Su v So, Verekers Lawyers v So

Su v So, Verekers Lawyers v So - [2010] NSWCA 119 - NSWCA 2010 case summary — Zoe

[15]

the second applicant, the second defendant in the District Court proceedings (Verekers), in the sum of $17,198.25, comprising $15,000 in exemplary damages and $2,198.25 as a proportion of the interest payable on the damages. 2 Since the appeals involve matters at issue of the value of less than $100,000, each of the applicants requires leave to appeal under the District Court Act 1973 (NSW), s 127(2)(c). 3 The backgrounds of the principal contestants to the first application and appeal were described by the primary judge at [8] of his reasons: "[8] The plaintiff [Mr So] and the first defendant [Mr Su] were both born in China. The plaintiff emigrated to Australia in 1974. He was then 22 years of age and commenced work as a market gardener selling fruit and vegetables at the Flemington Growers Market. The first defendant came to Australia in 1980 when he was 16 years of age. He initially lived in Western Australia with his family but later moved to Sydney and started work as a kitchen hand." 4 The essential dispute was described by the primary judge at [2] of his reasons: "[2] At the end of 2003 a house at 3 Rose Parade, Mount Pleasant, near Wollongong, was purchased in the name of the plaintiff. The price was $500,000 and was entirely funded by a loan from the National Australia Bank. The Bank was a third defendant to these proceedings but its dispute with the plaintiff was resolved before the hearing commenced. In December 2004 the Mount Pleasant property was sold for $607,000. Between purchase and sale the property underwent a substantial 'makeover'." 5 The case put by Mr So was that his former friend and business associate, Mr Su, fraudulently and without authority appended what purported to be his (Mr So's) signature to a transfer of the Mount Pleasant property which was owned by Mr So, in order to take the benefit of the sale of the property for himself. One of the partners of Verekers, Mr V Cuoco, was the solicitor acting on the sale of the property. It was alleged by Mr So that Mr Cuoco was negligent in his handling of the sale causing Mr So economic loss.

[16]

6 The primary judge heard the case over seven days. He heard oral evidence from Mr So, Mr Su and others, but not Mr Cuoco who did not give evidence. His Honour described the evidence of each of Mr So and Mr Su in unflattering terms. He said (at [12] of his reasons) that he was "strongly of the view that at times they each gave evidence that so defied credulity that it was almost an insult to the court to imagine that it might be accepted." His Honour refused (at [14] of his reasons) to place any weight at all on the demeanour of the plaintiff (Mr So) and of the first defendant (Mr Su). His Honour said (at [14] of his reasons) that the only way to resolve the dispute was to look for matters within the whole of the evidence which tended to favour one side or the other. 7 The primary judge also referred (at [19] of his reasons) to the evidence of other witnesses. He did so after listing, at length, the factors which bore for and against the acceptance of the respective versions of the plaintiff (Mr So) and the first defendant (Mr Su). His Honour said: "… It will be noticed that I have not referred to the many conversations asserted by or on behalf of the plaintiff and first defendant which took place in assorted motor vehicles, restaurants and a gambling establishment. The reason I have not factored these conversations into the equation is that, without more, on my assessment of the witnesses I would simply not be in a position to accept the versions of one or the other. Whether or not these conversations occurred must depend on whether or not they are consistent with my findings based on the above factors. It may even be the case that the actual conversations, if they occurred, are not as alleged by either party." 8 The primary judge was faced with oral evidence from all sides which he profoundly distrusted. Yet, as his Honour said at [7] of his reasons: "… an acceptance of either the plaintiff's version or the first defendant's (including that of his witnesses) is vital to the outcome of the case. Credit, therefore, plays a major part in the decision." 9 At [14] and [15] the primary judge described his dilemma, given the apparent unreliability of the oral evidence: "[14] The parties, if I understood them correctly, agreed with my observation that the outcome of the case depended on the acceptance on the evidence of one of the plaintiff or the first defendant (including his witnesses). I have already said that the demeanour of the plaintiff and the first defendant has no effect on my decision as to their reliability. Further, both of them, as I have highlighted above, put matters to the court which were simply beyond belief. I think the only way to resolve this dispute is to look for matters within the whole of the evidence which tend to favour one side or the other. [15] I think the appropriate way to conduct this exercise is to look at matters which favour the plaintiff's case and those which are against it. In doing so I am also, in effect, looking at issues which favour, or do not favour, the first defendant's case. It is worth recalling at this stage that the plaintiff's allegation is that the property at 3 Rose Parade was purchased for his sole benefit as a means of assisting him to recoup the moneys (about $825,000) that he says he lent to SDL [Suprising Development Pty Ltd, a company of which Mr So, Mr Su and two others were directors]." (emphasis added) 10 As we read these paragraphs, his Honour set about looking for objectively verifiable factors to permit him to reach his decision. Such a course may be seen to remove the trial judge's advantage of assessment of credit and demeanour and placing the appeal court in a position of being able to review the findings, subject only to the recognition of the more general and less potent advantage of a trial judge of absorbing, integrating and synthesising facts over the course of a trial: State Rail Authority (NSW) v Earthline Constructions Pty Ltd [1999] HCA 3; 73 ALJR 306 at 330 [90]; and Fox v Percy [2003] HCA 22; 214 CLR 118 at 125-126 [23] esp. footnotes 34 and 35. There was a debate as to whether, in fact, the learned primary judge did employ demeanour so as to require this Court to conclude that the primary judge had misused his position or that his findings were glaringly improbable or contrary to incontrovertible facts in the sense discussed in Fox v Percy at 127-129 [26]-[31] and Abalos v Australian Postal Commission [1990] HCA 47; 171 CLR 167 at 179. We will return to this question of appellate review in due course. 11 It is instructive, to set out the starkly contradictory cases of the parties as clearly summarised by the learned primary judge at [3], [4] and [5] of his reasons: "[3] According to the plaintiff: (a) The first defendant, or one of his companies, owed him approximately $825,000. (b) The property was purchased in his name as a means of appeasing him for the failure to repay the debt. (c) He was free to sell the property at his will and to retain any profit on the sale. (d) It was for him to decide whether it would be renovated or sold. (e) He was not aware that the property was sold in December 2004. He certainly did not authorise it. (f) He did not find out about the sale of the property until October 2006. (g) He was never told that renovations were to be carried out on the property and he did not know they had been effected. (h) The first defendant fraudulently effected the sale knowing it was not his to sell. (i) The second defendant, in effect, conspired in the fraud because it knew, or should have known, that the sale was not authorised by the property's owner, the plaintiff. (j) As a result of the fraudulent sale the plaintiff says he is entitled to the profit (of $107,000) ostensibly made on the sale. In addition, he wants exemplary damages from both defendants. [4] The first defendant paints a very different picture. According to him: (a) The plaintiff, together with the second defendant and two others, were directors of a company called Suprising Pty Limited ("SDL"). (b) The property was bought on behalf of this company. (c) The plaintiff's name was used on the purchase for taxation reasons. (d) The plaintiff authorised the first defendant to sell the property. (e) The plaintiff knew about the sale and consented to it happening. [5] In addition the first defendant has a 'back up' case which asserts a constructive trust on behalf of SDL in case the plaintiff's version is accepted. This Resulting Trust stems from the renovation work carried out on the property." 12 In [16] and [17] of his reasons, the primary judge set out the matters which favoured the plaintiff's and the first defendant's respective versions. In summary these matters were:

[17]

In favour of Mr So's (the plaintiff's) version: (a) Mr So's name was on the contract for purchase of the property. (b) Mr So was the mortgagor under a loan from the National Australia Bank ("NAB"). (c) Mr So received from SDL an invoice (albeit, in part, falsely prepared) for work done on the property. (d) There was no documentation to support the conclusion of a trust in favour of SDL. (e) There was no valid reason for buying the property in Mr So's name (although in this context the primary judge made the comment that the "validity of the taxation reasoning seems obscure to me but I make no finding on it"). (f) The evident ridiculousness of the purpose of putting the house in Mr So's name that Mr Su gave in evidence (to make $10,000 to $20,000 to have a good time in China on holiday). (g) The making of an application by Mr Su, in Mr So's name, for exemption from vendor duty in respect of a principal place of residence. There was no issue, however, that the property was not, and was not intended to be, Mr So's principal place of residence. (h) Mr Su's concession in evidence that he knew the contract for sale needed to have Mr So's signature and so he inserted it. (i) A number of the invoices produced in evidence by Mr Su as relevant to the renovation before June or July 2004 were dated after July 2004. This made some of Mr Su's evidence simply unbelievable. (j) Mr So was not called on to fund the deposit. Mr So was not called on to contribute to the mortgage account beyond an amount of $6,000 which he contributed in June 2004, some four months after work began. (k) The disbelief by the judge of Mr Su's evidence that he did not instruct the NAB to pay $97,841.75 to SDL out of the proceeds of sale. (l) The instructing by Mr Su of solicitors to recover from Mr So sums in invoices for work on the property and the rejection of Mr Su's denial in evidence that he gave those instructions. (m) The addressing of correspondence to Mr So at a post box address belonging to Mr Su. (n) Aspects of internal NAB emails that were consistent with evidence of Mr So's son, Norman. (o) The existence of a prior transaction involving one of the shareholders of SDL, Mr Wu, that bore the hallmarks of Mr So's case here. (p) The property was not mentioned in SDL's financial returns.

[18]

In favour of Mr Su's (the first defendant's) version: (a) The false evidence given by Mr So in looking for documents during the hearing. (It is unnecessary to recount what the primary judge describes at [12(a)] of his reasons. It is sufficient to say that the plaintiff gave most unsatisfactory evidence about searching for and obtaining documents at his house.) (b) Further unsatisfactory evidence of Mr So involving his son, which was contradicted by the latter. (c) The difficulty in accepting evidence of Mr So about mail received at his house. (d) The property was bought in early 2004 and sold in December 2004; it was never rented; and it underwent extensive renovations. Mr So said he was unaware of the renovations and not aware of the sale until 2006. It was extraordinary that after an initial inspection, Mr So never visited the property again and that he did not try to derive rental income from it. The primary judge refused to accept that Mr So, if his account were to be accepted, would have allowed the property to lie fallow for over two years. The primary judge said (at [17(d)]) that this suggested that Mr So was aware of the renovations and the sale of the property well prior to October 2006. Later, at [21] of his reasons, the primary judge concluded that Mr So would have become aware of the sale by the receipt of the bank statement for November/December 2004. (e) SDL received the sum of $97,841.75 from the proceeds of sale and Mr So was never asked for permission for the work to be done. (f) Mr So did not know renovations were being carried out. The renovations were not part of the "deal" that he propounded as the explanation for the transaction. Mr Su went to the trouble, via one or more of his companies, of carrying out a major renovation on the property. (g) The plaintiff knew there was a mortgage with the NAB, made no payments other than the $6,000 in June 2004 and did not make enquiries of the NAB or Mr Su as to the state of the loan for over two years. 13 The difficulty posed by all these competing factors was summarised by the primary judge at [18] of his reasons: "[18] I now come to the very difficult decision of whether or not to accept the plaintiff's case. The factors I have set out above, for and against his case, if judged on a numerical basis by far favour the 'for' argument. Quantity, however, is not the test. I have little doubt that the case put by the first defendant, in particular that the purpose of the transaction was to make a quick $10,000 to $20,000 should not be accepted. That does not, however, mean the plaintiff's case should be accepted. There is a strong sense in the evidence that neither party is telling the truth and there was some other undisclosed purpose behind the transaction." 14 The primary judge then (at [19] of his reasons) referred to what he saw as the factor most heavily weighing against Mr So: "[19] The factor which weighs most heavily on [one] to not accept the plaintiff's case is his evidence that he did not receive documents addressed to his home address (styled [identified] Fourth Road) and that he was not aware of the sale until October 2006. …" 15 The primary judge then referred to the other witnesses in a passage that I have earlier set out. 16 At [20]-[22] of his reasons, the primary judge gave his reasons for concluding that the property was bought for Mr So, the plaintiff. An examination of these paragraphs reveals, if we may put it this way, the caution, indeed legitimate and real hesitation, of the primary judge in drawing his conclusions. He said: "[20] Consistent with my view that the first defendant should not be accepted and consistent with his admission that he signed the plaintiff's name on various documents, I am satisfied that the first defendant acted without the authority of the plaintiff in the sale of the property. Had the authority of the plaintiff been obtained I can see no reason why either the plaintiff could not have signed the documents or, with the appropriate signed authority, the first defendant could not have signed ' on behalf of ' the plaintiff. Because of this conclusion I think I must also conclude, and this is corroborated by the absence of documentation to the contrary, that the property was not bought on trust for SDL. [21] On the other side of the ledger I am not satisfied that the plaintiff did not become aware of the sale until October 2006. Because I have not accepted his evidence about his address I am of the view that he would have become aware of the sale at least with the receipt by him of the statement for November/December 2004 from the NAB. This statement would have been received, in the normal course, shortly after 13 December 2004. A difficulty with this conclusion is the letter from the NAB dated 12 November 2004 which is to be found at page 94 of the plaintiff's first affidavit. I can only conclude in respect of this letter that it was received by the plaintiff, but because he did not understand it, he did not act upon it. I think it clear that all instructions in respect of the sale were provided by the first defendant. [22] As to whether the house was purchased for the benefit of the plaintiff, although I have real doubts about exactly what purpose was behind the purchase, having regard to the fact that it was purchased in his name and absent any other reason for the transaction (other than the trust in favour of SDL which I have rejected) I think it must follow that I accept the house was owned, subject to the mortgage, by the plaintiff. The evidence of Mr Wu about 'his' house at least tends to support this conclusion." 17 There does not appear to be any expressed reasoning for the first sentence of [20] in particular by reference to the extrinsic factors that his Honour had set out at length. What is clear, however, is that the judge did not accept Mr Su's evidence; but this appears to have been as a result of weighing the relevant factors that he listed. 18 The primary judge then (in [23] of his reasons) drew conclusions about the causes of action in deceit (against Mr Su) and negligence (against Mr Cuoco and thus Verekers) as follows: "[23] The first defendant, therefore , effected the sale of the property without the authority of the plaintiff. The second defendant, for reasons I have expressed above, must have been negligent, and probably complicit in this exercise. The second defendant should not have allowed the first defendant to use the plaintiff's name, nor should it have allowed the transaction to proceed absent the sighting of appropriate authorities. The plaintiff has established its cause of action for deceit against the first defendant and for negligence against the second defendant. For this reason I do not think it necessary to consider the alternate causes of action in contract and for breach of the Trade Practices Act 1974 (Cwlth) and the Fair Trading Act 1987 (NSW). Attributing the degree of liability in accordance with Section 35 of the Civil Liability Act 2002 I think the first defendant should be responsible for 75% of the damages and the second defendant for 25%. This apportionment is based on the first defendant being the originator and driving force behind the various transactions." (emphasis added)

[19]

19 The primary judge then made some further comments about the position of Mr Cuoco, the solicitor, as follows: "[24] I will now make some comments in relation to the second defendant. The second defendant has been pursued, as I have understood the plaintiff's case, primarily for breach of retainer and in negligence. The second defendant concedes that it owed the plaintiff a duty of care under the law of tort to prevent economic loss by his conduct (see Chandra & Anor v Perpetual Trustees [2007] NSWSC 694 at para 26). In my view the liability of the second defendant rises or falls with that of the first defendant. If the first defendant is liable to the plaintiff then so too I think must be the second defendant, for these reasons: (a) The second defendant, through Mr Cuoco, had acted for the first defendant on a number of occasions. It can be reasonably inferred that Mr Cuoco was familiar with the first defendant's signature. Whether or not Mr Cuoco actually witnessed the first defendant signing the plaintiff's name, he would have noticed that the first defendant was not signing various necessary documents in his own name. (b) Mr Cuoco made no attempt to verify the existence of any trust. He made no attempt to ensure compliance with the Conveyancing Act (in particular Section 23C). (c) Mr Cuoco ignored the first defendant's use of the plaintiff's name and did not advise him that this was inappropriate, let alone bring to his attention the requirement for the trust to be established in writing. (d) Mr Cuoco acted not only on the purchase of the property but also on the sale of the property when he acted for both vendor and purchaser. In carrying out the latter instructions he did so with absolutely no regard for the confirmation of the first defendant's supposed authority to act on behalf of the plaintiff. (e) The first defendant executed the contract for sale, using the plaintiff's name, in the second defendant's offices. (f) In the above circumstances there is an overwhelming picture supporting a conclusion that Mr Cuoco was at least negligent if not complicit in the deception of the plaintiff." 20 The primary judge turned to damages. His Honour rejected Mr So's primary claim, for the net sale proceeds of $107,000. His Honour found that there was no loss because the $107,000 was represented by renovation costs and that the property was in fact sold at a loss "factoring in the cost of renovation": see [28] of the reasons. There was no cross-appeal from this finding. 21 In [29] of his reasons the primary judge identified deficiencies in the evidence of loss, but concluded that there was loss proved of $6,000: "[29] There is no evidence, nor in fact is it the plaintiff's case, that had the property not been sold it would now, or at any other time, have been worth some other figure from which a profit may have been derived. There is also no evidence of the value for the property had the renovations not been performed. In my view, the only identifiable loss to the plaintiff is the sum of money which he invested in the property. This is $6,000. I therefore assess damages in this amount. The plaintiff is entitled to interest on this amount which I assess from June 2004 (when he paid it to the NAB) to date, essentially 4.9 years, at 9.5%. The interest produced is $2,793." 22 The primary judge then turned to exemplary damages. After referring to principle in an uncontentious way the primary judge said the following at [32]-[33]: "[32] Placing the principal focus on the wrongdoers I think allows me to award exemplary damages notwithstanding my findings on the plaintiff's credit. My conclusions about the conduct of the defendants fit easily into the categorisation of a ' conscious wrongdoing in contumelious disregard of another's rights. ' The first defendant, without informing the plaintiff, assumed the name of the plaintiff and conducted transactions as if he was the plaintiff. The second defendant paid absolutely no regard to the legal rights of the plaintiff and facilitated the first defendant's use of the plaintiff's identity. I do not accept the submission that Mr Cuocco [sic] did not act 'consciously'. He must have been aware of the impropriety, for example, in the use of the Contract for Sale (Exhibit 2D1) which had the unwitnessed signature of the plaintiff although actually signed, to Mr Cuocco's [sic] knowledge, by the first defendant. [33] Had I not been critical of the plaintiff I would have assessed larger damages. In all the circumstances I think exemplary damages should be assessed against the first defendant in the sum of $25,000 and against the second defendant in the sum of $15,000." 23 The primary judge then made the following orders: (a) Judgment for the plaintiff against the first defendant for $31,594.75. (b) Judgment for the plaintiff against the second defendant for $17,198.25. The applications for leave to appeal 24 Both Mr Su and Verekers seek leave to appeal. They expressly recognised the difficulties in seeking leave to appeal in relation to a judgment for such small sums. Nevertheless, they asserted that the errors of the primary judge were so clear and the personal consequences to them in terms of reputation so grave that leave was warranted. It is unnecessary to rehearse the cases on the circumstances in which Parliament's policy of discouraging small appeals will be outweighed in the particular case. The essential question is whether the statutory policy is outweighed by the nature and significance of the errors alleged. The task of persuasion to grant leave is greater where the complaint concerns issues of fact. 25 Here the question of leave should be addressed as to each of the grounds of appeal. Leave on one ground does not automatically lead to leave on other grounds.

[28]

Deceit and exemplary damages 32 Mr Su's first complaint was one based on the pleadings. Paragraph 15 of the Further Amended Statement of Claim pleaded that by falsely signing or forging the transfer and then presenting the transfer to Mr Cuoco, Mr Su fraudulently represented that the forged signature was that of Mr So. 33 The primary judge found the action of deceit made out. His Honour did not explain in [23] of his reasons how or why this was so (see [18] above). There is, however, illumination of the matter in [24] of his reasons ([19] above) dealing with Mr Cuoco (the second defendant). It is plain that the deceit found was not based on a finding that Mr Su presented a signed transfer to Mr Cuoco for the latter to witness (that is falsely to witness, on that hypothesis), but that by signing Mr So's name in Mr Cuoco's presence Mr Su represented to Mr Cuoco that he had Mr So's authority to do so. (That would have also involved a serious misrepresentation by Mr Cuoco because he was not in fact witnessing Mr So's signature at all, but rather he was witnessing Mr Su signing Mr So's name.) 34 It can be accepted that that false representation and deceit of Mr Cuoco was not pleaded. Nevertheless, there is a reasonable basis in the transcript of the trial to conclude that the case was conducted on the basis that Mr Su's wrong was misrepresenting to Mr Cuoco that he had authority of Mr So to sign his (Mr So's) name. 35 In answer to this, it was submitted that there was no evidence from Mr Su that he told Mr Cuoco that he had Mr So's authority. We do not think that matters. Such a statement was implied by his actions. We would not give leave on this point. 36 Secondly, not only did the primary judge make a finding of deceit but he also awarded exemplary damages on the basis of "conscious wrongdoing in contumelious disregard of [Mr So's] rights": [32] of the reasons (see [22] above). 37 Mr Su says that, even assuming the finding of lack of authority, a finding of exemplary damages (and indeed deceit) required the judge to deal with Mr Su's state of mind. Even if Mr Su lacked authority, he may have had a genuine belief that he had that authority. The reality and importance of this caveat can be seen by the fact that it was not contested that Mr Su had authority to sign Mr So's name on the contract of purchase of the land. 38 It was submitted that Mr Su conceded in cross-examination that he did not have authority. We do not read him as doing so. (See T p 252; White Folder Vol 4 p 252). At that point in the evidence, Mr Su was stating that he did not have "that right" - that is the right to sign per pro. On the same page, Mr Su said that he believed he had authority to sign any document for the business. Though somewhat confused and illogical, it did not amount to a clear admission. 39 It was incumbent upon the learned primary judge to deal with the beliefs and state of mind of Mr Su. His Honour did not address this essential component of the claim for exemplary damages and of the element of deceit. In our view, his findings in this regard cannot stand. Essential elements of the tort and of the findings of deceit and necessary findings for exemplary damages were not addressed. 40 We would grant leave and set aside the awarding of exemplary damages. The inadequacy of the reasons for the finding of deceit, in particular the failure to address Mr Su's mental state, warrants leave and the setting aside of the finding of deceit against Mr Su.

[58]

(q) Mr Cuoco did not give evidence. 44 Mr Garnsey SC, who appeared for Mr So, submitted that this Court was not in a position to gainsay the primary judge's finding that Mr Su lacked authority to sell the property or to execute documents on Mr So's behalf, because the finding depended in part on his Honour's assessment of the credit of Mr So and Mr Su. The primary judge expressly disavowed receiving any assistance from the demeanour of the principal witnesses in determining the credibility of their evidence. Even if, contrary to his Honour's disavowal, his assessment rested partly on his observation of the witnesses, there is no challenge to his finding that the evidence of both Mr So and Mr Su was completely unreliable. Given the unreliability of their evidence, his Honour considered that he had to make findings on the basis of the various matters he identified in the judgment (at [16]-[17]). 45 The matters identified by the primary judge consist of objective facts established by documentary evidence, matters that were not in controversy (such as Mr Su having signed documents in Mr So's name), claims which his Honour rejected as "unbelievable" or "ridiculous" and facts found in the face of conflicting evidence (such as the finding that Mr Su had authorised the NAB to pay $97,841 to SDL following the sale of the property). Although his Honour did not explain which of the matters carried particular weight in his assessment of the probabilities, that assessment was based on inferences drawn from findings of primary fact that are not now in contest. In these circumstances, this Court is as well placed as the primary judge to determine whether his Honour drew the proper inference from the facts which are undisputed or, having been disputed, are established by the findings made. This Court will give respect to and weight to the conclusions reached by the primary judge, but will give effect to its own conclusion: Warren v Coombes [1979] HCA 9; 142 CLR 531 at 551, per Gibbs ACJ, Jacobs and Murphy JJ. 46 There are two particular difficulties with his Honour's willingness to infer that Mr So had not authorised Mr Su to sell the property or to sign documents in his (Mr So's) name. The first is that a number of the matters identified by his Honour (and by Mr Garnsey) as favouring Mr So's case are at best equivocal. For example, the finding that a good deal of correspondence addressed to Mr So, such as the settlement statement from Verekers relating to the sale of the property, was sent to Mr Su's post office box is consistent with Mr Su making all decisions connected with the property and with him having authority to make those decisions. In our view, the fact that an application was made in Mr So's name for an exemption from vendor stamp duty (but not completed or signed by him) is equivocal on the question of whether Mr Su had authority to sell the property and to complete documentation in Mr So's name. Similarly, the absence of any demand from Mr Su that Mr So should contribute to the cost of the renovations on the property, if anything, would seem to militate against Mr So's claim that Mr Su acted without authority. 47 The second difficulty is that the primary judge appears to have placed little or no weight on matters that point very strongly against the conclusion that Mr Su lacked authority from Mr So to sell the property and, to that end, to sign documentation in Mr So's name. It was not in dispute that the contract of sale by which the property was purchased was signed by Mr Su in Mr So's name with Mr So's consent. The primary judge considered (at [16(a)]) that the fact that Mr So's name was on the contract for purchase of the property favoured Mr So's version. But his Honour did not specifically refer to the circumstance that Mr Su had written Mr So's name on the contract with Mr So's approval as support for the inference that much the same thing had happened when the property was sold. In our view, this circumstance, although not conclusive, is an important indication that Mr So authorised Mr Su to sign the contract of sale and transfer of the property late in 2004. 48 An even more significant matter is the primary judge's finding (at [17(d)] that Mr So was "aware of the renovations and the sale of the property well prior to October 2006" (when Mr So said he became aware of the sale). The primary judge later expressed (at [21]) this finding in somewhat different language, but a reading of the judgment as a whole makes it clear that his Honour found that Mr So became aware of the sale when he received bank statements in December 2004 showing a nil balance due to the NAB in respect of the loan secured over the property. 49 Despite Mr So knowing of what he claimed to be the unauthorised sale of his property, he made no complaint and took no action for a period of nearly two years. The primary judge did not explain why he appears to have given little weight to this telling failure to complain. In our opinion, the failure is a very powerful indication that, whatever the precise arrangement between the parties, Mr So authorised Mr Su to sell the property and, to that end, authorised Mr Su to sign the contract of sale and transfer in Mr Su's name. 50 If the facts found by the primary judge are considered independently of Mr So having authorised Mr Su to sign the contract for the purchase of the property and of Mr So's failure to complain about the sale of the property for a period of two years, the scales might be said to be reasonably evenly poised on the question of whether Mr So authorised Mr Su to sell the property and sign documentation in Mr So's name. However, these two matters strongly support the clear inference that Mr So authorised Mr Su to sell the property and to sign the necessary documentation in Mr Su's name. In our opinion, his Honour was in error in inferring that Mr So had given Mr Su no such authority. 51 It follows from this conclusion that the primary judge, had he considered the issue, could not have found that Mr Su knew he had no authority to sell the property or executed the documents in Mr So's name. Nor could his Honour have found that Mr Su acted with reckless disregard as to whether or not he had authority. Thus there is no basis for an award of exemplary damages against Mr Su. 52 For the above reasons, in relation to Mr Su's application we would:

[62]

Claim against the solicitors 56 As the primary judge recorded, Verekers conceded that they owed Mr So a duty of care to prevent him sustaining economic loss by reason of the conduct of Mr Su. Mr Philips, who appeared for the solicitors, acknowledged that at the trial the solicitors had accepted that they owed Mr So a duty of care and that, by reason of the acts and omissions of Mr Cuoco, that duty had been breached. However, he pointed out the solicitors had not conceded that Mr So had suffered any loss or damage. Accordingly, the solicitors had disputed that Mr So was entitled to any damages whether compensatory or exemplary, by reason of the breach of duty. 57 The argument in this Court concerning the award of exemplary damages against the solicitors concentrated on whether the evidence supported the primary judge's finding (at [32]) that Mr Cuoco acted in the knowledge that his conduct was improper and that therefore his conduct could be characterised as "conscious wrongdoing in contumelious disregard of another's rights". 58 The primary judge made (at [24]) very serious findings against Mr Cuoco who, it will be recalled, did not give evidence and thus did not explain his actions. On those findings, Mr Cuoco, a solicitor admitted to practice, permitted Mr Su to sign a contract of sale and a transfer of the property in Mr So's name. Moreover, Mr Cuoco certified that the person signing the transfer was known to him and that the document had been signed by that person in his (Mr Cuoco's) presence. Mr Cuoco allowed the transfer to be sent out into the world, including its lodgement with the Registrar-General, as if it had been signed by Mr So, the registered proprietor of the property. As it happened, a bitter and prolonged dispute arose between Mr So and Mr Su as to whether Mr So had authorised Mr Su to act in the way he did. Presumably, the litigation would have been avoided had Mr Cuoco exercised elementary care in obtaining instructions from Mr So and requiring clear authority from him to allow Mr Su to sign documents as his duly authorised attorney. 59 There can be no dispute as to the seriousness of Mr Cuoco's conduct on the findings made by the primary judge. However, the appeal was conducted on the basis that the award of exemplary damages against the solicitors could be upheld only if the primary judge's conclusion as to Mr Su's lack of authority was affirmed. Mr So did not file a notice of contention seeking to uphold the award of exemplary damages in the event that this Court set aside the primary judge's conclusion on the question of authority. Nor was any submission made on Mr So's behalf that the award could be upheld, in the absence of a finding that Mr Su sold the property and signed the transfer without Mr So's authority. 60 There is therefore no occasion to consider the circumstances in which exemplary damages can be awarded in cases of negligence, an issue not canvassed in argument: see A v Bottrill [2003] 1 AC 449; Backwell v AAA [1997] 1 VR 182; R Balkin and J L R Davis, Law of Torts (4th ed, LexisNexis Butterworths) at [27.10]-[27.13]; cf Hunter Area Health Service v Marchlewski [2000] NSWCA 294; 51 NSWLR 268 at [94]-[110], per Mason P (with whom Stein and Heydon JJA agreed); Civil Liability Act 2002 (NSW), s 21 (precluding exemplary damages in an action for the award of personal injury damages). 61 The foundation for the award of exemplary damages against the solicitors, given the way the appeal was conducted, has been removed. Despite Mr Cuoco's conduct, the solicitors should be granted leave to appeal against the award of both exemplary and compensatory damages. The appeal should be allowed. 62 The orders we propose in relation to Verekers' application for leave to appeal are the following:

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