Citibank Ltd v Liu
[2003] NSWSC 569
•25 June 2003
Reported Decision:
(2004) Aust Contract Reports (Digest) 90-182
(2003) ATPR (Digest) 46-236
Supreme Court
CITATION: Citibank Ltd v Liu; ABN Amro Bank NV v Liu [2003] NSWSC 569 HEARING DATE(S): 3 & 4, 8, 10 & 11 October 2002, 10 - 13, & 20 February, 28 March and 29 May 2003 JUDGMENT DATE:
25 June 2003JURISDICTION:
EquityJUDGMENT OF: Hamilton J DECISION: Defendant liable for damages on some causes of action for deceptive or misleading conduct under the Fair Trading Act 1987. Judgment for defendant on other causes of action. CATCHWORDS: EVIDENCE [144] - General principles - Civil proceedings - Evidence Act 1995 s 140 - Serious charge - Fraud - PROCEDURE [112] - Supreme Court procedure - Practice under Supreme Court Rules - Evidence - Other matters - Affidavits - Affidavit allowed to be read although deponent does not attend for cross examination - Weight to be given to evidence - TRADE AND COMMERCE [32] - Trade and commerce generally - Statutes relating to misleading or deceptive conduct in trade - New South Wales - Interpretation - Whether representation made by agent who is employee on behalf of principal also made by employee personally - TRADE AND COMMERCE [136] - Trade practices and related matters - Enforcement and remedies - Actions for damages - Causation - Causal link between contravening conduct and loss - Extent of reliance on conduct. LEGISLATION CITED: Evidence Act 1995 s 140
Fair Trading Act 1987 s 42
Supreme Court Rules 1970 Part 8 r 16
Trade Practices Act 1974 (Cth) ss 52, 53(a)CASES CITED: Amalgamated Television Services Pty Ltd v Marsden [2002] NSWCA 419
Australian Competition and Consumer Commission v McCaskey (2000) 104 FCR 8
Briginshaw v Briginshaw (1938) 60 CLR 336
Clyne v The Law Society of New South Wales NSWCA 4 September 1987 unreported
Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594
Derry v Peek (1889) 14 App Cas 337
Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (1988) 28ACSR 688
Gould v Vaggelas (1985) 157 CLR 215
Helton v Allen (1940) 63 CLR 691
John G Glass Real Estate Pty Limited v Karawi Constructions Pty Limited (1993) ATPR 41-249
Lam v Ausintel Investments Australia Pty Ltd (1989) 97 FLR 458
Lowe v Indoor Cricket Federation of NSW Inc (1994) ATPR 41-359
Pricom Pty Ltd v Sgarioto (1994) ATPR (Digest) 46-135
Re O'Neill [1972] VR 327
Rejfek v McElroy (1965) 112 CLR 517
Shepherd v The Queen (1990) 170 CLR 573
Sibley v Grosvenor (1916) 21 CLR 469
Yorke v Lucas (1985) 158 CLR 661PARTIES :
4660/99
Citibank Limited (P)
Chiu Wah Liu (aka Tina Liu) (D1)
Casey Wong (aka Kai Chee Wong) (D2)
Tatepro (Aust) Exports Pty Limited (D3)
Premier Corporation Pty Limited (D4)
Strategic Commodities Pty Limited (D5)
4662/99
ABN Amro Bank NV (P)
Chiu Wah Liu (aka Tina Liu) (D1)
Casey Wong (aka Kai Chee Wong) (D2)
Tatepro (Aust) Exports Pty Limited (D3)
Premier Corporation Pty Limited (D4)
Strategic Commodities Pty Limited (D5)
FILE NUMBER(S): SC 4660/99; 4662/99 COUNSEL: M A Pembroke SC and T M Faulkner (Ps)
S L Bell (D2)
No other appearancesSOLICITORS: Mallesons Stephen Jaques (Ps)
Ian B Mitchell (D2)
No other appearances
THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
HAMILTON J
WEDNESDAY, 25 JUNE 2003
4660/99 CITIBANK LIMITED v CHIU WAH LIU (aka Tina Liu), CASEY WONG (aka Kai Chee Wong) & ORS
4662/99 ABN AMRO BANK NV v CHIU WAH LIU (aka Tina Liu), CASEY WONG (aka Kai Chee Wong) & ORS
JUDGMENT
1 HIS HONOUR:
Item INTRODUCTORY THE CLAIMS THE WITNESSES The Defendant The Plaintiff’s Witnesses THE FALSITY OF THE REPRESENTATIONS General Evidence of Sellers Evidence of Port Authorities Evidence of Shipping Agents Evidence of Document Examiner EVIDENCE THAT DEFENDANT KNEW REPRESENTATIONS FALSE Admissions Other Evidence of Knowledge of Falsity EVIDENCE AS TO WHETHER REPRESENTATIONS WERE MADE BY DEFENDANT AND RELIANCE BY PLAINTIFFS THE LAW Misrepresentations by Agents and Employees Reliance on Misrepresentations Proof of Fraud FINDINGS Whether the Representations were False Whether the Representations were Representations of the Defendant Whether the Plaintiffs Relied on the Defendant’s Representations Whether the Defendant Knew the Representations were False CONCLUSIONS
INTRODUCTORY
2 This judgment arises from the trial together of two separate sets of proceedings brought by two banks, Citibank Limited (“Citibank”) and ABN Amro Bank NV (“ABN Amro”). The proceedings are for the recovery of large sums totalling some $US57 million in respect of funds advanced by the banks to Pacific Asia Merchandising Pty Limited (“PAM”) under trade loan facilities. The controller of PAM was the first defendant, Chiu Wah Liu, commonly known as Tina Liu (“Tina Liu”). She is bankrupt and is not present in Australia. The second defendant, Casey Wong (also known as Kai Chee Wong) was the general manager of PAM. Companies associated with the second defendant were also joined as defendants. However, the hearing proceeded against the second defendant only and he is hereafter referred to as “the defendant”. I have continued to refer to him as the defendant, although he died on 5 May 2003 and has been replaced as the second defendant by his son, Daniel Wai Jin Wong. Daniel Wong is named in the defendant’s will as his executor. He has not obtained probate, but has been appointed under Part 8 r 16 of the Supreme Court Rules 1970 to represent the defendant’s estate.
3 The proceedings were in respect of a total of 59 drawdowns under the trade loan facilities comprehending 62 transactions. All but four of the drawdowns were under post shipment facilities. The remaining four were under pre shipment facilities. Of the 59 drawdowns, 20 (including the one comprehending four transactions) were on Citibank and 39 were on ABN Amro. These drawdowns are respectively designated C1 – C20 and A1 – A39 in the schedule annexed to this judgment (“the Schedule”).
4 The post shipment facilities in the present case permitted the bank’s customer to operate in the following way. The customer enters into a contract to buy a commodity from a seller and also a contract to sell the same commodity to a purchaser abroad. The customer ships the commodity to the purchaser. The customer then draws down from the bank the price of the commodity shipped abroad which permits it to pay the seller and to receive its profit in advance. The customer subsequently repays the bank from receipt of the purchase price from the purchaser after delivery. To permit a drawdown under a post shipment facility the customer must present to the bank a drawdown notice signed by two authorised signatories on behalf of the customer; a copy of the customer’s invoice showing the customer’s buyer; details of the goods sold; the terms of trade and the payment terms; and a copy of a bill of lading evidencing dispatch of the goods consistent with the invoice.
5 The pre-shipment facilities differed from the post shipment facilities in that the bank provided finance prior to the customer shipping the commodity abroad so that the customer could purchase the commodity for sale and export. They operated in this way. The customer provides the bank with a letter of credit providing for repayment by the overseas purchaser’s bank upon presentation of evidence that the commodity has been shipped to the overseas purchaser. After drawdown the letter of credit is negotiated by the bank by it providing to the overseas bank documents received from the customer evidencing the shipment of the commodity to the overseas purchaser. Under a pre shipment facility the customer must present to the bank a drawdown notice signed by an authorised signatory on behalf of the customer together with a letter of credit and documents listed in the letter of credit, which would include an invoice from the customer to its overseas purchaser for presentation to the overseas purchaser’s bank and an original bill of lading to be presented with it.
6 In respect of the 59 drawdowns the subject of these proceedings the banks were never repaid the amounts drawn down. Their allegations are in general that the documents with which they were presented as the basis of the drawdowns were false in that the invoices presented related to non-existent transactions and the bills of lading were false.
THE CLAIMS
7 The defendant signed all of the drawdown notices. The drawdowns took place between February and August 1999. The defendant had engaged in many such transactions over a period of years prior to the first of the impugned transactions, which transactions were successfully completed. During the period in which the impugned drawdowns were made there were other drawdowns by PAM under the facilities which are not impugned in these proceedings. It cannot be inferred simply from the fact that they were not impugned that they reflected genuine transactions. However, equally, it cannot be assumed that those transactions were false.
8 The plaintiffs base their claims on three causes of action. The first is in deceit, the second two are causes of action under the Fair Trading Act 1987 (“the FTA”) or the Trade Practices Act 1974 (Cth) (“the TPA”). The first of the statutory causes of action is under s 42 of the FTA on the basis that the defendant himself engaged in trade or commerce in conduct which was misleading or deceptive or likely to mislead or deceive and that the plaintiffs thereby suffered damage. The second is on the basis that PAM was guilty of misleading or deceptive conduct; that the defendant aided, abetted, counselled or procured that conduct; and that by the conduct the plaintiffs suffered damage.
9 All causes of action are founded on the making of representations. Against ABN Amro these are all pleaded in a common form which is mutatis mutandis as follows:
“On each of the 30 drawdowns Pacific Asia, by providing the drawdown notices, the copy of the purported invoices, the copy purported bills of lading, the bills of exchange (in respect of the first and third drawdowns only) an the EFIC Declaration of Export to the Plaintiff, represented to the Plaintiff:
(a) that the copy invoice was a copy of a genuine invoice of Pacific Asia;
(b) that the copy bill of lading was a copy of a genuine bill of lading of the shipping line;
(c) that there was a genuine sale by Pacific Asia to the specified buyer of the subject goods;
(d) that the subject goods had been shipped on the vessel specified on the bill of lading;
(e) that the bill of exchange (in respect of the first and third drawdowns only) was drawn on a genuine buyer of the subject goods from Pacific Asia;
(f) that the transaction referred to in the documents had in fact occurred;
(h) that the shipment and transaction detailed in the EFIC Declaration of Export had occurred as so detailed.”(g) that the nominated beneficiary in the drawdown notice was the supplier of the subject goods to Pacific Asia or was someone who would cause the supplier to be paid;
10 In Citibank’s statement of claim there are in general terms two forms of allegations of representations. The first is as follows:
“On or about 28 January 1999 the second defendant and the Company represented to the plaintiff that:
(a) the Company had supplied goods to an overseas purchaser being Shenzhen Foodstuff General Co for an invoice value of US$1,984,500;
(b) the goods referred to in (a) were shipped on the ship named Hua Tai He on or about 17 January 1999;
(d) that of the sum of US$1,786,050 to be drawdown by the Company under the Post Shipment Facility, the sum of US$1,731,375 was required to pay Tatepro for the said goods.”(c) the goods referred to in (a) were purchased by the Company under a purchase order 3849 issued by the Company to Tatepro;
11 The second of the two forms of pleading of representations in Citibank’s statement of claim is as follows:
“On or about 29 April 1999 the second defendant and the Company represented to the plaintiff that:
(a) the Company had purchased frozen whole raw prawns form Belville Seafood Pty Limited for an invoice value of A$1,233,505;
(c) the sum of US$780,000 to be drawdown by the Company under the Pre Shipment Facility would be used by the Company to pay the invoice from Belville Seafood Pty Limited for the said goods.”(b) the goods referred to in (a) were purchased by the Company under invoice number BS/99/12 issued by Belville Seafood Pty Limited to the Company;
12 The elements required to be proved to establish the cause of action in deceit are as follows:
(1) That a representation was made.
(2) That the representation was made by the defendant.
(3) That the representation was false.
(4) That the representation was false to the defendant’s knowledge.
The following further observations may be made in respect of each of those elements.(5) That the relevant plaintiff suffered damage by reason of the false representation.
13 As to (1), there can be little doubt, and it is not really disputed, that the documentation presented to the banks in each case made representations including representations that the transaction shown in the invoice presented was a real transaction and that the dispatch of goods shown in the bill of lading had in fact occurred.
14 As to (2), that the representation must be a representation by the defendant, the plaintiffs rely on the signature on the relevant documentation by the defendant in each case. The defendant does not in any case deny the authenticity or fact of his signature. He points out, however, that the statements constituted by the documents are in each case made in terms by PAM and not by him. The drawdown was in each case requested by PAM. It is his case that the representations are PAM’s representations and cannot be regarded as his representations. This allegation needs to be considered in conjunction with the assertion in [17] below that the banks did not rely on any representation as a representation made by him, but only as a representation made by PAM, so that damage cannot be said to have flowed from any representation made by him.
15 As to (3), the defendant puts in issue in every case the allegation of the falsity of the representations.
16 As to (4), the defendant denies that he knew that any of the representations was false.
17 As to (5), the defendant denies the causal connexion between any representation made by him and the damage suffered by the banks. He says that he was a mere mechanical actor and that the banks could not be said in any way to have relied upon a representation made by him (if it can be regarded as having been made by him), so that it cannot be said that it was by his conduct that any loss was suffered.
18 So far as concerns the cause of action relying upon the defendant’s misleading or deceptive conduct, the relevant elements to be established in the context of these proceedings are as follows:
(1) That there was a representation made by the defendant.
(2) That the representation was made in trade or commerce.
(4) That the plaintiffs suffered damage by the conduct, ie, that it was in reliance upon the representation that money was paid away which was not subsequently repaid.(3) That the representation was false.
19 In respect of this cause of action, there is of course no need to establish a dishonest intent, nor any intent to mislead or deceive. The establishment of intent is not necessary to the establishment of a cause of action under s 42 of the FTA or s 52 of the TPA: see the passage from Yorke v Lucas (1985) 158 CLR 661 cited in [50] below. It has not been asserted or argued in this case that any conduct of the defendant was not in trade or commerce. In my view this is correct: see Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 at 612 - 614 per Toohey J; Lowe v Indoor Cricket Federation of NSW Inc (1994) ATPR 41-359 at 42,691 – 42,692 per Burchett J. But, in any event, the contrary was not argued. Otherwise, the defendant’s defences are essentially the same as in respect of the cause of action in deceit, namely, that the representations cannot be taken to have been made by the defendant rather than by PAM, that their falsity is not established and that the plaintiffs are not proved to have relied on conduct of the defendant (rather than of PAM) in paying away the money.
20 The elements necessary to make out the derivative cause of action under the TPA or the FTA are as follows:
(1) That there were representations made by PAM.
(2) That those representations were false.
(3) That the defendant was so involved in the making of those representations that his conduct falls within the aiding and abetting provision of the TPA: see s 75B.
The defences in this case may be perceived from what has been said above in respect of the other causes of action. In this case, as in the case of the action in deceit, knowledge by the defendant of the falsity of the representations must be proved, since liability in the derivative action requires proof of knowledge of the aider and abettor of the essential elements constituting the contravention: Yorke v Lucas supra at 670.(4) That loss was suffered by the conduct of PAM.
THE WITNESSES
The Defendant
21 The evidence material to each of the contested issues I shall discuss as necessary when dealing with those issues respectively. I should, however, say something at once about the defendant’s evidence. The defendant gave evidence that he had had a background in banking for something like 20 years and was very experienced in transactions of the nature of the transactions involved in these proceedings. He denied knowledge of the dishonesty of any of the transactions involved in the proceedings. He gave evidence that, although he was described as the general manager of PAM, his role in the conduct of the company and in these transactions was a limited one. Tina Liu was not only the controller of the company, but played a dominant part in its business and in the conduct of these transactions. She was for a good deal of the relevant time not in Australia but in Hong Kong or China. It was she who in each case conveyed to the defendant the nature of the transaction that was to be carried out. He was responsible only for its implementation. Similarly, when complaints were made about non payment on time of obligations to the banks, it was to Tina Liu that he referred for instructions as to what was to occur and on her that he relied to contact the purchaser as necessary and to inform him when it was that it was likely that payment would be made. There is no doubt, however, that it was with him, or principally with him, that the banks communicated. Equally, it was he who conveyed back to them answers as to when payment could be expected. This evidence was all given by affidavit. A sad aspect of this case is that before the trial the defendant was diagnosed with liver cancer which was advanced and said to be terminal. This was borne out by his death on 5 May 2003. There was medical evidence that he was unfit to be cross examined at the time of the trial. The plaintiffs were allowed to have their own medical examination of the defendant. There was no challenge to the proposition that he was unfit to give oral evidence. The plaintiffs opposed the use of his affidavits without cross examination. However, I allowed the affidavits to be used without him being cross examined. The plaintiffs in terms submit that, in the absence of cross examination, his evidence can be given little weight. That submission in those terms is correct. Affidavit evidence read without cross examination over objection to that course must be discounted accordingly. No difference is made by the fact that the lack of cross examination is without the fault of the deponent, or of the party reading the affidavit where, as in this case, the cross examination was precluded by the state of the defendant’s health: see Clyne v The Law Society of New South Wales NSWCA 4 September 1987 unreported, especially per Mahoney JA; Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (1988) 28ACSR 688 at 698 per Santow J; Re O’Neill [1972] VR 327 at 333 per Anderson J.
The Plaintiffs’ Witnesses
22 Among the plaintiffs’ witnesses who were cross examined were bank officers, who had dealt with the defendant and the transactions, and Mr and Mrs Matthews, whose company was named as vendor in two of the impugned transactions. The bank officers were in a sense interested in the proceedings, but their evidence was not substantially detracted from by cross examination. The Matthews were not interested in the litigation and gave their evidence in a straightforward manner.
23 Also cross examined were two witnesses of the plaintiffs from shipping agencies, Alan Brundish and Leonard John Davis. Both had extensive experience in the shipping industry, in Mr Brundish’s case of 36 years. Mr Brundish holds a senior management position with Five Star Shipping & Agency Company Pty Ltd, a major shipping agency (“Five Star Shipping”). Mr Davis holds a senior position with OOCL (Australia) Pty Ltd (“OOCL”), which was the charterer of two ships named in bills of lading in this case. Neither Mr Brundish nor Mr Davis has any interest in the proceedings. They displayed a detailed grasp of the records of their respective companies and also authoritative knowledge of the industry generally. The manner in which they gave their evidence bespoke a careful attempt to assist the Court.
THE FALSITY OF THE REPRESENTATIONS
General
24 The plaintiffs sought to prove the falsity of the representations, ie, that the invoices and bills of lading did not reflect real transactions, by tendering four types of evidence. There is not any drawdown in respect of which all of the four types of evidence ware tendered. There are some in respect of which only one type of evidence is tendered. What types of evidence were led to support the allegation of falsity in respect of any particular drawdown is summarised in the Schedule. In respect of A2, A3, A9, A11 and A27 there is no evidence in support of the falsity of the representations relating specifically to these transactions. The Court is asked to draw the inference of falsity in those cases from the evidence relating to the other impugned transactions.
25 The types of evidence tendered are:
(1) Sellers
(2) Port authority
(4) Document examiner.(3) Shipping agent
26 As to (1), there is evidence by representatives of only one seller, Matthews Raw Prawns. Evidence was given by both Mr Matthews and Mrs Matthews to the effect that that company did not sell the prawns referred to in the invoices in relation to two drawdowns (C9 and C20) and that the invoices were not invoices of that company. Furthermore, Mr Matthews gave evidence that suggested that the purported seller in two other drawdowns (C7 and C8), Belville Seafoods (“Belville”), did not engage in those transactions. It may be added here that the plaintiffs opened to the Court an intention to lead evidence of foreign buyers to the effect that the transactions of sale to them relied on to justify other drawdowns did not exist. Some documentary evidence to this effect was tendered during the trial but none of this was admitted. So it is only in respect of at most the four drawdowns in respect of which the Matthews gave evidence that there is direct evidence that either the contract of purchase by PAM or the contract of sale by PAM was non existent.
27 As to (2), evidence was given to the effect that the actual time of presence of the ship on which the goods were alleged to have been loaded in the port of loading was such that one would conclude that the bill of lading was not a true document.
28 As to (3), evidence was given by the shipping agent witnesses in general terms negating that the goods were loaded on to the relevant ships or present on those ships during the relevant voyages at all.
29 As to (4), evidence was led from Mr Westwood, an expert document examiner, which suggested that in a number of instances the bills of lading were manufactured documents made by recopying from other bills of lading or in some other fashion.
Evidence of Sellers
30 The defendant’s evidence concerning this was that some time before the impugned transactions he had negotiated the purchase of some prawns from Matthews Raw Prawns. There was evidence that suggested that around the time of the relevant transactions, namely, about April/May 1999, he made enquiries of the Matthews as to the availability and price of prawns. The Matthews concede some such contact. However, they have searched their records and can find no record of the transactions represented by the invoices. They say that the quantities of prawns were very large and were likely to have stuck in the memory. They also say that in some instances the quantity of prawns shown would not physically fit in a container or containers of the size specified. Mr Matthews also gave evidence that, although he had been engaged for many years in the Australian seafood export trade, in which there were only a limited number of vendors, he had never heard of Belville. There was other evidence that that company, although existent, was not trading at the relevant time. The Matthews were cross examined but the cross examination did not in reality detract from their evidence. There was some vague and hearsay evidence that a Simon Wai in Hong Kong said that the details on one or both of the bills of lading in respect of the two Matthews Raw Prawn shipments were correct. However, I do not accept that this could prevail in face of the Matthews’ clear evidence.
Evidence of Port Authorities
31 In the case of 19 bills of lading there is evidence that the ship was not in port at a time corresponding to the date appearing in the bill of lading. It is contended that it can be inferred from that fact that the bill of lading is not a true bill of lading. The evidence as to the dates that the relevant ships were in port is affidavit evidence from officers of the relevant port authorities. This evidence is not really controversial. It was admitted in a number of instances. The port officers were not required for cross examination and there is no reason to doubt that there is a high probability that the evidence reflects their port records and that those port records were accurate. This evidence shows that, in relation to 13 of the 19 bills of lading, the date shown in the bill of lading as the date on which the goods were laden on board was a day before the ship entered port. In relation to six of the bills of lading the date showing the goods as laden on board was a day after the ship had departed from the port, being a day one to three days after its departure. To explain the significance of the date in a bill of lading and its correspondence with the days that the ship is in port the plaintiffs relied on the evidence of Mr Brundish and Mr Davis. Their experience is stated in [23] above. Mr Brundish gave evidence that normal industry practice is that the date recorded in the bill of lading as the date on which goods were “laden on board” is the date that the goods were loaded on board and the ship actually sailed from the port. In respect of carrier bills of lading Mr Brundish said that the bill of lading will normally record the date “laden on board” as the date the cargo was physically loaded on the ship and the ship sailed from port. For house bills of lading Mr Brundish said that it is normal industry practice that that bill is issued strictly in line with the carrier bill and therefore shows the same date laden on board as the carrier bill, even where the house bill of lading is physically issued on a day after the ship sailed. The reason for strictness in the correspondence of the date recorded as the “laden on board” date and the date of physical loading of the cargo is that a bill of lading is a document of title which the carrier is not prepared to issue until it can guarantee that the goods have been loaded and placed beyond risk of unloading by the ship having physically left the port. This evidence certainly tends to show that bills that show a laden on board date after the ship has departed from port and a fortiori a date before the ship entered the port are not true bills of lading. No doubt in an imperfect world errors sometimes occur, but there are good reasons for strictness being observed in relation to this practice.
Evidence of Shipping Agents
32 The evidence the plaintiffs rely on in this regard is again that of Mr Brundish and Mr Davis. Mr Brundish gave evidence about the records maintained by Five Star Shipping and his review of those records. Mr Davis gave evidence about the records maintained by OOCL and his review of those records. This evidence is relevant to 49 of the drawdowns and 52 underlying export transactions. Five Star shipping was the agent in respect of 47 of the transactions, namely, C1 - C3, C6, C10 - C15, C17 - C19, A1, A4, A5, A7, A8, A10, A12 - A26, A28, A29, A31, A32, A34 - A38 and A39a, A39b, A39c and A39d. OOCL was the agent in respect of five transactions, namely, C7, C9, C16, C20 and A30. For each of the 49 drawdowns, documentation was delivered to the bank, which in all cases included documentation which described specified goods shipped on a specified ship on a specified voyage number.
33 Mr Brundish’s evidence shows that Five Star Shipping issues and keeps records of a bill of lading for all goods loaded on a ship for which it is the agent. Those details include the shipper, the ship number and voyage number, the size, type and quantity of containers, the unique container numbers, the type and quantity of cargo and the date the cargo was laden on board. This record is summarised in a vessel manifest. There are also recorded the names of all shippers, shipping agents and freight forwarders which book space on a vessel.
34 OOCL issues and keeps a record of the bill of lading for all cargo shipped in Australia on OOCL Envoy and OOCL Explorer. It records the unique number of all containers loaded on OOCL Envoy and OOCL Explorer, together with the cargo contained in the container, and the location of each container on each ship on each voyage (recorded in the terminal load report, the bay plan and the terminal load list).
35 This evidence negatives the presence on the relevant voyages of the goods the subject of the drawdowns.
36 The probability of their presence on the ship is further diminished in many instances by PAM’s documents showing break bulk goods as being loaded on container only ships, which simply does not occur, or by the quantity of goods recorded as being loaded in a container being such as would not physically fit in.
Evidence of Document Examiner
37 Evidence was given by Mr Westwood, an expert document examiner, of features of the documentation in the case of certain of the drawdowns as indicated in the relevant column in the Schedule. The evidence is to the effect that those features of the documents suggest that the documents had been created by recopying of other documents, including the recopying of signatures. In the circumstances of this case, I do not regard Mr Westwood’s evidence as of great probative value. If the document examiner’s evidence were the only evidence of the falsity of any transaction, I should not find that transaction on that evidence to be false. Nor do I regard his evidence as adding significantly to the cogency of other evidence in respect of any transaction.
EVIDENCE THAT DEFENDANT KNEW REPRESENTATIONS FALSE
Admissions
38 The plaintiffs rely on evidence of various sorts to establish that the defendant knew that the representations they allege he made were false. Of particular significance in this regard, since they contain what are sought to be characterised as admissions on the defendant’s part of a guilty state of mind, are the contents of emails that he wrote to family members in the last days of August and in September 1999. These came into the plaintiffs’ possession as a result of the seizure of the defendant’s home computer under an Anton Piller order. The emails had been deleted, but were recovered by an imaging process. It is important to know, to understand them, that Maureen Ong was the defendant’s ex wife, but that he clearly maintained a close relationship with her. It should also be added that he was not aware at the time the emails were written of his fatal illness.
39 On 30 August 1999 the defendant wrote to Maureen Ong of his return from a trip to Singapore and Hong Kong to investigate new health products. He continued:
- “On the office front things have gone quite bad with Citibank getting very suspicious and the pressure keeps coming everyday [sic] even ring me up at home & in HK. Although HSBC bank is prepared to grant us a new loan I am afraid it may be too late. I hope the Lord will deliver me for the sake of the children.”
Maureen Ong responded and on 31August the defendant replied:
- “Citic is still shareholder but not willing to put up additional cash to support. Tina is back and concerned and trying to do something but too little too late I guess. I had already sounded to her the seriousness of the matter some months ago. Hope we can make it.”
40 On 3 September 1999 the defendant wrote to Maureen Ong:
- “My worst fears came true, HSBC declined credit facilities. Tina is trying to raise a few mil and also informed Citic of the seriousness if they do not help. I will tell her later today, hopes she does not give up. Everything looks terribly bad. Pray for me.”
And to his brother, Mai Ming Wong:
- “Please arrange immediate liquidation of [Sinmametal] urgently. Things are taking a turn for the worst [sic] for our company do not know what to expect.”
41 On 5 September 2003 he wrote to his son, Daniel:
- “Things in the office are getting very critical, tomorrow we shall be having a meeting with one of the banks. Auntie Tina is to get more time and also ask the other shareholders to make a loan to tide over. If Citibank refuses to give more time, the worst will befall the company.”
Then and on 17 and 18 September 2003 there were various communications concerning sale of shares. It is not entirely clear in whose name the relevant shares were held. The communications also dealt with payment of debts, the despatch of some funds to accounts of his ex wife and children and the making of financial and family arrangements generally. One possible motivation for these arrangements appears in the following passage of an email of 18 September to Maureen Ong:
- “I have spoken to Earnest [sic] and he agreed to stay in our house if I am not around on a permanent basis as long as he likes to help look after Stef.
- ……
- Last night I briefly told her that Earnest will stay in our house should I be not around, or if I have a mental breakdown because of the company's problems.”
42 On 20 September 2003 he wrote his most discursive email to Maureen Ong concerning the impending fate of the company:
- “Please do not to feel sad, I have learned that God is putting us through all these trials and tribulations in life to test our faith and to strengthen us and teach us to be obedient to him ……. I was very troubled since [sic] the last two months, only peaceful time I had was the weekends …… I really dread those phonecalls [sic] from the bankers and I really shaked [sic] when they look [sic] for me. I have prepared for the worst, perhaps things may not turn out so bad because I honestly was not intentionally a party to defraud the banks. I do not believe that Tina had any intention to do that too except perhaps use the banks [sic] funds to help her in her business investments. I am putting all my trust in God and whatever the outcome I pray that God will have mercy towards all of us. I always do not feel comfortable having to help Tina for these types of transactions and in a way I can have the peace of mind even if I lose my job. Anyway Tina told Lisa and myself that we should stick to agreed understanding that both of us are not aware of what is actually going on with the funds. We send the monies to Tina's company in HK for centralised buying and buyers will also pay the bills through the same company. We are not involved with the actual purchase and shipment of the goods. Those companies like Tatepro, Premier are merely set up to facilitate transfer of funds and the ultimate owner is Tina. The other reason for having these companies is to assist business associates in China/HK to invest here to enhance their application for P/R. One good thing is that the auditors of PAM mentioned about these companies and CITIC directors signed and acknowledged that these companies are dealing on arms-length basis. Anyway I do not remember whether I told you that Tina ranged [sic] on Friday night to tell me that Citic may yet be willing to help, we would probably know by Monday. Tina is a nice person, but irresponsible in many ways, she has too big a heart and do [sic] not have enough business acumen and perservance [sic] and patience to build up a business. Her desire for quick and huge profits perhaps from her FX and casino gambling habits is her greatest folly. …… As far has [sic] for me, perhaps the banks may not think that I am a party to the fraud and will not be charged. I pray the Lord will be kind to me in this respect. I have discarded our previous Wills and left my new Will in the folder. I have also put in the carton box with Mark/May the note to the kids you prepared in case of our death what to do [sic]. …… Once again, Maureen do not feel despaired [sic] over the events that has [sic] happened over the last two over years [sic], Look to God always …… Maureen, please do not worry, as I tell myself also, worry does not help, cast our burden on the Lord and leave it to Him and you will feel better.”
43 Later the same day he wrote again to Maureen Ong:
- “Had meeting with Citibank which demanded quite a few things and documents besides payment. Citic’s Mr Zhang ranged [sic] me this morning to tell me not to resign as they are still prepared to support if the securities are acceptable. Tina told me that the man from Citic is flying back tonight to Melbourne and seems to be reasonably satisfied with what he saw. By Wednesday we should know whether Citic is going to help. Citibank is also keen to know as it is the key to resolving a great part of the problems. Esther, Tina's younger sister said that she may be able to raise a couple of millions from LC through one of her friend’s company [sic] in Hong Kong. It is only as good when we see the LC. Thank God, for a few more days of reprieve.”
44 On 21 September 1999 he wrote to Maureen Ong:
- “Pressure is now coming from all the banks, Export Credit Insurance etc don’t think the company can survive despite Citic's possible help as there are too many payments overdues [sic]. I cannot hold the banks any more if I do I could be implicated further. I am going to tell Tina she has to maintain contacts with the banks etc and not leave me to handle it. …… My heart is heavy and worried, I can only cast all my burdens upon the Lord to have mercy on the outcome”
And to his brother, Kai Ming Wong:
- “Things are appearing to be turning for the worst [sic] in office. My boss is back in HK and if other shareholders will not inject cash into the company, she is likely to remain outside the country and throw in the towel leaving me to sort out with the banks and creditors. Although I am not a party to the default of payment, I worry I may be implicated somehow thus the cautionary moves take [illegible]……. Unfortunately the shares value dropped in the last 2-3 weeks and not timely to dispose of everything. For Sinmametal I strongly urge you liquidate the company, close the bank accounts as one of my boss’s [sic] companies in HK used the name of Sinmametal for some dummy transactions and I do not want to get any of you in trouble. …… Pls delete all emails rec’d from me immediately.”
45 The other material sought to be relied on as admissions is answers given by the defendant on examination before a Registrar of the Court on 11 August 2000 in the winding up of PAM. Perhaps the most significant of those answers are as follows:
“Q Do you have any idea how the money got out of the company?
A Got out of the company?
Q Yes.
A From which company?
Q Well from PAM. Tina just didn’t write herself out a cheque?
A I think the money, as you can see were obvious channel back to the Wealthcourt (sic).
Q Channelled back to Wealthcourt?
A Yes.
Q So you think it was being siphoned out through Wealthcourt?
A I guess so, yeah, just a guess.
………
Q Well, is it the case that it came to your attention that purchasers who were supposed to be paying for shipments were in fact not paying for those shipments and other parties were paying for the shipments?
A I beg your pardon?
Q Did you become aware that, if I can put it simply, wrong parties were repaying debts in the sense that a purchaser - a nominated buyer such as Glorius (sic) Trading wouldn't pay the debt but another company such as Wealthcourt, for example, would pay the debt?
A This was brought to my attention. I was given to understand that the buyers paid to Wealthcourt the moneys and Wealthcourt pay on their behalf.
Q About February?Q Well, when was it brought to your attention?
A Six, seven, eight months before the company closed.
A Yeah, something like that.”
Other Evidence of Knowledge of Falsity
46 The plaintiffs contend that a multitude of objective facts surrounding the drawdowns make it implausible that the defendant did not know that the drawdown notices and supporting documents delivered to the plaintiffs falsely described underlying export transactions. The facts relied upon by the plaintiffs include that the defendant was the general manager of PAM, was actively involved in the conduct of its business, including the drawdowns, and professed detailed knowledge of the transactions; and that, at most of the drawdowns, the defendant directed the plaintiffs to pay funds to companies (Premier, Tatepro and Strategic) in which he had an interest. The plaintiffs also allege that it was the defendant’s practice to lie to bank officers about contact with buyers; and that the defendant knew documents submitted to the plaintiffs were false in other respects, namely, that they contained false signatures. The plaintiffs rely on evidence of the shipping agents that they had never heard of a shipping agent or freight forwarder called Oceanic Container Line Inc, on whose paper all or virtually all the bills of lading were written.
EVIDENCE AS TO WHETHER REPRESENTATIONS WERE MADE BY DEFENDANT AND RELIANCE BY PLAINTIFFS
47 There is a body of evidence concerning the defendant’s dealings with officers of the plaintiffs which is relevant to both the question of whether the misrepresentations can be taken to be conduct of the defendant for the purposes of s 42 of the FTA and whether it is established that the plaintiffs relied on the representations as made by the defendant as opposed to relying on the representations as made by PAM. This body of evidence was summarised by the plaintiffs, in my view accurately, along the following lines.
48 In at least some cases the facility agreements required nomination and identification of PAM’s representatives as follows:
“Prior to a Drawing hereunder the Customer shall lodge with the Bank (in a form and substance satisfactory to the Bank and its legal advisers):
……
(c) proof of identity of each of the directors of the Customer and any other persons authorised to execute documents on behalf of the Customer;”(b) a certified copy of a resolution by the Customer’s board of directors authorising acceptance of this Agreement and nominating authorised signatories to give instructions and execute Drawdown Notices under this Agreement;
In late 1998, Citibank was provided with a copy of a resolution by PAM that the defendant was authorised for and on behalf of and so as to bind PAM, to execute documents, give notices and do acts in accordance with the facility. The defendant was described in dealings with both plaintiffs as PAM’s “authorised signatory”. The defendant also dealt with the plaintiffs under the title of PAM’s “General Manager”. The defendant admits in an affidavit that one of his “responsibilities” was dealing with the plaintiffs. In view of his evidence of decades of dealing as a banker with such transactions, this is hardly surprising. The evidence appears to indicate that this was one of his principal functions in PAM. Bank officers dealt with the defendant both on substantial matters (such as establishment and amendment of major facilities) and more routine matters including drawdowns. The defendant was the officer at PAM who almost always dealt with the bank officers and he did so in a visibly confident, knowledgeable and authoritative manner. Other staff at PAM appeared to defer to the defendant. Detailed evidence is given of the procedure involved in the approval of drawdowns within each of the plaintiffs, involving a primary checking process and a secondary supervising and approval process. In each case the identity of the authorising signatories was thoroughly checked as part of the processes.
THE LAW
Misrepresentations by Agents and Employees
49 It has long been established that the liability of an agent for a fraudulent misrepresentation is not precluded by the fact that it was made on behalf of the principal. If the agent participated in the fraud, he is himself liable for it. As Barton J said in Sibley v Grosvenor (1916) 21 CLR 469 at 479:
- “I find nothing in the authorities which should save a fraudulent agent, under such circumstances as exist here, from the proper consequence of his fraud, which is, that he should make good to the plaintiffs the losses immediately and directly caused by the fraud.”
50 The following observations were made in the joint judgment of Mason ACJ, Wilson, Deane and Dawson JJ in Yorke v Lucas supra at 666:
- “It should be observed at the outset that the facts as found by the trial judge raise the question whether the Lucas company itself was guilty of a contravention of s 52. It is, of course, established that contravention of that section does not require an intent to mislead or deceive and even though a corporation acts honestly and reasonably, it may nonetheless engage in conduct that is misleading or deceptive or is likely to mislead or deceive: Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216, at p 228; Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191, at p 197. That does not, however, mean that a corporation which purports to do no more than pass on information supplied by another must nevertheless be engaging in misleading or deceptive conduct if the information turns out to be false. If the circumstances are such as to make it apparent that the corporation is not the source of the information and that it expressly or impliedly disclaims any belief in its truth or falsity, merely passing it on for what it is worth, we very much doubt that the corporation can properly be said to be itself engaging in conduct that is misleading or deceptive.”
51 Gardam v George Wills & Co Ltd (1988) 82 ALR 415 was a case under s 53(a) of the TPA. A corporation which was a wholesaler of clothing was charged with “falsely representing” that goods were of a particular standard by labels attached to them by the manufacturer. In the Federal Court French J cited the passage from Yorke v Lucas cited above and said at 427:
- “The innocent carriage of a false representation from one person to another in circumstances where the carrier is and is seen to be a mere conduit, does not involve him in making that representation. Nobody would expect that the postman who bears a misleading message in a postal article has any concern about its content or is in any sense adopting it. The same is true of the messenger boy or courier service. When, however, a representation is conveyed in circumstances in which the carrier would be regarded by the relevant section of the public as adopting it, then he makes that representation. It will be a question of fact in each case, but in my opinion the wholesaler who resells goods labelled without attribution of authorship can be taken in ordinary circumstances to adopt the text of those labels.”
52 In John G Glass Real Estate Pty Limited v Karawi Constructions Pty Limited (1993) ATPR 41-249 a Full Court of the Federal Court (Davies, Heerey and Whitlam JJ) was dealing with a case under s 52 where a real estate agent had transmitted a false representation conveyed to it by the owner concerning the floor area of rental premises. After citing from Yorke v Lucas supra the joint judgment continued at 41,359:
“That passage has been applied in a number of cases including decisions of Full Courts of this Court: The Saints Gallery Pty Ltd v Plummer (1988) ATPR 40-882 at 49,562 - 49,563; (1988) 80 ALR 525 at 530 - 531 and Lezam Pty Ltd v Seabridge Australia Pty Ltd (1992) ATPR 41-171 at 40,352 - 40,353, 40,355 - 40,357; (1992) 35 FCR 535 at 552 - 553, 556 - 558.
In our view, a close analysis of the factual situations in the Saints Gallery and Lezam does not assist in the disposition of question [sic] arising on this appeal which is essentially one of fact, albeit, as the appellant correctly submits, fact not depending on questions of credibility and in respect of which an appellate court is as able to draw inferences as was the trial judge.
In our opinion an estate agent which holds itself out as, amongst other things, ‘consultants to institutional investors and to developers of major properties’ would not be regarded by potential purchasers of properties as merely passing on information about the property 'for what it is worth and without any belief in its truth or falsity’.
In the present case the appellant adopted the information in question and incorporated it as a central and prominent feature of their selling effort on behalf of the vendor. There was certainly no express disclaimer of the appellant’s belief in the truth of the information in the brochure - indeed there was an express assertion of such belief. As part of its ordinary business the agent was providing information in a persuasive form with a view to achieving a sale of its principal’s property and of course earning commission. It was this conduct which the learned trial judge, correctly in our opinion, held to be misleading and deceptive. Once the falsity of the figure was demonstrated, it seems to us that no other conclusion could follow.”Information of the kind in question, the net lettable area of a building, stands on a different footing from the puffery which often accompanies the sale of real property. The figure is one of hard physical fact. As the appellant's own calculations indicate, it is an essential factor in determining the likely profitability of a commercial building and hence its value. We think a purchaser like Karawi would ordinarily expect, to quote the terms of the appellant’s own disclaimer, that the agent had no reason to doubt the completeness or accuracy of the information provided.
53 In my view, no difference is made to the application of the principle by the fact that the representor on behalf of a corporation is an employee. The fact that he is an employee does not negative the fact that he is acting as an agent. That the FTA may impose liability on employees acting as such is illustrated by Australian Competition and Consumer Commission v McCaskey (2000) 104 FCR 8. That was a case under the TPA but, as the conduct involved telephone communications, the provisions bound natural persons as well as corporations. The injunctive orders were made by consent, but French J scrutinised them carefully to see that they were authorised by the Act (see at 21). His Honour made orders against the employee who had engaged in the conduct. In Pricom Pty Ltd v Sgarioto (1994) ATPR (Digest) 46-135, a case under the Victorian FTA, Eames J held an estate agent liable for misleading conduct although his principals selling their own house could not be held liable because not engaged in trade or commerce. The FTA proscribes conduct by natural persons. If that conduct is in trade or commerce and cannot be said not to be misleading conduct of the person who engages in it by reason that that person is acting merely as a conduit, in my view the person is not removed from the purview of the Act by the fact he is engages in the conduct as the employee of another.
Reliance on Misrepresentations
54 In Gould v Vaggelas (1985) 157 CLR 215 (concerning an action in deceit) Wilson J said at 236:
- “1 Notwithstanding that a representation is both false and fraudulent, if the representee does not rely upon it he has no case.
2 If a material representation is made which is calculated to induce the representee to enter into a contract and that person in fact enters into the contract there arises a fair inference of fact that he was induced to do so by the representation.
3 The inference may be rebutted, for example, by showing that the representee, before he entered into the contract, either was possessed of actual knowledge of the true facts and knew them to be true or alternatively made it plain that whether he knew the true facts or not he did not rely on the representation.
4 The representation need not be the sole inducement. It is sufficient so long as it plays some part even if only a minor part in contributing to the formation of the contract.”
55 Lam v Ausintel Investments Australia Pty Ltd (1989) 97 FLR 458 was a decision of the Court of Appeal in which one of the causes of action was under s 52 of the TPA. Gleeson CJ at 477 – 478 cited the above passage from Gould v Vaggelas as relevant to that cause of action. In Lam the trial Judge (Brownie J) had found that, although untrue representations had been made, the appellant had entered into the relevant agreements, not as the consequence of reliance on those representations, but because of his view of his own commercial interests, dictated by pressure he was under from creditors. The Court of Appeal found no reason to overturn this finding of fact. Whether or not there was a reliance on representations is a question of fact to be determined on the circumstances of each case.
Proof of Fraud
56 To establish liability in deceit, the plaintiff must establish fraud. In the classic case of Derry v Peek (1889) 14 App Cas 337 Lord Herschell said at 374:
- “I think the authorities establish the following propositions: First, in order to sustain an action of deceit, there must be proof of fraud, and nothing short of that will suffice. Secondly, fraud is proved when it is shewn that a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false.”
57 Fraud may be established by circumstantial evidence. When making a determination on circumstantial evidence, one must look at the body of evidence as a whole. As McHugh J said in Shepherd v The Queen (1990) 170 CLR 573 at 591 – 592:
- “There are many cases where the probability of the correctness of an inference of guilt drawn from the circumstances of the case is greater than the probability of the truth of any of the individual circumstances. As Lord Simon of Glaisdale pointed out in Reg v Kilbourne [1973] AC 729, at p 758:
- ‘Circumstantial evidence ... works by cumulatively, in geometrical progression, eliminating other possibilities.’
Ordinarily, in a circumstantial evidence case, guilt is inferred from a number of circumstances — often numerous — which taken as a whole eliminate the hypothesis of innocence. The cogency of the inference of guilt is derived from the cumulative weight of circumstances, not the quality of proof of each circumstance.”
……
58 Unlike Shepherd, this is a civil not a criminal case. The standard of proof therefore is not proof beyond reasonable doubt, but is prescribed by s 140 of the Evidence Act 1995 (“the EA”) as follows:
“140 Civil proceedings: standard of proof
(2) Without limiting the matters that the court may take into account in deciding whether it is so satisfied, it is to take into account:(1) In a civil proceeding, the court must find the case of a party proved if it is satisfied that the case has been proved on the balance of probabilities.
- (a) the nature of the cause of action or defence, and
(b) the nature of the subject-matter of the proceeding, and
(c) the gravity of the matters alleged.”
Section 140(2) in effect subsumes the common law doctrine embodied in decisions such as Briginshaw v Briginshaw ( 1938) 60 CLR 336; Helton v Allen (1940) 63 CLR 691; and Rejfek v McElroy (1965) 112 CLR 517: see Amalgamated Television Services Pty Ltd v Marsden [2002] NSWCA 419 at [61]. The allegations of a number of frauds involving very large sums of money are clearly very grave. The standard of proof is therefore the civil standard on the balance of probabilities bearing in mind the gravity of the allegations.
FINDINGS
Whether the Representations were False
59 In my view the evidence that is most convincing of the non existence of the transactions is the actual evidence of supposed participants in the transactions. This applies to only two of the 59 drawdowns, namely, C9 and C20, which related to prawns supposedly bought from Matthews Raw Prawns. Mr and Mrs Matthews were both, as I have said, straightforward witnesses. They did not engage in a large number of export transactions each year. The supposed transactions were for very large quantities of prawns which are likely to have stuck in their minds. There is no reason to think that they would not have remembered the transactions. There is no reason to think that their records are wrong when they contain no record of any such transactions. It is true that there was a small amount of distant hearsay evidence that somebody in Hong Kong said that the details contained in the relevant bills of lading were correct. That cannot prevail against the clear evidence of credible witnesses who it may be supposed would have would have had recall and records of the transactions had they existed. Furthermore, in those two cases, if it is necessary, there is the evidence of port authorities and of the shipping agents, which appear to confirm the evidence that the transactions did not exist.
60 There is evidence, but obviously of a much lesser degree of cogency in relation to the two Belville Seafoods (“Belville”) drawdowns, C7 and C8. In these transactions the vendor of prawns was said to be Belville. The Matthews, of course, had no personal knowledge of those transactions. However, Mr Matthews gave evidence that, had Belville been engaged in the seafood export trade at the relevant time, he would have known of that fact. There is other evidence seeming to show that Belville was existent but not operating at the time. It was opened that there would be evidence that the defendant manufactured the Belville invoices. The relevant witness was brought to Court by subpoena but not called. In relation to C8 there is no other evidence of the non existence of the transaction. In the case of C7 there is also the evidence of the port authority and the shipping agent.
61 After the evidence of the sellers, the class of evidence that I find next most compelling is the evidence of the shipping agents. As set out in [33] and [34] above the records of both agencies contained minute details relating to all shipments made by them. The records of the relevant voyages were able to be examined by Mr Brundish and Mr Davis, on whose satisfactoriness as witnesses I have already commented. In relation to the OOCL ships, there was even a cargo plan which negatived the presence on the relevant ships of the particular containers mentioned in the documentation relating to the transactions. No doubt mistakes are made in records, but the possibility that the goods may have been differently described in PAM’s documentation and in the documentation kept by the shipping agents concerning the cargo on the ships is minimised by the practice of always describing the cargo in the same way for the very purpose of ensuring that it can be readily identified. No doubt, as I have said, in human affairs, errors occur even in well regulated systems. However, on the balance of probabilities the evidence of the shipping agents in respect of the drawdowns as to which they give evidence is compelling evidence.
62 I find the evidence of the port authorities somewhat less compelling. The evidence does not contain the same amount of detail as the evidence of the shipping agents. In my view it may not be known with as much precision exactly when cargo was loaded on a ship and it seems to me that ships may on many occasions, by reason of a variety of exigencies, depart on days different from the days on which they are expected to depart. The statement that ships are generally turned around in 24 hours does not seem to accord with the port authorities’ records as to the days on which the ships concerned were in port. The actual content of the evidence I do not doubt. There is no reason to think that the port authorities do not keep their records carefully and the persons who gave evidence of the records were not cross examined to suggest otherwise. However, as I have said, I do not regard the evidence of shipping authorities in the circumstances of this case as conveying the same degree of probability of proof as does the evidence of the shipping agents.
63 I have already expressed the view that in the particular circumstances of this case I do not think the evidence of the document examiner has added very much to the quantum of proof in respect of any drawdown.
64 In relation to the transactions as to which Mr and Mrs Matthews gave evidence I find that the transactions did not exist and that the representations were false. As I have said, I accept the evidence of Mr and Mrs Matthews. The transactions involved are C9 and C20. Furthermore, in each case there was, in addition, evidence of the port authority and of the shipping agent which corroborated the non existence of the transaction.
65 In the case of one of the two Belville transactions, namely, C7, the evidence concerning Belville itself was supported by evidence of the port authority and of the shipping agent. On the balance of probabilities I find that that transaction did not exist and that the representations concerning it were false. In respect of C8, whilst there is a deal of force in the evidence concerning Belville, there is no other specific evidence and, if that transaction stood alone, I should not be prepared to find on the balance of probabilities that that transaction was non existent. However, in that case the evidence concerning C7 comes to the aid of the plaintiff. The transactions were only six days apart. The form of the invoices is the same. There is no evidence that shows that the goods in C8 were shipped. I infer that this invoice also is false and that the representations concerning C8 were also untrue.
66 I have said that the single most compelling class of evidence was the shipping agents’ evidence negativing the presence of the goods on the ships on which they were allegedly shipped. Where the shipping agents’ evidence is supported by port authority evidence, I do not have difficulty in finding on the balance of probabilities that the bills of lading were false and that the goods were not laden on to the ships specified. On that basis I find that there were material misrepresentations in 12 cases, namely, C3, C12, C13, C16, A8, A21, A23, A24, A30, A31, A35 and A36.
67 In cases where there was shipping agents’ evidence alone, I have had more doubt as to whether I should make a finding on the balance of probabilities that the goods were not laden on the ship and that there were accordingly misrepresentations in the documentation presented to the plaintiffs. However, bearing in mind the fact that the onus of proof is on the balance of probabilities and the strength of the shipping agents’ evidence, I have come to the conclusion that, where the shipping agents’ evidence negatives the presence of the goods on the relevant ship, even where it is not otherwise supported (except by document examiner’s evidence), I should find that the goods were not laden on the ship and that there was a misrepresentation accordingly and I so find. That applies in respect of the following 34 drawdowns (38 transactions), namely, C1, C2, C6, C10, C11, C14, C15, C17, C18, C19, A1, A4, A5, A7, A10, A12, A13, A14, A15, A16, A17, A18, A19, A20, A22, A25, A26, A28, A29, A32, A34, A37, A38 and A39 (all four transactions).
68 I then come to the class of transactions where the only type of evidence available was the evidence of port authorities. I have come to the conclusion that, by reason of what I have said concerning that evidence in [62], I should not on that evidence alone make a finding on the balance of probabilities that the representations were false. I appreciate that there is a deal of force in the port authorities’ evidence, however, I do not deem it sufficient without more to make a finding of falsity of representation. This applies in respect of the following four drawdowns, namely, C4, C5, A6 and A33.
69 In relation to the five transactions in respect of which, as noted in [24] above, there is no specific evidence to support the falsity of the representations, namely, A2, A3, A9, A11 and A27, I decline to infer from the evidence relating to the other impugned transactions that the representations made in respect of these transactions were false.
Whether the Representations were Representations of the Defendant
70 I have considered carefully whether the representations made would have been taken by the relevant bank officers to have been representations by the defendant as opposed to representations by PAM. In my view there are a number of reasons for accepting that the relevant bank officers would have viewed the representations as representations which the defendant himself was making rather than, as some sort of cipher, simply making them on behalf of PAM. The persons who were authorised to sign documents on behalf of PAM were limited in number, responsible in office and identified ahead of time. The defendant was one of them. In the case of Citibank, a resolution was passed by PAM authorising the defendant to act on behalf of PAM so as to bind that company and furnished to Citibank. The defendant dealt with the banks under the description of authorised signatory or general manager. One of his principal responsibilities was dealing with the plaintiffs. His identity and the manner in which he routinely dealt with the bank officers was something that they relied on in their dealings with PAM. I find that in an entirely real fashion the representations sued on by the plaintiffs were, in the context in which they were made, representations made by the defendant as well as made by PAM through him when he was signing or acting on PAM’s behalf.
Whether the Plaintiffs Relied on the Defendant’s Representations
71 For similar reasons I am of the view that the plaintiffs did rely on the representations made by the defendant in permitting the drawdowns to take place. I have already commented in [70] above on the relationship into which the defendant was placed with the plaintiffs by the course of dealings and transactions between the plaintiffs on the one hand and PAM on the other. The fact that he was specified to the plaintiffs as a person authorised and the manner in which he dealt with them were factors in the plaintiffs being prepared to make the drawdown on each occasion. I take into account the evidence of the approval processes mentioned in [48] above. A significant piece of evidence is the note that was made on behalf of Citibank of the fact that the defendant was to be involved with the transaction was a factor mitigating risk in respect of the Matthews’ Raw Prawns transactions. Although that was in a slightly different context, it is illustrative of the fact that the bank officers were well aware of the identity of the defendant and prepared to take into account his personal involvement in dealings between themselves and PAM. Furthermore, in my view the applicable principle in considering whether the conduct of an agent, although misleading or deceptive, may involve only the principal and not the agent in liability under the TPA or the FTA is that laid down in Yorke v Lucas and adopted in Gardam v George Wills and John G Glass Real Estate as discussed in [50] to [52] above. There was not the slightest suggestion in the circumstances of this case that the defendant expressly or impliedly disclaimed any belief in the truth or falsity of the information, merely passing it on. For all these reasons I find that in the instance of each of the drawdowns the plaintiffs relied upon the representations and conduct of the defendant in authorising the drawdowns and thereby suffering loss.
Whether the Defendant knew the Representations were False
72 The finding in relation to this is affected by the special rule as to the onus of proof in relation to fraud. It is important to bear in mind that what the plaintiffs must establish to succeed in relation to this is not some blanket or generalised finding that the defendant knew of some fraud. To support the finding in respect of each of the representations, it must be found that it is established in the requisite way that the defendant knew that that representation was false at the time it was made, ie, that at the time each drawdown notice was signed and delivered to one of the banks the defendant was aware that the transaction in the particular drawdown notice was non-existent or that the goods referred to had not been laden on the ship specified as asserted in the bill of lading. It will, of course, be sufficient if it is established that the defendant made the representation recklessly, careless whether it was true or false. The difficulty in the way of the plaintiffs’ case is the making of a finding to the requisite standard that the defendant knew of the falsity of the particular representation or was reckless of its status at the time the particular representation was made. In saying this, I have not forgotten what was said about the accumulation of circumstantial evidence either in Derry v Peek supra or in Shepherd’s case supra.
73 The strongest individual pieces of evidence in support of the plaintiffs’ case concerning knowledge are the defendant’s remorseful statements in the various emails set out in pars [39] – [44] above. However, whilst it is plain that the defendant was remorseful and felt a sense of regret or even guilt about things that had occurred, it is far from plain what the subject matter was of his remorse or regrets. It is equally unclear as to how far back his knowledge went that led to the remorse or regrets. There is an admonition to Maureen Ong in [42] not to “feel despaired [sic] over the events that has [sic] happened over the last two over years [sic].” But the events referred to are not clearly identified as the subject matter of these proceedings. In his examination before the Registrar he admitted knowledge going back to February 1999, but that was knowledge that some moneys were not coming back from some purchasers. There is no admission of knowledge that the transactions did not exist when drawdowns were applied for. The closest that the admissions available in the emails get to knowledge of non existent transactions is the statement in the email to his brother referred to in [44] that “one of my boss’s [sic] companies in HK used the name of Sinmametal for some dummy transactions”. However, it was not put to me that Sinmametal had anything to do with any of the transactions sued upon in the present proceedings and the nature of the “dummy transactions” referred to is unclear. Nor is it clear as to how long the defendant had had that knowledge when he made that statement on 21 September 1999. Furthermore, there are some indications in the contemporaneous material that what the defendant believed was occurring was that Tina Liu was diverting moneys to her own use after payment by purchasers and before repayment to the plaintiffs (eg, the reference in his examination before the Registrar to purchasers paying Wealthcourt and Wealthcourt paying the bank).
74 I have paid attention to the facts surrounding the drawdowns including those mentioned in [46]. In relation to the defendant’s interest in the various companies mentioned, I am not satisfied that the defendant (rather than Tina Liu) had the ultimate beneficial interest in these companies. As to the allegation that he knowingly submitted false documents to the banks, the defendant says that he was authorised to place Mr Zhong’s signature on documents in his absence, and this is neither disproved nor totally implausible. As to the allegation that he lied to bank officers about contact with buyers, giving answers to the plaintiffs’ inquiries about repayment after saying that he would check with the purchasers and making inquiry of Tina Liu does not seem to me to be necessarily dishonest. It could quite easily be the response of someone in the defendant’s position, if inquiry were being made by him of the purchasers through the person in his organisation who dealt with them, as the defendant says Tina Liu did. The evidence that the shipping agent witnesses had not heard of Oceanic Container Line Inc is not accompanied by evidence that permits the assessment of the significance of that lack of knowledge (cf the evidence of Mr Matthews re Belville, where the evidence shows that there were few operators in the relevant market, so that all the others would probably be known to one).
75 I have also taken into account the defendant’s denial on oath of dishonesty, though I have given it but slight weight in view of the principles stated in [21].
76 In all the circumstances, bearing in mind that these findings are vital to a finding of fraud against the defendant, I am unable to come to the conclusion in respect of any of the many representations sued upon that the defendant is established in the requisite way to have had the necessary state of mind at the relevant time.
CONCLUSIONS
77 What follows from the foregoing is that a cause of action under the FTA is established against the defendant in respect of all the drawdowns except the four mentioned in [68] and the five mentioned in [69] This flows from findings in respect of the other transactions that the defendant represented at least that the transaction the subject of the relevant invoice was genuine and that the goods the subject of the invoice had been shipped; that these representations were false; and that the relevant plaintiff relied on the representations in allowing a drawdown. With regard to those drawdowns, a cause of action is established against the defendant for damages under the FTA. In respect of the other nine drawdowns mentioned above a cause of action under the FTA is not made out, because I am not satisfied that the falsity of the representations has been established. A cause of action in deceit is not made out against the defendant in the case of any of the representations sued upon, because I do not find in any case find the fraud established. Similarly the plaintiff cannot succeed against the defendant in a derivative action under the TPA in respect of any of the drawdowns, because the requisite guilty knowledge is not established.
78 There will be judgment for the plaintiffs in respect of the drawdowns where the cause of action under the FTA is established. There will be judgment for the defendant in respect of the other drawdowns and the causes of action in deceit and for aiding and abetting. The plaintiffs should bring in short minutes of order to give effect to my decision. Accompanying those short minutes there should be a schedule which shows the amount in which judgment should be entered in respect of each of the drawdowns in respect of which either of the plaintiffs has succeeded. If interest is claimed, that should be calculated to the date of judgment. The question of the conversion of the drawdowns in US dollars to amounts in Australian dollars for which judgment should be entered should also be dealt with in that or a separate schedule and, if there is not agreement, any necessary evidence should be brought forward. It seems to me that the defendant must bear the plaintiffs’ costs of the proceedings, but I shall hear submissions as to any other order which it is suggested there should be as to costs at the time the short minutes are brought in.
THE SCHEDULE
13 Jan. 99 28 Jan. 99 5 Feb. 99 8 Feb. 99 11 Feb.99 12 Feb. 99 16 Feb. 99 22 Feb. 99 24 Feb. 99 26 Feb. 99 3 Mar. 99 4 Mar. 99 8 Mar. 99 8 Mar. 99 10 Mar. 99 15 Mar. 99 15 Mar. 99 17 Mar. 99 19 Mar. 99 23 Mar. 99 25 Mar. 99 25 Mar. 99 29 Mar. 99 1 Apr. 99 1 Apr. 99 12 Apr. 99 14 Apr. 99 14 Apr. 99 16 Apr. 99 20 Apr. 99 21 Apr. 99 22 Apr. 99 23 Apr. 99 29 Apr. 99 29 Apr. 99 30 Apr. 99 6 May 99 13 May 99 17 May 99 21 May 99 28 May 99 1 Jun. 99 6 Jun. 99 6 Jun. 99 15 Jun. 99 15 Jun. 99 17 Jun. 99 24 Jun. 99 24 Jun. 99 24 Jun. 99 12 Jul. 99 12 Jul. 99 13 Jul. 99 13 Jul. 99 16 Jul. 99 16 Jul. 99 20 Jul. 99 4 Aug. 99 4 Aug. 99 4 Aug. 99 4 Aug. 99 19 Aug. 99
Last Modified: 07/14/2003
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