Re Wendy Wai Ying Leung Wan v Donald Robert Mcdonald; Ranald Murray Mcdonald and Dotwell Investment Pty Ltd [1992] FCA 4; - FCA 1992 case summary — Zoe

[9]

40. In respect of a number of other matters, Mr Donald McDonald's credit suffered during cross-examination. A particularly serious question was raised in respect of a document prepared for lodgement under the Stamp Act 1894-1987 (Queensland), on a form known as Form Q. Completion of this form is required to obtain the concessional rate of duty previously mentioned. The document was filled out with Mrs Wan's full name and address in Hong Kong. It contains an acknowledgment of an obligation to notify the Commissioner of Stamp Duties in certain events, including failure to remain in continuous occupation of the property, as a principal place of residence, for a period of not less than six months, and two forms of statutory declaration "by virtue of the provisions of the Oaths Act 1867-1981". The document has been completed to show McDonald Partners solicitors as Mrs Wan's solicitors, and bears what purports to be her signature, in four places, as well as her initialling, in three other places. It is dated 8 May 1989 against each of the signatures. Two of the signatures purport to be Mrs Wan's signatures as declarant of statutory declarations. In each of those cases, the justice of the peace purporting to witness the statutory declaration is Mr Donald McDonald, who has signed as such. Mr Donald McDonald acknowledged in cross-examination, of each of these two signatures, "(T)hat would be my signature, yes." And he acknowledged that the document was lodged, through his office, "on Mrs Wan's behalf with the Stamps Office". He also agreed that Mrs Wan, who was in Hong Kong at the date of the document, had never signed anything in his presence. The inevitable question was then put to him: "That signature (i.e. Mrs Wan's signature to each declaration), I put to you, is a forgery?" He replied: "Oh, I wouldn't say it's a forgery." Relying on the fact that Mrs Wan's Chinese surname is Leung, he pointed out that "the Chinese share a very small number of surnames for such a large population", which, of course, is true. He then suggested some other Leung may have called to sign a document at his office, and signed this document in his presence by mistake.

[10]

41. I found Mr Donald McDonald's explanation, and his demeanour in giving it, most unsatisfactory. But, in any case, it simply cannot be true. For a comparison of the purported signatures, which Mr Donald McDonald has witnessed, with genuine signatures of Mrs Wan, which are in evidence, shows very clearly that the purported signatures are quite close copies of actual signatures. It is beyond controversy that, as she has sworn and Mr Donald McDonald acknowledged in cross-examination, they were not written by Mrs Wan. But, equally, they purport to be her signatures, and therefore must be forgeries. It seems the reasonable inference that the purpose of the forgeries was to overcome a difficulty with the concessional rate of stamp duty at a time when Mrs Wan was becoming suspicious, and therefore less co-operative, by reason of the inordinate delay in obtaining title to land for which she had made full payment. In the light of Mr Donald McDonald's own evidence, it is extremely difficult to believe that he placed his personal signature on the document honestly, as a justice of the peace witnessing a statutory declaration. I am unable to accept this view of what happened. There is, in my opinion, no escaping the fact that Mr Donald McDonald arranged for the lodging with the Stamps Office of a document which he knew contained a false representation, namely, that he as a justice of the peace had attested the signature of Mrs Wan to each of two statutory declarations made by her before him. That was a fraudulent act: Demetrios v Gikas Dry Cleaning Industries Pty Ltd (1991) 22 NSWLR 561. I should also observe that, if Mr Donald McDonald was previously unaware of what had happened to the bank draft for $165,000, there is little doubt he must have become aware when this problem about the concessional rate of stamp duty emerged. He could hardly have considered the matter without asking what had happened to the purchase price. There was, after all, an established practice followed in quite a number of transactions, and it is the respondents' evidence that this matter broke the pattern.

[37]

56. If the focus of attention is shifted, from the case of an amalgamation of firms or other change in a partnership (where the question of conflict arises out of the relationship, but the solicitor actually handling the matter has never acted for the other party), to the case of a solicitor who has acted for both parties continuing to act for one of them after a conflict has arisen, the issues of loyalty and propriety seem to me to loom more largely. The practice of the profession in many places insists upon a solicitor, in such a case, ceasing to act for either side. My own impression of the approach generally adopted in Australia is reflected in the comment of Wootten J. in Thompson v Mikkelsen (supra), which was a case where a solicitor acting for both vendor and purchaser in a conveyancing transaction discovered that the vendor wished to withdraw from the contract: "(O)ne might have thought that at this stage a solicitor, faced with an obvious conflict of interest between the parties, would have felt it proper to cease to act for both parties" (emphasis added). In England, the Law Society has laid it down, in terms which were summarized in argument in David Lee and Co. (supra, at 262): "If a solicitor has already accepted instructions from two clients and a conflict subsequently arises between the interests of those two clients, the solicitor must cease to act for both clients." In Canada, the Law Society of Manitoba and the Law Societies of other provinces have adopted a Code of Professional Conduct which is cited in MacDonald Estate (supra, at 256): "A lawyer who has acted for a client in a matter should not thereafter act against him (or against persons who were involved in or associated with him in that matter) in the same or any related matter ... ." The same obligation applies under the rules of professional conduct of the Law Society of Upper Canada, as appears from an illuminating article on the whole topic, Acting Against Former Clients - a Matter of Dollars and Common Sense by P.W. Kryworuk (1984) 45 CPC 1 at 3. In the United States, the same rule was laid down in Gesellschaft Fur Drahtlose Telegraphie M.B.H. v Brown (1935) 78 F 2d 410, where the court referred (at 412) to "the well-established rule of public policy that where an attorney has acted for a client he cannot thereafter assume a position hostile to the client concerning the same matter, or (emphasis added) use against the client knowledge or information obtained from him while the relation existed."

[40]

59. So far, I have found that Dotwell was guilty of contraventions of s. 52 of the Trade Practices Act, in which Mr Donald McDonald was involved within the meaning of s. 75B, being knowingly concerned. On the facts of this case, the misrepresentations concerning the application of the Business Migration Policy, and the role of the solicitor, Mr Donald McDonald, and his trust account, were important factors in inducing Mrs Wan to deal at all with Dotwell. She relied on the representations. I have also found that Mr Donald McDonald was guilty of significant breaches of his fiduciary duty owed to Mrs Wan. I now turn to the question whether Mr Ranald McDonald too was involved in the contraventions of s. 52. He was a member and director of Dotwell, and described himself as its managing director. He took a personal role in dealing with Mrs Wan on each of her visits to Australia. He personally received the draft for $165,000 which was misapplied, and I am satisfied that he was well aware of what happened to the two earlier amounts totalling $30,000, and the single payment of $1,000. I have found that he made one of the representations, on the occasion of Mrs Wan's first visit to Australia, that his father would be her solicitor and would "check everything for a clear title and will transfer the land to your name". He was, of course, also present at the restaurant when his father stated he would attend to the documents for the house and act as Mrs Wan's solicitor. From his knowledge of the manner in which Dotwell and his father carried out the transactions involving business migrants, he must have been aware that the represented handling of the matter by a solicitor was a quite illusory protection for Mrs Wan. In his position in the company, he must also have been aware of the modus operandi by which it was represented to intending business migrants that moneys transmitted by them to Australia would go into a solicitor's trust account, and by which the documentation I have already described was utilized. I am satisfied Mr Ranald McDonald was well aware that his company was engaging in a course of conduct calculated to mislead an intending business migrant into the belief that the transaction would involve his having the protection of a solicitor acting for him and the protection of that solicitor's trust account. Mr Ranald McDonald knew there was no real protection of that kind at all.

[41]

60. Mr Ranald McDonald was also aware, on the evidence, of the fact that more than a third of the money supposedly invested in Australia in the purchase of a house and land would in fact be remitted to Hong Kong within days of its receipt, and before the purchase had even been completed. The evidence of Mr Aho leaves no doubt that this money could not count towards Mrs Wan's business migration application. There is, however, a question whether Mr Ranald McDonald understood the Business Migration Policy sufficiently to make him knowingly concerned in the misrepresentation of it to Mrs Wan. The policy was in fact misrepresented to her in at least two other material respects: in so far as, apart from the remission of a large part of the money, only $100,000 of the amount utilized in the purchase of a home could be counted, contrary to what she was told; and in so far as it was represented to her that she need only invest in Australia, under Dotwell's scheme, less than the total amount required by the Business Migration Policy. Both of these were intended to influence Mrs Wan, and, applying what was said by Wilson J. in Gould v Vaggelas (1985) 157 CLR 215 at 238, I find they did contribute to her decision to contract with Dotwell. Mr Ranald McDonald said in cross-examination that he personally, although he was not a solicitor, made alterations to the form of contract used for business migrants which had originally been settled in his father's office. It was also said in cross-examination that he told Mrs Wan "so long as her boss was prepared to certify that she acted on behalf of the company like a director of the company or an owner and he was prepared to certify that, that she stood a reasonably good chance of migrating." This evidence suggests some knowledge of the requirements. He conceded, too, in cross-examination that at the time the contracts were signed he told Mrs Wan "you will be required to transfer another amount of $150,000 to us for investment." And that he said, with respect to the two contracts, "One's for the house, the other's for the application". He also conceded that he said to her, on this occasion, that "the house will be treated as part of your assets if you apply for migration under the B.M.P."

[45]

64. A good example of the complete unreliability of the evidence of both Mr Donald McDonald and Mr Ranald McDonald is provided by the banking of the draft for $165,000. I have already dealt with this in some detail, but there are aspects of the circumstances which ought to be mentioned here, while I am discussing the conclusions to be drawn about the role of Mr Ranald McDonald. It was suggested by Mr Ranald McDonald in evidence that the draft was banked to Dotwell's account by "an oversight on behalf (sic - scil. on the part) of my secretary", and that it was transferred to an account "opened up in the name of Miss (sic) Wan". But if such an error had occurred, it would certainly have been discovered the very next morning, because Mr Ranald McDonald signed, on 20 December 1988, a request to the bank relating to this particular deposit. Yet his secretary, who was finally subpoenaed upon the matter being pressed during the hearing, had no recollection of any incident when she was blamed for a mistake in respect of what was by far Dotwell's largest banking during a period of more than six months covered by the bank deposit book. That book also gives the lie to evidence furnished by Mr Donald McDonald, and not corrected by Mr Ranald McDonald, that Miss Shaw had already been sacked, at the time of the receipt of the $165,000, on some other ground. The book contains her signature on the very great majority of deposits made on behalf of Dotwell during the ensuing six months, up to and including 22 June 1989. Even more importantly, the request to the bank signed by Mr Ranald McDonald on 20 December 1988 expressly asks the bank to "deposit $165,000.00 received on behalf of Wendy Leung to bank into our 11AM Account under the name Dotwell Investment Pty Ltd". It was not an account "in the name of" Mrs Wan, and there is no suggestion, on the face of the request, that an error had occurred. If there had been any intention to give Mrs Wan real protection by the deposit of her money into a solicitor's trust account, it would have been easy to vary the terms of the request. On all the evidence, I find Mr Ranald McDonald was involved in Dotwell's contraventions of s. 52, of which he had the necessary knowledge.

[48]

"It is hardly to the point that the defendant's

shareholding in Deep Hills Corporation Pty. Limited was that

of a trustee. That fact, indeed, left him with less

discretion to prefer the interests of the plaintiffs than he

would have had if he (had) owned the share in his own right.

The plain fact is that, as shareholder, director, manager

and secretary of Deep Hills Corporation Pty. Limited, the

defendant himself had an interest in the terms of any

arrangement reached between the plaintiffs, on the one hand,

and Deep Hills Corporation Pty. Limited ... on the other

hand, which was in direct conflict with the interests of the

plaintiffs. As trustee shareholder, director, manager and

secretary of Deep Hills Corporation Pty. Limited he owed, in

relation to the overall transaction, duties to his ultimate

cestui que trust ... and to Deep Hills Corporation Pty.

Limited which were in conflict with his duty to the

plaintiffs as his clients. The defendant does not suggest

that he informed any of the plaintiffs other than Palmisano

of the existence of this conflict of interest. On my

finding, he did nothing to inform Palmisano of it. ...

The defendant did not, at any time, suggest to any of

the plaintiffs the desirability of seeking independent legal

advice. ...

... In a situation where he was acting as the

plaintiffs' solicitor, his failure to advert to the

existence of the conflicts both of interest and duty or even

to raise the possibility of the plaintiffs seeking

independent legal advice not only constituted a flagrant

breach of his fiduciary duty to the plaintiffs. It tainted

whatever advice he gave to the plaintiffs or actions he

performed for them, as a solicitor, in relation to the

overall transaction.

The duty of a solicitor to bring to the attention of

his client the existence of any conflict of interest between

the client and another client or between the client and

himself is not based upon any presumption that the solicitor

will, in dereliction of his duty to his client, prefer the

interest of the other client or himself. It is based on the

clear recognition by the Courts that such a conflict of

interest or duty should simply not be permitted to exist

without the client being fully appraised of it. The

solicitor who fails to inform his client of the existence of

such a conflict of interest or duty and to explain fully its

implications is in breach of his fiduciary duty to his

client even if he prefers the interests of that client over

the interests of his other client or himself."

Parties

Applicant/Plaintiff:

# Re Wendy Wai Ying Leung Wan

Respondent/Defendant:

Donald Robert Mcdonald; Ranald Murray Mcdonald and Dotwell Investment Pty Ltd \[1992\] FCA 4;

Legislation Cited (3)

Stamp Act 1894

Practices Act 1974

Oaths Act 1867

Cases Cited (15)

Re Wendy Wai Ying Leung Wan v Donald Robert Mcdonald; Ranald Murray Mcdonald and Dotwell Investment Pty Ltd [1992] FCA 4; (1992) 105 ALR 473 (1992) 33 FCR 491 (3 January 1992)

Commonwealth Bank v Smith [1991] FCA 375; (1991) 102 ALR 453

33. Dotwell instructed Mr Donald McDonald to act as solicitor upon the purchase by it of the land it had contracted to sell to Mrs Wan. He received those instructions on 10 January 1989, and settlement was effected on 25 January 1989. In the normal course, that settlement would have involved the receipt of the certificate of title, over which Mrs Wan undoubtedly had a lien for the respective sums of $30,000 and $165,000 received by Dotwell in advance of transferring title to her. In Shirlaw v Taylor [1991] FCA 415; (1991) 102 ALR 551 at 557, the joint judgment of the full court refers to the lien "of the purchaser who has paid the vendor without obtaining a conveyance" as one of "(t)he most commonly encountered species of equitable lien". It is, of course, possible, although unlikely, that Mr Donald McDonald handed the certificate of title to Dotwell before he opened, on 4 April 1989, a file as solicitor for both parties in respect of the sale to Mrs Wan. Even in that case, he should not have done so, since he had received into his trust account, in anticipation of that very matter, the sum of $30,000 and disbursed it to Dotwell. While it cannot be regarded as proper to have paid Mrs Wan's money to Dotwell in anticipation of a contract not then entered into, at least, when the contract was entered into, Mr Donald McDonald must have regarded her as a purchaser who had paid part of the purchase money. Furthermore, the execution of the very contract he had anticipated "engage(d)" his firm as solicitors for Mrs Wan (cl. 3), and he certainly knew the terms of the contract, and that it had been entered into. If, as I think more probable, since the transfer to Mrs Wan was then expected to occur very shortly, Mr McDonald retained the certificate of title, as solicitor for both parties, at latest by 4 April 1989, when he opened the file, he would have become aware that the whole of the purchase price had been pre-paid by Mrs Wan. (In fact, it is most likely, having regard to the practice and his relations with his son and with Dotwell, that he knew she had paid while she was still in Australia, and that he knew, the next day, what had happened to her draft.) He would then have held the certificate of title subject to her lien for the full amount. On 2 August 1989 Mrs Wan's new solicitors, Messrs Marrinan and Allen, sent a letter to Dotwell stating (inter alia) that the land was registered in the name of Dotwell in early February, that the sum of $195,000 being the price for the purchase of the land had been paid, that Dotwell had failed to transfer the land to Mrs Wan, that no construction work had commenced on the land, and that no building application had been lodged with the local authority in respect of any construction. Mrs Wan purported to terminate the agreement and demanded repayment of the sum of $195,000. Messrs Marrinan and Allen had lodged a caveat on 14 July 1989, and proceedings were commenced almost immediately against Dotwell, in the Supreme Court of Queensland, for relief including a declaration of an equitable lien.

(1992) 105 ALR 473

(1991) 102 ALR 453

(1989) 87 ALR 539

(1991) 102 ALR 551

(1985) 157 CLR 215

(1959) 101 CLR 298

(1992) 33 FCR 491

(1991) 1 Qd R 508

(1991) 22 NSWLR 561

(1987) 9 NSWLR 118

(1983) 153 CLR 52

(1989) 171 CLR 125

Re Wendy Wai Ying Leung Wan v Donald Robert Mcdonald; Ranald Murray Mcdonald and Dotwell Investment Pty Ltd [1992] FCA 4;

At a glance

Court

Decision date

Before

Source

Judgment (68 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (15)

Re Wendy Wai Ying Leung Wan v Donald Robert Mcdonald; Ranald Murray Mcdonald and Dotwell Investment Pty Ltd [1992] FCA 4; (1992) 105 ALR 473 (1992) 33 FCR 491 (3 January 1992)