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Federal Court of Australia |
COURT
IN THE FEDERAL COURT OF AUSTRALIACATCHWORDS
Trade Practices Act - s. 52 - misrepresentations made overseas as to the effect of arrangements under Australia's Business Migration Policy - misrepresentations as to the interposition of a solicitor to protect interests of intending business migrant - whether solicitor was "involved" within s. 75B - questions relating to the award of interest for loss of the use of money.Solicitors - Fiduciary Duty - whether solicitor should act for both parties in a conveyancing transaction - whether, after a conflict had developed, he could act for the vendor to remove a caveat lodged in support of the purchaser's equitable lien as a purchaser who had paid the full purchase price - duty of solicitor acting for both parties to explain his dual responsibility, obtain informed consent, and advise in cases where he has a close personal association with one party that the other obtain independent advice - remedy for losses suffered where these duties are not fulfilled - solicitor's duty to put his knowledge at the disposal of his client - whether a solicitor who has acted in a transaction for a party can thereafter act against that party in the same or a closely related matter - whether this is a question dependent on the possession of confidential information or raises wider issues of the loyalty of a fiduciary and confidence in the administration of justice - whether Rakusen v Ellis, Munday and Clarke (1912) 1 Ch 831 represents the law in Australia today - circumstances in which dealings with trust moneys were in breach of a solicitor's fiduciary duty - circumstances in which representations made by a solicitor to a Registrar of Titles were deceptive - irrelevance, to fiduciary's obligation to compensate his beneficiary for losses caused by breach of fiduciary duty, of any question as to what would have happened had the duty not been breached - circumstances in which solicitor's conduct was referred to the Law Society and the Registrar of a Supreme Court.
Trade Practices Act 1974, ss. 5(3), 5(4), 52, 75B and 87
Palmisano v Hyman (Deane J., Supreme Court of New South Wales, unreported, 30 March 1977)
Commonwealth Bank v Smith [1991] FCA 375; (1991) 102 ALR 453
National Mutual Holdings Pty Ltd v Sentry Corporation (1989) 87 ALR 539
David Lee and Co. (Lincoln) Ltd v Coward Chance (1991) Ch 259
MacDonald Estate v Martin (Martin v Gray) (1990) 77 DLR (4th) 249
Rakusen v Ellis, Munday and Clarke (1912) 1 Ch 831
Australian Commercial Research and Development Limited v Hampson (1991) 1 Qd R 508
Farrington v Rowe McBride and Partners (1985) 1 NZLR 83 Spector v Ageda (1973) 1 Ch 30
HEARING
SYDNEYCounsel for the Applicant: Mr R.R. Douglas QC with Mr D.K. Smith
Solicitors for the Applicant: Messrs Marrinan and Allen
Counsel for the First Respondent: Mr N.M. Cooke QC with Mr A.B. Crowe
Solicitors for the First Messrs Sly Weigall Cannan and Peterson Respondent:
Counsel for the Second and
Third Respondents: Mr F.W. Redmond
Solicitors for the Second andThird Respondents: Messrs Whitman and Co.
ORDER
It be declared that the whole of each of the contracts made between the applicant and the third respondent on or about 19 December 1988 is void ab initio.The respondents pay the applicant the sum of $306,000.
The respondents pay the applicant's costs of and incidental to the application.
The counter-claim made by the third respondent in proceedings in the Supreme
Court of Queensland transferred to this Court be dismissed
with costs
including any costs of the proceedings in the Supreme Court of Queensland the
subject of the reservation to the Federal
Court of Australia included in the
order of Ambrose J. made 22 November 1990.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal
Court Rules.
DECISION
When, as we are told in chapters 21 and 22 of the Acts of the Apostles, the apostle Paul was placed under arrest for provoking a riot in Jerusalem, he claimed the immunities of a Roman citizen. "And the chief captain answered, With a great sum obtained I this freedom. And Paul said, But I was free born." (Acts 22:28.) Nearly 2,000 years later, the sale for "a great sum" of the right to settle in Australia was an official practice pursued under the auspices of the Department of Immigration, Local Government and Ethnic Affairs. This case arose out of some of the consequences of that practice, which was regulated by a set of formal requirements under the name the "Business Migration Program" (also called the "Business Migration Plan", or the "Business Migration Policy").2. In 1988, the Business Migration Plan was a matter of considerable interest to those residents of Hong Kong who had some prospect of being able to take advantage of it. An applicant needed to have available $A500,000 for transfer to Australia for business purposes, together with a sufficient sum for his settlement as a migrant in Australia. By the end of 1988, the sum required for settlement had not been specified in any departmental statement, but a figure of approximately $A100,000 was fixed by the existing practice. The spending of a significantly larger sum on the purchase of a house would be of no assistance to an applicant, since it could neither form part of the required transfer of funds for business purposes nor would the excess over $100,000 be treated as relevant to settlement in Australia. It goes without saying that a fundamental assumption of the scheme was that the full amount, totalling approximately $A600,000, would remain in Australia. Late in 1989, a requirement of a specific undertaking to that effect was introduced.
3. In the situation created by this official policy, the applicant Wendy Wai Ying Leung Wan (whom I shall call Mrs Wan) claims that she was the victim of misleading conduct falling within s. 52 of the Trade Practices Act 1974, in respect of which she seeks relief under s. 87. She alleges the conduct was engaged in by a company Dotwell Investment Pty Ltd, the third respondent, and that a solicitor, the first respondent Donald McDonald, and his son, the second respondent, who was the managing director of the company, were persons involved within the meaning of s. 75B. Appropriate consents in writing have been obtained from the Minister under s. 5(3) and s. 5(4) in respect of certain of the allegations which relate to conduct engaged in outside Australia and in Hong Kong. Additionally, claims are made in deceit, in negligence, in contract, particularly arising out of a contract of retainer by the applicant of Mr Donald McDonald as her solicitor, and, also as regards Mr Donald McDonald, for breach of fiduciary duty. All these claims relate to arrangements entered into with a view to Mrs Wan's migration to Australia under the Business Migration Plan. In order to understand the issues, it is necessary to recount the rather tangled tale of her dealings with the respondents.
4. The story begins when Mrs Wan, as a result of seeing an advertisement in a
Hong Kong newspaper, attended a seminar held on 9 September
1988 at the Bond
Centre, a very modern building in Hong Kong. She was accompanied by the
proprietor of the wig business (First Fashion)
of which she was the manager,
one Friendy Tang Lee. When she arrived, Mrs Wan met a Mrs Cheung and one
Cheng Kwok Hung (known as
Jackson Cheng). The suite of rooms where the
seminar was held was identified by a sign as the premises of the Nicehold
Group. Mr
Cheng told the participants that the group included Kawana Water
Property Agency, concerned with Real Estate in Australia, Dotwell
Investment
Pty Ltd, an Australian company which looked after migration and investments,
and McDonald Partners, Australian solicitors
who would look after an
applicant's purchase of real estate in Australia and migration application.
There were a number of certificates
hanging on the wall, including one which
referred to McDonald Partners, solicitors, and one which referred to Dotwell
Investment
Pty Ltd (Dotwell). According to Mrs Wan, Mr Cheng mentioned the
normal requirements of the Business Migration Program, and said:
"The
Australian Government will ask intending migrants of this category to transfer
$A600,000 to Australia through their accredited
Agents." He then asserted:
"With the Migration scheme our company is recommending, all you need is to buy
a house (for) $A195,000
from Dotwell, Australia, and to invest the sum of
$A150,000 in Australia." He went on to represent that his company and the
Queensland
government had worked together to develop the Sunshine Coast for
more than 25 years. He said:
"If you join our company's scheme to apply for migration toHe also said: "McDonald Partners, solicitors, will look after each buyer in the transaction ... ."
Australia, you need $A600,000, but you will only need to
transfer $A350,000 to Australia. This $A350,000 is for the
purchase of a $A195,000 house from Dotwell and to invest
$A150,000 through Dotwell. On top of that, there is (sic)
the fees for the purchase deal. This way, the Applicant
will have no need to transfer all his (or) her $A600,000 to
Australia and yet can still migrate."
5. The substance of Mrs Wan's account of the seminar was confirmed by Mr Lee.
It was in large measure denied by Mr Jackson Cheng,
although he admitted that
he "said that McDonald Partners are solicitors that could be used in Australia
to do the legal work for
(a business migration) applicant". He said:
"I did say that if a BMP applicant wants to apply for6. This conflict makes it appropriate to say at once that, having observed Mrs Wan under cross-examination for a considerable time, I formed a generally favourable view of her evidence. It was more difficult to assess Mr Lee, who not only gave evidence through an interpreter, but was in the witness box for only a short time. He, of course, would have had less reason to recall the seminar than Mrs Wan, although he probably paid considerable attention at the time, since he also was interested in the business migration program, under which both he and Mrs Wan did eventually secure admission to Australia. I was not unfavourably impressed by Mr Lee. On the other hand, I was very unfavourably impressed by Mr Jackson Cheng, and I do not accept his evidence where it is in conflict with that of Mrs Wan or Mr Lee.
migration to Australia, he needs $A600,000. I did not say
that anything less can be used if a person applies through
(Kawana Water Property Limited). I said that the applicant
needs $A600,000, but that at the time of application for a
BMP visa it will be necessary to transfer only $A350,000 of
that to Australia. I said that at the time of application
only $A350,000 needs to be invested in Australia through
(Kawana Water Property Limited). I explained that until
approval of the application the balance of the $A600,000 can
remain in Hong Kong, but must be taken to Australia when
migration is approved."
7. It should also be observed, at the outset, that there would, if I had accepted Mr Jackson Cheng's account of what he said at the seminar, have remained a great difficulty in reconciling it with what I have already stated about the Business Migration Policy. While Mr Cheng did not dispute that the $A350,000 mentioned by him included $A195,000 for the purchase of land and construction of a house in Australia, the evidence of a solicitor called on behalf of the second and third respondents, a Mr Aho, who was clearly well qualified to speak of the Business Migration Policy, showed that, at the relevant time, only $100,000 of such a purchase of house and land could have been taken into account. That is because, as I have already said, this was the figure allowed for settlement expenses. Even if that had not been so, an investment of $195,000, made under the scheme promoted at the seminar, although transmitted to Australia, would not all have remained there. An amount of approximately $70,000 would have been remitted straight back to Hong Kong, as gross profits of the Hong Kong members of the Nicehold Group. Plainly, that sum could not be taken into account under the Business Migration Policy. It would seem to follow that, on Mr Cheng's own version, what he said was quite misleading. An intending migrant who possessed the minimum sum, stated by him, of $600,000 would, after making the investments he suggested, have a short fall, under the Business Migration Policy, of approximately $100,000. Of course, on the version of Mrs Wan, which I accept, the divergence between the requirements of the policy and the statements of Mr Cheng was even greater.
8. Mrs Wan's evidence also detailed statements made at the seminar by Mrs Cheung. Mrs Cheung referred to McDonald Partners as part of the Nicehold Group, and said they "would handle all the documents on behalf of anyone wanting to buy houses".
9. Following the seminar, Mrs Wan made an appointment to meet Mrs Cheung. A
meeting took place at her office at the Bond Centre.
They discussed the
possibility of purchasing a house on the Sunshine Coast for $A195,000, and Mrs
Cheung said:
"If you agree to buy such a house, you may join ourMrs Cheung suggested that Mrs Wan should go to Australia to "discuss directly with Dotwell and McDonald solicitors matters on application for migration and real estate purchases". If she were to do that, she would have to pay a deposit of $A10,000 which could be telegraphically transferred to the McDonald Partners trust account. Mrs Cheung gave her the account number and address for that purpose. On a later occasion, Mrs Cheung added:
migration scheme, invest $A150,000 in the Asian Cultural
Village (a particular investment said to be similar to Hong
Kong's "Sung City") or other business. ... You may not join
our migration scheme if you don't buy a house".
"When you tele-transfer your $A10,000 to McDonald PartnersAbout 19 September 1988, Mrs Wan signed a letter of appointment and authority in Mrs Cheung's office. Mrs Wan then arranged for her bank to transfer telegraphically the sum of $A10,000 to the McDonald Partners trust account.
Trust Account, the solicitor will put the money in their
Trust Account. McDonald Partners is your Solicitor for the
house purchase. He will deposit the money in your name and
when the time comes for you to purchase the house, this
money will be used as a deposit."
10. On 23 September 1988, Mrs Wan and Mr Lee flew to Australia. They were greeted at Brisbane airport by a Miss Flora Hui. They also met Mr Ranald McDonald, the second respondent, who was introduced to them as being from the third respondent, Dotwell. On the evening of their arrival, they had dinner at a restaurant with Miss Hui, Mr Ranald McDonald and Mr Donald McDonald, the first respondent. Mr Donald McDonald was, I accept, referred to by Miss Hui as "your Solicitor". I also accept Mrs Wan's evidence that Mr Donald McDonald, at the dinner, "said that he would do the documents for the house and act as my Solicitor if we bought the house."
11. Mrs Wan was taken to see a house and land. She had a meeting with Mr Ranald McDonald, at which there was discussion about the position of Mr Donald McDonald in relation to the house purchase. Mr Ranald McDonald said: "My father Donald McDonald will be the Solicitor for you. He will check the land. He will check everything for a clear title and will transfer the land to your name." They discussed the business migration application, and she was told she would be required to invest $150,000 through "us" (i.e. Dotwell).
12. Mrs Wan returned to Hong Kong on 2 October 1988, where she had further meetings with Mrs Cheung. Mrs Cheung told her she would need to pay a "checking fee" to have her business migration application checked. Mrs Cheung said: "Transfer this $A1,000 to McDonald Partners Trust Account." She also said: "This is what they charge for checking fee". On 10 October 1988, Mrs Wan transferred the fee of $1,000, and provided some documents to Mrs Cheung for the purposes of her application. A few days later, Mrs Cheung telephoned her and told her there would be no problem with a business migration application. Mrs Cheung also told her the price of houses was about to go up, but she could be guaranteed a house at the original price if she transferred a further sum of $A30,000 to Australia. After some bargaining, this amount was reduced to $A20,000, to be telegraphically transferred "to McDonald Partners Trust Account as soon as possible". In the second half of October, Mrs Wan did transfer $A20,000 to the McDonald Partners trust account, obtaining a receipt dated 24 October 1988 from Donald McDonald and Company, solicitors, forwarded by facsimile by Kawana Water Property Agency Ltd, and subsequently the original receipt, forwarded by Dotwell.
13. During this period, Mrs Wan had a conversation with Mrs Cheung, in which she expressed concern to Mrs Cheung that the Australian government might require more money. Mrs Cheung said: "Our clients who apply through Dotwell normally send $A350,000 over. This $A350,000 includes $A195,000 for buying the house." Mrs Cheung added further reassurance: "Everyone of our clients sent only $A350,000. Believe me, that's enough". Mrs Wan decided that she would proceed with the purchase, and with a business migration application. She made arrangements to return to Australia, for that purpose, on 18 December 1988. Before she left Hong Kong, Mrs Cheung told her to obtain a bank draft in the sum of $A165,000, "made out to McDonald Partners Trust Account". Mrs Wan obtained the bank draft.
14. On this occasion, Mrs Wan was accompanied to Australia by her husband. They were met at the airport by Mr Ranald McDonald and Miss Flora Hui. They were taken to the Sunshine Coast, where they were shown a house, said to have been built by Dotwell, and some parcels of land. Later, at a meeting with Mr Ranald McDonald, in his office, which took up much of a day, two contracts were signed, one in respect of land and the erection of a house, and the other in respect of the business migration application. Mr Ranald McDonald told Mrs Wan she would have to pay about $1,500 to McDonald Partners for their professional services. "They will check everything to make sure that the land is clear before transferring the title to you and they will transfer the title to your name." There was discussion about some changes required to the plan of the house, and Miss Flora Hui went through the contract with Mr and Mrs Wan in Cantonese. Mrs Wan handed the bank draft for $165,000 to Mr Ranald McDonald, who gave her a receipt which he stamped with the name of Dotwell. It was not a trust account receipt of McDonald Partners. Mr Ranald McDonald offered the excuse that they had "run out" of the printed receipt forms. He said: "Don't worry about it. McDonald and Dotwell are the same".
15. Mrs Wan returned to Hong Kong on Christmas Day. She was promised by Mrs Cheung that she would be told about the alteration required to the plan. Mrs Wan kept reminding Mrs Cheung, but there was no news until 14 February, when she was shown a plan that did not comply with what had been arranged. Again, she kept getting in touch with Mrs Cheung without success. In June, she was told Mrs Cheung had left the company. She was then asked to pay a fantastically excessive - obviously and absurdly erroneous - amount of stamp duty, and after that request had been corrected a still very excessive amount. About this time, it is clear that the relationship between Mrs Wan and the respondents became ruptured. The present litigation has resulted.
16. Throughout the entire period, Mrs Wan had no direct contact with McDonald Partners except for the meeting with Mr Donald McDonald at dinner on the occasion of her first visit to Australia, to which I have already referred. She received neither legal advice nor communication of any kind concerning the contract for the purchase of the land. This continued to be the position up until the institution on 15 August 1989 of proceedings in the Supreme Court of Queensland, followed by the institution of the present proceedings on 10 January 1990. But in January 1991, when Mrs Wan was back in Hong Kong, she received a telephone call from Mr Cheng, who told her that Mr Donald McDonald wished to speak to her about the matter. She replied that she had handed the case over to her solicitor, and did not know if she should talk to Mr McDonald. Later, she called Mr Cheng back and told him it was not convenient for her to talk to Donald McDonald, but her solicitor would like to contact him, and she asked for the name of his hotel. Mr Cheng promised to call back; however, later that day, he and Mr Donald McDonald arrived at Mrs Wan's office. Mr Donald McDonald attempted to record, on a tape recorder, a conversation with Mrs Wan. Mrs Wan said: "I have passed the case to my Solicitor, please contact him if you want to know anything". Yet Mr McDonald continued to attempt to have, and to record, a discussion with her. I find this whole incident extraordinary behaviour for a solicitor who knew that Mrs Wan was represented by another solicitor, and that in any discussion about litigation in Queensland she was labouring under the disadvantage of being a Hong Kong Chinese with limited knowledge of English, and almost no experience of Australia. However, I am quite satisfied, on the evidence, that the incident occurred as Mrs Wan related it. It was followed, a few days later, by a telephone call from Mr Donald McDonald to Mrs Wan, in which he suggested that her money would be lost to her solicitors, and urged her to compromise with him. He also made a reference to her migration application, which might have been taken as a veiled threat to interfere with her plans to come to Australia.
17. It is now appropriate to turn back to the documentation involved in this case, as well as to fill in some of the details that do not depend on the evidence of Mrs Wan. The documents handed to Mrs Wan in Hong Kong, before she had entered into any contract with Dotwell, included statements praising the Sunshine Coast, and a number of very well known names. They could quite readily have conveyed an impression that Dotwell had some association with prominent companies. This may have seemed not unlikely in the plush surroundings of the Bond Centre in Hong Kong. The documents contained, too, a passage in extremely laudatory terms about the law firm McDonald Partners, which was described as "skilled in handling real estate, immigration ... . They examine each case meticulously, and make every effort to help the client attain his objective of migrating."
18. The letter of appointment mentioned earlier, which Mrs Wan signed before
leaving Hong Kong on the first occasion, when she was
accompanied by Mr Lee,
is addressed to Kawana Water Property Agency Ltd of Bond Centre, Hong Kong.
It confirms appointment of the
company "as my agent in Hong Kong", and sets
out terms which include: "I will place an initial deposit of A$10,000.00 with
you for
your onward remittance to the Vendor's solicitors, Messrs McDonald
Partners Solicitors (`the McDonalds')." Although the language
of this
provision does not suggest that McDonald Partners would be acting for her as
well as for the vendor, the next provision is
consistent with Mrs Wan's
account, according to which McDonald Partners were to act also for her. It
reads:
"Within 60 days after your remittance of the initial deposit(This never happened.) There is also a term specifying that a refund of the $10,000, if Mrs Wan should decide not to proceed with the transaction, would be made via the agent, and Mrs Wan undertook "that I will not demand refund of the deposit from the McDonalds." She would in that case receive only $8,800 from the agent. Clause 4 provided, again consistently with Mrs Wan's account:
to the McDonalds, you shall arrange a conference to be held
between the McDonalds and myself for giving me legal advice
relating to the transaction."
"If the proposed transaction can be put through, I confirmThe letter of appointment also contained a clause in the following terms:
that you have no liability whatsoever towards me since I
have (sic - scil. will have) already taken full an (sic)
proper legal advice from the McDonalds. Your responsibility
towards me is entirely as an (sic) placing agent ... ."
"6. I hereby declare that my purchase of the Property isThis clause was plainly contrary to the fact, given that I accept Mrs Wan's account. She said she was told by Mrs Cheung to ignore it.
purely a personal investment and I have never been
advised that such purchase could have any bearing on
any prospective application to immigrate to Australia
on my part."
19. There was tendered in evidence a copy of the document by which the China
State Bank Ltd remitted, on behalf of Mrs Wan, the sum
of $10,000 to Westpac
Banking Corporation in favour of McDonald Partners trust account. The
document is dated 19 September 1988.
It was acknowledged by a letter
(undated) from Kawana Water Property Agency Ltd stating:
"We have acknowledged to receive your remittance ofThe receipt is signed for Donald McDonald and Company solicitors of Brisbane and is marked "TRUST ACCOUNT". It is dated 22nd September 1988 and shows the amount as having been received from Mrs Wan, "being House Deposit Dotwell Investment Re: Leung Wai Ying". On the same day, the money was paid out of the trust account into a money market account earning interest, at Chase AMP Bank Limited, in the name "McDONALD PARTNERS AS TRUSTEE FOR LEUNG WAI YING", but the interest was directed to be paid "TO DOTWELL INVESTMENT ACCOUNT".
A$10,000.00 which (we) have deposited into the Trust Account
in McDonald Partners in your own name which will solely be
operated by your goodself (sic). ..."
20. There was also tendered documentary evidence of the telegraphic transfer
of $A1,000 on 10 October 1988 in favour of the McDonald
Partners trust
account. For this sum, a trust account receipt issued, dated 11 October 1988,
acknowledging receipt from Mrs Wan
of the amount, "being Legal fees on
Migration Processing". Lower down on the receipt, there was noted the
following: "Dotwell Investment
Re Leung Wai Ying". Again, Kawana Water
Property Agency Ltd wrote confirming the receipt of this sum "which has been
remitted to
McDonald Partners". There was tendered, too, documentary evidence
of a telegraphic transfer of $A20,000 on 21 October 1988 in favour
of the
McDonald Partners trust account, transmitted by Mrs Wan through the China
State Bank Ltd. In response, Kawana Water Property
Agency Ltd wrote a letter
dated 26 October 1988 to Mrs Wan, as follows:
"Please find copy of receipt for your remittance.The receipt document is a copy of a trust account receipt dated 24 October 1988, from Donald McDonald and Company in favour of Mrs Wan, for the sum of $20,000, described as "being Additional House Deposit Dotwell Investment Re: Leung Wai Ying". The copy is a facsimile copy, and it appears the original was received a few days later by Mrs Wan under cover of a letter from Dotwell Investment Pty Ltd dated 27 October 1988, signed by Ranald McDonald as managing director.
The additional deposit will enable us to fix the purchase
price at AUD$195,000.00 for your forthcoming tour in December."
21. The bank draft, which Mrs Wan took with her to Australia on her second visit, was also tendered. It is dated 16 December 1988, and is made out, in the sum of $165,000, "to the order of McDonald Partners Trust Account", addressed to Westpac Banking Corporation, and marked "NON NEGOTIABLE A/C PAYEE ONLY". It is quite remarkable that a draft, so made out, should have been paid, not into the trust account of Mr Donald McDonald, but into an account of Dotwell. There cannot, of course, be any justification for that, but I think the explanation must be bound up with the close relationship between Donald McDonald and Company and Dotwell, which may have led to some confusion on the part of staff of the bank.
22. The two agreements, signed by Mrs Wan in Brisbane on 19 December 1988, were in accordance with forms drawn in Mr Donald McDonald's office, and were endorsed, in the familiar way, with the name of his firm. One was an agreement for sale of land and for the erection of a house on it; the other was an agreement specifically related to the proposed business migration application. The agreement for sale was made between Dotwell Investment Pty Ltd, the address of which was given as identical with the address of McDonald Partners, solicitors, whose name appeared on the agreement, and Mrs Wan whose full name was shown in a schedule. The schedule also showed the description of the land, which was at 17 Mulgani Street, Warana, Kawana Waters. The purchase price payable to Dotwell was shown as $195,000, and there was a provision for payment to the McDonald Partners trust account in respect of costs and outlays. There was a note in ink, after a reference to conveyancing costs, "1% STAMP DUTY". The note about stamp duty accords with evidence given by Mrs Wan that it was represented a concessional rate would be obtained. I shall return to a consequence of this representation, but note here that the excessive demands later made upon Mrs Wan in respect of stamp duty were for sums very much greater than 1% of $195,000.
23. The agreement contained several provisions which it is desirable to set
out precisely. After reciting that Dotwell had the land
"on offer to it" and
was "prepared to complete the purchase of the said land and erect or have
built a dwelling on it", the agreement
continued with a number of operative
clauses, as follows:
"1. Subject to the completion by DOTWELL of its purchase of the landthe
in the Schedule DOTWELL does hereby sell to the Purchaser and the
Purchaser hereby buys from DOTWELL clear title to the freehold land in
the Schedule and DOTWELL shall ensure that there be built on such land
the dwelling agreed to between the parties and DOTWELL shall have
supplied and installed free of encumbrances the fittings, appliance,
furniture, lighting, furnishings, floor coverings, pathways, garden and
landscaping in a package designed by Dotwell agreed between parties
prior to signing of this agreement subject to the terms hereof.
2. It shall be paid in full by the Purchaser to DOTWELL, to be
lodged by DOTWELL in its own trust account in relation to the supply of
the said house, land, furniture and landscaping package within the said
time and in accordance with this agreement.
3. At the time of issueance (sic) of title deed, (approximately 2
months) the Purchaser shall also pay, if set out in the Schedule, to
as Solicitors, necessary to allow the transfer of land to be registeredof
into the name of the Purchaser clear of all encumbrances. The amount
professional costs will be the sum of AUD$1500.00. This clause engagesand
the said Solicitors to act in transferring the land to the Purchaser
the Solicitors are authorised to pay from such monies received forhouse
costs, outlays, stamp duties, and titles office fees, such outlays as
are due and to transfer their own professional costs without further
authority than this agreement, and if a lump sum on account of
professional costs and outlays is lodged by the purchaser with such
Solicitors or is available by the Purchaser in connection with the
and land purchase then the Solicitors may draw such outlays and costsadjustments
from such lump sum, The Solicitors shall be entitled to make
of outgoings, including rates and taxes relating to the land and anysuch
surplus of money from costs, stamp duties, titles office fees or
otherwise, or from adjustments of rates and taxes shall be accounted by
the Solicitors to the Purchaser and shortfall or deficiency paid by
by the Purchaser to the Solicitors.the
4. Such part of the balance of the monies as set out in Clause 2
hereof as DOTWELL requires to have the dwelling house agreed between
parties, and to have completed the lanscaping (sic) paths and gardenslater
agreed upon, and to purchase and install the furniture, furnishings,
appliances, floor coverings, lights and other matters agreed to between
the parties hereto, either at the time of this agreement or varied
by mutual agreement shall be lodged by DOTWELL to it's (sic) credit inthe
relation to this agreement and the Purchaser and the land set out in
Schedule in its own Account. All interest shall be the property ofprogress
DOTWELL and if possible payment or credit of interest is to be made to
DOTWELL directly. DOTWELL shall be at liberty to draw out such
applicances (sic), lights, floor coverings, or otherwise connected withOther clauses followed - a provision that time was not of the essence for completion (despite the accepted meaning in conveyancing of the word "completion", I think this clause was intended to refer to completion of the building work), a provision that mistakes should not annul the sale, a provision enabling Dotwell to increase the price by 5 per cent for increases in building costs, a provision (directed to the concessional stamp duty) requiring the purchaser not to purchase any other land in Australia within one year, a general provision that Dotwell would ensure the purchaser got valid title clear of encumbrances, a provision for apportionment of rates and taxes at the time of transfer "and the property shall (be) at the purchaser('s) risk from the date of transfer", and an acknowledgment by the purchaser including the following:
the house and its fittings as are needed from time to time."
not connected with any application that he may seek to make to migratehis
and that no promise has been made to him regarding migration in
connection with this purchase except that the amount of investment in
the house, land, furniture and furnishings could be shown as part of
total assets proposed for migration purposes."24. Although cl. 2 of the agreement uses the expression "within the said time", no preceding provision of the agreement enables a time to be identified. There is no provision about a deposit, and nothing is said about the $30,000 (apart from the $1,000 fee) already transferred by Mrs Wan to Mr Donald McDonald's trust account. Clause 3 "engages" McDonald Partners as solicitors, and requires payment of their professional costs in the sum of $1,500. Bearing in mind that the document was drawn in Mr McDonald's office, and should, so far as its meaning is doubtful, be construed contra proferentem, I think it must be read as indicating that McDonald Partners would be acting as solicitors for the purchaser in the normal way. In fact, in Mrs Wan's case, a conveyancing file was opened on this basis.
25. Bearing in mind the evidence of Mrs Wan, which I have accepted, concerning what was said when she met Mr Donald McDonald at dinner on her first visit to Australia, and the contents of the agreement, quite apart from any effect other evidence in the case might have, I think Mr Donald McDonald, both orally and by what he represented through the document bearing his firm's name, indicated to Mrs Wan that he would act as her solicitor in the transaction. In the context, this amounted to a representation that he would perform on her behalf the normal duties of a solicitor for a purchaser, and on the evidence, she accepted him as her solicitor to do so.
26. This conclusion is important from a number of points of view. It is clear that Mr Donald McDonald was also acting as solicitor for Dotwell. As Richardson J. said in Farrington v Rowe McBride and Partners (1985) 1 NZLR 83 at 90: "(T)he Courts have often warned of the risks involved where the solicitor acts for both parties in a conveyancing transaction". But here the solicitor was not merely acting for both parties in the transaction; he was very much involved with one of the parties. There was some dispute whether Mr Donald McDonald's involvement extended to a shareholding, or position as a director, in relation to Dotwell at the relevant time, as at any rate he had been until shortly before (he was a director until at least 10 June 1988), but he was certainly very much concerned in its affairs. His son acted as its managing director. He visited the Hong Kong office with some regularity. The name of his firm was displayed there; reference was made to it in the seminars conducted there and in documents distributed there; and the arrangements for remittance of moneys from Hong Kong to Australia involved the use of his firm's name and trust account. In that regard, his own evidence shows this was no isolated case; there was a pattern of transferral of moneys to his trust account, and payment out to Dotwell.
27. When a branch office was opened in Taiwan in October 1988, Mr Donald McDonald was in attendance at the ceremony. His name was used, so as to suggest he was part of the enterprise, in advertising emanating from that branch. Although this use of his name attracted unfavourable attention from the Immigration Department on the ground that the advertising was misleading, he took no steps to stop it, or to dissociate himself from it. His excuse that the Taiwan branch ceased operations quite quickly, if true, hardly answers the inference of his involvement; an uninvolved solicitor would naturally protect his name, it would be expected, by prompt action, particularly as some of the same Chinese principals (if not all of them) were involved in both the Taiwan and Hong Kong operations - what they had done in Taiwan, they might be doing in Hong Kong. He also closely associated himself with the immigration activities of Dotwell in applications he made to the Department of Immigration to become an accredited immigration agent. In those applications, he put himself forward as having an office in Hong Kong, which on the evidence could only be the office used by Dotwell and Kawana Water Property Agency Ltd, and his son, Dotwell's managing director, who was not legally qualified, was represented as being a member of his firm. He personally (not Dotwell) contracted for the obtaining of certificates from an immigration agent for Dotwell's clients, who were treated by the contract as his clients. He drafted a letter (though he swore it was not sent) to the Australian consul in Hong Kong, giving the address of McDonald Partners as "Kawana Water Property Agency Ltd ...", and adding "this will be our office in Hong Kong, not for the purpose of practising local Hong Kong law".
28. The closeness of the association between Mr Donald McDonald and Dotwell is very clearly seen in what happened to the moneys telegraphically transferred from Hong Kong to Mr McDonald's trust account, and to the draft for $165,000 drawn in favour of that account. On 8 November 1988, Mr McDonald's firm received an authority from Dotwell to pay moneys out of trust. At that time, it held $30,000 on behalf of Mrs Wan who, of course, had given Mr McDonald no authority to pay that sum to Dotwell. The contract with Dotwell was not signed until 19 December. But Mr McDonald paid the $30,000, held in trust, to Dotwell without obtaining any instruction or authority to do so from Mrs Wan, and without any further contact with her other than the initial conversation in September, at dinner, when he had promised to act as her solicitor. Although his firm wrote out trust account receipts, it did not send them directly to Mrs Wan. Mr Donald McDonald claimed in evidence to be justified, in ignoring Mrs Wan, by the letter of appointment addressed to Kawana Water Property Agency Ltd. But this document appointed that company as Mrs Wan's "agent in Hong Kong"; it did not appoint an agent in Australia. Its terms did not commit Mrs Wan to proceed with the proposed purchase, nor did they contemplate that Dotwell would receive the $30,000 before the conclusion of a contract. Furthermore, the document did not refer to $30,000, but to $10,000 only. It will be recalled that the balance of $20,000 was forwarded later, under a separate arrangement, to the trust account of McDonald Partners, into which it was paid as money held in trust for Mrs Wan. Even as regards the $10,000, the letter of appointment leaves no real doubt (and the letter, already quoted, by which Kawana Water Property Agency Ltd acknowledged the remittance of the money, emphasized) that the money was to be held in trust for Mrs Wan pending the conclusion of a contract. It was for this reason that it was necessary, in order to protect Kawana Water Property Agency Ltd in respect of the cost of flying Mrs Wan out to Australia, to provide, as a term of her contract with that company, that she would not demand her money from her solicitor - instead, she would have the amount refunded to her (in case no contract was concluded) through the company, so that it could deduct the agreed amount in respect of its expenses. In any case, the evidence suggested Mr Donald McDonald did not receive the letter of appointment, said to have been relied upon, until long after he had paid the money to Dotwell, though, as to this, it is possible he assumed its existence from his knowledge of the practice of the Nicehold Group.
29. The payment of the $30,000 to Dotwell by Mr Donald McDonald could not be justified on any basis which emerged in the evidence. It was not, in fact, directly out of his trust account that the money went to Dotwell. It had already been paid into a special account with Chase AMP Bank Limited, the opening of which was entirely without authority. Although the special account was admittedly opened as an account of McDonald Partners in trust for Mrs Wan, Donald McDonald treated it as at the disposal of Dotwell. The result was to enable interest to be earned on the money, but not for the benefit of Mrs Wan whose money it plainly was, at least pending contract. Mr Donald McDonald recognized, in the witness box, the irregularity of what he had done in paying the $30,000 to Dotwell, and claimed the trust account was wrongly named. He said Dotwell should have been included as a beneficiary. I do not accept that there was any mistake.
30. As I have said, the transactions with the sums telegraphically transferred show the closeness of the relationship between Mr Donald McDonald and Dotwell. It is inconceivable that a solicitor could be unaware of the grave dereliction of his duty involved in these dealings, unless blinded by the closeness of his association with the business of Dotwell. Of course, this manner of doing business had the effect of giving Mrs Wan the impression that her money was perfectly secure, because paid to the trust account of a solicitor who would be acting for her. I think it is very unlikely that Mrs Wan would have transferred the whole sum of $30,000, or any significant part of it, to Australia if she had not been given that assurance. In my view, the method of transferring money to Australia was employed in order to suggest the security of the involvement of a solicitor and his trust account. In the circumstances, it amounted, at best for the solicitor, to misleading conduct to which he, who knowingly allowed his name and trust account to be used in this way, was a party. At worst, and in reality, as the moneys were truly held in trust for Mrs Wan, the solicitor was also acting in serious breach of trust.
31. The events surrounding the receipt of the draft for $165,000 are even more remarkable. This sum, too, Mrs Wan was induced to yield up, under the illusion that it would go into the safe keeping of the trust account of a solicitor who would protect her interests. She handed it, as I have said, to Mr Ranald McDonald at the address where both Mr Donald McDonald and Dotwell had offices, and shared the same telephone number. Despite the clear language of the draft, and the endorsement that it was for the account of the payee only, it found its way into an account of Dotwell. Mr Donald McDonald gave evidence that he knew nothing about the draft until much later. But the conveyancing could not have been attended to without it coming to notice that the full price had already been received by Dotwell, although it was supposed to have been paid, according to the practice established in a considerable number of matters, into the trust account of the solicitor. Mr Ranald McDonald explained that his "secretary, Theresa Shaw before I had arrived in that morning (i.e. 20 December 1988) had just seen it (i.e. the bank draft) there - `oh, a cheque, a receipt' - and had taken it to the bank." However, this reconstruction cannot be correct. Miss Shaw did not come in the next morning to find documents of which she knew nothing, and just jump to an assumption that the draft should be banked in Dotwell's account. She had been involved in the giving of the receipt on the previous day, for it bears her signature. Although Mr Donald McDonald originally said he did not know where Miss Shaw was, after he and Mr Ranald McDonald had been cross-examined, she was found and brought urgently to court. She had no recollection of being blamed for making a mistake in the banking of so large an amount, which was far greater than any other sum she had banked in the substantial period covered by the banking book. She had filled out the banking book on the day before she did the banking, the day when the draft was received by Mr Ranald McDonald. If his version, that they were working back late, is correct, she must also have been working back. She thought it was "more than likely" that Mr Ranald McDonald directed her to bank the cheque, although she could not recall. When the matter was raised by the Queensland Law Society in 1989, the explanation given by McDonald Partners, in a letter dated 18 August 1989, suggested that the receipt for the bank draft had been "erroneously issued" by Miss Shaw; it made no mention whatever of Mr Ranald McDonald's part as the person who received the draft, authorized the issue of the receipt, and actually handed it over to Mrs Wan.
32. No steps were taken, at any stage, by Mr Donald McDonald to require the sum of $165,000 to be deposited in his trust account. In his letter of explanation to the Queensland Law Society, he suggested that this would be unnecessary because of the terms of the contract of 19 December 1988; however, he also said that if the money were made good to his trust account, the dispute between Mrs Wan and Dotwell would require him to pay it into court. That, of course, would have protected Mrs Wan.
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.
34. However, Mrs Wan decided to seek relief alternatively under the Trade Practices Act, and also against Mr Donald McDonald and Mr Ranald McDonald, as I have already indicated, and to proceed in this court. Accordingly, the present action was commenced in January 1990. That, of course, made it impossible for Mrs Wan to continue the proceedings in the Supreme Court of Queensland, since both proceedings related to the same matter, and in both she sought, as regards her general law claims against Dotwell, substantially the same relief. In particular, in both she sought to establish an equitable lien in respect of the purchase money paid by her. In this situation, cross-summonses were taken out, each returnable on 26 September 1990, by which the plaintiff, Mrs Wan, sought leave to discontinue the Supreme Court action and sought a stay, until further order, of proceedings on a counter claim which had been brought by Dotwell, while the defendant Dotwell sought to have the statement of claim struck out or stayed. Relief was granted as asked by Mrs Wan, and a notice of discontinuance (which had obviously been prepared in advance of the summons for leave, being dated 12 February 1990) was filed on 2 November 1990.
35. On 24 October 1990, Dotwell executed a Request to the Registrar of Titles
to remove the caveat which had been lodged by Mrs Wan.
The Request was lodged
on 25 October 1990, and the document shows that the deed was lodged by the
lodger. The fact that it was
able to be lodged in support of that application
shows how illusory was the protection which Mrs Wan had repeatedly been given
to
understand she would have from the involvement of a solicitor to act in the
conveyancing on her behalf. The ground of the request
was that the action in
the Supreme Court
"proof of which supported this Caveat was the subject of anThe application gave no hint that, in fact, leave to discontinue had been sought in order to enable more comprehensive proceedings to be continued in this court. In support of Dotwell's application, Mr Donald McDonald signed a letter dated 31 October 1990 addressed to the Registrar of Titles. The letter, too, gave no hint of the continued pursuit of Mrs Wan's claim. After referring to the lodgement of the caveat, it continued:
Order made on the 26th September, 1990 for discontinuance
and for payment of the costs of the registered proprietor by
the Plaintiff Caveator (sic) Wendy Wai Ying Leung Wan."
"Under section 39 of the Real Property Acts 1877-1979 afterIt related the connection between the caveat and the Supreme Court proceedings, and referred to the summonses returnable on 26 September 1990. It continued:
the expiration of three calendar months from the lodgement,
such Caveat shall be deemed to have lapsed unless the person
by whom or on whose behalf the same was lodged shall within
that time have taken proceedings in any Court of competent
jurisdiction to establish his Title to the estate or
interest therein specified and shall have given written
notice thereof to you."
"The action Writ 2747 of 1989 which prevented the Caveat36. Surprising though it may seem, this ex parte application was acceded to by the Registrar of Titles, without reference to Messrs Marrinan and Allen. Dotwell proceeded to complete a sale of the property (with Mr Donald McDonald acting as vendor's solicitor) and pocket the proceeds. Counsel for Mrs Wan rely on the manner of removal of the caveat in two ways. They contend that it involved a breach of fiduciary duty on the part of Mr Donald McDonald, who had acted for both parties in the very transaction that led to the lodgement of the caveat. They also rely on the terms of Mr Donald McDonald's letter as annihilating his credit.
from lapsing on 15 October, 1989 as from the time of the
Order of 26th September, 1990 is now at an end, saving only
the aspects of the counterclaim (sic) (sine die) and that is
a matter for the Defendant Caveator (sic), if even
continued, has no relevance to the Caveat.
It is absolutely clear cut that the Plaintiff's claims in
the action as Plaintiff is (sic) at an end. The payment of
costs the (sic) by the Plaintiff (Caveator) and perhaps a
need to meet or counterclaim (if carried on and that aspect
is adjourned) does not change the facts.
The action which supported the Caveat has been discontinued
by the Plaintiff (Caveator) following on a summons taken out
by the Plaintiff (Caveator) seeking to do so. ...
Therefore, we ask that the Caveat be marked as LAPSED, and
any lapsing fee required will be paid. Once the supporting
action is discontinued or disposal of the lapse applies, and
if the lapse has run out, which it has, it would be
illogical to rule otherwise, as it would create confusion.
. . .
A person could lodge a caveat, start proceedings and give
notice to you and then disappear or go overseas. Surely
your belief is that such a person must be found and forced
(to) withdraw the Caveat, or be served with a Summons to
remove a Caveat which depended on a discontinued or struck
out action. Service could be difficult, have overseas
delays or be impossible.
. . ."
37. In my opinion, the very severe submissions made about the letter are fully justified. By its emphasis on the discontinuance of Mrs Wan's action in the Supreme Court, while at the same time totally suppressing the existence of the proceedings in this court and the necessity for that discontinuance, once the proceedings covering the same ground (and additional grounds as well) had been launched in this court, Mr Donald McDonald succeeded in conveying an impression which was the precise opposite of the truth. The Registrar of Titles was given to understand that Mrs Wan's claim had been withdrawn, and in such complete defeat that she had had to pay the costs. The statement: "It is absolutely clear cut that the Plaintiff's claims in the action as Plaintiff is at an end" could only convey a straight out lie; unless the reader was aware of the proceedings in this court, he could not be expected to give the words "in the action" the unnatural emphasis necessary to make the statement true. In fact, the plaintiff's claims were not at an end, but were being continued in a court of competent jurisdiction, together with additional claims capable of supporting the same relief. The reference to possible difficulties of service overseas was inexcusable, unless unintentional as regards its most likely effect - to suggest subtly a reason for ex parte action.
38. A public official, such as the Registrar of Titles, must often act upon the representations of solicitors. He is justified in expecting frankness and honesty. In this instance, the solicitor abused his privileged position in order to mislead. And he did so in the interests of a company with which, at the least, he had a close family association, so as to enable it to evade its obligations under an equitable lien towards a former client, on whose behalf he should long ago have at least secured possession of the title deed. If he did not thoroughly understand the law of equitable liens, he knew the facts which made Dotwell's conduct dishonest. And he participated in that dishonesty, both by his deceit in obtaining removal of the caveat, and by carrying through the sale of the property and disbursement of the proceeds. I have not thought it relevant to explore the respondents' contention that the caveat was, for technical reasons, vulnerable to removal; if true, this could not change the fact that its actual removal was engineered by deception, and that Mrs Wan was denied by concealment the opportunity to replace it with injunctive relief.
39. Mr Donald McDonald was cross-examined about these matters. He claimed that a lien would not support a caveat, and appeared to suggest it was the obligation of Mrs Wan's solicitor to inform the Registrar of Titles of the Federal Court action. He said it was not his duty to do so, and suggested it would be "to do the work of the other solicitors". Pressed as to whether he should have notified Messrs Marrinan and Allen, he said: "I dislike Marrinan and Allen. I wouldn't willingly tell them anything. I dislike them excessively." Asked: "Oh, is that the true story, is it?" he replied: "Oh, yes. I hate them." Further comment is not required.
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.
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.
42. I am regretfully driven to the conclusion that I ought not to accept the evidence of Mr Donald McDonald, where it is not confirmed by other evidence or in accordance with what I find to be the probabilities. Neither do I accept the evidence of Mr Ranald McDonald, where it conflicts with the evidence called for the applicant, nor particularly in respect of the draft for $165,000. I think the probability is that Mr Ranald McDonald instructed Miss Shaw to lodge the draft in Dotwell's account, and that Mr Donald McDonald, if not then aware of his action, became aware of it within a very short time, most likely the next day. Having regard to the admitted practice, the closeness of the relationship between Dotwell and McDonald Partners, and the need of Mr Donald McDonald's firm to know the facts of the matter in order to perform their function as conveyancers, this conclusion seems to me to follow naturally. Had the rest of the evidence suggested that Mr Donald McDonald paid meticulous regard to the obligations he owed as a solicitor, a conflicting probability of regular conduct of his affairs might have had to be considered. However, he had already demonstrated, in respect of the $30,000, that he was not meticulous, and that he was prepared to see trust moneys paid out when he had not checked whether an authorizing contract had been signed, and when none had in fact been signed. The statutory declarations for the Stamp Office and the letter to the Registrar of Titles need no further comment. I am satisfied the situation was as I have stated it.
43. I do not accept Mr Donald McDonald's construction of the contract of 19 December 1988. It is clumsily drawn, but I see no reason to construe it as meaning that the full price had to be paid before title was obtained in Mrs Wan's name. It does not say so. Unless compelled by intractable language, a court would normally construe a contract for the sale of land as contemplating that the price would be paid over upon delivery of an appropriate transfer or conveyance and other documents of title. The evidence of the respondents was that Dotwell was liquid, and there is no evidence to the contrary in respect of the period prior to the sale that was completed in evasion of Mrs Wan's equitable lien. Accordingly, if Mr Donald McDonald had performed his duty as a solicitor acting for Mrs Wan, and had taken prompt steps to recover the draft which had been wrongfully paid into Dotwell's account, it is probable the whole sum of $165,000 would have been recovered and paid into his solicitor's trust account. Likewise, the sum of $30,000 wrongfully paid out of the trust account would probably have been recovered, if prompt action had been taken, as was Mr Donald McDonald's duty.
44. I do not think the authorities require Mrs Wan to prove any more than
that, in order to be entitled to a decision in her favour
on the ground of
breach of Mr Donald McDonald's fiduciary duty to her as her solicitor. Mr
Donald McDonald failed to disclose to
his client that his other client had, as
a result, at least, of his negligence, obtained $30,000 in advance of the
signing of any
contract; and, as a result of the conversion of her bank draft,
had obtained the whole balance of the purchase money in advance of
showing any
title or executing any transfer, or even obtaining title. A more material non
disclosure it would be very difficult
to imagine in relation to a conveyancing
matter. As was pointed out in Farrington v Rowe McBride and Partners (supra,
at 92-93, 97-99),
where a situation of that kind arose, the solicitor had a
responsibility, at the least, to explain to Mrs Wan the nature of his dual
responsibilities in order to obtain her informed consent to his continuing to
act for both clients. And she should have been advised
that because of his
professional commitment to his other client, and his close personal
association with it, and because too of the
demonstrated reality that her
interests and its interests would not necessarily coincide in the particular
transaction, she should
consider taking independent advice. I shall return to
the law on this topic; for the present it is enough to say it was stated in
Farrington v Rowe McBride and Partners at 99 (and see also 93) that in such a
situation
"(E)quity gives a remedy for the loss suffered ... . ...45. So far as concerns the matter of disclosure to Mrs Wan of the misapplications of her funds which had occurred, I do not think there can be any doubt of Mr Donald McDonald's duty. It is not for a solicitor to hide such matters from his client. As Megarry J. said in Spector v Ageda (1973) 1 Ch 30 at 48:
Once the Court has determined that the non-disclosed facts
were material, speculation as to what course the aggrieved
party, on disclosure, would have taken is not relevant
(Brickenden v London Loan and Savings Co. (1934) 3 DLR 465,
469)."
"A solicitor must put at his client's disposal not only his46. I have already referred to the passage in Farrington v Rowe McBride and Partners (at 90) in which Richardson J. warned of the risks involved in a solicitor acting for both parties in a conveyancing transaction. That learned judge cited some of the leading cases in England, Australia and Canada in a passage which continued onto the next page of his judgment. A particularly strong warning was also given by Wootten J. in Thompson v Mikkelsen (Supreme Court of New South Wales, unreported, 3 October 1974), where he said:
skill but also his knowledge, so far as is relevant; and if
he is unwilling to reveal his knowledge to his client, he
should not act for him. What he cannot do is to act for the
client and at the same time withhold from him any relevant
knowledge that he has".
"It seems to me that the practice of a solicitorIn Commonwealth Bank of Australia v Smith [1991] FCA 375; (1991) 102 ALR 453 at 478, a full court of this court also went out of its way to reassert that the practice of one solicitor acting for both vendor and purchaser "is an undesirable practice and it ought not to be permitted".
acting for both parties cannot be too strongly deprecated.
It is only because of the possibility that something may be
wrong in a transaction, or may go wrong during its
implementation, that the employment of highly trained
professional people at professional scales of remuneration
can be justified. To scrutinize a transaction to discover
whether something is wrong in a way that may affect his
interests, or to notice and deal with something that goes
wrong during the transaction, is what a party employs such a
person for. He is entitled to assume that that person will
be in a position to approach the matter concerned with
nothing (in mind) but the protection of his client's
interests against (those) of the other party. He should not
have to depend on a person who has conflicting allegiances
and who may be tempted either consciously or unconsciously
to favour the other client, or simply to seek a resolution
of the matter in a way which is least embarrassing to
himself.
In the present case I have no doubt that the solicitor
acted with complete integrity and with the utmost good
faith. Equally, I have no doubt that his position as
solicitor for both parties, one of whom was a long-standing
client, placed him in a position of conflict, in which the
defendant did not at any stage of the transaction, from
beginning to end, receive the concerned interest and advice
that a client is entitled to expect from a solicitor. ...
I say all this not because I take any joy in criticising a
member of the legal profession, but because I think it is
important to draw to the notice of other practitioners the
great undesirability of a solicitor acting for both parties
to a transaction."
47. Where, as here, the solicitor who acts for both parties has close family and commercial ties with one of them, his conflict of duty and interest is obvious. Nothing short of a truly informed consent can justify his position: cf. Commonwealth Bank of Australia v Smith (at 477-478), where it was said "(t)here is no precise formula which will determine in all cases if fully informed consent has been given; it is a question of fact in all the circumstances of each case". In this case, I am satisfied that informed consent was never given.
48. The obligation of a solicitor, who has a personal interest, to advise his client to obtain independent advice has also recently been reasserted in the Canadian case Garofoli v Kohm and Raimondi (1989) 77 CBR 84 at 98, where it was said "failure to do this is a ... breach of (the solicitor's) fiduciary duty". What is required, in the way of full disclosure, in order to obtain a fully informed consent is well indicated by Dr Paul Finn in his paper Conflicts of Interest and Professionals, published by the Legal Research Foundation Inc. in Professional Responsibility (1987) at 25-29.
49. As has already been made clear, the facts proved in this case raise questions of breach of fiduciary duty on the part of Mr Donald McDonald in a number of respects. He failed to obtain the informed consent of Mrs Wan to his acting for her when he had a plain conflict of interest; he failed to advise her that, in the circumstances, she should obtain independent advice; he dealt with trust moneys in a manner inconsistent with his duty, and he failed to recover trust moneys misapplied, when it was his plain duty to do so; he also failed to give his client, Mrs Wan, the benefit of his knowledge of what had transpired, which was directly relevant to a matter in which he was acting on her behalf; he failed to advise her of the further facts that he had taken no steps to ensure that her equitable lien, as a purchaser who had paid the whole of the purchase money, could not be defeated, and that he had not taken title, nor even retained the certificate of title, on her behalf; and he advised Dotwell, and acted on its behalf in relation to the removal of the caveat, in respect of the very transaction in which he had been acting for Mrs Wan, his former client. I have already made findings about these matters, but I should make further reference to the law relevant to the last.
50. Counsel for Mr Donald McDonald placed reliance upon Australian Commercial Research and Development Limited v Hampson (1991) 1 Qd R 508, in which Mackenzie J. followed the well known decision Rakusen v Ellis, Munday and Clarke (1912) 1 Ch 831 and the decision of Bryson J. in D and J Constructions Pty Ltd v Head (1987) 9 NSWLR 118. Rakusen and D and J Constructions were both cases where one partner in a firm of solicitors had acted for a party to litigation in the past, and another partner desired to act for the other side, there being no reason shown to believe that in fact information confidential to the former client would become available in the litigation to the later. The emphasis in the judgments was placed on the solicitor's duty to safeguard confidential information of his client. But there are at least two other aspects of the problem to which attention has more recently been drawn; a solicitor's duty of loyalty, which cannot be treated as extinguished by the mere termination of the period of his retainer, and the important consideration of public policy which gives a special quality to the relationship of solicitor and client that the law will not generally permit to be stained by the appearance of disloyalty.
51. It is obvious that, at least in the application of these principles to particular circumstances, there is likely to be a great difference between cases such as Rakusen and D and J Constructions, on the one hand, and cases, on the other, where the one solicitor, having acted for both parties, seeks to act against one of his former clients, and in the interest of a preferred client, in litigation arising out of the very matter in which he himself acted for both. In my opinion, it could only be in a rare and very special case of this latter kind that a solicitor could properly be permitted to act against his former client, whether or not any real question of the use of confidential information could arise. As Gummow J. said in National Mutual Holdings Pty Ltd v Sentry Corporation (1989) 87 ALR 539 at 559: "(E)ven among fiduciaries, solicitors stand in a special position." Sir Owen Dixon explained why all professional persons stand, in a sense, in such a position in Jesting Pilate at 192, a passage quoted by Dr Finn in the paper already cited, when he wrote: "Unless high standards of conduct are maintained ... the trust and confidence of the very community that is to be served is lost and thus the function itself of the profession is frustrated."
52. Dr Finn, having drawn attention to the traditional concentration upon the
lawyer's duty to preserve his client's confidentiality,
adds (at 16, footnote
23):
"An aspect of the fiduciary's duty of loyalty would seem toIn MacDonald Estate v Martin (Martin v Gray) (1990) 77 DLR (4th) 249, the Supreme Court of Canada was unanimous in rejecting Rakusen, and emphasizing the importance of "the confidence of the public in the integrity of the profession and in the administration of justice" (per Sopinka J. at 270), although the court was divided upon the question how stringent a test this consideration required it to apply. A bare majority supported the view of Sopinka J. (at 268) that:
have some part to play where a solicitor discharges himself
from a retainer and then acts against his former client: see
Cholmondeley v Lord Clinton [1815] EngR 511; (1815) 19 Ves 261; 34 ER 515."
"(O)nce it is shown by the client that there existed aThe minority supported the view of Cory J., who held (at 271) that "the most important and compelling" consideration "is the preservation of the integrity of our system of justice". He also said (at 273): "It is the appearance of fairness in the eyes of the public that is fundamentally important." His conclusion (at 276) was:
previous relationship which is sufficiently related to the
retainer from which it is sought to remove the solicitor,
the court should infer that confidential information was
imparted unless the solicitor satisfies the court that no
information was imparted which could be relevant. This will
be a difficult burden to discharge. ... None the less, I
am of the opinion that the door should not be shut
completely on a solicitor who wishes to discharge this heavy
burden."
"Where a lawyer who has had a substantial involvement with aThis approach seems to me to be consistent with the emphasis placed by Deane J. in Baker v Campbell [1983] HCA 39; (1983) 153 CLR 52 at 113-115 upon the great importance of the role played by the lawyer in the administration of justice.
client in an ongoing contentious matter joins another law
firm which is acting for an opposing party, there is an
irrebutable presumption that the knowledge of such lawyer,
including confidential information disclosed to him or her
by the former client, has become the knowledge of the new
firm. Such an irrebutable presumption is essential to
preserve public confidence in the administration of justice."
53. In David Lee and Co. (Lincoln) Ltd v Coward Chance (1991) Ch 259 at 268,
Sir Nicolas Browne-Wilkinson v C. (as he then was), to whom Canadian and
American authority in conflict with Rakusen had
been cited, said: "It may well
be that it will be desirable, in the light of 1990, to rethink what was laid
down as the law in 1912.
But that is for some other court, not for me. I
must apply the Rakusen test as best I can." However, he did state that test in
its broadest form, saying:
"As it seems to me, what I have to do is to look at the(The solicitors for the liquidators had amalgamated with a firm which included partners who had advised the other side.) In the circumstances, he concluded (at 270) that "it would not be lawful for the new amalgamated firm to continue to act for the liquidators."
particular circumstances of the case to see whether there is
or is not a reasonable anticipation of mischief flowing from
the continued provision of legal services by the combined
firm ... ."
54. In Australia, the authorities are not unanimous. As against the decisions relied on by counsel for Mr Donald McDonald, a strict approach, similar to that adopted in the United States, was taken by the Queensland full court in Mills v Day Dawn Block Gold Mining Company Limited (1882) 1 QLJ 62, a decision which has received some academic approval, as was noted by Gummow J. in National Mutual Holdings (supra, at 560). Gummow J. was dealing with a question of the appropriate forum for the determination whether a solicitor should be restrained from acting for a client on the basis that a merger of legal firms had resulted in a party being represented by a firm members of which had previously represented the other side. It was submitted the law of New York would raise an irrebutable presumption of a conflict of interest. Gummow J. (at 561) said: "It is sufficient to say that there is a real possibility that the law in this country is no less stringent than that which Sentry submitted to be the law to be applied in the New York proceedings."
55. It is apparent from this brief survey of recent decisions that the application of Rakusen to any particular case to which it is said to apply may, in the current state of the authorities, be subject to some debate. As Sir Nicolas Browne-Wilkinson vC. pointed out in David Lee and Co. (supra, at 267), the tests laid down by the Court of Appeal in Rakusen are not all consistent with each other and, while the case has been rejected elsewhere, in England it has been followed by the adoption of the least precise of its formulations, that stated by Fletcher Moulton L.J. (at 841), who thought: "As a general rule the Court will not interfere unless there be a case where mischief is rightly anticipated". (Emphasis added.) A helpful recent discussion of the authorities by M.R. Dean and C.F. Finlayson in Conflicts of Interest: When May a Lawyer Act against a Former Client? (1990) NZLJ 43 does not favour a lax application of the rules designed to avoid a conflict of interest or duty.
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."
57. It is true, as was pointed out in MacDonald Estate (at 257), that not every rule of professional conduct adopted by a law society will be reflected in a rule of law. However, I think the wide acceptance of this particular rule supports the view of the United States court, in the case last cited, that this is not merely a matter of a code of professional ethics.
58. In the particular circumstances of this case, Mr Donald McDonald knew from his previous involvement in the matter as Mrs Wan's solicitor that, at any rate during the period when he had been acting, there had been no approach to the Registrar of Titles which might have alerted him or his officers to the true nature of Mrs Wan's claim to an equitable lien, or might in some way have led to a revelation of the deceitfulness of what Mr Donald McDonald proposed to write. He also had an intimate knowledge of Mrs Wan's personal affairs, having been informed of them in detail for the purposes of the intended business migration application in pursuit of which the purchase had been made. I do not think I can discount the possibility that Mr Donald McDonald was assisted by his knowledge of what had happened, and of Mrs Wan's affairs, when he engaged in the delicate process of balancing the risks and advantages of putting to the Registrar of Titles the particular submissions which he set forth in his letter. One factor he must have considered, I infer, was the likelihood of his being found out, which his knowledge must have assisted him to assess. The fact is that no copy of his letter to the Registrar of Titles was ever discovered or produced. Furthermore, Mr Donald McDonald had obtained while he was Mrs Wan's solicitor, although not from her, confidential information about what had happened to her draft for $165,000. In my opinion, the effect of a solicitor having confidential information relating to the affairs of a client does not depend on the source of the information. I think Mr Donald McDonald accepted Dotwell's instructions to act upon the removal of the caveat, and upon the sale of the land, in breach of his fiduciary duty to Mrs Wan.
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.
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."
61. When, to such evidence of personal involvement, there is added the probability that the managing director of this small company would be in constant touch with its activities, it would be natural to infer a knowledge of what was being represented on behalf of the company by its agents in Hong Kong. After all, Mr Ranald McDonald could hardly have the discussions with Mrs Wan which are in evidence without knowing what she had already been told, unless he were to run a severe risk of serious inconsistencies becoming apparent. Since the truth was not being told in Hong Kong, if he did not know what was being told this problem would have been acute. In cross-examination, Mr Ranald McDonald attempted to distance himself from his agents in Hong Kong, asserting, in the teeth of the evidence, that they were not Dotwell's agents but acting independently. The inference seems available that he spoke out of a guilty knowledge of their misrepresentations of the position. I did not find Mr Ranald McDonald's evidence persuasive. It is extremely unlikely, having regard to the number of cases handled by Dotwell, that none of the intending migrants said anything to Mr Ranald McDonald that alerted him to the nature of the representations being made in Hong Kong.
62. In February 1988 Mr Ranald McDonald gave notice to the Department of Immigration, Local Government and Ethnic Affairs of his intention to act as a migration agent. He signed a statement under the letterhead of McDonald Partners, in which he claimed to have gained "NOT ONLY A THROUGH (sic) UNDERSTANDING OF THE AUSTRALIAN IMMIGRATION LAWS BUT A PRACTICAL WORKING KNOWLEDGE OF THE CONDITIONS AND ASSISTANCE THAT MUST BE GIVEN TO BUSINESS MIGRANTS TO ENSURE THE SUCCESS OF THEIR AUSTRALIAN RESIDENCY." In the same document, he referred to "OUR ONLY ASSOCIATED COMPANY KAWANA WATER PROPERTY AGENCY LTD OF HONG KONG". The document was accompanied by a notice of the same date signed by Mr Donald McDonald.
63. In his affidavit, Mr Ranald McDonald swore that he told the applicant that the $195,000 "would be counted in part towards the resettlement costs and in part towards the eventual transfer of funds to Australia". This, of course, was misleading in two ways: the excess over $100,000 could not be counted towards resettlement costs, and it could not be counted as part of a business investment in Australia because it was not a business investment; and furthermore, about $70,000 was being remitted by Mr Ranald McDonald's own direction, within two or three days of receipt, to Hong Kong for payment to the Hong Kong companies involved in the scheme, so that in no way could it be counted towards either resettlement or transfer of funds to Australia. In that affidavit, Mr Ranald McDonald does not suggest that he was unaware of the requirements of the Business Migration Policy, which he expressly concedes would not be complied with only by the buying of a house for $195,000 and the investing of $150,000 in a business. He states: "There was a basis for BMP entry into Australia upon the investment of ... $600,000". And: "I did explain in some detail the way that the BMP worked. ... I did explain that further sums would be required." I reject this evidence in so far as it suggests that a complete and truthful explanation was given, and in particular in so far as it asserts that anything was said about further sums being required; but the evidence plainly concedes that Mr Ranald McDonald was aware of the true position.
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.
65. In view of my finding that Mr Donald McDonald was actively involved in the affairs of Dotwell, it is perhaps unnecessary to pursue the question of the effect of his 50% shareholding, which he claims he held in trust. However, I shall say something about it. The documents show that Mr Donald McDonald was one of two subscribers, each of whom took up one share in Dotwell upon its incorporation on 8 December 1987, the other subscriber being Mr Ranald McDonald. The first indication of a change of shareholding, to be found in any documentary evidence, is in an annual return filed by the company bearing the date 11 September 1990, signed by Mr Ranald McDonald, which shows the members as Mr Ranald McDonald and Mr Jackson Cheng. How Mr Jackson Cheng was said to have come to be a member was not disclosed by any evidence, and it would have been easy for Mr Donald McDonald to have produced a transfer, or evidence of the existence and terms of a transfer, including its date, if any existed and was effective at any time prior to the events with which this case is concerned. The matter is one peculiarly within the knowledge of the respondents, and particularly of Mr Donald McDonald, whose affidavit sworn 18 July 1991 acknowledges he "held one subscriber's share" and that he was a director until June 1988, but does not claim that he had transferred his share to Mr Jackson Cheng. In the circumstances, I think the failure to produce any transfer, or to explain its absence, or to produce any other contemporary record of a transfer, raises a case for the application of the principle stated in Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298. I reject the bare statement of Mr Ranald McDonald that his father "ceased to be a director and shareholder of Dotwell on 30 June 1988", which echoed a similarly bare assertion by Mr Donald McDonald in his oral evidence, but not in his affidavit.
66. Once it is accepted that Mr Donald McDonald was a shareholder in Dotwell
at the time he accepted Mrs Wan's retainer as her solicitor,
it is irrelevant
whether or not he held his 50% shareholding in trust. As Deane J. said in
Palmisano v Hyman (unreported, 30 March
1977, Supreme Court of New South
Wales), a case where the defendant acted as solicitor for the plaintiffs and
also for a company
in which he held shares as a trustee:
"It is hardly to the point that the defendant's67. I have concluded that Dotwell contravened s. 52 of the Trade Practices Act in the respects I have mentioned, and that Mr Donald McDonald and Mr Ranald McDonald were both involved in the contraventions within the meaning of that Act. I have also found that Mr Donald McDonald committed a number of breaches of his fiduciary duty towards Mrs Wan. It was suggested in his defence that the misapplications of trust moneys which occurred did not give rise to any right to compensation because, if they had not occurred, Mrs Wan would still have paid away these moneys through Mr McDonald, acting properly, and the ultimate consequences would have been the same; and that had a full disclosure been made, and had she been advised to seek independent advice, she would or might still have pursued the transaction with Dotwell. This argument ignores the possibility that Mrs Wan, if properly advised, would have insisted upon changes in the arrangements. It also ignores the possibility that Mr Donald McDonald, acting properly, might himself have protected Mrs Wan, his client. But it is unnecessary to pursue these objections. For the authorities are clear that the whole question is irrelevant. Once a breach of fiduciary duty is shown, the beneficiary's right to compensation does not depend upon the answer to questions of this kind. In Commonwealth Bank v Smith (supra, at 479), the full court cited the statement of Lord Thankerton in Brickenden v London Loan and Savings Co. (1934) 3 DLR 465 at 469:
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."
"When a party, holding a fiduciary relationship, commits aAs the full court pointed out, Lord Radcliffe made a similar statement in Gray v New Augarita Porcupine Mines Ltd (1952) 3 DLR 1 at 15. In Palmisano v Hyman (supra) Deane J. said:
breach of his duty by non-disclosure of material facts,
which his constituent is entitled to know in connection with
the transaction, he cannot be heard to maintain that
disclosure would not have altered the decision to proceed
with the transaction, because the constituent's action would
be solely determined by some other factor, such as the
valuation by another party of the property proposed to be
mortgaged. Once the Court has determined that the
non-disclosed facts were material, speculation as to what course
the constituent, on disclosure, would have taken is not
relevant."
"It is a matter of speculation whether or not, anySimilarly here, Mr Donald McDonald's breach of fiduciary duty has caused loss which he is bound to make good. It is not open to him to evade that responsibility upon the basis of any speculation about what might afterwards have been done with the money if it had not been lost by reason of his breach of fiduciary duty.
arrangements between the plaintiffs and the Resources Group
would, if the plaintiffs had been in receipt of untainted
advice, have included effective guarantees ... or security
... . ... I do not consider it any part of my function in
the present matter to engage in any such speculation.
On my findings, the defendant has, in breach of his
fiduciary duty to the plaintiffs applied the money and
property of the plaintiffs in a manner which has resulted in
that money and property being completely lost. ...
... They (i.e. the plaintiffs) have lost all their
investment. The defendant is, in the circumstances, under a
liability to make good that loss ... ."
68. Furthermore, I think it is plain that, in these circumstances, Mr Donald McDonald was also guilty of negligence in the performance of his duties as Mrs Wan's solicitor. He took no care whatever to ensure that she was protected in the transaction in which he was retained to act on her behalf. Not only did he fail to exercise care in relation to the payments out of his trust account, and in relation to the recovery of the very large sum diverted from his trust account, the diversion of which I have concluded on the probabilities came to his notice within a day of its occurrence, but also he failed to take any steps to protect the equitable lien which Mrs Wan undoubtedly had over the property the subject of the contract of purchase. His negligence caused foreseeable loss. It is unnecessary to consider the further case made by Mrs Wan in fraud. So far as the representations made by Mrs Cheung are concerned, however, I should note that she was not called as a witness, and it would be difficult to infer with any confidence that she personally was aware of the falsity of the representations she made. There is a real possibility that she was acting on information which she believed to be genuine, emanating from Mr Jackson Cheng, Mr Donald McDonald or Mr Ranald McDonald.
69. I turn to the question of relief. The contractual arrangements made between Mrs Wan and Dotwell, including both the agreement of purchase and the migration agreement, were induced by misrepresentations, and must be declared void. Whether or not my findings justify that order on any other basis, I think it is clearly the appropriate order to make under s. 87 of the Trade Practices Act. Dotwell's counter-claim, which is based on the migration agreement, must be dismissed with costs, to include any costs of the proceedings in the Supreme Court of Queensland the subject of the reservation to the Federal Court of Australia contained in the order of Ambrose J., made 22 November 1990, when he transferred the counter-claim to this court. In addition, Mrs Wan is entitled to an award of damages or compensation in respect of the moneys paid away by her and the loss of the use of those moneys. As was the case in Commonwealth Bank v Smith (supra, at 479- 480), I think the measure is the same, in relation to the major losses sustained, under each of the causes of action I have found established. I think Mrs Wan is entitled to recover the whole of the sum of $196,000 that she paid upon the misrepresentations of Dotwell, in which the other respondents were involved, and that was also lost, or substantially lost, to her by reason of the negligence and breach of fiduciary duty of which Mr Donald McDonald was guilty.
70. But the mere award of the sum of $196,000 would not restore Mrs Wan to the position in which she was before she paid away the moneys. She must also be compensated for the loss of the use of the money, to the extent that it would have been productive of benefits to her. In Commonwealth Bank v Smith (at 457) it appears the trial judge, whose decision was affirmed, allowed compound interest pursuant to the principles stated by the High Court in Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125. But in Commonwealth Bank v Smith, as the full court stated at the same page, compound interest was calculated at rates in line with those actually charged by the bank. In Hungerfords v Walker, the position was less clear. Although a calculation of compound interest was made, the resulting figure was substantially reduced on the basis of doubts as to the use which would have been made of the money. King C.J. had stated in the Supreme Court (in a passage quoted by Mason C.J. and Wilson J. at 151): "There is no firm basis for arriving at the amount of the adjustment. It is a matter of judgment on the sparse material available." Mason C.J. and Wilson J. added the comment: "In the light of these observations, the Chief Justice adopted a broad-brush approach and adjusted downward the amount assessed for the loss of the use of the money."
71. In the present case I find myself in the position described by King C.J.
Mrs Wan was planning, at the relevant time, to migrate
to Australia under the
Business Migration Policy. In fact, she was eventually successful in
achieving acceptance under that policy.
The evidence condescends to few
details of the steps taken by her, presumably on the advice of the different
agent to whom she went
after she became dissatisfied with the respondents.
Although there was some evidence of the high return which could have been
achieved
from investments in Hong Kong, it is not clear whether the money
would have been committed to those investments, or to investments
in
Australia. I think it is very difficult for Mrs Wan to place herself in a
hypothetical situation, which did not in fact exist,
of having this money
available to her during the critical period when she was attempting to secure
admittance to Australia. I willingly
accept, on the basis of Hungerfords v
Walker and Commonwealth Bank v Smith, the availability of compound interest as
a measure of
damages in such a case; however, I think in the particular
circumstances of the present matter the best I can do is to take a broad-brush
approach to the question of interest. The money, or much of it, may very well
have been invested in Australia, and Mrs Wan's unfamiliarity
with the
commercial conditions here may have affected the net result. On the whole, I
think it would be appropriate in this case
to award, in respect of the loss of
the use of the money, a rounded amount assessed at the approximate figure
which would be produced
by adding together the following:
1. The amount of interest in fact earned by the deposit of Mrs Wan's
$30,000 with Chase AMP Bank Limited up until 9 November 1988, i.e.2. Interest on the sum of $31,000 (being the $30,000 plus the sum of
$214.74;
$1,000 received from Mrs Wan on 11 October 1988) from 9 November3. Interest upon the further sum of $165,000 from 16 December 1988 to
1988 to the date of judgment at the rates applicable during that
period in accordance with the practice of the Supreme Court of New
South Wales;
the date of judgment at the rates applicable during that periodI calculate that these figures add up to an amount close to $110,000.
according to the practice of the Supreme Court of New South Wales.
72. On this basis, the total sum which each of the respondents is ordered to pay to the applicant is $306,000. The respondents must pay the applicant's costs.
73. There is one further matter. As Megarry J. pointed out in Spector v
Ageda (supra, at 50),
"I need hardly say that I have been concerned merely toHowever, like Megarry J. in that case, I have been left with no doubt that the protection of the public and of the legal profession requires such an inquiry to be made in accordance with the proper procedure. Accordingly, I direct the Registrar to forward copies of these reasons to the Queensland Law Society and to the Registrar of the Supreme Court of Queensland.
decide this case as between (applicant) and (respondents)
... : I have not been conducting any inquiry in the
appropriate manner into whether a solicitor has acted in
accordance with the high standards of an honourable
profession."
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