Lth Pty Ltd (ACN 085 412 835) v Hung Phuoc Tong
[2013] VSCA 268
•27 September 2013
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2013 0105
| LTH PTY LTD (ACN 085 412 835) | Applicant |
| v | |
| HUNG PHUOC TONG | Respondent |
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| JUDGES | HANSEN and TATE JJA |
| WHERE HELD | MELBOURNE |
| DATE OF HEARING | 13 September 2013 |
| DATE OF JUDGMENT | 27 September 2013 |
| MEDIUM NEUTRAL CITATION | [2013] VSCA 268 |
| JUDGMENT APPEALED FROM | LTH Pty Ltd v Tong [2013] VCC 854, Judge Cosgrave |
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PRACTICE AND PROCEDURE – Permanent stay of proceedings insofar as there was direct or indirect reliance upon a forged document – Rule 23.01 of the County Court (General Civil Procedure) Rules 2008 – Misappropriation of gold – Disputed agreement to return gold – Handwriting experts – No cross-examination – Inadequacy of reasons – Unable to discern whether all relevant considerations taken into account including future conduct of trial in accordance with amended statement of claim.
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| Appearances: | Counsel | Solicitors |
| For the Applicant | Mr J K Arthur | Western Lawyers |
| For the Respondent | Mr M E King | Verduci & Co |
HANSEN JA:
I agree with Tate JA.
TATE JA:
This is an application for leave to appeal against orders made by Judge Cosgrave on 28 June 2013, following a hearing on 19 to 20 June 2013, permanently staying the proceeding brought by LTH Pty Ltd (ACN 085 412 835) (‘LTH’) against Hung Phuoc Tong (‘Tong’), insofar as LTH made any claim which directly or indirectly relies upon ‘the forged document, being Exhibit AS1 to the affidavit of Angpal Singh sworn 6 June 2013’. His Honour also struck out LTH’s statement of claim as an abuse of process.
It is not in contest that the orders made by his Honour were interlocutory, and that it is necessary, before leave will be granted, for LTH to show that Judge Cosgrave’s decision was attended with sufficient doubt to warrant its being reconsidered on appeal and that substantial injustice would be caused if the orders made were allowed to stand.[1]
[1]Niemann v Electronic Industries Ltd [1978] VR 431, 441-2; King v Lintrose Nominees Pty Ltd (2001) 4 VR 619, 627.
LTH urged the Court, if leave to appeal was granted, to hear the appeal instanter. With this in mind, the Court heard the appeal at the same time as the application for leave to appeal.[2]
[2]The appeal was heard by two Judges of Appeal in accordance with a determination of Buchanan AP made pursuant to s 11 (1A) of the Supreme Court Act 1986, dated 9 September 2013.
LTH also accepted that his Honour’s decision was an exercise of discretion, and thus that the restrictive preconditions for appellate intervention in House v The King apply:
If the judge acts upon some wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in
substitution for his if it has the materials for doing so.[3]
[3](1936) 55 CLR 499, 505.
For the reasons that follow, I would grant the application for leave to appeal and allow the appeal.
The disputed agreement to return gold
LTH is a company which manufactures jewellery. Tong had been a director of LTH and responsible for the administrative aspects of the company. Mr Loi Tien Nguyen was also a director and was responsible for the casting and manufacture of product. Loi Nguyen returned to Vietnam to develop and design products for the business and Tong assumed sole day-to-day responsibility for LTH’s operations in Australia. This included responsibility for the care of the inventory which comprised gold and other precious metals.
In its Writ, LTH initially alleged that Tong, between 2005 and 2010, appropriated to his own use seven kilograms of gold which was the property of LTH. LTH alleged that on or about 20 May 2011, Tong agreed that he would return to LTH seven kilograms of gold provided that LTH took no further action against him for the misappropriation of gold, cash and other precious materials. LTH alleged that the agreement was oral, in writing and to be implied. Paragraph 6 of the Statement of Claim read:
Insofar as it [the agreement] is written, it is contained in an acknowledgment dated 20 & 24 May 2011 in which the Defendant, Peter Tong, returned to the Plaintiff 500 grams of fine gold.
This document was exhibited as Exhibit AS1 to the affidavit of Angpal Singh sworn 6 June 2013, and is the document that his Honour ordered could not be relied upon in the proceeding. It is convenient to refer to it as ‘the acknowledgment’.
LTH then alleged that having provided 500 grams of gold, Tong refused to return the 6.5 kilograms of gold constituting the balance under the agreement.
In his Defence, Tong denied executing the acknowledgment and, more generally, denied entering into any agreement with LTH or anyone else to return seven kilograms or any other amount of gold. He also denied any misappropriation. He said that Loi Nguyen, Leon Dang Vu Tran and Henry Nguyen (Loi Nguyen’s brother and an employee of LTH) were also responsible for dealing with gold, other precious metal and cash on behalf of LTH.
Tong made an application before Judge Cosgrave to stay the proceedings, pursuant to r 23.01 of the County Court (General Civil Procedure) Rules 2008 on the ground that the proceeding was an abuse of process because it centred upon a claim which relied upon the acknowledgment which, he alleged, had been forged.
At the same time counsel for LTH made an oral application before Judge Cosgrave to file and serve an Amended Statement of Claim including the allegation that Tong misappropriated, or was otherwise unable to properly account for, about 22.9 kilograms of gold belonging to LTH Alternatively, LTH claimed that Tong agreed to return seven kilograms of gold. In addition, LTH sought to allege that:
(1) on or about 26 June 2009 Tong took company funds of about $52,000 by way of cheque; and
(2) on or about 19 April 2009 Tong took $75,000 cash from the company to lend to Melissa Chan, and only $55,000 had been repaid.
His Honour referred to these as ‘the two money claims’. He granted leave to LTH to file an Amended Statement of Claim substantially in the form handed to him but not including any claim which directly or indirectly relied upon the acknowledgement.
His Honour had before him a report from a handwriting expert engaged by Tong who concluded that the signature on the acknowledgement was probably not Tong’s. He also had a report from another handwriting expert, obtained by LTH, who concluded that Tong did not write his signature on the acknowledgement.
The acknowledgement purported to contain the signature not only of Tong, but also of Henry Nguyen, and a signature of Trung Le as ‘the witness’.
Henry Nguyen’s evidence was that he was not a party to any agreement or conversation on or about 20 May 2011 pursuant to which Tong agreed to return seven kilograms of gold to LTH on the condition that LTH took no further action against him for the misappropriation of gold, cash and other precious items. He agreed that he signed the acknowledgement. He said that at the time he signed, the document was given to him by Ngoc Hanc Tran (otherwise known as Sarah Tran). He said that at the time he signed his name, there was already a signature under the typed name of Tong. Henry Nguyen said that he was asked to sign under the word ‘receiver’. He said that Sarah Tran and he were the only people present when he signed the acknowledgement. Neither the name of ‘the witness’, Trung Le, nor Trung Le’s signature, was on the acknowledgement at the time.
Sarah Tran, in her affidavit sworn 17 June 2013, said that in effect on 24 May Tong attended LTH’s premises with his first ‘payment’ of gold. She said that Tong handed 500 grams of gold to Henry Nguyen and asked for a receipt. She typed the acknowledgement. She gave the typed sheet to Henry Nguyen who in turn gave it to Tong. Tong and Henry Nguyen then went into the casting room where they remained for some time. When they came out of the room Tong handed the acknowledgement to Sarah. It had been signed by Tong. Sarah said that Henry Nguyen and Trung Le also signed as witnesses.
Trung Le did not swear an affidavit supporting LTH’s version of events.
There was no application by LTH to cross-examine Tong or Henry Nguyen, and no cross- examination took place. Nor was there any cross-examination of either of the handwriting experts.
The reasons his Honour gave for granting a permanent stay, in so far as LTH made any claim which directly or indirectly relied upon the acknowledgement, were contained in three short paragraphs which did not, in express terms, contain a finding that the acknowledgement was a forged document although the orders he subsequently made, as set out above, included a reference to ‘a forged document’. The reasons did include, however, a finding that Trung Le did not witness the acknowledgement. His Honour said:
Whichever account of events at [LTH’s] premises on 20 May 2011 is correct, two things are clear:
(a)Trung Le, even on [LTH’s] own account, could not have been a witness to the alleged signing of the relevant document [the acknowledgement] by [Tong] and Henry Nguyen. [LTH] does not allege that Trung Le was in the casting room with [Tong] and Henry Nguyen at the time the document [the acknowledgement] was signed;
(b)[LTH’s] own expert is notably more emphatic than [Tong’s] expert that [Tong] did not sign the document relied on by [LTH] [the acknowledgement].
In addressing the allegation of fraud or forgery, which is plainly a serious matter, the court is to be satisfied on the balance of probabilities regarding the allegations made. On the evidence, the court would be justified in finding, and I do find, that Trung Le did not witness [Tong] sign the document and that [LTH] has relied upon a document which it knew, or should have known, did not properly support the claim made in respect of it.
It is a matter of grave concern when a party to litigation uses a false or forged document in this manner to support its claim against another party. In the circumstances, I consider that a stay is appropriate.[4]
[4]Reasons, [16]-[18].
His Honour made the following relevant orders:
(1) The proceeding be permanently stayed insofar as the plaintiff [LTH] makes any claim which directly or indirectly relies upon the forged document, being Exhibit AS1 to the affidavit of Angpal Singh sworn 6 June 2013.
(2) The Statement of Claim endorsed on the writ be struck out as an abuse of process.
(3) Subject to order (1) above, the plaintiff [LTH] have leave to file an Amended Statement of Claim substantially in the form handed to the court on 19 June 2013, and the plaintiff [LTH] serve such claim on the defendant [Tong] by 3.00pm on Tuesday 2 July 2013.[5]
[5]His Honour also made orders for a later directions hearing at which objections could be made to the proposed amended claim.
The Notice of Appeal
The Notice of Appeal lists 20 proposed grounds of appeal. They may be grouped generally as follows:
(1)The judge was wrong to stay the proceeding without considering all the circumstances of the case, these circumstances only being ascertainable after an adjudication on the merits;
(2)The jurisdiction to stay a proceeding for abuse of process is to be exercised with great caution and supported by proper evidence or very sparingly and only in very exceptional cases;
(3)The judge failed to take into account adequately or at all the affidavit of Sarah Tran sworn 17 June 2013, and other affidavits;
(4)The judge applied the wrong standard of proof in failing to apply the principle that if an allegation of fraud or forgery is made, cogent and convincing proof on the Briginshaw standard[6] must be available before such allegation is found proven;
(5)The judge was wrong to arrive at the conclusions he drew in the absence of cross-examination;
(6)The judge misconstrued LTH’s case regarding the existence of the repayment agreement with Tong and the significance of the acknowledgement to its case – the document itself was alleged not to constitute the agreement (which was antecedent) but was only evidence of it;
(7)The judge went beyond the matters raised by Tong in determining the application, specifically by deciding it on the basis of whether or not Trung Le had witnessed Tong signing the document (instead of the question of whether the acknowledgement was forged), denying natural justice to LTH;
(8)His Honour failed to give adequate reasons for his decision.
[6]Briginshaw v Briginshaw (1938) 60 CLR 336, 361-2.
LTH submitted that it was inappropriate for the judge to order a permanent stay, even one with a limited operation, when there was a serious factual dispute still to be tried. It submitted that it was wrong for the judge to make an order for a stay on an interlocutory application, on affidavit, in the absence of cross-examination and without a knowledge of all the circumstances of the case which could only be arrived at after an adjudication on the merits, after all relevant witnesses had given evidence at trial.
LTH argued that at trial, it may, with the assistance of other evidence, particularly that to be given by Sarah Tran, persuade a court that the acknowledgement, made on 24 May 2011, does properly evidence the agreement made 20 May 2011 and is otherwise probative of its case. In her affidavit sworn 17 June, mentioned above, Sarah Tran gave evidence not only of the typing of the acknowledgement but more extensive evidence of how the agreement for Tong to return gold came to be arrived at over several days. This involved a detailed analysis carried out by Sarah Tran of Tong’s various accounts, the total of gold sold while he was in effective control of the stock over several months and his purchases of gold over that same period, resulting in an alleged shortfall which, it was argued, he agreed to repay.
Furthermore, it was submitted that a stay was a disproportionate response to an allegation that a document had not been witnessed, especially when this did not form part of Tong’s case and concerned a document that did not need to be witnessed nor needed to have other regularities applied to it.[7]
[7]LTH relied on Fairclough Homes Limited v Summers [2012] UKSC 26, for this proposition.
Regarding substantial injustice, LTH complained that it had been denied the opportunity to rely upon an important piece of evidence (the acknowledgement) and that his Honour’s findings impinge on its credit in such a way as to prejudice its chances of a fair trial.
In response, Tong submitted that the decision below was not attended with doubt, and that it is based upon evidence which, aside from the improbability of a witness admitting to a forgery, could not very well have been stronger. Tong denied from the outset in his Defence that the signature on the acknowledgement was his; this was explicit and unequivocal. Tong later repeated this on oath on affidavit.[8]
[8]Affidavit of Hung Phuoc Tong sworn 6 June 2013.
The strength of the handwriting evidence produced by both parties, it was argued, clearly supported his Honour’s order for a stay. It was further submitted that the reasons, while brief, made it clear that his Honour had found that the acknowledgement was a forged document, even if this was not stated as an express finding.
Furthermore, Tong submitted, quite correctly, that it is wrong to conceive of the test in Briginshaw test, or the Briginshaw principle, as a different standard of proof. As Branson J said in Qantas Airways Ltd v Gama:[9]
[I]t seems to me that each of the expressions ‘the Briginshaw standard’ and ‘the Briginshaw test’ should be avoided because of its tendency to mislead.
[9](2008) 247 ALR 273, 306 [110], 308 [123], (French and Jacobson JJ agreeing).
The standard of proof that was applicable was, as his Honour correctly recognised, the balance of probabilities, taking into account the gravity of the matters alleged.[10]
[10]Evidence Act 2008, s 140(2).
Tong also submitted that when the relevant issues were raised before his Honour at the hearing on 19 June, namely, that Trung Le could not have witnessed the alleged ‘signature’ of Tong, and the absence of any affidavit by Trung Le, no explanation was given by LTH of any omission. No submission was made to the effect that the question of whether Trung Le was a witness was an irrelevant consideration, when there was an opportunity for such a submission to have been made. There was no application made to his Honour for an adjournment to obtain any further material.
More generally, Tong submitted that the stay ordered by the judge was an appropriate exercise of discretion at an appropriate stage of the proceeding, in the context of LTH making an amendment to its statement of claim, and after the evidence from the two handwriting experts had been received. Without shutting LTH out from bringing a claim, his Honour determined that any claim LTH sought to rely upon could not involve reliance on the acknowledgement, in the light of the expert evidence received and in the absence of any evidence from the purported witness.
In my view, while there may be substance in the submission made by Tong that his Honour’s orders were well supported by the evidence of the handwriting experts, it remains the case that such evidence is only one factor to be considered and is not in itself determinative. Whether the document was forged, and whether LTH was to be wholly precluded from placing any reliance on it, were matters for adjudication by the judge. The reasons his Honour proffered for making a permanent stay were all too brief and failed squarely to express a finding that the acknowledgement was a forged document, or to provide adequate reasons which explained why he made that finding. The emphasis he placed on the issue of whether Trung Le had witnessed the document appears, to my mind, to be misplaced not only because there was no requirement for the acknowledgment to be witnessed but, more importantly, because at trial further evidence may yet be given as to how it came to be that the acknowledgement contained Trung Le’s name and signature. The possibility could not be discounted that, although Trung Le was not in the casting room with Tong and Henry Nguyen, he was asked to sign the acknowledgement, and did sign, soon after Tong and Henry Nguyen emerged from the casting room on the basis of his familiarity with Tong’s signature which purported to be on the acknowledgement.
Moreover, it was necessary for the judge, when he was determining whether to accede to the application for a permanent stay, to consider whether any reliance might be placed on the acknowledgement in the context of the claims made in the Amended Statement of Claim for which he granted leave. It was important for his Honour to look to the future conduct of the trial, and not backwards to the unamended Statement of Claim, when considering whether there could be any permissible reliance upon the acknowledgement. The reasons of his Honour do not disclose that he did this. It is thus impossible for this Court to be confident that he took all relevant factors into consideration.
There may be rare circumstances in which, in the context of an interlocutory application, a document, or a signature on a document, may be found to be forged and a permanent stay ordered preventing any reliance upon that document at trial. However, where it is clear that the trial will nevertheless proceed, as here, there is much to be said for the view that any findings of forgery should await trial and the opportunity a trial provides for a consideration of all the circumstances of the case, on the merits, including an evaluation of the evidence, after the opportunity has been extended, in the context of the trial, for cross-examination of witnesses.
I consider that LTH ought be granted leave to appeal and the appeal should be allowed.
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