Luben Petkovski v Kai Yin Huang - [2018] NSWSC 1667 - NSWSC 2017 case summary — Zoe

NSWNSWSC

Luben Petkovski v Kai Yin Huang

[2018] NSWSC 1667

Supreme Court of NSW|2017-08-29|Before: Slattery J

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At a glance

Source facts

Court

Supreme Court of NSW

Decision date

2017-08-29

Before

Slattery J

Source

Original judgment source is linked above.

Judgment (72 paragraphs)

[1]

7] VSCA 311 Bringinshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 38 Burge v Commonwealth Bank of Australia (No 3) [2017] FCA 383 Campbell v Backoffice Investments Pty Limited (2009) 238 CLR 304; [2009] HCA 25 Carl Zeiss Stiftung v Herbert Smith & Co [No 2] [1969] 2 Ch 276 Celsteel Ltd v Alton House Holdings Ltd [1985] 2 All ER 562; [1985] 1 WLR 204 City Motors (1933) Pty Ltd v Southern Aerial Super Service Pty Ltd (1961) 106 CLR 477; [1961] HCA 53 Clegg v Dearden (1848) 12 QB 575; (1848) 116 ER 986 Commercial Bank of Australia v Amadio (1983) 151 CLR 447; [1983] HCA 14 Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373; [1975] HCA 8 Coventry v Lawrence [2014] UKSC 46 Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40 Cubillo v Commonwealth (2000) 103 FCR 1; [2000] FCA 1084 Demagogue Pty Ltd v Ramensky & Anor (1992) 110 ALR 608; [1992] FCA 851 Fabre v Arenales (1992) 27 NSWLR 437 Field Common Ltd v Elmbridge Borough Council [2008] EWHC 2079 Ch Ford Motor Company of Australia Ltd v Arrowcrest Group Pty Ltd (2003) 134 FCR 522; [2003] FCAFC 313 Fouldes v Willoughby (1841) 8 M & W 540; (1841) 151 ER 1153 Goode v Angland [2017] NSWCA 311 Halliday v Nevill (1984) 155 CLR 1; [1984] HCA 80 Hospitality Group Pty Ltd v Australian Rugby Union Limited (2001) 110 FCR 157; [2001] FCA 1040 Hospital Products Ltd v United States Surgical Corporation, Surgeons Choice (1984) 156 CLR 41; [1984] HCA 64 In the Marriage of Michiels (1991) 103 FLR 1 Inverugie Investments Ltd v Hackett [1995] 3 All ER 841 Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 Kakavas v Crown Melbourne Limited (2013) 250 CLR 392; [2013] HCA 25 Kirk v Gregory (1876) 1 Ex D 55 Konskier v B Goodman Ltd [1928] 1 KB 421 Lagan Navigation Co v Lambeg Bleaching, Dyeing and Finishing Co Ltd [1927] AC 226 Laris v Lin (No. 2) [2016] NSWSC 560 Laris v Lin [2017] NSWSC 279 Lord v McMahon [2015] NSWSC 1619 Louth v Diprose (1992) 175 CLR 621; [1992] HCA 61 Loxton v Waterhouse (1891) 7 WN (NSW) 98 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; [2010] HCA 31 Mir Bros Trading Co Pty Ltd v Cavasinni Constructions Pty Ltd [2015] NSWSC 421 Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd & Ors (1992) 67 ALJR 170; [1992] HCA 66 Nuhic v Rail & Road Excavations [1972] 1 NSWLR 204 Owners Corporation of Strata Plan 42472 v Menala Pty Ltd (1998) 9 BPR 16,337 Palmer v Dolman; Dolman v Palmer [2005] NSWCA 361 Payne v Parker [1976] 1 NSWLR 191 Polly Peck International PLC v Nadir (No. 2) [1992] 4 All ER 769 Pullen v Smedley [2017] NSWSC 1721 Rodrigues v Ufton (1894) 20 VLR 539 Shum Yip Properties Ltd v Chatswood Investment & Development Co Pty Ltd [2002] 40 ACSR 619; [2002] NSWSC 13 Smith v Scott [1973] Ch 314 Stoneman v Lyons (1975) 133 CLR 550; [1975] HCA 59 Tonto Home Loans Australia Pty Ltd v Tavares (2011) ASC 155-107; [2011] NSWCA 389 Thorne v Kennedy (2017) 91 ALJR 1260; [2017] HCA 49 Torette House Pty Ltd v Berkman (1940) 62 CLR 637; [1940] HCA 1 Universe Tankships Inc of Monrovia v International Transport Workers Federation [1983] 1 AC 366 Wentworth v Lloyd (1864) 11 ER 1154; 33 LJ Ch 688 XR Property Developments Pty Ltd v Denning Real Estate Pty Ltd [2015] NSWSC 1937 Zieleniewski v Scheyd [2012] EWCA Civ 247 Texts Cited: Halsbury's Laws of Australia Sappideen and Vines (eds), Fleming's The Law of Torts (Thomson Reuters, 10th edition) JD Heydon, MJ Leeming and PG Turner, Meagher, Gummow & Lehane's Equity: Doctrines & Remedies (5th ed, 2014, LexisNexis Butterworths) Category: Principal judgment Parties: Luben Petkovski (first plaintiff, first cross-defendant) Diana Petkovski (second plaintiff, second cross-defendant) George Gashovski (third plaintiff, third cross-defendant) Lence Petkovski (fourth plaintiff, fourth cross-defendant) Kai Yin Huang (defendant, first cross-claimant) Xuan Jing Huang (second cross-claimant) Representation: Counsel: D A Moujalli (plaintiffs/cross-defendants) J S Wheelhouse SC, J E Doyon (defendant /cross-claimants)

[3]

Judgment

The parties in these proceedings contest events concerning the sale, the subdivision and then the occupation of six adjoining properties in Watkin Street, Rockdale, during the years 2010 to 2014. These reasons first deal with disputes arising between early 2010 and mid-2012 relating to the purchase and subdivision of these properties, and then they deal with other disputes arising between mid-2012 and 2014 about alleged trespasses and nuisances among adjacent property owners in the subdivision.
The six adjoining properties are respectively numbered 47 to 57 Watkin Street. They are situated on the northern side of that street and are Lots 1 to 6 of a single subdivision, registered in April 2012, of a parcel of land that was formerly DP1/536641. Somewhat counter intuitively, the higher lot numbers in the subdivision correspond with the lower street numbers in Watkin Street. So, for example, Lot 1 in the subdivision corresponds with No. 57 Watkin Street and Lot 6 in the subdivision corresponds with No. 47 Watkin Street. For convenience in these reasons, the six lots in question will be referred to both by their lot numbers in the subdivision and their street numbers in Watkin Street. In its pre-subdivided state, the whole parcel of land will be referred to either as DP1/536641 or as "the Watkin Street property".
The plaintiffs/cross-defendants, and the parties related to them ("the Petkovski parties"), are the registered proprietors (in various combinations shortly to be explained) of three of the six lots in the subdivision, namely Lot 1 (No. 57), Lot 3 (No. 53) and Lot 4 (No. 51). The defendant and his wife (who together are the cross-claimants) are both registered proprietors of the other three lots, namely Lot 2 (No. 55), Lot 5 (No. 49) and Lot 6 (No. 47). More detail is required to explain the holdings of each of these groups in the Watkin Street property.
The four plaintiffs to these proceedings are: Luben Petkovski (the first plaintiff), Diana Petkovski (the second plaintiff), George Gashovski (the third plaintiff), and Lence Petkovski (the fourth plaintiff). All four plaintiffs are the registered proprietors of Lot 1 (No. 57). Mr Petkovski is the registered proprietor of Lot 4 (No. 51). All these properties, held by the plaintiffs and Petkovski parties, are held either singly or as tenants-in-common. The property Lot 3 (No. 53) is held solely by another Petkovski party, Ms Yanna Elfes, who is not a party to these proceedings. The party referred to most frequently in this judgment is Mr Luben Petkovski. For that reason, he is simply referred to as "Mr Petkovski" in these reasons. All other plaintiffs and Petkovski related parties are described by their full names, including their first names, and collectively as the "Petkovski parties".
Mr Kai Yin Huang, and his wife, Mrs Xuan Jing Huang, are the registered proprietors as joint tenants of each of Lot 2 (No. 55), Lot 5 (No. 49), and Lot 6 (No. 47).
The plan of subdivision of the six lots was registered with Land and Property Information New South Wales ("LPI") on 5 April 2012. The plan indicates the relative location of the six adjacent Lots on Watkin Street and is set out in Figure 1 below: Figure 1
In October 2015, the four plaintiffs initiated proceedings against Mr Huang, as the sole defendant, for damages for alleged trespass upon some of the lots they held in the subdivision. Mr and Mrs Huang Cross Claimed in the proceedings against all four plaintiffs, alleging: 1. Unconscionable conduct and contraventions of ss 18, 20 and 22 of the Australian Consumer Law ("ACL"), in relation to three declarations of trust that Mr and Mrs Huang say that Mr Petkovski pressured them into executing on 10 March 2011, resulting in what the Huangs further allege was their forced sale to the plaintiffs of their interests as purchasers in each of Lots 1 (No. 57), 3 (No. 53) and 4 (No. 51); and 2. Trespass, nuisance and interference with a right of carriageway benefitting Lot 2 (No. 55), one of the three properties held by the Huangs.
These reasons first deal with the Huangs' pleaded allegations against the plaintiffs of unconscionable conduct and contraventions of the ACL, arising from the circumstances in which the six properties came to be sub-divided and held by the parties between 2010 and 2012. These reasons then turn to the allegations by each party of various trespasses upon, and interferences with, each other's properties between 2012 and 2014.

[4]

Overview of the Huang's Unconscionable Conduct Case

The Huang's unconscionable conduct case may be shortly summarised. Tome Bros Pty Ltd ("Tome Bros") acted as the real estate agent for the vendor, Pangani Pty Ltd ("Pangani"), on the sale of the Watkin Street property. Mr Petkovski was an employee of Tome Bros.
Mr and Mrs Huang say that they agreed in April 2010 with Mr Petkovski, who was at all times acting as Pangani's agent, to purchase DP1/536641 for $3.05 million. They claim that they simultaneously entered into an informal arrangement with a friend of theirs, Ms Judy Wu, for her to purchase two of the six lots that would result from the subdivision of DP1/536641. Mr and Mrs Huang say they planned to retain the other four lots for themselves.
The Huangs allege that, in November 2010, Mr Petkovski told Mr Huang that he wanted to buy two of the six lots himself, and that if Mr Huang did not agree to selling these two lots to parties associated with him, then the sale from Pangani to the Huangs would not proceed. Subsequently, Ms Wu withdrew entirely from the purchase. The Huangs say that, after Ms Wu's withdrawal, they were prepared to buy the whole parcel of land in DP1/536641 but Mr Petkovski said he and the Petkovski parties insisted on buying three of the six lots.
The Huangs contend that, in February 2011, Mr Petkovski told Mr Huang that Mr Huang had to sign a form of trust deed (or trust deeds), under which Mr Huang would declare he held three of the six lots to be subdivided on trust for Mr Petkovski and the Petkovski parties. The Huangs further contend Mr Petkovski threatened that, should the Huangs fail to sign the trust deed/s, the contracts for sale of the land would not proceed and their deposit would not be returned.
In March 2011, the Huangs executed three declarations of trust ("the Trust Deeds"). They contend that they did so acting under Mr Petkovski's threats. Under the Trust Deeds, the Huangs agreed and declared that they: 1. would enter into options to purchase the whole of the land in DP1/536641, or to purchase the six lots into which it was to be subdivided, if it were subdivided by the end of end of the option period; 2. would then exercise the options and would enter into a contract to purchase the whole of the land, or the six lots if the land had been subdivided; and 3. were to hold Lot 1 (No. 57), Lot 3 (No. 53) and Lot 1 (No. 57) on trust for Mr Petkovski and the related parties.
Throughout late 2011 and early 2012, steps were taken to register the plan of subdivision of the Watkin Street property. Registration was ultimately achieved on 5 April 2012. The Huangs execution of call options over each of the lots followed a few days later. Then, in May 2012, the Huangs executed three deeds of rescission ("the Rescission Deeds") in respect of Lot 1 (No. 57), Lot 3 (No. 53) and Lot 4 (No. 51). Pangani then entered into contracts to sell those three lots to the plaintiffs/cross-defendants and to the Petkovski parties.
In July 2012, each of the six contracts for the sale of land were completed. Transfers of each of the lots were registered as follows: Lot 1 (No. 57) to the plaintiffs/cross-defendants; Lot 2 (No. 55) to the Huangs; Lot 3 (No. 53) to a Petkovski party, Ms Yanna Elfes; Lot 4 (No. 51) to Mr Goran Petkovski; Lot 5 (No. 49) to the Huangs; and Lot 6 (No. 47) to the Huangs. Lot 4 (No. 51) was subsequently transferred from Mr Goran Petkovski to Mr Petkovski in 2014.
The Huangs claim that they were in a position of special disadvantage in relation to Mr Petkovski and that Mr Petkovski acted unconscionably by applying illegitimate pressure to Mr and Mrs Huang to their agreement to the Petkovski parties becoming the purchasers of Lot 1 (No. 57), Lot 3 (No. 53) and Lot 4 (No. 51) by forcing them to execute the Trust Deeds, and then by subsequently taking the benefit of the rescission of three of the contracts with Pangani. The Huangs say that Mr Petkovski took advantage of them, both immigrants from China with a limited understanding of English, and who were highly dependent on Mr Petkovski as an experienced real estate agent for advice and information about the purchase.
The Huangs claim that Mr Petkovski's conduct also contravened ACL, ss 18, 20 and 22 and they seek the following relief: 1. a declaration that Mr Petkovski holds Lot 1 (No. 57) and Lot 4 (No. 51) on constructive trust for the Huangs; and alternatively, equitable, compensation; and 2. equitable compensation in relation to the purchase of Lot 3 (No. 53) by Ms Yanna Elfes.
The Huangs also sought damages under ACL, s 236 for conduct by the cross-defendants contravening ss 18 and 20 (and alternatively to s 20, s 22). But, by the time of the hearing, the Huangs had abandoned any relief for revesting these properties in them.
The Huangs also raise a subsidiary purchase and subdivision issue. They allege in their Cross Claim that the plan of subdivision Mr Petkovski registered on 5 April 2011 was different to the plan in the contracts attached to the option agreements, under which the Huangs acquired the land from Pangani. The total area of the three lots retained by the Huangs was some 21.5 square metres less than the land area identified in the Pangani contracts. This difference in area is mostly accounted for by reduction in the size of Lot 1 (No. 57).
The plaintiffs/cross-defendants answer this part of the claim simply. They disown personal involvement in the decision to subdivide Lot 1 (No. 57) with boundaries different from the plans attached to the option agreements. They allege that the construction manager superintending building works on Lot 1 (No. 57), Mr Harry Fandakis, took it upon himself to lodge an application to modify the subdivision of Lot 1 (No. 57) to avoid a more expensive fire rating treatment of walls. Mr Petkovski says he was not aware of this application.

[6]

Pangani, the Vendor of the Watkin Street Properties

The statutory regime applying to Mr Petkovski and Mr Cochinas (who shall be introduced later in these reasons) as estate agents may be shortly stated. As a real estate sales person employed by a real estate agency, Mr Petkovski was required neither to obtain, nor be in any way concerned in obtaining (for example, through relatives), a beneficial interest in the property the subject of an agency agreement between a vendor and the sales person's employer: Property Stock and Business Agents Act 2002 ("PSBA Act"), s 49. Contravention of PSBA Act, s 49 may be avoided if the written consent of the vendor in the prescribed form is obtained: PSBA Act, s 49(3)). Mr Petkovski has not contended that Pangani ever signed a consent in the prescribed form.
Pangani has never been a party to these proceedings. At the commencement of the hearing, the Court enquired whether Pangani had been served with notice of the proceedings. It emerged from this enquiry that Pangani had been placed in liquidation and had later been deregistered.
The Court expressed concern that, if Mr Huang's case were made out, and if Pangani was unaware of the arrangements between Mr Huang and its agent, Mr Petkovski, that Pangani may yet wish to bring separate proceedings against Mr Petkovski. Such proceedings would be heard separately from the present proceedings, with the undesirable attendant risk of inconsistent verdicts. So the Court directed notice be given to the persons relevantly interested in Pangani about the issues raised in the Cross Claim.
The Court's directions produced a response. Mr Scott Truman and Mr Michael Truman were identified as the last directors and shareholders of Pangani before deregistration. Mr Scott Truman was overseas when inquiries were made, but he emailed back a reply to the Court's directions, saying: "I have read the information provided and am of the opinion that we would be unlikely to take the steps suggested by his Honour to become a party in the action. I would be unable to arrange representation to appear by the specified time and date."
The liquidator of Pangani before its deregistration, Mr Alan John Hayes of Hayes Advisory, indicated that there were no funds available in the liquidation and that there was no foreseeable prospect of the liquidator re-registering the company. On 28 August 2017, Hayes Advisory formally wrote on behalf of the directors of Pangani and the shareholders of the company, thanking the Court for making them aware of the proceedings and advising that "no further future action will be taken by the company, its directors or shareholder at this stage". The Court will direct that the cross-claimants provide a copy of these reasons, or a reference where they can be found on the Court's website, to Hayes Advisory within seven days of publication of the reasons.
The Court decided the matter should proceed without making further efforts to notify anyone associated with Pangani. It seemed insufficiently likely that Pangani would later seek to initiate proceedings against the parties to these proceedings to warrant further delay to the matter.
Before commencing the Court's narrative of findings in relation to the unconscionable conduct claim, the credibility of the principal witnesses will be now briefly examined.

[7]

Mr Huang's Credibility

The Court generally accepts Mr Huang as a credible witness. His evidence can mostly be relied upon as reliable and truthful. But assessing his credibility was a complex task. His difficulties with English and some at times strange evidence added to the puzzle of forming an opinion about him as a witness.
Aspects of Mr Huang's testimony were troubling. One prominent example of this was his persistent refusal to recognise himself in a photograph on page 18 of Exhibit C (a set of photographs taken on Lot 1 (No. 57) and on Lot 3 (No. 53)). Mr Huang continually denied in evidence on Wednesday 23 August 2017 that he could recognise himself in this photograph. This was strange, as it was very obviously a photograph of him, dressed in an identical way to the manner in which he was depicted in other photographs taken at the same time. But he was not prepared to volunteer in cross-examination even that he "might have been" the person in the photograph.
But when he was asked further questions on this subject on Thursday, 24 August, he changed tack. He was asked whether if the photograph in Exhibit C was not of him, did he have any view as to who it was that was on the property dressed in the same way that he had been dressed in other photographs that he did recognise as photos of him. He then confessed to an error the day before. He finally said that he did recognise the photograph in Exhibit C as one of himself.
In my view, he always recognised the photograph in Exhibit C as a photograph of himself but was reluctant to admit that fact in his initial testimony, because he thought that the admission might disadvantage him in some way. His non-recognition of himself in this photograph does not bear directly upon any fact in issue. But his performance on this issue was damaging to his credit in showing that he was, for no explicable reason, prepared to stubbornly adhere to testimony that he must have known was wrong.
Aspects of Mr Huang's unconscionable conduct case also led to direct challenges to his credibility. It was put to Mr Huang that he should have asked a lawyer about the alleged threats that he says were being made to him by Mr Petkovski. There was force in this cross-examination, as it was difficult to understand at first why he had not done so. He showed, for example, that he was later quite prepared to consult lawyers when he needed to do so. He had access to a number of lawyers at the time. But the Court accepts that he thought that going to lawyers would be useless and that he would lose everything if he did not comply with the pressure being placed upon him by Mr Petkovski. Ultimately, the Court has accepted the nature of this pressure and that his relationship with Mr Petkovski was such that Mr Huang genuinely thought at the time that lawyers could not help him. And his perception of lawyers was clouded by his personal experience: most of the lawyers Mr Huang had used had been introduced to him by Mr Petkovski.
Mr Huang paid a substantial deposit well before signing the Trust Deeds or the option agreements. He accepted some risk of the loss of this deposit. He was genuinely keen to proceed with these transactions which he saw as potentially very profitable for himself. He was keen to buy and hold them for profit. It is therefore unlikely that he would seek to share his investment with Mr Petkovski on a voluntary basis.
Substantial allowance must be made for Mr Huang's lack of familiarity with English. Mr Huang felt very beholden to Mr Petkovksi. This was in part because Mr Huang perceived Mr Petkovski to be a well-connected source of future potential property transactions. Mr Huang did not want to miss property investment opportunities that were commonly offered and discussed in English, not Mandarin. Mr Petkovski took the time to explain to these opportunities through Mr Huang's limited English. Mr Huang did not want to get on the wrong side of Mr Petkovksi. Mr Petkovksi well understood this aspect of Mr Huang's dependence upon him and took advantage of it. For example, it must have been obvious to Mr Petkovski that Mr Huang had: (1) at any time throughout the subject transactions not obtained legal advice other than from Mr Lee and Mr Ng (who, the evidence will show, were probably also taking some instructions from Mr Petkovski); and (2) was almost entirely dependent upon Mr Petkovski for information about the details of and commercial merits of the transactions being proposed.
Mr Huang had demonstrable language difficulties. He had a capacity to understand and speak English in a slow and halting fashion. Quick or colloquial spoken English was beyond him. Mr Petkovski became an important communication gateway for Mr Huang. At one stage, Mr Huang was asked how he remembered a conversation that Mr Petkovski had with him on the telephone. This was indeed a puzzle. It is to be wondered how Mr Huang could converse by telephone with Mr Petkoski: Mr Huang could not clearly speak English and Mr Petkovski could not speak Mandarin. In answer to this question, Mr Huang managed to dramatically mouthe in "baby" English the very simple monosyllabic way that Mr Petkovski spoke to him on the telephone to convey meaning to him in English. Mr Huang's demonstration of this in the court room was realistic and thoroughly convincing. It well explained how Mr Petkovski's and Mr Huang's communications had actually occurred.
But this also indirectly showed Mr Petkovski's degree of control over Mr Huang. Mr Petkovski knew exactly how to speak to Mr Huang in simple English and he took the time to do so. This kind of communication from Mr Petkovski helps to explain the puzzling discontinuity, for example, between Mr Huang's belief that the deposit was not refundable and the contrasting letter from Tome Bros dated 25 May 2010 that said the opposite. Mr Huang's evidence was that he was threatened by Mr Petkovski with the prospect that his deposit would not be recoverable if he did not proceed with the purchase upon the terms Mr Petkovski had dictated. This, at first, looks doubtful in light of the letter of 25 May 2010, which clearly offered a refund of the deposit if the matter did not proceed.
But I accept Mr Huang heard Mr Petkovski say the deposit was not refundable, even though the letter says the contrary. But the contradiction between what the letter said and what Mr Huang was told never became obvious to Mr Huang. He never had the letter read to him word for word and he cannot read English. He relied on what Mr Petkovski had explained to him about the deposit.
The Court now comments on the credibility of the other witnesses, whose evidence was relevant to the unconscionable conduct and the trespass cases.

[8]

Credibility of Witnesses Other than the Parties

Mr Harry Fandakis, who was the supervising engineer for the subdivision, was a generally reliable witness. He could be forthright. He was concerned about the accuracy of his evidence; so much so that he readily questioned his cross-examiner, when he perceived questions put to him were not clear enough. Mr Fandakis was a witness of substantial truth. His evidence, for example, about altering the boundaries between Lot 1 (No. 57) and Lot 2 (No. 55) and why he undertook that exercise - to reduce the costs of compliance with the BCA for the fire-rated windows - was simple, compelling and logical. The Court accepts it entirely.
Mr Stan Tsoutouras was an excellent witness. He was an obviously diligent plumber, who had worked on many different tasks at the subdivision. He was demonstrably proud of the quality of his work and would only take responsibility for work that met his high standards. He had a ready familiarity with the sites of all the six lots to be subdivided from the Watkin Street property. At the Court's request, he designed and costed a number of possible solutions to the trespass issues in the case. His credibility was not in issue. The Court has adopted aspects of his solutions in the relief ordered in this judgment.
Mr James Xu was a dependable witness. He was a longstanding friend of Mr and Mrs Huang. He assisted Mr Huang from time to time, when Mr Huang thought he would be unable to understand a transaction being discussed or conducted in English. Mr Xu attempted to answer all questions completely and truthfully. He was a witness of substantial truth. He gave considered answers reflecting on the questions asked of him, and only answered to the extent that he could reliably speak about the facts. His account of his meetings with Mr Petkovski and with Mr and Mrs Huang, where he acted as a translator, is entirely accepted. Substantial parts of what he said were not challenged in cross-examination.
Mrs Judy Wu also was an excellent witness. She had migrated from China in December 1989, barely six months after the Tiananmen Square massacres. For a period, she had a personal financial interest in the acquisition of the Watkin Street property. Therefore, she was very focussed upon the disputed events to which she was a witness. Her memory was sharply concentrated on what was said to her. The Court assesses her as a witness of substantial truth. Again, as with Mr Xu, she was not strongly cross-examined to suggest that her evidence may either be inaccurate or biased.
Mrs Huang was a truthful witness. I accept all her evidence. She had poor English and a limited education. She was highly dependent on her husband for communication in English with others. His English, despite its limitations, was still considerably better than hers. She was not in the habit of questioning her husband's business decisions. She was naturally shy and somewhat overawed by the Court process. It would not occur to her to ask questions of persons who she accepted had authority to make decisions that might affect her financial interests, such as her husband.
She appeared to have a natural deference to such authority. She was, for example, cross-examined as to why she did not ask her husband, or their solicitor, about the various transactions in which she was included, about the legal effect of documents she signed, or about having important documents translated so she could better understand them. She looked quite mystified by these suggestions: such ideas had never occurred to her.
The protection of her own separate individual interests by asking questions and refusing to proceed further with a transaction, unless satisfied with the answer, was a concept beyond her experience. Her approach to life was straightforward: her husband could decide for her and she accepted his decisions. The Court sees no basis to discredit Mrs Huang's testimony, as was suggested, because she did not question transactions in which her husband was involved, or seek to assert her own independent financial interests. Her evidence of lack of questioning of transactions is really a badge of her dependence and lack of capacity to protect her own interests.

[9]

Evidence of Serious Misconduct and Absent Defendants

The Court makes findings against Mr Petkovski in these reasons that amount to serious misconduct as an estate agent on his part. He has chosen not to give evidence. But he and the other plaintiffs/cross-defendants have been represented throughout the proceedings.
Such serious findings raise special considerations. In doing so, the Court has applied the principles in Bringinshaw v Briginshaw (1938) 60 CLR 336; HCA 34 ("Briginshaw") and has had regard to Evidence Act 1995, s 140(2).
The strength of the evidence necessary to establish a fact or facts on the balance of probabilities may vary according to the nature of what is sought to be proved; it is a conventional perception that members of our society do not ordinarily engage in fraudulent or criminal conduct and a judicial approach is that a Court should not lightly make a finding that on the balance of probabilities a party to civil litigation has been guilty of such conduct: Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd & Ors (1992) 67 ALJR 170; [1992] HCA 66 at 170 per Mason CJ, Brennan, Deane and Gaudron JJ; see also Amalgamated Television Services Pty Ltd v Marsden [2002] NSWCA 419 and Palmer v Dolman; Dolman v Palmer [2005] NSWCA 361.
The plaintiffs/cross-defendants called no oral evidence from any party and did not call any witnesses to give oral evidence in their case. This led to debate on both sides about the application of the rule in Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 ("Jones v Dunkel"). The doctrine may be shortly stated. The unexplained failure by a party to give evidence, to call witnesses or to tender documents may, in appropriate circumstances, lead to an inference that the uncalled evidence would not have assisted that party's case: Jones v Dunkel at CLR 308, 312 and 320-21. The rule also permits the trier of fact to take that into account in deciding whether to accept any evidence relating to a matter on which the absent witness could have spoken. The rule also permits the trier of fact to more readily to draw any inference fairly to be drawn from other evidence by reason of the opposing party being unable to prove the contrary, had the party chosen to call evidence. But the rule does not permit an inference that the untendered evidence would in fact have been damaging to the party not tendering it and the rule cannot be employed to fill gaps in the evidence, or to convert conjecture and suspicion into inference: Nuhic v Rail & Road Excavations [1972] 1 NSWLR 204 at 206-7.
But the inference is one which will vary depending upon the circumstances. And this case is an example of how subtle those circumstances can be. The appropriate circumstances to call a witness will exist where it was within the power of a party to call the evidence which was not called. The Court of Appeal discussed this in Fabre v Arenales (1992) 27 NSWLR 437 ("Fabre") at 449-450 (Mahoney JA, Priestley and Sheller JJA): "The significance to be attributed to the fact that a witness did not give evidence will in the end depend upon whether, in the circumstances, it is to be inferred that the reason why the witness was not called was because the party expected to call him feared to do so. But there are circumstances in which it has been recognised that such an inference is not available or, if available, is of little significance. The party may not be in a position to call the witness. He may not be sufficiently aware of what the witness would say to warrant the inference that, in the relevant sense, he feared to call him. The reason why the witness is not called may have no relevant relationship to the fact in issue: it may be related to, for example, the fact that the party simply does not know what the witness will say. A party is not, under pain of a detrimental inference, required to call a witness "blind". … A Jones v Dunkel inference may not arise if, for example, a witness has a reason for not telling the truth or refusing to assist and the party who may call him is aware of this."
In Fabre, the Court of Appeal gave examples of witnesses whose absence might not support a significant Jones v Dunkel inference as including circumstances where a person would be asked to admit a serious crime. But whether or not the inference can be drawn may depend upon the closeness of the relationship of the absent witness with the party who did not call the witness: Hospitality Group Pty Ltd v Australian Rugby Union Limited (2001) 110 FCR 157; [2001] FCA 1040 at [64].
Greater significance will attach if the witness not called is a party to the proceedings, or a senior executive of the party: ASIC v Adler [2002] 41 ACSR 72 at [448]; [2002] NSWSC 171.
These principles apply to the position of each of Mr Petkovski and the other plaintiffs and cross-defendants. As the reasoning in this judgment shows, all of their conduct might be able to be criticised, particularly that of Mr Petkovski.

[11]

Mr and Mrs Huang

Mr Huang was born in China and came to Australia in early 1989 on a student visa. After the Tiananmen Square massacres of June 1989, his student visa was replaced in January 1990 with a protection visa by the Australian Government. His student visa permitted him to study English but his protection visa allowed him to work to support himself and his family back in China. Language difficulties made finding suitable employment difficult for him. He had completed his secondary education in China but had been educated no further. His first language is Mandarin. As these reasons have already indicated, he speaks and understands very simple English but can neither read nor write English.
Mrs Huang was also born in China. Mr Huang sponsored her to come to Australia in 1992. She never attended school and has received no formal education. Mrs Huang's first language is also Mandarin but she can only read and write a limited number of Chinese characters. She grasps and can speak only a few English words and cannot read or write English. Mr and Mrs Huang both came from Houyuxiang, a village situated in Fujian Province, near the city of Fuzhou. Fujan Province is a part of coastal China facing northern Taiwan. Mr and Mrs Huang married in 1984 and have two children, who were born in China.
Mr Huang found employment alongside other Chinese migrants as a sweeper in a Sydney bread factory. From there he learned to bake. His acquired skills were profitable and his earnings enabled him to purchase his own bread factory in 1994. In November 1994, the Australian Government granted him a permanent visa. Mr Huang says, and the Court accepts, that although he has lived in Australia for nearly 30 years, he rarely socialises or communicates beyond the circle of Mandarin-speaking people in Sydney's Chinese community, with whom he is most familiar. He has been able to advance in life in Australia without reading or writing English, but by relying on English speakers with whom he has become familiar, and in whom he has trust and confidence.

[12]

Mr Petkovski Introduces the Watkin Street Property - 2009

Mr Huang and Mr Petkovski first met in 2006. Mr Petkovski was a real estate sales representative, employed by Tome Bros, a real estate agency in Rockdale. They met during an open house inspection for a property in King Edward Street, Rockdale that Mr Petkovski was then marketing for Tome Bros.
Mr Petkovski was licensed under the PSBA Act as an employed real estate sales agent. Mr James Cochineas, a director of Tome Bros, held the Tome Bros agency's licence and was responsible for supervising Mr Petkovski. In their conversations, neither Mr Cochineas nor Mr Petkovski used Mr Huang's full Chinese name, Kai Hin Huang. For convenience, they preferred to call him "Johnny", which also for convenience, he accepted.
Tome Bros also employed Mr Harry Fandakis as a consultant engineer and project manager. He was the project manager for the subdivision and development of the Watkin Street property. He became an important witness in relation to the trespass issues that are considered later in these reasons.
After that first meeting, Mr Petkovski telephoned Mr Huang to assess his interest in various other properties for sale in the local area. Appreciating that Mr Huang's English was limited and that he found it hard to understand Mr Petkovksi on the telephone, Mr Petkovski often invited Mr Huang to the Tome Bros office to take Mr Huang through details of properties for sale and to explain their prices. In 2007, Mr Huang purchased two properties in King Edward Street, Rockdale, on which Mr Petkovski had acted as selling agent.
Mr Huang's only form of contact with Mr Petkovski during this period was as prospective purchaser to real estate agent. Mr Petkovski initiated phone calls about potential properties to Mr Huang and Mr Huang often went to the Tome Bros office to discuss the properties. They did not otherwise have a social relationship.
In 2008, Pangani retained Tome Bros as the exclusive selling agent to sell the Watkin Street property. Mr Petkovski first introduced Mr Huang to the property in May 2009. The Watkin Street property had the unusual feature of six early 20th century style houses constructed on a single block of land. Mr Huang was initially unaware of this single title for the six houses. His early conversations with Mr Petkovski generally referred to the property in terms of "six lots". Mr Petkovski did not clearly communicate to Mr Huang for some time that the six houses shared the one title.
Mr Petkovski sounded out Mr Huang for his potential interest in buying the Watkin Street property. Mr Petkovski opened the discussions, seeking an offer from Mr Huang: "how much would you pay for the property if you are interested?" In response, Mr Huang expressed a willingness to purchase all six lots for $2.5 million. Mr Petkovski promised to consult his principal. A short while later, Mr Petkovski telephoned Mr Huang and asked him to come into the Tome Bros office to discuss the property.
At the office, Mr Petkovski said that the vendor wanted "$2.7 million for the six lots". He wrote the figure down on a sheet of paper and gave it to Mr Huang, who indicated he was prepared to buy it for that higher price. Upon Mr Huang enquiring about the amount of the deposit that was required, Mr Petkovski said to him "5% for each of the lots".
Mr Huang acted quickly. He collected funds amounting to 5% of the $2.7 million proposed purchase price, namely $135,000, to give to Mr Petkovski. He brought a cheque to Mr Petkovski at the Tome Bros office in Rockdale. But when he tried to present it to Mr Petkovski, he was greeted with the surprising response, "the landlord [Pangani] wants $3 million instead of $2.7 million". Mr Huang was not ready to deal with this further price hike, so he went home to think about what he should do next. Mr Huang nevertheless remained tempted to purchase all six houses.
From mid to late 2009, Mr Huang sat on the vendor's request for $3 million. He needed to be persuaded to buy at this higher figure. Mr Petkovski rang him several times before Christmas 2009 to follow up the vendor's new price. Mr Huang responded to these queries, saying to Mr Petkovski a few times, "I am not sure; $3 million is quite expensive".
But by April 2010, Mr Huang was prepared to commit. He says, and the Court accepts, that he decided that month to purchase the six lots for $3 million. He went to see Mr Petkovski at the Tome Bros offices in Hurstville and told him of his desire to proceed. The detail of that conversation is referred to below.
From this time on, Mr Petkovski gave Mr Huang informal support to promote the purchase of the Watkin Street property. For example, in May 2010, he provided Mr Huang with real estate agent's letters offering his expert opinion about the probable rental returns from Mr Huang's existing investment properties in Edward Street to assist him to demonstrate to prospective lenders the reliability of his income for servicing future borrowings to acquire the Watkin Street property.

[14]

Mr Huang Confers with Mr Lee - Mid-March to Early April, 2010

In early 2010, Mr Petkovski recommended that Mr Huang consult a particular solicitor, Mr Raymond Lee of Raymond Lee & Co, to assist Mr Huang with the conveyancing on the purchase of the Watkin Street property. Mr Huang felt obliged to accept this recommendation. Mr Huang's acceptance of a lawyer-referral from the agent for the other side of the transaction he was about to enter at first seems surprising. But Mr Huang accepted the recommendation, in part because he had already become dependent on Mr Petkovski's advice about property transactions and in part because he was not familiar with other solicitors.
Mr Huang retained Mr Lee for the conveyancing. Mr Lee acted in that role until December 2010, when a new solicitor was engaged, Mr Alan Ng. Mr Lee did not give evidence at the hearing. But his file notes produced under subpoena allow some limited inferences to be drawn with reasonable confidence about what passed between Mr Huang and Mr Lee at their various meetings.
The Court generally accepts Mr Huang's account of his various communications with Mr Lee. On 16 March 2010, Mr Petkovski initiated Mr Huang's referral to Mr Lee. He telephoned Mr Lee and organised an appointment for Mr Lee to see Mr Huang. Mr Petkovski also gave Mr Lee's business card to Mr Huang and told him to go and see Mr Lee. Mr Huang visited Mr Lee the same day in George Street, Haymarket. Mr Lee only spoke Cantonese and English. Mr Lee therefore arranged an interpreter to speak to him in Mandarin on each of the several occasions that they consulted each other. Mr Lee's notes of their first conference on 16 March 2010 record that there was an interpreter called "Grace" present.
The conference on 16 March 2010, between Mr Huang and Mr Lee, was to instruct Mr Lee about putting an offer to Pangani. Mr Huang was exploring his options at this first meeting. Mr Huang wanted a 12 month settlement period under the proposed contract with Pangani. It appears that, as time had gone by, the vendor had by March 2016 again sought to raise the price, this time to $3.15 million.
Following up on the instructions given in this 16 March 2010 conference, Mr Lee wrote to Mr Cochineas at Tome Bros on 18 March 2010, formally conveying an offer for the Watkin Street property from Mr Huang for $3.15 million, to proceed by way of an assignable call option exercisable by Mr Huang within 12 months of the date of the call option deed, at a call option fee of $200,000.00, which would be deductable from the purchase price, and on otherwise acceptable terms.
On 19 March 2010, Mr Cochineas told Mr Huang that the Watkin Street property could not be subdivided. An application for subdivision was already before Rockdale Council, and faced an obstacle so approval had not yet been granted. That approval was not given until 24 March 2010. Mr Huang accepted what Mr Cochineas told him. Mr Lee and Mr Huang then spoke. Mr Huang was informed that easements needed to be created for each driveway in the subdivision and for Sydney Water in one line. This is probably the obstacle to subdivision to which Mr Cochineas was referring.
On 6 April 2010, Mr Cochineas telephoned Mr Lee and told him that Pangani would get immediate approval to subdivide and that the vendor was not keen on the 12 month option period referred to in Mr Lee's 18 March 2010 letter. But this conversation is also somewhat strange: Pangani already had an approval for a subdivision at the time Mr Cochineas made the phone call.
On 8 April 2010, Mr Huang again conferred with Mr Lee. A different interpreter was present. Mr Huang's instructions relevantly were that Mr Huang was: arranging funds from China for the deposit; wanting Mr Lee to look into the development approval and advise on the possibility of subdividing later; and wishing to on sell separately to different people within 12 months. Mr Lee's legal costs were discussed and the complexity of the transaction was mutually acknowledged.
Mr Lee's file note of this conference suggests that Mr Huang and Mr Lee had, by this date, become aware of the Rockdale Council development approval to the subdivision which had come through a few days earlier.

[17]

Mr Lee, Mr Huang and Ms Wu - April to May 2010

Mr Lee, Mr Huang and Ms Wu met or communicated by telephone several times between April and May 2010 to try and progress the purchase. Mr Lee and Ms Wu spoke by telephone on 29 April 2010. Ms Wu was keen to commit. She wanted to know whether contracts for the purchase had been exchanged.
In late April or possibly early May 2010, Mr Petkovski first broached with Mr Huang the topic of the property being split into six titles. In a conversation in the Tome Bros office, Mr Petkovski said, "the property has to be split into six titles".
Mr Huang was surprised. He thought the property already was comprised of six separate titles. But he was unperturbed by this new information. He wanted to buy the six houses and their surrounding land in whatever form they were available.
But he did question why there needed to be a split at all. He was unaware how far the subdivision application had proceeded over recent months. So, Mr Huang said to Mr Petkovski, "Why should I split?" I want to buy six lots without subdivision. I don't need to divide the property. I don't need the purchase to be messy. Just give me the contract and we can settle on the purchase".
Mr Lee met Ms Wu on 30 April 2010. Ms Wu was then proposing to buy part of the Watkin Street property with its own separate title and to further subdivide it later. Ms Wu's continued involvement in meetings throughout this period shows her keenness to proceed.
Mr Lee's file note for 30 April includes a notation "3.05m has been accepted". Since mid-April, there had been further negotiations between Pangani and Mr Huang, through Mr Petkovski, which appear to have resulted in this new compromise sale figure of $3.05 million being reached.
On 4 May 2010, a further meeting took place between Ms Wu, Mr Huang and Mr Lee in relation to the purchase of the Watkin Street property. At this meeting, Mr Huang and Ms Wu confirmed the new total purchase price of $3.05 million and that this purchase price would be apportioned equally six ways and the property would be divided into six separate and equal lots. Mr Huang and Ms Wu agreed that Mr Huang would receive four houses of the six in the Watkin Street property and that Ms Wu would receive two houses. They both expected each would be divided into its own separate lots.
Mr Lee's notes confirm this and confirm that the total purchase consideration of $3.05 million was going to be divided six ways with Mr Huang being responsible to fund the purchase price of four out of the six lots, namely a total consideration of $2,033,333, and that Ms Wu would be responsible to fund the balance, being a total consideration of $1,016,666.67. As the agent wanted them to pay a 5% deposit as soon as possible, Mr Lee calculated that Mr Huang's deposit would be $97,343 and Ms Lee's would be $41,200.50.
By early May 2010, Mr Huang was actively looking for finance for the proposed purchase. He had already gone to St George Bank, as had Ms Wu. Mr Petkovski was assisting him in this with written valuations of the two properties Mr Huang owned in King Edwards Street Rockdale and another property in Eastlakes, all of which were to be offered as security for Mr Huang's borrowings.
Mr Lee confirmed with Ms Wu and Mr Huang on 14 May 2010. He advised Ms Wu that she could pay the deposit to the agent but she was not to sign anything and to make sure she obtained a receipt from the agent and mark it "refundable" if the matter did not proceed. This tends to suggest that Ms Wu was aware that the receipt moneys may have be refundable. But her situation on this issue is to be contrasted with Mr Huang's: given what Mr Petkovski (who he trusted) had said to him, he thought that the deposit would not be refundable.
On 17 May 2010, Mr Lee wrote to Mr Cochineas querying a statement Mr Cochineas is alleged to have made: that the Watkin Street property had already been subdivided and each of the six houses on the Watkin Street property had a separate and independent title. Mr Lee said: "We refer to the above and advise that we had a conference with our clients on Friday the 14th May, 2010. Our clients had advised that at that time you had advised that property had already been sub-divided and each of the six (6) houses on the said property had, at this time, separate and independent Certificates of Title. We advised that our clients that we were of the view that the sub-division had not as yet taken place. We would be pleased if you would confirm that regard. We are instructed that our clients wish to proceed with the purchase of the property and now understand that a contract will be issued to our office for our clients in relation to their proposed purchase. We understand that six individual contracts will be issued each subject to and conditional upon the registration of the plan of subdivision. We understand that our clients will have or will pay 5% deposit into you trust account as a holding deposit to be refunded in the event that the matter does not proceed."
On 18 May 2010, Mr Cochineas replied to Mr Lee stating "I think there is confusion with Johnny possibly the language barrier". "We have explained the subdivision not gone through as yet. At the moment we have council approval, land titles office approval and are just waiting for the water board to inspect the properties for the sewer approval. We do not envisage any problems. Our client agrees to prepare the six contracts with a conditional clause that each property will have its own certificate of title. We have spoken to Johnny today to pay the 5% deposit which will be held in trust as a holding deposit once we have received the deposit we will instruct the vendor's solicitors to prepare new contracts."
Thus the amount of the deposit as 5 per cent of $3,050,000 was agreed in the discussion on 18 May 2010 between Mr Petkovski and Mr Huang.
On 19 May 2010, Ms Wu gave Mr Lee a bank cheque drawn in favour of Tome Bros for $137,500.00 ($137,500 plus $15,000, namely $152,500, which is 5% of $3,050,000.00). The cheque for $137,500.00 was drawn by Mr Huang and Mrs Huang on a Home Loan account. A copy was left on Mr Lee's file.
On 20 May 2010, Mr Cochineas wrote to Mr Lee to try and clear a log jam about the purchasers paying the deposit. The letter states in part: "We refer to your letter dated 14 inst and advise that from first conversations with your client we had explained that the properties are not subdivided and made him aware of such. Due to the fact that on two occasions finance approval had been declined because all six homes were registered on one title. We did though explain to your client that we have commenced with the subdivision on behalf of the vendor. We are trying to assist your clients in the purchase of the properties, but the matter has been dragging on now for some six weeks, with an initial offer by your clients at $3,150,000 which the matter did not proceed. A further counter offer of $3,050,000 was made and the matter has still yet to proceed further. Kindly understand the frustrations of the vendor and his thoughts that your clients are not financially stable enough to pay a 5% deposit. Let alone raise the finance on the properties. In your correspondence you mention that your clients will pay 5% deposit which will be held in trust as a holding deposit pending receiving six contracts on exchange. Furthermore the vendor agrees to instruct his solicitor to prepare contracts, but please understand that the preparation of six contracts is not a cheap exercise and he is reluctant to do so until he receives the 5% deposit. Raymond please advise you client to pay the deposit and allow us to move along in this matter. Also understand that time is of the essence because the final subdivision approval is not far away and if we do not progress the matter rapidly the vendor may offer to sell them separately on the public market."
On about 21 May 2010, Mr Petkovski telephoned Mr Huang and said that the contract was ready and asked for the purchasers to pay the rest of the 5% deposit to Mr Lee. Mr Huang went to Mr Petkovski's office. Mr Petkovski wrote down the precise amount Mr Huang needed to pay, gave it to him and asked him in turn to give it to Mr Lee.
Between 25 May and 1 June 2010 Ms Wu reimbursed Mr Huang for the purchase of her two houses, a total sum of $50,834. She did so in five instalments of $10,000 on each of 25, 26, 27 and 28 May and 1 June 2010, together with a payment of $834 on 31 May 2010.

[18]

The Deposit Paid and Contract Delayed - Late May to Late September 2010

By 25 May 2010, Mr Huang and Ms Wu had instructed Mr Lee to pay the balance of the deposit. Pangani was refusing to instruct its solicitor to issue a contract unless the 5% deposit was paid. Mr Huang and Ms Wu were keen to pay the deposit but did so subject to conditions set out in an accompanying letter.
On 25 May 2010, Mr Lee wrote to Mr Cochineas: "We refer to the above and have been instructed that our clients wish to proceed with the purchase of the property subject to the following: 1. Six (6) individual Contracts will be issued, each of such subject to and conditional upon the registration of the plan of subdivision. 2. The time for registration of the plan of sub-division (sunset date) is 30 November 2010, 3. Settlement is within 21 days after the purchasers receiving notice of the registration of the plan of subdivision from the vendor. Please confirm the above in writing. We understand that our clients have paid $15,000.00 deposit and will pay the balance of 5% deposit upon your confirmation that the vendor will issue to our clients (sic) contracts which include the above conditions. The deposit is to be held in your Trust Account as a holding deposit and is to be refunded to the purchasers in the event that the matter does not proceed. We look forward to receiving your confirmation of the above and the draft Contracts in due course."
Mr Cochineas replied to Mr Lee the same day. His reply became controversial: it contradicts Mr Huang's claimed belief that he was told that the deposit would not be refunded, if the purchase did not proceed: "We refer to your email dated 24th instant and confirm that your client wishes to proceed with the purchase of the subject property. We advise that after discussions with the vendor the following was confirmed: 1. Six (6) individual Contracts will be issued, each of such subject to and conditional upon the registration of the plan of subdivision. Agreed 2. The time for the registration of plan of sub-division (sunset date) is 30 November 2010. Agreed 3. Settlement is within 21 days after the purchasers receiving notice of registration of the plan of subdivision from the vendor. Agreed Furthermore, we confirm that we are holding in trust $15,000.00 deposit and await the balance of 5% deposit at your clients (sic) earliest convenience. The deposit will be held in our Trust Account and the vendor agrees for it to be refunded to the purchasers in the event that the matter does not proceed".
Despite Mr Lee's letter and Mr Cochineas' reply, the Court accepts Mr Huang's evidence that he believed the deposit was not refundable. The reasons for that acceptance have been explained earlier in relation to the assessment of Mr Huang's credibility: Mr Petkovski had directly represented to Mr Huang that the deposit was not refundable and that was a continuing powerful influence on Mr Huang's mind.
The ultimate delay between receipt of the final amount of the deposit of $152,500 and the execution of the Option Agreements was not necessarily part of a deliberate scheme to place the Huangs in a position of disadvantage to pressure them to sign the later Trust Deeds and Option Agreements. There may have been a legitimate reason for Pangani to ask for and hold a refundable deposit in circumstances where it was originally contemplating itself undertaking the subdivision works. But whatever Pangani's or Mr Petkovski's reasoning for asking for the deposit, ultimately does not matter. What does matter is that once the deposit was paid it was represented to Mr Huang as being non-refundable, which became an important pressure point compelling him into signing the subsequent Trust Deeds. The receipts for the deposits did not contain any written conditions and were not a basis for Ms Huang to conclude that the deposits might be refundable.
On 25 May 2010, Mr Lee's office delivered the $137,500 cheque for the balance of the 5% deposit to Tome Bros. Mr Lee requested the contracts for sale at the same time. But they were not yet available.
On 2 June 2010, Mr Cochineas advised Mr Lee that the vendor's solicitor would be able to issue contracts "this week". The information provided by Mr Cochineas was relayed through to Ms Wu. This turned out to be an optimistic assessment.
The proposed transaction proceeded along reasonably conventional lines in the first half of June 2010. The vendor continued to promise that contracts would be delivered to Mr Lee. Mr Cochineas invited the purchasers to suggest any necessary changes to the contract before exchange. In mid-June, the purchasers instructed Mr Lee that they would need six months to complete and were prepared to accept an 8% penalty for any failure to complete within that time. But the position they were taking was that if they could not complete within six months they were prepared to forfeit their deposit, provided they could continue to buy the property as one title and presumably subdivide it later themselves and take a profit in that way.
Up to the middle of June 2010, the parties were negotiating on the basis that the vendor would complete the subdivision. But the vendor lost interest in undertaking that responsibility and decided to shift the task onto the purchasers.
The vendor's decision to shift to responsibility for the subdivision to the purchasers focussed Mr Huang's and Ms Wu's minds about which of the six properties each of them was to get and in what proportions and with what co-purchasers. By about 22 or 23 June 2010, they had reached agreement to lodge the subdivision plan themselves and had settled on the title particulars of all six lots post subdivision. They were made aware of the extra cost involved for them in subdividing. But provided they had extra time to complete, they were prepared to subdivide themselves.
They agreed that the properties would be held as follows: Lot 1 (No. 57) by Hua Tang (Ms Wu's son) (95%) and Ms Wu (5%) as tenants in common; Lot 2 (No. 55) by Ms Wu (95%) and Hua Tang (5%) as tenants in common; Lot 3 (No. 53) by Mr and Ms Huang; Lot 4 (No. 51) by Mr and Mrs Huang; Lot 5 (No. 49) by Mr and Ms Huang; and Lot 6 (No. 47) by Mr and Mrs Huang.
Subsequent events meant that the Watkin Street property sale did not proceed in this way. But the extent of this agreement reached this early between Mr Huang and Ms Wu shows their mutual commitment to proceed: Mr Huang deciding to purchase with his wife in equal shares, and Ms Wu deciding to purchase with her son in a very specific ratio.
Pangani's solicitors sent draft contracts to Mr Lee in the last week of June 2010. Mr Lee advised his clients, including Mr Tang, by letter on 28 June 2010 about these draft contracts saying that: the purchasers would have the obligation to register the proposed plan of subdivision; the vendor would give no warranty in relation to registration of the subdivision and the purchasers may make no objection, requisition or claim for compensation in relation to the proposed plan of subdivision; and, if the plan of subdivision was not registered within six months of the date of the contract and the six separate folio identifiers were therefore not created, then either party (including the vendor) would be able to rescind the contract.
Mr Lee also pointed out in this letter that: the cost of proceeding with the subdivision could be substantial. Mr Lee seemed to be under the misapprehension in giving this advice that a development application had not yet been approved. But his advice nevertheless correctly emphasised the potentially substantial cost of compliance with the development approval to achieve subdivision. He further pointed out that the draft contract did not provide for the vendor to reimburse the purchasers for monies spent in relation to the subdivision, in the event that the contract was rescinded. Mr Lee's clients confirmed that the total price for the land was agreed at $3.05 million.
On 28 June 2010, Mr Lee also wrote to Alfred J Morgan & Son, the solicitors for the vendor, confirming that Mr Lee had the six contracts, listing the purchasers as had been agreed between Mr Huang and Ms Wu, and that the price of each lot was to be $508,333.00 ($3,050,000 ÷ 6).
But in early July, price and subdivision disinformation began to emerge. On 5 July 2010, Mr David Morgan, the solicitor with carriage of the transaction for the vendor at Alfred J Morgan & Son, telephoned Mr Lee to say that it was his understanding that Pangani had not accepted the $3.05 million offer to purchase made by Mr Huang and Ms Wu. Ms Wu called Mr Lee the same day to advise that she had been told by someone described as "the agent" that her price for each lot was $550,000.00 and that the agent (as distinct from the vendor) would attend to registration of the plan of subdivision. This was an early sign that the agent was perhaps taking a course independent of his own vendor.
On 6 July 2010, at a further conference between Mr Lee, Mr Huang, Ms Wu and Mr Tang, the clients instructed Mr Lee that they wanted to proceed at what they thought was the agreed price of $508,333.00 per lot and that they would arrange to meet the cost of the subdivision between themselves.
Despite the letter from Mr Lee to Mr Morgan of 28 June 2010, that provided all the details to go into the six contracts to be issued, no exchange had yet occurred and Pangani had not even issued the six separate contracts.
Between August and October, little was heard from the vendor and the purchase arrangements stalled. During September, Ms Wu and Mr Huang made further enquiries about the various costs of carrying out the works to register the plan of subdivision. Mr Cochineas and Mr Petkovski were involved in these discussions, which centred around the vendor's unwillingness to allow an extended settlement for the purchasers to complete the subdivision and around whether the vendor would agree to bearing any of the costs of subdivision.
But the vendor was becoming restive. In October 2010, Mr Cochineas or Mr Petkovski advised Ms Wu that Pangani wished to increase the purchase price to $3.1 million. Conversations concerning the possible increase in the purchase price continued.
Later in the same month, on 28 October 2010, Mr Lee's file notes record that Ms Wu was passing on to her solicitor some disturbing information, "Agent told her the agent is buying the property and is not selling to her and will refund the 5 per cent deposit". The file note is undoubtedly authentic and is one of the early signs of the agent's emerging plans. The only agent with whom Ms Wu was dealing on a regular basis was Mr Petkovski, who the Court infers was the agent referred to in this file note.
Mr Huang and Ms Wu were ready to purchase the Watkin Street property as one title and arrange between themselves to divide it, as to two-thirds to Mr Huang and Mrs Huang, and as to one-third to Ms Wu and her son. But Mr Petkovski resisted this course. He insisted that Pangani would only agree to sell the Watkin Street property after it had been subdivided.
The position Mr Petkovski was taking was a reversal of the vendor's sentiment expressed only some months earlier: that the purchasers were to take full responsibility for the subdivision. And by October 2016, the agents were themselves curiously becoming more heavily involved in trying to effect the subdivision. This anomaly is explained by the later conduct of the agents. Subsequent events tend to suggest that, between May and October 2010, the agents began to conceive a plan in which they would effect the subdivision and buy some of the lots themselves. That emerging plan is detailed in the next section.

[19]

Mr Petkovski Makes a Clear Demand - November 2010

The inaction on the vendor's side has another explanation. Mr Petkovski was developing a proposal which he had first floated to Mr Huang in about June 2010. Mr Huang was indifferent as to whether the property was purchased under the same title, or in six lots. He was quite prepared to split the property between Ms Wu and himself after the purchase if it was only available as one title. He trusted her and was comfortable that they would have little difficulty in making this happen between themselves.
But Mr Petkovski began to insist to Mr Huang, "the property has to be split into six titles" before purchase. Mr Huang queried this, saying, "Why should I split?" and again, "I don't need to divide the property. I don't need the purchase to be messy. Just give me the contract and we can settle on the purchase".
Ms Wu had had a similar conversation with Mr Petkovski in about May 2010, in which Mr Petkovski insisted, "Only after the property has been subdivided into 6 lots will I be able to exchange contracts with you".
Mr Petkovski's motives for controlling the timing of the subdivision were revealed more clearly a few weeks later. One day in conversation in his office, he said to Mr Huang, "My boss, James Cochineas said his daughter, Yanna Elfes, wants to purchase one of the lots from you. So it's better to divide one title into six titles".
Mr Huang immediately refused. In response, Mr Petkovski said, "If you disagree with this subdivision, I cannot give you the contract for the sale of the six lots". Mr Petkovski persisted in this position, pointing out to Mr Huang that he should take advice from Mr Lee "and agree with the subdivision, and then I can give you the contract". Mr Huang would not agree to a subdivision before sale. No contract was forthcoming. Given what Mr Petkovski had said, it should be inferred that the two events were connected.
The suggestions that the Watkin Street property be subdivided and relatives of the agents take some of the subdivided lots remained an inchoate suggestion until November 2010. Before then, the suggestions were more Mr Petkovski dropping broad hints to Mr Huang. But the proposal became far more concrete during an unusual meeting in November 2010, when Mr Petkovski expressed what he wanted to Mr Huang in the form of a demand.
In November 2010, Mr Petkovski called Mr Huang and asked to meet him at Rockdale train station. This strange choice of venue presaged a strange request. When they met there Mr Petkovski said, "My son and I both want two of the six lots from you". Mr Huang did not want to go along with this and replied, "No, I cannot agree with it". Mr Petkovski then said, "If the people I've told you about can't buy it [the Watkin Street property] then you won't be able to purchase the property". This made it quite clear Mr Petkovski was demanding a sale on to Mr Petkovski's relatives as the price for Mr Huang having any access to purchase. Mr Petkovski's words also implicitly made clear to Mr Huang that Mr Petkovski was in a position to prevent the sale if Mr Huang did not co-operate with his demand.
Mr Huang called Ms Wu and explained to her, "Luben wants two lots, otherwise the property transaction may not go through". Ms Wu's evidence confirms this conversation. She says that Mr Huang called her saying, "Luben wants to buy the two lots and if he cannot, there will be a hindrance to the property transaction". Her recollection reaffirms the essential idea that Mr Petkovski was saying that no part of the transaction would proceed unless Ms Wu and Mr Huang agreed to forego two lots. Their versions are very close and corroborate one another.
At the same time, other discussions were taking place between Alfred J Morgan & Son and the agent. For example, in an email of 12 November 2010, Mr Cochineas gave instructions to the vendor's solicitors about the structure of the contract that needed to be prepared. But it is quite evident from this and their other correspondence at the time that Mr Cochineas does not mention to Pangani's solicitors that the agents are, by then, planning to purchase some of the Watkin Street property lots for themselves. There is no evidence in this contemporaneous file material that Tome Bros had told Pangani, or had any plans to tell Pangani, of their interest in purchasing lots from the Watkin Street subdivision.
Ultimately Ms Wu and Mr Huang compromised to save the purchase. She agreed to forego one lot, and he agreed to forego the other. Mr Huang says, and the Court accepts, he did this because Mr Petkovski's demand made him feel powerless and that he really had no choice in the matter.

[20]

Events During December 2010

Mr Huang's and Ms Wu's account of their dealings with Mr Petkovski in November 2010 are confirmed by conversations that both Mr Petkovski and Ms Wu had with Mr Lee on 6 December 2010. Mr Petkovski visited Mr Lee's offices that day and had a conversation with him, in which Mr Petkovski dictated the terms of purchase along the lines of his demand to Mr Huang. Mr Petkovski said to Mr Lee that now Ms Wu was buying Lot 1 (No. 57), Mr Huang was buying Lot 2 (No. 55), Lot 6 (No. 47) and Lot 5 (No. 49) and that other buyers were now purchasing Lot 4 (No. 51) and Lot 3 (No. 53), using other solicitors.
Mr Petkovski further explained to Mr Lee that he had suggested that these other buyers come to Mr Lee so that he, Mr Lee, could act for all purchasers and that the buyers had the obligation, under this revised arrangement, to attend to the subdivision of the land, with the subdivision costs equally shared among them. The final element of Mr Petkovski's communications to Mr Lee was that there would be a proposed settlement period of 4 months, not subject to extension beyond 2 months because of delays in the subdivision. During this extension, the purchaser would have to pay 8% interest per annum to the vendor.
Mr Lee's file notes of 6 December 2017 are revealing. They record that Mr Petkovski visited Mr Lee's office to tell him there would be new purchasers involved. What Mr Petkovski (described in the file note as "Lou") says to Mr Lee is consistent with Mr Huang and Ms Wu's versions of what had happened in November. Mr Petkovski says to Mr Lee that in respect of Lot 3 (No. 53) and Lot 4 (No. 51) that there will be "another buyer" who will be "using another solicitor" for each of those lots. He adds that the buyers, as the file note records, "are related to Lou" and their purchases will take place through a trust. Of course, this contact to Mr Lee from Mr Petkovski raises the question: why is Mr Petkovski saying this to the purchaser's solicitor at all? One would ordinarily only expect him to be communicating to the purchasers' solicitor in relation to the vendor's business. But in this conversation he is clearly rearranging the identity of the purchasers.
Mr Lee's file note says that in each of these buyers "[using another solicitor]" as if to infer that each of the new buyers at that time was proposing to use a solicitor other than Mr Lee. But then Mr Lee's file note says "Lou asked them to come to us so that we act for all purchasers". Who that other solicitor was is unclear, but Mr Petkovski clearly had a desire to have one solicitor acting for all purchasers. That turned out to be what happened but that solicitor was not Mr Lee, as there was shortly to be a change of solicitors initiated by Mr Petkovski.
These instructions importantly confirm that, by early December 2010, each of Ms Wu and Mr Huang had given up one property each to Mr Petkovski. Mr Huang was now buying three properties, not four. Ms Wu was now buying one property, not two.
Ms Wu also spoke to Mr Lee in early December. She said that she knew about the other two new purchasers. Mr Lee told Ms Wu the settlement was not subject to registration of subdivision of the Watkin Street property.
In late December 2010, the vendor suggested a further price increase. Mr Petkovski told Mr Huang at that time that the vendor wanted to increase the price to $3.15 million. Mr Huang was angry. He responded to this apparent opportunism "we have already agreed with the price of $3 million why has is increased again". Mr Petkovski said to him: "it is not my problem. It is the landlord [meaning Pangani] who wants to increase the price".
Frustrated by yet another possible price hike, Mr Huang said to Mr Petkovski that, this time, Mr Petkovski would have to give him the actual contract and write the exact price on the contract. But this episode must have been an example of the vendor, or the agent, testing the waters, as nothing further seemed to come of it. The price as agreed in May 2010 was $3,050,000. The deposit of $152,500 already paid equalled 5% of $3,050,000. And the file notes produced by Mr Lee record the purchase price at $3,050,000. The price remained at this figure.
Mr Petkovski introduced to Mr Huang as early probably as December 2010 the idea of a structure in which he would sign a trust deed to hold the purchased properties on trust for the Petkovski parties. Mr Huang says, and the Court accepts, that Mr Petkovski requested this in a conversation between them. I accept that Mr Petkovski said, "Alright sign a trust with my boss' daughter Yanna Elfes, and my son Goran Petkovski and me to provide 3 properties to us. If you don't sign the trust with us, I will not provide you the contracts for the 6 lots, or any refund of your deposit". Mr Huang maintained his outrage at these demands, saying to Mr Petkovski, "You cannot do that". Mr Huang says, and the Court accepts, that he was shocked but felt he had no choice but to give into Mr Petkovski's demand.
Mr Huang asked the obvious question for a man of his background, "What is a trust?" In response, Mr Petkovski told him, "You purchase the lots first and then later you give me 3 lots of your 6 lots." Mr Huang then asked, "Who pays for the expenses of the subdivision?" to which Mr Petkovski responded, "We pay."
Mr Huang felt he had to compromise to save the purchase. So he proposed a structure that would at least suit him physically with the proposed Watkin Street lots. He said "I want to have the 3 lots connected, 47, 49 and 51 or 53, 55, 57." But Mr Petkovski would not agree to this. He said, "No. I do not want to have connected lots." It is a sign of Mr Petkovski's power in these negotiations that, even on this, Mr Huang failed to make any headway. The final configuration of properties was as Mr Petkovski, not Mr Huang, wanted. The proffering of the trust documents to Mr Huang is dealt with in more detail later in these reasons.
As between vendor and purchaser, the uncertainty of the subdivision led in December to the use of a call option for the transaction. The idea of a call option had emerged as early as 3 December 2010 in email correspondence between Mr Cochineas of Tome Bros and Mr Morgan at Alfred J Morgan & Son. By then, Pangani had shifted the obligation to undertake the subdivision works on to the purchasers and Mr Cochineas said to Mr Morgan "they [will have] six months to do what they need, the risk will be all theirs". Again, this email is another example of correspondence between the agent and the vendor in which no mention is made of the purchasers that Mr Petkovski was introducing.
On 17 December, Alfred J Morgan & Son sent a draft call option agreement for the sale of the Watkin Street property to Mr Lee. And in December 2010, Mr Cochineas and Mr Petkovski forwarded the draft call option agreement to Mr Lee.

[21]

A Change of Solicitors from Lee to Ng - December 2010

In December 2010, Mr Huang and Ms Wu changed solicitors from Mr Lee to Mr Alan Ng. Mr Petkovski initiated this change. For reasons that will be explained, the Court infers that Mr Ng was not only retained by Mr Huang but was also probably receiving instructions from Mr Petkovski at the same time in relation to the same transaction.
The change of solicitors coincided with Mr Lee sending Mr Huang and Ms Wu a costs agreement under cover of a letter dated 9 December 2010. The letter stated that, due to the complexity of the transaction, Mr Lee was unable to provide an estimate of the total costs involved should the matter proceed to settlement. Shortly after receiving this costs disclosure, Mr Huang decided he would no longer retain Mr Lee. Mr Lee's retainer appears to have been cancelled shortly after 17 December 2010. Once Mr Lee had ceased to act, there is no evidence among the documents produced on subpoena that he sent a memorandum of fees to Mr Huang.
The tipping point seems to come on 17 December 2010. At 11.00am that day, Alfred J Morgan & Son solicitors emailed Mr Cochineas, thanking him for obtaining a s 149 Certificate and asking "I have now been requested to obtain the details of the purchasers. Do you have? Wait to hear from you again". This email was signed by the paralegal, Karen.
On the same day, Mr Huang had a consultation with Mr Lee which demonstrated a degree of tension had arisen between them about how the two new purchasers, Mr Luben Petkovski's relatives, were going to be advised. Mr Huang obviously wanted to have little to do with them and said to Mr Lee as Mr Lee's file note records, "We don't need to explain the contract to the other two purchasers [Lou's relatives]". But Mr Lee records his response, "But we are still acting for them. I told Mr Huang it doesn't work that way. We have a responsibility to make sure the purchaser knows the terms of the contract".
A nice problem was looming for any plan to keep the names of the true purchasers secret from the vendor. Mr Lee would be advising all of the purchasers. And Mr Cochineas' duty was to obtain the "details of the purchasers", which would presumably happen through Mr Lee. But this tension was resolved with the change of solicitors.
The same month, Mr Petkovski introduced Mr Huang and Ms Wu to Mr Ng and recommended that they retain him to act for them on the purchase. The introduction was quite abrupt. Mr Huang says, and the Court accepts, that Mr Petkovski called him and told him to come to his office. When Mr Huang arrived, Mr Ng was already there. Mr Huang says, and the Court accepts, that Mr Petkovski told him that Mr Ng would be acting as his new lawyer and would assist him to deal with the purchase and the subdivision of the Watkin Street property.
Ms Wu's similar evidence is also accepted. She says Mr Petkovski introduced them to Mr Ng as Mr Petkovski "thought Mr Lee was unable to deal with the complicated matters of this transaction". It is certainly unusual that Mr Petkovski should have any say in Mr Huang's choice of legal representation for this conveyance, but that is what happened. Strangely, Mr Huang seems to have accepted that Mr Petkovski was entitled to direct a change in Mr Huang's legal representation. Again, this shows Mr Huang's deep dependence on Mr Petkovski for commercial and legal advice.
Mr Lee's departure was troublesome for Ms Wu who had used him before and had confidence in him. In the short term, she appeared to go along with the change but what happened probably caused her to lose confidence and was one of the reasons why she eventually pulled out of purchasing any lot in the subdivision.
Little is known of the first three months of Mr Ng's retainer from December 2010 to March 2011. In response to a subpoena, Mr Ng has not produced any file notes of attendances on Mr Huang and Ms Wu prior to 16 March 2011. Nor has he produced any fee disclosures.
But one intriguing document was found amongst the papers Mr Ng produced. Mr Huang placed great store on it in submissions. It was a handwritten note in the following terms: "Lou- [Mr Petrovski's mobile telephone number appears here in the note but is not reproduced in these reasons] Son - 49-55 Frank Huang 55 Frank Hua 49 - Feng Huang 55 Hua Huang (depending on finance) 47 Kai Yin Huang andXian Jing Huang 57 Luben Lence George Diana 51 Gordon (Lou's son) 53 Tyana - Jing's??? son in law"
Mr and Mrs Huang's case is that this note evidences that, from the very first, Mr Petkovski was giving instructions to Mr Ng in relation to the identity of the parties to whom all the various lots were to be transferred.
The note can be read in a number of ways. Its provenance remains something of a mystery. The early reference to "Lou" (an abbreviation for Mr Luben Petkovski) and a mobile telephone number might indicate that the note was made in response to a telephone call from Mr Petkovski. But equally, it could have been created as a result of someone else giving Mr Petkovski's telephone number to Mr Ng. Much of the information in the file note relates to Mr Huang's proposed holdings of the subdivided lots after the sale, which was information that would not necessarily have come from Mr Petkovski.
On the other hand, there is little doubt that the instructions contained in the note for the title details of the three properties that were not going to Mr Huang and Ms Wu are only consistent with new information coming from Mr Petkovski. For example, only Mr Petkovski was likely to know the precise names of the proposed purchasers of Lot 4 (No. 51) and Lot 1 (No. 57), which were now to be acquired by Petkovski parties. The file note is quite specific in naming the actual purchasers of Lot 1 (No. 57) as "Luben, Lence, George and Diana". These are, in fact, the names of the final purchasers of Lot 1 (No. 57).
Equally, although the names for Lot 4 (No. 51) and Lot 3 (No. 53) are garbled, they are discernibly the kind of information that must have come from Mr Petkovski. Lot 4 (No. 51) is described as being purchased by "Gordon (Lou's son)". In fact it is "Goran" Petkovski and he is indeed Mr Petkovski's son. Lot 3 (No. 53) is described as being purchased by "Tyana", a name which the three question marks following it indicate it was not clearly taken down. "Tyana" is close enough to "Yanna", although the description "son-in-law" is wrong; she is Mr Cochineas' daughter. But it is close enough and it is likely that information probably coming only from Mr Petkovski has just become a little garbled. Mr Huang and Ms Wu could not give this information to Mr Ng.
The document is undated. It is uncertain just when the information was given. But the Court is prepared to infer that it came from Mr Petkovski, because that is the most probable explanation of the recording of this composite range of information. Mr Huang and Ms Wu were not aware that such information was being provided from Mr Petkovski to Mr Ng.
Whether Mr Petkovski had retained Mr Ng as his solicitor to act for the Petkovski parties on the same purchases is unclear. If Mr Ng was, he was acting for competing interests: Mr and Mrs Huang had separate interests from the Petkovski parties, who were now buying from them.

[22]

A Jones v Dunkel Inference Against the Absent Solicitors?

There was spirited debate between the parties as to a whether a Jones v Dunkel inference could be drawn against Mr and Mrs Huang by reason of their failure to call either Mr Lee or Mr Ng, their former solicitors. The Petkovski parties contended that such an inference should be drawn but the Huangs resisted that conclusion.
The relevant principles concerning the drawing of a Jones v Dunkel inference from the failure of confidential advisers, including solicitors, to give evidence may be shortly stated.
Ordinarily, the rule in Jones v Dunkel does not apply where the witness not called is the solicitor for a party, where the evidence that could be given is privileged: Wentworth v Lloyd (1864) 11 ER 1154; 33 LJ Ch 688. But here, the Huangs have accepted that Mr Lee and Mr Ng were acting as their solicitors and have chosen to give extensive evidence about what was said between them and Mr Lee and Mr Ng. The Huangs have therefore waived any previously subsisting client privilege attaching to the relationship.
As client privilege does not apply here, the next consideration is the level of confidence that exists between the non-party witness, the solicitor who is not called, and the party who it is said should have called the witness and against whom the Jones v Dunkel inference is sought to be drawn. The classic statement discussing whether a missing witness would be expected to be called by one party rather than another comes from the judgment of Glass JA in Payne v Parker [1976] 1 NSWLR 191 at 201-202: "The first condition is also described as existing where it would be natural for one party to produce the witness, or the witness would be expected to be available to one party rather than the other, or where the circumstances excuse one party from calling the witness, but require the other party to call him, or where he might be regarded as in the camp of one party, so as to make it unrealistic for the other party to call him, or where the witness' knowledge may be regarded as the knowledge of one party rather than the other, or where his absence should be regarded as adverse to the case of one party rather than the other. It has been observed that the higher the missing witness stands in the confidence of one party, the more reason there will be for thinking that his knowledge is available to that party rather than to his adversary. If the witness is equally available to both parties, for example, a police officer, the condition, generally speaking, stands unsatisfied. There is, however, some judicial opinion that this is not necessarily so. Evidence capable of satisfying this condition has been held to exist in relation to a party's foreman, his safety officer, his accountant, his treating doctor."
Whilst this reasoning might suggest that Mr Lee and Mr Ng should be called by Mr and Mrs Huang as their solicitors, the quality of confidence between Mr and Mrs Huang and each of Mr Ng and Mr Lee is much diminished in this case and seriously weakens the drawing of any Jones v Dunkel inference against the Huangs from their absence.
This is so for several reasons. The Huangs' evidence is critical of the conduct of both solicitors. Upon careful review of the available evidence, the Court has found that, despite the Court's inability to be able to seek an explanation from Mr Lee or Mr Ng, this criticism is warranted at least with respect to Mr Ng. The solicitors may have an explanation for the circumstances, which could have perhaps been proffered had they been called. But on what the Court knows, it can nevertheless be inferred that Mr Lee and Mr Ng are no longer the Huangs' solicitors and their conduct as solicitors is the subject of strong adverse criticism.
Moreover, there is circumstantial evidence to support the inference that Mr Ng and Mr Lee were also acting for Mr Petkovski, for example, in the drafting of the Trust Deeds and perhaps in other aspects of the transactions. Thus it might be said that the two solicitors also stand in Mr Petkovsk's confidence and a Jones v Dunkel inference could be drawn in the other direction. This is significant in this case given the relationship between Mr Ng and the Huangs has now ended and a relationship between Mr Ng and Mr Petkovski had begun, although there is no evidence here that any relationship with Mr Petkovski continued: see for example Shum Yip Properties Ltd v Chatswood Investment & Development Co Pty Ltd [2002] 40 ACSR 619; [2002] NSWSC 13.
But another reason why a Jones v Dunkel inference should only be very weakly drawn in respect of the two solicitors, if at all, is that the rule does not operate to require a party to give merely additional evidence already covered by other witnesses. The rule does not compel time to be wasted by calling unnecessary witnesses to give cumulative evidence: Cubillo v Commonwealth (2000) 103 FCR 1; [2000] FCA 1084 at [360]. Here, because of language difficulties between Mr Huang and each of Mr Lee and Mr Ng, it emerged that Mr James Xu and Ms Wu were often present at their conferences, as was Mrs Huang. This is not a case where the solicitors' evidence could fill a gap not accounted for by other witnesses, to the extent that the solicitors were actually advising the Huangs and were in a confidential relationship with them. A Jones v Dunkel inference is not available against the Huangs for not calling either Mr Lee or Mr Ng.
So far as the absent solicitors are concerned in this case, for these reasons, the Court does not draw a Jones v Dunkel inference in either direction, against either the Huangs or the Petkovski parties. This is to be distinguished from the Jones v Dunkel inference which the Court finds can be drawn against the absent parties - the plaintiffs/cross-defendants.

[23]

Instructions for the Call Option Agreements - January and February 2011

Mr Ng wrote a series of letters to Mr Morgan in early 2011. The first letter sent on 14 January 2011, written by Mr Ng on behalf of Mr Huang, refers to a draft option to purchase. Mr Ng appears to have had the draft form of the Option Agreement and the Contract for the Sale of Land for the Watkin Street property before he wrote this letter to Mr Morgan. The draft Option Agreement was attached to Mr Cochineas' business card, and was located in Mr Lee's files. Mr Petkovski and Mr Cochineas had the draft form of Option Agreement before Mr Ng was retained by Mr Huang and Ms Wu and were in a position to give information to Mr Ng about its contents.
Documents produced by Alfred J Morgan & Son throw light on Mr Ng's early correspondence as the solicitor for all the purchasers. On 17 and 19 January 2011, Mr Morgan sought from Mr Ng "the names of the various grantees so that we may prepare the necessary documentation". On 20 January 2010, Mr Ng replied, saying that the grantee for all lots other than Lot 1 (No. 57) were the Huangs and that Ms Wu was the grantee for Lot 1 (No. 57).
On 21 January 2010, Mr Ng received draft Option Agreements for the purchasers' approval from Mr Morgan. Correspondence ensued about the terms of the Option Agreements. But then, on 7 February 2010, Mr Ng wrote to Mr Morgan and gave the names of the grantees for each of the options as "Mr and Mrs Huang" for all the properties. Mr Ng's letter to Mr Morgan of 7 February 2010 did not mention any other purchasers. By 7 February 2010, Ms Wu had dropped out. Mr Ng confirmed that the Huangs "or their nominees" were the grantees of the options. But Mr Huang's correspondence also does not reveal who the nominees were.
The Court infers that he had instructions not to mention the names of Mr Petkovski or the Petkovski parties to Mr Morgan. Given the instructions that had been coming to Mr Lee before he ceased to be the purchasers' solicitor, it is difficult to accept that similar instructions about the true identity of the purchasers were not also given to Mr Ng.
Mr Huang says, and the Court accepts, that he does not recall giving instructions to Mr Ng to write the January 2011 letters. Ms Wu says she only spoke to Mr Ng on two occasions. Copies of the letters sent by Mr Morgan replying to Mr Ng were produced by Mr Petkovski on subpoena. It is Mr Huang's case that it is to be inferred from this production of letters from Mr Petkovski's possession that Mr Ng gave this correspondence to Mr Petkovski and that Mr Petkovski was probably the source of Mr Ng's instructions for this correspondence. Whether or not that is so, the production of this correspondence from Mr Petkovski's possession certainly shows Mr Petkovski was very closely involved with Mr Ng's execution of his instructions.

[25]

Mr Petkovski Replaces Ms Wu - Late February to March 2011

Shortly after, Mr Huang rang Mr Petkovski, who immediately demanded the property Ms Wu was abandoning: Mr Petkovski: "I want the rest of the properties if Wu isn't going to buy them". Mr Huang: "No. I want the rest of the properties if Wu isn't going to buy them." Mr Petkovski: "No, you won't. I told you I want to buy them". Mr Petkovski: "Johnny I have documents in my office for you to sign. Can you come to my office with your wife and sign them?"
About this time, Mr Petkovski introduced the need for the Huangs to sign the Trust Deeds. He said to Mr Huang that, "If you don't sign the [the Trust Deeds] with us, I will not provide you with the contracts for the six lots or any refund of the deposit."
Mr Petkovski's views prevailed. He had the power to deny any deal to Mr Huang to purchase the Watkin Street property and he used it.
Mr Huang co-operated and attended at Mr Petkovski's office. There, Mr Petkovski gave him what was described as "trust documents" for him and his wife to sign. It is unclear where Mr Petkovski obtained these "trust documents" or who prepared them. But circumstantial evidence suggests that it is not improbable they were prepared by Mr Ng acting on Mr Petkovski's instructions. The Court accepts Mr Huang's denial that he retained Mr Ng in relation to the Trust Deeds. They were the documents Mr and Mrs Huang ultimately signed in March 2011, and which are referred to in these reasons as "the Trust Deeds".
Mr Huang says, and the Court accepts, that Mr Petkovski told him that the Trust Deeds were created because Mr Petkovski could not legally buy the properties himself, unless Pangani consented. The Court infers from this statement that Mr Petkovski did not have the necessary consent under the PSBA Act from Pangani for him, or for a close relative, to obtain a beneficial interest in the Watkin Street property.
Mr Huang says, and the Court accepts, that the only reason he ultimately signed the Trust Deeds was because Mr Petkovski told him to do so, and that he feared that if he did not, Mr Petkovski would deny him any opportunity to buy any part of the Watkin Street property and he would lose his deposit. Mr Petkovski said at this first meeting in February 2011, where the Trust Deeds were discussed, "If you do not sign this trust deed documents you cannot purchase the property at 47-57 Watkin St, Rockdale."
Why did Mr Petkovski go to the lengths of creating the Trust Deeds? Having Pangani sign a written consent seems far simpler. The most probable inference is that Mr Petkovski and Mr Cochineas knew they were potentially breaching PSBA Act, s 49 in obtaining this interest and wished to keep knowledge of that away from Pangani.

[26]

Mr and Mrs Huang Sign the Trust Documents - March 2011

After the February 2011 meetings, Mr Huang did not immediately sign the Trust Deeds. He took them home.
Mr Huang could neither understand nor read the Trust Deeds. So he consulted his old friend, Mr James Xu, who had good written and spoken English. He requested that Mr Xu accompany him to his next meeting with Mr Petkovski.
Mr Huang says, and the Court accepts, that he did not wish to proceed with Mr Petkovski having any involvement as a party to this transaction. But Mr Huang acceded to Mr Petkovski's demands to acquire three of the houses. As indicated above, Mr Huang thought that, unless he gave in to Mr Petkovski, he would be denied the opportunity to buy any of the Watkin Street property and would lose his deposit.
On 24 February 2014, he and Mr Xu met Mr Petkovski at his office. Mr Petkovski said to Mr Xu, who was translating, "Johnny here are the trust documents that you and your wife have to sign to take this matter forward". The Court accepts that Mr Huang continued not to understand what a "trust document" was. No one at this meeting had the legal qualifications to explain it to him.
The Court accepts Mr Huang's recollection that the meeting with Mr Petkovski and Mr Xu went for over 30 minutes. Mr Petkovski said, and Mr Xu translated, to Mr Huang: "You are buying three properties on trust for me and the others. There is no problem with them paying their money because I will guarantee it. You have to buy them on trust for me so I don't have to pay two stamp duties. You have to sign the trust documents before we can proceed with signing the option contract. You have to buy the property in trust as I cannot by law buy it myself unless the owner signs a form consenting to me buying it. There are only two weeks' worth of work to do to finish the sub-division."
This meant that Mr Huang had to sign the Trust Deeds before he could sign the option agreements to buy the land. He continued to believe that if he did not sign the Trust Deeds he would not be able to buy the Watkin Street property and would have to forfeit his deposit.
Mr Xu gave a complementary account of the course of this meeting from his perspective. The Court also accepts his account which is consistent with Mr Huang's account. Mr Xu remembered some details that Mr Huang did not. He recalls Mr Petkovski describing the documents that he handed over as "declarations of trust". The Court accepts from Mr Xu the following account of the conversation: Mr Petkovski: "Hey Johnny [Mr Huang] you've got to sign these forms then we can sign the contract for Nos. 47 (Lot 6) to 57 (Lot 1)." Mr Huang: "I have been contacting the lawyer who has not been helpful at all, because the lawyer only listen to you (meaning Mr Petkovski)." Mr Petkovski: "Okay I'll try and contact my lawyer and we will sort this out. You must sign these forms and then we can go to the lawyer and get the real contract for sale of the land."
Mr Huang's statement that "the lawyer", who was Mr Ng, "only listen to you", is evidence of Mr Huang's contemporaneous perception that Mr Ng had divided loyalties and even then appeared to Mr Huang to be acting on some of Mr Petkovski's instructions.
Between this 24 February meeting and 10 March, Mr Huang obtained copies of the Trust Deeds. He took them home so Mrs Huang could sign them.
About 9 March 2010, Mr Petkovski telephoned Mr Huang and arranged for him to come into Mr Petkovski's office the following day. Mr Huang telephoned Mr Xu and asked him to accompany him to Mr Petkovski's office, which he agreed to do.
On the morning of 10 March 2011, Mr Xu visited Mr Huang's home close to 9.00am. By prior arrangement he was there to help Mrs Huang sign the documents. Mrs Huang was getting ready to go to work. Mr Huang showed his wife the documents. He said to her what he believed to be the then situation: "Luben [Mr Petkovski] said we have to sign these documents, so we can go ahead with the purchase of the land at Watkin Street."
As she signed, Mrs Huang suffered a number of obvious disadvantages. She could neither read nor speak English. She was neither offered nor received legal advice. In fact, she did not even understand that she could obtain legal advice, nor appreciate how valuable legal advice might be to her at this point. The transaction was presented to her as a fait accompli. She was simply doing what her husband asked her to do, as she usually did in financial matters.
She also did not have any independent commercial advice. Mr Xu was able to speak English and appeared to the Court to be quite commercially astute. But he did not take it upon himself to offer Mrs Huang any kind of practical commercial advice about her options. The pressure from Mr Petkovski had led to Mr Huang making a decision that he and Mrs Huang should sign. Mrs Huang was simply carrying out that decision.
Most of Mrs Huang's disadvantages must have been obvious to Mr Petkovski, even though Mr Petkovski was not present when she signed the Trust Deeds. Mr Petkovski knew that Mr Huang had taken the documents away for Mrs Huang to sign, and that they were brought back signed, without any accompanying evidence that a lawyer had been involved in advising her. Of course, it should first be inferred that, by Mr Petkovski arming Mr Huang with the documents and appointing him as his agent to have them signed by Mrs Huang, Mr Petkovski was put on notice, as the principal in that agency, of all the disadvantages that Mrs Huang suffered in the course of Mr Huang's execution of the agency.
But apart from that, Mr Petkovski had direct knowledge of Mrs Huang's disadvantage. It could readily be inferred from the circumstances: Mr Huang brought Mr Xu with him to the signing of the Trust Deeds with Mr Ng, not his wife. If Mrs Huang had much better English skills than her husband, it could be expected that Mr Huang would have brought her to assist him with the signing. But the fact that he brought Mr Xu and not Mrs Huang put Mr Petkovski on notice that Mrs Huang's English comprehension was probably much lower than Mr Huang's, which Mr Petkovski already knew to be very poor. And, although he could have asked Mr Huang or Mr Ng about whether Mrs Huang had obtained legal advice, Mr Petkovski made no such inquiry.
In front of Mr Xu, Mrs Huang signed the Trust Deeds, where Mr Huang had indicated. Mr Huang then went on to Mr Petkovski's office with Mr Xu. Then all three set out for Mr Ng's office.
There they met Mr Ng. Mr Huang did not have, nor was he offered, the opportunity of a separate conference with Mr Ng. After some social pleasantries in English, the group sat down so Mr Xu could translate to Mr Huang what was being said. Mr Petkovski handed the documents to Mr Ng and they started to go through them, with Mr Xu continuing to translate.
The account which follows is largely taken from Mr Huang's evidence about this signing meeting, evidence which the Court accepts. The meeting went for about 50 minutes and was conducted in a mixture of Cantonese, Mandarin and English. Mr Huang recalls that Mr Ng opened his explanation by repeating the limited choices that it was perceived Mr Huang had if he wanted to proceed with the transaction: "You are buying three properties on trust for Luben [Petkovski] family and Elfes family. If you don't sign the trust documents you don't buy any of the property and you lose your deposit if the contracts do not settle."
Startling though this evidence is, and conscious that Mr Ng has not given evidence on the matter, the Court accepts it. Mr Ng seems to have come in after the decision to enter the Trust Deeds had been made and he did not apparently take upon himself the burden of advising Mr Huang that he may not have to sign the Trust Deeds. Mr Huang says that the reason he signed the Trust Deeds was in his words, "I had no alternative". The Court accepts that was his state of mind. Instead, Mr Ng seemed more focused on warning Mr Huang of the consequences of not doing so. And in the course of so doing, he reinforced the idea that the deposit already paid was not refundable. This is perhaps an understandable position for him to take, as this solicitor's file produced on subpoena (Exhibit 16) does not contain any of the correspondence with Mr Lee of 25 May 2010.
Mr Ng then showed Mr Huang each part of the documents that were required for signature. Mr Huang signed as directed. He did so for the reasons already expressed: he did not want to lose the opportunity to buy the property, nor did he want to risk losing his deposit. He believed if he signed the Trust Deeds, he would then be able to sign the option agreement.
Mr Huang was in a special position of disadvantage to Mr Petkovski at the moment of signing the Trust Deeds. Mr Petkovski was aware of Mr Huang's position of special disadvantage and pressed ahead nevertheless because of the benefits he, and those close to him, would derive under the Trust Deed transactions. The various categories of applicable disadvantage may be shortly stated.
Mr Huang had not obtained legal advice about the Trust Deeds. Mr Petkovski made no enquiry of either Mr Ng or Mr Huang whether such advice had been given. Mr Ng was also probably either giving advice to Mr Petkovski or drafting the Trust Deeds for him (there is no evidence any other solicitor was involved), so the disinterested nature of any advice he was giving to Mr Huang, if he was indeed giving such advice, would have been plainly questionable from Mr Petkovski's perspective.
Mr Huang also did not know all the commercial details of the transaction, some of which had been withheld by Mr Petkovski. For example, it quickly became apparent that Mr Petkovski had not even given Mr Huang the assurance of a definite purchase price for the Watkin Street property. Moreover, Mr Huang was not obviously seeking to negotiate with Mr Petkovski or question him about the transaction. His whole approach really seemed to be one of just taking instructions from Mr Petkovski. It must also have been apparent to Mr Petkovski that Mr Huang did not have any other source of knowledge about the transaction nor any capacity to dispute the commercial wisdom of entering into the Trust Deeds. Some of the practical effects of these disadvantages are analysed later in these reasons.
Mr Huang wanted to sign the option agreement as soon as possible. He was keen to advance the transaction as delay had already occurred. Once the Trust Deed signing was complete, Mr Huang requested the option agreement for signing. Mr Petkovski explained it was not yet available: "The option agreement isn't final because Pangani has not agreed on the price. I am talking to Jimmy [Mr Xu] and he will let me know the final price. We can sign the option agreement tomorrow."
Mr Huang became angry, which is not surprising. He was now discovering not only that the option agreement had not been finalised, but also that the vendor might be going to renegotiate the price. Mr Huang believed that he had already agreed on a price of $3,050,000. Mr Petkovski had represented to Mr Huang that he would be able to execute the Trust Deeds and the option agreement on the same day. This was logical because one was said to be the precursor to the other.
Mr Huang thought he was in a bind. He had reluctantly given up the opportunity of purchasing three of the lots to be subdivided from the Watkin Street property. But he was now exposed to the possibility of the vendor increasing the price yet again, as it had sought to do previously. This was a logical moment for Mr Huang to consult a lawyer to consider his options. There was a lawyer in the room, Mr Ng. Mr Huang did not ask him for advice and Mr Ng did not offer any. Neither Mr Xu nor Mr Huang gave any indication in their evidence that any advising took place between Mr Ng and Mr Huang at this moment and I infer that it did not.
Mr Huang says he did not know what to do next. The Court accepts that. He certainly did not want to risk losing his deposit or the properties, so he took the course that had served him well in the past: he went along with what Mr Petkovski was demanding, and did so in accordance with Mr Petkovski's timetable. Mr Petkovski insisted Mr and Mrs Huang sign the Trust Deeds before they could sign the Option Agreements. This was essential to the effectiveness of their scheme.
After Mr Huang signed the Trust Deeds, he, Mr Xu and Mr Petkovski left Mr Ng's office together. Mr Petkovski took the signed Trust Deeds with him and kept them. Mr Huang does not at first seem to have been given a copy.
Neither Lyon Lawyers nor Mr Ng issued a memorandum of fees to Mr Huang for the legal services involved in drafting and arranging the execution of the Trust Deeds. If Mr Ng issued a fee note for his work on the Trust Deeds, it must have gone to Mr Petkovski. But Mr Huang did receive seven memoranda of fees, one for each of the seven option agreements that were later provided for his signature. Mr Huang only kept three of the invoices, the ones relevant to the three option agreements relevant to his and Mrs Huang's purchases.
Mr Huang thought that if he was going to be forced to buy less than six lots he should at least have his three or four lots adjacent to one another. But Mr Petkovski rejected this idea. He did not want the Petkovski parties to have one set of adjacent lots and Mr Huang to have another set of adjacent lots. The ultimate configuration of lots that resulted was structured on Mr Petkovski's demand. It was said in final submissions that this result was motivated by a desire on his part to save stamp duty or capital gains tax. Be that as it may, the assumed reasoning behind the request is less important than the fact that Mr Petkovski insisted on this outcome and achieved it. It is yet another demonstration of Mr Petkovski's power over the Huangs. Even with their diminished number of lots they were not even able to get the residual lot configuration that they wanted, because that was inconsistent with Mr Petkovski's preference. This outcome is yet another sign of the Huangs having little or no power in these negotiations.

[27]

The Trust Deeds - 10 March 2011

The text of the Trust Deeds may be shortly summarised. Prior to the execution of the Trust Deeds, Mr Huang had not had other than superficial contact with the Trust Deed counter parties. Mr Huang had not met either Mr Con Elfes or Mrs Yanna Elfes. Prior to the execution of the Trust Deeds, he had once met Mrs Diana Petkovski, Mr George Gashovski and Mr Lence Petkovski at Mr Petkovski's home. But this was only a brief social meeting and the Watkin Street property transaction was not discussed. Mr Huang had also only met Mr Goran Petkovski once socially at Mr Petkovski's home.
The Trust Deeds are all structured in similar terms. The only differences between them relate to the identification of the individual allotments in the Watkin Street property that are the subject of each Trust Deed. They each cover the situation both if the subdivision did not proceed and alternatively that it did go ahead.
Under the executed Trust Deeds, Mr and Mrs Huang are defined as the trustees of the respective trust properties. Mr Goran Petkovski is the beneficiary of Lot 4 (No. 51) under the first Trust Deed signed. The beneficiaries of the second Trust Deed signed are Mr Con Elfes and Mrs Yanna Elfes in relation to Lot 3 (No. 53). The third Trust Deed signed has Mr Petkovski, Ms Diana Petkovski, Mr George Gashovski and Mr Lence Petkovski as beneficiaries of Lot 1 (No. 57).
The first four clauses of the Trust Deeds are in the nature of recitals but are entitled "Introduction". They recite: that "the Trustee and Beneficiary" are purchasing the Watkin Street property (clause 1); that there are six separate houses built on the Watkin Street property each with its individual street address (clause 2); and that there is a plan of subdivision of the Watkin Street property and the trustee will hold "that part of the property being [the identified Lot] on trust for the benefit of the Beneficiary" but that if the subdivision does not eventuate then "the Trustee will hold one sixth (1/6) interest in the title of the property on trust for the benefit of the Beneficiary" (clause 3).
Clause 4 of the introduction then deals with the entry into call options. It explains that the purpose of the call options is to give sufficient time to "make application of the subdivision of the property". Curiously, the application for the subdivision of the property had already been made to Rockdale Council and had been approved by Rockdale Council in March 2010 but the approval had not yet been carried through into execution and the plan had not been registered with the Registrar General. Clause 4 provided as follows: "In order to have sufficient time to make application of the sub-division of the property, the Trustee will enter into Call options with the owner of the properly to purchase the property and this option will be exercised prior to the expiry of the option period and the trustee will thereupon enter into either a contract to purchase the property either as a whole (in the event that the sub-division is not eventuated with the option period) or six contracts to purchase the sub-divided properties (in the event that subdivision of the property is eventuated). The Call options provide that the option fee will become the deposit of the contract to purchase when the options be exercised. The Call options in relation to the trust property are annexed herewith."
The last clause of the introduction, Clause 5 of each of the Trust Deeds, deals with the beneficiaries providing their share of the consideration for the purchase: "The beneficiary will provide to the Trustee one sixth (1/6th) of the consideration for the acquisition of the property and to share the expenses and costs associated with the proposed subdivision. In consideration of it the Trustee has agreed to hereafter hold that the one sixth (l/6th) share of the property [in the event that subdivision of property was not eventuated] OR to hold that part of the property being 51 Watkin St Rockdale 2216 [in the event that sub-division of the property was eventuated and that part be assigned a new folio] upon Trust of the Beneficiary."
The operative parts of the Trust Deeds then commence a new numbering system with a further 10 clauses numbered from 1 to 10. In the first of those operative clauses, the Trustee declares that they will hold on trust absolutely for the Beneficiary either a 1/6 interest in the Watkin Street property, DP1/536641 if there is not a subdivision, or otherwise "the interest and title of (the street number) Watkin Street, Rockdale if the property is subdivided and a new folio created for the same."
The second operative clause deals with the obligation of the beneficiary to fund the Trustee to complete the purchase of the lot the subject of each Trust Deed. It provides that the Beneficiary under each Trust Deed "will provide the funds to the Trustee in the following fashion": "i. A sum of $26,250 on the date when the Trustee enters into a Call Option to purchase the said property; ii. One sixth of the cost or costs associated with the sub-division of the property within 2 days upon the request of the trustee; iii. The Beneficiary's share of stamp duties the amount of which will be in accordance with the Duties Act (NSW) that arise whether directly or indirectly from the acquisition of the trust property and these shall be payable by the Beneficiary immediately upon request by the Trustee or his representative; and iv. A sum of $498,750 plus all adjusted outgoings in relation to the Trust property at the time of the completion of the contract to purchase the Trust property."
The Beneficiary promises to indemnify the Trustee in Clause 3: "Beneficiary to Indemnify Trustee. In consideration the Trustee acting as trustee of the trust property, the Beneficiary indemnifies and discharges the Trustee for and in respect of all losses, expenses, costs (including those of a solicitor/client nature) claims damages or other outgoings which the Trustee may suffer or incur directly or indirectly as a result of entering into the Call option or contract to buy the trust property."
The operative part of the Trust Deeds then sets out a number of clauses that do not need to be reproduced in full. The Trustee agrees to obey the directions of the Beneficiary (Clause 4) and to execute a transfer of the property as directed by the beneficiary (Clause 5); the Trustee appoints the Beneficiary as the Trustee's lawful attorney (Clause 6); the Beneficiary may appoint a new trustee by written notice to the Trustee (Clause 7); and headings are for convenience only (Clause 8).
Clause 9 of the operative terms of the Trust Deeds is expressed in the following terms: "Beneficiary default - the parties agree that in the event that the Beneficiary failed to perform either wholly or partly of paragraph 2 and 3 of this Deed, this Declaration of trust would become void and the trust property would thereby be vested in the Trustee absolutely. The beneficiary shall make no claim demand or suit against the Trustee and shall forever release and hold the Trustee harmless for any claim if any that arises from this Declaration of trust."
Mr Huang's signature was witnessed by Mr Ng on the Trust Deeds. Mrs Huang's signature was witnessed by Mr Xu. The signature of the beneficiaries to each Trust Deed was witnessed by Mr Cochineas.
These reasons have already identified Mr Huang's contention: that the Trust Deeds were prepared on the instructions of Mr Petkovski. This submission should be accepted.
In the course of final submissions, the Court asked Mr Moujalli, for the cross-defendants, whether all the subpoenaed documents from Tome Bros, Mr Lee and Mr Ng had been analysed to see if there was a document that proved any disclosure to the vendors or their solicitors of the involvement of the agent as one of the purchasers. It was clearly indicated that if such a document existed it would be put into evidence. As it turns out there was such a document but it was created only after the exchange of contracts between Pangani and the Huangs, as will be seen below.

[28]

Executing the Seven Option Agreements - 16 March 2011

On 16 March 2011, Pangani as Grantor and Mr and Mrs Huang as Grantees executed a total of seven Option Agreements: one in respect of the whole of the Watkin Street property (which, for convenience, will be called here "the Single Option Agreement") and then six more, one each in respect of each of the six undivided lots (which, for convenience, will be called collectively here "the Six Option Agreements"). Not all the Option Agreements could be exercised. The Option Agreements were structured to operate in the alternative: if the subdivision plan were not registered, then the Single Option Agreement could be exercised by the Grantee. But if the subdivision plan were registered, then the Grantees of each of the Six Option Agreements could exercise the individual options for each of the six lots created by the subdivision.
The Single Option Agreement had annexed to it a contract for the sale of whole of the Watkin Street property. Each of the Six Option Agreements had annexed to it a contract for the sale of one of the six lots.
The subdivision plan annexed to the contracts was the one drawn by Mr Cleary in 2008 and approved by the Rockdale Council on 24 March 2010 but which was as yet not registered. Although this point did not arise in the proceedings between the parties, the subdivision plan was altered in November 2011 by what these reasons later call the "Modified Development Consent". This alteration may well have had the result that some of the Option Agreements strictly became unenforceable. But Mr Huang was never alerted to this possibility by Mr Ng. The plan of subdivision was registered on 5 April 2012 in accordance with the Modified Development Consent. The call options conferred under the Six Option Agreements were exercised and the registered titles were transferred.
The terms of the Option Agreements are dealt with below. But first, these reasons briefly set out more of the relevant correspondence that preceded the execution of the Option Agreements.
Between mid-January and mid-March 2011, prior to the execution of the Trust Deeds, correspondence was exchanged between Mr Ng and Mr Morgan in relation to the terms of the options to be executed by Mr and Mrs Huang.
On 17 January 2011, Mr Morgan requested by letter that Mr Ng confirm he had a copy of the draft Option Agreement and attached a contract for Lot 1 (No. 57) in the proposed subdivision. This letter refers to various procedural matters in relation to the proposed option that are not of present importance.
Although he did not give oral evidence, Mr Ng answered a subpoena for his documents relating to his dealings with Pangani. Amongst the documents he produced on subpoena is a copy of the draft form of contract to be attached to a draft Option Agreement in respect of the sale of Lot 1 (No. 57) from Pangani to Mr and Mrs Huang.
In a letter sent on 20 January 2011, Mr Ng wrote to Mr Morgan confirming that the names of the proposed Grantees for Lot 6 (No. 47), Lot 5 (No. 49), Lot 4 (No. 51), Lot 3 (No. 53) and Lot 2 (No. 55) were Mr and Mrs Huang, or their nominees, and that the grantees for Lot 1 (No. 57) were Ms Wu and her son Mr Tang. This was indeed the January 2011 combination of purchasers of the Watkin Street property, at a time before Ms Wu had finally withdrawn as a purchaser.
On 21 January 2011, Mr Morgan sent Mr Ng another draft Option Agreement for Mr and Mrs Huang's approval. On 27 January 2010, Mr Ng requested changes to the draft Option Agreement. The original draft contained a clause that wholly forfeited the deposit paid by Mr and Mrs Huang in the event that the registration of the subdivision should be unsuccessful. This clause was said to be unacceptable to Mr Huang but the final form of the Option Agreements contains such a clause.
On 31 January 2011, Mr Ng wrote to Mr Morgan proposing amendments to the Option Agreement. The amendments Mr Ng proposed specifically provided that Mr and Mrs Huang, as grantees under the option "...shall be responsible for the application for approval and registration of plan of subdivision of the Unregistered plan...".
The final structure of the Option Agreements had emerged clearly enough by early February 2011 through the correspondence passing between Mr Ng and Mr Morgan. On 8 February 2011, Mr Morgan advised Mr Ng by letter that Pangani, as vendor, would issue options for each of the six lots and then another option for the whole block. This letter stated: "As discussed the option for the whole block will only be exercisable if the subdivision has not been registered. Conversely the options for the individual lots will only be capable of exercise, if the subdivision has been registered. Moreover, I have been instructed that the options for the six lots are to be interdependent."
The terms of the Option Agreements, as executed, reflected this overall arrangement. Those terms are now considered in more detail.
First, all the Option Agreements provide that the Grantees of the options "shall be responsible for the application for approval and registration of the plan of subdivision of the Unregistered Plan". This is evident in the Single Option Agreement and in the Six Option Agreements.
The circumstances in which, and the period during which, the Grantee's exercise of the options to purchase were permitted, emerged from the drafting of clause 5 of all the Option Agreements. Clause 5 of the Single Option Agreement commences with the words, "Provided that the grantee has not registered the Unregistered Plan, thereby effecting subdivision of the land…", making it clear that that Single Option Agreement only confers an option to purchase where the Unregistered Plan remains unregistered. But even then, it defines the option period as the limited period "after 43 days from the date of this agreement (being 28 April 2011) and before four (4) calendar months from the date of this agreement has expired (the expiry date being 16th day of July 2011)". Thus, even though the Unregistered Plan was to remain unregistered, the option could only be exercised for the whole of the Watkin Street property between 28 April 2011 and 16 July 2011.
In contrast, clause 5 of the Six Option Agreements provides for option exercise during exactly the same period but in the opposite circumstances, where the plan was registered. It provides as follows: "Provided that the Grantee has registered the unregistered plan thereby affecting subdivision of the land then this option may be exercised by the Grantee delivering a written notice of exercise to the Grantor at the address shown in this agreement after 43 days from the date of this agreement (being 28 April 2011) and before (4) calendar months from the date of this agreement has expired (the expiry date being 16th day of July 2011). After the expiry date, the option will expire worthless and the option fee will not be refunded."
The Option Agreements are interdependent in relation to price, option fees and the disposition of the purchase deposits. The consideration expressed in the contracts for sale of each of the Six Option Agreements is $525,000. Six of these together totalled a consideration of $3,150,000, the sum Pangani would receive if the Six Option Agreements were exercised.
The Single Option Agreement provides that upon exercise of the option, the consideration payable under the resulting contract for sale is $2,992,500, a figure that differs from $3,150,000 by $157,500. The sum of $157,500 is 5% of the total purchase price of $3,150,000. The sum of $157,500 is also the total of the option fees that had been paid under each of the Six Option Agreements (namely $26,250 x 6, noting that $26,250 is also 5% of the $525,000 purchase price of each lot). All option fees were to be credited against the final consideration in the event of the exercise of the options.
But the Single Option Agreement ensured that Pangani would receive the full $3,150,000, whether the Single Option Agreement were exercised, or whether the Six Option Agreements were exercised. Recital E of the Single Option Agreement provides that it is interdependent with entry into the Six Option Agreements, "so that if the Grantee exercises this option, then then the Grantor receives in addition to the sum of $2,992,500, the sum of $157,000 being the total of the option fees on the six individual lots".
Under each of the Six Option Agreements (clause 7), upon exercise of the option, the option fee would form part of the deposit payable. But if the option conferred under the Six Option Agreements were not exercised, then the option fee paid would be forfeited to the Grantor. This seems to confer a windfall on Pangani, which might be expected to receive less if the purchasers were to undertake subdivision before exercise of the option.
The Six Option Agreements were also interdependent with one another in relation to the exercise of their respective options. It was only possible for a grantee of these options to exercise any one option provided all the other five options were exercised. Clause 2 provides for this in the following terms: "2.1 In consideration the Grantee paying to the Grantor the option fee the receipt of which the Grantor acknowledges the Grantor hereby grants the Grantee an option to purchase the properly PROVIDED THAT the Grantee has registered the Unregistered Plan thereby affecting the sub-division of the land. Provided further, that the options on the balance of the lots in the Unregistered Plan are also simultaneously exercised. Exercise of this option is interdependent with the exercise of those remaining options on the terms and conditions set out in the contract."
The Six Option Agreements permit the Grantee to enter the property and commence to carry out work to assist the implementation of the subdivision: clauses 3.2 and 3.3. But clause 3.4 of the Six Option Agreements gives the material benefit of such work to the Grantor in the event that the options were not exercised. Clause 3.4 is in the following terms: "3.4 (a) If this option shall not be exercised or if the option shall be exercised but the contract is not completed for any reason and if the Grantee shall have carried out work on the property in accordance with the provisions of this clause or otherwise and the Grantee shall not be entitled after such non exercise, termination or rescission to any compensation for the cost of any such work or any value which he shall have added to the property nor shall the Grantor be liable to compensate the Grantee for or in respect of such work..."
Notice of exercise of option under all the Option Agreements was to be given in writing and, once given, would bring into existence a contract in the form of the contract for sale of land attached to the option.
The Option Agreements placed the burden of risk associated with the subdivision on the Grantees. The Grantees, Mr and Mrs Huang, were obliged to complete all the works required to obtain registration of the plan of subdivision. But if works were carried out to obtain registration of the unregistered plan and the option not exercised, no compensation was payable to Mr and Mrs Huang in respect of that work. And the option period was relatively short - 43 days.
Because of all these disadvantages, it was justifiably submitted on behalf of Mr and Mrs Huang that it was unlikely the terms of the Option Agreements were properly explained to Mr Huang.
The Court accepts Mr Huang's account of how the seven Option Agreements came to be signed. On or about 15 March 2011, Mr Petkovski invited him to Mr Ng's office to sign the agreements. Mr Huang asked Mr Xu to join them. Once Mr Huang ascertained that his wife was available, he called Mr Ng and arranged to come to his office on 16 March at noon.
On 16 March 2011, Mr and Mrs Huang went to Mr Ng's office with Mr Xu. Mr Huang thought that Mr Ng was representing him and his wife as their solicitor on this occasion. Mr Huang says, and the Court accepts, that he wanted Mr Ng to prepare the Option Agreements so he and his wife could acquire the Watkin Street property. But he says that he had not wanted to sign the Trust Deeds on 10 March 2011 and that the Trust Deeds were not prepared upon his instructions.
It was at this 16 March meeting that Mr Huang saw the Option Agreements for the first time. Conversing mainly in Mandarin, Mr Ng showed Mr Huang the Option Agreements and pointed out where Mr and Mrs Huang's signatures were required on them.
Mr Ng explained, "Here are seven option agreements in total, one for each property and another one is just in case if the subdivision fails. You can purchase this property as a whole lot. Mr Huang recalls, and the Court accepts, that he and Mr Ng continued in conversation as follows: Mr Ng: "Here's the option agreement. If you don't purchase it you can lose all your deposit." Mr Huang: "What if the subdivision failed?" Mr Ng: "Then you have to buy the whole lot altogether otherwise you will lose your deposit." Mr Huang: "I will 100% purchase the property because I have already paid the deposit."
Mr Huang does not recall whether Mrs Huang said anything. They both then signed the documents.
On 23 March 2011, Mr Ng issued Mr and Mrs Huang with several tax invoices, one for each Option Agreement. But he only kept three of the invoices for the Option Agreements. Curiously, these were not all invoices for the lots that were to remain Mr and Mrs Huang's. He kept invoices for Lots 1 (No. 57), 2 (No. 55) and 3 (No. 53). Of these three lots, Mr and Mrs Huang were the final purchasers only of Lot 2 (No. 55).

[29]

From Option Agreements to Subdivision Registration - March 2011 to April 2012

As soon as the Option Agreements were entered on 16 March, Mr Fandakis, who was retained to carry out the subdivision works, started the works. He played an active role in doing so. Although he says he received instructions from a manager, Mr Truman, it was in Mr Petkovski's financial interests to complete the subdivision and it is probable that he gave instructions to Mr Fandakis to do so.
There can be little doubt that Mr Petkovski was closely involved in giving instructions in relation to the carrying out of subdivision works. His own file (Exhibit 15) contains documents showing the receipt of funds from various parties for subdivision works and reconciling those receipts against payments made to contractors for those works. Such a document would not exist on his file unless he was closely involved in the subdivision. Despite what Mr Fandakis says, the Court infers that he was taking instructions for Mr Petkovski about the subdivision works and it is likely that it was under Mr Petkovski's authorisation that the Modified Development Consent took place.
The Option Agreements provided that the Grantees had to undertake the responsibility to get the subdivision registered at the risk [clause 7.1] of forfeiting the option fee. It is not clear that Mr Huang was even aware that he was at risk in this way, if the subdivision was not done.
Mr Petkovski became the conduit through which monies were conveyed from the various Beneficiaries to reimburse or indemnify Mr and Mrs Huang, the Trustees, under the Trust Deeds. Important elements of Mr Huang's account of these payments are recorded in the next few paragraphs of these reasons. But it is not necessary to make findings about or even to give a full account of these payments here, as they may become issues in a later accounting between these parties at a relief and damages hearing.
On 2 March 2011, Mr Huang says Mr Petkovski gave him a cheque for $25,416.65 from Mr Goran Petkovski, one of the co-purchasers of Lot 1 (No. 57). Mr Huang deposited the cheque into his cheque account.
Mr Petkovski's file (Exhibit 15) shows that he miscalculated the correct amount for the deposit due in respect of the purchase of Lot 4 (No. 51). The correct amount under the Option Agreement was $26,250. That is the amount due under the Trust Deed that Mr Goran Petrovski was to immediately reimburse Mr and Mrs Huangs. But in fact Mr Petkovski's file shows that the amount that Mr Goran Petrovski paid to Mr Huang was $25,416.65. This had the consequence under clause 9 of the Deed that the Deed became void.
Had Mr Huang obtained fully independent legal advice, he would have been able to appreciate the effect of clause 9 and assert it against the Petkovski parties. But the incorrect payment under the Trust Deed does not seem to have been noticed by Mr Ng or Mr Huang. The fact that this opportunity to avoid the Deed in respect of Lot 4 (No. 51) past Mr Huang by is some further evidence of the lack of independent legal scrutiny that was being deployed on his behalf.
On 23 May 2011, Mr Huang says Mr Petkovski gave Mr Huang four further cheques totalling $22,500.00 and drawn as follows: 1. Goran Petkovski - $7,350.00; 2. Two unknown persons - $7,350.00; 3. D Petkovski - $3,675.00; and 4. Lou Petkovski - $3,675.00.
On 23 May 2011, Mr Huang says Mr Petkovski told him to pay Pharaoh's Plumbing Pty Ltd $44,100.00. Mr Huang followed Mr Petkovski's instructions and provided two cheques for $22,050.00, one on 23 May and the other on 25 May 2011.
Further amounts of money were paid by Mr Huang to Tome Bros in cash starting in June 2011. Mr Huang says he drew the amounts and paid them as directed by Mr Petkovski, who appeared to be issuing payment directions on behalf of the Trust Deed Beneficiaries, in accordance with the terms of the Trust Deeds.
On 19 August 2011, Mr Huang says he paid a cheque in the sum of $8,465.00 to Tome Bros on the basis of a calculation Mr Petkovski had performed.
Mr Huang says he paid substantial sums in cash to Mr Petkovski at the offices of Tome Bros, which he drew from his home loan account. The total amounts Mr Huang says he withdrew between 14 April 2011 and 1 February 2012 were $82,000.00. Mr Huang claims that he was not given any receipt for the payments that he made.
Before April 2011, Mr Huang says he paid legal fees of $9,394.00 to Lyon Lawyers for Mr Ng to act on the call options.
Mr Huang says that he has not been indemnified in respect of these payments, other than through a cheque Mr Petkovski and Mr Goran Gashovski paid him on 4 May 2011 in the sum of $13,420.00.

[30]

The Modified Development Consent - September to November 2011

On 23 September 2011, Mr Fandakis applied on behalf of Pangani to Rockdale Council to modify the existing Development Consent. The modification involved an alteration to the boundaries of the proposed Lots and specifically the boundary between Lot 1 (No. 57) and Lot 2 (No. 55). This alteration is discussed in more detail in the next section of these reasons in relation to the trespass claims. The adjusted development consent ("the Modified Development Consent") was approved by Rockdale Council on 23 November 2011.
Mr Huang was not consulted about any part of the Modified Development Consent. It was quite evident to the Court that he was ignorant until very recent times of the fact that the plan of subdivision had been so modified. The fact that he was not consulted led to confusion that is discussed in the next section of these reasons in relation to the trespass claims. But the lack of consultation with the principal purchaser of the Watkin Street property tends to shows a rather high-handed attitude by Mr Petkovski in relation to Mr and Mrs Huang's interests, an attitude which is consistent with Mr Petkovski's other conduct that generally treats Mr and Mrs Huang as a convenient means to Mr Petkovski's own financial ends.
On 5 April 2012, after subdivision works had been done, the plan of subdivision was finally registered. The plan of subdivision became Lots 1 to 6 in DP/1536641. But April 2012 was well outside the 43 day option exercise period, which expired in July 2011. It made commercial sense for Mr Huang to exercise the options soon after the registration of the plan of subdivision and not before. But this meant the original option period needed to be extended.
The original approved plans had approximately equal sized lots. But the effect of the Modified Development Consent was that the Petkovski parties' lots had a total of 1760.8m². The Huangs' three lots had an area of 1654.4m², a difference of 106.4m². This difference is the source of the Huangs ACL, s18 claim.

[32]

The Three Rescission Deeds - 29 May 2012

The three Watkin Street properties for which the ultimate purchasers were not Mr and Mrs Huang all became the subject of the Rescission Deeds that were executed on 29 May 2012.
The Rescission Deeds and the contracts that resulted from them are remarkable in that they do reveal to Alfred Morgan & Son that Mr Petkovski and the other Petkovski parties were the ultimate purchasers of these three properties from Pangani. As the correspondence below shows, it must have been obvious to Pangani by no later than 9 May 2012 that Mr Petkovski had acquired an interest in these three properties. This revelation is somewhat inconsistent with the Huangs' case theory that the Trust Deeds were a smokescreen to conceal Mr Petkovski's interest in the property. But in my view, the course of the documents really points to the conclusion that Mr Petkovski felt able to reveal, in May 2012, that he and the Petkovski parties were subsequent purchasers of the three properties, largely because the Huangs had exercised the options on 12 April and this revelation about a month later did not automatically reveal that the Petkovski interest in the purchase had predated 12 April 2012, when the options were exercised. What was then revealed to the vendor, Pangani, was on the surface at least, consistent with Mr Petkovski and the other Petkovski parties taking up their interests after exercise of the option on 12 April.
But the findings in these reasons show that Mr Petkovski and the Petkovski parties had acquired interests simultaneously with the exercise of the options by the Huangs.
On 9 May 2012, Mr Ng wrote to Alfred Morgan & Son (Exhibit 16), stating that the "option agreement has stipulated the grantee's right to nominate other persons as purchasers and therefore we need to change the purchasers names on some of the contracts". The letter then identifies some of the new purchasers of each of Lot 4 (No. 51), Lot 3 (No. 53) and Lot 1 (No. 57). The 9 May 2012 letter makes no mention of the Trust Deeds or the pre-existing arrangements that they represent, nor does any of the subsequent correspondence on Mr Ng's file.
On 11 May 2012, Mr Ng wrote to Mr Morgan, stating that Mr Ng had been advised by the "real estate agent" (most probably a reference to Mr Petkovski) that Pangani had agreed to requests that included the following: 1. The settlement dates to the contracts will be 20 June 2012 or earlier; 2. The purchaser of Lot 4 (No. 51) will be Mr Goran Petkovski; 3. The purchasers of Lot 3 (No. 53) will be Mr Con Elfes and Ms Yanna Elfes; and 4. The purchasers of Lot 1 (No. 57) will be Mr Petkovski, Ms Diana Petkovski, Mr George Gashovski and Mr Lence Petkovski.
A later change in the purchase arrangements for Lot 3 (No. 53) meant that Ms Yanna Elfes became the sole purchaser of that property.
On 14 May 2012, a letter from Mr Morgan noted that Lyon Lawyers' clients (Mr and Mrs Huang), "wish to have the nominee purchase some of the properties, our client agrees to execute a transfer to any nominee as agreed in the option agreements". Mr Morgan's letter also said that Pangani requested that the purchasers immediately provide the outstanding deposit money under the contracts. Mr Morgan's letter also offered the possible option of Pangani entering into Rescission Deeds with Mr and Mrs Huang followed by the issue of fresh contracts to Mr and Mrs Huang' nominees, provided Pangani was appropriately compensated for the legal costs of the change.
On 15 May 2012, Mr Ng wrote to Mr Morgan advising of the identities of the proposed purchasers of the lots for the new contracts to be created once the Rescission Deeds had been executed. Mr Ng wrote: "The contracts in relation to 51, 53, and 57 Watkin St shall be rescinded and new contracts of the said properties shall be entered into with the following purchasers (nominees of KY Huang and XJ Huang simultaneously)."
The names of the purchasers proposed to be on the contracts were: Mr Goran Petkovski for Lot 4 (No. 51); Ms Yanna Elfes for Lot 3 (No. 53) and Mr Petkovski, Ms Diana Petkovski, Mr George Gashovski and Mr Lence Petkovski for Lot 1 (No. 57).
Mr Ng requested the Rescission Deeds in relation to each of these properties. He also confirmed that his clients accepted that a fee of $1,000.00 plus GST (being $333.33 per property plus GST) was payable to Pangani.
On 20 May 2012, Mr Ng told Mr Huang, "You have to sign and exchange 2 deeds of rescission for… Watkin Street Rockdale with the vendor Pangani Ltd." This seems to have been said more or less as an instruction. Mr Huang has no recollection of having received legal advice from Mr Ng in connection with this subject and the Court accepts that he did not receive any.
Mr Ng also told Mr Huang that he had to pay $333 plus GST per contract for Pangani's costs of the preparation of the Deed of Rescission and the new contract. Mr Huang should not have been finally responsible for these fees as the Rescission Deeds were only for the benefit of the Petkovski parties, not for the benefit of Mr and Mrs Huang.
Mr Huang says he has no recollection of seeing the exchange of the new contracts for sale of the Watkin Street property or of any Rescission Deeds signed by Pangani. The Court accepts this evidence. Whatever events led to the execution of the Rescission Deeds, they were very quick. As they unfolded, Mr Huang did not have the documents explained to him, mainly because they were probably seen by all involved as merely consequential on the documents that had already been executed or given: the Trust Deeds, the Option Agreements and the notices of exercise of option.
I accept Mr Huang's evidence that Mr Ng did not explain to him the contents of the Rescission Deeds that he was requested to sign. And in my view, Mrs Huang had no understanding of what she was doing when she signed the Rescission Deeds.
On 21 May 2012, Mr Morgan provided the Rescission Deeds in respect of Lot 1 (No. 57), Lot 3 (No. 53) and Lot 4 (No. 51). On 22 May 2012, fresh contracts were subsequently issued by Mr Morgan in respect of these three lots.
The Rescission Deeds were all executed on 29 May 2012 and were witnessed by Mr Cochineas. This tends to suggest that Mr Ng was not present at the time of their execution. The Court accepts Mr Huang's evidence that the effect of these documents were not explained to him or to Mrs Huang before they were executed. He has no recollection of their execution. It is probable they were signed in the presence of Mr Petkovski and Mr Cochineas and away from Mr Ng. Mr and Mrs Huang were given no legal advice about them.
But the Rescission Deeds were really giving effect to the Trust Deeds and the option agreements consequent upon the exercise of the options.
Each of the final contracts for sale of the Watkin Street property provided for a nominated purchase price of $525,000.00, a 10% deposit of $52,500.00 and a balance owing of $472,500.00. After the rescission of Lot 3 (No. 53), the final contract dated 29 May 2012 showed only Ms Yanna Elfes as the purchaser.
The final contract for Lot 4 (No. 51) dated 29 May 2012 also had a purchase price of $525,000.00 with a deposit of $52,500.00 leaving a balance payable of $472,500.00. The named purchaser was still Mr Goran Petkovski.
The final contract for Lot 1 (No. 57), also dated 29 May 2012, was in similar terms. The named purchasers were Mr Petkovski, Ms Diana Petkovski, Mr George Gashovski and Mr Lence Petkovski. The contract for this property also had a purchase price of $525,000.00 with a deposit of $52,500.00, leaving a balance payable of $472,500.00.
The lots the subject of the Rescission Deeds were transferred to the purchasers after 29 May 2012. Mr and Mrs Huang's three lots were all transferred to them on 29 June 2012 as was Lot 1 (No. 57) to its purchasers. Lot 4 (No. 51) was transferred to Mr Goran Petkovski the same day but on 24 August 2014, Mr Goran Petkovski transferred it to Mr Petkovski. Lot 3 (No. 53) was transferred to Ms Yanna Elfes on 24 August 2012.
On about 2 June 2015, Mr Huang requested from Lyon Lawyers six copies of the Option Agreements and six copies of the final contracts for sale. At the time of this request, he did not have copies. I infer that they had not been given to him by Mr Ng in May 2012, another reason for inferring that Mr Ng had not been closely involved in the giving of instructions for the Rescission Deeds and the issuing of the final contracts for sale.

[33]

Mr and Mrs Huang's Claims

By their Amended Cross Claim, Mr and Mrs Huang each sue for duress and unconscionable conduct in relation to the three Trust Deeds executed on 10 March 2011 and the sale of the three lots, Lot 1 (No. 57), Lot 3 (No. 53) and Lot 4 (No. 51). They also allege contraventions of ACL, ss 18, 20 and 22.
Mr and Mrs Huang only claim specific relief in addition to damages against the first cross-defendant, Mr Petkovski. Damages only are claimed against all other cross-defendants. It is convenient to divide up the claims made by Lot numbers. Mr and Mrs Huang's claims only relate to the lots that they sought to acquire from Pangani but which they contend were diverted from them by Mr Petkovski's conduct, namely Lot 4 (No. 51), Lot 1 (No. 57) and Lot 3 (No. 53). Specifically the claims in respect of those three lots are: 1. In relation to Lot 4 (No. 51) held by Mr Petkovski: 1. A declaration Mr Petkovski holds it on constructive trust for Mr and Mrs Huang; 2. Alternatively, equitable compensation in a sum equal to the difference between its purchase price and its value at the time of judgment; and 3. A declaration that the Trust Deed is void and alternatively an order that it vests in Mr and Mrs Huang pursuant to Clause 9 of the Trust Deed (the Beneficiary default clause). 1. In relation to Lot 3 (No. 53) held by Ms Elfes: 1. Equitable compensation in a sum equal to the difference between its purchase price and its value at the time of judgment; and 2. A declaration that the Trust Deed is void and alternatively an order that it vests in Mr and Mrs Huang pursuant to Clause 9 of the Trust Deed (the Beneficiary default clause). 1. In relation to Lot 1 (No. 57) held by all four cross-defendants: 1. A declaration that the cross-defendant, Mr Petkovski, holds his interest in the land known as Lot 1 (No. 57) on constructive trust for Mr and Mrs Huang; 2. Alternatively, equitable compensation in a sum equal to the difference between its purchase price and its value at the time of judgment; and 3. A declaration that the Trust Deed is void and alternatively an order that it vests in Mr and Mrs Huang pursuant to Clause 9 of the Trust Deed (the Beneficiary default clause). 1. In respect of all three lots, damages under ACL, s 236 by reason of conduct that contravened ss 18, 20 and 22.
The cross-claimants no longer press the claim that Mr Petkovski holds Lot 1 (No. 57), Lot 3 (No. 53) and Lot 4 (No. 51) on constructive trust and at least one of them, Lot 3 (No. 53) was always owned by a non-party, Mr Elfes and was transferred to another unrelated party, Mr Qi Zong Li. Mr Petkovski is not the sole registered proprietor of any of those lots.
The Court foreshadowed in final submissions that in these reasons it would make findings that would ground any claims for relief. But the Court envisaged there would be a separate relief and damages hearing at which additional expert evidence might be called but where the parties could not give fresh evidence and be recalled such that their credit would be put in issue again. Directions are made later in these reasons for that hearing to be held. That hearing may involve a closer examination, for example, of the claim for the monies allegedly unpaid under the Trust Deeds and other matters of causation that are not the subject of findings in these reasons.

[35]

The PSBA Act and the PSBA Regulation 2003

The terms of PSBA Act, s 49 are set out below in full: "49 RESTRICTIONS ON LICENSEE OBTAINING BENEFICIAL INTEREST IN PROPERTY (1) A real estate agent who is retained by a person ("the client") as an agent for the sale of property must not obtain or be in any way concerned in obtaining a beneficial interest in the property. Maximum penalty: 200 penalty units or imprisonment for 2 years, or both. (2) A real estate salesperson employed by the real estate agent must not obtain or be in any way concerned in obtaining a beneficial interest in the property. Maximum penalty: 200 penalty units or imprisonment for 2 years, or both. (3) A person does not contravene this section by obtaining a beneficial interest in property if: (a) before the person obtains the interest, the client consents in writing in a form approved by the Secretary to the person obtaining the interest, and (b) the person acts fairly and reasonably in relation to the obtaining of the interest, and (c) no commission or other reward is payable to the person in relation to the transaction by which the interest is obtained, unless the client consents in writing in a form approved by the Secretary to the commission or other reward being paid. (4) Without limiting this section, a person is considered to obtain a beneficial interest in property if: (a) the person or a close relative of the person obtains a beneficial interest in the property, or (b) a corporation having not less than 100 members and of which the person or a close relative of the person is a member, or a subsidiary of such a corporation, obtains a beneficial interest in the property, or (c) a corporation of which the person or a close relative of the person is an executive officer obtains a beneficial interest in the property, or (d) the trustee of a discretionary trust of which the person or a close relative of the person is a beneficiary obtains a beneficial interest in the property, or (e) a member of a firm or partnership of which the person or a close relative of the person is also a member obtains a beneficial interest in the property, or (f) the person or a close relative of the person has, directly or indirectly, a right to participate in the income or profits of a business carried on for profit or gain and another person carrying on that business obtains a beneficial interest in the property. (5) Without limiting this section, each of the following is considered to constitute the obtaining of a beneficial interest in property: (a) purchasing property, (b) obtaining an option to purchase property, (c) being granted a general power of appointment in respect of property. (6) In this section: "close relative" of a person means: (a) a spouse of the person, or (b) an existing or former de facto partner, or (c) a child, grandchild, sibling, parent or grandparent of the person, whether derived through paragraph (a) or (b) or otherwise, or (d) any other person who has a relationship with the person that is prescribed by the regulations as constituting the relationship of close relative for the purposes of this section. Note: "De facto partner" is defined in section 21C of the Interpretation Act 1987. "property" includes an interest in property."
PSBA Act, s 49(1) and (2) create criminal offences with serious consequences, a maximum penalty of 200 penalty units (presently a fine of $22,000 - see the Crimes (Sentencing Procedure) Act 1999, s 17) or imprisonment for 2 years.
I infer that Mr Petkovski, as a real estate sales person employed by the real estate agent Tome Bros, contravened PSBA Act, s 49(2). Indirect evidence also supports the conclusion that Mr Cochineas may also have acted in contravention of that section. Mr Goran Petkovski, the purchaser of Lot 4 (No. 51), is the son of Mr Petkovski. Ms Elfes, the purchaser of Lot 3 (No. 53), is the daughter of Mr Cochineas. The owners of Lot 1 (No. 57), other than Mr Petkovski, are relatives of Mr Petkovski.
Tome Bros is a licensee under the PSBA Act. The Rules of Conduct prescribed for the conduct of licensee's business are authorised under PSBA Act, s 37. PSBA Act, s 37 also attaches criminal sanctions by way of fine to the rules of conduct prescribed by the regulations as follows: "37 Rules of conduct for licensee's business (1) The regulations may prescribe rules of conduct to be observed in the course of the carrying on of business or the exercise of functions under a licence or certificate of registration. (2) A licensee or registered person who without reasonable excuse contravenes a rule of conduct prescribed for the purposes of this section is guilty of an offence. Maximum penalty: (a) 100 penalty units in the case of a corporation, or (b) 50 penalty units in any other case."
The substantial part of the relevant conduct of Mr Petkovski and Tome Bros in question in these proceedings occurred in the years 2010 to 2013. At that time, the applicable regulation passed for the purposes of s 37 and other relevant provisions was the Property, Stock and Business Agents Regulation 2003 ("the 2003 PSBA Regulation").
The 2003 PSBA Regulation, r 11 prescribes general rules of conduct (Schedule 1) for all licensees and registered persons operating under the license, including employees such as Mr Petkovski. Schedule 1, Items 1-7 and 11, relevantly provide as follows: "SCHEDULE 1 General rules of conduct applying to all licensees and registered persons 1 Knowledge of Act and regulations An agent must have a knowledge and understanding of the Act and the regulations under the Act, and such other laws relevant to the category of licence or certificate of registration held (including, laws relating to residential tenancy, fair trading, trade practices, anti-discrimination and privacy) as may be necessary to enable the agent to exercise his or her functions as agent lawfully. 2 Fiduciary obligations An agent must comply with the fiduciary obligations arising as an agent. 3 Honesty, fairness and professionalism (1) An agent must act honestly, fairly and professionally with all parties in a transaction. (2) An agent must not mislead or deceive any parties in negotiations or a transaction. 4 Skill, care and diligence An agent must exercise reasonable skill, care and diligence. 5 High pressure tactics, harassment or unconscionable conduct An agent must not engage in high pressure tactics, harassment or harsh or unconscionable conduct. 6 To act in client's best interests An agent must act in the client's best interest at all times unless it would be contrary to the Act or regulations under the Act or otherwise unlawful to do so. 7 Confidentiality An agent must not, at any time, use or disclose any confidential information obtained while acting on behalf of a client or dealing with a customer, unless: (a) the client or customer authorises disclosure, or (b) the agent is permitted or compelled by law to disclose. … 11 Conflicts of interest An agent must not accept an appointment to act, or continue to act, as an agent if doing so would place the agent's interests in conflict with the client's interests."
The 2003 PSBA Regulation was replaced on 1 September 2014 by the Property, Stock and Business Agents Regulation 2014 ("the 2014 PSBA Regulation"). Under the 2014 PSBA Regulation, Schedule 1, Items 1-7 and 11 are identical in form to the same Items under the 2003 PSBA Regulation.

[36]

Principles For The Claim Based on Alleged Unconscionable Conduct

The Huangs bring a claim under ACL, s 20 which prohibits persons from engaging in unconscionable conduct in trade, commerce as follows: "(1) A person must not, in trade or commerce, engage in conduct that is unconscionable, within the meaning of the unwritten law from time to time."
ACL, s 20 is found in Chapter 2 of the ACL. The Huangs seek relief in an action for damages under ACL, s 236, relief which is available where conduct contravenes ACL, Chapter 2. Certain conduct in relation to supply of goods and services is excluded from the operation of s 20 by s 20(2). But that exclusion is not relevant here.
The relevant legal principles governing relief for unconscionable conduct at general law, that is, "the unwritten law", may be shortly stated.
In Commercial Bank of Australia v Amadio (1983) 151 CLR 447; [1983] HCA 14 ("Amadio"), the High Court held (by majority) that the Commercial Bank of Australia had engaged in unconscionable conduct by finding that it had taken unconscientious advantage of the "special disadvantage" suffered by the plaintiffs in their dealings with the bank. In the result, the bank was unable to rely on a guarantee given by the plaintiff parents on behalf of their son. Mason J articulated the principle of unconscionable conduct in the following terms (at 461 and 467): "[2]…relief on the ground of 'unconscionable conduct' is usually taken to refer to the class of case in which a party makes unconscientious use of his superior position or bargaining power to the detriment of a party who suffers from some special disability or is placed in some special situation of disadvantage. … [22] …if A having actual knowledge that B occupies a situation of special disadvantage in relation to an intended transaction, so that B cannot make a judgment as to what is in his own interests, takes unfair advantage of his (A's) superior bargaining power or position by entering into that transaction, his conduct in so doing is unconscionable. And if, instead of having actual knowledge of that situation, A is aware of the possibility that that situation may exist or is aware of facts that would raise that possibility in the mind of any reasonable person, the result will be the same."
In Amadio, Mason J also drew a distinction between a transaction that is sought to be set aside on the grounds of unconscionable conduct, and one that is sought to be set aside on the basis of undue influence (at 461): "Although unconscionable conduct in this narrow sense bears some resemblance to the doctrine of undue influence, there is a difference between the two. In the latter the will of the innocent party is not independent and voluntary because it is overborne. In the former the will of the innocent party, even if independent and voluntary, is the result of the disadvantageous position in which he is placed and of the other party unconscientiously taking advantage of that position. There is no reason for thinking that the two remedies are mutually exclusive in the sense that only one of them is available in a particular situation to the exclusion of the other. Relief on the ground of unconscionable conduct will be granted when unconscientious advantage is taken of an innocent party whose will is overborne so that it is not independent and voluntary, just as it will be granted when such advantage is taken of an innocent party who, though not deprived of an independent and voluntary will, is unable to make a worthwhile judgment as to what is in his best interest."
A party may also set aside a transaction by showing that the other party had, in fact, come to occupy or assume a position of practical ascendency, power or domination over the first party who had taken a co-relative position of dependence or subjection: JD Heydon, MJ Leeming and PG Turner, Meagher, Gummow & Lehane's Equity: Doctrines & Remedies (5th ed, 2014, LexisNexis Butterworths) at paragraph 15-105.
The High Court has restated the principles in Amadio in a number of cases, for example, in Louth v Diprose (1992) 175 CLR 621; [1992] HCA 61 and more recently in Kakavas v Crown Melbourne Limited (2013) 250 CLR 392; [2013] HCA 25 ("Kakavas") and Thorne v Kennedy (2017) 91 ALJR 1260; [2017] HCA 49.
The Courts have also considered the essential content of unconscionable conduct. In Tonto Home Loans Australia Pty Ltd v Tavares (2011) ASC 155-107 [2011] NSWCA 389, the New South Wales Court of Appeal Allsop P (with whom Bathurst CJ and Campbell JA agreed) made the following observations at [291] (citations omitted): "Aspects of the content of the word "unconscionable" include the following: the conduct must demonstrate a high level of moral obloquy on the part of the person said to have acted unconscionably; the conduct must be irreconcilable with what is right or reasonable; factors similar to those that are relevant to the CRA are relevant; the concept of unconscionable in this context is wider than the general law and the provisions are intended to build on and not be constrained by cases at general law and equity; the statutory provisions focus on the conduct of the person said to have acted unconscionably. It is neither possible nor desirable to provide a comprehensive definition. The range of conduct is wide and can include bullying and thuggish behaviour, undue pressure and unfair tactics, taking advantage of vulnerability or lack of understanding, trickery or misleading conduct. A finding requires an examination of all the circumstances."
And the High Court emphasised in Kakavas that the conduct proscribed by the equitable doctrine of unconscionability involves the unfair exploitation of weakness. The Court in Kakavas observed at [161]: "Equitable intervention to deprive a party of the benefit of its bargain on the basis that it was procured by unfair exploitation of the weakness of the other party requires proof of a predatory state of mind. Heedlessness of, or indifference to, the best interests of the other party is not sufficient for this purpose. The principle is not engaged by mere inadvertence, or even indifference, to the circumstances of the other party to an arm's length commercial transaction. Inadvertence, or indifference, falls short of the victimisation or exploitation with which the principle is concerned."
In the present case, the alleged author of the alleged unconscionable conduct, Mr Petkovski, is not the same person who enters the relevant transactions that the Huangs seek to impugn. Such a transaction structure (where the author of the unconscionable conduct is not a party to the impugned transaction) can nevertheless ground relief for unconscionable conduct. An example of relief being granted with this structure is Begbie v State Bank of New South Wales Limited (1994) ATPR 41-288 ("Begbie"), a case in which the Federal Court had to decide whether the applicant was entitled to have a mortgage and guarantee set aside on the ground of the bank's unconscionable conduct.
In Begbie, having concluded that the applicant suffered from a special disadvantage vis-à-vis the bank, Drummond J went on to consider whether the bank knew of the applicant's special disadvantage, so as to make it unfair for to it to take from her the mortgage and guarantee as security. Drawing on the principles of unconscionable conduct set out by the High Court in Amadio, Drummond J said (at 41-895 to 41-896): "It is apparent from the way both Mason J and Deane J formulated the principle that, for it to apply in a given case, it is not necessary that the party who has benefited from the impugned transaction should itself have created the special disadvantage from which the party claiming relief suffers. See also Louth v Diprose (1993) 67 ALJR 95. It is enough that the first-mentioned party knows (or ought to know) of the other's handicapped situation and takes unfair advantage of the opportunity so presented. … It is also clear from the statements in Amadio that if one person has either actual knowledge that another occupies a position of special disadvantage in relation to an intended transaction or, without actual knowledge, is aware of the possibility that the situation of special disadvantage may exist or is aware of facts that would raise that possibility in the mind of a reasonable person, then that person's conduct in entering into the transaction from which he benefits against such a background of knowledge or awareness on his part will be unconscionable."
In Begbie, Drummond J concluded that the bank had acted unconscionably in taking security from the applicant because the bank took that security knowing that the applicant believed the funds to be borrowed against her security would be used for one purpose which might ultimately benefit her but also knowing that the applicant was unaware that the funds would be used for other purposes that would be of no benefit to her but which would benefit the bank itself as well as various other related parties.
Here, the question arises whether the cross-defendants other than Mr Petkovski, who all benefited under the Trust Deeds, were aware of or ought to have been aware of Mr Petkovski's alleged unconscionable conduct, even though they did not actively participate in it. This is considered later in these reasons.

[37]

Principles For The Claim Based on Alleged Economic Duress

A finding of unconscionable conduct against a party may also provide a basis to conclude from the same circumstances that party has also engaged in actionable economic duress.
The modern rationale of the doctrine of economic duress is that the law will not give effect to an apparent consent which was induced by pressure applied to one party by another party, when the law regards that pressure as illegitimate: Universe Tankships Inc of Monrovia v International Transport Workers Federation [1983] 1 AC 366 ("Monrovia") at 384 per Lord Diplock. Lord Scarman identified in Monrovia (at 400) the two elements that comprise economic duress: (a) pressure amounting to compulsion of the will of the victim, and (b) the illegitimacy of the pressure exerted. His Lordship went on to say (also at 400): "there must be pressure, the practical effect of which is compulsion or the absence of choice".
In Australia, the doctrine of economic duress was comprehensively considered in Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40, by McHugh JA (as his Honour then was) at 45-46, a case in which unlawful threats, or unconscionable conduct, were said to be its constituent parts. McHugh JA there said: "A person who is the subject of duress usually knows only too well what he is doing. But he chooses to submit to the demand or pressure rather than take an alternative course of action. The proper approach in my opinion is to ask whether any applied pressure induced the victim to enter into the contract and then ask whether that pressure went beyond what the law is prepared to countenance as legitimate? Pressure will be illegitimate if it consists of unlawful threats or amounts to unconscionable conduct. But the categories are not closed. Even overwhelming pressure, not amounting to unconscionable or unlawful conduct, however, will not necessarily constitute economic duress."
More recently, the Court of Appeal in this State discussed the doctrine in Australia and New Zealand Banking Group Limited v Karam (2005) 64 NSWLR 149; [2005] NSWCA 344. The Court there emphasised the width of the commercial and financial interests of a party that may attract the doctrine and said (Beazley, Ipp and Basten JJA at [66]): "The vagueness inherent in the terms "economic duress" and "illegitimate pressure" can be avoided by treating the concept of "duress" as limited to threatened or actual unlawful conduct. The threat or conduct in question need not be directed to the person or property of the victim, narrowly identified, but can be to the legitimate commercial and financial interests of the party. Secondly, if the conduct or threat is not unlawful, the resulting agreement may nevertheless be set aside where the weaker party establishes undue influence (actual or presumptive) or unconscionable conduct based on an unconscientious taking advantage of his or her special disability or special disadvantage, in the sense identified in Amadio."
The doctrine has also been considered in Ford Motor Company of Australia Ltd v Arrowcrest Group Pty Ltd (2003) 134 FCR 522; [2003] FCAFC 313 and more recently in Burge v Commonwealth Bank of Australia (No 3) [2017] FCA 383.

[38]

Principles For The Claim Based on Misleading or deceptive Conduct

The Huangs also plead a limited contravention of ACL, s 18, which prohibits a person in trade or commerce from engaging in conduct that is misleading or deceptive or likely to mislead or deceive. This claim is limited to the alleged unauthorised reduction in the size of the lots conveyed to the Huangs as a result of the Modified Development Consent.
The two step analysis required to establish s 18 liability was discussed by the High Court in Campbell v Backoffice Investments Pty Limited (2009) 238 CLR 304; [2009] HCA 25. The two step process is: (1) whether facts establish conduct pleaded; and (2) whether as a matter of fact the conduct is false misleading or deceptive or likely to mislead or deceive.
The ACL, s 18 claim is pleaded as one of representation by silence. Special principles are engaged when such a pleading is raised.
Whether silence or non-disclosure of certain information constitutes misleading or deceptive conduct is to be "assessed as a circumstance like any other": Demagogue Pty Ltd v Ramensky & Anor (1992) 110 ALR 608, 609; [1992] FCA 851 at 609. Black CJ articulated the principle in the following terms (at 609-610, emphasis added): "To say this is certainly not to impose any general duty of disclosure; the question is simply whether, having regard to all the relevant circumstances, there has been conduct that is misleading or deceptive, or likely to mislead or deceive. To speak of "mere silence" or of a duty of disclosure can divert attention from that primary question. Although "mere silence" is a convenient way of describing some fact situations, there is in truth no such thing as "mere silence" because the significance of silence always falls to be considered in the context in which it occurs. That context may or may not include facts giving rise to a reasonable expectation, in the circumstances of the case, that if particular matters exist they will be disclosed."
Silence as constituting misleading or deceptive conduct was most recently considered by the High Court in Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357; [2010] HCA 31. In that case, the High Court endorsed the language of a "reasonable expectation" of disclosure (at [18]-[23]). The Court also emphasised that the application of the "reasonable expectation" approach may differ depending on whether the non-disclosure is said to be misleading or deceptive to members of the public, or whether it arises between parties to commercial negotiations (at [19]).
In deciding whether a reasonable expectation exists, regard may be had to the knowledge of the parties to the transaction, and the existence of any common assumptions and practices established between the parties (at [20]). The High Court reaffirmed that, as a general proposition, Trade Practices Act, s 52 (and for present purposes, ACL, s 18) does not require a party to commercial negotiations to volunteer information which will be of assistance to the other party's decision-making. Nor does it impose on a party an obligation to disclose information to avoid the consequences of the careless disregard of another party of equal bargaining power and competence (at [22]).

[39]

Analysis of the Plaintiffs' Claims - Unconscionable Conduct

The Huangs' claim that Mr Petkovski acted unconscionably by preventing Mr and Mrs Huang from purchasing the whole of the Watkin Street property and causing them to execute Trust Deeds in respect of Lot 1 (No. 57), Lot 3 (No. 53) and Lot 4 (No. 51), so that upon the exercise of the options subsequently granted by Pangani, the right to purchase those three properties was beneficially held by Mr Petkovski or his nominees, rather than the Huangs.
All the elements were in place by November 2010 for Mr Petkovski to take unconscionable advantage of the Huangs. By then, they were in a position of special disadvantage vis-à-vis Mr Petkovski. He was aware of their special disadvantage and he exploited it.
In November 2010, Mr Petkovski first raised the idea of his taking an interest in the Watkin Street property. Through a series of steps between November 2010 and March 2011, Mr Petkovski put himself in a position to maximise the benefit he would derive from his position of knowledge of Mr and Mrs Huang's position of special disadvantage. He ultimately achieved his objective in March 2011 by orchestrating their execution of the Trust Deeds, followed shortly afterwards by the Option Agreements. The Rescission Deeds, which were signed 12 months later in May 2013 after exercise of the options, added little to his previous unconscionable conduct. They were really only its logical working through.
Mr Petkovski's unconscionable conduct centres upon the three Trust Deeds. The Trust Deeds were disadvantageous transactions in which Mr and Mrs Huang entered by reason of Mr Petkovski's unconscionable conduct and were the vehicle by which the Huangs lost the value of the subsequent Option Agreements over the three lots. The loss to the Huangs is measured by the lost opportunity to enter into Option Agreements unfettered by the obligations of the Trust Deeds.
Mr Petkovski's principal moral obloquy is his scheme: he used his position as an estate agent contrary his PSBA Act obligations by creating the Trust Deeds both to effect and to hide his breach of PSBA Act, s 49 in relation to Lot 1 (No. 57), Lot 3 (No. 53) and Lot 4 (No. 51). Mr Petkovski knew and understood that he or family members could not acquire an interest in the Watkin Street property without the written consent of Pangani, which he did not have. I accept that Mr Petkovski propounded the Trust Deeds, which were created to give effect to this scheme of hiding the purchasers' identities from Pangani until after contracts had been finally exchanged.
But the Huangs only suffered indirectly from Mr Petkovski's breach of PSBA Act, s 49. That provision is primarily enacted for the benefit of real estate vendors, who are principals of agents such as Tome Bros. The person perhaps most injured by Mr Petkovski's dishonest contravention of s 49 was Pangani. It should be said that the Court's findings also warrant the conclusion that Mr Petkovski contravened the 2003 PSBA Regulation, rr 2,3,4,5,6,7, and 11 but it is not necessary for the purposes of this judgment further to explore those possible contraventions.
Mr Petkovski's moral obloquy in relation to the Huangs is actually slightly different, but motivated by his dishonest scheme to hide the truth from Pangani. Because of that motivation, he could never openly bid against the Huangs for any of the Watkin Street properties. Pangani thereby lost the benefit of price competition for the Watkin Street property. Instead, Mr Petkovski decided to take the three properties at the minimum cost to himself and his associates, so they could share the same attractive profits as the Huangs. That meant forcing a transaction through the Trust Deeds on the Huangs that kept their cover from Pangani but maximised their profit. To achieve this, the Trust Deeds virtually had to gift the three lots to him and his associates; and that is what they did.
Mr and Mrs Huang were both in position of special disadvantage with respect to Mr Petkovski in relation to the sale and purchase of the Watkin Street property. Set out below is an analysis of the position of each of them with respect to Mr Petkovski, followed by an analysis of Mr Petkovski's conduct in relation to them.
Mr Huang's Position. Mr Huang was in a position of special disadvantage in his dealings with Mr Petkovski in relation to entry into the Trust Deeds, the purchase of the Watkin Street property and the purchase of the subdivided lots for the following reasons.
Mr Petkovski, not Mr Huang, knew directly of the instructions of, and the negotiating position being taken by the vendor, Pangani. As an employee of Tome Bros, Mr Petkovski was able to deal directly and exclusively with Pangani and had information which he could choose to disclose or not to disclose to Mr Huang, who was keen to purchase. Mr Huang never dealt with Pangani directly in relation to the purchase. Mr Petkovski knew that Mr Huang wholly depended upon him in this way. The ever-changing purchase price of the Watkin Street property is one example of how information held by Mr Petkovski could be used to create uncertainty for Mr Huang.
Mr Huang otherwise had a highly dependent relationship with Mr Petkovski. His personal dependence upon Mr Petkovski came from a number of related sources: Mr Huang was essentially illiterate in English; Mr Petkovski was someone Mr Huang trusted to take the time and trouble to speak to him and explain things to him accurately in English. Mr Petkovski knew that Mr Huang depended upon him in this way.
Mr Petkovski was an important identified source of potential future real estate opportunities for Mr Huang that Mr Huang valued highly. As a result Mr Petkovski was someone Mr Huang could ill afford ever to offend, or to put at arm's length. Mr Petkovski knew that Mr Huang depended upon him in this way.
Mr Huang was not familiar with the law applicable to the sale and subdivision of New South Wales land such as the Watkin Street property. Although a solicitor would ordinarily be Mr Huang's source of information about that matter, in practice, the conversations between them show that Mr Petkovski became an informal adviser to Mr Huang on this subject, as he understood the applicable law. Mr Petkovski knew that Mr Huang depended upon him in this way.
Mr Petkovski controlled decisions about how to overcome obstacles to and about the cost and timing of the subdivision. And he dealt directly with Mr Fandakis, who was responsible for undertaking all works necessary to achieve registration the plan of subdivision. Mr Petkovski knew that Mr Huang depended upon him in this way.
At the time of execution of the Trust Deeds, Mr Huang did not have the benefit of wholly independent legal advice. Whilst he had retained a solicitor at different times, first Mr Lee and then Mr Ng, both these solicitors appeared to obtain instructions from Mr Petkovski about aspects of the transaction and seemed influenced by Mr Petkovski's communications to them. In the absence of their giving evidence, it is difficult to know the extent of Mr Petkovski's communications with them. I infer from the fact that no other solicitor corresponded with Mr Ng on behalf of Mr Petkovski or the Petkovski parties that Mr Petkovski retained Mr Ng to act for him as the acquirer of interests in three lots of the Watkin Street property under the Trust Deeds. But in the critical phase of Mr Ng's legal work for the Huangs in March 2011, when the Trust Deeds were prepared and signed, there is little evidence that Mr Ng successfully organised any one-to-one meetings with Mr Huang in which the Huangs' separate interests which were possibly adverse to those of Mr Petkovski were discussed. Mr Petkovski knew that Mr Huang lacked this truly independent advice.
Mr Huang had paid a deposit of $152,500 and was under the mistaken impression, induced by Mr Petkovski, that he could lose his deposit if the purchase of the Watkin Street property did not proceed. Mr Petkovski knew that Mr Huang had this impression: Mr Petkovski had himself induced this particular belief in Mr Huang.
Mrs Huang's Position. Mrs Huang was in a similar position to her husband, one of special disadvantage in her dealings with Mr Petkovski for the purchase of the Watkin Street property. Because Mr Huang was the sole practical source of Mrs Huang's information about all aspects of this transaction, her position could be no more independent of Mr Petkovski than that of her husband. The Court concludes that she was in a position of special disadvantage with respect to Mr Petkovski for the same reasons as Mr Huang. But she had the following additional special disadvantages.
Mrs Huang was illiterate in English, educationally and commercially unsophisticated, wholly dependent upon her husband for advice of all kinds, and totally unwilling to question his commercial judgment. For her, taking legal or commercial advice separately from her husband was unthinkable. Mr Petkovski knew that Mrs Huang depended upon him, and Mr Huang, in this way.
Mr Petkovski knew that Mrs Huang would rely on information about the Watkin Street property transaction passed on to her by Mr Huang, with all its limitations, and that she had no other identified source of such information. Mr Petkovski knew that Mrs Huang ultimately depended upon him in this way too.
Mrs Huang was misled by Mr Huang as to the meaning and effect of the documents she signed. Mr Huang passed on to her the same misrepresentations about the documents that Mr Petkovski had made to Mr Huang.
The Exploitation. How did Mr Petkovski exploit the Huangs' position of special disadvantage? He did so using his unique position and knowledge. By November 2010, Mr Petkovski had unique access to information about the potential sale of the Watkin Street property: (1) he knew the price and terms on which Pangani would offer the property for sale; (2) he knew he was Mr Huang's sole practical channel of communication to the directors of Pangani; (3) he knew that Mr Huang had paid a deposit of $152,500.00 to secure the purchase of the Watkin Street property and that Mr Huang feared losing his deposit if the purchase did not proceed; (4) he knew the approximate cost of the subdivisional work carried out by Mr Fandakis on behalf of Pangani; (5) he knew the detail of the separate agreement between Mr Huang and Ms Wu, for Ms Wu to purchase two of six lots if the Watkin Street property were subdivided; and (6) he knew Mr Huang placed trust in him in relation to technical real estate issues involved in the possible purchase of the Watkin Street property.
In November 2010, Mr Petkovski asked for two of the six lots. He deliberately withheld giving instructions for the release of the contracts for exchange, until he got an answer from Mr Huang that suited him. He threatened Mr Huang that he would withhold the issue of the contracts unless he got his way. He held loss of the deposit over the Huangs. He also threatened, in the owner's name, to exclude Ms Wu from the purchase.
Mr Petkovski's substantial power of threat was demonstrated within the month. After the conversations in November 2010, Mr Petkovski and Ms Wu agreed that an unnamed buyer related to Mr Petkovski would purchase Lot 4 (No. 51) and Lot 3 (No. 53).
By late February 2011, Ms Wu informed Mr Huang she did not wish to proceed with the purchase of any lot. Her withdrawal was itself the product of Mr Petkovski's pressure.
Mr Petkovski then increased his demands. He wanted one more property, Ms Wu's last property, this time for Ms Elfes. In order to get it, Mr Petkovski again threatened Mr Huang in January 2011 with not issuing any contracts and with loss of his deposit unless he abandoned any claim to Ms Wu's second property and signed the Trust Deeds.
Mr Petkovski's actions and statements prior to 10 March 2011 made Mr Huang (and through him, Mrs Huang) believe that if they wished to purchase any lots and not risk losing the deposit, they had no choice but to execute the Trust Deeds in respect of Lot 1 (No. 57), Lot 3 (No. 53) and Lot 4 (No. 51).
On 10 March 2011, Mr Petkovski caused Mr and Mrs Huang to execute the three Trust Deeds. The Trust Deeds were wholly improvident transactions from the Huangs' perspective. Put simply, they gifted the whole of the benefit of these three lots in the subdivision to the Petkovski parties. They show every sign of being the product of pressure in which the Huangs' interests were wholly suppressed. They required the Huangs to enter the Option Agreements, obey the directions of the Beneficiaries, pay the option fees, fund the subdivision and then seek recoupment from the Beneficiaries.
Mr and Mrs Huang derived no financial reward for any of these obligations. Moreover, they were financially exposed if any of the beneficiaries failed to honour their indemnities, although they could ultimately perhaps have had recourse up to the limit of the value of trust assets to recoup potential losses.
The Trust Deeds were improvident from the Huangs' perspective in another way. One statement Mr Petkovski made on 24 February 2011 to Mr Huang, when he insisted that Mr Huang buy three properties on trust for him and the Petkovski parties, was "there is no problem with them paying their money because I will guarantee it". But the ultimate form of the Trust Deeds offered no such guarantee. Mr Ng did not appear to notice this deficiency and Mr and Mrs Huang were not warned about it. This left the Huangs dependent upon the solvency of the other Petkovski parties for initial reimbursement without having to sue for recoupment out of the value of the trust property under their right of indemnity as a trustee.
The cross-defendants (other than Mr Petkovski) were also knowingly concerned in his unconscionable conduct. Mr Petkovski arranged the Trust Deeds for all the beneficiaries. Those beneficiaries were well aware that they were relations either of Mr Cochineas or Mr Petkovski. They each signed the Trust Deeds. They would have known from the very terms of the Trust Deeds that Mr and Mrs Huang were apparently gifting these properties to them for no consideration, which in turn would have raised for each of the beneficiaries the question why the Huangs had agreed to enter into such improvident transactions for their benefit. Any enquiry on their part to Mr Petkovski would have revealed more. And given their closeness to Mr Petkovski and Mr Cochineas, it is highly likely, in my view, that they knew that Tome Bros were the vendor's agents on the sale of the Watkin Street property.

[41]

Analysis of the Huangs' Claims - Contravention of the ACL, s 18

In November 2011, the Modfied Development Consent altered the boundaries of the proposed subdivided lots from the Watkin Street property (Rockdale Council development approval DA/263).
The Option Agreements Mr and Mrs Huang entered on 16 March 2011 annexed agreements for the sale of the Watkin Street property to be exchanged on the exercise of the options. These annexed contracts defined the land to be conveyed by reference to the original unamended boundaries in DA/263 from March 2010.
From his involvement in subdivision works and his conversations with Mr Fandakis, I infer Mr Petkovski knew that the subdivision boundaries had been amended by the Modified Development Consent. He also knew that the Option Agreements annexed the unamended DA/263.
But Mr Petkovski did not inform Mr Huang that the subdivision was finally registered on 5 April 2012, amending the boundaries of the Lots.
Mr Petkovski also knew that Mr Huang was unaware that the subdivisional boundaries had been amended through the Modified Development Consent. If Mr Huang had been aware of the November 2011 amendment he would have raised the issue Mr Petkovski, either directly or through Mr Ng. This can be inferred from his disquiet when he did find out later about the amendments.
The Huangs allege that Mr Petkovski, by his silence, engaged in conduct in contravention of ACL, s 18.
The alleged misleading or deceptive conduct can only arise after the Modified Development Consent in November 2011. This post-dates the Trust Deeds and the Option Agreements. This misleading or deceptive conduct, even if established, could not be a basis for setting aside the Trust Deeds. In this sense, the ACL, s 18 claim does not overlap with the unconscionable conduct and economic duress claims, which are primarily directed at the Trust Deeds.
It can be inferred against Mr Petkovski that he engaged in misleading or deceptive conduct. He must have assumed that the Huangs were proceeding without knowledge of the Modified Development Consent because Mr Petkovski had received no enquiry from them about it, something which he could reasonably have expected had they become aware of the boundary changes.
This was a situation where, in all the circumstances, Mr Petkovski had a duty to speak. The duty arose in part because of his knowledge of the Huangs' high dependence upon him for information, advice and opportunities, a dependence which transcended even their own relationship with Mr Ng. He could readily have assumed that if the Huangs had not found out about the boundary change through him, that they had not found out through anyone else, including Mr Ng, who may perhaps not have noticed the changes. And as the next part of these reasons in relation to the trespass claims shows, the boundary changes could be foreseen by any reasonable person in Mr Petkovski's position to have a substantial practical effect upon the operation of the easements in the proposed subdivision and upon vehicular access in the vicinity of the amended boundaries.
Here, Mr Petkovski neither spoke, nor made the position clear to Mr and Mrs Huang. In those circumstances, in my view, he engaged in misleading or deceptive conduct in contravention of ACL, s 18.
It is not obvious that the cross-defendants (other than Mr Petkovski) participated in this misleading or deceptive conduct. If this is asserted on behalf of the Huangs, the issue can be dealt with at the damages and relief hearing.
But the next question is whether this contravention caused any loss to the Huangs. To determine that, it is necessary to examine the transactions in which the Huangs entered after this misleading or deceptive conduct.
On 8 May 2012, Mr Morgan sent to Mr and Mrs Huang's solicitors six contracts for sale in respect of Lots 1 to 6 in DP1/536641, executed by Pangani, all with Mr and Mrs Huang as purchasers.
After intervening correspondence, which revealed the identity of Mr Petkovski and the Petkovski parties to Pangani on 29 May 2014, Mr and Mrs Huang executed the three Rescission Deeds for the sale of Lot 1 (No. 57), Lot 3 (No. 53) and Lot 4 (No. 51). After that, Pangani entered into contracts for sale of these lots with Mr Petkovski and the Petkovski parties.
What would have happened if the misleading conduct had not occurred? If the amendments to the boundaries had been revealed after the Modified Development Consent in November 2011, Mr Huang's conduct strongly suggests that he would not have abandoned the purchase of any part of the Watkin Street property on this ground. He was deeply attracted to the potential profits that might be deprived from this transaction. And he had a moral commitment to Ms Wu, who had herself already shown considerable interest in the purchase. In my view, he would have proceeded but would have sought to obtain full compensation for the boundary change, were it available to him legally. What compensation may have been available to him is a question that has not yet been explored in the proceedings. It can be dealt with in the possible damages and relief hearing.

[42]

The Huangs' Contentions Based on Barnes v Addy Principles

Mr and Mrs Huang also argued in submissions that both limbs of Barnes v Addy (1874) LR 9 Ch App 244 apply in the present case to attach liability to all the cross-defendants at the suit of the cross-claimants.
The relevant principles are well known. Responsibility as a constructive trustee may be extended in equity to those who are not properly trustees but were found (per Lord Selborne at p 251) "either making themselves trustees de son tort, or actively participating in any fraudulent conduct of the trustee to the injury of the cestui que trust". The first limb of the rule applies to receivers of trust property and the second limb to those who participate in the dishonest conduct of a trustee. Both limbs apply to defaulting fiduciaries as well as trustees: Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373; [1975] HCA 8 ("Consul") at 397 and Hospital Products Ltd v United States Surgical Corporation, Surgeons Choice (1984) 156 CLR 41; [1984] HCA 64.
One question would arise whether the cross-defendants "received" trust property. Receiving trust property within the first limb of the rule goes beyond obtaining either physical possession of, or an absolute interest in, trust property. It includes any interest, including a security interest: Carl Zeiss Stiftung v Herbert Smith & Co [No 2] [1969] 2 Ch 276 at 290. Under the first limb, it is unnecessary to establish that the transfer of the trust property stemmed from dishonest conduct by the transferor; it need only be established that the transferee had notice that the property was trust property and that it was being misapplied: Polly Peck International PLC v Nadir (No. 2) [1992] 4 All ER 769 at 777.
These principles could potentially be applied a claim to be brought by the vendor, Pangani. On the facts already found, each of the Petkovski parties had notice of circumstances under the first limb in Barnes v Addy that the properties they received were being misapplied by the vendor's fiduciary agent. That inference arises from their knowledge that Mr Cochineas and Mr Petkovski were the agents for the vendors and that a trust structure was being set up which had no obvious purpose other than, at least temporarily, to conceal their identity as purchasers from the vendors.
But whether such principles could possibly apply as between the Huangs and the Petkovski parties is doubtful. The matter was not adequately developed in submissions. Whilst the Court has found that Mr Petkovski engaged in unconscionable conduct in relation to the Huangs, he did not owe the Huangs any fiduciary duty. His employer, Tome Bros, owed that duty solely to the vendor, Pangani. It is difficult to see how the Huangs could mount any Barnes v Addy case arising out of Mr Petkovski's primary conduct as agent dealing with Pangani's property. With these preliminary observations, whether any relief is available based on either limb of Barnes v Addy can be left to a later relief hearing.

[43]

Damages and Relief Hearing

The Court has found that Mr Petkovski engaged in unconscionable conduct and applied illegitimate pressure amounting to economic duress to the Huangs, causing their entry into the Trust Deeds and then the Option Agreements to acquire three lots of the Watkin Street property (Lot 1 (No. 57), Lot 3 (No. 53), and Lot 4 (No. 51)) on disadvantageous terms, requiring their transfer to the Petkovski parties.
Mr and Mrs Huang say that, as a result, they lost the opportunity to purchase the Watkin Street property as a whole, or as subdivided into six lots.
Had the unconscionable conduct not occurred, the most likely alternative scenario is one in which Mr Petkovski did not contravene PSBA Act, s 49 and no Petkovski parties bid for the Watkin Street property. There is no evidence they would have done so. Indeed, the terms of the Trust Deeds suggest their only interest in these properties was to access some of the lots without increasing their price beyond what the Huangs were paying.
The Court infers that Mr Huang could have purchased Lot 1 (No. 57) because he had cash in the bank as at 29 June 2011 of some $324,000. This would not have been a difficult acquisition for him. The only real question in the case whether he could have purchased the properties that Ms Wu was originally going to take.
The Court infers that, without the unconscionable conduct, Mr and Mrs Huang would have become the purchasers of at least four of the six lots in DP1/536641; all six lots would have been purchased from Pangani at the price of $3.15 million; Mr Huang and Ms Wu would have become the registered proprietors of all six lots from July 2012 onwards; that if Ms Wu had not proceeded to purchase her two lots, the Huangs would, in those circumstances, have acquired all six lots from July 2012; and Mr and Mrs Huang had the financial capacity to buy all three remaining properties of the Watkin Street property at $525,000 each.
Without Mr Petkovski's unconscionable conduct, it is probable that Ms Wu would have purchased her two lots. This counter factual needs a little explanation. Ms Wu's abandoning of the two properties that she and Mr Huang had agreed that she could have is wholly to be explained by Mr Petkovski's pressure. If it be assumed that Mr Petkovski did not press his scheme to purchase some of the properties behind the back of the vendor, then there would be no reason for him to apply any pressure to Ms Wu. And she is likely to have been the purchaser of two of the lots.
Ms Wu had the capacity to purchase the other two lots. She said under cross-examination that she went to Westpac and obtained a loan to acquire the two lots in her name without difficulty. The Court accepts that evidence.
But Ms Wu was always obtaining her lots as a result of Mr Huang's goodwill. There was no formal legally binding agreement between Ms Wu and Mr and Mrs Huang. He was clearly the gateway through which her purchase would proceed. But there was a high probability, in my view, having seen Ms Wu, that it would have proceeded in her name.
There is, of course, an ill-defined possibility that she may not have proceeded, in which case, in my view, it is certain that Mr Huang would then have taken up these two lots for himself and his wife. How this counter factual unfolds in terms of possible damages is a matter for the damages and relief hearing.
On the basis of these causal findings, each of Mr and Mrs Huang will seek to assess ACL, s 236 damages and equitable compensation, resulting from the established contraventions of ACL, s 20.
What is the correct measure of damages for this identified loss to the Huangs will become the subject of a separate damages hearing, which may include, for example, the adducing of expert evidence. The Court will make directions to facilitate the conduct of that hearing.
Such a damages and relief hearing will also need to consider whether any monies are due to the Huangs under the Trust Deeds. Each Trust Deed, in clause 2, provided that the beneficiary or beneficiaries would pay purchase and other monies to Mr and Mrs Huang. Each Trust Deed also provided in clause 3 that the beneficiary, or beneficiaries, would indemnify Mr and Mrs Huang for all expenses and costs incurred, as a result entering into an option or a contract to buy the trust property.
Mr Petkovski has paid some monies to Mr Huang after entry into the Trust Deeds. But the Huangs claim they have not been paid their full entitlements under the Trust Deeds. This is another matter for the damages and relief hearing. At such a hearing, the Court may also have to consider whether or not such monies may be claimed under the Trust Deeds in addition to equitable compensation or ACL, s 236 damages for entry into the Trust Deeds and the option agreements.

[44]

Referrals of Conduct Identified in these Proceedings

The Court's findings also raise questions as to whether the conduct of some professional persons mentioned in these reasons should be referred for further investigation to other external authorities. In my view, the conduct of three persons should be so referred: Mr Petkovski, Mr Cochineas and Mr Ng.
If, in civil proceedings, the Court ignores conduct, established on the evidence, which may also potentially be unlawful, the Court may appear to condone contraventions of the law. And the conduct of legal practitioners which at least raises a question of unsatisfactory professional conduct should also generally be referred to their appropriate professional body.
The Court is conscious that the individuals the subject of this referral have not given evidence and have not had any opportunity to answer the questions raised in this judgment about their conduct. But others such as Mr Petkovski are well aware of and participated in these proceedings. This referral does not itself amount either to a finding of criminal or other unlawful conduct, or of professional delinquency, on the part of any of these persons. All the referral means is that there is a basis for further investigation of their conduct.
The Court has decided to refer this judgment to the Real Estate Institute of New South Wales ("REINSW") which has supervisory jurisdiction over Mr Petkovski and Mr Cochineas. The REINSW will be in a position to investigate whether there has been a breach of PSBA Act, s 49(2) or any other misconduct on their part that may affect licenses they hold under the PSBA Act. The facts, once investigated, may possibly put a different complexion on their conduct. But further inquiry is warranted.
The Court has also decided to refer Mr Ng to the Law Society of New South Wales. The Court's reasons for decision and particularly the evidence of Mr Huang at least raise grounds to investigate whether or not he may have engaged in unsatisfactory professional conduct. Whether or not there is a basis to so conclude, when all the facts are known, many of which are not before this Court, is a matter for investigation and on which this Court can presently make no judgment.

[48]

Factual Background

On 24 March 2010, by notice given to Mr Fandakis, Rockdale Council approved the development application to subdivide the Watkin Street property (lodged by Mr Farmakis on behalf of Pangani) into six Torrens Title lots.
As part of the subdivisional works during early 2011 and prior to the registration of the subdivision on 5 April 2012, a sewer pipe was laid to services the main residence on Lot 1 (No. 57) ("the 2011 sewer pipe"). This pipe is depicted on a sewerage service diagram dated 12 May 2011, so it was probably laid before that date.
Both parties retained expert surveyors, who engaged in a conclave and prepared a joint report dated 11 August 2017 (Exhibit A). Those experts, Mr Michael Morris (retained by the plaintiffs) and Mr Scott Murray (retained by the Huangs), gave concurrent evidence on 15 August 2017 prior to the scheduled commencement of the hearing.
The following (figure 2) is the diagram which appears as Annexure A to the experts' joint report: Figure 2
The experts were asked about the shaded pipe which appears at the top of this diagram, below the words "CENTRE OF CAP 0.4 OVER BDY". They agreed that the shaded pipe is the sewer line servicing the residence on Lot 1 (No. 57). Mr Murray described this as the pipe that was installed at the time of subdivision, and agreed that it remained an active sewer line. Mr Morris clarified that while he did not test the line personally, he suspected that it remained active. Both experts agreed that in respect of this shaded pipe, there is no easement for services burdening Lot 2 (No. 55) in favour of Lot 1 (No. 57).
It is clear from the diagram, and especially from the encircled magnified inset, that the shaded pipe (the 2011 sewer pipe) is largely laid on Lot 2 (No. 55).
As of 5 April 2012, Pangani was the registered proprietor of both Lots 1 (No. 57) and 2 (No. 55). The plaintiffs and the Huangs did not become the owners of Lots 1 (No. 57) and 2 (No. 55), respectively, until settlement took place on 29 June 2012.

[51]

Determination

The joint expert evidence makes clear that the 2011 sewer pipe, which services the main residence on Lot 1 (No. 57), is largely located on Lot 2 (No. 55). No relevant easement presently accommodates it. The plaintiffs do not dispute that there is an encroachment onto the Huangs' land.
The relevant principles may be shortly stated. An action for trespass to land will lie where there is an "unjustified entry directly by a person on land in the possession of another, which is carried out either intentionally or negligently", even though there is no damage caused thereby: Halsbury's Laws of Australia at [415-480]. Trespass to land includes the physical intrusion onto land by tangible objects: see Break Fast Investments Pty Ltd v PCH Melbourne Pty Ltd (2007) 20 VR 311; [2007] VSCA 311. It is well-established that the tort of trespass is actionable per se, that is, without evidence of actual damage.
It is clear that there was no trespass at the time when the 2011 sewer pipe was constructed and installed. The 2011 sewer pipe was placed on Lot 2 (No. 55) before the Land was subdivided, when Pangani owned the entire property. If one owns both Redacre and Whiteacre and constructs work on Redacre which encroaches on the boundary of Whiteacre, there is no trespass: see XR Property Developments Pty Ltd v Denning Real Estate Pty Ltd [2015] NSWSC 1937 at [18]-[19] per Young AJA, referring there to Billiet v The Commercial Bank of Australasia Limited [1906] SALR 193 (see at 200-202 [11]-[13] per Way CJ) and Boed Pty Ltd v Seymour (1989) 15 NSWLR 715 (see at 718 per Bryson J).
It is not controversial that failure to remove a structure or object placed on another's land constitutes an actionable wrong; that there is a "continuing trespass" as long as the object remains; and that on account of such a trespass, a subsequent transferee of the land may sue: Fleming's The Law of Torts at 53 [3.40]. This analysis assumes that there was an initial trespass.
But the 2011 sewer pipe was placed upon Lot 2 (No. 55) with Pangani's consent, as the owner of both Lots 1 (No. 57) and 2 (No. 55). And the Huangs purchased Lot 2 (No. 55) in that state, without taking any steps at that point to negate or revoke that prior consent. In those circumstances, there was an implied licence for the maintenance of the 2011 sewer pipe upon Lot 2 (No. 55).
The grant of a licence may be implied by conduct, and is determined objectively, as a question of fact: Halliday v Nevill (1984) 155 CLR 1 at 6-7 per Gibbs CJ, Mason, Wilson and Deane JJ; [1984] HCA 80; see also Lord v McMahon [2015] NSWSC 1619 at [145]-[147]. The Huangs' conduct in purchasing Lot 2 (No. 55) with the 2011 sewer pipe already in place and thereafter failing to do anything to object to that situation, implied a licence in favour of the owners of Lot 1 (No. 57), at least up until the commencement of the Cross Claim in these proceedings.
If a structure was initially placed upon a plaintiff's land with consent, subsequent termination of an implied licence creates a duty to remove it, and a continuing trespass is committed by the defendant's failure to do so within a reasonable time: Konskier v B Goodman Ltd [1928] 1 KB 421 (see at 426-427 per Scrutton LJ, 428 per Sargant LJ); see also Lord v McMahon at [152]-[154]; Mir Bros Trading Co Pty Ltd v Cavasinni Constructions Pty Ltd [2015] NSWSC 421 at [77].
That is the applicable analysis in this case. The Huangs have now, by amendment of the Cross Claim during the course of the hearing, terminated the licence permitting the maintenance of the 2011 sewer pipe upon Lot 2 (No. 55). That termination imposes a duty upon the plaintiffs to remove the pipe from Lot 2 (No. 55) within a reasonable time.
In summary, there has been no past trespass by the placement and maintenance of the 2011 sewer pipe on Lot 2 (No. 55). As to the future, the Huangs proposed two solutions: either the grant of an easement for services pursuant to the Conveyancing Aci, s 88K(4) or the grant of a licence to the plaintiffs to enter upon Lot 2 (No. 55) for the purposes of removing the 2011 sewer pipe so that it could be located in its entirety upon Lot 1 (No. 57).
The plaintiffs do not accept that an easement for services is reasonably necessary, and say that they should be granted a licence to enter upon Lot 2 (No. 55) only to the extent required to remove the 2011 sewer pipe and relocate it upon Lot 1 (No. 57). The Huangs consent to granting such a licence, but seek compensation, arguing that if the plaintiffs enter upon Lot 2 (No. 55) with a licence to dig up the existing sewer pipe and relocate it, that would be a compensable trespass.
However, there has been no trespass, and there will not be any trespass unless and until the plaintiffs fail to remove the 2011 sewer pipe within a reasonable time. The Court is prepared to order that the Huangs grant the necessary licence to permit the plaintiffs to do so. The plaintiffs will bear the cost of the removal and relocation of the 2011 sewer pipe. But the Huangs are not separately entitled to compensation in exchange for permitting the plaintiffs to remove the very encroachment of which complaint is made.
The precise orders to be made consequent upon these findings and conclusions can be dealt with in the damages and relief hearing if they can not otherwise be agreed between these parties.

[53]

Factual Background

On 15 January 2014, the plaintiffs as owners of Lot 1 (No. 57), applied to the Rockdale Council for development approval to construct a single storey secondary dwelling (a 'granny flat') and garage to the rear of Lot 1 (No. 57) (DA 2014/218). On the same date, the owner of Lot 4 (No. 51) applied for approval to carry out a similar development on that property (DA 2014/219).
On 21 March 2014, Mr Petkovski entered into a construction management agreement with Mr Fandakis to carry out on Lot 1 (No. 57) the work the subject of the development application. The Huangs' allege that this agreement was falsified. That need not be considered because Mr Fandakis' role in supervising the granny flat construction is not in question. Also on 21 March 2014, Mr Petkovski, for the owner of Lot 4 (No. 51), entered into a construction management agreement with Mr Fandakis to carry out the works associated with DA 2014/219 on Lot 4 (No. 51) (in the same terms as the agreement regarding Lot 1 (No. 57)).
On 1 April 2014, the Council approved the development on Lot 1 (No. 57) (DA 2014/218), subject to both general and specific conditions. On 2 April 2014, the Council approved the development on Lot 4 (No. 51) (DA 2014/219), again subject to both general and specific conditions.
On 2 July 2014, a construction certificate for the work on Lot 1 (No. 57) was issued, with plans for work to commence on 5 July 2014.
The allegations of trespass by the placement of bricks and other debris are best analysed by reference to the photographs in evidence of the material in question.
Photographs A, D and G in Exhibit 1 were taken by Mr Huang on 9 October 2014, 5 November 2014, and 20 November 2014 respectively. They are described as depicting the removal of the fence between Lots 1 (No. 57) and 2 (No. 55), and excavator track marks on Lot 2 (No. 55) (as well as debris on Lot 2 (No. 55), in the case of Photograph A). The Court accepts that description as accurate. Similarly, Photographs H and I, taken by Mr Huang on 28 November 2014, are described as depicting the removal of the dividing fence and excavator marks and/or debris on Lot 2 (No. 55). The Court accepts that description as accurate. Photograph A (figure 3) is below: Figure 3
Photographs B, E and J in Exhibit 1 were taken by Mr Huang on 4 November 2014, 5 November 2014 and 28 November 2014 respectively. They are said to depict soil from Lot 1 (No. 57) deposited on the carriageway and on Lot 2 (No. 55) (the carriageway claim is dealt with from [497] below, in conjunction with the claims relating to the 2014 sewer pipe). The Court accepts that description as accurate. Photograph B (figure 4) is below: Figure 4
Photograph N in Exhibit 1 (figure 5 below) was also taken by Mr Huang, on 31 July 2016. The Huangs submit that it depicts the construction of a granny flat at the rear of Lot 1 (No. 57) and the presence of debris on Lot 2 (No. 55). The Court accepts that description as accurate, at least so far as the debris is concerned. It is not possible to infer by looking at it that it depicts the construction of anything. Figure 5
Photographs O and P in Exhibit 1 (figures 6 and 7 below) were taken by Mr Huang on 11 August and 12 August 2016 respectively. These photographs are described as depicting the construction of a new fence between Lots 4 (No. 51) and 5 (No. 49), with the construction encroaching onto Lot 5 (No. 49). The Court accepts that description as accurate. Figure 6 Figure 7

[56]

Determination

Several difficulties confront the Court in resolving the various trespass claims in this category.
First, the discrepancies between the Huangs' pleaded case and their case as it evolved at trial are a matter of concern. The trespass claim with respect to the building works, as pleaded, relates to more than ten piles of bricks which Mr Petkovski is alleged to have laid upon Lot 2 (No. 55) on or around 30 September 2014. It is said that this incident caused Mr Huang's tenants to move out. However, the Huangs' submissions focussed instead on a bobcat excavator allegedly driven across Lot 2 (No. 55), piles of soil and debris left on Lot 2 (No. 55), and encroachment of a newly constructed fence onto another property altogether, Lot 5 (No. 49).
The affidavit evidence filed in the Huangs' case also refers to further alleged trespasses (however as these allegations were not pressed in submissions, the Court has not addressed them). The plaintiffs' responses are put at a level of generality sufficient to embrace these new allegations. They say that Mr Huang consented to interference with his properties, both Lots 2 (No. 55) and 5 (No. 49) during the construction of the granny flats. But that circumstance does not overcome all of the problems consequent upon the Huangs' failure properly to plead and particularise the alleged trespasses.
Second, the evidence is limited and must be treated with circumspection. Some concern exists about Mr Huang's credit in this area of his testimony. Caution is required when relying upon photographic evidence: Goode v Angland [2017] NSWCA 311 at [84]-[114] per Beazley P, Meagher and Leeming JJA agreeing). Although the plaintiffs did not call Mr Petkovski, and left uncontested much of the evidence in relation to these trespass claims, the Huangs still bear the onus of making out those claims on the balance of probabilities.
Third, the person who was in possession of Lot 2 (No. 55) at the relevant time was Mr Huang's tenant, Ms Jie Jie Chen. In an affidavit affirmed on 11 August 2017, Ms Chen deposes that she was previously Mr Huang's tenant, leasing Lot 2 (No. 55) under a standard form residential tenancy agreement, and that she ended that agreement in September 2014 (at [9]). The Huangs' claim in trespass in respect of Lot 2 (No. 55) is therefore not a claim for interference with their use and enjoyment of possession of the land, but rather, a claim for consequential losses said to flow from the alleged trespasses. Although trespass is actionable per se, reflecting its role in protecting a plaintiff's interest in the exclusive use and enjoyment of their land, the Huangs' action in trespass, as landlords out of possession, will only lie if they can demonstrate loss: see, for example, Rodrigues v Ufton (1894) 20 VLR 539; Loxton v Waterhouse (1891) 7 WN (NSW) 98.
Bearing these difficulties in mind, the pleaded trespass, relates to the bricks allegedly laid upon Lot 2 (No. 55) on or around 30 September 2014. The evidence does support an inference that some bricks were probably placed upon Lot 2 (No. 55) at some time during September 2014.
Ms Chen's evidence is that during September 2014, when the owners of Lot 1 (No. 57) started to build their granny flat, "pallets of bricks were left on our backyard without my consent" (at [6]). She deposes that she complained to her landlord, Mr Huang. Ms Chen was not required for cross-examination and her evidence was admitted without objection. It should be accepted.
Moreover, Ms Chen's evidence is supported by Mr Huang's evidence on this same subject, which was unchallenged during his cross-examination. In his affidavit affirmed on 26 October 2015, Mr Huang deposes (at [3]) that in about September 2014, his tenant complained to him and said that Mr Petkovski "put lots of bricks and sand in the backyard and the right of carriageway".
And Mr Huang wrote a letter to the plaintiffs on 21 April 2015, in which he more or less contemporaneously confirms this evidence: "When the granny flat was being built bricks were put on the lawn on 55 Watkin Street, my property. I helped Mr Petkovski move the bricks to the back of my property. I spent two days moving the bricks. For one week I felt body pain. The tenant was not happy about the bricks being on the property and moved away from the property. I lost six weeks rent."
The plaintiffs refer to this letter as indicating that, by his conduct in assisting Mr Petkovski to "make the granny flat" and move the bricks to the rear of Lot 2 (No. 55), Mr Huang impliedly consented to any interference with his properties.
This argument fails for two reasons. First, the relevant consent required would be that of Ms Chen, the tenant. She deposes to the absence of any consent from her. Secondly, even if Mr Huang's consent were relevant, the fact that he subsequently moved the bricks to the rear of the property does not establish his consent to their placement upon Lot 2 (No. 55) in the first place. His letter of complaint and his evidence that the workers were operating without his permission make clear that he did not consent to the interference with Lot 2 (No. 55).
It is not certain who placed the bricks upon Lot 2 (No. 55). Ms Chen refers generally to the owners of Lot 1 (No. 57). Mr Huang's account of his conversation with Ms Chen suggests that it was specifically Mr Petkovski who did so. As the latter proposition was not challenged in cross-examination, and as the plaintiffs' only response to the trespass claim relating to the bricks has been to allege that Mr Huang consented to any interference, I accept that the trespassory conduct can, on the balance of probabilities, be attributed to Mr Petkovski. The Huangs have therefore established a trespass by the placement of bricks upon Lot 2 (No. 55).
In relation to the bobcat excavator allegedly driven across Lot 2 (No. 55), Mr Fandakis confirmed in oral evidence that he supervised building works on Lot 1 (No. 57) between April and December 2014. I accept this evidence. He agreed in cross-examination that Photograph A in Exhibit 1 (pictured above) depicts the works being carried out on Lot 1 (No. 57) under his supervision, and that the track marks displayed in that photograph are located on Lot 2 (No. 55). He could not say "for certain" whether those track marks were put there by the bobcat excavator displayed in the photograph, but said that "they could well be". Ms Chen deposes to "cars accessing our driveway and backyard without my consent" (at [6]). But there are no other references in either her or Mr Huang's evidence to vehicles being driven across Lot 2 (No. 55).
The Huangs argued that driving a bobcat across Lot 2 (No. 55) was a serious and intentional trespass by Mr Fandakis. The evidence does not go that far. The photographs, of themselves, do not enable the Court to infer the origin of the track marks appearing upon Lot 2 (No. 55), still less that there was an intentional and direct interference with the Huangs' land by Mr Fandakis or someone under his direction driving a bobcat excavator across the property, for which the plaintiffs could then be held liable.
In relation to the Huangs' more general allegation of debris and material being placed upon Lot 2 (No. 55), the evidence does permit the inference that some debris and material, particularly dirt, was probably placed upon Lot 2 (No. 55) during the construction of the granny flat on Lot 1 (No. 57). In his account of the September 2014 conversation with Ms Chen, Mr Huang attributes to her words to the effect of "[t]he workers put lots of dirt in the backyard that I couldn't even hang my laundries in the backyard [sic]" (at [3]). In cross-examination, Mr Tsoutsouras, the plumber performing work associated with the granny flat constructions agreed that the dirt on the right-hand side of Photograph B in Exhibit 1 (the "overburden") ended up there as a consequence of the excavation of the trench displayed in the photograph, and that he dug out that trench. In addition to Photograph B (pictured above), a number of other photographs in Exhibit 1 (Photographs A, D, E, G, H, I and N) appear to show debris and dirt placed upon Lot 2 (No. 55).
However, one problem with these allegations being unpleaded is that the basis of the plaintiffs' liability for the placement of dirt and other debris on Lot 2 (No. 55), presumably by various construction workers, including Mr Tsoutsouras, is left unclear. Neither the plaintiffs' direct, or any vicarious, liability for trespass has been established.
If it is assumed that the plaintiffs' liability is direct, and lies in failing to take steps to remove what has become a continuing trespass, it is difficult to see what steps they should take to remove dirt which would by now have compacted and thus would have become part of the land of Lot 2 (No. 55): as to this issue, see my judgment in Lord v McMahon at [156]-[162]. In relation to other debris, the photographs only indicate the presence of some debris at particular points in time. Photograph N, for example (pictured above]), which displays the most substantial rubbish, was taken on 31 July 2016. In the absence of any supporting evidence, it is impossible to infer from that photograph when that debris appeared on Lot 2 (No. 55) and for what period it has remained there.
If, on the other hand, the plaintiffs' liability is said to be vicarious, based on their direction or control over independent contractors, something more exceptional would be needed to impose liability. By way of comparison, the authors of Fleming's The Law of Torts point out (at 466-467 [19.200]) that the Court refused to impose vicarious liability on the owners of land in Torette House Pty Ltd v Berkman (1940) 62 CLR 637; [1940] HCA 1 when a plumber tampered with a stopcock, flooding adjacent premises, or in Stoneman v Lyons (1975) 133 CLR 550; [1975] HCA 59, when a building contractor caused a subsidence on the neighbour's land.
Finally, as to the alleged trespass onto Lot 5 (No. 49), there was no evidence of this beyond Photographs O and P in Exhibit 1. This claim suffers from similar problems to those outlined above in establishing the liability of the owners of Lot 4 (No. 51). In those circumstances, the Huangs have not made good any of the further unpleaded allegations of trespass.
I turn then to what relief, if any, the Huangs are entitled to in consequence of the Court's findings on these claims. As landlords out of possession, the Huangs' claim for consequential losses flowing from trespass to land depends on whether they can prove those losses. In circumstances where, as mentioned, Ms Chen was not required for cross-examination and Mr Huang's evidence on these points was not challenged in cross-examination, their evidence on this issue should be accepted.
Ms Chen's evidence is as follows (at [4]-[10] of her affidavit): "In about September 2014, the owner of [Lot 1] started to build their granny flat. The persons carrying out the work never approached me to discuss about how they would affect us during the construction. The following events happened during September 2014 time: A tree on our backyard, close but not adjacent to the border of the two properties (about 0.5 to 1 meter from the fence), was cut down by unknown personnel and left a pile of tree mulch on our backyard without my consent; Part of the colourbond fence between the two premises was removed without my consent; Pallets of bricks were left on our backyard without my consent; Noise, dust and unauthorised persons and cars accessing our driveway and backyard without my consent. The backyard was basically unusable and we also felt unsafe living there. I made complaint to my landlord. In the end, I ended the fixed term lease agreement early in September 2014. If these events had not happened we would have continued the tenancy."
Mr Huang's evidence corroborates this. He deposes (in his affidavit affirmed 26 October 2015, at [3]) that Ms Chen complained to him in September 2014 in words to the effect of: "I want to move out, your neighbour Luben removed your fence, and put lots of bricks and sand in the backyard and the right of carriageway. The workers put lots of dirt in the backyard that I couldn't even hang my laundries in the backyard."
Mr Huang explains that he then said to Mr Petkovski, "My tenants are not happy about your constructions, and they wanted to move out" (at [4]). Mr Huang states (at [5]-[8]) that: "Luben and his workers kept working on the right of carriageway without my permission. Annexed hereto and marked 1 is a true copy of the photo of the removal of the fence and the water tank that occupied my land. On 30 September 2014, my tenant moved out. I asked Luben "My tenants have moved out unhapply [sic] because of your plumbing work." Luben … said, "It is none of my business." I have no other options but rent out my house again after 3 weeks. I couldn't rent out my house untill [sic] 20 10 2014."
In a later affidavit affirmed on 11 August 2017, Mr Huang states (at [93]) that his tenant, Jie Jie Chen, moved out in September 2014 "due to the nuisance of the construction work" on Lot 1 (No. 57). Moreover, Mr Huang's letter of 21 April 2015 states, "[t]he tenant was not happy about the bricks being on the property and moved away from the property. I lost six weeks rent".
The evidence therefore indicates, and the Court infers, that it was probably the accumulation of interferences with Ms Chen's backyard, including the placement of bricks, the removal of part of the colourbond fence (which is clearly visible in many of the photographs in Exhibit 1), and the placement of debris, which led her to end her tenancy. Mr Petkovski trespassed upon Lot 2 (No. 55) by placing pallets of bricks there, but that the pleadings and evidence are insufficient to establish the plaintiffs' liability for any of the other alleged trespasses.
Despite references in the pleadings and in parts of the evidence to a loss of six weeks' rent, Mr Huang's own evidence in his affidavit affirmed 26 October 2015 (at [8]) is that he was able to rent out his house on Lot 2 (No. 55) about three weeks after Ms Chen moved out (he refers to renting it out from 20 October 2014). It therefore appears more likely that he lost about three weeks' rent, rather than six weeks' rent.
Given my finding that a combination of factors were responsible for Ms Chen's departure, and that the plaintiffs are liable for only one of those factors (or more specifically, Mr Petkovski is liable for one of those factors), it is appropriate for Mr Petkovski to pay only part of the amount of lost rent as damages. A one-third share (that is, one week's rent) would adequately reflect my findings as to Mr Petkovski's responsibility. This will need to be quantified in the damages and relief hearing.

[58]

Factual Background

The 2014 sewer pipe is associated with the construction of the granny flat on Lot 1 (No. 57), the background to which is outlined above. It is however necessary to outline some further details concerning the right of carriageway.
As part of the process of subdividing the Land, on 28 February 2012, Mr Fandakis lodged with Land and Property Information a subdivision plan together with the necessary instrument pursuant to the Conveyancing Act, s 88B. The subdivision plan and s 88B instrument were registered on 5 April 2012. The s 88B instrument as registered created rights of carriageway and easements for services.
Relevantly, Lot 1 (No. 57) is burdened by a right of carriageway benefitting Lot 2 (No. 55). The right of carriageway is described in the registered s 88B instrument as "Right of Carriageway 1 Wide & Variable Width" with a handwritten annotation, "(LIMITED IN HEIGHT)". It is marked (A) on the plan of subdivision pictured above. In its terms, the right of carriageway provides for: "Full and free right for every person who is at any time entitled to an estate or interest in possession in the land herein indicated as the dominant tenement or any part thereof with which the right shall be capable of enjoyment, and every person authorised by that person, to go, pass and repass at all times and for all purposes with or without animals or vehicles or both to and from the said dominant tenement or any part thereof."
The construction of the granny flat on Lot 1 (No. 57) was taking place between April and December 2014 under Mr Fandakis' supervision. On 29 September 2014, Stancon Plumbing Services Pty Ltd ("Stancon") tendered by quotation to carry out the associated plumbing works at Lot 1 (No. 57). Mr Stan Tsoutsouras, a director of Stancon, was supplied with hydraulic and survey plans by Mr Fandakis, which he used to determine the scope of works and the quotation for performing the plumbing works.
On about 9 October 2014, Mr Fandakis engaged Mr Tsoutsouras to undertake the plumbing works at Lot 1 (No. 57) (as well as at Lot 4 (No. 51), where a granny flat was also being constructed. The total cost of the works was $26,500, and the works included connecting the sewer lines for both Lots 1 (No. 57) and 4 (No. 51). Stancon commenced work on Lots 1 (No. 57) and 4 (No. 51) in about late October 2014. The work included internal drainage, rough-ins, hot and cold water services to all amenities, and the laying and connection of stormwater and sewer service lines.
Mr Fandakis' evidence is that he saw the plumbers dig the trenches between Lots 1 (No. 57) and 2 (No. 55), supervised the work, and ensured that the trenches were dug within the boundary of Lot 1 (No. 57). Mr Fandakis says that in order to do this he had access to the subdivision plans and a survey diagram.
Mr Tsoutsouras states that in order to install the 2014 sewer pipe, he excavated a trench within 300 millimetres of the eastern side of the house on Lot 1 (No. 57). He states that he ensured that the trench was excavated within the boundary of Lot 1 (No. 57) according to the survey diagram which Mr Fandakis had given him prior to commencing the works. Mr Tsoutsouras states that on 5 November 2014, the 2014 sewer pipe was laid within the trench and connected to the house and granny flat.
Mr Fandakis' evidence is that on 5 November 2014, he observed that the trenches had been dug and the plastic sewer pipes had been placed into the trenches and connected to the house and granny flat. He observed that the pipes had been laid approximately 300 millimetres from the north-eastern wall of the house on Lot 1 (No. 57). Mr Fandakis deposes that Mr Tsoutsouras said to him that he was just waiting for Sydney Water to come and approve the works.
The plaintiffs allege that on that same day, 5 November 2014, Mr Huang wrongfully entered Lot 1 (No. 57) and demolished and removed the 2014 sewer pipe. The plaintiffs refer to photographs (Exhibit C), which are said to show Mr Huang cutting the sewer pipes (Photograph 1), removing the pipes from the trench (Photographs 3 and 4), and destroying them with a spade (Photograph 18), as well as showing the pipes laid across the driveway after their removal from the trench (Photograph 2).
Mr Fandakis' evidence is that, within about 30 minutes of leaving Lot 1 (No. 57) on 5 November 2014, he received a call from Mr Tsoutsouras in which he was told that all hell had broken loose and that Mr Huang had ripped all of the pipes out of the ground. Mr Fandakis deposes to a subsequent conversation between himself and Mr Huang as follows: "Mr Fandakis: Johnny, you should never have done this. This will cost you a lot of money Mr Huang: no, no, no, this is my land the pipes don't belong here. Mr Fandakis: you are making a big mistake. The pipes weren't laid on your property Mr Huang: never, this is my land."
Mr Huang disputes this conversation, and states that what occurred was: that he asked Mr Petkovski, Mr Fandakis and the other workers to fix a leaking sewer pipe; Mr Petkovski dismissed his inquiry; and so he (Mr Huang) cut the pipe in order to fix the leak. Mr Huang claims that his tenants at Lot 2 (No. 55) moved out because they could not use the right of carriageway and because of the foul smell produced by the leaking sewer pipe. This must be a reference to Mr Huang's new tenants, because Ms Chen, the previous tenant, had moved out in September 2014.
The solicitors acting for the plaintiffs sent a letter dated 10 November 2014 to the Huangs in which they state: "We are instructed that recently, during the course of our clients connecting plumbing on their property, damage was caused to the works by Mr Huang when he removed the pipes from the trench."
A letter from Mr Huang of the same date states: "The owner of 57 Watkin Street, Bexley has violated my property and is building a granny flat on my property. I have attached two photos of the construction site and where my fence has been removed and where there are construction workers on my property. There are water pipes, connected with the granny flat, being built on my property without my approval or the Council's approval. There is also an attached "Sewerage Service Diagram" that indicates the sewage of the granny flat is violating my property as it is constructed on my property. The owner of 57 Watkin Street Bexley has no permission from me to enter my property or to build a granny flat with its associated sewage pipes on my property."
Also on 10 November 2014, Mr Huang caused a Fair Trading complaint form to be prepared which refers to "sewerage plumbing pipes illegally laid from neighbours" and states: "My next door neighbour is constructing a granny flat. The sewerage plumbing pipes from their granny flat have been laid underneath my fence inside my property boundry [sic], down my driveway. The neighbour builder removed my fence so they can gain access to the building site at the back of the house. My neighbour wanted to change our property boundry [sic] so the plumbing would be on his property. My neighbour has threatened me with violence when I confronted him about the issue."
On 11 November 2014, solicitors acting for the Huangs wrote back to the plaintiffs' solicitors, as follows: "We are instructed to deny any allegation as contained in your letter. We are instructed that workmen from your clients had entered into our clients' property without consent or authority and they had caused damage to the connection to the sewer on our clients' property and at this end, our clients reserve the right to hold your client liable for costs to have the same rectified."

[59]

Submissions - The Huangs

The Huangs submit that the digging of the trench for the 2014 sewer pipe and the laying of the pipe in the trench, partially on Lot 2 (No. 55), constituted a trespass. They point out that the experts agreed in their joint report (Exhibit A) that the trench that they both observed was partly located on Lot 2 (No. 55), and concurred that the pipe (as depicted in Photograph E in Exhibit 1) is either in the same place as the trench or in the vicinity of the trench. The Huangs therefore argue that there is no doubt that the 2014 sewer pipe was partly laid on the land of Lot 2 (No. 55).
The Huangs argue that the plaintiffs have not discharged their onus of establishing that Mr Huang trespassed onto Lot 1 (No. 57) by removing the 2014 sewer pipe. They note that the experts were of the opinion, by reference to Photograph 1 in Exhibit C (figure 8 below), that Mr Huang was standing on Lot 2 (No. 55), and agreed that it was possible that the area where he was using the saw as depicted in that photograph was within the area where the trench crossed over onto the land of Lot 2 (No. 55), with both experts agreeing that it was not possible to say definitively one way or another whether that was the case. Figure 8
The Huangs submit that even if Mr Huang did trespass upon Lot 1 (No. 57) and damage the pipes as alleged, this caused no damage to the plaintiffs, for two reasons. First, it was necessary for plaintiffs to obtain a licence from Mr Huang to dig the new trench into which the 2014 sewer pipes were to be placed, as the construction of the new sewer line trespassed on Lot 2 (No. 55), as both experts agreed. Secondly, the plaintiffs have not mitigated their damages by obtaining a licence from Mr Huang, and could have connected the granny flat to the existing sewerage system that was put in place at the time of the subdivision by Mr Fandakis as project manager of that subdivision.
As to their interference claims, the Huangs note that the experts concurred that it was not possible to install a sewer pipe between Lots 1 (No. 57) and 2 (No. 55) without going through the right of carriageway, and submit that the digging of the trench, which the experts have indicated was located along the boundary of Lots 1 (No. 57) and 2 (No. 55), was plainly an interference with the right of carriageway.
The Huangs also submit that the laying of the 2014 sewer pipe to a depth of 300 millimetres was an interference with the right of carriageway, because pipes laid in trafficable areas are required by the applicable Australian Standard to be laid at a depth of 500 millimetres. The Huangs tendered a copy of Part 2 of that Standard, AS/NZS 3500.2.2015 (Exhibit 2). Clause 3.7.2 provides minimum cover for buried pipes located in areas subject to vehicular traffic, and pipes made of materials other than cast iron and ductile iron are required to be laid at a depth of 500 millimetres. Under cl 3.7.3 of the Standard, drains constructed of materials having less than the minimum cover specified in cl 3.7.2 must be "covered by at least 50 mm of overlay" and then paved with: 1. 100 mm minimum thickness of reinforced concrete, where subject to heavy vehicular loading; 2. 75 mm minimum thickness of brick or concrete paving, where subject to light vehicular traffic; or 3. 50 mm minimum thickness of brick or concrete paving, where not subject to vehicular traffic.
To support this submission, the Huangs argue that the Court should not accept the evidence of Mr Tsoutsouras and Mr Fandakis that they intended to cover the pipes with concrete to enable compliance with the Australian Standard, because: Mr Tsoutsouras did not know that there was a right of carriageway; there is no indication in the quotation prepared by Mr Tsoutsouras that the works would include laying a 100 millimetre thick reinforced concrete slab; and Mr Tsoutsouras said that the reason for laying the pipe in the driveway rather than attaching it to the different sewer works in the backyard of Lot 1 (No. 57) was to enable access to those pipes in the event of a blockage, but did not explain how access would be obtained in the event that the pipe was laid under a reinforced concrete slab. Moreover, the Huangs argue that it is "obvious" looking at the photographs that the ground work had not been prepared in anticipation for the laying of a slab.
The Huangs submit that if the rights of a person with the benefit of an easement have been interfered with, that person can take action to remove or abate the interference by way of self-help, and hence that Mr Huang in the circumstances had "every right" to remove the 2014 sewer pipe, even if it was not on his land, because it interfered with the right of carriageway.
The Huangs now consent to granting a licence to interfere with the right of carriageway and trespass onto Lot 2 (No. 55) so as to enable the 2014 sewer pipe to be laid wholly within the title of Lot 1 (No. 57), provided that the pipe is laid in compliance with the applicable Australian Standard.

[60]

Submissions - The Plaintiffs

The plaintiffs refer to photographs (Exhibit C) which depict Mr Huang cutting the 2014 sewer pipes (Photograph 1) and removing them from the trench (Photographs 3 and 4). In addition, Photograph 2 is said to show the sewer pipes laid across the driveway (after removal from the trench), while Photograph 18 is said to show Mr Huang destroying the sewer pipes with a spade. The plaintiffs note that it is clear from the placement of Mr Huang's right foot as depicted in Photograph 22 of Exhibit C that Mr Huang trespassed onto Lot 1 (No. 57).
The plaintiffs submit that the area of encroachment onto Lot 2 (No. 55) identified by the experts relates to the trench and not to the sewer pipe that was laid in it, and that there is no evidence to support the proposition that any part of the 2014 sewer pipe encroached onto Lot 2 (No. 55).
The plaintiffs reject any suggestion that Mr Huang may have been able to destroy and remove the 2014 sewer pipe without entering upon Lot 1 (No. 57) as devoid of merit, on the basis that the authorities establish that a trespassory act will be committed if there is an unauthorised interference with the property of another person (whether such property consists of land or goods). They refer to authorities recognising that trespass may take the form of removing goods from the possession of another (City Motors (1933) Pty Ltd v Southern Aerial Super Service Pty Ltd (1961) 106 CLR 477 at 483 per Dixon CJ; [1961] HCA 53); moving another's goods from one place to another (Kirk v Gregory (1876) 1 Ex D 55; Fouldes v Willoughby (1841) 8 M & W 540 at 544-545 per Abinger CB, 549 per Alderson B; (1841) 151 ER 1153); or damaging or destroying goods (In the Marriage of Michiels (1991) 103 FLR 1).
The plaintiffs note the experts' agreement that Photographs 3 and 4 in Exhibit C show the 2014 sewer pipe, property of the plaintiffs, being removed from Lot 1 (No. 57). And they also refer to Mr Tsoutsouras' identification of the person removing the sewer pipe as Mr Huang. They therefore submit that it is "difficult to see how there can be any suggestion that Mr Huang's conduct was other than deliberate and wilful".
The plaintiffs also submit that Mr Huang's contention that his conduct in removing the 2014 sewer pipe was justified as an abatement of a nuisance should be rejected. Mr Huang stated in his affidavit of 26 October 2015 that he removed the 2014 sewer pipe because it was leaking and emanating a sewage smell. The plaintiffs submit that the weight of the evidence indicates that this was not the case, referring to: 1. Mr Tsoutsouras' evidence that after Mr Huang removed the 2014 sewer pipe, he said to Mr Tsoutsouras, "this is my land and you can't lay pipes on my land"; 2. Mr Fandakis' evidence that Mr Huang said words to the effect of "this is my land and the pipes don't belong here"; 3. the Fair Trading complaint form which Mr Huang caused to be prepared on 10 November 2014, which made no reference to any leak or the smell of sewage; and 4. Mr Huang's letter of 10 November 2014, which referred to water pipes being "built on [Mr Huang's] property" and not to any leak or smell of sewage.
In the alternative, the plaintiffs say that if the Court does find that the 2014 sewer pipe created a nuisance, Mr Huang would only be justified in abating that nuisance if he could show that he did not do any "unnecessary damage" thereby, referring to Lagan Navigation Co v Lambeg Bleaching, Dyeing and Finishing Co Ltd [1927] AC 226 at 244-245 per Lord Atkinson ("Lagan Navigation"). It is submitted that abatement did not require the destruction of the 2014 sewer pipe with an electric saw and spade (as depicted in Exhibit C, Photographs 1, 18 and 22), and that a reasonable act of abatement would have involved Mr Huang doing no more than arranging for the attendance of a plumber to carry out such works as were reasonably necessary to deal with any leakage, if any such leakage existed.
In response to the Huangs' submission that the Court should not accept Mr Tsoutsouras and Mr Fandakis' evidence about compliance with the Australian Standard, the plaintiffs submit that the critical evidence given by Mr Tsoutsouras and left unchallenged was that compliance could have been achieved merely by the installation of a 100 millimetre concrete slab. Mr Tsoutsouras' evidence was that this was the only way in which the 2014 sewer pipe could have been laid, as it was not possible to lay it deeper than the existing sewer line. The plaintiffs submit that as it was possible to achieve compliance with the Australian Standard without removing and destroying the 2014 sewer pipe, Mr Huang cannot demonstrate that his conduct in doing so did not cause unnecessary damage. The plaintiffs contend that Mr Huang's conduct was not necessary for the "security of lives and property", referring to Lagan Navigation at 245, and say that it had all the indicia of "high handed and violent" conduct which Lord Atkinson rebuked in Lagan Navigation, at 246.

[61]

Determination

The Huangs' Allegation of Trespass on Lot 2 (No. 55) by The Trench and 2014 Sewer Pipe. Ultimately it was agreed between the expert surveyors that the trench within which the 2014 sewer pipe was laid was within the boundary of Lot 1 (No. 57) apart from a small encroachment onto Lot 2 (No. 55) where there is a "kink" in the boundary line towards the rear of the properties. The area of encroachment can be seen as the small triangular area in the circular diagram shown on Annexure A to the experts' joint report (pictured above).
The plaintiffs submitted that the area of encroachment identified by the experts relates to the trench and not the sewer pipe that was laid in it, and that there was no evidence to indicate that any part of the 2014 sewer pipe encroached onto Lot 2 (No. 55).
That submission is unpersuasive. Mr Tsoutsouras' evidence was that he laid the 2014 sewer pipe within the trench; Mr Fandakis' evidence is to similar effect. If the trench encroached onto Lot 2 (No. 55), the likely inference is that the sewer pipe did as well. There was therefore an encroachment, albeit a very minor one, onto Lot 2 (No. 55) by the trench and 2014 sewer pipe.
The evidence indicates that Mr Huang's tenant, Ms Chen, had vacated Lot 2 (No. 55) by the end of September 2014 and that by about three weeks later (from 20 October 2014) Mr Huang had a new tenant in possession at Lot 2 (No. 55). The 2014 sewer pipe was laid in the trench on 5 November 2014. None of the photographic evidence suggests that the trench was excavated any earlier than 20 October 2014. All of the relevant photographs post-date 20 October 2014. Any trespass by reason of the excavated trench and 2014 sewer pipe would therefore have been an interference with the tenant's use and enjoyment of Lot 2 (No. 55) and, as explained above, the Huangs' claim for trespass would depend upon establishing consequential loss affecting them as landlords.
The Huangs did not adduce any evidence from the new tenant of Lot 2 (No. 55), and the paragraph of Mr Huang's affidavit affirmed 26 October 2015 which related to that new tenant was not read at the trial. In those circumstances, there is no evidence that the Huangs as owners out of possession suffered any consequential loss flowing from the alleged trespass. This means that there is no trespass actionable by them in this respect.
In any event, further issues about the plaintiffs' liability for the encroachment would arise - again, the Huangs have not established a basis for the plaintiffs' liability in trespass, as distinct from the liability of the construction workers who excavated the trench and laid the pipes. If the claim is put on the basis of direct liability for a failure to take action to remove a continuing trespass within a reasonable period of time, an excavated trench is a physical alteration to the land which is not subsequently filled or restored to its previous condition. As Lord Denman CJ explained in Clegg v Dearden (1848) 12 QB 575; (1848) 116 ER 986 at 995, that is not a continuation of something wrongfully placed upon another's land and hence not a continuing trespass. As to the pipe itself, it can hardly be said that a reasonable time had elapsed before Mr Huang acted to remove it on the very day it was laid. The plaintiffs would not therefore be liable for failure to remove a continuing trespass.
The Huangs' Allegation of Interference With the Right of Carriageway. As Senior Counsel for the Huangs explained in closing submissions, there are two aspects to the interference claim. The first is the interference constituted by the digging up of the right of carriageway and the second is the failure to lay the 2014 sewer pipe in accordance with the applicable Australian Standard.
The parties agree that in order to be actionable, an interference with a right of carriageway must be substantial. The plaintiffs referred to Averono v Mbuzi [2005] QSC 61; [2005] ANZ ConvR 315, in which Mullins J said at [19]: "The grant of a right of way involves such access as shall be reasonable: Saggers v Brown (1981) 2 BPR 9329, 9331. In determining whether the removal of the bitumen on Easement E is actionable, the test that has to be applied is whether what the respondents have done amounts to a substantial interference with the enjoyment of the right of way: Pettey v Parsons [1914] 2 Ch 653, 652; Powell v Langdon (1944) 45 SR (NSW) 136, 139 and Saggers v Brown (1981) 2 BPR 9329, 9331."
In Averono v Mbuzi, Mullins J found that the removal of a bitumen surface from a driveway over which there was a right of way made the driveway more difficult to use, however held that as the driveway remained traversable, the removal of the bitumen did not interfere in a substantial way with enjoyment of the right of way (see at [20]).
To similar effect, the Huangs referred to Celsteel Ltd v Alton House Holdings Ltd [1985] 2 All ER 562; [1985] 1 WLR 204 at 216, where Scott J said: "It has been settled law for a long time that an interference with a private right of way is not, per se, an actionable interference. In Clifford v Hoare (1874) LR 9 CP 362 a vehicular right of way had been granted over a roadway 40 feet wide. The defendant erected a building which encroached two feet into the roadway. It was held that this encroachment did not represent an actionable interference with the right of way. The issue was treated as depending basically on the construction of the grant. What quality of enjoyment of the right of way had been intended to be granted? Lord Coleridge C.J. answered this question by saying, at p. 370: "the intention was to grant the plaintiff an easement only, the reasonable use and enjoyment of an ascertained way". Since the encroachment did not interfere with the reasonable use and enjoyment of the way, it did not represent an actionable interference. … There emerge from the three cases I have cited two criteria relevant to the question whether a particular interference with a right of way is actionable. The interference will be actionable if it is substantial. And it will not be substantial if it does not interfere with the reasonable use of the right of way."
The Huangs refer also to the summary of the applicable principles in Zieleniewski v Scheyd [2012] EWCA Civ 247 at [11], as follows: "Not every interference with a right of way is actionable. The owner of the right may only object to activities, including obstruction, which substantially interfere with the exercise of the defined right as for the time being is reasonably required by him. The question whether the owner reasonably requires to exercise his right in a particular way is to be addressed by reference to convenience, rather than necessity or even reasonable necessity. Thus, if an obstruction interferes with a particular mode of exercise of the right which is neither unreasonable nor perverse of the owner to insist upon, then the obstruction will be an actionable interference even if there remain other reasonable ways to exercise the right which many, or even most, people would prefer. It is well established that a vehicular right of way acquired by prescription does not confine the owner to enjoyment only by the types of vehicle in current use during the period when the easement was acquired."
The digging up of the carriageway in order to install the 2014 sewer pipe undoubtedly interfered with the right of carriageway. The right of carriageway in terms confers the right to "go, pass and repass" upon both the holder of the freehold estate in the land (the Huangs) and any tenant or lessee. The plaintiffs' submissions focussed on the fact that any interference was not "substantial", which in effect assumes the Huangs' entitlement to sue for interference with the right. Similarly, the plaintiffs did not dispute that they, as owners of Lot 1 (No. 57), could be held liable for any interference, even though that interference would have been caused by the work of independent contractors. The Court will proceed on that basis.
The excavation of a trench and the laying of a sewer pipe would interfere with the reasonable use of the right of way, but only until the trench was filled in, provided that the pipe was then covered or protected in such a way as to permit vehicular traffic.
That brings the Court to the issue of compliance with the Australian Standard. The Huangs submitted that the 2014 sewer pipe was not laid at sufficient depth for a trafficable area, so that it would be required to be covered with a concrete slab, and that the Court should not accept Mr Tsoutsouras and Mr Fandakis' evidence that they intended to cover the pipes with concrete to enable compliance.
Mr Fandakis' evidence which the Court accepts on this subject, indicated that he was well aware of the relevant Australian Standard and the need to comply with applicable depths and appropriate engineering solutions in areas subject to vehicular traffic. He explained that the appropriate support or coverage would not be placed over the pipe until it was inspected and approved, and that after that inspection is "when we actually bury the pipes, and we make them comply with the AS3500, part 2. Before that.. we are waiting an inspection, we can't bury them". Mr Fandakis testified that the plumber would either have put a steel U-tube all the way across or a 100 millimetre reinforced concrete slab, which would have made the pipes compliant.
This evidence was corroborated by Mr Tsoutsouras, whose evidence the Court also accepts. He explained that the pipe would not be covered prior to inspection by Fair Trading. He confirmed that his intention was to cover the 2014 sewer pipe in a concrete slab when he was finished, and referred to the Australian Standard (AS3500, section 3.7) in this respect. It does appear that Mr Tsoutsouras was unaware that the area in which he excavated the trench was subject to a right of carriageway. However, there is no basis for inferring that, following the necessary inspections, Mr Fandakis as supervisor of the building works would have failed to ensure compliance with the Australian Standard. On the contrary, both Mr Fandakis and Mr Tsoutsouras demonstrated in cross-examination that they were conversant with, and attentive to, the requirements of the Standard. I accept their evidence.
Assuming then, that a trench is excavated, a sewer pipe is laid, inspected, covered with concrete which will permit vehicular traffic, and the trench is re-filled, no interference remains thereafter with the right of carriageway. There is a temporary interference with the right during the plumbing work, but I do not consider that sufficient to amount to a real and substantial interference with the reasonable use of the right of way, applying the authorities to which the parties have referred.
The Huangs' Allegation of Private Nuisance by Reason of Leakage in the 2014 Sewer Pipe. A leaking sewer pipe emanating the smell of sewage could constitute an actionable private nuisance. However, the Huangs have not discharged the burden of proving that the 2014 sewer pipe was in fact leaking. I do not accept Mr Huang's assertion that he removed the 2014 sewer pipe because it was leaking. The weight of the evidence indicates that Mr Huang removed the 2014 sewer pipe, because he believed that it was on his land. None of the contemporaneous documents make any reference to leakage or the smell of sewage. Both Mr Tsoutsouras and Mr Fandakis give evidence that I accept to the effect that Mr Huang said to them after removing the pipes that it was his land and they could not lay pipes on his land.
The Huangs adduced photographs said to display seepage from a sewer pipe located on Lot 1 (No. 57) onto the carriageway (Photographs R, S, T, U, V in Exhibit 1, pp 24-28). These photographs were all taken in 2017. It is difficult to see how they can support an inference that the 2014 sewer pipe was leaking on 5 November 2014, so as to necessitate Mr Huang destroying it with an electric saw. Moreover, the photographs do not clearly demonstrate a leak.
There is insufficient evidence to prove on the balance of probabilities the existence of a leak as alleged.
The Plaintiffs' Allegation of Trespass on Lot 1 (No. 57) by Mr Huang Removing and Demolishing the 2014 Sewer Pipe. The photographic evidence, Mr Tsoutsouras' evidence in relation to the photographs, and Mr Huang's implausible initial attempts to deny that the photographs depicted him, followed by a subsequent acceptance that he was the person shown in the photographs, all support the plaintiffs' claim in trespass against Mr Huang for his act in removing and demolishing the 2014 sewer pipe. I accept the plaintiffs' argument that even if it were possible for Mr Huang to remain at all times upon Lot 2 (No. 55), nonetheless reaching over, removing, and then destroying goods upon the plaintiffs' land, would still constitute a trespass.
The Huangs' main argument in respect of this trespass was that it was justified as an act of abatement. It was submitted that there were three proper explanations justifying Mr Huang's acts of abatement. First, the 2014 sewer pipe trespassed in the small area of encroachment onto Lot 2 (No. 55); second, it interfered with Mr Huang's right of carriageway because it was not laid to the proper depth; and third, it was leaking and creating a nuisance.
Trespass to land and nuisance may be remedied by acts of self-help or abatement. However, my findings that there was no substantial interference with the right of carriageway and no leakage remove the foundation of the Huangs' argument that Mr Huang was abating a nuisance by destroying the pipes. And in any event, I accept the plaintiffs' argument that destroying the pipes went beyond reasonable abatement and caused unnecessary damage. The acts of abatement were disproportionate to the threatened harm, and do not excuse the trespass.
As to relief, it follows from my findings that the plaintiffs are entitled to the cost of reinstating the sewer piping which was demolished and removed by Mr Huang any relevant quantification of this claim will have to take place in the damages hearing. The plaintiffs' entitlement to any of the other relief sought is addressed below in conjunction with the claims relating to trespass by the parking of vehicles upon Lots 1 (No. 57) and 4 (No. 51).

[64]

Submissions - The Huangs

The Huangs contend that the installation of the stormwater piping to the eastern side of the house on Lot 1 (No. 57) constituted an interference with the right of carriageway benefiting Lot 2 (No. 55).
The Huangs submit the right of the carriageway of variable width enjoyed by Lot 2 (No. 55) extends from the wall of the dwelling at Lot 2 (No. 55) to the brick and sandstone wall of the building on Lot 1 (No. 57). At its narrowest, the gap between Lot 1 (No. 57) and Lot 2 (No. 55) is 2.320 metres wide. The right of carriageway over Lot 1 is approximately 1 metre. The Huangs submit that, once the stormwater pipe is added, it narrows the total width between Lot 1 (No. 57) and Lot 2 (No. 55) to 2.205 metres, and that the width of the right of carriageway over Lot 1 (No. 57) is then narrowed to approximately 0.8 metres. The Huangs submit that the narrowing of an already narrow right of carriageway by a further 115 millimetres is significant. They further submit that the intrusion is also unreasonable and unnecessary because the pipe could readily have been placed at a higher point on the eastern wall of the building on Lot 1 or alternatively at the rear of Lot 1 (No. 57).
The Huangs submit that Mr Huang utilises the space between the dwellings on Lots 1 (No. 57) and 2 (No. 55) to drive vehicles into the backyard of Lot 2 (No. 55). They submit this necessarily involves his driving along and using the right of carriageway. The expert evidence the Huangs have adduced from a registered land surveyor, Mr Scott Murray, says that the wall-hung stormwater pipe did represent a substantial obstruction, as the driveway was already narrow.
The Huangs rightly accept that if their defence of abatement of this alleged nuisance fails, Mr Huang has trespassed on Lot 1 by removing the 2014 stormwater pipe from the eastern side of the dwelling on Lot 1 (No. 57). But they argue that this was always a minor trespass, as there were always alternative places on Lot 1 for Mr Petkovski to locate the pipe.
The future management of this issue is resolved. This has come about as a result of the exploration of the issues in the evidence. The Huangs consent to the granting of a licence to enable the stormwater pipe to be affixed upon the residence on Lot 1 (No. 57) and intruding into the right of carriageway, but at a height of not less than 2.4 metres.

[66]

Determination

There is no dispute the installation of the stormwater pipe narrowed the right of carriageway by 115 millimetres. The narrowing was from a width at its narrowest point of 2.320 metres to a width of 2.205 metres. The point at issue is whether, in the circumstances, that represents a real and substantial interference with the reasonable exercise of the right of way. I am not persuaded that it does.
By way of comparison, in the recent decision of Pullen v Smedley [2017] NSWSC 1721, Ward CJ in Eq considered whether the presence of shipping containers on part of a right of way constituted an actionable interference with the easement. Her Honour referred to the decision in Owners Corporation of Strata Plan 42472 v Menala Pty Ltd (1998) 9 BPR 16,337, where Bryson J considered an argument to the effect that it was an unreasonable impediment to allow a five metre opening in which to make a turn in reverse from a strip six metres wide into a strip five metres wide. His Honour said (at 16,340): "The defendant's right of way does not entitle the defendant to have the whole of the 6 m strip cleared of any obstruction as if it were a billiard table. The plaintiff continues to be the owner of the plaintiff's land, and may use it in any way and maintain on it any structure if it does not create a real substantial interference with the enjoyment of the right of way. If enough space is left free for passage without any real substantial interference with the right to pass and re-pass, the defendant cannot insist on more."
In contrast, in Pullen v Smedley, Ward CJ in Eq concluded that there was a real and substantial interference with the right of way, stating at [241]-[242]: "I accept that the presence of the shipping containers on part of the right of way does not obstruct the road on the right of way in the sense that it remains possible for vehicles to pass along the trafficable surface of the right of way around the corner of the shipping containers. (Indeed Mrs Pullen also accepts that it is the case.) I also accept that if G2 is closed then one would have to stop and open the gate and thus would have an opportunity both to see and hear any oncoming traffic. Nevertheless, as the gate may from time to time be open the safety issue (which I consider to be a reasonable concern on the part of the Pullens) remains. (Had the metal shipping containers been wholly on the land outside the right of way an interesting question might have arisen as to whether obstruction of vision on the right of way caused by an object not on the right of way itself would amount to a real and substantial interference with the reasonable use of the right of way. I see no reason why it could not constitute such an interference but in any event the question does not here arise.) In circumstances where I find that the metal shipping containers have been placed partially on the right of way and where it was accepted by Robert Smedley that there are probably other places on the Smedley property to which they could be re-located (and it has not been suggested that it would be exorbitantly expensive to do so), I consider that the obstruction of vision occasioned by their presence on part of the right of way does constitute a real and substantial interference with the Pullens' reasonable use of the right of way and that they should be moved."
These contrasting examples illustrate the range of considerations which may be relevant to determination of whether there is a real and substantial interference with the reasonable use of a right of way.
The present case presents a finely balanced issue. As the Huangs submit, the right of way is already quite narrow (for a visual depiction of its width in relation to the width of an average sized car, see, for example, Photographs 23, 24, 25, 26, and 27 of Exhibit C). Some of the considerations to which her Honour referred in Pullen v Smedley would also apply here, in that it does not appear that it would be grossly inconvenient or exorbitantly expensive to move the stormwater pipes.
But the Huangs have not adduced sufficient evidence to show that it the stormwater piping precludes or significantly obstructs vehicular passage through the right of carriageway. The photographic evidence adduced by the plaintiffs goes some way towards indicating the narrowness of the right of way. But such photographic evidence is a fragile basis to infer that it is either impossible, or even substantially more difficult, for vehicles now to pass and re-pass through the right of carriageway than they were able to do before the stormwater pipe was hung in this location. This is quite a fine judgment that can only really reliably be made with well crafted "before" and "after" evidence, showing the actual effect of the alleged obstruction on the passage of vehicles. Such evidence is not available here.
Moreover, the photographs in evidence may distort the available height and width of passage, depending on the angle from which they were taken. In the absence of more evidence as to the effect of a 115 - millimetre narrowing on the reasonable exercise of the right of way, I cannot conclude that there was an actionable interference with the right, particularly given the plaintiffs' persuasive submissions as to the height at which the stormwater pipes were placed in relation to rear vision matters.
The Huangs accepted that if there was no actionable interference with the right of carriageway, Mr Huang did trespass by entering upon Lot 1 (No. 57) and pulling down the stormwater pipes in December 2014.
One matter should be noted, even though it does not now arise. In my view, even if I were persuaded that the stormwater piping constituted an actionable interference with the carriageway, Mr Huang entering onto Lot 1 (No. 57) without permission the day after the pipes were installed, and pulling them down off the building, is not a reasonable act of abatement. Thus a plea of abatement would not excuse the trespass.
The plaintiffs are entitled to the reasonable cost of reinstating the stormwater piping which was removed by Mr Huang.

[69]

Determination

There is insufficient evidence to establish trespass by Mr Huang by placing, or permitting to be placed, vehicles upon Lots 1 (No. 57) or 4 (No. 51). One problem for the plaintiffs establishing their case is that the photographs only display vehicles parked at one moment in time, in August 2017. This could perhaps be met by Mr Fandakis' unchallenged evidence of "continuous" parking. But this is a particular matter on which the Court does not accept the evidence of Mr Fandakis. There may have been occasional parking on these two lots, but who was responsible for it and whether it was any more than fleeting have not been established to the Court's satisfaction.
But one legal issue is more problematic for the plaintiffs' claim against Mr Huang. There is no clear basis for holding him liable as landlord for vehicles which, as the plaintiffs appeared to accept in closing submissions, were probably parked by his tenants, not by himself.
In Laris v Lin [2017] NSWSC 279, White J (as his Honour then was), considered whether the cross-defendant could be held liable for acts of trespass by his tenants who had at various points in time parked vehicles on rights of carriageway. His Honour noted (at [18], [30]) that for Mr Laris to be liable for acts of trespass by his tenant, Mr Lin needed to discharge his onus of showing that Mr Laris authorised, caused or permitted such acts: Smith v Scott [1973] Ch 314; Field Common Ltd v Elmbridge Borough Council [2008] EWHC 2079 Ch; Coventry v Lawrence [2014] UKSC 46. In that case, White J found that there was an express authority given by Mr Laris to his tenants to park their vehicles on the right of carriageway, but which was limited in time (see at [31]-[32]). Mr Laris therefore attracted some, albeit limited, liability for the tenants' actions. That liability was direct, not derivative, and arose from his acts of authorising the tenant to use the right of carriageway for parking: see Laris v Lin at [34].
Comparisons with Laris v Lin are useful here in two respects. First, that case underscores the substantial deficiencies in the plaintiffs' evidence of parking in this case, once Mr Petkovski was not called to give evidence. In contrast, detailed evidence of this type was adduced in Laris v Lin. Secondly, the plaintiffs' argument here is that Mr Huang was liable because he had only done "very limited things" to prevent his tenants from parking on the rights of carriageway, namely writing a letter to tell the tenants not to park there. This falls far short of the kind of authority, or permission, required in order to hold Mr Huang directly liable in trespass for his tenants' actions. Laris v Lin illustrates that much more is required.
The plaintiffs relied on the parking claim in order to establish various heads of loss in respect of Lots 1 (No. 57) and 4 (No. 51), including their alleged inability to complete the building works on both these properties, their alleged liability to pay Construction Management Fees to Mr Fandakis in respect of the delayed completion of the building works, and their alleged loss of the rental income, which could have been generated from both properties, but for these alleged trespasses.
The parking claims fail. As a result the plaintiffs have no entitlement to any of these claimed heads of loss.
As to Lot 1 (No. 57), even without the parking claim, the plaintiffs can possibly establish some consequential loss flowing from Mr Huang's trespasses in destroying and removing the 2014 sewer pipe and the stormwater piping from Lot 1 (No. 57). But given the present findings dismissing the parking claim, such claimed losses should not include inability to complete building works on Lot 1 (No. 57). Any damages with respect to Lot 1 (No. 57) might encompass loss arising only from minor temporary delay in completion to building work on that property, which could be reasonably inferred to have resulted from Mr Huang's trespasses.
I accept the plaintiffs' submission that the deprivation of the use of their property (Lot 1 (No. 57)) due to the disconnection and removal of the sewer and stormwater pipes, gives them an entitlement to the reasonable rent which would have been derived from use of their property: Inverugie Investments Ltd v Hackett [1995] 3 All ER 841 at 845. Their damages would ordinarily include a loss of any rent which flowed from a brief delay in completion. But this would appear to be a loss confined to a short period, being the reasonable period of time required to replace and reinstate the damaged plumbing works.
But the precise extent of this delay may need to be the subject of supplementary submissions in the damages hearing, as its extent is not clear from the relevant materials to which the Court's attention has been so far drawn.

Luben Petkovski v Kai Yin Huang

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Judgment (72 paragraphs)

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Cases Cited (61)

Cited By (6)