Tang v Wu

[2013] NSWSC 583

Supreme Court

New South Wales

Medium Neutral Citation:	Tang v Wu [2013] NSWSC 583
Hearing dates:	30 & 31 January and 14 & 15 May 2013
Decision date:	16 May 2013
Jurisdiction:	Equity Division - Expedition List
Before:	Pembroke J
Decision:	See paragraph [67]
Catchwords:	CONTRACT - enforcement of settlement agreement - no inability to comprehend terms - no duress or intimidation BARRISTER - no failure to advise - no negligence - no conflict in a real and practical sense
Category:	Principal judgment
Parties:	Jian Xun Wu - plaintiff Xiao Ping Wu - first defendant Xiaoling Wu - second defendant Pinsi Cui - third defendant George Lucarelli - cross-defendant
Representation:	Counsel: A M Gruzman - for the plaintiff Xiao Ping Wu - first defendant in person J M Patel - for the second and third defendants M R Elliott - for the cross-defendant Solicitors: Di Lizio & Associates - for the plaintiff
File Number(s):	2012/00236230

Judgment

Introduction

1. This is an application by the plaintiff to enforce an agreement entered into with the first, second and third defendants. The agreement is in writing and is dated 4 July 2012. It sets out the terms of settlement of earlier proceedings number 2010/44647. Pursuant to the agreement, the first defendant agreed to pay to the plaintiff by 5 October 2012 the sum of $200,000 in full and final satisfaction of all claims by him, including costs and interest. The second and third defendants agreed to guarantee the payment of that sum and also agreed to execute such documents and render such assistance as may be required to enable the first, second and third defendants to perform the agreement. This included signing all the documents as may be required to effect a sale of certain property in Hurstville.

1. The second and third defendants also agreed, pending payment of the sum of $200,000, to execute and deliver on or before 10 July 2012 a second mortgage in registrable form over the property. This was to be held by the plaintiff's solicitor in escrow pending performance of the agreement. The registrable mortgage was to secure the sum of $200,000 together with interest that may become payable under Section 100 of the Civil Procedure Act if payment of the sum of $200,000 was not made by 5 October 2012. The agreement also permitted the plaintiff to lodge a caveat over the property pending performance of the agreement.

Parties to the Agreement

1. The parties to the agreement were the plaintiff and the first, second and third defendants. The plaintiff and the first defendant were once in a de facto relationship. The second defendant is the brother of the first defendant and the third defendant is his wife. The plaintiff was once the registered proprietor of the Hurstville property and he and the first defendant once lived together in the property.

1. In due course, the relationship between the plaintiff and the first defendant dissolved and in August 2008, the plaintiff signed a transfer of the property to the second and third defendants. The validity of that transfer was the central issue in the earlier proceedings.

The Property & the Motive

1. At the time of the settlement agreement, the first and second defendants and their families lived under the same roof in the Hurstville property and were obviously close knit. There were four children who lived there, together with the three adults. The mother of the first and second defendants may possibly also have lived there but the evidence was not entirely clear.

1. The central issue in the earlier proceedings was whether the defendants had acted fraudulently towards the plaintiff so as to procure the transfer of his property to the second and third defendants. In this sense there was a symmetry of interest between all defendants. Each wanted to resist a finding of fraud. And all of them wanted the Hurstville property to be retained. The defendants had given effectively the same evidence to negate the allegation of fraud. The position in the earlier proceeding was that either the plaintiff was lying or the defendants were lying about the circumstances in which the transfer to the second and third defendants occurred.

1. The first and second defendants well understood that the court would find either that the plaintiff was lying about what happened or that the defendants were lying. They knew that the outcome of the litigation turned on who the court found was telling the truth. They also knew that if the first defendant in particular performed badly as a witness, that would be damaging for the defendants' case and make it more likely that the defendants would lose.

1. And of course they understood that if the defendants lost the case, the plaintiff's ownership of the Hurstville property would be returned to him and that he could compel all of the defendants and their children to leave the home. Not surprisingly, each of them regarded this as a nightmare scenario. I am satisfied that each of the defendants was desperate to avoid a finding that they had committed a fraud - with the attendant consequences that I have mentioned.

1. In addition, the first defendant also understood that if the plaintiff succeeded, she would be liable to pay his legal costs. Those costs were over $100,000 by the start of the hearing. She wished to avoid that happening. The same no doubt applies to the second and third defendants.

1. The first defendant was also aware at the time that the central question involved fraud and dishonesty which could amount to a criminal offence. She heard the trial judge state that the case was about an alleged fraud and that if dishonesty were discovered, the parties should not assume that the case would end there and that a criminal prosecution may follow. Further, the first defendant was aware that the defendants had previously attempted to have the plaintiff's claim struck out on the basis that it was unarguable and that that application had failed before an Associate Justice who said that the plaintiff's claim raised real questions for determination.

1. Finally I should mention as a preliminary matter, that contrary to much of the evidence that was addressed to me by the first defendant, there had been an attempt made to settle the earlier proceedings before the final negotiations culminating in the settlement agreement on 4 July 2013. In particular, the plaintiff had offered to accept $400,000 and the defendants had offered to pay $30,000.

Mrs Wu's Evidence - Earlier Proceedings

1. Unfortunately for the first defendant, she was by all accounts a very unsatisfactory witness in the earlier proceedings. There appears to be no real controversy about this. Indeed, she volunteered it herself at one stage. And, of course, the second defendant had been in court and had seen the first defendant giving evidence. He understood that the evidence given by his sister was worrying for him, her and his wife. His state of mind was relevant to his decision to agree to the terms of settlement.

1. The cross-defendant, who was the barrister retained by the solicitor for the three defendants in the earlier proceedings, gave evidence before me that his own state of mind was that the first defendant was an awful witness who breached every rule that he told her to observe. Some examples given by him of her damaging evidence were as follows:

(a)   A central plank in the defendants' case had apparently been to rely on the fact that a Mr Hugo Ahwee, who the cross-defendant thought had been an independent solicitor, had acted on the transfer to the plaintiff as if it were a normal bona fide conveyance. However, the cross-examination revealed that Mr Ahwee and the first defendant shared office space as far back as 2002; that the first defendant had undertaken conveyancing related tasks for Mr Ahwee and was familiar with conveyancing practice herself; and in particular knew how to get a transfer stamped, and registered; and that at the relevant time Mr Ahwee was the first defendant's tenant. Clearly the personal and professional relationship between Mr Ahwee and the first defendant was a significant matter which, when it emerged in cross-examination, caused concern to the cross-defendant.

(b)   The first defendant apparently gave evasive and ultimately contradictory evidence about that association with Mr Ahwee. At one stage, she said that she first met Mr Ahwee in 2005 when he took a lease of a unit owned by the first defendant in the World Tower. In fact this was not an accurate statement of the circumstances in which the relationship commenced.

(c)   The trial judge was evidently alive to the first defendant's inconsistent versions of this aspect of the evidence.

(d)   The first defendant apparently gave some evidence without appreciating its significance to the effect that she provided a fabricated cheque direction authority to Mr Ahwee. When she realised the significance of that answer, she retreated and suggested that she had simply rung Mr Ahwee to confirm the cheque directions with him.

(e)   The first defendant gave apparently inherently implausible evidence that it was the plaintiff who suggested that the second and third defendants retain Mr Ahwee, although no such suggestion had ever been made in any affidavit sworn by any of the defendants.

(f)   The first defendant was argumentative and at one point earned a rebuke from the trial judge for insulting the cross-examiner.

(g)   The first defendant was cross-examined about the preparation and whereabouts of her tax returns. She was indignant about this line of cross-examination but more importantly, her answers were evasive, offensive and contradictory.

(h)   The first defendant's evidence as to the identity of her accountant was also apparently evasive, offensive and contradictory, culminating in a situation where she was ordered to look in her wallet to find her accountant's business card.

1. These were all matters which affected the cross-defendant's assessment of the defendants' prospects of success or failure. They influenced his advice in relation to settlement. He added that the body language of the first defendant during cross-examination, which the transcript could not reveal, was indicative of a witness who was determined to advance her own case and who was unlikely to be treated as a witness of truth.

Settlement Negotiations

1. In the result, following the morning tea adjournment on 3 July 2012, the cross-defendant and counsel for the plaintiff commenced negotiations for the compromise of the earlier proceedings. The cross-defendant assembled all three defendants together with their solicitor in a room opposite the courtroom. Counsel who appeared in the proceedings before me on behalf of the second and third defendants may also have been present, although the evidence did not resolve this matter.

1. The cross-defendant said to all three defendants, but he focused his attention on the first defendant, words to the effect that he suggested that he apply for a short adjournment 'to see if we can settle the proceedings'. These remarks were also addressed to the defendants' solicitor.

1. The first defendant responded, 'Why? Why should we settle? I want to talk to the Judge.' The cross-defendant explained to her that her case was not going well. She complained that the cross-examiner had been digging up old ground. She was indignant that she was being asked about her accountant and her tax returns. She insisted that they had nothing to do with the case.

1. The cross-defendant said that he would not discuss her evidence but asked for instructions to talk to counsel for the plaintiff. The defendants' solicitor encouraged the defendants but especially the first defendant, to allow the cross-defendant to talk to counsel for the plaintiff. He was instructed to do so. Counsel for the plaintiff was confident of his position and the cross-defendant's impression was that he was more than usually buoyant, making observations about the first defendant's poor performance in the witness box and intimating that there was more to come. These are all the usual incidents of the conduct of litigation in this court.

1. An offer was made for the payment of $355,000 inclusive of costs to the plaintiff. The cross-defendant relayed that offer to the first defendant in the presence of the defendants' solicitor. The offer was rejected. The cross-defendant was asked to suggest a number but resisted, saying that 'only you know what you can afford. All I can say is that it has to be a realistic figure as the plaintiff has spent over $100,000 in costs so far so that must be your floor'.

1. The first defendant then said, 'What if I do not offer anything' to which the cross-defendant replied, in words to the effect, 'if you do not settle this case then that is up to you but please listen to what may happen. If you do not win, there will be a finding of fraud against you. Do you know what that will mean? It will mean that you may not get another loan or [may] have problems getting insurance. You will probably lose the house and maybe Mr Tang (the plaintiff) will bankrupt you for the costs. The judge might even send the papers to the police. You've heard the judge. Fraud is a criminal offence.'

1. The cross-defendant then used a metaphor about Russian roulette and asked the first defendant the following question: 'Can you afford to lose this case? Even a 10 percent risk of losing everything is a huge risk for you. There must be some number which you can afford to offer to eliminate the risk. You can recover from this in two or three years time but if you lose, a fraud finding will be around your neck for life.' He then said that he was going to leave the first defendant with her solicitor to talk about it and he said that she should talk to her brother and sister-in-law about it. He added that if they were not prepared to make any offer, then he would press on. The cross-defendant left the first defendant and her solicitor alone in a room and went away. On his return the first defendant said, 'Offer Gruzman $150,000 total including all costs.' Counsel for the plaintiff responded with a final take it or leave it offer of $230,000 inclusive of costs. He added that the plaintiff wanted a second mortgage and caveat until he was paid.

1. The cross-defendant then returned to speak to his clients. The first defendant was now alone. The solicitor had left the room. The second and third defendants had been coming and going from the room but they were also now absent. He asked the first defendant where were her brother and sister-in-law to which she replied, 'They have gone home. They do not need to be here.' The cross-defendant said, 'But I would like them to be here' to which she simply replied, 'They have gone'.

1. She instructed the cross-defendant to put a counter offer of $175,000. That offer was rejected and a further offer was relayed by which the plaintiff would accept $200,000. The first defendant said that she would accept that further offer but she said, 'I need time to pay. I may have to sell the house.' It is pertinent to observe that she recognised the possible need to sell the house and that she referred, in the first person, to the need to sell it, although it was registered in the name of the second and third defendants. Her approach reflects the commonality of interests between the defendants. They were in it together; they each wanted to save the house; and all wanted to avoid a finding of fraud.

1. The solicitor for the defendants soon reappeared and the cross-defendant returned to his chambers with her and the first defendant. The second and third defendants had gone home. A typewritten draft of a settlement agreement was prepared by the cross-defendant's secretary. He went through it with the first defendant in the presence of the defendants' solicitor and explained each paragraph. He said to the first defendant, 'Do you understand these terms?' To which she replied, 'Yes'. He was satisfied that she understood the agreement and its essential components. He then asked her to sign a copy of the draft document to authorise him to send it to counsel for the plaintiff for his approval.

1. There then ensued some further negotiations between counsel for the plaintiff and the cross-defendant as a result of which handwritten changes were made to the draft document. The cross-defendant made those changes in an endeavour to improve the position of the defendants. He deleted the reference to the second and third defendants from paragraph 4 but informed the first defendant that the plaintiff wanted them to guarantee the sum of $200,000. He rightly explained in evidence that, as he perceived it, this worked for the benefit of the second and third defendants because it would give them a right of recoupment against the first defendant in the event that their guarantee was called upon.

1. He also said to the first defendant, 'Will your brother and sister-in-law agree to that? Will you ring and ask them?' To which she responded, 'I can sign it now and they can sign it tonight. There is no problem.' The first defendant then initialled the handwritten changes and the solicitor for the defendants also signed the document.

1. The matter was then mentioned before the judge at 4pm who adjourned the proceedings until the following morning to enable the second and third defendants to sign the document. The next morning the first defendant attended the chambers of the cross-defendant, handed him the terms of settlement signed by the second and third defendants and said that she had explained the document to them and they agreed to sign it. During the negotiations, the cross-defendant's observations of the first defendant were that she was at all times rational and that she displayed firm and shrewd negotiation skills. He believed that she was honest and intelligent. And there was no stage during the negotiations when he threatened to withdraw his services unless the first defendant settled the case.

1. For the reasons that I will further develop, I am quite satisfied that the first defendant fully understood the terms of settlement and executed the document for pragmatic commercial, personal and financial reasons, that affected both her and the second and third defendants. I am also satisfied, for reasons which I will later explain, that the second and third defendants were under no disability in their comprehension of the terms of settlement; that they understood the terms of settlement; and they also executed it for practical, commercial and financial reasons.

Mode of Instructions

1. I should make some observations about the agreed mode of communication and instruction between the cross-defendant and his clients. On being retained, the cross-defendant formed the impression from his first encounter with the defendants that the first defendant's command of the English language was superior to that of the other defendants. As he could not speak or understand Mandarin, he adopted the course, with the implicit agreement of all defendants, that he would speak to the first defendant and rely upon her to pass on his remarks to the second and third defendants. In this process, the solicitor for the defendants was also a participant. The evidence enables me to infer that she recognised the practical good sense in this approach.

1. I am satisfied that all of the defendants were comfortable with and approved this method of communication. This procedure by which the professional relationship was conducted was consensual. In fact, the second defendant's evidence was that he agreed that his sister would be responsible for communicating with the lawyers on his behalf and on behalf of his wife and that he trusted his sister to do so. The cross-defendant thus relied upon the first defendant's authority to speak on behalf of the second and third defendants. He had no reason to disbelieve her when she informed him that she had explained the terms of settlement to the second and third defendants.

Mrs Wu's Complaint

1. The first defendant's principal complaint is that she was coerced into the settlement agreement against her will. At various times, including as recently as this morning, she has used expressions such as 'threat' or 'intimidation'. Among other things, she says she was intimidated by the cross-examination to which she was exposed and blames the cross-defendant for not protecting her. She identified several particular matters of complaint, each of which I will shortly explain. However, I am satisfied that none of these matters, whether particular or general, affected her free will or her comprehension of what she was doing. None constituted a breach of duty by the cross-defendant. None amounted to a defence to the plaintiff's claim for specific performance. And none entitled her to recover damages from the cross-defendant.

1. I had an extensive opportunity to assess the first defendant during the four days of hearing and at a number of directions hearings, at all of which she represented herself with composure and confidence. I have no doubt that she is intelligent, quick thinking and astute. Unfortunately I am compelled to say that I formed the view that on a number of central issues she gave evidence that must be rejected. She had either convinced herself of a version of events that did not reflect what actually happened or she gave false evidence with the intention of advancing her own case regardless of the truth. The latter is in my view more likely.

1. In particular, I do not accept the first defendant's evidence that she misled her brother and did not tell the second and third defendants that the settlement agreement obliged them to guarantee the payment of $200,000 and to provide a mortgage of the property to the secure their guarantee. The following passage from the transcript illustrates my scepticism:

HIS HONOUR

Q Mrs Wu, you knew that the terms of settlement required you to pay $200,000?

A Yep, yep.

Q And you knew they required your brother and his wife to guarantee the $200,000?

A Yep.

Q And you knew that the terms of settlement required your brother and sister-in-law to give a mortgage, didn't you?

A Yeah, I know that.

Q They were the three elements, the three main elements of the terms of settlement, you knew that?

A I knew that.

Q When your brother said, 'Can you explain to me the terms of settlement? You know we do not understand English.' Do you seriously expect me to believe that you did not tell him those three simple elements that you understood?

A I told him that I have to pay the $200,000.

1. The first defendant took the terms of settlement to her brother and sister-in-law on the night of 3 July 2012. At that time, she knew and understood the terms of the document. She knew it contained paragraphs that affected and concerned the second and third defendants. She knew that the provision of security over the property was an essential component. Even before agreement was reached, she knew that 'she' might need to sell the house in which she lived with the second and third defendants. The relationship between her and her brother was close. It was a relationship where, in my assessment, it was inconceivable that either of them would try to trick or mislead the other. I do not accept that she failed to inform her brother and sister-in-law that a mortgage over the property was required. In any event, for reasons that I will later come to, the second defendant could read enough to recognise the term 'mortgage' and appreciate its significance in the document he signed.

1. At home on the night of 3 July 2012, the second defendant specifically asked the first defendant to explain the terms of settlement to him. She said that it was not a very hard task for her to explain the terms to her brother and sister-in-law in Mandarin. She also knew that her brother had given a mortgage before and understood what a mortgage was; and that she had expressly agreed with the cross-defendant that she would explain the terms of settlement to the second and third defendants and obtain their execution of the document.

1. The terms of settlement contained elements that were readily understood by the first and second defendants and readily capable of comprehension. They were not complicated. It was an easy task for the first defendant to translate the document. The relationship was close. She would not knowingly have deceived or harmed her brother and sister-in-law. She well knew that the terms of settlement directly affected them, at least in the sense that they would be liable to perform if she did not pay the sum of $200,000. And she knew that a sale of the property was always going to be a possible outcome of the terms of settlement.

1. I reject the first defendant's evidence that she did not explain the terms of settlement to her brother because he did not understand what mortgages were. This was untrue and, in my view, deliberately false. When she was reminded that the second defendant had provided a mortgage in the past, she changed her evidence in a manner that reflected poorly on her credit.

1. Ultimately, what the first defendant wants the court to do is to accept that she is now giving truthful evidence but that in July 2012 she misled her brother about an important matter. For reasons that I will further explain, it is not possible for me to be confident about the truth of the first defendant's evidence. It was characterised by self interest and desperation.

Particular Matters

1. The particular matters of which the first defendant complained as against the cross-defendant, related to a no case submission during the earlier proceedings and her entitlement to claim privilege against self incrimination. As to the first matter, the first defendant alleged that the cross-defendant did not tell her and did not explain why he withdrew the no case submission. This goes nowhere but in any event, I do not accept it. I prefer the evidence of the cross-defendant who said that he met with the defendants after court and explained to them that he had not pressed further with the application because, if it had been pressed, it would not have found favour with the trial judge and may have annoyed him. In fact, the first defendant accepted in cross-examination that the cross-defendant had given such an explanation.

1. Nor do I accept the first defendant's evidence that she asked the cross-defendant to renew the no case application. I prefer the evidence of the cross-defendant who says he did not receive any instructions to renew the application. In any event, it is a barrister's entitlement to refuse to make such an interlocutory application if he thinks that is in the best interests of his client. In the event that such an impasse cannot be resolved, the barrister should return his brief. No such events occurred and I do not think that there was any factual basis for this allegation.

1. The second matter concerned the privilege against self incrimination. There was nothing to this matter either. I do not accept the first defendant's evidence that the cross-defendant advised her, prior to her giving evidence, that there was no privilege against self incrimination. In fact, he explained in his evidence that he took the view, and so advised the first defendant, that it was not in her interests for him to seek to protect her by relying upon her privilege against self incrimination. He told her that it would only lead to an even greater likelihood of an adverse finding on credit against her. In relation to this issue, I find that the first defendant's evidence bears no resemblance to the reality of what occurred.

The Second Defendant

1. In some respects, the second defendant's evidence was even worse than that of the first defendant. I do not think that the second defendant had any intention of telling the truth, except where he thought it might assist him. I am satisfied that he was prepared to say anything that he thought might advance his case, whether in his affidavit or in the witness box. His affidavit was clearly a collaborative effort with the first defendant. I gained the impression that both the first and second defendants, but particularly the second defendant, did not fully respect the system of justice under which our courts operate. They paid only lip service to the overriding requirement for truth and honesty. I thought they treated the litigation as if it were some sort of 'contest', in which they could say anything which they thought might assist them, regardless of its truth or accuracy.

1. In particular, the second defendant was dissembling when challenged about the circumstances in which his affidavit was created. He was at pains to give the impression that he could not understand or read English. He gave evidence of a document in Mandarin, which was some kind of crib sheet, related to his English affidavit. He was able to identify which paragraphs of the affidavit corresponded with paragraphs in the Mandarin statement. This did not seem to be consistent with his inability to comprehend English.

1. The point was reinforced when I asked him to go to a particular paragraph of the Mandarin statement and to identify which paragraph corresponded to it in his English affidavit. He did so without difficulty. But when asked to continue the exercise after the morning tea adjournment, he had clearly appreciated that his conduct diminished the effect of his contention that he could not read or understand English. He said that he was not able to continue the exercise. He provided no intelligible explanation as to why he had been able to do it for one particular paragraph and not another. This was an example of several incidents where, it seemed to me, the second defendant inadvertently let slip that his English comprehension was better than he maintained.

1. He said that he could not read the statement of claim because it was in English and had no memory of anyone ever telling him what appeared in each paragraph of the statement of claim, yet in one of his affidavits, he affirmed that he admitted the chronology of events set out in the statement of claim in certain paragraphs.

1. He was not always consistent in his supposed ignorance of English. From time to time he made statements such as 'I know a little bit'. In the course of his evidence through an interpreter, I had many opportunities to observe what appeared to be his comprehension of the cross-examiner's question, even before the interpreter had translated the question. He agreed that he had been present during a conversation between the cross-defendant and the first defendant and heard the cross-defendant speaking with her about the desirability of a compromise of the proceedings. This conversation took place in English. Although at one stage the second defendant acknowledged that he recalled the discussion and what had been said, when confronted in the witness box, he contended that he did not hear the conversation. Further, from time to time I observed him appearing to read documents in English, appearing to run his finger along the lines of English documents, paying attention to the words in English and even at one stage correcting the interpreter.

1. Finally, when I made a remark to the cross-defendant during the course of his evidence which was intended to be light hearted, the second defendant clearly appeared to comprehend what I had said and to follow the exchange, smiling at what transpired between the witness and me. All in all, I found the second defendant to be evasive and dishonest in the witness box. His English may not have been perfect but it was distinctly better than he was prepared to concede. From time to time I thought the only useful purpose served by the presence of the interpreter was to give him additional time to consider the questions put by the cross-examiner.

1. Not only do I have no confidence in the second defendant's evidence but his evasion and mendacity in doing so served to reinforce my conclusion that the critical factual question should be determined against him. I am satisfied that he understood the terms of settlement which he signed and that he well knew that they obliged him and his wife to guarantee the payment of $200,000 and to provide a second mortgage of the property to the plaintiff to secure that payment.

Third Defendant

1. I should mention that the third defendant, although alive and well and apparently present in court, did not give evidence. She was unwilling to support the contention that the terms of settlement were not explained to her or that she did not understand what she had signed. It is clear that any evidence she could have given would not have assisted her case or that of the first and second defendants. There is no proper evidentiary basis upon which I can conclude that she has discharged the burden of proof that she carries as a cross-claimant.

Liability

1. For those reasons, there is no factual basis for the defences of the first, second and third defendants. The plaintiff is entitled to an order requiring the specific performance of the terms of settlement.

1. Equally there is no sound factual basis for the cross-claim by the first defendant. There was simply no negligence, or other breach of duty by the cross-defendant, either in relation to his conduct during the hearing in connection with the no case submission, or in his advice and conduct in connection with the first defendant's right to claim privilege against self-incrimination. Nor was there any breach of duty in the cross-defendant's advice to the first defendant about the practical and financial consequences to her if she did not agree to settle the earlier proceedings. And the first defendant's allegation that the cross-defendant is liable for negotiating a compromise that he knew was not in her interests is a sad reflection on the first defendant's own integrity. There is no factual basis for it. Having regard to the evidence that has been presented to me, the settlement was reasonable. The first defendant's cross-claim should be dismissed.

1. The cross-claim by the second and third defendants should also be dismissed. Although the pleaded case was confused and confusing, the essential complaint seemed to be that the cross-defendant did not recognise that there was a conflict of interest between the first defendant on the one hand and the second and third defendants on the other. It was alleged that he should have advised them not to settle on the terms of the agreement that was signed.

1. I have already explained the practical reality on which the cross-defendant acted. In substance, the position between the first defendant and the second and third defendants was materially the same. They had the same objective, the same interest in preserving the house and rebutting the plaintiff's claim and the same risks of adverse findings of credit. The earlier proceedings turned on whether the court accepted the plaintiff's evidence or the evidence of the three defendants. This meant that either the plaintiff was lying or all of the defendants were lying. If the evidence of the second and third defendants on key matters was not truthful, that would best be explained on the basis that they had been complicit in the alleged fraud and were protecting their own interests.

1. The cross-defendant explained that his view was that it was very unlikely, if not impossible, in a practical sense, for there to be a finding of fraud against the first defendant but not against the second and third defendants. He considered the earlier proceedings to be an all or nothing case, meaning that the defendants would either all succeed or all fail. The risks that he explained to the first defendant were risks that she shared with the second and third defendants.

1. Those risks including the risk not just of losing the proceedings, but of losing the property in which the defendants all lived with their children, together with the risk of liability for the plaintiff's costs, and the potential for a finding of fraud, were risks which it was appropriate to seek to avoid by the terms of settlement. The cross-defendant addressed his remarks specifically to the first defendant because she was the one who was then being cross-examined. They could have been applied equally to the second and third defendants.

1. I do not think that there is any sound basis revealed by the evidence in the particular circumstances of this case, for concluding that a reasonably competent barrister would have advised the second and third defendants against settling on the terms to which they have agreed. I have already found that the second defendant understood the terms of settlement. The same must of course be said for his wife.

1. I do not think that the cross-defendant needed to do more than he did. He recognised that the three defendants had a strong communion of interest and a powerful motive to act together. The three of them, as I have said several times, were living in the property that the plaintiff contended had been fraudulently transferred out of his name and into the name of the second and third defendants.

1. When assessing the reasonableness of the cross-defendant's conduct, it is relevant to recall the following facts, to some of which I have already adverted:

(a)   The first and second defendants were brother and sister and were clearly close.

(b)   The first defendant and the second defendants' families and children lived under the same roof and were obviously close knit.

(c)   The first defendant and the second and third defendants demonstrated to the cross-defendant throughout the earlier proceedings that they wanted and authorised him, to conduct their professional relationship on the basis that the first defendant would communicate with him on their behalf and that she could be trusted to do so.

(d)   The agreed mode of communication had a strong practical basis so far as the cross-defendant was concerned, bearing in mind his perception of the comprehension of English of the second and third defendants.

(e)   The first defendant had acted as the communicator of significant matters during the proceedings and was not just a go-between in relation to matters of detail or administration. She had been involved in communications that led to the preparation of affidavits and in respect of substantive legal advice. There was not the remotest suggestion that she might not communicate with her co-defendants in respect of all relevant matters with care and attention and having regard to the interests of all three of them.

1. When the first defendant told the cross-defendant that she had spoken with the second and third defendants and obtained their signature to the document, the cross-defendant had no reason whatsoever for thinking that she had not done so, or had not done so fully. He had even less reason for thinking that she had lied to her brother and sister-in-law and was now lying to him.

1. I should add that the opportunity to settle the case emerged relatively quickly in the context of the cross-examination of the first defendant. The negotiations and instructions occurred with a degree of speed and urgency and the terms of settlement contain three simple, readily comprehensible elements. It is well-known that unless an opportunity to obtain a compromise is taken promptly, the opportunity may sometimes be lost.

1. The cross-defendant was conscious of the position of the second and third defendants and specifically enquired why they had left the room. He was simply told by the first defendant that they had gone home and did not need to be here. These were added circumstances why he was justified in entrusting the first defendant with the task of ensuring that the second and third defendants executed the terms of settlement and understood their effect. When the first defendant returned the next morning with the signed terms of settlement, there was no reason to think that the second and third defendants had been misled, or failed to comprehend their effect, or were in a real and practical sense in a different position to the first defendant. They were not.

Causation

1. I should add, to the extent that it matters, that there is no foundation in the evidence for a finding that as a result of the cross-defendant's conduct, the second and third defendants have suffered loss. I am not prepared to accept that if they did not know that the terms of settlement included a guarantee and mortgage, they would have acted differently. It would not have mattered whether the cross-defendant communicated that fact to them or whether someone else did so.

1. I am satisfied that more likely than not the second and third defendants would have signed the terms of settlement in any event. Their abiding concern was the preservation of the property in which they lived together with the first defendant and their children. The first defendant was in favour of the terms which constituted a resolution by the family of a problem confronting them all. I do not think that it is likely that, on any hypothesis, the second defendant or his wife would have stood in the way of the first defendant's recommendation. She was, in the events that this litigation revealed, acting in the interests of each of them, when the earlier proceedings were settled in relation to the earlier events which led to the disputed transfer in favour of the plaintiff.

1. In any event, even if I assume that the second and third defendants would have acted differently, it does not take them anywhere. The proceedings would not have settled and the case would have continued. For all I am able to tell, the defendants would have lost anyway and been found to have been dishonest. The property would have been re-transferred to the plaintiff and they would have been ordered to pay his costs.

1. I cannot be certain about this outcome, and I do not need to decide that question, but the evidence does not enable me to say one way or the other. What is clear however is that such an outcome would have been substantially worse for the second and third defendants than the compromise embodied in the terms of settlement. The curious result is that on this analysis, the cross-defendant's supposed breach of duty might well have put the second and third defendants in a better position than they otherwise would have been in.

1. No attempt was made to adduce evidence on which I could find that there was a real chance that if the second and third defendants had not signed the terms of settlement and the earlier proceedings had proceeded to a conclusion, the second and third defendants would be in a better position.

Orders

1. For those reasons the orders will be in the terms set out in the document described as Judgment Order which I have signed and dated today and which I will now publish.

oOo

Decision last updated: 22 May 2013