Chen v Zhang
[2009] NSWCA 202
•24 July 2009
New South Wales
Court of Appeal
CITATION: Chen v Zhang & Ors [2009] NSWCA 202 HEARING DATE(S): 2 July 2009
JUDGMENT DATE:
24 July 2009JUDGMENT OF: Campbell JA at 1; Handley AJA at 2; Sackville AJA at 3 DECISION: 1. Leave granted to the appellant pursuant to the Felons (Civil Proceedings) Act 1981 (NSW) s4, to pursue the appeal.
2. Appeal dismissed.
3. Appellant to pay the First, Second and Third Respondents' costs of the appeal.CATCHWORDS: APPEAL – Appeal – Interference with findings of fact – Proof and evidence – Burden of proof – Appellant claimed interest in business – Primary judge disbelieved witnesses for both appellant and respondents – Whether evidence established existence of an agreement creating interest in the business on the balance of probabilities – Whether primary judge erred in not making findings of fact as to existence or nature of agreement LEGISLATION CITED: Evidence Act 1995
Felons (Civil Proceedings) Act 1981
Financial Transaction Reports Act 1992
Proceeds of Crime Act 2002 (Cth)CASES CITED: Guest v Nominal Defendant [2006] NSWCA 77
Jol v State of New South Wales (1998) 45 NSWLR 203
Kuligowski v Metrobus [2004] HCA 34; (2004) 220 CLR 363
Rhesa Shipping Co SA v Edmunds [1985] 1 WLR 948; [1985] 2 All ER 712PARTIES: Peter Chen
Shun Xuan Zhang also known as William Zhang
Wei Zhang also known as Vincent Zhang
Global Goldstar Pty Ltd
Luke Hor and Douglas Hor
Cam Phoong Tai
Christopher PapaioannouFILE NUMBER(S): CA 40425/08 COUNSEL: M R Gracie / D A Neggo (Appellant)
G George (First, Second and Third Respondents)
D Tynan (Fourth Respondent)SOLICITORS: Beazley Singleton Lawyers, Sydney (Appellant)
E Berman & Co, Chatswood (First, Second and Third Respondents)
Whitehead Cooper Williams, Sydney (Fourth Respondent)LOWER COURT JURISDICTION: Supreme Court LOWER COURT FILE NUMBER(S): SC 4409/08 LOWER COURT JUDICIAL OFFICER: Rein J LOWER COURT DATE OF DECISION: 12 November 2008 LOWER COURT MEDIUM NEUTRAL CITATION: Chen v Zhang & Ors [2008] NSWSC 1203
CA 40425/08
SC 4409/0824 July 2009CAMPBELL JA
HANDLEY AJA
SACKVILLE AJA
1 CAMPBELL JA: I agree with Sackville AJA.
2 HANDLEY AJA: I agree with Sackville AJA.
3 SACKVILLE AJA: This is an appeal against a decision of a Judge of this Court given on 12 November 2008. After a five day trial, his Honour dismissed a claim by the appellant (the plaintiff below) for declaratory and other relief relating to the interest claimed by him in a business conducted under the name “Heaven on Earth”. The business, which is located at premises in Crows Nest, Sydney (“Premises”), was described at the trial as a Chinese karaoke restaurant and hostess lounge.
4 The proceedings have several unusual features. First, the appellant was charged with money laundering offences in 2005. In March 2008, he was convicted of those offences and sentenced to a term of imprisonment of sixteen and a half years. The Court was informed that the appellant has appealed to the Court of Criminal Appeal against conviction and sentence, but the appeal has not yet been determined.
5 Secondly, in 2006, the Director of Public Prosecutions (“DPP”) commenced proceedings against the appellant under the Proceeds of Crime Act 2002 (Cth). In response to an order made in those proceedings on 18 October 2006, the appellant affirmed an affidavit setting out what was said to be a statement of his assets and liabilities. The affidavit made no mention of the business in respect of which the appellant subsequently claimed an interest.
6 Thirdly, the primary Judge concluded that not only was the appellant’s evidence lacking in credibility, but so too was the evidence of the witnesses called on his behalf and the witnesses who gave evidence on behalf of the first to third respondents (who actively opposed the appellant’s claims). His Honour said that he was
- “left with two competing versions of events … neither of which, in my view, is supported by credible evidence”.
Since the appellant bore the onus of proving his case, the primary Judge found that the appellant had failed to establish the existence of the agreement upon which his claim to an interest in the business was based. Accordingly, his Honour dismissed the appellant’s summons.
7 The appellant challenges the primary Judge’s conclusion that he failed to discharge the onus of proving that he held (as he claimed) a 70% beneficial interest in the business. The appellant contends that his Honour gave excessive weight to certain matters, notably the absence of any reference to the appellant’s interest in the business in his affidavit of assets and liabilities. The appellant also submits that the primary Judge failed to make findings to resolve the conflict between the two competing versions of events contended for by the appellant, on the one hand, and the first to third respondents, on the other.
Leave Requirement
8 Since the appellant is in custody as a result of his convictions, he requires the leave of the Court to pursue the appeal: Felons (Civil Proceedings) Act 1981 (NSW), s 4 (“Felons Act”). The Court is not to grant leave unless it is satisfied that the proceedings are not an abuse of process and that there is prima facie ground for the proceeding: s 5. The appellant filed a notice of motion in court at the commencement of the appeal seeking the leave required by s 4 of the Felons Act. The Court has power to grant leave in such circumstances: Jol v State of New South Wales (1998) 45 NSWLR 203. Mr George, who appeared for the first, second and third respondents, did not oppose the grant of leave. The Court indicated that the application for leave would be dealt with in the Court’s judgment.
Dramatis personae
9 We were told that at the trial, as a matter of convenience, a number of individuals were referred to by their anglicised names, rather than by their Chinese names. I shall follow the same practice without intending any disrespect to the persons concerned.
10 The appellant’s camp includes the following:
o The appellant himself - “Peter” o The appellant’s wife (not a party) - “Carol” o The appellant’s sister (not a party) - “Kuen”
11 The respondents (the defendants below) fall into three categories. The first comprises the first to third respondents, who actively opposed Peter’s claims at the trial. They are as follows:
o The first respondent - “William” o The second respondent (William’s brother) - “Vincent” o The third respondent (a company of which William was the sole shareholder and director) - “Global”
I refer to William, Vincent and Global together as the “Zhang Group”.
12 The second category of respondents comprises the fourth respondents, the owners of the Premises. They made a submitting appearance in the proceedings. I refer to them as the “Hors”.
13 The third category of respondents comprises the fifth and sixth respondents, each of whom is said by the appellant to hold a 15% interest in the business. They are as follows:
o The fifth respondent (who was not served) - “Mark” o The sixth respondent (who was served, but who did not appear) - “Taki”
Peter, Mark and Taki were together described in the proceedings as the “Chen Group”.
14 In addition, it is necessary to note the existence of the Poon Group, with whom the Chen Group entered into a Deed of Settlement and Release (“Settlement Deed”) on 2 February 2007. The Poon Group comprises the following:
| o Yu Fu Poon | - “Poon” |
| o Lu Wei Sheng | - “Sheng” |
| o Shenon Pty Ltd | - “Shenon” |
The appellant’s case
None of the members of the Poon Group was a party to the proceedings.
15 The appellant’s case at trial differed somewhat from the outline in the summons filed on his behalf. The case put to the primary Judge appears to have been as follows:
o In late 2006, discussions took place between the Chen Group and the Poon Group to form a partnership to take over a restaurant conducted on the Premises. The Hors granted a lease of the Premises (to which a liquor licence was attached) to Poon.
o Pending a formal partnership agreement, the two groups operated the business on the basis of an equality of interest. The Chen Group’s half interest was held by Peter (20%), Mark (15%) and Taki (15%).
o The members of the two groups executed the Settlement Deed on 2 February 2007. Under the Settlement Deed, the Chen Group agreed to pay the Poon Group $130,000 to acquire the Poon Group’s interest in the business. The sum of $130,000 was duly paid by Peter.
o The Settlement Deed provided for the Poon Group to assign the lease of the Premises from Poon to a nominee of the Chen Group. The Chen Group nominated Global for this purpose. A deed of assignment and consent was entered into, whereby Poon assigned the lease to Global. William guaranteed the obligations of Global under the lease.
o From January 2007 until early July 2008, Carol managed the business on behalf of the Chen Group. In July 2008 she was unjustifiably removed from her role by the Zhang Group, who claimed to be entitled to conduct the business.o Although there was no agreement in writing evidencing the arrangements between the Chen Group and the Zhang Group, Peter made an oral agreement with Vincent, who acted on William’s behalf. It was agreed that Global would be the vehicle through which Peter and Carol, on Peter’s behalf, would operate the business, in which Peter would retain a 70% interest. In return for William permitting Global to be the lessee and guaranteeing Global’s obligations under the lease, Peter would pay $200 per week to William. In his evidence, Peter stated that the Chen Group had also agreed to pay William 5% of the profits of the business after the investors had received their money back.
16 The relief sought by Peter included the following:
o an order requiring the Zhang Group to give immediate possession of the Premises to Carol;
o an order compelling the Hors to register the lease of the Premises;
o a declaration that Peter, as to 70%, and Mark and Taki as to 15% each, are the owners of the business conducted on the Premises; and
Zhang Group’s caseo an order that the Zhang Group “hand possession” of the business to the Chen Group.
17 The Zhang Group did not file a cross-claim. However, they put forward an affirmative case in opposition to Peter’s claim.
18 The Zhang Group’s case was that Peter, fearing that he would be incarcerated and lose the business, agreed to transfer ownership of the business to them. In return, the Zhang Group agreed to repay debts due to Mark and Taki and promised to employ Carol as the manager of the business at a salary of $1,000 per week. In accordance with the agreement, Carol was duly employed as manager of the business. However, she was dismissed from this position because the Zhang Group discovered that she was taking money from the business without authority.
19 The Zhang Group supported its contentions by pointing out that, on Peter’s case, William had not only agreed that Global could become the lessee of the Premises but had guaranteed Global’s obligation to pay rent to the Hors, a guarantee that could expose William to a liability of nearly $400,000 over three years. This was supposedly in return for a mere $200 per week and a 5% share of profit at some unspecified time in the future. Moreover, William had allegedly given a guarantee in relation to a business that had barely begun to trade.
Facts not now in dispute
20 In view of the findings made by the primary Judge and the documentary evidence, a number of matters were not in dispute on the appeal. The following account is based on those matters.
21 A restaurant known as Chopsticks had been located at the Premises prior to October 2006, but by that time had ceased trading. The Poon and Chen Groups had discussions with a view to establishing a new restaurant at the Premises.
22 At about this time, a Real Property Act form of lease of the Premises was executed by Douglas Hor as lessor and Poon, as lessee. The undated lease was for a term of three years, commencing on 27 October 2006, with options for renewal. The lease has never been registered. The initial rental was $10,833.33 per month ($130,000 per annum).
23 The lease provided that the lessee could sub-lease the Premises to Shenon and included an acknowledgement by the lessor that the lessee proposed to change the use of the Premises to a karaoke nightclub. The lease also recorded that the title of the Premises was in the joint names of the Hors and that Douglas Hor would do what was required to become the sole proprietor.
24 The lease required the lessee to provide a bank guarantee of $45,000 as security for the performance of his obligations. The lessee acknowledged that the lessor did not own the large number of items listed in a schedule to the lease. The list seems to have comprised items utilised in the restaurant conducted on the Premises.
25 On 18 October 2006, in the proceedings brought by the DPP against Peter, the Supreme Court ordered Peter to provide an affidavit setting out “the particulars of and dealings with [his] property” as specified in a schedule. The schedule required Peter, among other things, to “provide full particulars of all your property … and current liabilities”.
26 Global was incorporated on 24 October 2006. William was the sole shareholder and director. There is no evidence to suggest that the shareholding of Global changed at any stage, nor that any other person became a director of the company.
27 Plans for the renovation of the Premises were put in place in late 2006, but it seems that disagreements arose between the Poon Group and the Chen Group. The disagreements were resolved by the execution of the Settlement Deed on 2 February 2007. All members of the Chen and Poon Groups were parties to the Settlement Deed.
28 The Settlement Deed provided for the Chen Group to pay the Poon Group $130,000 but, oddly, did not specify that the payment was in return for a share in the business. However, each member of the Poon Group agreed to take all steps necessary to transfer the lease of the Premises from Poon to “a person nominated by the Chen Group” and to effect a transfer of the liquor licence to the nominee of the Chen Group.
29 The primary Judge found that Peter paid $130,000 to the Poon Group to enable the Chen Group (Peter, Mark and Taki) to purchase the Poon Group’s interest in the business known as “Heaven on Earth”. His Honour also found that Peter nominated Global pursuant to the Settlement Deed to be the assignee of the lease.
30 Global operated the business on the Premises from late January 2007. In late January or February 2007, Global granted Carol a power of attorney authorising her to act on behalf of the Company. The document was executed by William on behalf of Global and was dated 22 January 2007. From about that time until she was removed by the Zhang Group in July 2008, Carol managed the business. However, in March 2008 the Zhang Group withdrew Carol’s authority to draw cheques on Global’s account.
31 In about April 2007, an undated “Deed of Consent to Assignment of Lease” was executed by Douglas Hor, Poon, Global and William (“Assignment”). The Assignment provided for the lease of the Premises to be assigned to Global with Douglas Hor’s consent. At about the same time, William executed a guarantee in favour of Douglas Hor, guaranteeing Global’s performance of its obligations under the lease.
32 Shortly thereafter the National Australia Bank (“NAB”) provided a bank guarantee of $45,000 to the lessor of the Premises.
The primary judgment
33 The primary Judge noted (at [30]) that Peter had a motive for wishing to avoid appearing to hold any interest in the business. However, Peter had denied that the arrangements with the Zhang Group had anything to do with the charges that had been laid against him or the interest shown by the Australian Crime Commission (“ACC”) in his affairs.
34 His Honour also noted (at [25]) that Peter had made no claim in his affidavits filed in the proceedings that he had a beneficial interest in Global. Both he and Carol had asserted in their oral evidence that Global was Peter’s company, but there was no documentation to corroborate their claim.
35 The primary Judge observed (at [29]) that it was common ground that Peter and William had never spoken about the business and that the only conversations were between Peter and Vincent. Each had given evidence, but their accounts were contradictory.
36 The primary Judge then considered (at [38]–[42]) the provenance of the sum of $46,000, which had found its way into Global’s bank account in April 2007 by a series of cash deposits, each of around $9,000. His Honour was not persuaded by evidence given by Peter and his sister, Kuen, that Kuen had given Peter $46,000 in cash, which was then paid to Vincent to enable NAB to issue a bank guarantee for $45,000 on behalf of Global for a rental bond. Nor was his Honour persuaded by Vincent’s evidence that the series of cash deposits made to Global’s account had nothing to do with an attempt to avoid the operation of the Financial Transaction Reports Act 1988 (Cth).
37 The primary Judge recorded (at [44]) that there were a number of indications that Peter’s interest in the business had not ceased after his conversations with Vincent. For example, Global’s execution of the power of attorney in favour of Carol was “extraordinary” and suggested that Global had allowed Carol to operate the business on behalf of Peter. Other indicators included the considerable degree of autonomy accorded to Carol in relation to the handling of Global’s money and Carol’s role in keeping records of the business (which had understated the earnings).
38 On the other hand, his Honour observed (at [45]) that there were a number of indications that Peter’s interest in the business had ceased. These included the apparent absence of any role by Carol or Peter in Global obtaining a liquor licence; Carol’s admission that she gave copies of financial statements to Vincent and her acknowledgement in evidence that she had been authorised by William to act on behalf of Global; Carol’s evidence that she had repaid some money to Mark (when on Peter’s case Mark and Taki were continuing partners); and Carol’s failure to take any steps in March 2008 when William or Vincent terminated her authority to draw cheques on Global’s account.
39 The primary Judge next addressed Peter’s affidavit of 27 February 2007. His Honour found (at [48]) that the affidavit had to be taken as a statement of Peter’s assets and liabilities as at the date of the affidavit and not (as Peter had claimed) as at the date of the court order (18 October 2006). Peter’s affidavit was therefore an admission by him that he held no interest in the business at the date of the affidavit. However, his Honour also observed (at [51]) that if Peter had declared a beneficial interest in the business, his declaration would have sparked a further enquiry by the ACC. Accordingly, it was probable that
- “Peter contemplated that if he disclosed an interest, it would be pursued by the ACC”.
40 In his Honour’s view, Peter’s failure to disclose the claimed interest was compatible with only two possibilities: first, an absence of any interest in the business; and, secondly, a deliberate attempt to conceal his interest from the ACC.
41 His Honour stated (at [54]) that he had considerable doubts about Peter’s reliability as a witness for reasons that his Honour set out in some detail. These included the February 2007 affidavit and Peter’s evidence concerning it (including his implausible explanations for failing to disclose even the 20% interest in the business that he had held prior to February 2007); Peter’s contradictory evidence as to his role in Global; evidence that Peter had tampered with a document that was introduced into evidence with a critical portion missing; and Peter’s inability, while giving evidence, to provide any guidance as to the profitability of the business in which he claimed a majority interest.
42 The primary Judge rejected (at [55]–[56]) Peter’s evidence that $200 per week had been paid to William, albeit belatedly, in accordance with the agreement. His Honour could not be satisfied that any such payments had been made.
43 The primary Judge next addressed the reliability of evidence given by other witnesses. He found (at [60]) that he could have no confidence as to the reliability of evidence given by Kuen. He also expressed doubts about the credibility of the evidence given by William and Vincent (at [61]–[62]) and provided detailed reasons for those doubts.
44 The primary Judge expressed his conclusion (at [71]) in a single paragraph, as follows:
- “Given that neither Peter, on the one hand, or the Zhangs on the other, assert that what was done was part of the scheme to permit Peter to retain his interest but to avoid the business falling under the scrutiny of or within the grasp of authorities, or to preclude rejection or termination of the liquor license (sic), I am left with two competing versions of events as to what occurred, neither of which, in my view, is supported by credible evidence. The plaintiff bears the onus of proof and has failed to establish the agreement asserted. In my view, the plaintiff’s summons should be dismissed.”
45 The primary Judge said (at [72]) that if he had been persuaded that an agreement had been reached between Peter and William in the terms alleged by Peter, the obvious inference was that the agreement had been made in an endeavour to hide Peter’s involvement in the business to avoid a possible seizure of assets and to enable the business to obtain and retain a liquor licence that would not have otherwise been available to it. His Honour said that, in those circumstances, equitable relief would be denied to Peter. He did not accept that the Court, exercising its equitable jurisdiction, would grant relief where a party had entered upon a scheme of deliberate deception of public authorities.
Findings as to the Zhang Group’s Case
Reasoning
46 Mr Gracie, who appeared for the appellant, submitted that the primary Judge had failed to make any findings as to the existence of the arrangement propounded by the Zhang Group. According to Mr Gracie, his Honour simply found that Peter had failed to establish the agreement asserted by him. The consequence of this finding was that Global must have been given the business by Peter, yet his Honour did not attempt to determine how this had come about. Why, Mr Gracie asked rhetorically, would Peter give away his interest in the business to William who (as his Honour found) was someone Peter barely knew?
47 The difficulty with this submission is that the issue presented to the primary Judge was not (or not necessarily) which of two inconsistent accounts was more likely to be true. The issue was whether Peter had established on the balance of probabilities the facts essential to make out his claim to the relief sought in the summons: Evidence Act 1995, s 140(1).
48 In Kuligowski v Metrobus [2004] HCA 34; (2004) 220 CLR 363, the judgment of seven members of the High Court observed (at 385 [60]) that:
- “In general, disbelief in a witness’s evidence does not establish the contrary. Similarly, disbelief in the case presented by the moving party does not necessarily permit the court to conclude that the positive case of the opposing party is correct. In particular cases it may not be possible to reach a conclusion either way .” (Emphasis added)
Equally, disbelief in the affirmative case presented by the opposing party does not necessarily permit (much less require) the court to conclude that the moving party’s case is correct.
49 The Court in Kuligowski v Metrobus quoted briefly from the speech of Lord Brandon in Rhesa Shipping Co SA v Edmunds [1985] 1 WLR 948; [1985] 2 All ER 712 (with which all other members of the House of Lords agreed). In Rhesa Shipping, the trial judge regarded himself as required to choose between two theories as to the loss of a vessel at sea, one of which was inherently improbable and the other, if not impossible, was not consistent with the available facts. Lord Brandon said this (WLR, at 955-956):
- “[T]he late Sir Arthur Conan Doyle in his book The Sign of Four , describes his hero, Mr Sherlock Holmes, as saying to the latter’s friend, Dr Watson: ‘How often have I said to you that, when you have eliminated the impossible, whatever remains, however improbable, must be the truth?’ It is, no doubt, on the basis of this well-known but unjudicial dictum that Bingham J decided to accept the shipowners’ submarine theory, even though he regarded it, for seven cogent reasons, as extremely improbable.
- In my view there are three reasons why it is inappropriate to apply the dictum of Mr Sherlock Holmes … to the process of fact-finding which a judge of first instance has to perform at the conclusion of a case of the kind here concerned.
- The first reason is one which I have already sought to emphasise as being one of great importance, namely, that the judge is not bound always to make a finding one way or the other with regard to facts averred by the parties. He has open to him the third alternative of saying that the party on whom the burden of proof lies in relation to any averment made by him has failed to discharge that burden. No judge likes to decide cases on burden of proof if he can legitimately avoid having to do so. There are cases, however, in which, owing to the unsatisfactory state of the evidence or otherwise, deciding on a burden of proof is the only just course for him to take.
- The second reason is that the dictum can only apply when all relevant facts are known, so that all possible explanations, except a single extremely improbable one, can properly be eliminated. …
- The third reason is that the legal concept of proof of a case on a balance of probabilities must be applied with common sense. It requires a judge at first instance, before he finds that a particular event occurred, to be satisfied on the evidence that it is more likely to have occurred than not. …”
This passage was cited with approval by Ipp JA (with whom Handley JA agreed) in Guest v Nominal Defendant [2006] NSWCA 77, at [109].
50 His Honour’s finding in the present case that none of the Zhang Group’s witnesses was worthy of credit did not, of itself, establish that the evidence of Peter and those called on his behalf was reliable or likely to be substantially correct. It is true that the rejection of the Zhang Group’s evidence removed their version of events as a barrier to finding that Peter had established his case on the balance of probabilities. The rejection of the Zhang Group’s evidence was also a factor for the primary judge to take into account in determining whether the evidence given by Peter and his witnesses was reliable. But the rejection of the Zhang Group’s evidence did not relieve his Honour from the task of assessing the remaining evidence to determine whether Peter had discharged the evidentiary burden imposed upon him.
51 Had the Zhang Group adduced no evidence in the proceedings, but simply put Peter to proof of his case, Peter would still have had to persuade the primary Judge, to the civil standard, of the existence of the agreement alleged by him. If, after hearing the evidence, his Honour did not accept the account given by Peter and his Honour was not otherwise satisfied on the balance of probabilities of the critical facts alleged by Peter, he would have been entitled (if not obliged) to dismiss the summons. Similarly, the rejection of the Zhang Group’s evidence did not eliminate the need for the primary Judge to assess all of the remaining evidence in order to decide whether Peter had established, on the balance of probabilities, the existence of the agreement with the Zhang Group upon which his case depended.
52 It was not incumbent on the primary Judge, if he was not satisfied that Peter’s case was made out, to make findings as to precisely how the Zhang Group had acquired its interest in the business. The Zhang Group did not file a cross-claim and did not seek any relief that would vindicate their interest in the business. The only question that had to be resolved in the proceedings was whether Peter had shown that he had an interest in the business that supported the relief he claimed. If the evidence did not allow his Honour to determine what in truth had occurred, he was not required to go further than he did.
Did Peter Discharge the Burden of Proof?
53 Mr Gracie next submitted that his Honour should have found that Peter had discharged the burden of proving the agreement asserted by him. Mr Gracie, as I understood him, did not dispute that it was open to the primary Judge to find that Peter and the witnesses called on his behalf gave unreliable evidence and were not worthy of credit in important respects. However, Mr Gracie contended that that the primary Judge, in rejecting Peter’s case, had made inconsistent findings and had failed to take certain matters into account.
54 The first criticism made by Mr Gracie was that the primary Judge had wrongly found that Peter’s affidavit of assets and liabilities constituted an admission that he (Peter) had no interest in the business. Mr Gracie said that there was an inconsistency between his Honour’s reference to the affidavit as an admission (at [50]) and his observation in the following paragraph that Peter probably contemplated that if he disclosed an interest in the business the disclosure would attract the attention of the ACC.
55 In my view, this submission misinterprets his Honour’s reasoning. The primary Judge’s reference to an admission was made in the context of rejecting Peter’s claim that the affidavit was intended to record his assets as at 18 October 2006 (the date of the court order) rather than as at 27 February 2007 (the date the affidavit was affirmed). On this basis, his Honour considered that the affidavit could be treated as an admission by Peter that he did not have an interest in the business as at 27 February 2007. However, the primary Judge also acknowledged that Peter had an obvious motive for not disclosing his interest, since to do so would arouse the curiosity of the ACC.
56 As I have noted, the primary Judge explicitly stated (at [52]) that Peter’s failure to disclose in the affidavit his interest in the business was compatible with only two possibilities:
- “(1) an absence of interest
- (2) a deliberate attempt to conceal his interest from the ACC and [Australian Federal Police].”
57 His Honour later pointed out that Peter’s affidavit not only did not refer to his claimed 70% interest in the business, but also made no reference to his 20% interest which (on his Honour’s findings) pre-dated 18 October 2006. His Honour found (at [54]) that Peter’s explanation for his failure to include his 20% interest among the assets identified in the affidavit was untruthful.
58 The primary Judge did not treat the contents of Peter’s affidavit as fatal to his case. On the contrary, his Honour recognised that Peter had a motive for swearing a false affidavit. He regarded the affidavit as significant because, on any view, it was false and because Peter’s evidence about it was simply not credible. These findings bore on whether the primary Judge could accept the case advanced by Peter, particularly having regard to the absence of documentation supporting the alleged agreement with the Zhang Group.
59 Mr Gracie’s second criticism related to the primary Judge’s treatment of two invoices issued to Peter by Mr Junn, a solicitor. One of the invoices, dated 21 February 2007, included fees for acting in late January in respect of the transfer of the restaurant liquor licence and for acting in February 2007 in respect of securing the owners’ consent to the assignment of the lease of the Premises. The second invoice, dated 31 July 2007, included fees for extensive further work in relation to the assignment of the lease. Mr Gracie submitted that these invoices supported Peter’s case that he retained a dominant interest in the business after the execution of the Settlement Deed on 2 February 2007 and that he was actively involved in its affairs.
60 His Honour considered the invoices at some length. He found (at [58]) that Global (not Peter) paid the invoices by means of cheques drawn by Carol on Global’s account. More significantly, his Honour found that Mr Junn (who was not called to give evidence) reissued the invoices in August 2007, so that they were addressed to the attention of Vincent at Global. In a covering letter, dated 6 August 2007, Mr Junn explained that one of his clerks had “just continued to follow the computer template for accounts in this matter” and that Mr Junn himself had not paid close attention to their form. He suggested in the letter to Vincent that, since the errors in the invoices had been corrected, “your company should have no difficulty in satisfying the accounting requirements”.
61 The invoices may have supported Peter’s case had they remained in their original form. However, even if they had remained unchanged, it is not evident that they would have had the force Mr Gracie attributed to them. But once it became clear that the invoices had been directed to Peter in error and that they had been reissued to Global after Vincent had apparently protested, the invoices did not significantly advance Peter’s case. Indeed, on one view, the amended invoices were inconsistent with Peter’s claim that the business belonged entirely to the Chen Group.
62 Mr Gracie’s third criticism was that the primary Judge gave insufficient weight to the power of attorney executed by William, on behalf of Global, in favour of Carol. But his Honour explicitly stated (at [44]) that Global’s grant of the power to enable Carol to operate the business was
- “an extraordinary step for Global to take and indicative of Global allowing Carol to operate the business on behalf of Peter”.
However, this indicator and others suggesting that Peter’s interest in the business had not ceased, had to be set against other cogent evidence suggesting that Peter no longer retained a dominant interest in the business following his dealings with the Zhang Group.
63 The primary Judge undertook the task that he was required to perform. Having found that the oral evidence from all witnesses was unreliable, he had to consider the totality of the evidence in order to determine whether Peter had established the existence of the agreement upon which his case depended. His Honour recognised at several points that there were reasons why Peter might want to retain an interest in the business, yet hide that interest from the authorities. As his Honour observed (at [69]):
- “If [Peter], facing and fearing the reach of the ACC or an equivalent relevant authority, sought the assistance of William and Vincent to enable the business to be operated by a seemingly unconnected third party, with profits being paid to Carol in an untraceable or difficult to trace form, and with, in effect, a secret trust in place, what occurred would be comprehensible. If that were the rationale behind what has occurred, it would lead on to the question of whether what was done was illegal and/or dishonest, and whether in such circumstances this Court should be willing to grant any equitable relief.”
64 But, as his Honour pointed out (at [70]), it was simply not Peter’s case that the arrangements he had made with the Zhang Group were connected with the prospect that his assets might be confiscated or that he might be incarcerated or that his involvement would lead to the cancellation of the liquor licence.
65 After considering the evidence pointing to and against an agreement of the kind alleged by Peter, his Honour considered that this was one of those rare cases where, notwithstanding rejection of the defendants’ (the Zhang Group’s) evidence, the plaintiff (Peter) had failed to make out his case on the balance of probabilities. No error has been demonstrated in the approach taken by his Honour.
Other issues
66 The Zhang Group sought to uphold his Honour’s conclusion that, if he had been persuaded that an agreement had been reached on the terms alleged by Peter, he nonetheless would have declined to grant Peter equitable relief. As no error has been shown in his Honour’s factual findings, the question of whether Peter would be disentitled to equitable relief does not arise.
67 The questions of “clean hands” and illegality were not raised by the Zhang Group at the trial but were identified as issues by the primary Judge himself. The points were referred to in submissions in this Court, but were not addressed in depth. In these circumstances, it would not be appropriate to consider whether Peter would have been entitled to equitable relief had different factual findings been made at trial or by this Court.
68 It is also unnecessary to consider whether the form of relief sought by Peter (assuming the agreement alleged by him was made out) was appropriate. In particular it is unnecessary to consider whether an order could be made requiring the Zhang Group to give immediate possession of the Premises to Carol when Carol was not a party to the proceedings.
Conclusion
69 It is appropriate to grant Peter the leave required by s 4 of the Felons Act. However, the appeal must be dismissed. Peter must pay the Zhang Group’s costs of the appeal.
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