Ling v Beyond Development Group Pty Ltd

[2022] NSWSC 685

Supreme Court

New South Wales

Medium Neutral Citation:

Ling v Beyond Development Group Pty Ltd [2022] NSWSC 685

Hearing dates:

11, 15-18 November 2021

Date of orders:

30 May 2022

Decision date:

30 May 2022

Jurisdiction:

Equity

Before:

Ward CJ in Eq

Decision:

1.   Dismiss the plaintiffs’ claim against the second and fourth defendants with costs.

2.   Enter judgment for the plaintiffs against the third defendant in the sum of $800,000 plus interest and costs.

3.   Direct that any brief written submissions as to costs of the second and fourth defendants be filed within 14 days with a view, if possible, to dealing with costs on the papers

Catchwords:

CONSUMER LAW – Alleged misleading or deceptive conduct – Accessorial lability

GUARANTEE AND INDEMNITY – Contract of guarantee – Deeds – Fraud – Whether second defendant signed deed – Whether fourth defendant falsely attested signing of deed

NEGLIGENCE – Duty of care where claim for pure economic loss – Whether witness owed duty of care – Loss of opportunity case – Issues as to reliance and causation – Defences – Proportionate liability, concurrent wrongdoers, contributory negligence

Legislation Cited:

Civil Liability Act 2002 (NSW), ss 5B, 5D(3)(b), 34A(1)

Competition and Consumer Act 2010 (Cth) s 87CC(1), Schedule 2

Conveyancing Act 1919 (NSW), s 38

Corporations Act 2001 (Cth), ss 127(3), 129(3)

Evidence Act 1995 (NSW), s 128, 140

Legal Profession Uniform Legal Practice (Solicitor) Rules 2015, r 11

National Electronic Conveyancing Law (NSW)

Real Property Act 1900 (NSW), s 56C

Trade Practices Act 1974 (Cth), s 52

Uniform Civil Procedure Rules 2005 (NSW), r 25.14

Cases Cited:

Aardwolf Industries LLC v Tayeh [2020] NSWCA 301

About Life Pty Ltd v Maddocks Lawyers [2021] NSWSC 1370

Allen v Tobias (1958) 98 CLR 367

Astley v Austrust Ltd (1999) 197 CLR 1

Australian Securities and Investment Commission v Hellicar (2012) 247 CLR 345; [2012] HCA 17

Badenach v Calvert (2016) 257 CLR 440; [2016] HCA 18

Banque Commerciale SA (in liq) v Akhil Holdings Ltd (1990) 169 CLR 279

Briess v Woolley [1954] AC 333

Briginshaw v Briginshaw (1938) 60 CLR 336

Chandra v Perpetual Trustees Victoria Ltd (2007) 13 BPR 24,675; [2007] NSWSC 694

Chapman v Luminis Pty Ltd (No 4) (2001) 123 FCR 62; [2001] FCA 1106

Clark Equipment Credit of Australia Ltd v Kiyose Holdings Pty Ltd (1989) 21 NSWLR 160

Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225; [1993] FCA 536

Commercial Banking Co of Sydney Ltd v R H Brown & Co (1972) 126 CLR 337

Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389

Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594; [1990] HCA 17

Delany v Tenison (1758) 3 Bro PC 659; 1 ER 1559

Ellison v Vukicevic (1986) 7 NSWLR 104

Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89; [2007] HCA 22

Ginelle Finance Pty Ltd v Diakakis [2007] NSWSC 60

Glueck v Stang (2008) 76 IPR 75; [2008] FCA 148

Gors v Henderson, unreported; Supreme Court of WA (Steytler J); Library No 980499, 7 September 1998

Graham v Hall (2006) 67 NSWLR 135; [2006] NSWCA 208

Gray v Haig (1854-1855) 20 Beav 219; 52 ER 587

Hastie Group Ltd (in liq) v Bourne; Hastie Group Ltd (in liq) v Moore [2017] NSWSC 709

Houghton v Arms (2006) 225 CLR 553

Hoxton Park Residents Action Group Inc v Liverpool City Council [2012] NSWSC 1026

In the matters of Earth Civil Australia Pty Ltd, RCG CBD Pty Ltd, Bluemine Pty Ltd, Diamondwish Pty Ltd and Rackforce Pty Ltd (all in liq) [2021] NSWSC 966

Jackson v Sterling Industries Ltd (1987) 162 CLR 612; [1987] HCA 23

Jainti Pty Ltd v Fraser Panorama Pty Ltd [2021] NSWSC 744

Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8

Katsilis v Broken Hill Pty Co Ltd (1977) 18 ALR 181

Kayteal Pty Ltd v Dignan (2011) 15 BPR 29,515; [2011] NSWSC 197

Lloyd v Grace, Smith & Co [1912] AC 716

Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705

Manly Council v Byrne and Anor [2004] NSWCA 123

Matouk v The Entrance Seabreeze Pty Ltd [2010] NSWSC 649

Musa v Alzreaiawi [2020] NSWSC 638

Musa v Alzreaiawi [2021] NSWCA 12

National Commercial Banking Corporation of Australia Limited v Cheung (1983) 1 ACLC 1326

National Roads and Motorists’ Association Ltd v Construction, Forestry, Mining, and Energy Union (2019) 291 IR 28; [2019] FCA 1491

NEC Information Systems Australia Pty Limited v Linton (Wood J, 17 April 1985, unreported)

Ninemia Maritime Corp v Trave Schiffahrtsgesellschaft mbH & Co KG; The Niedersachsen [1984] 1 All ER 398

Nominal Defendant v Cardin (2017) 79 MVR 210; [2017] NSWCA 6

NWR FM t/a North West Radio v. Broadcasting Commission of Ireland & Anor [2004] IEHC 109

Payne v Parker [1976] 1 NSWLR 191

Perpetual Trustee Company Limited v Peter Ishak [2012] NSWSC 697

Perpetual Trustee Company Ltd v Milanex Pty Ltd (in liq) [2011] NSWCA 367

Perre v Apand Pty Ltd (1999) 198 CLR 180

Perre v Apand Pty Ltd (1999) 198 CLR 180

Podrebersek v Australian Iron and Steel Pty Ltd (1985) 59 ALJR 492; [1985] HCA 34

Rosebanner Pty Ltd v Energy Australia (2009) 223 FLR 406; [2009] NSWSC 43

Scottish Amicable Life Assurance Society v Reg Austin Insurance Pty Limited (1995) 9 ACLR 909

Sellers v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4

Sergienko v AXL Financial Pty Ltd [2019] NSWSC 1610

Severstal Export GmbH v Bhushan Steel Ltd (2013) 84 NSWLR 141; [2013] NSWCA 102

State Bank of NSW Ltd v Yee (1994) 33 NSWLR 618

Steinberg v Federal Commissioner of Taxation (1975) 134 CLR 640; [1975] HCA 63

Stellar Vision Operations Pty Ltd v Hills Health Solutions Pty Ltd [2022] NSWSC 144

Street v Luna Park Sydney Pty Ltd (2009) 223 FLR 245; [2009] NSWSC 1

Superbarn Supermarkets Pty Ltd v Cotrell Pty Ltd [2016] ACTSC 49

Tepko Pty Ltd v Water Board (2001) 206 CLR 1; [2001] HCA 19

The Ophelia [1916] 2 AC 206

Vella v Permanent Mortgages Pty Ltd (2008) 13 BPR 25,343; [2008] NSWSC 505

Vukicevic v Alliance Acceptance Co Ltd; Vukicevic v Ellison (1987) 9 NSWLR 13

Watson v Foxman(1995) 49 NSWLR 315

Wickham v Marquis of Bath (1865) LR 1 Eq 17

Yorke v Lucas (1985) 158 CLR 661; [1985] HCA 65

Texts Cited:

Bruce Feldthusen, Economic Negligence (2000, 4th ed, Carswell)

David Rolph et al, Balkin & Davis Law of Torts (2021, 6th ed, LexisNexis) at [13.24]

Found B & Rogers D Eds (1999) Documentation of Forensic Handwritting Comparision and Identification Method: a Modular Approach, Journal of Forensic Document Examination 12

G E Dal Pont, Law of Costs (2009, 2nd ed, LexisNexis)

Gino Dal Pont, Law of Agency (2020, 4th ed, LexisNexis)

R F Norton, R J A Morrison, H J Goolden, Norton on Deeds (1928, 2nd ed)

Torts Cases and Commentary (2017, 8th ed, Lexis Nexis)

Young, Newton and Cahill, Conveyancing Service New South Wales (2003, Lexis Nexis)

Category:

Principal judgment

Parties:

Kuo Shu Ling (First Plaintiff)
Chuan Dian International Trade Co Ltd (Second Plaintiff)
Beyond Development Group Pty Ltd (First Defendant)
Liping Wang (Second Defendant)
Peter Zhuang (Third Defendant)
Pang (trading as O Pang & Co) Oliver (Fourth Defendant)

Representation:

Counsel:
DP O’Connor with P Lin (Plaintiffs)
DC Eardley (Second Defendant)
DA Lloyd SC with C Robertson (Fourth Defendant)

Solicitors:
Pinnacle Lawyers (Plaintiffs)
Praxis Lawyers (Second Defendant)
DLA Piper (Fourth Defendant)

File Number(s):

2018/00012504

Publication restriction:

Nil

Judgment

1. HER HONOUR: This matter involves a dispute between various parties relating to the plaintiffs’ attempt to recover moneys under two instruments each titled “Mortgage Linked Loan Agreement” (and referred to collectively in submissions as the Loan Agreements) but which in their terms guaranteed the obligations of the first defendant, Beyond Development Group Pty Ltd (Beyond Development Group) (a company now in liquidation), to repay sums totalling $900,000 plus interest to the plaintiffs. The instruments are expressed to be executed as deeds.

2. Neither of the Loan Agreements was signed by Beyond Development Group; thus the instruments on which the plaintiffs sue would seem to be guarantees as such (not loan agreements per se). However, in reply submissions the plaintiffs contend that Beyond Development Group is a party to the Loan Agreements (an argument that I address in due course).

Parties

3. The first plaintiff is Ms Kuo Shu Ling (the wife of Mr Jonathan Lee, a director of the second plaintiff). The second plaintiff is a company, Chuan Dian International Trade Co Ltd (Chuan Dian). Ms Ling did not give any evidence in the proceeding. Rather, the evidence given for the plaintiffs was from Mr Lee and Mr Tupou, the solicitor for the plaintiffs.

4. The first defendant is Beyond Development Group, which was placed into liquidation in September 2018, after default judgment was entered against it in the proceeding in the sum of $1.3 million pursuant to orders made by Rees J on 25 May 2018.

5. The second defendant is Ms Liping Wang who purportedly signed the Loan Agreements as a guarantor. I say “purportedly” because Ms Wang denies that she signed the Loan Agreements and denies liability under the guarantees.

6. The third defendant, Mr Peter Zhuang, was the director of Beyond Development Group and also a guarantor under the Loan Agreements. Mr Zhuang (Ms Wang’s former husband) did not appear in the proceeding (and default judgment is sought against him). I was informed by the plaintiffs’ Counsel that Mr Zhuang had “effectively absconded” – see T 2.31-2.48; and that Mr Zhuang’s trustee in bankruptcy did not wish to take any part in the proceeding – see T 308.23.

7. The fourth defendant is Mr Oliver Pang, an accountant (and, relevantly, a Justice of the Peace) trading as O Pang & Co, who purportedly witnessed the guarantors’ signatures on the Loan Agreements (next to the words “SIGNED SEALED & DELIVERED in the presence of O Pang”). I say “purportedly” because Mr Pang (who concedes that the signatures look like his own) cannot recall whether or not he witnessed the signatures but says that, if he did, then it would have been done in accordance with his invariable practice (i.e., to do so only in the presence of the signatory in question).

Issues

8. As adverted to above, Ms Wang denies that she signed the Loan Agreements (and has adduced expert evidence providing strong “qualified” support for the proposition that they are not her genuine signatures). Should that contention be accepted, it logically follows that Mr Pang cannot have witnessed Ms Wang’s signature in her presence, despite (on the face of the documents) attesting that he had done so. Therefore, on the hypothesis that Ms Wang’s signature is not genuine, if Mr Pang’s signature on the Loan Agreements is genuine, there are logically only a number of possibilities: that Mr Pang witnessed a blank document (or at least one without anything appearing to be Ms Wang’s signature); that Mr Pang witnessed a document that already purportedly bore Ms Wang’s signature (but not in her presence); or (though no-one suggests this occurred) that someone other than Ms Wang attended Mr Pang’s offices and he witnessed that other person sign the documents (whether or not knowing that it was not Ms Wang (see discussion at T 309.7-309.20). In any of those scenarios, the attestation by Mr Pang would be false but only in the first two scenarios would it necessarily be knowingly false.

9. It is also relevant to note that Mr Pang’s own evidence is that he did not deal with Ms Wang (whose tax returns he prepared) in person (but only communicated with her through her husband, Mr Zhuang, by email) and had not met Ms Wang (and this is corroborated by Ms Wang, although her evidence is somewhat unreliable in a number of other respects – as to which I say more in due course). If so, it might perhaps be expected that Mr Pang would have been more definitive about not having witnessed Ms Wang physically sign any document (let along the documents in question). Hence, the significance the plaintiffs attach to Mr Pang’s seeming acceptance of the possibility that it is his signature. However, the explanation for this appears to be that Mr Pang has been scrupulous not to deny something of which he has no positive recollection (and he was adamant that if he had witnessed the signature then in accordance with his invariable practice he could only have done so in the presence of the signatory).

10. The issues for determination may be summarised as being: first, whether Ms Wang signed the Loan Agreements and is bound by the guarantees contained therein; second, if the signatures on the Loan Agreement are not those of Ms Wang, whether Mr Pang signed the Loan Agreements; third, whether (if it be found that Mr Pang did sign the Loan Agreements) whether Mr Pang is liable to pay to the plaintiffs the outstanding amount under the Loan Agreements as a result of: knowing involvement in the alleged misleading or deceptive conduct of Mr Zhuang; or misleading or deceptive conduct in his own right; or in negligence for breach of a duty of care owed to the plaintiffs in relation to his execution of the Loan Agreements; and, finally, if Mr Pang is liable to the plaintiffs, whether that liability is reduced as a result of the defences Mr Pang has here raised.

11. In essence, the plaintiffs say that their claim against Mr Pang is a loss of opportunity claim – that they lost the opportunity (at a time when Beyond Development Group was not insolvent or when it had funds available to repay the loans) to rescind the (oral) agreement with Beyond Development Group and recover their moneys (see at T 8.42-9.18) or, alternatively, to seek freezing orders to preserve the funds lend to Beyond Development Group. They rely on expert evidence from an accountant (Mr Trevor Vella) as to the time at which the funds were disbursed from Beyond Development Group (and thus effectively lost to the plaintiffs).

12. Insofar as it was suggested in opening submissions that the plaintiffs also lost an opportunity to trace the funds (see at T 9.5-9.12), Mr Pang takes issue with the fact that no such claim is pleaded (and says that had it been pleaded evidence might have been deployed on that issue – see T 16.41-16.47). It is noted by Mr Pang that the lost opportunity claim (as pleaded at [30] of the fifth further amended statement of claim) is pleaded, in essence, as a loss of opportunity to call on the guarantee, to rescind the oral agreement, and to commence action in a timely fashion to freeze the funds advanced or to sue for their return (T 16.38-16.48). I accept that the plaintiffs should be held to their pleading in this regard.

13. Mr Pang raises issues as to reliance and causation; and a number of defences in the event (which is denied) that he is liable on the claims as pleaded against him (including defences of contributory negligence (see at [32]-[33] of his defence); proportionate liability (see at [34] of his defence); and concurrent wrongdoer defences (see at [35A]-[83] of his defence)). The concurrent wrongdoers identified by Mr Pang are, variously, Mr Zhuang, the plaintiffs themselves, and the plaintiffs’ lawyers (Pinnacle Lawyers). There is hence an overlap between the various defences.

14. It seemed to be common ground that the proportionate liability regime was applicable (see T 16.1-16.34; T 369.26-371.46), at least other than for claims raising fraud or equitable fraud. In that regard, it was accepted by Mr Pang (see at T 338.40; 369.14-369.24) that on the authorities a “knowingly concerned” claim would not attract the concurrent wrongdoer defence; however, issue was raised as to the fact that the plaintiffs did not invoke s 87CC of the Competition and Consumer Act 2010 (Cth) (CCA) in their reply (and did not specifically plead that the regime does not apply to “knowingly concerned” claims). In the plaintiffs’ written closing submissions (at [50]), the plaintiffs maintain the contention that if a defendant concurrent wrongdoer intended to cause loss, then no apportionment is permissible pursuant to s 87CC(1) of the CCA. In this regard, the suggestion (faintly put) that the operation of s 87CC(1)(b) of the CCA might be disregarded because it had not been pleaded (see T 369.26-370.14) is not palatable.

Chronology of Events

15. Mr Lee (as noted above, one of the directors of Chuan Dian) was a business associate of Mr Zhuang, having known Mr Zhuang for some ten years (see at T 22.35-22.37) and having met through Mr Lee’s business of importing and selling mobile telephones (see Mr Lee’s first affidavit sworn 17 April 2019 at [4]). Mr Lee made clear in his oral evidence (more than once) that he trusted Mr Zhuang (and said he had no reason to distrust him).

16. Mr Lee’s evidence is that in early 2016 he had discussions with Mr Zhuang, in which Mr Lee says Mr Zhuang told him about an investment opportunity in relation to a commercial property development at 117-119 Stoddart Street Roselands, NSW (referred to in submissions as the development properties) for which Mr Zhuang said he had already obtained funding from NAB (see T 24.36-24.39). Mr Lee says that Mr Zhuang told him that he had set up a new development company called Beyond Development Group. According to Mr Lee, Mr Zhuang sought a $1 million loan from Mr Lee for one year, with a fixed interest rate of 30% p.a. (an interest rate that in cross-examination Mr Lee did not regard as high but which he seems to have been keen at the time to procure – at one point in cross-examination suggesting that the fixed interest rate was a factor contributing to it being a “safe” investment). (I note that it is accepted by the plaintiffs that the best that the plaintiffs can now achieve is to be put back in the position they were in prior to advancing the funds and hence that they cannot obtain interest at 30% – see T 336.38-336.45.)

17. Mr Lee says that Mr Zhuang offered security over the property development, and that personal guarantees would be given by Mr Zhuang and his wife, Ms Wang. Relevantly, Mr Lee has also deposed that, in January 2016, Mr Zhuang indicated that his and his wife’s Bella Vista property would secure (or provide a guarantee for) the loan, by Mr Zhuang saying to Mr Lee words to the effect that “my wife and I own property in Bella Vista and we would personally guarantee the loan” (see [8] of Mr Lee’s first affidavit). (There is a distinction between proffering a guarantee and proffering security for such a guarantee but this may not have been appreciated by Mr Lee.)

18. Mr Lee accepted in cross-examination that he was not in the property business (T 26.15); that he had not seen the land (only pictures of the land) (T 27.5). Mr Lee was based at all relevant times overseas. Mr Lee seems to have relied on projections of profit put to him by Mr Zhuang (see T 26.47) but said in cross-examination that he intended to do “research” if he was going to lend Mr Zhuang the money (T 27.35).

19. More than once in his oral evidence (indeed it was a constant refrain), Mr Lee reiterated the importance to him of the provision of personal guarantees (from Mr Zhuang and Ms Wang) (see, for example, and this is not intended to be an exhaustive list of such references, at T 27.18, T 27.45, T 27.49, T 28.11, T 28.43; T 29.1-29.11; T 33.5; T 35.29). (It is therefore somewhat surprising, to say the least, that ultimately Mr Lee advanced the loan funds before any such guarantee was signed – see below; simply on the faith of Mr Zhuang’s word.)

20. Mr Lee has deposed that he asked Mr Zhuang for the projected profit and loss figures and information as to whether Mr Zhuang had sold any properties off the plan (see [10] of Mr Lee’s first affidavit; T 30.26-30.47) (presumably this being part of the research to which Mr Lee has referred). In response, Mr Zhuang sent Mr Lee a copy of a letter dated 4 July 2016 from solicitors to Beyond Development Group, which enclosed various documents relating to the purchase of the development properties including settlement adjustment sheets and a copy of the front page of each of the contracts for sale of land, the price for the properties in question being $1.2 million and $2 million. (I interpose to note that the settlement statements record that deposit amounts of $240,000 and $400,000 were paid for each property. However, the contracts appear to record lesser deposit amounts: of $120,000 and $200,000, respectively – see Ex “JL1” to the first affidavit of Mr Lee.)

15. On 18 October 2016, Mr Leonard Tusa, an accountant helping Mr Lee in relation to the documents (T 32.22), sent requisitions to Mr Zhuang by email. Mr Zhuang responded to Mr Tusa’s email that day (see Ex “JL2” to the first affidavit of Mr Lee).

16. Mr Lee has deposed (see at [12] of his first affidavit; T 32.30-32.37) that, based on that reply email to his accountant, he formed the view that the development “would most likely be profitable” (which one might think was a somewhat remarkable conclusion given the paucity of information that had been provided) and he noted that Mr Zhuang told him that he had already sold two properties off the plan (see [12] of Mr Lee’s first affidavit; T 32.48-32.50; see also Mr Zhuang’s email to Mr Tusa sent on 18 October 2016 at 7.18pm, exhibited at p 23 of the fourth defendant’s tender bundle, Ex 10). Mr Lee did not identify any documents he had seen which supported this conclusion but said that he thought Mr Zhuang had given him a contract and that he would need to check his emails (T 45.21-45.49). In oral evidence, Mr Lee also said (at T 32.48-33.6) that he saw no reason for Mr Zhuang to lie to him about it and, based on Mr Zhuang’s estimation, he believed it would be profitable (though adding that there was “always risk”) but that he told Mr Zhuang that he still needed personal guarantees to lend the money.

17. Mr Lee said (T 34.25-34.38) that he did not ask Mr Zhuang for many of the details (as to the development) but that he knew Mr Zhuang had purchased the land and was doing a development; and that this was sufficient for him (though Mr Lee again stressed the importance to him of personal guarantees). At T 34.22-34.28, Mr Lee said that, based on the material sent by Mr Zhuang, he made the decision to go ahead; and that, because there was a fixed interest return and there was a personal guarantee, he believed that it was a “safe” investment.

18. On 6 October 2016, Mr Lee sent an email to his solicitor (Mr Tupou of Pinnacle Lawyers), attaching a net worth statement of Mr Zhuang (which referred to large and fixed assets of $3.46 million and liquid assets of $420,000; liabilities of $2.2 million; and a house worth $3.2 million) (see Ex 10 at p 1). Mr Lee deposed (at T 37.9-37.13) that he understood that the house there referred to was the Bella Vista Property. Pausing here, the $3.2 million figure (coincidentally or otherwise) matched the purchase price in total of the development properties at Roselands.

19. In his 6 October 2016 email to Mr Tupou, Mr Lee said that the contract was to state that Mr Zhuang and his wife would be “personal guarantor” and that he wanted a background check to make sure they were not in debt. In cross-examination, Mr Lee said that he did not try to analyse the figures (in the net worth statement); he forwarded them to his accountant (Mr Tusa) (T 37.28); and (at T 37.49) that he did not put a lot of importance on what was said in the (net worth) document as to Mr Zhuang’s financial position (forwarding it to his accountant and solicitor to check). At T 38.11, Mr Lee accepted that he did not take steps to find out if Mr Zhuang was the legal owner of the Bella Vista Property before advancing the money, to which answer Mr Lee added:

And, anyway, if he is not a legal owner, the wife will be the legal owner, and both are in the guarantee. So it doesn’t matter to me if he owns it or the wife owns it, because I have guarantee from both of them

…

I knew that the Beyond Development is owned by him, but for the personal guarantor, I am not completely sure it’s a joint name on the property or it’s just the property of the wife, but as long as I get a guarantee from both of them, I feel that my investment is secure.

26. Mr Lee’s solicitor (Mr Tupou) responded at 4.53pm on 6 October 2016 that the document sent to him (i.e., Mr Zhuang’s net worth statement) did not say much and that they still needed the documents he had requested in his previous email (see Ex 10 at p 2). Taken to this email in cross-examination, Mr Lee’s somewhat dismissive response was that “he’s just a solicitor, he’s not a financial adviser” and that “every business has a risk” (T 38.46) (though having earlier said that it was important to him that Mr Zhuang had “liquidity” – see T 38.34).

27. Mr Lee responded to his solicitor that he did not think that there was a balance sheet as the company was newly formed but that “maybe we can get him to pledge his house as a collateral for the loan” (see Ex 10 at p 2) (which suggests that to that point Mr Lee did not understand that the personal property was to be security as such).

28. On 9 October 2016, Mr Lee sent an email to Mr Tupou asking him to do searches involving Mr Zhuang and his wife, the Bella Vista house and the development properties; and to check that “both of them are not under any bankruptcy” as he would “need both of [Mr Zhuang and his wife] to be guarantor[s] for the loan” (see Ex 10 at p 4).

29. On 10 October 2016, Mr Lee emailed his solicitor a copy of the couple’s passports (which Mr Lee believes were sent to him by Mr Zhuang – see T 39.46) (see Ex 10 at pp 4-5). On the same day (10 October 2016), Mr Tupou emailed Mr Lee to say that there was a lot of work to be done, noting that “it is a fairly large amount of money” and saying that he would conduct searches and due diligence. Mr Tupou quoted an amount for his fees (both for the searches and for the contract) (see Ex 10 at p 7). Mr Lee’s response was that he was “somehow taken a back by the amount of the invoice so [he] need[ed] to check with [his] partners” (see Ex 10 at pp 6-7). In cross-examination (T 40.39), Mr Lee explained that he had two partners in Taiwan (the other two directors of Chuan Dian) but he later said that they left it to him to make the decision – T 54.30.

30. Mr Lee authorised Mr Tupou to conduct the due diligence searches (estimated at $5,500) but does not appear at that stage to have authorised the work in relation to the loan contracts (also estimated at $5,500) (T 41.31; see also Ex 10 at p 9).

31. On 18 October 2016, Mr Tusa sent an email to Mr Zhuang (copied to Mr Tupou), asking for various documents (see Ex 10 at p 13). In cross-examination, Mr Lee accepted (T 42.6) that it was probably “20%, 30%” important to conduct due diligence but said that he still felt that the personal guarantees were more important.

32. In response to the above email, Mr Zhuang sent an email to Mr Tusa, copied to Mr Lee, on 18 October 2016 (see Ex 10 at pp 18-21), which was later discussed in a telephone conversation between Mr Tusa and Mr Lee on 19 October 2016 (see at T 48.47-50). Mr Pang says that this email highlights a number of deficiencies in the information provided by Mr Zhuang regarding his personal finances and those of Beyond Development Group. Mr Lee made no further enquiries regarding these matters (admitting in cross examination that he was prepared to “take the business risk on [the investment]” (see T 48.47-50; T 49.15-16).

33. Mr Zhuang’s email response to Mr Tusa attached some documents. Mr Zhuang then emailed Mr Tusa again, with respect to the query about pre-sales (see Ex 10 at pp 16-17). At 9.32pm, Mr Zhuang sent an email to Mr Tusa, copied to Mr Lee, with a co-ordinated response to the matters that had been raised (see Ex 10 at pp 20-21). In relation to the request for a Beyond Development Group balance sheet, Mr Zhuang’s response was to refer to his personal profit and loss statement. In response to a question as to the details of any loans to Beyond Development Group used to finance the purchase of the Roselands real estate (question 3), Mr Zhuang responded “no” (an answer that was clearly incorrect). Mr Lee said in cross-examination that he did not know this was false; and that this was to his accountant “so I didn’t take fully notice of the email” (see T 44.4). Mr Lee accepts that he did not ask Mr Tusa or Mr Zhuang about this (T 44.44). Similarly, as to at least one other response by Mr Zhuang (the answer to question 10), Mr Lee said that he did not take much notice of the answer and assumed that Mr Tusa would reply on that issue (T 48.4). At T 47.7, Mr Lee again said that he felt the most important thing was the “personal guarantees”.

34. Mr Tusa then sent an email to Mr Zhuang (not copied to Mr Lee), querying the finance for the Roselands Property (the development properties) and noting that the balance sheet of the company showed $1.6 million in equity (see Ex 10 at p 19).

35. On 19 October 2016, Mr Lee sent an email to Mr Tusa referring to a discussion (“nice speaking to u”) (see Ex 10 at p 22). In cross-examination, Mr Lee thought he remembered speaking to Mr Tusa (about concerns that Mr Tusa had in relation to the information from Mr Zhuang) but said that he “decided to still take the business risk on it because I have actually instructed him to actually put a … caveat on his personal property and to guarantee the loan” (T 48.47) and that he still decided to go ahead with the loan because he felt that the business risk was minimised by the personal guarantee (T 48.48).

36. Following his telephone conversation with Mr Tusa, Mr Lee gave instructions (see Ex 10 at p 22) to move ahead and prepare the Loan Agreements with a caveat on the Bella Vista property and a charge on the development properties to guarantee the loan. Mr Lee agreed (T 49.31-49.46) that at the time it was important to protect his interests to have each of: the loan documents, caveat on personal property, and a charge on Roselands, but adding to that list of things “and also importantly is the personal guarantee on the house – on the personal loan”.

37. Then, at 4.36pm on 19 October 2016, Mr Lee sent an email amending the previous email (see above), saying that “we will raise the loan document just with the charge on his property development” and “will not do a caveat on his property” (see Ex 10 at p 23). Mr Lee thus clearly instructed Mr Tusa and Mr Tupou to proceed without lodging a caveat on the Bella Vista property. In cross-examination, Mr Lee explained that this was at Mr Zhuang’s request. At T 50.19-50.23, Mr Lee said that he thought he had some discussion with Mr Zhuang in which he told Mr Zhuang that he was going to put a caveat on his private property and “so he asked me to hold off for one or two days, because he is trying to get a loan”. Mr Lee said in cross-examination that this is why he asked Mr Tusa not to have a caveat on the private property but added that “eventually I did put a caveat on his private property”.

38. The 4.36pm email from Mr Lee asked Mr Tusa to “let me know when it can be done so I can get him [presumably Mr Zhuang] to come in and sign all your documents” (see Ex 10 at p 23). Mr Lee accepted that it was important to protect his interests for Mr Zhuang and Ms Wang to come in and be identified but said that it was only for his solicitor (not Mr Tusa) to identify him (T 50.48-51.1).

39. On 20 October 2016, Mr Tusa sent an email to Mr Lee setting out a range of concerns Mr Tusa had regarding the proposed transaction, including: a lack of documentation establishing the contribution of $1.6 million towards the project, the basis upon which loan repayments were being made; and that Mr Zhuang may have issues obtaining a loan from a bank at a much lower interest rate of five percent (see Ex 10 at p 24). Mr Tusa suggested that the total costs of the project concerning the development properties be verified; that controls with Beyond Development Group be established; and that a quantity surveyor be appointed to ensure the project concerning the development properties was not a risk.

40. Mr Pang points out that several of the matters the subject of Mr Tusa’s email to Mr Lee on 20 October 2016 were also contained in Mr Tusa’s later email to Mr Lee on 31 October 2016 (see below; see T 60.35), to which Mr Lee responded, on 1 November 2016, that “I do understand the risk involved and I have fully understand his project work & costing” (see Ex 10 at p 48). Mr Pang notes that Mr Lee accepted in cross-examination that, by this, Mr Lee meant he understood what Mr Zhuang was telling him about the development (T 61.30), in the absence of documents or expert advice from a quantity surveyor.

41. Mr Tusa also said in his email that he would like Mr Zhuang to authorise a credit check on himself and his wife (see Ex 10 at p 49).

42. Mr Lee’s evidence in cross examination was that he “looked at” Mr Tusa‘s view but “decided to take the risk to actually still go ahead with the loan” (T 51.38-40) “looking at the personal guarantee he’s going to give me”. Mr Lee said “but as I was mentioning before I mean this is business transaction and I think that you know with the guarantee I can limit my risk (T 51.24-51.25)”, emphasising again the personal guarantee. Mr Lee accepted that Mr Tusa had raised legitimate concerns (T 52.33) but said “it is up to me to decide” (T 53.29).

43. Mr Lee accepted that Mr Tusa had offered to meet with Mr Zhuang to continue the review process if Mr Lee had any doubts (T 53.39-53.48) and Mr Lee agreed in cross-examination (T 65.13) that he had rejected the offer that Mr Tusa made to meet with Mr Zhuang as to his financial position. Mr Lee’s position in this regard was not that it was not necessary to do the things that Mr Tusa had said; rather Mr Lee said that, after that, he “weighed out the pros and cons”.

44. Mr Lee accepted that he had replied to Mr Tusa’s email to the effect that he understood the risks involved and wanted to “raise the contract” (i.e., in effect instructing Mr Tusa to prepare the loan agreements; and to put a charge on the development properties and for credit checks on Mr Zhuang and Ms Wang (a matter which Mr Lee accepts he never followed up – T 55.46) (see Ex 10 p 26). Mr Pang emphasises that these were all matters that Mr Lee considered needed to be in place before advancing the funds, referring to his evidence in cross-examination at T 59.15-34.

45. Mr Lee’s position (see at T 54.23-54.30), in effect, that Mr Tusa gave him the advice; he thought about it and discussed it with his partners; they asked him to make the decision and he decided to go ahead with it.

46. Mr Lee says that, on or around the end of October 2016 , he had a conversation with Mr Zhuang to the effect that he (Mr Lee) was willing to proceed but could only provide $900,000 (as opposed to $1 million) and that the agreement was to be reduced to writing. Mr Lee then instructed Mr Tupou to prepare two loan documents reflecting the proposed advance to Beyond Development Group in two tranches: one tranche of $200,000 from Mr Lee’s wife, Ms Ling, and another tranche of $700,000 from Chuan Dian. Mr Tupou has deposed that he acted for the plaintiffs (being Ms Ling and Chuan Dian) though I note that it appears he only took instructions from Mr Lee (see [2]-[3] of Mr Tupou’s affidavit sworn 18 April 2019).

47. On 21 October 2016, Mr Lee sent an email to Mr Tupou copied to Mr Tusa, saying that he had told Mr Zhuang that they would contact him by email to ask some questions (see Ex 10 at p 32). Mr Lee gave Mr Tupou and Mr Tusa the details of Mr Pang’s firm (so that they could contact him to talk about Mr Zhuang’s financial details) (T 55.35; see also Ex 10 at p 30). In cross-examination, Mr Lee could not remember following up on this as to them speaking with Mr Pang (and there is no evidence that either did so at that stage) (see T 55.46).

48. At 9.29am on 21 October 2016, Mr Tupou sent an email to Mr Lee (over which the plaintiffs maintained a claim for legal professional privilege, so it is not known precisely what was there said). However, Mr Lee’s response to that privileged email was in evidence (see Ex 10 at p 31). In that response, Mr Lee said that he was aware of the risk involved and that he will “sign a letter to indemnify u” (see Ex 10 at p 31). Mr Lee also there asked Mr Tupou to get the contract out “ASAP by next Tuesday so that Peter [Zhuang] and the wife [Ms Wang] will be able to come down and signed [sic] them”. In cross-examination (at T 56.26), Mr Lee said that Mr Zhuang also told him that his wife may not be able to make it down to the city so he suggested that it be witnessed by a Justice of the Peace “which is his accountant”.

49. Mr Tupou, in cross-examination (at T 84.47), denied that he was seeking indemnification from Mr Lee and said that he did not give Mr Lee business advice. At T 85.11, Mr Tupou said that it was Mr Lee’s idea as to indemnification. Asked about whether he had concerns about the transaction, Mr Tupou responded, matter of factly, “Of course, yes”.

50. Pausing here, it is clear that the instruction given by Mr Lee to Mr Tupou to prepare the loan agreements was before any of the matters referred to in Mr Lee’s 20 October 2016 email (see above) (such as the credit checks) had been undertaken.

51. On 25 October 2016, Mr Lee sent Mr Tupou an email, asking how he had gone with the loan agreement and expressing the hope that Mr Tupou could finalise it by Wednesday (the following day) so that he could get Mr Zhuang and his wife to go down and sign it by Thursday (see Ex 10 at p 33). (I interpose here to note that it seems clear from this and the earlier emails of 21 October 2016 that Mr Lee expected that Mr Zhuang and Ms Wang would personally attend at his solicitor’s office to sign the documents.)

52. Asked in cross-examination what the “rush” was (T 57.1-57.6), Mr Lee said that it was because Mr Zhuang was saying that he needed funds to finish his investment; so that he (Mr Lee) was asking if the contract could be done ASAP; Mr Zhuang was saying that he needed the funds for the development (T 57.9). Mr Lee said that he did not ask Mr Zhuang for what aspect the money was needed (T 57.13).

53. On 25 October 2016, Mr Tupou sent an email to Mr Lee saying that Mr Tusa was finalising the background check for the borrower and was looking at putting a caveat or charge on the development properties at Roselands (see Ex 10 at p 34). Mr Lee accepted that what remained at that stage was the background check and the caveat or charge over the development properties (and at T 58.4-58.15 that the caveat over the private property was important to him but he was prepared to defer it).

54. On 27 October 2016 (the Thursday), Mr Lee emailed Mr Tupou to the effect that the contracts were “kind of urgent” (see Ex 10 at p 36).

55. On 28 October 2016 (the Friday), Mr Tupou emailed Mr Lee to say that Mr Tusa would have his part completed by next Thursday (which Mr Lee said in cross-examination he understood to include the check on Mr Zhuang and Ms Wang – see T 57.33-57.35) (see Ex 10 at p 37).

56. At 11.11am on 28 October 2016, Mr Lee emailed that “when its finalised the money is going to Beyond Development Accounts right?” (see Ex 10 at p 39). In cross-examination, asked about this, Mr Lee volunteered (at T 58.49) that “but I did advance this earlier because he really needed the money but I had a guarantee from him that he’s going to sign the agreement” (i.e., not the formal guarantee as such but some kind of assurance that Mr Zhuang would eventually sign some kind of guarantee). Further, in cross-examination (T 58.49-58.34), Mr Lee accepted that “when its finalised” meant that: the signed documents were to be in place; Mr Tusa was to have completed checks on Mr Zhuang and Ms Wang; there was to be a charge or caveat on the development properties and there was to be a caveat on the Bella Vista property (i.e., all to occur before the money was advanced).

57. About two hours after the above email, Mr Lee emailed Mr Tupou to the effect that the caveat on the development property should be done a month after the contract, as Mr Zhuang was applying for a construction loan from the bank and he did not “want to have a issue [sic]”. Mr Lee said in cross-examination that Mr Zhuang asked him to delay putting the caveat on the development property (T 59.48-60.2).

58. Mr Lee’s evidence is that, at about the end of October 2016, before the documents had been executed, Mr Lee received a telephone call in which Mr Zhuang indicated that there was an urgent need for the funds and requested that Mr Lee advance the funds forthwith. Mr Lee said that he was initially hesitant about advancing the funds prior to the finalisation of a written agreement, but that Mr Zhuang said words to the effect “Yes, it’s not going to be a problem, I’m happy with the terms we discussed”. (This seems to be the “guarantee” to which Mr Lee was referring in cross-examination at T 58.49; i.e., nothing but Mr Zhuang’s word that he would “sign the agreement”.)

26. On 1 November 2016, Mr Lee sent an email to Mr Tusa telling him that he totally understood his [Mr Tusa’s] concerns in relation to the loan but that he was willing to limit Mr Tusa’s due diligence (see Ex 10 at p 48). Mr Lee said that he understood the risks involved in the loan and fully understood the project work on costing. In cross-examination, Mr Lee explained that by this he meant “I fully understand in my experience of understanding not to a very detailed understanding” (T 61.25) and said at (T 61.35-61.50):

But, as I told you before, I know him for ten years, and a lot of our mobile phone deals are based on words that he provide to me through the deal, and I see no reason for him to come up with, you know, a story about a property. But, of course, I have partners to answer to, so I requested more security, which I have mentioned, it is the personal guarantee that I feel is safe for me, and I did feel that the signature by him and the wife being witnessed by the JP - and on that aspect I keep asking my lawyer to check if the Justice of Peace, you know, has actually witnessed the signature, everything has been done, you know, and he told me that, yes, he has a copy and everything has been done.

…

Yeah, I trust Peter [Zhuang] in business sense.

60. Mr Lee accepted that, on 1 November 2016, he told Mr Tusa that he (Mr Tusa) did not need to do a credit check and that he was happy to proceed with signing the contract (see Ex 10 at p 48). At T 62.11, Mr Lee said “I felt that I was willing to take the risk”.

61. At T 63.12, Mr Lee was taken to the conversation to which he had deposed at [8] of his affidavit (namely, the conversation in January 2016 when Mr Zhuang made him an investment proposal); that conversation being some four or so months before Beyond Development Group had even purchased the development properties (in May 2016). Mr Lee was “not too sure” if Mr Zhuang had already bought or negotiated the property, saying that the discussion was always about Mr Zhuang “going to be some property development” (T 63.32).

62. On 2 November 2016, Mr Lee himself transferred the funds to Mr Zhuang (see [17] of Mr Lee’s first affidavit). This is of no little relevance in relation to the reliance case. It is clear from the contemporaneous documents that Mr Tupou did not realise this had occurred – see, for example, Ex 10 at p 60). Thus, the funds were advanced before any loan agreement(s) were signed and before Mr Lee had obtained any signed guarantees (whether from Beyond Development Group or from Mr Zhuang and Ms Wang).

63. Mr Lee emphasised in his oral evidence that Mr Zhuang had promised him that he would sign the loan agreement (T 66.38; 66.48; and see earlier at T 58.49); and Mr Lee said that Mr Zhuang was a businessman and that he trusted him. Mr Lee said that he wanted to do some credit checks but at the end he decided to leave the credit checks aside. Mr Lee accepted that, prior to advancing the funds, there was no security in the form of any caveat. Mr Lee agreed (T 67.15) that when he advanced the money he only had Mr Zhuang’s word that he would sign some agreement (and Mr Lee agreed, at T 67.48, that it would have been prudent to accept his solicitor’s advice).

64. As noted earlier the first Loan Agreement is dated 9 November 2016 and it is accepted that the second Loan Agreement (though not dated) may be taken to have been signed on 9 November 2016.

65. At 8.54am on 10 November 2016, Mr Tupou sent an email to Mr Zhuang in relation to the contracts to Mr Zhuang (see Ex 10 at p 50). In that email, Mr Tupou referred to three things that were required: that Mr Zhuang and Ms Wang obtain independent legal advice; confirmation that the documents were witnessed by a Justice of the Peace; and provision of 100 points of identification. (By this stage, as noted above, the funds had already been transferred to Mr Zhuang.)

66. On or about 18 November 2016, the signed agreements were given to Mr Tupou by Mr Zhuang (T 88.43; 90.33). Mr Tupou’s evidence is that, when Mr Zhuang provided the agreements, he said “Hi I’m Peter Zhuang, these are the loan agreements you asked me to execute” (see Mr Tupou’s first affidavit sworn 18 April 2019 at [8]).

67. On 18 November 2016, Mr Tupou sent an email to Mr Zhuang, copied to Mr Lee, at 3.04pm enclosing the signed “contract” (in the body of the email Mr Tupou referred to “the contract” in the singular; however, the attachment to the email is entitled “Signed Contracts.pdf” plural) (see Ex “SFT4” to Mr Tupou’s first affidavit). The email stated that Mr Tupou wanted to see 100 points of identification from Mr Zhuang and Ms Wang to compare signatures and asked that the witness (Oliver Pang) state his address and competency as witness for the signed signatures. (I interpose here to note that this did not in terms request that Mr Pang confirm that he had in fact witnessed the documents – the focus here seemingly being on his address and competency as a witness, the assumption being that he had in fact witnessed the signatures).

68. Mr Pang points out that there is no reference in this email to any independent legal advice but in cross-examination Mr Tupou said that once he received the document witnessed, he assumed that Mr Zhuang “got the independent legal advice” (T 92.1). (It is not immediately apparent how such an assumption would follow from the fact that the document purported on its face to be witnessed.) Mr Tupou also said that this gave him confidence that someone had witnessed the signatures (T 93.21). Mr Tupou agreed (at T 94.22) that on 18 November 2016 he did not know anything about Mr Pang’s role. (Therefore, logically, Mr Tupou could not have known whether the witness was qualified or competent to give any legal advice.)

69. There is an entry in Mr Tupou’s office time recording system (LEAP) at 2.50pm on 21 November 2016, summarising an email a few days before (the 18 November email) see (T 96; see also Ex 10 at p 194).

70. At 9.25am on 21 November 2016, Mr Tupou emailed Mr Lee, thanking him for the documents (although, as noted, the documents were provided to Mr Tupou by Mr Zhuang); and saying that he was “just waiting” on Mr Zhuang and his wife to come into the office “so I can view his 100 points of ID” and “have the witness properly identify his capacity as a witness” (see Ex “JL4” to Mr Lee’s first affidavit). Mr Pang notes that this was, as acknowledged by Mr Tupou in his oral evidence, the second of the three matters Mr Pang had identified in his email to Mr Zhuang of 10 November 2016 as being required (see Ex 10 at p 50). Mr Pang thus submits that the 21 November 2016 email is consistent with Mr Tupou having in his mind (when he contacted Mr Pang the following day) asking Mr Pang, in effect whether he was a Justice of the Peace.

71. On 22 November 2016, Mr Lee instructed Mr Tupou to call Mr Zhuang on his mobile (to talk about coming into the office with his wife – see T 70.1-70.9).

72. Mr Tupou’s evidence is that, on 22 November 2016, Mr Tupou called Mr Pang and that, during that telephone call, Mr Pang indicated that he had witnessed the Loan Agreements. Mr Tupou deposed in his first affidavit (at [12]-[13]) that the conversation with Mr Pang was to the effect:

Mr Pang:   Hello.

Mr Tupou:    Hello my name’s Tame from Pinnacle Lawyers, is this Oliver Pang?

Mr Pang:   Yes, it is.

Mr Tupou:   I have this contract from Peter Zhuang, did you witness it?

Mr Pang:   Yes.

Mr Tupou:    Okay thanks.

73. Pausing here, it must be noted that in this account of the conversation there is a reference only to a contract in the singular (not to plural contracts) and only to a contract from “Peter Zhuang”. There is no reference to Ms Wang. Moreover, the conversation, as thus recounted, it very brief and it rather assumes that Mr Pang would have known what “contract from Peter Zhuang” Mr Tupou was there referring to (thus leaving in doubt whether Mr Pang would have understood the enquiry there being made in any event).

74. Mr Pang has deposed that he does not recall the conversation or witnessing the execution of the loan agreements (see [42]-[43] of Mr Pang’s affidavit sworn 3 July 2019; see also T 194.35-194.45; T 197.46).

75. Mr Tupou says that he made a file note on 22 November 2016 after the conversation (T 100.13-100.24; see also the typed transcription of Mr Tupou’s handwritten file note dated 22 November 2016, Ex 7). I interpose here to note that Mr Tupou’s file note does not support his assertion that Mr Pang confirmed he witnessed the signatures on the loan agreements; rather, the file note records that Mr Pang confirmed his status as a “JP” and accountant. This inconsistency was put to Mr Tupou in cross-examination who nevertheless maintained that the conversation to which he deposed in his affidavit took place as he described it – see T 102.37-102.41.)

76. On 22 November 2016 at 1.28pm, Mr Tupou emailed Mr Lee, saying that “I have also called the witnesser of the contract, Oliver Pang, and he confirms he is a JP” (see Ex “JL5” of Mr Lee’s first affidavit). Pausing here, this implicitly assumes that Mr Pang in fact witnessed the contract but does not expressly say that this was confirmed with Mr Pang; and, again, the email refers to a single contract.

77. In cross-examination, Mr Lee was “not too sure” whether he had telephoned or emailed Mr Tupou on 22 November 2016 (there is nothing in the affidavit about any such telephone conversation and no documentary record of it) (T 70.44). Ultimately, Mr Lee agreed that he did not have a recollection (T 71.48) but nevertheless confirmed that he was informed that Mr Tupou had spoken to Mr Pang and that Mr Pang had confirmed that he was a “JP” and an accountant (T 72.3). Mr Lee clearly drew comfort from Mr Pang’s status as a Justice of the Peace, saying in cross-examination “but I also understand in Australia a JP is able to witness documents, right?” (see at T 69.21.)

78. The plaintiffs received the Loan Agreements on 22 November 2016.

79. On 30 November 2016 (i.e., some days after the conversation he says he had with Mr Pang), Mr Tupou sent an email to Mr Lee, saying “[a]s discussed I contacted the lenders’ accountant and he confirmed that he had witnessed the signatures of both borrowers” (see Ex “JL6” to Mr Lee’s first affidavit). I note that this is consistent at least partially with the file note – though that referred only to one borrower – and with Mr Tupou’s recollection of the conversation. (It is perhaps worth noting that the reference to “borrowers” seems in error since Mr Zhuang and Ms Wang were named as guarantors.) At this point no issue had been raised as to the authenticity of the signatures, so I accept that there is no reason to think that Mr Tupou had any incentive to misstate the position in this email. I simply note that the focus in the email that had earlier been sent was on the technicalities of identification of the signatories – namely, the address and capacity of the witness; whereas by this stage a more expansive assurance is being given.

80. By 30 November 2016, the contracts had been sent to Mr Lee to be signed. Mr Tupou advised that “Once these documents are done then the money can be transferred”. (That is telling, to my mind, because by then the money had already been transferred – indeed this had happened some 28 days before Mr Tupou’s email; so the transfer cannot have been made in reliance on the authenticity of the execution of the Loan Agreements or any representation by the purported witness of the signatures.) In cross-examination, Mr Lee said that he thought that Mr Tupou had been shown a copy of the telegraphic transfer but, if so, this is inconsistent with Mr Tupou’s 30 November 2016 email.

81. On 2 December 2016, the contracts were signed by the plaintiffs and returned to Mr Tupou (see Ex 10 at p 54).

82. On 31 January 2017, Mr Tupou requested that Mr Zhuang provide the identification that Mr Tupou had previously requested (see Ex “SFT4” of Mr Tupou’s first affidavit) (i.e., still pressing for one of the three requirements).

83. On 7 February 2017, Mr Tupou sent an email to Mr Lee saying that he would keep chasing Mr Zhuang for certification ID. Mr Lee’s response was to thank Mr Tupou for the information. Mr Lee said “just talk to Peter and he’ll be back this Thursday from his cruise. Apparently there is some document issue with the council so he will solved it [sic] when he comes back” (see Ex 10 at p 55). In cross-examination, Mr Lee accepted (T 74.2) that by then he knew that Mr Zhuang and his wife had not been to see the solicitor with the 100 ID points but Mr Lee said that he felt “quite safe” because he knew Mr Zhuang for more than ten years and as long as he knew the contract was signed with a witness from a Justice of the Peace he felt quite safe (T 74.5-74.7).

84. On 28 February 2017, Mr Tupou sent an email pressing Mr Lee in relation to the certificate ID from Mr Zhuang and his wife. Mr Tupou said in that email that “he [Mr Zhuang] keeps saying he will send it. But I have not received anything” (see Ex 10 at p 59). Mr Lee’s response was that “I call him and he says he has difficulty finding a JP” (an explanation inconsistent with Mr Zhuang and his wife having purportedly already signed the documents in the presence of Mr Pang – unless Mr Pang had by then left his offices or otherwise become unavailable to witness signatures as a Justice of the Peace). Mr Lee suggested that Mr Zhuang might have to come to Mr Tupou’s office with identification.

85. Confronted in cross-examination with the inconsistency inherent in the explanation that Mr Tupou was apparently being given by Mr Zhuang, Mr Lee (at T 75.15) said at first that he did not know Mr Pang was a Justice of the Peace at that stage (1 March 2017) but almost immediately withdrew that evidence and confirmed that Mr Tupou had by then confirmed to him that Mr Pang was a Justice of the Peace (T 75.21). Mr Lee accepted in cross-examination that he knew the explanation from Mr Zhuang was ridiculous but said he did not act on it because he trusted Mr Zhuang (T 75.44).

86. It seems that in February 2017 at some stage Mr Zhuang attended Mr Tupou’s office to provide some documentation (see [16] of Mr Tupou’s first affidavit). (It is suggested by Mr Pang that the plaintiffs probably came into possession of the passport documents (certified by Mr Pang) in early 2017 (T 13.11). However, that seems inconsistent with the passport copies having been emailed by Mr Lee to Mr Tupou in October 2016 (see chronology above).

87. Mr Tupou nevertheless gave evidence that he received the certified documents in the latter part of February or early March 2017 (T 110.18). Mr Tupou said that he never sat down with Mr Zhuang and Ms Wang to certify their “IDs” (T 128.10; 128.49); and that he never met Ms Wang or spoke to her on the telephone and never received any communication from her (T 132.21-31) (and see at T 133.17-135.2 with respect to his conversation with Mr Pang).

88. In about April 2017, Mr Tupou arranged for a caveat to be lodged over the development properties. The caveat was defective (as Mr Tupou accepted in cross-examination) in that Mr Tupou accepts that he included the wrong people as the caveators in the caveat (see T 130.47). In any event, on 5 May 2017, Mr Lee instructed Mr Tupou to remove the caveat over the development properties, at the request of Mr Zhuang, so that Mr Zhuang could secure additional funding. On 10 May 2017, the caveat was withdrawn.

89. On 16 May 2017, Mr Tupou sought instructions as to when caveats should again be lodged over the development properties. Mr Lee’s response, on 24 July 2017 (hardly a quick response) was to seek advice from Mr Tupou as to how long he could refrain from taking steps to register caveats over the development properties. Mr Tupou responded the same day to the effect that Mr Lee could “hold off” from lodging caveats.

90. Meanwhile, on 10 July 2017, another entity, Megatop Trading Pty Limited (Megatop Trading) lodged a caveat over the development properties in respect of an unregistered mortgage between Megatop Trading and Beyond Development Group by virtue of a mortgage agreement dated 10 July 2017 (see copy of the registered caveat – Ex 12).

91. Repayment under the Loan Agreements was due on 9 November 2017, at which time the total principal amount of $900,000 was unpaid.

92. By letter dated 19 December 2017, Pinnacle Lawyers issued a demand pursuant to cl 12 of the Loan Agreements on Beyond Development Group for payment of principal and interest (see Ex 10 at p 127). The letter was addressed to both Ms Wang and Mr Zhuang at their residence at Bella Vista, NSW. (The Bella Vista property is in Ms Wang’s sole name and is valued at approximately $2.5 million.) The letter (directed at Beyond Development Group) was addressed to each of Ms Wang and Mr Zhuang at their Bella Vista home. The plaintiffs say that this had the effect of placing Ms Wang and Mr Zhuang on constructive notice that their personal liability to perform as guarantors might imminently be called upon should Beyond Development Group be unable to pay.

93. The present proceeding claiming recovery of the debt owing by Beyond Development Group was commenced on 12 January 2018.

94. On 26 February 2018, Mr Zhuang (apparently in his capacity as director of Beyond Development Group) paid $100,000 to Chuan Dian (thus reducing the principal outstanding under the loans to $800,000). (In reply submissions, the plaintiffs seem to cavil with whether this was a reduction of the outstanding loan but it is not suggested there was any other reason for the payment.)

95. On 25 May 2018, as noted above, default judgment was entered against Beyond Development Group.

96. The plaintiffs commenced winding up proceedings in respect of Beyond Development Group on 18 July 2018 (see [10](a) of Mr Vella’s report annexed to his affidavit sworn 1 October 2021).

97. Receivers were appointed by NAB (the first registered mortgagee) to realise the development properties on 29 August 2018 (six weeks after the commencement of the winding up proceeding) (see [10](b) of Mr Vella’s report).

98. Administrators (from Cor Cordis) were appointed to Beyond Development Group on 18 August 2018, and subsequently they were appointed as liquidators on 17 September 2018 (see [10](c) of Mr Vella’s report).

99. The administrators prepared a schedule as at 13 August 2018 which estimated that “sundry debtors” had an asset value of $2 million and that this was the only asset other than the development properties. At that time, secured creditors were owed $6,281,128 and unsecured creditors $1.281 million (see [10](f) of Mr Vella’s report).

100. Mr Vella has noted that Beyond Development Group maintained no books of account and there are no financial statements for FY17 or FY18 or any other time, and so it is not possible to know the extent of assets and liabilities of Beyond Development Group prior to the assessment made by the administrators in a report of 7 September 2018 (see [10](f) of Mr Vella’s report).

101. The liquidators, in their report of 14 December 2018, said that it was their preliminary view that Beyond Development Group may have been insolvent from at least 28 February 2018, and noted that from November 2017 demands for repayment were being made by a number of creditors in respect of outstanding liabilities (see [10](d) of Mr Vella’s report).

102. On an undisclosed date, the sale of the development properties was completed, realising the sum of $3.36 million. Costs had been incurred by NAB of $240,000 in excess of the loan principal, legal fees of $97,000 had been incurred and receivers’ remuneration was incurred of around $105,000. After allowing for the principal of $2.24 million, the net proceeds paid into Court in August 2019 were $568,963 (see [10](h) of Mr Vella’s report).

103. The administrators’ view was that Megatop Trading ranked first behind the NAB; and the amount owing to Megatop Trading secured on the development properties was $2,545,000 (see [10](j) of Mr Vella’s report). There were two other secured creditors, entities known as Eclipse and Synnex, which were owed $79,544 and $166,495 respectively (see [10](h) of Mr Vella’s report) (Eclipse being a company with its registered office at Mr Pang’s office).

73. Mr Vella reported that the plaintiffs ultimately received no payment from Beyond Development Group (see [10](k) of Mr Vella’s report) (although Mr Pang points out that this does not account for the $100,000 they were paid as deposed to in Mr Lee’s first affidavit at [24]).

74. After Beyond Development Group went into administration, the plaintiffs relied on cl 9 of the Loan Agreements to make a claim against Mr Zhuang and Ms Wang. An application was made for default judgment against Ms Wang (as she had at that stage filed no defence). Ms Wang then filed a defence denying that she had signed the Loan Agreements. The filing of Ms Wang’s defence (unsurprisingly) led to an enquiry of Mr Pang by Mr Tupou.

75. On 4 September 2018, Mr Tupou sent Mr Pang an email, enclosing the certification documents and (either one or both of) the guarantees; asserting that there had been a conversation at the end of 2016 where Mr Pang confirmed that he had witnessed the contracts; and asserting that the signatures (of Mr Pang) were very similar in all the documents (see Ex “SFT5” to Mr Tupou’s first affidavit).

76. On 7 September 2018, Mr Pang responded by email to the effect that in his normal practice he would keep a copy of the documents and that he would review his log over the weekend and revert (see Ex “SFT6” to Mr Tupou’s first affidavit).

77. Mr Pang’s evidence is that, when he was contacted by Mr Tupou in September 2018, he looked at the documents in the computer log that he had maintained and found scanned copies of the certified identity documents (see Ex 10 at p 114-118; T 203) but that he was unable to find copies of the guarantees. (Mr Pang confirmed in cross-examination that he did not find the loan agreements on the “log” – see at T 238.21.) Mr Pang has deposed that (after searching the log and being unable to find copies of the guarantees, and noting that the signature above his name on the guarantees looked like his signature) he telephoned Mr Zhuang (see Mr Pang’s affidavit sworn 3 July 2019 at [34]).

78. Mr Pang’s evidence is that, in that telephone conversation with Mr Zhuang, he (Mr Pang) said to Mr Zhuang that he had been given a copy of some loan documents by Pinnacle Lawyers with what looked like his signature on them; and that he could not find any record of the documents and did not know anything about them. Mr Pang has deposed that Mr Zhuang said to him “[l]ook, it’s not your signature and you won’t get into trouble for that”. Mr Pang says that he asked Mr Zhuang “[w]ell did you sign the documents and how did my signature get on them?”, to which Mr Zhuang responded that “I wouldn’t get any friends in trouble”. Mr Pang said that Mr Zhuang would not directly answer his query about how his signature was placed upon the guarantees (see Mr Pang’s affidavit at [34]). (Pausing here, it is therefore incorrect to suggest, as seemed to be asserted in the plaintiffs’ submissions, that Mr Pang made no enquiry of Mr Zhuang as to how his signature came to be on the documents.)

79. On 13 September 2018, Mr Pang wrote to Mr Tupou and apologised for being late to respond as he had been “flat out” (see Ex “SFT7” to Mr Tupou’s first affidavit). Mr Pang advised that he had found the log with regard to the certification documents but could not find any record of signing as a witness on the guarantees (though acknowledging that the signatures on those documents looked very similar to his own). Further, Mr Pang in that email said that he had called Mr Zhuang and that Mr Zhuang had acknowledged that Mr Pang did not witness the signature in one or both of the guarantees but did not give further details. Mr Pang also said that he could not remember answering Mr Tupou’s telephone call from 2016.

80. On 17 September 2018, as adverted to above, Beyond Development Group was placed into liquidation (the external administration subsequently ceasing on or about 23 August 2019).

81. On 7 March 2019, Mr Zhuang was declared an undischarged bankrupt.

82. On 8 November 2018, the plaintiffs served Mr Pang with a further amended statement of claim filed on 31 October 2018, joining him as a party to the present proceeding (see Mr Tupou’s second affidavit sworn 7 August 2020 at [13]).

83. Mr Pang’s evidence is that in around November 2018 the data on both his computer and the business hard drive he used as a back-up became corrupted (see Mr Pang’s affidavit at [44]-[45]; T 232.48). Mr Pang gave evidence that he organised for a Mr Rodney He to assist him in retrieving the data; but that he had only been able to retrieve some limited data in the form of temporary files since then (T 231.46-232.1; T 233.5; see also Mr Pang’s affidavit at [44]). Mr He, who it is said has worked in the field of “IT” since 1996 and was employed as a disaster recovery consultant for five years, advised that he spent several days trying to recover the original data for Mr Pang but the recovery was not successful and only temporary files could be recovered (see his email dated 9 April 2020 to Mr Tupou – Ex 11).

Pleadings

115. The plaintiffs sue on a fifth further amended statement of claim filed on 10 February 2021.

116. Against Ms Wang, the claim (pleaded at [5]ff and [9]) is a claim under the guarantee for repayment of the moneys advanced. At the time of the hearing, $800,000 plus interest on the Loan Agreements remained outstanding. Ms Wang filed her amended defence on 16 December 2019 and disputes that she signed any loan agreement. Ms Wang has deposed that she did not sign either of the Loan Agreements (see Ms Wang’s first affidavit affirmed 5 September 2018 at [13]-[18]) and Ms Wang affirmed this evidence in cross-examination (see T 144.34-144.49; T 146.18-146.19). Ms Wang has also deposed that she did not authorise any other person to sign any document on her behalf.

117. Against Mr Zhuang, the contraventions (in which it is alleged that Mr Pang was knowingly concerned) are pleaded at [18B] of the fifth further amended statement of claim, it being alleged that Mr Zhuang was in breach of s 18 of the Australian Consumer Law, being Schedule 2 to the CCA (ACL). The plaintiffs allege that Mr Zhuang represented to them that: the loans would be personally guaranteed by Ms Wang and Mr Zhuang and that Ms Wang and Mr Zhuang owned the Bella Vista Property, which would provide the plaintiffs with further security over the loans.

118. The alleged representations are said to have been made by Mr Zhuang: in conversations between Mr Zhuang and Mr Lee in January 2016 and October 2016; and on the loan agreements, including on the execution page.

119. The plaintiffs allege (at [18C]) that the representations were false, because (on the hypothesis that it is not Ms Wang’s signature on the documents) Ms Wang did not in fact sign the Loan Agreements and that Mr Zhuang either forged Ms Wang’s signature or caused someone else to do so.

120. Against Mr Pang, the allegations are of: knowing concern and involvement in the misleading or deceptive conduct of Mr Zhuang; misleading or deceptive conduct Mr Pang in his own right; and negligence (see at [18D]-[29]).

121. Mr Pang is said to have falsely attested that Mr Zhuang had signed the execution page of the loan agreements in his presence and to have done so intentionally (and that, in so doing, Mr Pang made good Mr Zhuang’s promise to reduce the loan agreement to writing with terms that provided security over the development properties and the personal guarantee). It is further said that Mr Zhuang could not have made the representation that he would provide the loan agreements in writing without the knowing assistance of Mr Pang.

122. At [24B], the plaintiffs allege that they relied on the representations pleaded at [20] and [24] (being the alleged representation by Mr Pang purporting to witness Ms Wang’s signature and the alleged representation in the telephone call to Mr Tupou on 22 November 2016). The plaintiffs allege that they “would not have entered into the loan agreements unless the loans were reduced to writing in the form of an equitable mortgage and executed as a deed witnessed by a justice of the peace” ([24]).

123. As to the negligence case, the sole allegation (at [28]) is that the plaintiffs relied upon Mr Pang’s signature on the agreements as proof that Ms Wang had signed the agreements.

124. In his defence, as adverted to above, Mr Pang has invoked a proportionate liability defence, identifying Mr Zhuang and Pinnacle Lawyers as concurrent wrongdoers (as well as Mr Lee, himself). The plaintiffs have pleaded an extensive reply to that case. As referred to earlier, the plaintiffs do not expressly take issue with the allegation (at defence [34]) that the claims against Mr Pang are apportionable but they plead in answer to the factual allegations made in the defence against Pinnacle Lawyers (see reply at [5]-[45]).

125. Mr Pang also raises a contributory negligence defence (at [32]-[33]).

Loan Agreements

126. As noted, the first Loan Agreement is dated 9 November 2016 and it is common ground that the second Loan Agreement was signed on that date. Under the first Loan Agreement, Ms Wang and Mr Zhuang each personally guaranteed a loan of $200,000 from Ms Ling to Beyond Development Group (see original loan agreements, Ex D) and, separately, under the second Loan Agreement, each of Ms Wang and Mr Zhuang personally guaranteed a loan of $700,000 from Chuan Dian to Beyond Development Group (see Ex D).

127. Each Deed contains (see cl 9 of the respective Loan Agreements) both a guarantee and indemnity in favour of the plaintiffs in the following terms:

The guarantor hereby guarantees to the mortgagee the due and punctual performance of all the obligations of the mortgagor contained or implied in this deed and hereby indemnifies the mortgagee against all losses, expenditure costs and expenses of whatever nature suffered or incurred directly or indirectly by the mortgagee in receiving the principal sum, interest and all other amounts that may become due under this deed or the mortgage.

128. Both Loan Agreements contain signatures underneath the printed names of Mr Zhuang and Ms Wang. Next to those signatures appear the name and apparent signature of Mr Pang. As noted above, Mr Pang accepts that the signatures on the agreements look like his signature. However, Mr Pang’s position is that if, in fact, Ms Wang did not sign the documents in his presence, then (based on his invariable practice) he did not witness her signature (because, on Ms Wang’s account, that would involve Mr Pang signing the agreements as a witness to her signature, without in fact having seen her sign the documents).

Evidence

129. Each of Mr Lee, Ms Wang and Mr Pang gave affidavit evidence and was cross-examined. There was no evidence from Ms Ling; nor was there any evidence from Mr Zhuang. In that regard, amongst a number of Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8 (Jones v Dunkel) submissions, the plaintiffs say (in reply submissions) that, despite giving evidence that Mr Zhuang is the person who could best resolve the dispute as to who affixed his signatures to the agreements, Mr Pang did not call Mr Zhuang to give evidence as to what occurred and to bolster Mr Pang’s version of the conversation in September 2018 (see the chronology above). The plaintiffs say that this is because Mr Zhuang’s evidence would not help Mr Pang, and “probably” would be “quite the opposite” (this last submission, in my opinion, traversing beyond the limits of a Jones v Dunkel inference – which I discuss in due course).

130. I do not accept that an adverse inference should be drawn from the fact that Mr Pang did not call Mr Zhuang (someone who the plaintiffs’ Counsel himself suggested had “absconded” – see at T 2.31-2.48; although Ms Wang’s evidence was that she was still in contact with her ex-husband – see T 151.15). This is because I do not accept that it can fairly be said that Mr Zhuang is in Mr Pang’s camp or that it would be more natural for Mr Pang to call Mr Zhuang than for Mr Lee to do so. The requirements for such an inference to be drawn are well-known (see as summarised at [155] in Jainti Pty Ltd v Fraser Panorama Pty Ltd [2021] NSWSC 744) and are discussed in greater detail below. In my opinion, they are not here satisfied in relation to Mr Zhuang.

131. As to expert evidence, there was the following.

132. Valuation evidence was given by Mr Joshua Towndrow (see his affidavit sworn 22 December 2020), called by the plaintiffs, and Ms Dimity Marshall (see her report dated 30 June 2020 – Ex 3; see also her supplementary report of 15 January 2021 – Ex 4), called by Mr Pang; with a joint report (Ex 6). These experts gave their opinion as to the valuation of the development properties (relevant to the issue as to the ability of the plaintiffs to have recovered the loan amounts had there been action taken at an earlier time).

133. Evidence was given from two solicitors – Mr Dennis Bluth, called by the plaintiffs (see Ex A to his affidavit sworn 30 September 2021), and Mr Peter Rosier, called by Mr Pang (see his report dated 19 March 2020 – Ex 1; and his supplementary report dated 24 March 2021, Ex 2; with a joint report 19 May 2021 (Ex 5), that evidence going to the practice of solicitors in relation to the certification of parties to property transactions.

134. Accounting evidence given by Mr Trevor Vella, called by the plaintiffs (see his report dated 28 May 2020 annexed to his affidavit), going to the capacity of Beyond Development Group to repay the debts as at early 2017.

135. Forensic analysis of the impugned signatures was given by expert handwriting analysts: Ms Melanie Holt, called by Ms Wang, opining as to the authenticity of Ms Wang’s signature; and Mr Clifford Hobden, called by the plaintiffs, opining as to the authenticity of Mr Pang’s signature.

Lay evidence

Mr Lee

136. I have referred through the chronology of events to much of Mr Lee’s evidence in the proceeding (both his affidavit evidence and the evidence that he gave in cross-examination). I considered Mr Lee to be a genuine and co-operative witness. Mr Lee certainly did not shy away from the fact that he had decided to take the risk or a business risk in his decision to advance the loan funds, though his constant refrain was the importance to him of the personal guarantees. I accept that those were of importance to him but the fact remains that ultimately Mr Lee placed trust in Mr Zhuang (both to make good his promise that the personal guarantees would be executed and to make good the underlying assumption that the Bella Vista property would be sufficient security if those guarantees were to be called upon); just as Mr Lee seems to have placed trust in little more than Mr Zhuang’s projections as to the profit to be made from the proposed development.

137. Thus, while I accept that Mr Lee was a credible witness, the issues in dispute do not turn on his credibility as such.

Ms Wang

138. Ms Wang was in a number of respects an unreliable witness. In the course of her cross-examination, Ms Wang gave varying accounts of being employed by a company known as Elite Express (whose registered office was the same as the office of Mr Pang) and admitted that she had lied when representing to a bank, from which she had sought to secure a refinance, that she was earning almost $300,000 per annum (see T 175.25 - T 175.41).

139. For Ms Wang, it is submitted that, although the evidence given in relation to the salary recorded and the loan application given to the bank was false (in respect of which Ms Wang was given a certificate under s 128 of the Evidence Act 1995 (NSW)), Ms Wang nonetheless conceded that she had been untruthful. It is said that the untruth that was told by Ms Wang was in relation to a loan application and her employment status (not in relation to questions put to her about signing the loan agreements) and that, although Ms Wang was untruthful in relation to her employment that does not necessarily infect the balance of her evidence as to the signing of the two loan agreements.

140. It is said for Ms Wang that her evidence was clear and unequivocal in relation to not signing the two loan agreements. While Ms Wang accepts that a cautionary approach is warranted in this regard because of the untruthful evidence given by Ms Wang in cross-examination, it is said that this is not the only source of evidence upon which reliance can be placed on the question as to whether Ms Wang did indeed sign the respective Loan Agreements.

Mr Pang

141. Mr Pang’s evidence as to whether it is his signature on the guarantees (noting he has been a justice of the peace since 24 July 1991 – see his affidavit at [5], which I note is not consistent with Mr Pang’s oral evidence at T 198.22 that he has been a justice of the peace since 1995), is that, on viewing the copy of the guarantees provided to him in September 2018, it appeared to him that his signature (or a signature that looked like his signature) is adjacent to the execution signatures of Mr Zhuang and Ms Wang (see his affidavit at [28]); and that his practice is not to certify that he has witnessed a signature unless the person is in his presence (see T 196.48-197.1; T 197.26-28).

142. Relevantly, Mr Pang’s evidence is that in about 2013 or 2014, he implemented an invariable practice of making an electronic copy of important documents the execution of which he had witnessed, and saving that electronic copy to the computer system located in his business premises (see his affidavit at [6]). He says that the guarantees and the certified identity documents are documents of the kind that if he witnessed them he would enter into that log in accordance with his usual practice (see T 198.43, T 199.8, T 199.2-3).

143. I have referred above to Mr Pang’s evidence that, when he was contacted by Mr Tupou in September 2018, he found copies of the identity documents in his witness log (but no copy of the Loan Agreement). Mr Pang consistently maintained in his oral evidence that he had no recollection as to whether he witnessed the guarantees, but his position that (if it was the case that Mr Zhuang or Ms Wang did not sign them in his presence), then in accordance with his invariable practice that he would not have put his signature on them certifying that he had witnessed the signature ultimately were signed in his presence (see for example T 196.48-197.1, T 197.26-28).

144. Mr Pang’s evidence was that he was anxious if someone had forged his signature (T 206.2) but he took comfort from the fact that Mr Zhuang had confirmed at it was not his signature (T 207.24).

145. Mr Pang did not know Mr Lee and had had no dealings with him (T 215.50), basically having dealt with Mr Zhuang most of the time (T 219.49). Mr Pang’s office was the registered address for both Beyond Development Group and Elite Express (companies with which Mr Zhuang was associated). Mr Pang, who has been a Justice of the Peace since (at least) 1995, had acted as accountant for Mr Zhuang and his companies and had prepared taxation returns for Ms Wang (though he had not met Ms Wang).

146. Mr Pang gave evidence as to his practice of keeping a log of important documents that he certified (and copies of some but not all of the documents he certified or attested). Mr Pang’s evidence (as I understand it) was that if he had witnessed the signing of the Loan Agreements there would have been an entry in his “log” and he would have kept scanned copies of the documents.

147. Cross-examined as to his failure to complain (to the police or other authorities) when he learnt about the (alleged) forgery of his signature (T 215.6-215.26), Mr Pang’s position was to the effect that he was concerned but that he did not consider that he was personally affected because he was not being made personally liable under the documents. Mr Pang said that he had never met or spoken to Ms Wang (T 220) (which would seem to me have been an understandable basis for a denial that it was his signature on the document that purportedly witnessed her signature). Mr Pang said that he communicated with Ms Wang about her tax returns through Mr Zhuang by email (consistent with Ms Wang’s evidence at [15]). At T 233.39, Mr Pang gave evidence that he did not see Ms Wang sign the documents.

339. Mr Pang relies upon the plaintiffs’ pleaded case against Mr Zhuang, which principally alleged fraud he perpetrated on the plaintiffs ([18B]-[18C]) was compounded by Mr Zhuang’s conduct in early 2017 (as set out in Mr Pang’s defence at [36]). It is noted (see annexure “C” to Mr Pang’s affidavit ), that Mr Zhaung had amassed millions of dollars’ worth of debt (some of which was through gambling), and it is said that obviously there was further money owing to Megatop, which had lodged a caveat over the development.

340. It is noted that Mr Zhuang persuaded Mr Lee to advance $900,000 on the promise of a 30% return over 12 months and prior to exchanging any loan documentation. Further, it is said that Mr Zhuang lied as to his ability to give security over the residence in circumstances in which he did not own it; lied as to the willingness of his wife to give security over the residence in circumstances in which Ms Wang’s evidence is that she knew nothing of the transaction until August 2018 (T 144.22). It is said that Mr Zhaung or someone at his direction, likely forged signatures of Ms Wang and Mr Pang in circumstances in which neither of them knew anything of the transaction (see T 144.22) (regarding Ms Wang); also Mr Pang’s affidavit (at [20]-[25], [34]).

341. Mr Pang argues that, when providing the allegedly executed Loan Agreements to the plaintiffs’ solicitor, Mr Zhuang must have known that the signatures of Ms Wang and Mr Pang were not genuine and when requesting the plaintiffs remove the caveat on the development properties must have known that he was doing so for reasons other than those conveyed to Mr Lee (referring to Mr Lee’s evidence at T 66.23 that “Peter asked me to remove it because he says that he need to raise more fund and I trusted him and I removed the caveat”).

342. In the event of an adverse finding against Mr Pang, it is submitted there should be a significant reduction on account of Mr Zhuang’s culpability. Mr Pang contends for 75% in this regard.

Pinnacle Lawyers

345. The allegations against Pinnacle Lawyers are pleaded in Mr Pang’s defence (at [50]-[83]).

346. It is noted that Mr Tupou admitted in cross examination that he had concerns about the transaction the subject of this dispute (T 84.39) and identified three important matters to be addressed in order to ensure that his clients were protected in respect of the funds they were advancing (T 87.50; see also T 126.20-22). Those matters were: for Mr Zhuang and the guarantors to obtain independent legal advice (see Ex 10 at p 50; see also T 92.18); for Mr Zhuang’s signature to be witnessed by a Justice of the Peace or a person qualified to do so (see Ex10 at p 50, see also T 92.18); and the provision of 100 points of identification for each of the parties signatory to the Loan Agreements so that Mr Tupou could properly verify their identity (see Ex 10 at p 50; see also T 92.18), so as to enable Mr Tupou to compare the signatures on the Loan Agreements with the identification provided (T 91.12, 19; see also Ex “SFT3” to Mr Tupou’s first affidavit).

347. The plaintiffs note that, despite this, neither Mr Zhuang nor Ms Wang obtained independent legal advice in relation to the Loan Agreements. It is noted that Mr Tupou took no steps to ascertain whether Mr Zhuang and/or Ms Wang obtained independent legal advice in relation to the Loan Agreements, assuming that they had done so (by reference to the fact that their signatures had been witnessed) (T 91.50- T 92.1), in circumstances in which Mr Tupou had no evidence to this effect (T 92-18), and that no solicitor’s certificate was requested or provided by Mr Tupou (T 93.17). Mr Pang refers to Mr Tupou’s evidence in cross-examination where he accepted that, in order to protect his clients’ interests he should have requested from Mr Zhuang proof or evidence that he had obtained independent legal advice (T 94.27; see also T 94.12-13) (Mr Pang says that such a request could have been made for example in the email dated 18 November 2016 from Mr Tupou to Mr Zhuang (see Ex “SFT3” to Mr Tupou’s first affidavit). Mr Pang notes that Mr Tupou also failed to advise Mr Lee that he had no evidence that Mr Zhuang or Ms Wang had obtained independent legal advice (and says that Mr Tupou also accepted this was a failure on his part see T 95.44-49).

348. It is noted that it was March or April 2017 (T 128.38), before Mr Tupou received the 100 points of identification for each party that was a signatory to the Loan agreements (T 110.7) and that at no point did he actually meet with Mr Zhuang or Ms Wang to verify their identities (T 128. l 0, 42, 49; T 129.29) (indeed it is noted that Mr Tupou’s evidence is that at no point did he ever meet Ms Wang – see T 128.4).

349. While Mr Tupou sought to lodge a caveat on the development properties to protect the plaintiffs’ interests, the parties listed as the caveators on the caveats were Mr Zhuang and Ms Wang and Mr Tupou accepted that this was an error (T 130.33); i.e., that when he came to execute the caveats, he included the wrong people as the caveators in the caveat (T 130.50; see T 131.1-10).

350. Mr Pang submits that, in circumstances in which Mr Tupou is a solicitor of some 13 years standing (T 92.49), and has admitted to professional failures on his part (see, for example, T 95.49), the expert evidence of Mr Rosier and Mr Bluth is largely irrelevant. Nevertheless, Mr Pang says that his allegations against Pinnacle Lawyers are supported by the expert opinion of Mr Rosier, an experienced solicitor. As set out above, Mr Rosier’s opinion was that Pinnacle Lawyers departed from the usual or common professional practice of reasonably competent solicitors by failing to insist that Mr Zhuang and Ms Wang execute the loan agreements before an independent solicitor or before themselves, in circumstances where the transaction was high-value and the importance of proper execution was known to Pinnacle Lawyers (see also Ex 1). While there are some differences between Mr Rosier and the expert solicitor retained by the plaintiffs (Mr Bluth) as noted in the joint report (Ex 5), Mr Pang contends that the common ground is sufficient to establish the case pleaded against Pinnacle Lawyers.

351. The experts agree that the guarantees (assuming their authenticity) did not provide the security sought by Mr Lee on behalf of the plaintiffs (see Ex 5 answer 4). In answer to Mr Rosier’s view that the terms of the “loan agreements” could be improved, Mr Bluth’s view was that it was not the intention of the parties that an actual mortgage be executed and registered as a second mortgage but guarantees and a charge to support a caveat (see Ex 5 answer 4). Mr Pang says that, even on that view, it is questionable whether the loan agreements equate to guarantees and a charge, noting that the loan agreements do not appear to have been executed by the borrower (Beyond Development Group) and that Ms Wang denies having signed them. Further, it is said that the caveat which was eventually lodged on 18 April 2017 was defective (as noted above, a matter acknowledged by Mr Tupou (T 130.33), and both experts accept that this gave way of little utility (see Ex 5 answer 9).

352. Further, the experts agree that Mr Tupou ought to have taken steps to satisfy himself as to the identity of Mr Zhuang and Ms Wang (see Ex 5 answer 5). While Mr Bluth says that it was sufficient for Mr Tupou to discharge that duty by making an inquiry of Mr Pang as to whether he witnessed Ms Wang’s signature, Mr Pang says that this is not exactly what Mr Tupou says he did (see [13]) and not what Mr Tupou thought was required on 18 November 2016 (see Ex “SFT3” to Mr Tupou’s first affidavit) (where he said to Mr Zhuang that he needed to view 100 points of ID of Mr Zhuang and Ms Wang and compare the signatures on the loan agreements with the signatures on the passports, as well as speaking to Mr Pang).

353. As to the allegation that a solicitor in Mr Tupou’ s position ought to have advised the plaintiffs by July 2017 to register a second mortgage over the development properties, Mr Rosier’s view is that reasonable care required Mr Tupou to give that advice (see Ex 5 answer 13) and the joint report does not reveal Mr Bluth’s opinion. If there is disagreement, then Mr Pang submits that Mr Rosier’s view is plainly the correct one.

354. Mr Pang says that both of these failures (at least) caused loss to the plaintiffs (assuming the plaintiffs establish any loss) and that there should be a reduction of the plaintiffs’ damages on account of Pinnacle Lawyers’ acts and omissions. Mr Pang asserts that an apportionment of 33% would be reasonable.

Plaintiffs’ reply submissions

355. In reply to Mr Pang’s closing submissions as to the concurrent wrongdoer defence (see [121]-[139]), the plaintiffs say (and Mr Pang does not dispute this) that if Mr Pang is found intentionally or fraudulently to have caused the loss then no apportionment of its liability to the plaintiff to another concurrent wrongdoer is permissible (referring to s 34A(1) of the Civil Liability Act and s 87CC(1) of the CCA); and the plaintiffs say that their pleading (that Mr Pang “falsely attested” that Ms Wang had signed the execution page of the loan agreements in his presence and that Mr Pang did so intentionally (see [18D] of the fifth further amended statement of claim; and see the reply), sufficiently amounts to a pleading of fraud (see Banque Commerciale SA (in liq) v Akhil Holdings Limited (1990) 169 CLR 279 at 285 per Mason CJ and Gaudron J, and 295 per Dawson J). The plaintiffs further say that they have joined issue by citing the facts said to ground the allegation that Mr Pang behaved dishonestly such as to engage the fraud exception. It is noted that the word “fraud” does not need to be pleaded but the facts that underly the allegation must be pleaded. Thus it is submitted that the concurrent wrongdoer claims fail.

356. The plaintiffs say that even if the claims were able to be prosecuted by Mr Pang the amounts claimed are grossly inflated, noting that no authority is provided for a 75% reduction.

357. As to the claims as against Mr Lee (to the effect that he should not have entered into the agreement in the first place against advice), the plaintiffs maintain that the risk he took was not as egregious as suggested. It is said that, Mr Lee observed in his cross-examination, he was confident in the transaction because he thought he had a personal guarantee from the second and third defendants and they owned property.

358. As to the claims as against Pinnacle Lawyers, the plaintiffs rely on the report of Mr Bluth (see above).

Contributory negligence defence

359. Mr Pang refers to the principles regarding contributory negligence by Rees J set out in About Life (at [657]-[660]). It is noted that a finding of contributory negligence turns on a factual investigation of whether the plaintiff contributed to its own loss by failing to take reasonable care of his or her person or property, quoting Astley v Austrust Ltd (1999) 197 CLR 1.

360. The application of the relevant principles involve the following issues: the degree of any departure from the standard of care by the plaintiffs; and the causal potency of any departure(s) from the standard of care of the plaintiffs.

361. Mr Pang submits that the standard of care is that of a reasonable business person and that it at least required the plaintiffs to address the matters particularised in the defence at [31] (many of which, it is noted, Mr Lee himself considered important, and which were raised by the plaintiffs’ solicitors and/or accountant at various times).

362. In summary, the particulars of contributory negligence assert the failure to take any steps, or any adequate steps to understand how the deposit and purchase of the development properties had been funded and how Beyond Development Group would service the loan advanced by NAB to Beyond Development Group; to understand the intended use of the funds advanced; independently to verify the identity of Ms Wang; to investigate the creditworthiness of Beyond Development Group and Mr Zhuang and to investigate the ability of Beyond Development Group, and Mr Zhuang and Ms Wang as guarantors, to repay the plaintiffs; to investigate the presale of unit 2, and more generally, the nature and profitability of the development; to have regard to the advice and warnings provided by the accountant and Mr Tusa (see Mr Pang’s defence at [31.2(1)]); and to obtain confirmation from Beyond Development Group that it had obtained independent legal advice.

363. It is Mr Pang’s case that Mr Lee knew very little about the proposed development (referring to his 10 May 2018 affidavit though see amendments in 17 April 2015 affidavit) and was determined to advance the funds in circumstances in which Mr Zhuang had asked him to do so, and in which Mr Lee trusted Mr Zhuang with whom he had had a close working business relationship with for in excess of ten years (referring to the evidence at T 22.35, 49-50; T 23.22-23.23; T 66.48-66.50). It is submitted that this is apparent from Mr Lee’s blatant indifference to the due diligence undertaken by Mr Tusa in relation to the proposed transaction referring to the communication in October 2016 set out in the chronology of events above.

364. Mr Pang says that it is clear from email correspondence (see Ex 10 at p 36), and Mr Lee’s evidence (see for example T 58.22), that Mr Zhuang was desperate for the funds, noting the 21 October 2016, for example, where Mr Lee requested Mr Tupou “get the contract out asap ... so that Peter & the wife will be able to come down and sign them” (see Ex 10 at p 31) in circumstances in which “Peter ... needed the funds” (T 57.4-57.6). It is said that in cross examination, Mr Lee could not explain the urgency in which Mr Zhuang needed the funds (T 57.13-57.23).

365. Mr Pang emphasises that the advance of the funds on 2 November 2016 was: in the absence of written loan agreements or guarantees (these only were executed on or about 9 November 2016: see T 58.49-59.2); without credit checks being conducted on Mr Zhuang and Ms Wang (Mr Lee instructed Mr Tusa not to proceed with these (T 61.12; see also Ex 10 at p 48), in circumstances in which Mr Lee’s evidence is that he “decided to take the risk” (T 64.47), in respect of Mr Tusa meeting with Mr Zhuang regarding his financial position, Mr Lee requested that this be skipped (T 60.16; T 65.13); and with no caveat or charge on the development properties or the Bella Vista property (noting that Mr Lee requested the caveat on the development properties only be put on them following the signing of the loan agreements, at Peter’s request – see Ex 10 at p 41; see also T 66.9-14, 33).

366. It is noted that, as at 2 November 2016, Mr Lee had no document which recorded that either Mr Zhuang or Ms Wang owned the Bella Vista property (T 65.21-22).

367. Accordingly, Mr Pang says that the funds were advanced on Mr Zhuang’s “word” that the security and the loan agreements would be forthcoming (T 67.15). It is noted that the identities of Mr Zhuang and Ms Wang had still not been verified as at 7 February 2017 (a matter which it is said Mr Lee was prepared to put to one side – see T 74.24-74.26).

368. Finally, Mr Pang says that the transaction raised so many “red flags” that there was a reference to indemnification of Mr Lee’s solicitors in relation to it (T 56.14-56.16, see also T 65.39). The matters raised by Mr Lee’s solicitors also were rejected by Mr Lee (T 65.43).

369. Mr Pang submits that if any one of the steps outlined in his defence at [31], or the matters raised by Mr Tupou and/or Mr Tusa had been taken, it would have raised a “red flag” which, if acted upon, would have resulted in the harm suffered by the plaintiffs being avoided.

370. Mr Pang submits that there should be significant reduction of any damages for the plaintiffs’ contributory negligence (Mr Pang contends for a figure of 75%).

Determination

371. The conclusion reached above as to the lack of authenticity of Ms Wang’s signatures gives rise to obvious difficulty for Mr Pang if his signature on the Loan Agreements is genuine. It is accepted that in those circumstances Mr Pang could not have attested the signing of the documents by Ms Wang in her presence (and the attestation would therefore be false).

372. The first issue, therefore, is as to the authenticity or otherwise of Mr Pang’s signatures on the documents. In that regard, while I accept that Mr Pang’s evidence of his invariable practice (of only attesting documents in the presence of the signatories) is eminently plausible (indeed it would be surprising if that were not the case for someone in his position), I bear in mind that Mr Pang has an obvious self interest in giving such evidence and it is impossible to test on the material before me (so it rests entirely on acceptance of his word).

373. Mr Hobden’s expert evidence thus becomes highly relevant. Mr Hobden (as noted above) gave qualified support (much of the same level as that expressed by Ms Holt in her separate opinion about Ms Wang’s signature) for the proposition that Mr Pang’s signatures were authentic. However, the force of that opinion is lessened in circumstances where it is not disputed that Mr Hobden did not have the original documents from which to make the comparison between signatures and had fewer specimen signatures than his own evidence would suggest was preferable. I reject Mr Hobden’s expression of opinion as to the likelihood of the signatures being those of a skilled (or very highly skilled) forger (as I consider that assessment of probability goes beyond Mr Hobden’s expertise as a forensic handwriting analyst) but I accept that Mr Hobden has expertise as to forensic analysis of the handwriting itself. (I note that Mr Hobden was not asked to analyse the capital letters on the documents that appear in relation to Mr Pang’s signature, which seem to be of the same general handwriting as the signature.)

374. To my eye, some of the “Pang” signatures seem almost identical in the specimen group considered by Mr Hobden but there are certainly others where there are observable variations (which would tell against the signatures having been precise copies but not against them being forgeries). However, and also from a lay perspective, Mr Pang’s signature does not appear to be a particularly complicated signature and might well lend itself more readily to copying than, say, Ms Wang’s signature. In this regard, it is also relevant to note that Mr Zhuang had possession of the documents for some eight days before the executed documents were provided to Mr Tupou (and therefore ample opportunity to have executed a forgery had he wished to do so).

375. The plaintiffs, in their submissions in support of the conclusion that Mr Pang did sign the documents, say that there is a mosaic made up of the following pieces of evidence: first, the 22 November 2016 conversation between Mr Tupou and Mr Pang; second, the 30 November 2016 email from Mr Tupou to Mr Lee; third, Mr Pang’s account of the conversation (in Chinese) with Mr Zhuang in September 2018 which put Mr Pang’s mind to rest; fourth, Mr Pang’s concession that Ms Wang was “no stranger” to him (in that he prepared her tax returns) but he did not alert her to the discovery (on Mr Pang’s evidence) that one or more signatures had been forged on the documents; and, fifth, Mr Hobden’s expert evidence (expressed to the level of a moral certainty).

376. Thus, the plaintiffs say that on the balance of probabilities Mr Pang was just presented with the documents bearing signatures already on the documents; and signed the documents (falsely attesting that he was witnessing the documents in the presence of the signatories).

377. Insofar as the plaintiffs place reliance on the 22 November 2016 conversation, as already discussed the evidence on this aspect of the matter is brief in its content (and accounts of the conversation given by Mr Tupou are not wholly consistent). At T 87, Mr Tupou’s account was “I’ve got a contract you witnessed – did you sign it?” which is not how the conversation is expressed in his affidavit. What precisely was said was not clear (and, as I observed in the course of oral submissions, it seems to me that this is an instance where the precise words that were used would be of particular importance). For example, it might be (and I appreciate this is mere speculation but I use this to highlight the difficulty) that what was said was along the lines “I am calling about a contract you witnessed”, to which (if Mr Pang said yes) an affirmative response would not necessarily be an affirmation that he had witnessed anything in particular. (In much the same way a judge might say “yes” when a submission was put to him or her without necessarily agreeing thereto; perhaps simply as an acknowledgment that the submission has been made or to indicate that it has been understood.)

371. There is also the further difficulty that English is not Mr Pang’s first language and (with no disrespect to him) it is evident from his email communications and from his oral evidence that his level of facility with the English language might well permit misunderstandings to arise on his part or on the part of a listener. In particular, the suggestion in the plaintiffs’ submissions that, in context, a query about a “contract” (in the singular) would have been understood to encompass a query about Ms Wang’s signature is by no means self-evidently the case (especially when on Mr Tupou’s account there appears to have been no reference to Ms Wang).

372. I accept that Mr Tupou understood from the 22 November 2016 conversation (at least by the time he came to recall it when he sent the 30 November 2016 email to Mr Lee) that Mr Pang had confirmed that he had witnessed the signing of the contracts. However, I am left in doubt as to whether that was an assumption or conclusion drawn by Mr Tupou or whether it was something actually stated by Mr Pang.

373. As to the fact that Mr Tupou was not shaken in his evidence in this respect, I would simply note that, if Mr Tupou in fact had drawn a conclusion from something implicit but not explicit in the conversation with Mr Pang, then it would not be surprising that over time his recollection would have firmed (unconsciously or otherwise) (see Watson v Foxman) and therefore the adamance of his evidence (compared with Mr Pang’s lack of recollection of the conversation at all) does not take the matter very far.

374. As to the second piece of the mosaic, that suffers from the same problem as the first. I am left in doubt as to whether Mr Tupou’s email was in effect expressing a conclusion he had drawn or something that he had actually been told. (In saying this, I do not suggest that Mr Tupou was misrepresenting the position to his client; I simply read the email as open to a different construction.) I also consider it relevant that Mr Tupou’s focus, at the time of the 22 November 2016 conversation, seems to have been on confirming the address and capacity of the witness (not whether the witness had actually witnessed the signing of the document as such) – as evident from the emails at around that time; and from Mr Tupou’s file note.

375. As to the third piece of the mosaic, as I have discussed earlier, I consider that the conversation to which Mr Pang has deposed with Mr Zhuang is consistent with Mr Pang’s version of events. Similarly, as to the fourth piece of the mosaic, I do not accept that this amounts to any kind of consciousness of guilt.

376. Finally, as to Mr Hobden’s evidence, I have taken that into account but I am of the view that its force is weakened by the limitations identified by Mr Pang (and discussed above).

377. I consider that Mr Pang’s email to Mr Tupou in September 2018 corroborates Mr Pang’s account of his telephone conversation with Mr Zhuang as does his reference to the witness log; and that this is consistent with Mr Pang not knowing (or remembering) what had happened in relation to the loan agreements about which he was then being questioned but candidly accepting that the signatures looked like his signatures.

378. Balancing all of the above, I am not comfortably satisfied that the overall mosaic when pieced together reveals or points to the conclusion that the purported signatures of Mr Pang on the Loan Agreements are authentic signatures. On the balance of probabilities, I consider it more likely that the signatures were placed on the documents by someone else (most likely the “chief rogue”, as Mr Zhuang was identified by the plaintiffs in oral submissions – see T 328.19 - or someone at his behest).

379. That conclusion means that the various claims against Mr Pang fail. However, for completeness, I briefly deal with the issues that would arise had I come to a different conclusion as to the authenticity of the Pang signatures.

380. Had I concluded that Mr Pang did (falsely) attest to the signing of the Loan Agreements by Ms Wang, then I would have concluded that Mr Pang had engaged in misleading or deceptive conduct in representing (by his attestation) that he had witnessed the execution of the documents by Ms Wang (and, leaving aside the pleading complaint that has here been made, that Mr Pang was in breach of a duty of care owed to persons in the position of the plaintiffs who might reasonably be foreseen as likely to rely on the correctness of the attestation). I do not accept Mr Pang’s characterisation of the act of witnessing guarantors’ signatures as conduct which is divorced from any relevant actual or potential trading or commercial relationship; rather, while I accept the restriction imposed on the terms “in trade or commerce” contained in Concrete Constructions, I consider that the services of a chartered accountant in his capacity as a justice of the peace may be seen as professional and, in this context, intended to have an impact on commercial activities (since a validly signed and attested deed would have bound Mr Zhuang and Ms Wang as guarantors to the loan made by the plaintiffs and provided security for the loan transaction). In this regard, I refer to Houghton v Arms (2006) 225 CLR 553, in which the plurality accepted at [34] that:

… statements made by a person not himself or herself engaged in trade or commerce may answer the statutory expression if, for example, they are designed to encourage others to invest, or to continue investments, in a particular trading entity.

388. I also consider that the conduct of a justice of the peace is sufficiently analogous to a liquidator who fulfills a statutory function by identifying assets with a view to facilitating the interest of other parties in conducting business, which was held to be an activity of essentially trading or commercial character in Aardwolf Industries LLC v Tayeh [2020] NSWCA 301 at [75]-[77] per Macfarlan JA (with whom Bell P and Leeming JA agreed). I further note that s 18 expressly contemplates the inclusion of any professional activity that is not carried on for profit.

389. I would not have concluded that Mr Pang was knowingly concerned in, and party to, the alleged misleading or deceptive conduct on the part of Mr Zhuang (in the absence of evidence that Mr Pang knew of the alleged oral agreement with Mr Zhuang and having regard to the disconformity in the pleaded case against Mr Zhuang and the accessorial liability case against Mr Pang, to which Mr Pang has pointed).

390. In respect of the negligence claim, I note that the ‘duty of care’ concept is the mechanism by which the law limits liability in negligence for pure economic loss, and the core of this liability is the defendant’s voluntary undertaking, although there is no universally agreed test (see Torts Cases and Commentary (2017, 8^th ed, Lexis Nexis) at [16.1.9]; Bruce Feldthusen, Economic Negligence (2000, 4^th ed, Carswell) at pp 126-127). The scope of the defendant’s liability is determined by several factors, including the defendant’s knowledge, or means of knowledge, of an ascertainable class of vulnerable persons who are unable to protect themselves against harm, and the degree of control which the defendant has over the dissemination of the information (see David Rolph et al, Balkin & Davis Law of Torts (2021, 6^th ed, LexisNexis) at [13.24]); the starting point is the identification of the interests for which the plaintiffs seek protection (see Perre v Apand Pty Ltd (1999) 198 CLR 180 at [192] per Gummow J, which statement was adopted by Ipps JA at [46] in Graham v Hall).

391. The interest of the plaintiffs for which they seek protection is their interest in the enforceability of the guarantees, and I consider that this would have been obvious to Mr Pang if he had attested the signatures on the loan agreement. I accept that there are factual differences between this case and Graham v Hall, and the plaintiffs were not in as vulnerable a position as Mrs Hall was in that case, in the sense that the plaintiffs were aware of the transaction and could have required the attestations to take place in the presence of their solicitors. However, I consider that the interests to be protected and the foreseeability of the harm is sufficiently similar to support the recognition of a duty of care owed by Mr Pang to the plaintiffs. As Ipp JA emphasised in Graham v Hall at [66], false attestation is not a case of omission, rather it is an act over which the attestor has full control and sole discretion; if Mr Pang had attested his signature, he would have implicitly assumed responsibility to those who could be affected by his negligence in carrying out that task. Further, the fact that the imposition of liability would not give rise to indeterminate liability is significant (as here the only possible plaintiffs could be the mortgagees).

392. As to the issue of reliance, I am not persuaded that reliance is made out on the part of the plaintiffs in circumstances where the evidence of reliance comes relevantly only from Mr Tupou (and even if it were sufficient it would suffer from a difficulty in terms of causation since it is apparent that Mr Lee routinely did not act on Mr Tupou’s recommendations). I accept that an agent’s reliance may be sufficient to establish compensable loss, irrespective of whether the agent may have been careless or failed or comply with standard procedures (see Perpetual Trustee Company Ltd v Milanex Pty Ltd (in liq) [2011] NSWCA 367 at [49]-[69] per Macfarlan JA with whom Campbell and Young JJA agreed). While a solicitor clearly falls into the realm of agency, not every aspect of a solicitor’s role involves agency (see Gino Dal Pont, Law of Agency (2020, 4^th ed, LexisNexis) at [1.39]). In this respect, Mr Lee’s own evidence was that Mr Tupou was “just [his] solicitor and he’s not a financial advisor” and as such rejected Mr Tupou’s concerns about the transaction (T 65.43). This strongly suggests that the acts and state of mind of Mr Tupou did not govern and represent the state of mind of Mr Lee (or the plaintiffs, for that matter). Accordingly I am not satisfied that reliance is made out on an agency basis. Had reliance been made out, I would have accepted that in principle the plaintiffs lost an opportunity to take steps at an earlier time to protect their interests but I am not persuaded that this was an opportunity of any real value.

393. The plaintiffs made much reference in submissions to rescinding the agreements (variously referring to the Loan Agreements or the oral agreement pursuant to which the moneys were advanced). It is by no means clear precisely what the plaintiffs contemplated by this. Breach of the Loan Agreements (even if Beyond Development Group was a party thereto and I have real doubt about this since Mr Zhuang signed the document only once – clearly in the capacity of guarantor) would ordinarily sound in damages not a claim for rescission; as would breach of an oral agreement to provide a personal guarantee. It seems more likely that what might have been contemplated would have been some kind of claim for misleading or deceptive conduct (of the kind ultimately pleaded against Mr Zhuang) but in that event it seems unlikely in the extreme that relief would have been obtained in the short period of time between the discovery (on this counterfactual) that the signatures of Ms Wang had not properly been witnessed and the time at which the loan funds had been disbursed.

394. Assuming for present purposes that a freezing order could have been obtained (at a time when Beyond Development Group retained some of the loan funds), it is still not clear that the plaintiffs would have had priority in respect of those funds over secured creditors such as NAB. As to the lack of an opportunity to lodge a caveat over the development properties, for the reasons put forward by Mr Pang I accept that this was not the loss of any real or valuable opportunity since there was no caveatable interest identified (and Mr Lee had in any event appears to have expressed reluctance at lodging a caveat after the first caveat was withdrawn.

395. Therefore, had I concluded that the claim for damages for loss of opportunity was made good, and that there was some value to the lost opportunity, I would nevertheless not have assessed that value as being of any real substance. In those circumstances it is not necessary to say anything further as to the debate over whether there would have been funds able to have been realised by the plaintiffs from a forced sale of the development properties (whether in February 2017 or, more likely, sometime later in 2017 or 2018).

396. As to the defences raised by Mr Pang, again these do not strictly arise for determination in light of the findings that I have made. Briefly, my conclusions had they arisen for determination would have been that the contributory negligence defence was well established. The plaintiffs, through Mr Lee, ignored the advice given by Mr Tupou and the concerns raised by Mr Tusa, and advanced moneys prior to the execution of any loan agreements or guarantees at all; chose not to pursue the instructions for due diligence and credit checks; and delayed in lodging a caveat to protect their interests (even assuming that there was a caveatable interest that they held). It is abundantly clear that Mr Lee acted as he did because he trusted Mr Zhuang. It is unfortunate that this trust was obviously misplaced. Nevertheless, it is clear that the plaintiffs in so doing did not act reasonably to protect their own interests.

397. There being contributory negligence, responsibility must be apportioned according to the degree of departure by each party from the standard of care of the reasonable person and the relative importance of the parties’ respective acts in causing the loss sustained by the applicant (i.e., the degree of culpability and causative force to be attributed to each of them – see Podrebersek v Australian Iron and Steel Pty Ltd (1985) 59 ALJR 492; [1985] HCA 34 at 494). In my opinion the level of contributory negligence in this regard on the part of Mr Lee is high and I consider that the 75% figure put forward by Mr Pang is appropriate to reflect that level of negligence. It is not to the point to say that the plaintiffs had legal representation when it is clear that they did not rely on the advice they were given (and which Mr Lee accepted would have been prudent).

398. As to the concurrent wrongdoer (and overlapping proportionate liability defences), as already noted Mr Pang accepts that if he were found to have attested the signatures when he had not then this would exclude reliance on the concurrent wrongdoer defence (though it is not conceded by him that the plaintiffs have actually invoked s 87CC and hence it is said that it is open to treat this as an apportionable claim). I have not found that Mr Pang was guilty of dishonest conduct or fraud in this regard, so the issue does not arise. Had it arisen, I would have concluded that (despite the lack of pleading on this issue) the effect of a fraud finding would mean this is not an apportionable claim in respect of the relevant conduct.

399. As to the concurrent wrongdoers identified by Mr Pang, I have already referred to the position of the plaintiffs. As to Mr Zhuang, on the evidence before the Court, it must be concluded that he is the principal culprit in this matter and I would assess his responsibility for the loss at a high level (at least 75%) as against that (on this hypothesis) of Mr Pang, for the reasons put forward by Mr Pang. As to Pinnacle Lawyers, I would assess their liability at a much lower level (noting the expert advice referred to above but also that the advice they gave as to prudent measures to protect the plaintiffs’ interests was routinely rejected). I would have assessed this liability at most at, say 20%.

Claim against Mr Zhuang

400. As to the claim for judgment against Mr Zhuang, I can deal with this very briefly in light of the conclusions reached already as to the factual aspects of this matter. Assuming that Mr Zhuang’s signatures on the Loan Agreements are genuine (and there is no reason to doubt this), there must nevertheless be an issue as to whether Mr Pang attested these signatures. In circumstances where I have found that Mr Pang did not attest Ms Wang’s signatures on the documents, and having regard to the evidence of Mr Pang’s communications with Mr Zhuang in September 2018, I am not satisfied that the Loan Agreements were properly attested as deeds (and I accept the force of the argument that they would not be enforceable as contracts for lack of consideration – past consideration being no consideration).

401. However, it seems to me abundantly clear that there was misleading or deceptive conduct on the part of Mr Zhuang in the making of the alleged representations; and I would accept that Mr Lee (and through him the plaintiffs) relied on these representations in advancing the moneys (albeit before execution of the documents) and then in not taking steps to recover or attempt to recover the moneys. Mr Lee’s constant refrain as to the trust he reposed Mr Zhuang makes that clear. I would also accept that there was a relevant causal link between the misleading or deceptive conduct and the loss of the funds advanced. In addition, it would seem that Mr Zhuang breached his oral agreement with Mr Lee to provide a valid and enforceable personal guarantee, giving rise to damages for compensable and measurable loss. In those circumstances, I will enter judgment against Mr Zhuang for the amount claimed.

Costs

402. I see no reason that costs should not follow the event. However, in her written submissions at the hearing, Ms Wang included submissions as to costs, in which Ms Wang made clear that she seeks costs on an indemnity basis or alternatively on an ordinary basis. It appears that the basis on which indemnity costs are here sought is that explained in “Law of Costs” by G E Dal Pont (2009, LexisNexis Butterworths, 2^nd ed) at [16.51] (in effect that the proceeding has been commenced or continued in circumstances where the plaintiffs, properly advised, should have known that the proceeding had no chance of success); and see Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225; [1993] FCA 536 at [5] per Sheppard J.

403. As it is not clear whether the plaintiffs wish to respond to the special costs order sought by Ms Wang, and Mr Pang may seek to make submissions as to costs, I will make directions to permit any further submissions on the issue of costs.

Orders

404. For the above reasons, I make the following orders:

1. Dismiss the plaintiffs’ claim against the second and fourth defendants with costs.

2. Enter judgment for the plaintiffs against the third defendant in the sum of $800,000 plus interest and costs.

3. Direct that any brief written submissions as to costs of the second and fourth defendants be filed within 14 days with a view, if possible, to dealing with costs on the papers

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Decision last updated: 30 May 2022