertised online, the plaintiff sought ex parte interim relief from Williams J, sitting as the duty judge. Upon the plaintiff giving the usual undertaking as to damages, her Honour made orders restraining the first defendant from completing the sale of the Chatswood property to the second defendant, together with freezing orders.
The matter came back to Court and was argued on a contested interlocutory basis on 7 and 14 June 2024.
For the reasons which follow, I find that the balance of convenience does not favour the continuation of the injunction preventing the sale of the Chatswood property to the second defendant. In find that the most appropriate course is for the two transactions to occur, namely for the Chatswood property to be transferred to the second defendant and for the first defendant to acquire the Artarmon property, but for the first defendant to be subject to freezing orders (including over the Artarmon property and other property) to secure the plaintiff's claim.

The factual background

The plaintiff, Wen Chiang Lien, is 69 years old. He is married and is the father of two children, Juo-Yao Lien (who goes by the name James Lien) and his sister Pei-Ti Lien.
In about 2000, the plaintiff and his family moved to Australia. By that point, James Lien was already living here as a student. The family lived in Killara.
The plaintiff purchased the Chatswood property in late 2005 for $1,221,000. Title was transferred to the plaintiff on 23 January 2006. There was a mortgage on title for a period of about two years but this was discharged in 2009. The property was rented out in 2006 and 2007.
In about 2007, the first defendant's son, James Lien, moved back to Taiwan where he married the first defendant, Yuan Huang. The first defendant often goes by the name Catie Huang.
Two children were born to the marriage of the first defendant and James Lien, in 2007 and 2008. In 2009, the first defendant, James Lien and their children moved back to Australia and took up residence in the Chatswood property. By that point, the plaintiff had done some renovations to the property. The first defendant says that she assisted with this. She also says that she assisted in renting the property out in the period prior to them moving in.
James Lien travelled frequently between Australia and Taiwan for work. All the while, the first defendant and their children lived in the Chatswood property. They did not pay rent. The plaintiff continued to pay Council rates.
James Lien and the first defendant separated in 2018 and were divorced in early 2019. The children have at all times resided with the first defendant, who has sole custody pursuant to parenting orders made in Australia and Taiwan.
The first defendant is a licensed conveyancer.
James Lien and the first defendant did not enter into a financial settlement upon their divorce. According to James Lien, the first defendant asked for a share of the Chatswood property but he informed her that the property belonged to his father and that it was therefore not his to give.
It is not altogether clear when the plaintiff moved back to Taiwan. In any event, he has lived in Taiwan for at least the past 10 years.
James Lien also now lives permanently in Taiwan. His sister, Pei-Ti Lien, also lives in Taiwan but has property in Australia.

The plaintiff's discovery of the transfer of the Chatswood property

On Friday, 24 May 2024, James Lien returned to Australia for the first time since 2019. On 29 May 2024, he visited Mr Su, the family's Australian accountant, and the topic of the Chatswood property came up. Mr Su did an internet search and discovered that the Chatswood property had been sold on 24 March 2024 for $4,526,000. Further searches revealed that the property had been transferred into the name of the first defendant on 28 June 2023 for consideration of $1.
James Lien and his sister made urgent arrangements to consult a solicitor on 30 May. These proceedings were commenced the next day.
The circumstances in which the Chatswood property was transferred to the first defendant are very much in dispute. It is convenient to describe that dispute by reference to the parties' competing accounts.

The first defendant's account of how the 2023 transfer occurred

According to the first defendant, she has always had a good relationship with the plaintiff. She claims that in about September 2022, she received a phone call from the plaintiff in which he offered to transfer the Chatswood property to her. She claims that he said "I'd like to make sure your sons have a permanent home. I know [James] does not pay anything to support them…I would like to transfer them the house so they are looked after." She claims to have said that it would be inappropriate to transfer title to them because they were minors, whereupon he said "then I will transfer the property to you because you are responsible for them and will look after them." She claims he then said "you must come to Taiwan to meet me if you want me to sign papers [and] you must pay all costs yourself".
There seems to be no dispute that the first defendant did travel to Taiwan on 8 December 2022 and returned to Australia in early February 2023. Her sons travelled to Taiwan also.
The first defendant claims that she had arranged to meet the plaintiff "at his request" outside the National Cheng Kung University in Tainan City near a small bridge. She claims to have been accompanied on this visit by an uncle.
She also claims that the plaintiff agreed to sign a PEXA Client Authorisation Form allowing her to act on his behalf to transfer the property. She claims that he produced Australian identification documents which were expired, together with an expired Taiwanese passport. According to the first defendant, she asked whether he had any current ID and he said "No, any other records are kept at home with my wife and I cannot get anything to show you".
She also claims to have taken photocopies of all of his expired identification documents at the time of their meeting, although quite how that occurred is unexplained.
It is also relevant to note that, on the first defendant's case, she showed the plaintiff a photograph of her two sons and asked whether he would like to see them given that they had travelled to Taiwan with her. However, according to the first defendant, the plaintiff said "No, I know you look after them."
On the first defendant's case, she returned to Australia and organised the transfer. She says she first had to obtain a valuation of the property for duty purposes and had to save to be able to pay the transfer duty.
The first defendant says she never contacted the plaintiff about any of this because she "cannot contact him from Australia." There are no texts, emails or phone records corroborating that there was communication between the first defendant and the plaintiff.
The first defendant then registered the transfer, which occurred on 28 June 2023.
So far as rates were concerned, the first defendant says that she has paid the rates since the transfer. She says that prior to that time, rates were usually paid by direct debit. Occasionally she would receive notice that they had not been paid and would pay them herself. She says she has for a long time paid water rates for the Chatswood property. The first defendant says that the plaintiff has not contacted her since the transfer of the property in relation to the payment of rates.

The plaintiff's account of how the 2023 transfer occurred

According to the plaintiff, the foregoing account of how the Chatswood property was transferred to the first defendant is a complete fiction. He denies having spoken with the first defendant since a family reunion in mainland China in 2010. He has no contact details for her, save that he knows her home address. He has not had a valid passport since 2013. He does not have an email account and barely uses his mobile phone. The only messaging service he uses is WeChat, but the first defendant is not one of his contacts on that platform. He denies having had anything whatsoever to do with the June 2023 transfer of the Chatswood property to the first defendant.
The plaintiff, his son and their lawyers have all drawn attention to various anomalies in the first defendant's account of how the 2023 transfer occurred.
So far as the first defendant's account of the meeting in January 2023 is concerned, the plaintiff submits that it is inherently unlikely that he would not have wished to see his grandchildren in the circumstances described by the first defendant. The whole point of the visit, on the first defendant's account, was for the plaintiff to bestow the Chatswood property on their mother as a gift for their long-term benefit.
So far as concerns the ID which the first defendant claims to have copied during their meeting by the small bridge, the plaintiff points out that it is inherently unbelievable that he would have had those documents to hand but, at the same time, have no valid ID. He flatly denies that he is separated from his wife which, according to the first defendant, is the reason he supposedly gave for not being able to produce valid ID.
Critically, the plaintiff points out that the PEXA Client Authorisation Form produced by the first defendant and which, according to her, the plaintiff signed on 21 January 2023, was version 7 of that form. However, version 7 of that form was not approved by the Australian Registrars' National Electronic Conveyancing Council (ARNECC) until 23 February 2024 when ARNECC developed and approved the Model Participation Rules Version 7. Those model rules, in turn, formed the basis for the Participation Rules (Version 7) determined by the NSW Registrar General with effect from 28 March 2024. Prior to that time, there was a "version 7" of the PEXA Client Authorisation Form in the public domain, but it was available only as a draft - and marked as such - as an annexure to a consultation draft of the ARNECC Model Participation Rules Version 7. The plaintiff points out that the form which he is supposed to have signed in January is not marked as a draft. Prior to the promulgation of version 7, only version 6 of the PEXA Client Authorisation Form was available for use.
Next, a title search reveals that the first defendant also lodged a caveat over the Chatswood property in 2015. The first defendant claims to have lodged this caveat upon receiving a divorce application from James Lien in order to notify and protect her claim to an equitable interest in the Chatswood property. The caveat contains the usual statutory declaration by the caveator (ie, the first defendant) as to the address of the registered proprietor (ie, the plaintiff) but this was stated to be the address of the Chatswood property. As the plaintiff points out, he did not live at that address as the first defendant well knew. He says that the declaration was a complete falsehood and that, unsurprisingly, he was completely unaware of the caveat until it was revealed by the title search done by his solicitor immediately prior to the commencement of these proceedings.
The plaintiff has also led opinion evidence from his solicitor to the effect that the signature that appears on the PEXA Client Authorisation Form is identical to the signature that appears on the plaintiff's expired Australian passport. The inference I am asked to draw is that the signature has been copied from the passport and pasted electronically onto the PEXA Client Authorisation Form by, presumably, the first defendant. I am of course no expert and although the two signatures do look remarkably alike, I am unwilling to place much weight on this consideration at this stage.
The first defendant has responded at least in part to the plaintiff's claims of fraud. She has produced a document purporting to be the unsigned draft of the PEXA Client Authorisation Form version 7 with the plaintiff's details completed, together with what she says is the Google Docs metadata for that document. This metadata is said to show that the document was indeed created on 29 January 2023, although it is inexplicably titled "Client Authorisation Form - version 6 Lien." She says she cannot explain why the document itself is version 7.
So far as the signed PEXA Client Authorisation Form is concerned, the first defendant claims to have taken a photo of the form after it was signed and saved it as a pdf on her phone. She has produced a photo of a page in the "Notes" app on her phone which shows that the app contains a folder entitled "CLIENT AUTHORISATION". Under that folder name is this description: "22/1/23 4 attachments." The first defendant says that this is where she saved the pdf of the signed PEXA Client Authorisation Form.
The first defendant has also given some evidence as to the broader context in which the transfer, on her account, took place. She says that she and the plaintiff have remained in a good relationship and that he would occasionally call her to ask about her sons. She says that she does not get along with his wife. She says that the plaintiff's wife assisted James Lien to apply for custody of their sons in Taiwan. She describes a general estrangement between herself, on the one hand, and James Lien and the other members of his family, on the other. She describes a moderately acrimonious custody dispute. She says James Lien has never paid child support to her and that he in fact (according to her) sought custody of the children on terms that would involve her paying child support to him. Her evidence is that the plaintiff has maintained a good relationship with her and that he has, in effect, kept this secret from James Lien and the other members of his family because of the general estrangement.

The 2024 sale of the Chatswood property

The second defendant is LV-ESB Pty Ltd, the trustee of a family trust associated with Mr Jian Wei Liang and his wife. Mr Liang and his wife live in a unit on the same street as the Chatswood property. He and his wife saw that the Chatswood property was for sale and took an interest in it. Mrs Liang attended the auction on 24 March 2024 and was the successful bidder. A contract was entered into under which the second defendant is the purchaser. They have paid the deposit of $452,600 from their savings. They intend use their savings to pay the balance of the purchase price.
Special condition 46 to the contract of sale provides for the release of the deposit on the following terms: "Notwithstanding any other provision of this contract, the depositholder is authorised and directed to release to the vendor so much of the deposit as the vendor (or the vendor's solicitor or conveyancer) may request, as and when such request is made, provided that the request indicates that the released money is required to be used as a deposit and/or stamp duty and/or balance of purchase monies on the vendor's purchase of real estate in New South Wales or shares for company title property in New South Wales. No further authority of evidence shall be required by the depositholder in this regard."
In April, funds totalling almost $385,000 were released pursuant to requests apparently made under special condition 46.
The second defendant had no inkling of the plaintiff's claim to the property at the time the contract was entered into. The second defendant wants to complete the purchase of the Chatswood property.

The purchase of the Artarmon property

The first defendant claims that she decided to sell the Chatswood property in late 2023. Her evidence is that local traffic is bad, her older son was about to start his final year in high school and they (she and her sons) believed that it would be better to move to a quieter neighbourhood. She located a property in Artarmon which she believed would be suitable for them and would be more convenient for her sons when they attended university. She also wanted to "free up some of the equity" in the Chatswood property to assist her sons in their tertiary education. She will also need funds to pay the transfer duty on the Artarmon property and to undertake some renovations, which she says have been quoted at $480,000.
The first defendant entered into a contract to purchase the Artarmon property on 23 April 2024 for the sum of $2,850,000. She paid the deposit of $285,000 using funds released from the deposit received from the second defendant under the contract for sale of the Chatswood property. It is unclear why she also requested the release of an additional sum of almost $100,000 beyond that amount. The contract is due to settle on 25 June simultaneously with the settlement of the sale of the Chatswood property.

Other matters relevant to the balance of convenience

It is relevant to note several additional matters that are relevant to the question of where the balance of convenience lies.
The first defendant lives at the Chatswood property with her two sons and an elderly aunt, who has lived with them on and off for many years. The children attend schools in the broad vicinity, although they are in their final years of school and do not seem to be at schools that are more convenient to Artarmon than they are to Chatswood.
If the sale of the Chatswood property does not complete, the first defendant will be liable to return the whole of the deposit of $452,000. She will also be liable to pay the agent's selling commission of 1.32% on that property, as well as marketing costs, pursuant to clause 9.2. She may also have a liability in damages.
If the sale of the Artarmon property does not complete, the first defendant will forfeit the whole of the deposit of $285,000. She may also have a liability in damages.
The first defendant says that she would be "effectively homeless" if she is unable to move to the Artarmon property. I note, however, that the plaintiff has undertaken to allow her to continue to live at the Chatswood property while this dispute is resolved.
The first defendant has said that her total assets, excluding the Chatswood property, come to $1,750,000. This consists of two apartments in Wollstonecraft, a house in Orange, some shares and some other relatively minor personal use assets.
She says that her liabilities, consisting mostly of mortgage liabilities, a small credit card debt and a $100,000 personal loan, total about $950,000.
The plaintiff, as I have noted, is not an Australian resident. Other than his claimed entitlement to the Chatswood property, he has no assets in Australia. However, his daughter Pei-Ti Lien, although not a resident either, does have real property here. The property is an apartment in Chatswood which she purchased for $845,000 in 2011 and which is unencumbered. Similar apartments are currently advertised for sale for between about $1,520,000 to $1,760,000. Ms Lien has undertaken that she will not encumber the property while this dispute is on foot and that she will make the property available to meet her father's obligation if his undertaking as to damages is called on.
So far as the plaintiff's financial position is concerned, he points out that he will be required to include an amount of capital gains tax in his assessable income in relation to the disposal of the property. Evidence from his accountant shows that the amount to be included on a disposal of the property as at 28 June 2023 would be $1,115,095.50. He also gives evidence that the purchase of a replacement property at about the same value would involve transfer duty of $245,480.

The issues in dispute and the parties' positions

As matters stand, there are two interim orders in place. One order is in the nature of a freezing order which prevents the first defendant from dissipating her assets up to the unencumbered value of $4,526,000. The other is in the form of an injunction preventing the first defendant from taking any steps to complete the sale of or otherwise encumber the Chatswood property.
The first defendant does not dispute that the freezing order should continue. Rather, her position is that the injunction should be discharged to allow the sale of each of the Chatswood and Artarmon properties to occur and that the freezing order should remain in place to ensure that the whole of the monetary value of the plaintiff's claim against her can be met if the plaintiff is successful. She accepts that the Artarmon property, as well as the balance of the proceeds of sale of the Chatswood property, will be available to meet the plaintiff's claim, should he ultimately be successful.
This is the position supported by the second defendant, who simply wishes to proceed to settlement on the Chatswood property.
The plaintiff contends that the injunction should continue. He contends that he has demonstrated a strong case for final relief and that the balance of convenience favours the continuation of the injunction. He contends that the undertaking as to damages, combined with his daughter's undertaking to effectively secure that undertaking, will ensure that the first defendant's position is secure and that she will be made good if his claim to the Chatswood property ultimately fails.

Resolution

Given that there is agreement as to the continuation of the freezing orders in one form or another, the real issue in dispute is as to the continuation of the injunction which is preventing settlement of the sale of the Chatswood property to the second defendant.
The power to order an interim injunction is to be found in s 66(4) of the Supreme Court Act 1970 (NSW). In Australian Broadcasting Commission v O'Neill (2006) 227 CLR 57; [2006] HCA 46 at [19], Gleeson CJ and Crennan J said that in all applications for an interlocutory injunction, the Court will ask the questions identified by Doyle CJ in Jakudo Pty Ltd v South Australian Telecasters Ltd (1997) 69 SASR 440 at 442-443, namely: "…whether the plaintiff has shown that the there is a serious question to be tried as to the plaintiff's entitlement to relief, has shown that the plaintiff is likely to suffer injury for which damages will not be an adequate alternative remedy, and has shown that the balance of convenience favours the granting of an injunction."
Their Honours agreed with the explanation of these "organising principles" by Gummow and Hayne JJ in that same case at [65] where their Honours referred to what Kitto, Taylor, Menzies and Owen JJ had said in Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618; [1968] HCA 1. Gummow and Hayne JJ particularly referred to the two questions which the Court ordinarily addresses, which were described in Beecham Group as follows at 622: "The first is whether the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief … The second inquiry is … whether the inconvenience or injury which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted."
The parties' submissions were correctly addressed to these issues. The first defendant does not dispute that the plaintiff has demonstrated a prima facie case in the relevant sense. She accepts that there is a real probability that the Court will find that the plaintiff is entitled to the Chatswood property. She contends that the only real issue presently in dispute is the balance of convenience.
The plaintiff agrees that the real issue presently in dispute is as to the balance of convenience, but contends that the evidence even at this early stage demonstrates quite powerfully that the 2023 transfer was achieved by fraud and that the strength of his case is a matter to be weighed in the balance when determining where the balance of convenience lies.
It is sometimes said that the Court will not generally grant an injunction where the effect of the order is to grant what is, in substance, final relief: see for example Kolback Securities Ltd v Epoch Mining NL (1987) 8 NSWLR 533 at 534-535
Whether or not that proposition amounts to a general rule (as to which see JD Heydon, MJ Leeming and PD Turner, Meagher, Gummow & Lehane's Equity: Doctrines and Remedies (5th ed, 2014, LexisNexis Butterworths) at [21-400]) it is appropriate to consider the strength of a plaintiff's case where, as here, the interlocutory relief is likely to have relatively dire consequences for both the defendant and third parties.
It is therefore appropriate for me to consider the strength of the plaintiff's case before turning to the question of the balance of convenience.

The strength of the plaintiff's case

The final relief for which the plaintiff contends is essentially twofold. First, the plaintiff seeks a final injunction restraining the first defendant from transferring or encumbering the Chatswood property. Secondly, the plaintiff seeks an order requiring the first defendant to transfer title to the Chatswood property back to him. The plaintiff does not presently seek damages or other relief, such as tracing the proceeds of sale, but that is not surprising given the present state of play.
The basis of the plaintiff's claim is that the first defendant fraudulently caused title to the Chatswood property to be transferred to her and that, as a result, she holds the property on constructive trust for him: Black v S. Freedman and Company (1910) 12 CLR 105; [1910] HCA 58.
I accept the plaintiff's submission that the evidence in support of his claim to final relief appears to be relatively strong at this stage. The first defendant's account of her dealings with the plaintiff are, frankly, somewhat fanciful. It strikes me as quite remarkable that a transaction such as this would occur without any email or text correspondence being exchanged, particularly when it is remembered that the first defendant is a professional conveyancer. The first defendant's account of what occurred by the small bridge in front of the National Cheng Kung University seems to me to be quite unlikely. In particular, it seems most unlikely that the plaintiff would not wish to see his grandchildren in those circumstances, or that the plaintiff would be carrying around his long since expired Australian identification documents but claim to have no access to current documents. Above all, there is the fact that the evidence does strongly suggest that the PEXA Client Authorisation Form version 7, which the plaintiff is supposed to have signed on 21 January 2023, was not in use at that time.
However that may be, I make no finding as to any of these matters at this stage. As the first defendant has pointed out, she has led evidence that she did in fact create the PEXA Client Authorisation Form in question in January 2023 and that this is so despite version 7 not being in general use at that time. She has also led evidence of having created a pdf of the signed form at about the same time. She also points out that the plaintiff's evidence at this point is all on information and belief and that the reliability of his account may ultimately depend on questions of credit. She also accepts that the reliability of her own account may equally depend on questions of credit in the long run. She suggests that the active party here is, in a practical sense, James Lien and not the plaintiff, insofar as it is James Lien who is liaising with the plaintiff's solicitor, although I note that most of the evidence attributed to the plaintiff on information and belief has come from the solicitor, not James Lien.
I therefore proceed on the basis that the plaintiff has demonstrated a relatively strong prima facie case but that it is not presently possible to reach a firm conclusion as to whether he will ultimately succeed at a final hearing.

Balance of convenience

My account of the background to the dispute and the additional matters going to the balance of convenience will likely have revealed the nub of the issue. If the injunction is continued: the second defendant will be deprived of its contractual right to complete the purchase of the Chatswood property; the vendor of the Artarmon property will lose the benefit of her contract; the deposit for the Artarmon property will likely be forfeited, making the return of the deposit for the Chatswood property extremely difficult if not impossible for the first defendant to achieve at least in the short term; and the first defendant will find herself potentially liable in damages on two fronts, namely to a dissatisfied purchaser and a dissatisfied vendor.
On the other hand, if the injunction is discharged the plaintiff will lose any prospect of recovering title to the Chatswood property, which is in substance the final relief he seeks. He points out that the Chatswood property has sentimental value to him and that he may wish to return to it someday. He does not consider damages to be an adequate remedy for the fraud which, on his case, has been perpetrated on him. He also contends that the loss of the property will occasion other costs, namely the CGT on disposal and the cost of acquiring a new property to replace the Chatswood property.
A significant issue in weighing these competing considerations is the adequacy of each party's ability to make good the other's claim to damages in due course.
So far as the first defendant's ability to make good on a damages claim is concerned if the competition of the sale of the Chatswood property is allowed to go ahead and if the Artarmon property and the balance of proceeds of sale of Chatswood are frozen, then the plaintiff will in due course be entitled to look to the first defendant for a sum equal to the sale proceeds of the Chatswood property.
The plaintiff contends that if the property is not returned to him, his loss may be greater than that amount. In particular, he points out that he will have to pay a significant amount of capital gains tax as well as stamp duty to acquire a new property.
So far as concerns CGT, it is not clear to me that the plaintiff will in due course be entitled to a significant sum in addition to the sale proceeds to meet this liability. The plaintiff's case in this regard has proceeded on the basis that if the property is not returned to him, he will be required to include an amount of CGT in his assessable income for the year ending 30 June 2023, being the year in which the unauthorised disposal occurred, and that the relevant CGT event would be CGT event A1: s 104-10 ITAA 1997. It is on this basis that he calculates the sum of $1,115,095.50, which assumes that the property was disposed of for market value on 28 June 2023.
However, if the plaintiff succeeds in establishing that the transfer was fraudulent, the more appropriate CGT event is likely to be C1: s 104-20. CGT event C1 happens if an asset you own is lost or destroyed. Section 104-20 provides: "(2) The time of the event is: (a) when you first receive compensation for the loss or destruction; or (b) if you receive no compensation--when the loss is discovered or the destruction occurred."
Subsection (3) provides that you make a gain in respect of CGT event C1 if the "capital proceeds from the loss or destruction are more than the asset's cost base."
This means that if the plaintiff is successful and if he receives compensation from the plaintiff then CGT event C1 would occur only at the time he receives those damages and the gain would be calculated by reference to the amount recovered. His tax liability will therefore be a function of what he recovers and he will be able to use the funds he receives to fund his resulting CGT liability.
I am therefore not prepared to place much weight on the circumstance that the fraud, if established, will give rise to a CGT liability. At most, the plaintiff may be entitled to some loss due to the fact that he has crystallised a gain and incurred a CGT liability sooner than he otherwise wished. However, the evidence at this point does not really allow me to reach any particular conclusion as to whether any such loss has been suffered and, if so, what its value is.
I am however prepared to accept that the plaintiff may have other losses if the Chatswood property is not returned to him. One such loss for which the plaintiff contends may be the stamp duty cost of acquiring an alternative property. However, it would be inappropriate for me at this stage to do anything more than note that this will be an aspect of the plaintiff's claim.
So far as the plaintiff's ability to meet a damages claim is concerned, the additional undertaking given by the plaintiff's daughter means that the first defendant's position will ultimately be protected if the plaintiff's claim fails.
The aspect of the plaintiff's claim that gives me the most pause in weighing the balance of convenience is the fact that the sale, if it proceeds, will put the Chatswood property beyond the plaintiff's reach. From the plaintiff's point of view, the whole point of this litigation is to recover the Chatswood property. It is not a claim for damages for loss of that property.
There is a long line of authority to the effect that real property is unique and that damages are not an adequate remedy where a party asserts a right to realty. This seems to be especially so in cases where specific performance is sought: see Adderley v Dixon [1824] EngR 376; 57 ER 239 at 240; Dougan v Ley (1946) 71 CLR 142 at 150 (Dixon J); [1946] HCA 3; Xu v Lindsay Bennelong Developments Pty Ltd [2020] NSWSC 1692 at [419] (Ward CJ in Eq). The proposition has also been called upon in the context of injunctions to restrain sale: Nicholas John Holdings Pty Ltd v Australia & New Zealand Banking Group Ltd [1992] 2 VR 715 at 723-724.
Be that as it may, the proposition that damages are not an adequate alternative remedy to a claim to real property is not absolute. It is necessary in all cases where an injunction is sought for the Court to determine what is "just and convenient" (see s 66(4) of the Supreme Court Act 1970) and, in particular, to determine where the balance of convenience lies. In doing so it is necessary and appropriate to take account of the nature of the plaintiff's claim. But it is equally necessary to take account of the position of other parties, including third parties, and their competing claims to the real property in question. It is also appropriate to consider the plaintiff's economic position, not simply his sentimental claim to the particular property, although I of course take that matter into account.
In the present case there are significant countervailing considerations that tend against the continuation of the injunction. The freezing orders which the first defendant is effectively proffering will protect the plaintiff's economic position. If the injunction is discharged, the second defendant will be entitled to take a transfer of the Chatswood property and will not have the difficulty of trying to recover the deposit from the first defendant, which is likely to be difficult in the short term, or of seeking damages; the vendor of the Artarmon property will be entitled to complete the contract and will not be put to the difficulty of having to find a new purchaser and, potentially, seek damages from the first defendant; and the first defendant will be able to move with her sons to the Artarmon property, which is what she wants for her and her sons.
The plaintiff submitted that the position which the second defendant now faces if the injunction continues, namely the potential inability to recover the deposit for the Chatswood property (at least, to recover it easily), is a function of the fact that the first and second defendant freely agreed to special condition 46. I do not see it quite that way. As the second defendant pointed out, if the sale of the Chatswood property is enjoined and the second defendant is unable to recover its deposit in the short term, that is a circumstance that is very far removed from what was contemplated by special condition 46. It is the very kind of potential injustice which is appropriate to take into account in weighing the balance of convenience or, as it is sometimes described, the "balance of the risk of doing an injustice": see Kolback at 535 quoting May LJ in Cayne v Global Natural Resources plc [1984] 1 All ER 225 at 237.
In ABC v Lenah Game Meats Pty Ltd (2001) 208 CLR 199; [2001] HCA 63 at [64], Gummow and Hayne JJ pointed out that the purpose of an interlocutory injunction is "to preserve the status quo pending the determination at trial of the rights of the parties to final relief." If the injunction in the present case is discharged, the plaintiff will probably no longer be able to press a claim for legal title to the Chatswood property.
However, exactly what is involved in preserving the status quo will vary from case to case. In a case such as the present case, where the interests of third parties are involved and where the plaintiff's economic position can be sufficiently protected pending trial by the continuation of the freezing orders, I find that the balance of convenience favours the discharge of the injunction.

ORDERS

The orders made by Williams J on 31 May 2024 included the following: "8. Until further order of the court the first defendant is restrained from: (a) Taking any steps to enable completion of the contract for the sale of the [Chatswood property]. (b) Encumbering the [Chatswood property]. (c) Lodging a caveat over the [Chatswood property]. (d) Taking any steps to transfer the [Chatswood property] to any party other than the plaintiff. 9. Upon the plaintiff giving the undertakings contained in Schedule A to these orders, orders against the first defendant in the terms set out in Annexure A of these orders."
The references to Schedule A and Annexure A were to documents originally accompanying the summons but with some alterations. One of those alterations excluded the sale of the Chatswood property from the usual carveout for dealing with assets in discharging obligations bona fide and properly incurred prior to the making of the orders.
Those orders were subsequently continued with slight variations by me. The injunction is now order 1 to the orders made by me on 14 June. The freezing order is now order 2.
In the light of my conclusions, it is appropriate for the orders of the Court to be as follows: 1. Order 1 made on 14 June 2024 is discharged. 2. Order 2 made on 14 June 2024 is continued until further order, with the following amendments to Annexure A: 1. Paragraph 1 shall read: "This order has effect until further order". 2. Delete the words "(save for the contract for sale of the property in lot 151 DP733862 entered into on or about 23 March 2023 with LV. ESB Pty Ltd)". 1. Costs as between the plaintiff and the first defendant be reserved. 2. The plaintiff and the first defendant to pay the second defendant's costs to date, any such costs actually paid by either party to be that party's costs in the cause.

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: 20 June 2024

Income Tax Assessment Act 1997(Cth)ss 104-10, 104-20

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