New South Wales Crime Commission v Chik Chen and 6 Ors

NEW SOUTH WALES SUPREME COURT

CITATION: New South Wales Crime Commission v Chik Chen & 6 Ors [2001] NSWSC 331 revised - 9/05/2001

CURRENT JURISDICTION:

FILE NUMBER(S): 010856/00

HEARING DATE{S): 7 and 8 March 2001

JUDGMENT DATE: 04/05/2001

PARTIES:
Gang He and Jing He (The applicants)
New South Wales Crime Commission (First Respondent)
The Public Trustee (Second Respondent)
Jack Rigg (Third Respondent)

JUDGMENT OF: Howie J

LOWER COURT JURISDICTION: Not Applicable

LOWER COURT FILE NUMBER(S): Not Applicable

LOWER COURT JUDICIAL OFFICER: Not Applicable

COUNSEL:
G.J. Mackey - Applicants
I. Temby QC with P Singleton - 1st Respondent
P. Singleton - 2nd Respondent

G. Stanton - 3rd Respondent

SOLICITORS:
Tzovoras Legal - Applicants
J.M. Giorgiutti - 1st Respondent
Solicitor to the Public Trustee of NSW - 2nd Respondent
-

CATCHWORDS:

ACTS CITED:
Criminal Assets Recovery Act 1990

DECISION:
See paragraph 84.

JUDGMENT:

- 33 -

THE SUPREME COURT OF
NEW SOUTH WALES
COMMON LAW DIVISION
HOWIE J
FRIDAY 4 MAY 2001
010856/00 NEW SOUTH WALES CRIME COMMISSION v CHIK CHEN & 6 ORS
JUDGMENT
Introduction

By notice of motion the applicants, Gang He and Jing He, seek that certain orders made by this Court be set aside and that consequential orders be made to undo the effects of those orders. The orders, which are the subject of these proceedings, are consent orders made by a Deputy Registrar of this Court and were entered on 15 September 2000.
I entertain considerable doubts as to whether the proceedings before me were appropriately commenced by notice of motion in the original proceedings. The consent orders made were not interlocutory and would, but for the current applications, have determined the proceedings in respect of which the orders were made. The notice of motion joined as parties strangers to the original proceedings. Setting aside the consent orders cannot itself resuscitate the proceedings that were brought to an end by the making of the orders.
In Spies v Commonwealth Bank of Australia (1991) 24 NSWLR 691 at 607E it was held that proceedings to set aside a consent judgment on the grounds of fraud or common mistake should have been commenced by fresh proceedings and not by notice of motion. However, it was also held that a party could waive the right for the proceedings to be commenced by fresh proceedings, although the court was not bound to entertain complex proceedings commenced by motion (at 701).
No objection was taken to the present applications being commenced by notice of motion. The commencement of fresh proceedings is merely a procedure of convenience; Logwon Pty Ltd v Warringah Shire Council (1993) 33 NSWLR 13 at 30F where it was held by Sheller JA with whom Kirby P agreed (Powell JA doubting) that the applications in that case should have been commenced by notice of motion.
Proceedings taken to restrain and forfeit property
The orders which the applicants seek to have set aside were made as a result of proceedings commenced by the New South Wales Crimes Commission (the Commission) pursuant to the provisions of the Criminal Assets Recovery Act 1990 (the Act). The proceedings were commenced in April 2000 following the arrest of a man named Chik Chen (Chen) in relation to offences involving the supply of prohibited drugs. It was the suspicion that Chen had “engaged in serious crime related activity” as defined in s 6 of the Act which gave rise to the proceedings in this Court.
On 11 April 2000 the Court made restraining orders under s 10 of the Act in respect of all interest in property of Chen, and specific interests in property of three other persons, Jun Chen, Jian Guo Du and Li Hua Du. The next day, 12 April, the Commission applied to the Court for orders under s 22 of the Act for the forfeiture of the interests in property which were subject to the restraining orders made the day before. On the same date the Commission applied for a proceeds assessment order under s 27 of the Act in respect of the “illegal activities” of Chen. On 20 April 2000 the Court varied the restraining order in respect of the interests of Chen to include other specified interests in property that had not been subject to the original restraining order.
On 8 May 2000 the Court made an order restraining specified interests in property of Cindy Chak. On that date the Commission applied for orders for forfeiture of Ms Chak’s interest in the property restrained.
Mr Jack Rigg, solicitor, filed notices of appearance for the various persons against whom proceedings were taken by the Commission as follows: for Chen on 19 May 2000; for Jun Chen, Jian Du, and Lian Hung Du on 31 May 2000; and for Cindy Chak on 29 May 2000.
By a Fourth Amended Summons filed on 19 July 2000 the Commission sought restraining orders under s 10 of the Act in respect of specified property of the following persons: Chen; Jun Chen; Jian Guo Du; Li Hua Du; Cindy Chak and, the applicant Gang He.
In respect of Gang He the property to be restrained was set out in Part Twelve of the Schedule to the Summons as follows:
“Funds in the account number 0459865820 held in the name of Gang He and Jing He at the Citibank Limited” (the Citibank account).
The Commission also sought orders under s 12 of the Act requiring each of these persons to furnish to the Commission a statement verified by oath setting out particulars of the nature and extent of the person’s interest in property set out in Part Seven of the Summons. In respect of the applicant Gang He, the Commission sought orders requiring him to provide full particulars of the source of funds held in the Citibank account and to provide full particulars of all payments made to Chen and all moneys received from him since 1 July 1993.
The Commission further sought orders under s 22 of the Act forfeiting and vesting in the Crown all the interests in the property of the persons named in the Summons in respect of which a restraining order was in force. In respect of the applicant Gang He this was the property in Part Twelve of the Schedule as set out above. Finally, the Commission sought the granting of leave to join Gang He as a party to the proceedings.
An affidavit was filed in support of the Summons. It was sworn by Michael Charles Lulan, an officer of the Commission, who was an “authorised officer” as defined in s 4 of the Act. The affidavit contained the following paragraphs in purported compliance with s10(3)(b) of the Act:
9.I believe that Gang He (“HE”) has an interest in property (within the meaning of “interest in property” as defined in section 7 of the Act) in the property described in the Schedule hereto.
10The belief referred to in paragraph 9 above is held by me on the following grounds:-
(a)documents produced to the commission by FIMAT SNC trading as FIMAT Australia (“FIMAT”) pursuant to a notice issued under section 17 of the New South Wales Crime Commission Act 1985 disclosed the following:

HE provided FIMAT a Notice of Appointment for HE to operate FIMAT Margin foreign Exchange account number 11130 of Chen;
HE also provided FIMAT a Power of Attorney given by Chen to HE on 12 April 2000;
on 14 April 2000 HE requested FIMAT to close account number 11130 and write a cheque payable to HE for the balance plus interest;
on 17 April 2000 FIMAT gave HE a cheque in the amount of $89,382.36 drawn on FIMAT company account held with The Chase Manhattan Bank N.A.

(b) Information provided to the Commission by Citibank Limited pursuant to section 51 of the Act revealed that:

the Citibank account described in the Schedule hereto (“Citibank account”) is held in the name Gang He and Jing He;
a deposit of $89,382.36 on 17 April 2000 was made to the Citibank account;
the following transactions occurred within the Citibank account:

Date	Deposit	Withdrawal	Balance
17 April 2000	89,382.36	199,211.52
28 April 2000	83.88	199,127.64
28 April 2000	52.37	199,075.27
28 April 2000	523.69	199,598.96
09 May 2000	20,000.00	219,598.96
29 May 2000	85,000.00	134,598.96
31 May 2000	12.31	134,586.65
31 May 2000	85.49	134,501.16
31 May 2000	854.86	135,356.02
1 June 2000	60,727.04	196,083.06
14 June 2000	20,000.00	176,083.06
30 June 2000	36.94	176,046.12
30 June 2000	75.59	175,970.53
30 June 2000	755.92	176,726.45

the balance of the Citibank account as at 14 July 2000 was $176,726.45

I suspect that the interest in property of HE in the property described in the Schedule hereto is serious crime derived property (within the meaning of “serious crime derived property” as defined in section 9 of the Act) because of the serious crime related activity or serious crime related activities of Chen.
The suspicion referred to in paragraph 11 above is held by me having regard to the Szancer affidavit, my first affidavit and paragraph 10 above.
The references to the “Szancer affidavit” and “my first affidavit” are references to affidavits previously filed in support of the Commission’s proceedings in relation to this matter. The Schedule referred to the account held in the name of the applicants at the Citibank Limited.
On 18 July 2000 this Court made a restraining order in respect of the funds in the Citibank account. On 19 July the Commission applied to the Court for orders forfeiting those funds.
On 7 August 2000 Mr Rigg filed a notice of appearance for Gang He.
On 18 August 2000 a notice of appearance was filed for Gang He by a firm of solicitors, Tzovaras Legal. There was a covering letter from this firm to the Court explaining the failure of any person to appear for Gang He on 14 August. The letter noted that the next return date for the Summons was 11 December 2000. It seems that this notice was not served on the Commission, although the contents of the letter attached to the notice indicate that there had been communication between the solicitor filing the notice and Mr Lulan from the Commission. No notice of ceasing to act was filed by Mr Rigg.
On 23 August 2000 Gang He attended the offices of the Commission for the purposes of being examined under s 12 of the Act. It seems that a solicitor from Tzovaras Legal attended with the applicant. The examination was not concluded on that day and was adjourned to some future date.
The consent orders
On 13 September Mr Rigg attended the offices of the Commission to take part in settlement negotiations in respect of the proceedings before the Court. Chen was also present in custody. None of the other persons who were parties to the proceedings taken by the Commission was present. Neither Gang He nor Tzovaras Legal was notified of this meeting.
At some stage during the meeting, it became apparent that the Commission did not have on its files a notice of appearance for either of the applicants. At the behest of Mr Rigg, a member of the Commission’s staff prepared a notice in respect of both Gang He and Jing He. Mr Rigg signed the completed document as “Solicitor for the Defendants”. The notice was left with the Commission to be filed by it on Mr Rigg’s behalf.
On 15 September 2000 the notice of appearance for the applicants signed by Mr Rigg was filed in this Court. On the same date seven consent orders were made in respect of the forfeiture of the interests in property of Chen. Mr Rigg had signed each of the orders as “Solicitor for the Defendant” and each was dated 13 September 2000. The orders were entered by the Court on 15 September 2000.
The first consent order related to Chen and contained a schedule setting out items of property including cash, funds in specified accounts with financial institutions, shares in particular companies, real property and motor vehicles. The order noted that Chen warranted to the Commission that his only interest in property at the date of the restraining order was his interests in the property set out in the schedule.
Part Four of the schedule contained the following:
(a) Funds of $150,000 held in the trust account of Jack Rigg, Solicitor and Attorney on behalf of Jun Du.
(b) Funds in the account number 0459865820 held in the name of Gang He and Jing He at the Citibank Limited.
There were three orders sought and made by the Court in this document. The first was that, pursuant to s 10(5)(b) of the Act, the restraining order make provision for the meeting the reasonable legal expenses of Chen by way of a sum agreed at $275,000 to be paid out of the property specified in Part Four of the schedule to Mr Rigg. The second order sought was that, subject to the first order, the interests of Chen in the property specified in the schedule be forfeited to, and vest in, the Crown. The third order was that the application for a proceeds assessment order be dismissed.
The Court was asked to note that in consideration of the orders being made, Chen released the Crown and the Commission from any claim in damages in consequence of the making of the restraining order and agreed not to make any application seeking the exclusion of any property or interests under ss 25 and 26 of the Act. The Court was also asked to note that the sum of $250,000 being paid to Mr Rigg was the same as sums referred to in orders sought on the same date in respect of the interests in property of Jun Chen and the applicants, Gang He and Jing He.
The next set of orders sought by the parties and made by the Court related to the property of Jun Chen. Subject to the payment of a specified sum of money to Mr Rigg as provision for meeting the reasonable legal expenses of Chen and the payment of a sum agreed as costs of the Commission, the interests of Chen set out in property specified in the schedule to the order was forfeited and vested in the Crown. The application for an assets forfeiture order was dismissed.
Consent orders were sought by the parties and made by the Court in relation to the property of Jian Guo Du, Li Hua Du and Cindy Chak. In each case an order was made forfeiting to, and vesting in, the Crown the interest of the relevant person in property set out in the schedule to the consent order.
In respect of the property of the applicant Gang He, two orders were sought by the parties and made by the Court. They were:
3.Pursuant to section 10(5)(b) of the Act the restraining order make provision for meeting the reasonable legal expenses of Chik Chen (also known as Jack Chen) agreed at $37,000 out of the property specified in the Schedule hereto such sum to be paid to Jack Rigg Solicitor.
4Subject to Order 3 above pursuant to section 22 of the Act the interest in property of the Defendant [Gang He] in the property specified in the Schedule hereto be forfeited to, and vest in, the Crown.
The schedule to the order referred to the funds in the Citibank account.
The Court was asked to note that in consideration of the orders being made, Gang He released the Crown and the Commission from any claim in damages in consequence of making of the restraining order and agreed not to make any applications under ss25 and 26 of the Act. (Those sections are concerned with the exclusion of any property or interest in property from an assets forfeiture order.)
In respect of Jing He, three orders were sought by the parties and made by the Court. They were:
1Pursuant to section 10 of the Criminal Assets Recovery Act 1990 (“the Act”) the interest of Jing He (“the Defendant”) in the property specified in the Schedule hereto be restrained (“the restraining order”).
2Pursuant to section 10(5)(b) of the Act the restraining order make provision for meeting the reasonable legal expenses of Chik Chen (also known as Jack Chen) agreed at $88,000 out of the property specified in the Schedule hereto such sum to be paid to Jack Rigg, Solicitor.
3Subject to Order 2 above pursuant to section 22 of the Act the interest in property of the Defendant in the property specified in the Schedule hereto be forfeited to, and vest in, the Crown.
The schedule to the order referred to the funds in the Citibank account.
The Court was asked to note that in consideration of the orders being made, Jing He released the Crown and the Commission from any claim in damages in consequence of the making of the restraining order and agreed not to make any application under ss25 and 26 of the Act.
As a consequence of the consent orders made by the Court on 15 September 2000, the proceedings between the Commission and Chen effectively came to an end. The Public Trustee, acting under the power conferred on it by s 23(1) of the Act, took possession of the forfeited property, including the funds in the Citibank account. On 18 October 2000, the Public Trustee received a bank cheque for $179,162.63 representing the funds in the Citibank account. From this amount, the sum of $125,000 was paid to Mr Rigg, $4,479.07 was paid to the Public Trustee as commission, $107.50 was transferred to pay Financial Institutions Duty and $447.91 transferred to pay Goods and Services Tax.
Mr Rigg has retained in his trust account the sum of $125,000 and has given an undertaking to the Court not to deal with that money until the present proceedings are determined. Notwithstanding that the Public Trustee had been authorised to transfer the balance of the forfeited money, being $49,128.15, to the Treasury, it has retained the sum and given an undertaking not to deal with it pending the resolution of the present matter.
The applications to set aside the orders
The foundation for the present applications are affidavits made by the applicants to the effect that they never instructed Mr Rigg to act on their behalf in relation to the proceedings taken by the Commission. They assert that they have never had any dealings with Mr Rigg and have never communicated with him either directly or indirectly. In particular, they state that they had no knowledge of the proceedings in this Court on 15 September 2000 and deny that they ever instructed Mr Rigg to enter into the consent orders on their behalf.
The applicants dispute that Chen had any interest in the funds that were forfeited. They have made affidavits in connection with the present proceedings as to the source of the funds contained in the Citibank account and the nature of transactions involving that account. The uncontroverted evidence before me is that a significant part of those funds was deposited in, or transferred to, that account by Jing He and was derived from her legitimate business ventures in China. There was unchallenged evidence that in March 2000 Jing He transferred over $122,000 to that account from a Citibank account she maintained in China.
Gang He accepts that on 17 April 2000 he deposited into the Citibank account the sum of $89,382.36 that he obtained from money held in an account with FIMAT in the name of Chen. Gang He acknowledges that he withdrew that money under a power of attorney granted to him by Chen. His evidence was that he and another person named Bo Li invested the sum of $100,000 in that account. He states that he contributed the sum of $75,000 and the money was to be used for trading on foreign currencies. He gave evidence that the money was invested in the name of Chen on the advice of an employee of FIMAT who said there would be tax benefits obtained from Chen’s status as the holder of a Hong Kong Resident Identification Card.
Jing He has sworn an affidavit in which she states that she does not know Chen. Gang He in an affidavit swore that he had never spoken to Chen about the Citibank account and, in particular, had never spoken to him about the consent orders made by the Court. Neither of the applicants was cross-examined on this evidence nor was it suggested to them that it was false.
Mr Rigg gave evidence before me. He does not suggest that he ever received instructions directly from either of the applicants in respect of the proceedings taken by the Commission. His evidence is that he took instructions with respect to settling these proceedings from Chen. However, Mr Rigg is adamant that he did have dealings with a person, whom he believes to be the applicant Gang He, in connection with the preparation and execution of a power of attorney granted by Chen.

It was Mr Rigg’s evidence that on about 11 April 2000, shortly after he received instructions to appear for Chen following his arrest for the importation of heroin into Australia, he was instructed by Chen to prepare a power of attorney in favour of a man named Gang He. As a result Mr Rigg met a person, whom he believes to be the male applicant, at his office and, using his clerk as an interpreter, explained the nature and purposes of a power of attorney to this person. Mr Rigg says that on about 14 April 2000 a power of attorney executed by Chen was registered by his clerk and a copy given to the person whom Mr Rigg believes was Gang He.
Gang He denies that he ever attended Mr Rigg’s office or that he received the power of attorney from an employee of Mr Rigg. He maintains that he received it from the person Bo Li shortly before they attended the offices of FIMAT to withdraw the money from the account in the name of Chen.
A copy of the power of attorney is in evidence before me. The certificate under s 163F of the Conveyancing Act, which is printed on the form, has been made by an employee of Mr Rigg’s office. The power of attorney was registered in the Land Titles Office on 14 April 2000.
I am unable to determine whether Gang He attended at Mr Rigg’s office in connection with the power of attorney. Persons who might have given evidence on this issue, such as Bo Li or Mr Rigg’s clerk have not been called even though it appears that they may have been available and able to give evidence had they been asked to do so. But I do not believe that it is necessary for me to resolve the issue.
I accept that, following the arrest of Chen, Mr Rigg took instructions from both Chen and those intimately connected with him and his illegal activities concerning the aftermath of his arrest and including the transfer of money out of accounts operated by Chen. These instructions included the making of a power of attorney by Chen in favour of a person named Gang He so that money could be transferred from an account in the name of Chen to an account in the name of Gang He. For the purpose of resolving the issues raised by these applications, it does not seem to me to matter greatly whether the person who attended at Mr Rigg’s office in connection with the power of attorney was the applicant or not.
I find that at the time Mr Rigg attended the Commission’s offices to settle the proceedings before this Court, he believed that an account operated by the applicants had been used for the deposit of money taken from an account in the name of Chen by the use of the power of attorney which Mr Rigg had prepared on the instructions of Chen or those involved with him.
When asked during cross-examination by Mr Mackey, the solicitor appearing for the applicants, what he knew about the Citibank account at the time he took instructions from Chen, Mr Rigg replied:
I knew that money was going to be transferred from Jackie Chen’s account into the Citibank account of Kenny Noon’s boy Gang He which had been used for money laundering. I warned them not to do it but they insisted on a power of attorney to do it. I read the affidavit of your client. I’m now convinced that my judgment was correct.
Mr Rigg’s evidence was that he received instructions in respect of the proceedings taken by the Commission from “the principal, Chen, and his wife”. When during his evidence it was put to him that he had never received instructions from Jing He in relation to the filing of a notice of appearance for her, Mr Rigg said:
I did not receive instructions from her directly. I had received instructions from the principal, from June Do and Lou, that I was to act for Gang He and his sister in regard to settling this matter. And its not unusual to settle matters for all the applicants, or all the respondents rather, in matters of this nature without consulting them personally. I settled the matter for Cindy Chak who I ever saw once. I never saw June Do’s brothers or sister-in-law at all. I saw Gary (sic) He in regards to what I have already told you and I never saw his sister.
It was Mr Rigg’s evidence that, after he had agreed to terms of settlement with the Commission, he was told that there was no notice of appearance on the Commission’s file for either of the applicants. He said that he then took instructions from Chen and was told that he was still acting for everybody. He then told the Commission that he was acting for the applicants.
It seems clear to me that after the arrest of Chen, Mr Rigg received information and instructions from Chen, his wife and other persons in respect of both the offence alleged against Chen and the disposition of Chen’s assets. Mr Rigg stated in evidence that he viewed Chen as the principal or as “the drug boss”. I accept that Mr Rigg believed that Chen was the guiding force behind the actions taken by others after his arrest including the applicant Gang He’s use of the power of attorney to transfer the FIMAT money into the Citibank account.
For the purpose of these proceedings, I am prepared to find that Mr Rigg believed that he was instructed to act for all persons involved in the Commission’s proceedings when settling those proceedings to the advantage of Chen. However, while he may have believed that Chen had a beneficial interest in some of the money in the Citbank account, he did not know the extent of that interest or whether either of the applicants had any legitimate interest in the funds held in that account. Yet he knew, or should have known, from what was contained in the Fourth Amended Summons that the account contained considerably more money than that derived from the FIMAT account and that funds had been deposited in that account two months after Chen’s arrest. There is no evidence that he made any inquiry with Chen or any other person as to the status of the balance of the funds in the account at the time the account was placed under the restraining order. He also knew that he was to receive a substantial amount of the funds in the Citibank account to cover legal expenses for Chen for whom he was to continue to act.
The Court is asked to set aside the orders
It was not in dispute before me that I have a discretion to set aside the orders made by this Court notwithstanding that they have been entered. However, the basis upon which that discretion arose was never clearly identified by the parties.
Mr Mackey relied principally upon the judgment of Santow J in Wentworth v Wentworth [1999] NSWSC 638 in which his Honour reviewed the principles relating to the setting aside of judgments and orders. However, it should be noted that the judgment in that case had not been entered.
It was submitted by Mr Mackey that the circumstance giving rise to the exercise of discretion in his client’s favour was that the Court had acted upon a misapprehension as to facts and law when making the order and that misapprehension could not be attributed solely to the applicants’ neglect or default. In support of that submission he relied upon statements of Mason CJ in Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300 at 302, a case dealing with an application to reopen a judgment which had not been entered. The misapprehension under which the Court acted in the present case was said to be that Mr Rigg had acted as if he had authority to appear for the applicants and to settle the proceedings on the applicants’ behalf when he did not in fact have such authority.
It was also submitted by Mr Mackey that in effect the orders were made ex parte because the applicants had no notice of the proceedings in which the orders were made and, therefore, the court had power to intervene. Reference was made to the judgment of Gibb J in Bailey v Marinoff (1971) 125 CLR 529. Mr Mackey submitted that to allow the orders to remain would be unjust and the Court should not permit its processes to bring about injustice.
It was further argued by Mr Mackey that the orders were invalid because there was no information in the affidavit filed in support of the Fourth Amended Summons that could sustain the orders made. In this respect Mr Mackey relied upon various sections of the Act relevant to the Court’s power to make forfeiture orders. In particular Mr Mackey argued that, even if there may have been a basis for the forfeiture of the money that was derived from the FIMAT account, there was nothing to support the forfeiture of the balance of the funds in the Citibank account. Mr Mackey submitted that on the undisputed evidence now before the Court, there were funds forfeited which legitimately belonged to Jing He and which would have been exempted from the forfeiture order had she not been deprived of the opportunity to make an application to the Court under the provisions of the Act.
Mr Temby QC, who appeared with Mr Singleton for the Commission, drew my attention to the decision in Logwon Pty Ltd v Warringah Shire Council, above, but contended that there was no basis upon which the agreement between the Commission and the applicants could be set aside. He submitted that the discretion to set aside an order should only be exercised in exceptional cases and that this was not a case where it would be appropriate to exercise the power. In particular, he stressed the effect of setting aside the orders on the Commission and the Public Trustee, which, it was said, were innocent parties in the dispute between Mr Rigg and the applicants.
The Court’s jurisdiction to set aside the orders
In Harvey v Phillips (1956) 95 CLR 235 the appellant sought to have a consent judgment set aside on the basis that her action had been settled by her counsel without her knowledge or authority. The appeal was dismissed because the High Court held that counsel had signed the terms of settlement on the express authority of the appellant although she may have been temporarily overborne and induced by her legal representatives to agree to the settlement.
In its judgment the Court considered the power of a court to set aside a consent order. The Court stated at 242-243:
But in the circumstances of this case it does not appear to us that the court possesses a discretion to set aside the compromise or to intercept the formal entry of judgment. It is not a case of misapprehension or mistake made by counsel in consenting to an order or settlement: cf. Hickman v. Berens (1895) 2 Ch. 638. It is not a case where the assistance of the court is sought or invoked to carry a compromise into effect which otherwise could not be enforced by the party relying upon it. In such a case the assistance may be refused on grounds not necessarily sufficient to invalidate a simple contract. It is not a case where a compromise has been agreed upon by counsel acting only in pursuance of his apparent or implied authority from his client but, owing to a mistake or misapprehension, in opposition to his client's instructions or in excess of some limitation that has been expressly placed on his authority. In such a case, at all events until the judgment or order embodying the compromise has been perfected, an authority exists in the court to refuse to give effect to or act upon the compromise and perhaps to set it aside”; see Neale v. Gordon Lennox (1902) A.C. 465, particularly at pp. 469, 470, 473; Shepherd v. Robinson (1919) 1 K.B. 474; Little v. Spreadbury (1910) 2 K.B. 658, at p. 662, per Bray J.; Hansen v. Marco Engineering Co. (Aust.) Pty. Ltd. (1948) V.L.R. 198, at pp. 201-203, per Fullagar J.; Schwarz v. Clements (1944) 171 L.T. 305, at p. 309. In the course of the judgment in the case of Sheonandan Prasad Singh v. Abdul Fateh Mohammad Reza (1935) 62 Ind. App. 196, already cited, Lord Atkin said that these cases qualified the implied authority of counsel to compromise an action. “In the first instance the authority is an actual authority implied from the employment as counsel. It may, however, be withdrawn or limited by the client; in such a case the actual authority is destroyed or restricted, and the other party if in ignorance of the limitation could only rely upon ostensible authority. In this particular class of contract, however, the possibility of successfully alleging ostensible authority has been much restricted by the authorities such as Neale v. Gordon Lennox (1902) A.C. 465 and Shepherd v. Robinson (1919) 1 K.B. 474, which make it plain that if in fact counsel has had his authority withdrawn or restricted the Courts will not feel bound to enforce a compromise made by him contrary to the restriction, even though the lack of actual authority is not known to the other party" (1935) 62 Ind. App., at pp. 199, 200. It is said that this power of the courts is to be exercised as a matter of discretion when in the circumstances of the case to allow the compromise to stand would involve injustice in view of the restriction on counsel's authority. See Halsbury's Laws of England, vol. 3, 3rd ed., p. 51; 2nd ed., vol. 2, pp. 526, 527. But in the case of a compromise which is made within the actual as well as apparent authority of counsel a court does not appear to possess a discretion to rescind it or set it aside. The question whether the compromise is to be set aside depends upon the existence of a ground which would suffice to render a simple contract void or voidable or to entitle the party to equitable relief against it, grounds for example such as illegality, misrepresentation, non-disclosure of a material fact where disclosure is required, duress, mistake, undue influence, abuse of confidence or the like…..
The power of the court to vary or set aside consent orders was further considered in Paino v Hofbauer (1988) 13 NSWLR 193, a case concerned with a consent judgment that had been entered by the Court. The terms of settlement provided for a verdict and judgment in favour of the appellants against the respondents in the sum of $750,000, the execution of which judgment was to be stayed provided that the respondents made payments of instalments at times stipulated in the judgment. The respondents failed to meet their obligations and applied for an extension of time for the payment of instalments under Pt 2 r 3 of the Supreme Court Rules. A judge of this Court granted the extension of time by varying the original orders. On appeal that decision was reversed.
The Court of Appeal considered whether the Court had any power to vary the orders originally made. McHugh JA (as he then was), with whom Samuels JA agreed, said:
English courts have gone so far as to say that a court will only interfere with a consent order based on a contract on the grounds that it interferes with any other contract: Siebe Gorman & Co Ltd v Pneupac Ltd [1982] 1 WLR 185; [1982] 1 All ER 377. In Harvey v Phillips (1956) 96 CLR 235 the High Court (at 244) approved the statement of Lindley LJ in Huddersfield Banking Co Ltd v Henry Lister & Son Ltd [1895] 2 Ch 273 at 280, where his Lordship said:
“… To my mind, the only question is whether the agreement upon which the consent order was based can be invalidated or not. Of course, if that agreement cannot be invalidated the consent order is good.”
The issue in Harvey v Phillips, and in General Credits Ltd v Ebsworth[1986] 2 Qd R 162, which applied it, was whether a consent order based on a compromise agreement could be set aside. The issue in the present case is different. The Court does have a discretion. Moreover, I am not prepared to adopt the English approach to consent orders based on contracts. The discretion conferred by Pt 2, r 3, is not to be equated with the extent of the Court's powers to vary or set aside contracts.
Nevertheless, when a party asks that a consent order based on a contract should be set aside or varied and the underlying contract could not be set aside or varied, the case would need to be exceptional before the Court would exercise its discretion in favour of an applicant…..
Clarke JA, who generally agreed with McHugh JA stated (at 200):
In England there is a line of authority in support of the proposition that a consent order should not be set aside unless grounds which would entitle the court to set aside or vary a contract are shown: Purcell v F C Trigell Ltd [1971] 1 QB 358; National Benzole Co Ltd v Gooch [1961] 1 WLR 1489; [1961] 3 All ER 1097; Siebe Gorman & Co Ltd v Pneupac Ltd [1982] 1 WLR 185; [1982] 1 All ER 377.
Some of the judicial statements in these cases, and earlier ones referred to in them, are sometimes relied upon in support of an argument that the court is not empowered to set aside or vary any consent order. Or, at least, that if there is power then the court should not exercise its discretion in favour of a party who seeks an order that the order be varied or set aside.
But in Siebe Gorman & Co Ltd v Pneupac Ltd, Lord Denning MR observed there was a critical distinction between consent orders which recorded a contract between the parties and those orders which meant no more than that one party was not objecting. In respect of the former Lord Denning said (at 189; 380): “the court will only interfere with such an order on the same grounds as it would with any other contract.”
There is also a line of authority in Australia to the effect that consent orders embodying a compromise agreement between the parties should only be set aside if the underlying agreement might be invalidated: Harvey v Phillips (1956) 95 CLR 235 at 243-244 and General Credits Ltd v Ebsworth [1986] 2 Qd R 162 at 165. These authorities are in point in the present case.
In Paino v Hofbauer the respondents did not seek to set aside the original order and the Court of Appeal came to the view that it should not exercise its discretion to allow the variation sought.
In Lewis v Combell Constructions Pty Ltd (1989) 18 NSWLR 528 Finlay J considered whether to enter judgment in a case where the defendant had accepted an offer of compromise made by mistake by the plaintiff’s solicitor in a situation where a reasonable solicitor for the defendant would have realised that there had been a mistake. His Honour came to the view that the interests of justice required that the plaintiff be relieved of the consequences of the mistake by his solicitor and directed that judgment not be entered in terms of the offer of compromise. Finlay J stated (at 538):
What I perceive to be the relevant principle in the category of cases into which this matter falls is that in an appropriate case, especially before judgment is made, the overriding interests of justice and the court's concern over its own procedure may mean that the court will not enforce a contract. Of course, contracts made during the court's process to settle, if they are bona fide and not affected by any error, will normally be enforced. But I repeat my previous observation that whenever parties agree to a compromise of litigation they do so subject to the procedures of the court which include the possibility that the court may consider it unjust to enforce the terms of settlement or that it is in the interests of justice that the matter proceed to trial.
In Logwon Pty Ltd v Warringah Shire Council, above, the consent orders had been entered by the Land and Environment Court and the appellant sought to have them set aside on the basis of mistake. Sheller JA, with whom the other members of the Court generally agreed, stated:
A superior court's inherent jurisdiction to uphold, protect and fulfil its function by ensuring that justice is administered according to law and in an effective manner in my opinion enables it in the absence of a statutory limitation to discharge or revoke a consent order made by it giving effect to a compromise of proceedings before the court and entered into by a party under a mistake. I think this is sensible and consistent with the court's jurisdiction before judgment is filed or to correct slips or to right procedural unfairness where orders are made ex parte.
The Court dismissed an appeal against the refusal of a Judge of the Land and Environment Court to set aside the consent orders in question on the basis that there was no mistake made which would have justified the Court in setting aside the agreements on which the orders were based.

The principles, which govern the exercise of the Court’s power to set aside a consent order based upon a compromise reached between the parties, can be summarised shortly. If the order has not been entered, the Court may set aside the compromise or may refuse to enforce the agreement by declining to make an order giving effect to it. In such a case, the Court has a general discretion derived from its power to ensure that its procedures are not a source of injustice. If the consent order has been entered, the Court has a discretion to set the order aside but, unless there is a ground upon which the compromise between the parties could be set aside, the discretion would only be exercised in an exceptional case.
Is there a ground to set aside the agreement between the Commission and the applicants?
Mr Temby submitted on behalf of the Commission that there was no basis upon which the agreement between the Commission and Mr Rigg could be set aside. In my view, that submission cannot be accepted.
The validity of the agreement entered into by Mr Rigg on behalf of the applicants depends upon a consideration of the circumstances in which an agent can bind a principal. Mr Rigg could only enter into an agreement with the Commission on behalf of the applicants if he had authority to do so. Even if he had authority to act for Gang He, he could not proceed in the name of both applicants; Hood v Phillips [1843] 6 Beav 176 at 178.
In considering the status of the contract that underlies the consent orders in this case, it should be borne in mind that the agreement entered into by Mr Rigg related to all of the funds in the Citibank account, not just those funds that were obtained from the FIMAT account by the use of the power of attorney. It was clear from the affidavit filed in support of the Fourth Amended Summons that a substantial sum of money was deposited into the Citibank account on 1 June 2000, some two months after Chen was arrested. There appears to have been nothing before the Commission to indicate that this sum of money was in some way connected with Chen’s criminal activities. Nor did Mr Rigg in his evidence suggest that he understood all the money in that account to have been derived from Chen.
It does not appear to be in dispute that Mr Rigg had no actual authority from the applicants to enter into the agreement with the Commission on their behalf. He believed that his authority came from Chen or those who spoke on his behalf. However, the evidence before me is that Chen had no actual authority to enter into an agreement in relation to the funds in the Citibank account. Both applicants gave evidence to this effect and they were not challenged on that matter. Chen was not called to give evidence before me.
Nor had the applicants done anything that would clothe Chen with ostensible authority to act on their behalf in respect of that account. The use of the power of attorney by Gang He to transfer money from the FIMAT account to the Citibank account could not, in my view, give rise to any authority in Chen to deal with the money in that account as if it were his own. It certainly could not authorise Chen to dispose of the whole of the funds in the Citibank account.
The Commission appears to have acted on the basis that Mr Rigg had authority to act for the applicants derived from instructions he received from Chen. Even accepting that Mr Rigg believed that Chen did have authority to give those instructions based upon what he had been told by Chen and others, he received no representation either by conduct or orally from the applicants that would confirm that authority and give Chen ostensible authority to act on their behalf.
But, even if it were accepted that Chen had ostensible authority to bind the applicants, Mr Rigg obtained his authority to act as agent for the applicants only from Chen. The Commission could not uphold the agreement with the applicants relying upon the ostensible authority of Mr Rigg to act for the applicants where that authority was based upon the ostensible authority of Chen: Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd (1975) 133 CLR 72 at 80.
In my view as Mr Rigg had no authority to act for the applicants or enter into an agreement with the Commission on their behalf in respect of the forfeiture of the funds in the Citibank account, there was in fact no agreement between the Commission and the applicants in terms of the consent orders made by the Court. Because the agreement underlying the consent orders can be set aside, the Court has power to set aside the orders made as a result of that agreement.
Should the discretion be exercised?
The submissions before me proceeded on the basis that the Court was being asked to exercise a general discretion to set aside an order and that it would only do so in an exceptional case. I accept that generally the public interest in maintaining the finality of litigation will require that the circumstances must be exceptional before a court would reopen proceedings after its judgment or order had been perfected. It has been held that the power should “be exercised with great caution”: Wentworth v Woollahra Municipal Council (No 2) (1982) 149 CLR 672 at 684. But in the case of a consent order derived from a compromise between the parties which itself can be set aside, I do not believe that the discretion is so constrained. However, I am prepared to determine the matter in accordance with the way in which it was argued before me because it seems to me that the result must be the same whichever view is taken of the extent of the Court’s discretion to intervene.
The most significant matter which suggests to my mind that the orders should be set aside is that the Court is now aware that the orders were not founded on any real agreement between the applicants and the Commission. Yet, as a result of the orders, property of the applicants was forfeited without the applicants having the opportunity to be heard in the proceedings commenced by the Commission. The applicants did nothing to bring about that result and, had the proceedings not been cut short by the agreement reached between the Commission and Mr Rigg, there is a real likelihood that some of the funds would have been exempted from the forfeiture order.
There is no doubt that there were funds in the Citibank account which were the property of Jing He and there is nothing which suggests that they were in any way connected with the activities of Chen. But those funds have been forfeited even though, until the consent order was made, Jing He had never been made a party to the proceedings. That seems to me to be such an unjust result of the proceedings taken in this Court that I cannot in good conscience allow the orders to remain. There is nothing in her conduct that would militate against the exercise of the Court’s discretion in her favour.
I appreciate the strength of the matters upon which both the Commission and the Public Trustee rely to preserve the orders. The orders under consideration were made as part of a package of orders designed to compromise the proceedings taken by the Commission against Chen. If the orders relating to the applicants had not been made, the Commission would not have consented to the other orders made. None of the other orders are to be set aside. The Commission cannot be restored to the position in which it was before the orders were made.
The orders have been acted upon by an innocent third party, the Public Trustee, which has expended some of the funds in carrying out the orders of the Court. This is a very significant consideration and in many, if not most, cases would be an insurmountable obstacle in the way of an applicant seeking to have an order set aside. But in my view it cannot stand in the way of this Court at least granting partial relief against the injustice resulting from the forfeiture of the applicants’ property. I am not persuaded that nothing can be done to redress any prejudice to the Public Trustee. But in any event the loss which might be suffered by it, if the orders are set aside, is very significantly less than that which the applicants might suffer if the orders were allowed to remain.
It was argued by Mr Temby that the applicants have a remedy against Mr Rigg to recover the loss occasioned to them, that loss being of a purely financial nature and one that can be readily quantified. Although there is some force in this submission and I was initially attracted to it, on reflection I do not believe it is fair or just to require the applicants to seek a remedy from another court or in other proceedings to redress the injustice that has arisen from the very proceedings with which I am concerned. In any event, it seems to me to be equally open to the Commission and, perhaps, the Public Trustee to take proceedings against Mr Rigg in an attempt to recover any loss occasioned to them by his failure to obtain instructions from the applicants.
I cannot rectify the injustice occasioned to Jing He unless I set aside both consent orders because each of them ordered the forfeiture of the funds in the Citibank account and vested them in the Crown. If it had been open to me to do so, I doubt that I would have exercised my discretion in favour of Gang He alone. I do not accept his evidence in relation to the source of funds in the FIMAT account, at least not to the extent of being persuaded by him that the funds deposited in the Citibank account through the use of the power of attorney were not “illegally acquired property” as that term is defined in the Act. If the consent orders had not been made and if, relying only on the evidence before me, Gang He had sought an order under the Act to prevent the forfeiture of the funds obtained by him from the FIMAT account, he would have failed in that endeavour. This would be so even if I were to disregard Mr Rigg’s evidence as to the instructions he received from Chen and others with respect to the preparation of the power of attorney.
It is not only the fact that the power of attorney was used by Gang He within one week of the arrest of Chen that leads me to doubt that the funds in the FIMAT account belonged to the applicant. I am also unimpressed by the applicant’s explanation for why those funds were in the name of Chen if in truth they belonged to the applicant and Bo Li. Further, I am dubious about his explanations to account for the large amounts of money to which he had access in early 2000, having regard to the legitimate sources of income he had available to him at that time.
Although I believe that the fundamental defect in the agreement upon which the Court’s orders were based gives rise to such injustice that it is appropriate to set aside the consent orders, I am not prepared to make orders which would have the effect of returning the proceeds of the FIMAT account to the applicants. Before finally determining this matter I will hear further submissions as to the appropriate orders I should make as a consequence of setting aside the consent orders and as to the costs of these proceedings.
During the course of this judgment I have refrained from making any comment about the appropriateness or otherwise of the conduct of Mr Rigg in signing a notice of appearance and a consent order forfeiting the property of a person without receiving instructions from that person. I have taken this course because it may be that other proceedings will be taken against Mr Rigg arising from the agreement which he brokered with the Commission and I do not wish to say anything which might possibly impact upon those proceedings. However, my silence in this regard should not be taken in any way to suggest that I find his conduct unremarkable or that I condone it.

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LAST UPDATED: 09/05/2001

[2001] NSWSC 331

4 May 2001