Sham Transactions Invalidate Previous Judgment

The court examined whether certain transactions were shams and fraudulent conveyances, impacting the enforceability of a previous judgment. The court found that the transactions were indeed shams and fraudulent, thereby invalidating their use to frustrate the enforcement of the previous judgment.

New South Wales Supreme Court

CITATION : [NAME] v [NAME] & 2 [NAME] [2002] NSWSC 1187 CURRENT JURISDICTION: Equity FILE NUMBER(S) : SC 3510/99 HEARING DATE(S) : 20/02/01-22/02/01; 13/03/01; 12/07/01; 13/07/01; 14/08/01-17/08/01; 28/08/01; 05/09/01; 07/11/01; 08/11/01; 19/11/01; 26/11/01; 19/03/02; 20/03/02 JUDGMENT DATE : 12 December 2002

[NAME] (Plaintiff) PARTIES : [NAME] (First Defendant) [NAME] ([NAME] Defendant) [NAME] (Third Defendant) JUDGMENT OF : Santow J

COUNSEL : [redacted] [NAME], QC/ [NAME] (First Defendant) SOLICITORS : [redacted] [NAME] (First Defendant) CATCHWORDS : CONVEYANCING - sham transactions - whether loan and mortgage transactions bona fide - whether loan and mortgage transactions liable to be set aside - CONVEYANCING - whether the loan and mortgage transactions and discharge of mortgage and sale transactions constitute an alienation of property within the meaning of s37A of the Conveyancing Act 1919 - whether there was an intent to defraud creditors - meaning of "creditors" in s37A - whether bona fide purchaser for value and without notice - ESTOPPEL - whether a defendant could be precluded from asserting an entitlement to repayment of loan and rely on a mortgage in light of what was said in court - EQUITABLE LIEN OR CHARGE - whether the plaintiff held an equitable lien or entitled to a charge in equity to secure payment for work done on a house, when subsequent judgment otherwise frustrated by sham transactions, to prevent consequences of unconscionable conduct - equitable lien as an alternative to a constructive trust as a remedy for unconscionable conduct - CONSPIRACY TO INJURE - whether the loan and mortgage transactions constituted a conspiracy against the plaintiff - whether plaintiff suffered any damage. Conveyancing Act 1919 s37A LEGISLATION CITED : Evidence Act s125 Real Property Act 1900 ss42 and 43 Abignano v Wenkart (1998) 9 BPR 765 [NAME] v [NAME] (No. 2) (1988) 164 CLR 604 Cadogan v Cadogan [1977] 3 All ER 381 Clegg v Bromley [1912] 3 KB 474 Esanda Ltd v Burgess [1984] 2 NSWLR 139 Giumelli v Giumelli (1999) 196 CLR 101 Graham H Roberts Pty Limited v Maurbeth Investments Pty Limited [1974] 1 NSWLR 93 H. & G. & R. Nominees v Carlson Pty Limited (2000) V Conv.R 54-630 Hewett v Court (1983) 149 CLR 639 ICT Pty Ltd v Sea Containers Ltd (1995) 39 NSWLR 640 Jones v Dunkel (1959) 10 CLR 298 Kang v Kwan ([2001] NSWSC 698, 16 August 2001, unreported) CASES CITED : Lonrho Limited v Shell Petroleum Co Limited [1982] AC 173 Mackay v Douglas [1872] LR 14 Eq 106 Re Mackay (1951) 16 ABC 18 Mandarin International Developments Pty Limited v Growth Corp (Australia) Pty Limited (1998) 143 FLR 408 Middleton v Pollock [1876] 2 Chd 104 Morris v Morris (1982) 1 NSWLR 61 Munnings v Australian Government Solicitor (1994) 118 ALR 385 Roy Morgan Research Centre Pty Limited v Wilson Market Research Pty Limited (1996) 39 NSWLR 311 [COMPANY] v [NAME] (1988) 13 FCR 449 [NAME] v [NAME] 7 West Riding Investments Ltd [1967] 2 QB 786 [COMPANY] v [COMPANY] of Commerce Trust Co (Bahamas) Ltd [1986] 1 WLR 1072 Vander Lee & [NAME] v State of New South Wales & [NAME] ([2002] NSWCA 286 [COMPANY] v [COMPANY] (NSWSC, Giles CJ CommD, 8 September 1997, unreported)

DECISION : See para 220

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

SANTOW J

No.3510/99 [NAME] Plaintiff [NAME] First Defendant [NAME] Defendant [NAME] Defendant Table of Contents Page INTRODUCTION 2 Overview 2 Persons Principally Involved – brief description 11 Plaintiff and those associated 12 [NAME] and those associated 12 CHRONOLOGY OF FACTS 13 1991 13 1995 14 1998 14 1999 16 2000 33 QUESTIONS FOR RESOLUTION 34 Question 1 – Sham transactions? 38 [NAME] v [NAME] 48 [NAME] 52 Conclusion 59 Question 3 - Estoppel? 65 Question 4 - Equitable lien or charge in equity? 67 Question 5 - Priority of mortgage over equitable claim? 70 Question 6 - Conspiracy to injure? 70 Question 7 - Damage to Plaintiff? 73 OVERALL

CONCLUSION AND ORDERS 73

JUDGMENT 12 December 2002 INTRODUCTION Overview 1 These proceedings, in very broad terms, seek to challenge certain transactions carried out which had the practical effect of denying the availability of property against which to enforce a money judgment earlier obtained in the District Court in the Plaintiff's favour. The challenge is not, primarily, against the party against whom the judgment was obtained (the judgment debtor). Rather it is against a third party's property said to derive from the judgment debtor, when the latter claimed to have repaid a loan from the third party. That loan is challenged as is the supporting mortgage on a number of bases. These include that they were a sham, or a fraudulent conveyance. That challenge is defended on a number of grounds. 2 These proceedings thus arise out of earlier proceedings in the civil jurisdiction of the District Court. They were between the present Plaintiff, [NAME], and the present [NAME]. The latter are hereafter collectively referred to as "[NAME]" and individually (without any disrespect) as "[NAME]" and "[NAME]" respectively. The third party earlier referred to is the First Defendant in these present proceedings, [NAME]. I refer to him, for convenience and without any disrespect, as "[NAME]". 3 The substantive District Court proceedings were commenced by Statement of Claim initially in the Supreme Court filed 4 March 1996. They were preceded by two letters of demand by Legal Aid on behalf of the Plaintiff, to [NAME] and [NAME] respectively, dated 1 February 1996. Those proceedings were subsequently transferred to the District Court in about October 1997. They were heard in the District Court between 28 July and 12 October 1999. This followed an earlier order for judgment obtained by the Plaintiff on 23 April 1999 which was later set aside upon and by virtue of Notice of Grounds of Defence filed by [NAME]. It also followed [NAME]' successful application on 1 June 1999 before Judge Sidis to vacate the allocated hearing date to 28 July 1999. The circumstances in which that hearing date was vacated are relied upon as part of the Plaintiff's case. This is insofar as they concern what was said in court concerning the Plaintiff's caveat, mistakenly placed against a small part only of [NAME]'s [NAME]. There is a dispute as to whether, at the relevant time, [NAME] was aware of that mistake. 4 In the substantive District Court proceedings tried before Herron DCJ (over 41 days) between 28 July 1999 and 12 October 1999, he found that the Plaintiff was entitled to reasonable remuneration for the work he had performed on the [NAME]'s [NAME]. By that District Court judgment of 12 October 1999, Herron DCJ determined that [NAME] was entitled, as against [NAME] to: (a) a sum of $108,345 representing (i) $89,100 for work performed by [NAME] between 14 December 1991 and 5 October 1995 or thereabouts, and (ii) $19,245 interest awarded to [NAME] under the District Court Act 1983, s83A; and (b) a sum equal to 50% of his costs in the District Court proceedings as and when assessed. 5 That Judgment remains wholly unsatisfied. Execution upon it has not been stayed. 6 On the Plaintiff's case in the present proceedings, the [NAME], as is not denied, was a close personal friend and business associate of [NAME]. Nor is it in dispute that he, from a date no later than mid-November 1998, had knowledge of the District Court proceedings and from time to time instructed solicitors to act for [NAME] in those proceedings. However, latterly (from late May 1999) [NAME] came also to exercise that role. 7 In late May 1999, prior to commencement of the hearing, the Plaintiff had caused a caveat to be entered on the title of the [NAME] then owned by [NAME] at [ADDRESS], [NAME]. The caveat claimed "an equitable interest in the land of [NAME] arising from extensive building works and improvements effected on the land by [[NAME] between 1991 and 1995] and for which no payment has been received". However, the [NAME] was divided into two titles, with the principal title covering house property with a separate title in respect of a small laneway at the rear of relatively small value. In error, the caveat was entered on the title to the [NAME] laneway but not to the house property. 8 The transactions challenged in the present proceedings commenced prior to the hearing, namely on 25 June 1999. That was when [NAME] and [NAME] instructed the solicitors [NAME] to prepare a mortgage ("the Mortgage") of the [NAME] in favour of [NAME] as well as a contract of sale of the property to a third party. The Mortgage, dated and registered on 28 June 1999, was granted in support of an alleged advance of US$430,580 agreed orally to be made by [NAME] to [NAME] "in or about January 1998". There was no written agreement for loan at the time or any other informal record, beyond the bank transfers. The only written record comes ex post facto, when [NAME] instructs his solicitor about the terms for documentation some 18 months later, by letter dated 25 June 1999 (PX4, at 114); there are of course the affidavits of [NAME] referred to below. Such advance, according to [NAME], was effected on 13 February 1998 by the transfer of that sum from [NAME]'s account No. 275-321230 in the Hang Seng Bank in Hong Kong to the account of [NAME], No. 275-308799 at that Bank, according to the affidavits of [NAME] of 12 October 1999 with annexed bank records, and of [NAME] (DX14). Shortly after, on about 9 July 1999, [NAME] contracted to sell the [NAME] to a third party by a contract of sale dated and exchanged that day. Sale of the subject property to the third party was completed less than two weeks later, on 22 July 1999 for a sale price of $825,000, inclusive of a deposit of $82,500; on settlement, an amount of $743,717.03 (exclusive of the deposit) was paid as balance of the sale price adjusted for outgoings. The whole net proceeds of the sale were paid by the purchaser at the direction of [NAME] to [NAME]. They comprised $804,987.98, made up of $741,380 (after minor deductions from the $743,717.03) and $63,607.98 (being the balance of the deposit after deduction of commission and legal costs). On the Plaintiff's case it was paid "purportedly" pursuant to and in discharge of the Mortgage, though on that case, strenuously denied, the mortgage was either a fraudulent conveyance or a sham, and the loan was not genuine either. On the [NAME]' case there was no fraudulent conveyance and neither were a sham; this amount was thus actually and properly so applied. After payment of what was so claimed to be an amount owing by [NAME] and now secured by the Mortgage, being the amount originally allegedly lent by [NAME] to [NAME], the balance was remitted out of Australia. It remains out of the jurisdiction. That left the Plaintiff with nothing to satisfy his judgment against, unless these transactions were to be set aside or the Plaintiff's interest otherwise satisfied by an equitable lien or charge against now [NAME]'s Castle Cove property, which he purchased using this alleged loan repayment. 9 Thus, to quantify the above more precisely. Whereas $804,987.98 was paid by direction to [NAME], with the balance remitted overseas, the amount of the alleged loan, converted from US$430,580 at the favourable rate (to him) that [NAME] contended was agreed (US$0.58 to A$1.00) produces A$742,379.29. That is still less than the $804,987.98 that went to [NAME], by some $62,000. Had instead the actual prevailing exchange rate been used on 13 February 1998 this would have been substantially more favourable to [NAME] (US$0.673 to A$1.00). It would have produced an amount equal to A$639,791.97, if one converted the US$430,580 to Australian dollars at that, the prevailing rate. This substituted exchange rate of 58 cents, represented on the Plaintiff's case an immediate divestment of A$102,587.32. This was in return for an on-demand loan there being no evidence of any agreement to refrain from making a demand. Moreover, had an exchange rate been adopted as applicable on the date the Mortgage was actually discharged, being 22 July 1999 the rate would have been US$0.6488 to A$1.00. In that event, US$430,580 would convert to a lesser amount than $804,987.98 namely A$663,655.98. As regards his attack on these arrangements, as a sham, the Plaintiff's pleading, denied by the First Defendant, is to be found in various parts of the [NAME] of claim; see in particular at para 42 as particularised under paras (a) and (b) thereof. 10 To sum up. Unless one assumed not only an unfavourable exchange rate to [NAME] of 58 cents but also interest (claimed by the First Defendant to be 9% though the only later written version of what was agreed stipulated "nominal" interest) in every one of these three scenarios [NAME] was over-paid; that is, he was paid more than he was allegedly owed. Thus treating interest as nominal, and so not in reality charged, he was paid A$804,987.98 but was allegedly owed (for the claimed loan of US$430,580) only (a) A$742,379 at a 58 cent assumed exchange rate; (b) A$639,791.97 at the 67 cent then prevailing exchange rate, at the time of the alleged advance, or (c) A$663,655.98 at the 64 cent then prevailing exchange rate at the time of the discharge of the alleged advance. 11 The difference went, so far as the evidence goes, to China, to [NAME], with some $60,000 then lent back by [NAME] to [NAME] to cover their District Court costs. All of this is difficult to reconcile with the notion of a genuine loan, an issue to which I will return. In particular why would anyone rationally agree to an on-demand loan capable of being called up immediately, at 9% interest and a grossly unfavourable exchange rate? And why would [NAME] take advantage of his friend [NAME] to do so, unless the real arrangement was rather different, and designed between these two close friends to defeat [NAME]? That in essence is the allegation of the Plaintiff. 12 The Plaintiff seeks to attack these transactions and to enforce an equitable lien against the First Defendant's property. That property subsequently bought at Castle Cove, he claims, represents the proceeds of the sale of the [NAME] paid to or at the direction of the First Defendant, a proposition which can be taken as correct. The contentions of the Plaintiff include first that the alleged debt was not genuine and the mortgage to secure it a sham. It is also contended that the alleged loan transaction, the mortgage of 28 June 1999 the sale and the discharge of the Mortgage from the proceeds of that sale effected between 9 to 22 July 1999 jointly or severally constitute an "alienation of property" by the [NAME] Defendant within the meaning of the Conveyancing Act s37A. This is said to have been with the intent to defraud the Plaintiff as a creditor of [NAME], pursuant to the District Court judgment in his favour, he being a person "thereby prejudiced" within the meaning of the section. This was in circumstances where it is alleged by the Plaintiff that [NAME] was not "a purchaser in good faith not having, at the time of alienation, notice of the intent to defraud creditors" within the meaning of the section so as to satisfy that defence. The mortgage and loan, if they constitute genuine transactions or the end result of the money transfers, are thus said to be within the ambit of s37A, and are, according to the Plaintiff, voidable at the instance of the Plaintiff, as a "person thereby prejudiced". 13 The Plaintiff in claiming an equitable lien or charge should be declared against [NAME]'s Castle Cove property does so on the basis pleaded in the [NAME] of Claim including by way of estoppel; see paras 10 to 29, and in particular "25. By reason of the facts pleaded in paragraphs 19 to 24 hereof, each of [NAME] and [NAME] is estopped in these proceedings from asserting that: (a) [NAME] had made no claim to an interest in the [NAME], in the same terms as the claim to an interest in land made in the Caveat, prior to the time when [NAME] purported to charge and dispose of her interest in the [NAME] as alleged in paragraph 18 hereof. (b) they did not have notice of [NAME]'s claim to an equitable interest in the [NAME] at the time when [NAME] purported to charge and dispose of her interest in the [NAME] as alleged in paragraph 18 hereof. (c) the rights of the parties to these proceedings should be determined on the basis that (at the time [NAME] purported to charge and dispose of her interest in the [NAME] as alleged in paragraph18 hereof) there was no caveat on the title to the [NAME] in terms similar to the terms of the Caveat. (d) the [NAME] was not, at all material times, available to [NAME] to satisfy any order or judgment made in favour of [NAME] in the District Court Proceedings.

26. By reason of the facts pleaded in paragraphs 8 to 25 hereof, the attempt by [NAME] to charge or dispose of the [NAME], without the liability of [NAME] and herself to [NAME] being discharged, was unconscionable.

27. By reason of the facts and circumstances pleaded in paragraphs 10-26 hereof, the [NAME] was at all material times charged in equity with the liability of [NAME] to remunerate [NAME] for work done at the Property.

28. At all material times [NAME] had notice of the facts pleaded in paragraphs 10 to 26 hereof and, accordingly, it would be unconscionable for him to deny (and in equity he is not entitled to deny) that: (a) the [NAME] was at all material times charged in equity with the liability of [NAME] to remunerate [NAME] for work done at the Property. (b) the proceeds of sale of the [NAME] paid to him, or at his direction, upon completion of the sale of the [NAME] were, and remain, charged with the liability of [NAME] to remunerate [NAME] for work done at the Property.

29.

Accordingly, [NAME] is entitled in equity: (a) to a charge, in an amount equal to the sum of $89,100.00 (pleaded in paragraph 6(a)(i) hereof) together with such interest as may be allowed by this Court, on; and (b) to satisfy his entitlements under the District Court Judgment and any entitlements to costs arising in the course of any appeal from that Judgment from, the interest of [NAME] in the land known as [ADDRESS], Castle Cove ("the Substituted Property") which (as recorded in orders and notations made by [NAME] on 3 November 1999) represents the proceeds of the sale of the [NAME] paid to or at the direction of [NAME]." 14 The Plaintiff further alleges that the [NAME] conspired, and carried into execution, a conspiracy against the Plaintiff for the purpose of preventing him from recovering any remuneration to which he might be entitled against [NAME] or [NAME] for work done at the property. 15 The Plaintiff contends that the [NAME], including the First Defendant, conducted the District Court proceedings and secured a forensic advantage in those proceedings upon the express basis that the [NAME] would be available to satisfy orders made by the court in favour of the Plaintiff. Further, that no disclosure was made by the [NAME] to the Court or the Plaintiff that the property was subject to a charge in favour of [NAME] nor that the caveat ostensibly lodged by the Plaintiff over the [NAME] was in fact lodged only over the rear laneway and not the main title that was later mortgaged and sold after 1 June 1999. The Plaintiff contends that result gives rise to an abuse of process and estoppel (see [16] below) precluding the [NAME] asserting against the Plaintiff the Mortgage or any charge over the property, with a consequent obligation to account. 16 The First Defendant disputes these claims and contends first and foremost, that the original loan for securing which he became the mortgagee of the [NAME] was a genuine transaction. Further that the mortgage was not a sham. [NAME], the First Defendant contends that the Plaintiff had no equitable interest in the property arising either from his right to remuneration nor the right of residence which the Plaintiff claims he was promised. In any event, the registered mortgage prevailed over any prior unregistered interest, there being no fraud, according to the First Defendant. Third, the First Defendant claims that the Plaintiff failed to establish the elements of an estoppel against the First Defendant with respect to his alleged failure to alert the Plaintiff (and/or Sidis DCJ at the application to vacate the date set down for hearing) that the caveat on [NAME]'s property had been inadvertently entered on the [NAME] laneway. Indeed, the First Defendant claims that any representations made by Counsel or legal advisors in respect of a caveat being in existence to protect the Plaintiff's costs cannot be said to have been made by him or by agents having his authority, and moreover, that at the relevant time he did not know that the [NAME] was a separate parcel of land. Fourth, the First Defendant contends that the alienation of the [NAME] was not made with an intent to defraud creditors (for the purposes of s37A of the Conveyancing Act). Fifth, the Defendant contends that the Plaintiff's claim of conspiracy is flawed because prior to judgment it was permissible for [NAME] to dispose of her assets as she wished and the Plaintiff suffered no damage or loss caused by the payment to [NAME] because there was then no judgment. Nor did the evidence disclose a basis for concluding that such a judgment could not be satisfied from the assets of [NAME] that were temporally available within the jurisdiction. 17 [NAME] took an active part in these proceedings, retaining solicitors (not the solicitors for the First Defendant but [COMPANY]) and filing a sworn Defence and subsequently an Amended Defence on 9 June 2000. (Her affidavit of 9 August 1999 and earlier affidavit of 31 May 1999 (DX14) were filed in the District Court proceedings.) However, on 20 September 2000, [NAME] filed a Notice of Ceasing to Act on behalf of [NAME]. Thereafter, attempts to contact [NAME] by the Plaintiff's solicitors received no response.

Accordingly, the [NAME] did not appear in the course of the Supreme Court proceedings before me, gave no evidence nor did they take any further part. The Plaintiff contends that, in relation to [NAME], as well as other potential witnesses, inferences against [NAME] should be drawn, in accordance with the principles in Jones v Dunkel (1959) 10 CLR 298 at 320-1. The First Defendant submits that neither were available as witnesses, being in an unknown location, presumably in China. 18 The Plaintiff seeks a variety of relief including (paras 29 and 55(a) of the [NAME] of Claim) a charge in equity – or equitable lien in respect of the amount claimed by the Plaintiff over the interest of [NAME] in the property he acquired at [ADDRESS], Castle Cove, representing the proceeds of sale of the [NAME] paid to or at the direction of [NAME]. Orders are also sought pursuant to s37A of the Conveyancing Act 1919, together with an order for account and damage, in terms of para 55 of the [NAME] of Claim. Damages are claimed in fact, by reason of an alleged conspiracy to injure the Plaintiff carried into execution by [NAME] and [NAME]. Overlaying these claims is an estoppel claim, which asserts that [NAME], by representations and conduct on and after 1 June 1999, is estopped from "dealing with the sale proceeds" otherwise than as if charged in favour of the Plaintiff. Persons Principally Involved – brief description 19 It is convenient first to list and briefly describe the persons principally involved, and others whose names appear in the evidence. The description of each is intended to be neutral and non-controversial. Plaintiff and those associated [NAME] Plaintiff. Pursuant to Herron DCJ's judgment of 29 October 1999 he is entitled to a sum of $108,345.00 against [NAME] for work performed by him on the [NAME] between 14 December 1991 and 5 October 1995 (including interest). [NAME] Solicitor for the Plaintiff in the employ of the Legal Aid Commission. Placed caveat on [NAME] title. [NAME] and those associated [NAME] First Defendant. Friend and Business Associate of [NAME] (see below). [NAME] Defendant. Daughter of [NAME]. Title of [NAME] in her name. [NAME] Defendant. Mother of [NAME]. [NAME] from [NAME] originally retained by [NAME] to act on behalf of [NAME] on 17 December 1998 in the District Court Proceedings (PX6). However, his instructions were terminated around 26-27 May 1996. [NAME] Solicitor from [NAME] subsequently instructed by [NAME], to act on behalf of [NAME], who supervised [NAME] (see below), in relation to events between 26 May 1999 and 6 July. [NAME] Solicitor employed by [NAME] Solicitors, having carriage of [NAME]' District Court litigation from about 26 May 1999. [NAME] Counsel who acted for [NAME] in the District Court proceedings and appeared on the occasion when vacation of the hearing date was successfully sought before Sidis DCJ on 1 June 1999. [NAME] Solicitor at [NAME] (who were the solicitors for the First Defendant) and who drafted and prepared the Mortgage and sale documents between [NAME] of 28 June 1999. [NAME] signed an authority on 23 May 1999 for her to instruct solicitors on their behalf in the District Court proceedings. She is the partner of [NAME]: T, 547-548 PX21 para [26]. [NAME] Solicitor in [COMPANY] who acted on behalf of [NAME] in these proceedings until he filed a Notice of Ceasing to Act on 9 June 2000. [NAME] Client of [NAME]. Was the intermediary between [NAME] and [NAME] in retaining the latter for the District Trial. [NAME] employed by [NAME] who had conduct of some of the work in the [NAME] matter. [NAME] Solicitor acting as intermediary between [NAME] and [NAME] in the initial stages of her appointment as agent for [NAME]. CHRONOLOGY OF FACTS 20 I include below a chronology identifying where necessary points of dispute between the parties and their alternative versions. It generally incorporates the First Defendant's additions to the Plaintiff's version of the chronology. Its purpose is to provide a skeletal outline, to which can be fitted the analysis of the relevant transactions which follows. I have added occasional comment. 1991 21 14 December 1991: Plaintiff takes up residence at the [NAME]: Plaintiff's Affidavit sworn 20 February 2000 para [2]. 1995 22 5 October 1995: Plaintiff leaves the [NAME] after being arrested by the Immigration Authorities and is sent to the Villawood Centre: Supreme Court Transcript p134 line 39-45 (hereafter T, 134-135); District Court judgment of Herron DCJ of 29 October 1999 at p41. 23 10 December 1995: Date of commencement of conspiracy alleged by the Plaintiff. The Plaintiff claims that on this date the Third Defendant, [NAME] ("[NAME]"), with the acquiescence of the [NAME] Defendant, [NAME] ("[NAME]"), and First Defendant, [NAME] ("[NAME]"), made statements to him to the effect: "If you sue you will get nothing. I will ask everyone to oppose you.": [NAME] of Claim para [53] 1998 24 Late January: [NAME] claims that he agreed to lend funds to [NAME]: Affidavit of [NAME] sworn 12 October 1999 para [4] 25 Early February: [NAME] receives US$430,580 into his Hang Seng Bank account in Hong Kong remitted from China as compensation for resumption of his mother's house in China: DX15 26 13 February 1998: [NAME] transfers the sum of US$430,580 from his account No.275-321230 in the Hang Seng Bank in Hong Kong to the account of [NAME], No. 275-308799 in the Hang Seng Bank in Hong Kong: Affidavit of [NAME] sworn 12 October 1999 para [5] and Annexures "A" and "B". 27 2 October 1998: [NAME] (Plaintiff's solicitor) swears an affidavit in support of application for substituted service of District Court Statement of Claim which annexes, inter alia, Land Title Office searches showing [NAME] land comprises two titles: T, 514-516. 28 12 December 1998: Fax from [NAME] to Mr [NAME] attaching Legal Aid letter dated 4 September 1998 and Notice of Listing dated 8 October 1998; inviting assistance on behalf of [NAME]; and recording "that this matter is so important it will determine whether [NAME] comes over for Xmas or not": PX6 pp21, 138. 29 17 December 1998: [NAME] ("[NAME]") was retained by [NAME] (via [NAME]) to act on behalf of [NAME]: PX6 p2. The instructions were to maintain "total client confidentiality" and to "act in the best and most favourable position and interest of [[NAME]] under [[NAME]'s] instructions": PX6 p12. 30 21 December 1998: [NAME] wrote letter to [NAME] seeking proper instructions from [NAME]: PX6 pp2-3 (para 3) and p22. 31 22 December 1998: [NAME], by telephone, confirmed [NAME]'s instructions "to enquire as to the position with the Court": PX6 p3 (para 4). 32 23 December 1998: [NAME] wrote letters to [NAME], Legal Aid and his law stationer confirming instructions to act for [NAME]: PX6 p3 (para 5) and pp23-26. 33 28 December 1998: Over the Christmas holiday period, [NAME] sent a fax to [NAME] protesting about the form of his letters of 23 December 1998, pointing out that he [NAME] (an "interested third party") was [NAME]'s client, not [NAME], and that [NAME] in declaring himself [NAME]' solicitor meant Legal Aid could formally serve documents initiating proceedings on [NAME]. [NAME] requested that [NAME] "(p)lease establish the true facts of the service of the documents before we commit ourselves to a Court case that we are trying to avoid": PX6 p3 (para 6) and pp27, 137. 1999 34 7 January 1999: Fax dated 5 January 1999 addressed to [NAME] by [NAME]. It records that [NAME] "would like to confirm that he is your client at this stage with regard to [this] matter" and that he "would like to ensure that all the assets owned by the [NAME]'s [sic] are fully protected. This is foremost in his mind and would also provide some peace of mind to [NAME] [sic]": PX6 p136. 35 11 January 1999: [NAME] saw letter from [NAME] denying retainer: PX6 pp28, 78. 36 13 January 1999: [NAME] letter to [NAME] recording that he could not inspect documents in the Court file until a Notice of Appearance had been filed and noting that "we repeat our advices to you last year that as Solicitor for an interested third party, we do not have access to the Court file…": PX6 p3 (para 7) and pp28, 79 and 150. 37 20 January 1999: Fax from [NAME] to [NAME] stating that "at the moment, [NAME] have still not given me sanction to appoint a legal adviser" and inquiring about procedural steps. [NAME] also states in this fax that "This point is not related to [NAME]' case – I have a debtor who owes my company Australian dollars six thousand (A$6,000.00) plus interest. The debt was incurred on 20 March 1995": PX6 p3 (para 8) and pp29, 79 and 150. 38 25 January 1999: [NAME] letter to [NAME] responding to the fax of 20 January 1999 observing that he is unable to obtain any information unless he has status as Solicitor for the [NAME] ([NAME]): PX6 p3 (para 8) and pp30 and 79. 39 27 January 1999: [NAME] telephoned [NAME]'s office to say that [NAME] could now "officially" represent [NAME] in the proceedings: PX6 p3 (para 9) and pp79 and 150. 40 28 January 1999: Fax from [NAME] to [NAME] confirming that [NAME] had accepted his "recommendation" to "officially" ask [NAME] "to represent them in the case". The fax also records that [NAME] was relieved that "we can now see what we are defending against" and that he looked forward "to working with [[NAME]] to assist [NAME] defend this case": PX6 p3 (para 9) and pp31, 79 and 150. 41 2 February 1999: [NAME] received a letter from Legal Aid enclosing Statement of Claim, and noting that default judgment would be sought unless a Notice of Appearance was filed promptly: PX6 p3 (para 10) and pp32, 58. 42 4 February 1999: [NAME] conference with [NAME] and [NAME] taking instructions (30 mins). Among other things the conference canvassed the prospect of the Plaintiff succeeding in application for summary judgment and the residential status of the Plaintiff and his wife: PX6 p151. 43 4-5 February 1999: Notice of Appearance filed on behalf of [NAME]: PX6 pp3, 58, 79. 44 8 February 1999: [NAME] perused letter from [NAME] to Senator Ruddock dated 22 March 1996 and [NAME]'s letter dated 7 October 1997 to Department of Immigration: PX6 p151. [NAME]'s letter is reproduced at PX6 pp100-102. In it he recorded that "apart from the [NAME]" he was the best person in Australia acquainted with the true character of [NAME] (page 100); [NAME] had threatened the lives and property of [NAME] (page 101); and [NAME] needed to know [NAME]'s "future status in Australia in order to be able to advise the [NAME] whether or not to return to Australia" and so, he urged, [NAME] should be deported (page 102). 45 22 February 1999: The District Court listed the proceedings for hearing on 2 June 1999: PX6 pp4 (para 14), 64-65. 46 9 March 1999: [NAME] made inquiries about the availability of [NAME] of counsel for the hearing listed for 2-3 June 1999: PX6 p4 (para 15) and pp34, 79 and 153. 47 24 March 1999: [NAME] conference with [NAME] and [NAME] taking instructions, including instructions to brief counsel, and providing advice on need for conference with [NAME], possible application for security for costs and the further evidence required (1 hour) PX6 p4 (para 17) and p154. 48 4 April 1999: Date of e-mail from [NAME] to [NAME] recording (in para 2) that "the lawyer understands no contact but if urgently need to he will ask me that he wants to talk to [NAME] or you" and (in para 4) an entry reads "The house – I understand your concerns. But if I don't put a caveat on the house you will not be protected": PX6 p135. 49 10 April 1999: [NAME]'s employed solicitor [NAME] (identified at PX6 pp80 and 148) prepared, on this day (a Saturday), a brief for delivery to [NAME]: PX6 p5 (para 20). The brief was delivered on 12 April 1999: PX6 pp5, 80. It is reproduced at pp36-39. It observes that [NAME] is acting for [NAME] and receiving instructions from [NAME]. At p38 [NAME] was requested "to advise generally" and to draw a defence; there is also a notation that [NAME] was "most anxious to see counsel in conference". 50 10 April 1999: Letter to [NAME] enclosing a copy of [NAME]'s brief for his information: PX6 pp76, 155. 51 11 April 1999: E-mail from [NAME] to [NAME] asking that "a meeting with our barrister" be set up "as soon as possible" and noting that [NAME] are concerned that there will be insufficient time to prepare the case and suggest an extension to the hearing date: PX6 p70. 52 12 April 1999: [NAME] perused [NAME]'s e-mail (to [NAME]) dated 4 April 1999 and advised "re need to have caveat placed on title of house": PX6 p155. 53 12 April 1999: [NAME] sent email to [NAME] advising hearing date is not able to be vacated without good reason. Subsequently, [NAME] advised in respect of evidence needed to support an application for vacation: PX6 p155. 54 19 April 1999: [NAME] instructed [NAME] by telephone to "do no other tasks until the barrister's advice was received": PX6 p5 (para 21) and pp40, 80. On the same day [NAME] had perused a fax from [NAME] requesting advice whether a security specialist had been retained to inspect the house and "requesting advice re strategy re conduct of proceedings": PX6 p156. 55 21 April 1999: [NAME] appointed a conference for 30 April 1999: PX6 p5 (para 22). 56 21 April 1999: E-Mail from [NAME] to [NAME] notifying him of conference on 30 April 1999, that being the first available time: PX6 p77. 57 21 April 1999: [NAME] faxed to [NAME] in anticipation of conference with [NAME], recording that "both [NAME] and I have been quite stressed out about the imminent hearing date" and stating that [NAME] was "banking on" [NAME] and [NAME] to "pull [NAME] out of this" difficulty: PX6 p95. 58 29 April 1999: Telephone conversation between [NAME] and [NAME] in which the matter was discussed generally, addressing briefly issues in respect of defence and vacating hearing date (18 minutes): PX6 p5 (para 23) and pp80, 157. 59 30 April 1999: Conference between [NAME] and [NAME]: PX6 p5 (paras 24-25). [NAME] was engaged for 3.5 hours: PX6 p157. [NAME] was engaged for 1.5 hours: [NAME] p130. Detailed instructions were taken in respect of issues arising in the statement of claim, in assessing the state of evidence, vacation of hearing date and defence, and assessing the prospects of successfully defending the action: PX6 p157. [NAME] wanted a leader: PX6 p80. He advised that a brief should be delivered to [NAME], QC in relation to certain aspects of the matter, and [NAME] accepted that advice: PX6 p5 (para 25). He advised that a silk be briefed about those aspects so that decisions could be made in relation to the way the action should be defended: PX6 p49 (paras 6-7). Senior counsel was to advise "re ramifications of the property being sold" to [NAME], the ability of the Court to set aside any such transaction, and the ability for any judgment to be enforced against the assets of the [NAME] (Hong Kong): PX6 p157, 134, 148 (item 17). The brief to [NAME], QC was delivered (and copied to [NAME]) on 5 May 1999. A copy was sent to [NAME] on 17 May 1999. 60 5 May 1999: [NAME] received from the District Court Notices of Orders for Judgment against [NAME]: PX6 p6 (para 26) and pp48, 53, 80, 157. The Notices are reproduced at PX6 pp65 and 67. 61 5 May 1999: [NAME] briefed [NAME], QC as requested by [NAME]: PX6 p6 (para 28) and pp80, 157. The brief is reproduced at PX6 pp42-45. It records (at p42) that [NAME] had asked that the specific questions the subject of the brief, referrable to the District Court proceedings, be referred to [NAME], QC. It noted (at pp42-43) that [NAME] received instructions from [NAME] as a friend, and on behalf, of [NAME]. It also recorded that the [NAME] was registered in the name of [NAME]: p43. At pp43-44 three specific questions were put to [NAME], QC in the following terms: "(1) Can the property at 228 [NAME] be sold at market price to [NAME]. [NAME] is owed approximately $600,000.00 by the [NAME] [sic]. The value of the property is estimated to be $750,000.00. The balance purchase price of $150,000.000 would then be returned to China.

(2) If this is done is it possible for the Court set aside the sale.

(3) If Judgment is entered against the [NAME] can such Judgment be enforced against assets held by the [NAME] in Hong Kong and/or mainland China." 62 5 May 1999: A copy of the Brief to [NAME], QC was delivered to [NAME] under cover of a letter dated 5 May 1999: PX6 p6 (para 27) and pp41, 158. [NAME] acknowledged receipt of [NAME]'s letter in his "Initial Memorandum Advice" dated 11 May 1999: PX6 pp48-49 (paras 2, 4, 6 and 7). 63 11 May 1999: [NAME]'s "Initial Memorandum of Advice" delivered to [NAME]: PX6 p6 (para 29) and pp46-56. This advice dealt, principally, with the application of [NAME] to vacate the hearing date: PX6 p46-56. He acknowledged that [NAME], QC had been briefed in accordance with instructions that were provided by [NAME], on behalf of [NAME], on 30 April 1999: PX6 p49 (para 7) and p53 (para 24). [NAME] charged [NAME] for this advice (see entry on [NAME]'s fee note – [NAME] p130). 64 13 May 1999: In accordance with [NAME]'s advice (recorded at PX6 pp49-55) [NAME] swore an affidavit in support of a Notice of Motion seeking that the June 1999 hearing date be vacated: PX6 p6 (para 30) and pp57-67. He deposed that he had not met either of [NAME] but had been retained on their behalf by [NAME]: PX6 p58 (para 6). 65 17 May 1999: [NAME] letter to [NAME] enclosing the Notice of Motion and supporting affidavit (of [NAME]) sworn 13 May 1999. The letter noted that the Motion was returnable on 19 May 1999. It also enclosed the brief to [NAME], QC dated 5 May 1999, [NAME]'s letter of the same date to [NAME]'s Advice dated 11 May 1999, and a copy of the [NAME] affidavit: PX6 pp68-69, 159. 66 18 May 1999: E-mail from [NAME] to [NAME] noting that the Motion for vacation of hearing date was listed for 19 May 1999: PX6 p6 (para 33) and p70. 67 19 May 1999: [NAME]'s instructions were terminated by [NAME] and [NAME] while he was at Court; he advised the Court accordingly and [NAME]' Motion for vacation of the hearing date was dismissed with costs: PX6 p6 (para 34) and p160. On 20 May 1999 (see below) [NAME] wrote to [NAME] a letter relating to [NAME]' peremptory determination of his retainer the previous day (PX6 pp71-72). 68 20 May 1999: [NAME] (Plaintiff's solicitor) lodges caveat over title to smaller parcel of [NAME] land: [NAME]'s affidavit sworn 20 February 2001 paras [7]-[8]. For convenience I will hereafter refer to this smaller parcel of the property as the "laneway", but observe that there is, in fact, no separate, physical laneway that one can discern when one attends the property: T, 507.7. 69 20 May 1999: [NAME] asked [NAME], QC and [NAME] to return their briefs: PX6 pp72, 160. 70 20 May 1999: [NAME] letter to [NAME] recording inability to understand why his instructions had been withdrawn at such a critical time: PX6 p7 (para 35) and pp71-72. (See also entry on p17 of [NAME]'s bill of costs – PX7) [NAME] advises [NAME] in the letter of the dismissal of the notice of motion in the District Court seeking vacation of the hearing date, the need for the [NAME], to put on a defence and that he has asked both counsel briefed to return their briefs. 71 20 May 1999: [NAME] discussed the situation with [NAME] (6 minutes): PX6 p7 (para 38) and p160. 72 21 May 1999: [NAME] responded to [NAME]'s letter dated 20 May 1999 by a letter dated 21 May 1999 (PX4 p73 and DX18). In this letter [NAME] sought to re-engage [NAME] on behalf of [NAME]: PX6 p7 (para 36): and pp73, 81 and 147. With that letter [NAME] enclosed a letter dated 20 May 1999 signed, and faxed to him, by [NAME] (DX 18). By [NAME]'s letter of 21 May 1999, [NAME] also sought an urgent conference with [NAME] at the "earliest possible time, excepting 21 and 25 May". 73 The fax from [NAME] and its attachment from [NAME] were read by [NAME] that day (see entry on p17 of [NAME]'s bill of costs – PX7). 74 21 May 1999: Discussion between [NAME] and [NAME] (6 minutes) requesting advice of [NAME], asking him to appear on hearing on 2 June 1999. [NAME] advised [NAME] that Senior Counsel needed to be briefed as well (see entry on p17 of [NAME]'s bill of costs – PX7). 75 21 May 1999: Discussion between [NAME] and [NAME] by telephone about a caveat (6 minutes); PX6 p133 (bottom file note) and p147; PX7 p17 [NAME]'s bill of costs). [NAME] says that, [NAME] having re-engaged him on behalf of [NAME], "instructions were then received by [[NAME]] to lodge a caveat on the title of the property": PX6 p147 (items 13-14). 76 21 May 1999: Telephone discussion between [NAME] and [NAME] (24 minutes) discussing "strategy re conducting the defence in view of outcome of the notice of motion, advise further re lodging caveat on title of the property": See entry on p17 of [NAME]'s bill of costs – PX7. 77 21 May 1999: [NAME]'s law stationer, [NAME], obtained a Folio Identifier search of Folio Identifier A/29028 ("the [NAME]") and Folio Identifier 1/521774 ("the [NAME]") at 5.11 pm-5.12 pm (PX6 pp131-132, 181 and 187) and faxed them to [NAME]'s office at 5.40 pm (PX6 p130) the same day, a Friday. The searches showed [NAME]'s caveat entered against the title of the Laneway and no caveat recorded against the Property. The fax was addressed to [NAME]'s clerk (PX6 p148) but [NAME] personally perused the searches and noted lodgement of the caveat: PX6 p161; (See entries on p17 of [NAME]'s bill of costs – PX7). 78 22 May 1999: [NAME] sent a fax dated 22 May 1999 to the attention of [NAME] headed "[NAME]" ([NAME] pp43-52 produced on subpoena from the records of their solicitors, [NAME], T, 704). This fax attached a number of documents marked with handwritten annotations. 79 23 May 1999: This is the date of a document entitled "Authority to Act" addressed by [NAME] to [NAME]: PX6 p121. It was not seen by [NAME] until 25 May 1999: PX6 p162. 80 24 May 1999: [NAME] had telephone discussions with [NAME] and [NAME]: PX6 p7 (para 39) and p161. [NAME] spoke to [NAME] for 12 minutes in respect of the hospitalisation of [NAME] and her anticipated length of rehabilitation, and had two telephone attendances on [NAME], one for 12 minutes and the other for 6 minutes. These dealt respectively with the effect of [NAME]'s inability to give evidence due to bad health, and the issue of engaging new Counsel because [NAME] was now unavailable: PX6 p161. 81 24 May 1999: [NAME] attended a conference in person with [NAME] "taking instructions re: future conduct of matter" (1.7 hours): PX6 p161. This appointment was recorded in [NAME]'s diary as being set down for 11:00am: PX16 (entry for Monday 24 May 1999). During this conference [NAME] made a call to the [NAME] at 11.55am for a duration of 1,986 seconds, just over 33 minutes: PX22; T611.14-17; T628.30-35; PX6 p9 para 49. 82 24 May 1999: [NAME] had requested earlier in the day, and his office received from his law stationer (at 12.06 pm-12.08 pm), a copy of [NAME]'s Caveat and the Deposited Plans referred to in the Folio Identifier searches of the Property ordered and received by [NAME] on Friday 21 May 1999: PX6 pp124-129 & 130. 83 24 May 1999: [NAME] e-mailed to [NAME] advising a new e-mail address at 4.16pm: PX6 pp109, 161. 84 25 May 1999: [NAME], solicitor, contacted [NAME] twice on behalf of [NAME]. He said that he had been consulted by [NAME]. Initially he asked that all further dealings with [NAME] be made direct and not through [NAME]. He then left a message that [NAME], a friend of [NAME], would contact him to provide instructions: PX6 p7 (para 40) and pp123 and 162. 85 25 May 1999: Telephone attendances by [NAME] on [NAME], in course of which she "made certain allegations against [[NAME]] about not providing full details of the true situation in the case" and that [NAME] was seriously ill in hospital and unable to travel (PX6 p7 para 41). [NAME] noted "concern [of [NAME] and [NAME]] of conflict of interests in instructions provided to date [by [NAME]]": PX6 p162 (item 162/18 minutes and item 166/12 minutes) and pp120, 122, 163 (Item 168/6 minutes). File note of [NAME] reads "need to vacate hearing/thought MS [[NAME]] in cahoots with CK [[NAME]] to lose house": PX6 p122. 86 25 May 1999: [NAME] perused "Authority to Act" dated 23 May 1999 signed by [NAME] in favour of [NAME]: PX6 pp121, 162. 87 25 May 1999: [NAME] telephone attendances upon [NAME] to discuss "possible conflict of interests between [[NAME] and [NAME]]", to note the unavailability of [NAME], QC and to arrange a conference: PX6 p7 (para 42) and pp120, 122 and 162 (item 163/12 minutes and item 165/12 minutes). 88 25-26 May 1999: First Defendant claims that his role as agent for [NAME] is terminated; [NAME] appointed in lieu: PX6 p121, Ex PX21, Affidavit of [NAME] sworn 21 February 2001 paras [2]-[3]. 89 26 May 1999: [NAME] telephone attendance upon [NAME]. File note records that [NAME] would call [NAME]; he "happy with [[NAME]'s] instruction"; "OK to bank cheq funds in"; and "he wants best for [NAME]": PX6 p118. [NAME] apparently engaged 6 minutes: PX6 p163. 90 26 May 1999: [NAME] banked in his trust account a cheque for $5,000.00 received from [NAME] on account of costs and disbursements of [NAME]: PX6 p117. 91 26 May 1999: [NAME] attendances on [NAME] and [NAME] to confirm that [NAME] had given permission for [NAME] to attend that day's conference with counsel: [redacted] 92 26 May 1999: [NAME] exchange of e-mails with [NAME] with respect to the chance of appealing any adverse decision, vacating hearing date, and defence: PX6 p163 (items 169, 170 and 174) and pp82-94, 119. Also a telephone attendance: PX6 p163 (item 176). [NAME]'s email to [NAME] (on the subject of "[NAME]-defence") is reproduced at PX6 pp89-94. At p88 it says of [NAME] (the Plaintiff) that "he dragged me into this case because I am the registered proprietor of the house and [NAME] wanted to make sure if his scheme could be completed, he knew where to get the money." 93 26 May 1999: [NAME], QC being unavailable, alternative senior counsel had been found: PX6 pp119, 163 (item 170). 94 26 May 1999: Conference between [NAME] and [NAME] in [NAME]'s chambers. [NAME] confirmed that he considered that there was a conflict of interests between the two [NAME] and that they should be separately represented. He recommended engaging Mr [NAME] to act for [NAME]. A further conference was appointed for Friday, 28 May 1999: PX6 p8 (para 43) and pp74, 81, 115-116, 147, 163. 95 27 May 1999: [NAME] letter to [NAME] reporting on conference: PX6 p8 (para 44) and pp74-75, 113, 164. 96 27-28 May 1999: [NAME] was not kept informed of developments in arrangements for the conference with [NAME] on 28 May 1999 arranged at the conference of 26 May 1999: PX6 pp8-9 (paragraphs 45-48) and pp81, 107, 108, 111-112, 114, 164-165. 97 28 May 1999: Friday. Four and a half hour conference in [NAME]'s chambers attended by [NAME] and [NAME], of [NAME] and [NAME] (See entry on [NAME]'s fee note – [NAME] p130). Subsequently, [NAME] advised by [NAME] and [NAME] that his instructions had been terminated and that [NAME] was now acting for both [NAME]. [NAME] informed [NAME] that he did not consider that there was now a conflict of interest between the [NAME]: PX6 p9 (para 47) 98 28 May 1999: By an e-mail dated 28 May 1999 terminating [NAME]'s retainer, [NAME] said "I am terribly sorry for such a short notice, for I have only learnt about the situation at night, 27th May 1999": PX6 p108. 99 29 May 1999: Saturday. [NAME] read documents provided by [NAME] and engaged in preparation in relation to affidavit evidence and Notice of Motion to vacate hearing dates (2 hours) - see entry on [NAME]'s fee note – [NAME] p130. 100 29-31 May 1999: Conferences between [NAME] (and deponents to affidavits to be sworn) and her lawyers to prepare for application to vacate hearing date and defence of District Court proceedings: [NAME] pp.130-131, PX4 p.225 101 Affidavits sworn by [NAME], and [NAME] on 31 May 1999: PX21 102 30 May 1999: Sunday. Four hours conference in [NAME]'s chambers attended by [NAME] and [NAME] (See entry on [NAME]'s fee note – [NAME] p131). 103 31 May 1999: Monday. [NAME] spent eight hours on the [NAME] matter. First, conference in [NAME]'s chambers attended by [NAME] and [NAME] to prepare affidavits. [NAME], preparation of Notice of Motion documentation and consultations with [NAME] (See entry on [NAME]'s fee note – [NAME] p131). 104 31 May 1999: [NAME] called upon [NAME] to return to [NAME] the $5,000.00 paid into his trust account on 26 May 1999 and called for an itemised account to be delivered to her: PX6 p106. 105 1 June 1999: Notice of Motion at District Court heard by Her Honour Judge Sidis. This proceeding was attended by [NAME] and [NAME]: Affidavit of [NAME] sworn 31 August 2001 para 6. [NAME] successfully sought to vacate the hearing date (See entry on [NAME]'s fee note – [NAME] p131). 106 [NAME] sought that costs be paid before the new hearing date. In response [NAME] observed that "the plaintiff has taken a caveat over the premises at [ADDRESS], [NAME] so in the long term certainly the cost issue is something that is secured your Honour." (transcript from District Court 1/6/99 p12 lines 36-45). 107 Judge Sidis made an order for costs against [NAME] and required [NAME] to show cause why he should not be required to indemnify the [NAME] in respect of the order for costs made against them: PX4 (1/6/99) p90 (transcript of District Court proceedings 1/6/99 – judgment of Sidis DCJ). 108 There is dispute between the parties as to whether [NAME] was present in Court at the time that [NAME] made reference to the caveat over the [NAME]. 109 8 June 1999: A view occurred at 228 [NAME], attended (among others) by [NAME] and [NAME] (2 hours) (See entry on [NAME]'s fee note – [NAME] p131; Affidavit of [NAME] sworn 31 August 2001 para 23; PX11; T, 505.5-13). 110 9-10 June 1999: Correspondence between [NAME] and [NAME] in which [NAME] observes that a number of communications sent to [NAME] from [NAME] were not included in [NAME]'s brief and requests [NAME] to forward copies of all documents held which were not included in the brief: PX6 p105. 111 11 June 1999: [NAME] affidavit (filed in the District Court proceedings on 6 July 1999) sworn: PX6 p2. The Affidavit outlines [NAME]'s involvement in [NAME] proceedings between 17 December 1998 and 28 May 1999 when his retainer was terminated. 112 11 June 1999: [NAME] letter to Law Society recording that one of [NAME] was out of the jurisdiction ([NAME]) and had no assets in the jurisdiction whilst the other had resided, and was likely to continue to reside, in China and had only "one asset in the jurisdiction being a house which [[NAME]] has placed a caveat over" ([NAME]): PX6 pp103-104. 113 18 June 1999: [NAME] undertook "research re enforcement of judgments" and had a discussion with [NAME], of counsel on that subject ([NAME] p132). 114 25 June 1999: [NAME] instructs [NAME] to prepare mortgage over [NAME]: Affidavit of [NAME] 12 October 1999, Annexure C. The letter referred to a loan made to [NAME] in January 1998 for US$430,000.00, a "nominal interest rate" [emphasis added], an agreed mortgage over the [NAME] and no deadline set for [NAME] to make a call on the funds. The letter noted that "The funds would have been borrowed at an exchange rate of 0.59" and that the mortgage agreement should be drawn up urgently for the parties to sign.

[ Comment : In the pleadings (para 41 of the [NAME] of Claim), para (a) of the Particulars (as distinct from the opening part of para 41) states that [NAME]'s case was that "[NAME] promised to repay … at the rate of US$0.58 to A$1.00 …", i.e. not $0.59. But nothing hangs on that 1 cent difference; the real issue is whether the intended exchange rate was to be so much less than the then prevailing rate at the time (13 February 1998) of the alleged loan (US$0.673 to A$1.00) or at the time (22 July 1999) of discharge of the alleged loan out of proceeds of the sale of the [NAME] (US$0.6488 to A$1.00), as explained earlier at [9].and [10] above). 115 28 June 1999: [COMPANY] searched Folio Identifier A/29028 (the [NAME]): PX6 p181. 116 28 June 1999: [NAME] execute mortgage: PX4 p104. The mortgage provided that: (i) the [NAME] ([NAME]) acknowledges receipt of the sum of $741,380.00 advanced on or about January 1998; (ii) the [NAME] shall pay to the Mortgagee interest on the advance in the amount of 9% per annum; (iii) the principal and interest is repayable to the Mortgagee upon demand: PX4 p105 Annexure "A"

[Comment: The $741,380 corresponds approximately to the (lower) exchange rate of US$0.58 to A$1.00. The interest rate of 9% per annum was clearly not "nominal" as stated in the letter of [NAME] to [NAME] ([NAME]) dated 28 June 1999 (annexure C of affidavit of [NAME] 12 October 1999). [NAME]'s explanation of these instructions (para 11 of his affidavit and T, 584-5) is that he understood the word "nominal" to mean "normal". The Plaintiff's contention is that this explanation is incredible, given his education and commercial experience (T, 570-2) as was evidenced to me when he was in the witness box, and his own "obvious familiarity with the meaning of the word "normal" (PX14, formerly in F16 at p102).] 117 6 July 1999: A solicitor for [NAME] appeared before Judge Sidis to show cause why he should not be required to indemnify [NAME] in respect of the order for costs made against them on 1 June 1999. The Plaintiff's solicitor was not present. Appearing for [NAME] observed that "(t)he plaintiff indeed has a caveatable interest over the house so it is not like the interests are not protected. The house is of substantial value. If there is any order as to costs, the position is protected.": District Court transcript (6/07/99) p12.1-6; see Affidavit of [NAME] sworn 31 August 2001 Annexure "G". 118 Her Honour Judge Sidis subsequently confirmed the order for costs made on 1 June 1999 against [NAME] to be paid as assessed without the application of any stay pending the outcome of the proceedings and required the [NAME] to pay the costs incurred by [NAME]: District Court transcript (6/07/99) p12.53-58. 119 9 July 1999: [COMPANY] searched Folio Identifier A/29028 (the [NAME]): PX6 p181. 120 9 July 1999: [NAME] exchanged contracts for sale of the [NAME] (A/29028) with an unrelated party, [COMPANY], for a sale price of $825,000.00. 121 14 July 1999: The District Court proceedings were the subject of an unsuccessful application made by [NAME] and [NAME] on 14 July 1999 (before Her Honour Judge English) to vacate the already deferred hearing date of 28 July1 999 upon which the final hearing of the proceedings was to commence. 122 20 July 1999: [COMPANY] searched Folio Identifier 1/521774 (the [NAME]): PX6 p187. 123 22 July 1999: Settlement of sale of property between [NAME]. Transfer registered: PX4 p106. Net proceeds of the sale after commission and legal costs ($804,987.98) were paid by [NAME] by direction to [NAME], on the First Defendant's case, pursuant to and in discharge of the mortgage: Affidavit of [NAME] sworn 12 October 1999 para [15]. 124 28 July 1999: District Court Hearing Commenced. 125 16 August 1999: [NAME] assured [NAME], by telephone, that he would pay [NAME]'s account for costs and disbursements: PX6 p178. 126 19 August 1999: [NAME]'s Statement of Account [addressed to [NAME] care of [NAME]] "as per orders" made by Sidis DCJ on 6 July 1999: PX6 p143. 127 5 October 1999: Original Statement of Claim in these Supreme Court proceedings filed 5 October 1999 (Amended 8 February 2000, Amended for a [NAME] time 27 August 2001). 128 29 October 1999: Judgment in District Court proceedings for Plaintiff on claim for remuneration for building works. Plaintiff's claim for wrongful imprisonment rejected: PX4 p17ff. 2000 129 18 July 2000: [NAME] sued [NAME] and [NAME], all as former clients, for his costs and disbursements: PX6 pp173-174. 130 22 August 2000: Judgment entered in favour of [NAME]: PX6 p175. 131 12 September 2000: A Writ of Execution issued (at request of [NAME]) against [NAME] returned unsatisfied: PX6 p176. 132 16 November 2000: By consent, [NAME]'s judgment against [NAME] was set aside upon [NAME] submitting to an order for costs: PX6 p175. QUESTIONS FOR RESOLUTION 133 I turn now to the issues requiring resolution, both factual and legal. These are stated in the form of a series of questions which I have formulated below. 134 Question 1 - Sham transactions? (i) Was there a bona fide loan transaction of 13 February 1998 between the First Defendant ("[NAME]") and [NAME] Defendant ("[NAME]") or was it a sham? (ii) Was the mortgage of 28 June 1999 given over the [NAME] by [NAME] to [NAME] a sham? 135 Question 2 - Fraudulent Conveyances? (i) Did the alleged loan transaction, the mortgage of 28 June 1999 or the sale and discharge of mortgage effected between 9-22 July individually or in combination constitute an "alienation of property" by [NAME] within the meaning of s37A of the Conveyancing Act ? (ii) If the answer to question 2(i) is in the affirmative: (a) Was the Plaintiff a "creditor" of [NAME]? (b) If the Plaintiff was a creditor, was there an alienation of property by [NAME] with intent to defraud the Plaintiff, rather than the mere preference of one creditor over another, in terms of the principles discussed in Middleton v Pollock [1876] 2 Chd 104, Clegg v Bromley [1912] 3 KB 474 and Abignano v Wenkart (1998) 9 BPR 765? (c) Was the Plaintiff a "person thereby prejudiced" within the meaning of s37A? (d) Was the First Defendant, [NAME], "a purchaser in good faith not having, at the time of alienation, notice of the intent to defraud creditors" within the meaning of s.37A? ([NAME] of Claim – paras [38] and [39])

(iii) Depending on the answer to these questions, is the Mortgage and, if and to the extent it be found that the loan underlies the mortgage, the loan liable to be set aside under s37A of the Conveyancing Act and, if so, with what consequences? (see paras 49 and 50 of the [NAME] of Claim) 136 Question 3 - Estoppel? With respect to the Plaintiff's claim of estoppel: (a) Can the Court be satisfied that [NAME] was aware that on 1 June 1999 before Sidis DCJ Counsel for [NAME] made a statement to the effect that the [NAME] would be available to meet an order for the costs thrown away by the vacation of the hearing date of the District Court proceedings? (b) If so:- (i) was [NAME] aware that the Plaintiff's solicitor had made a mistake as to the title over which she had placed the Plaintiff's caveat? (ii) was [NAME] aware that the Plaintiff's solicitor was labouring under a misapprehension as to the title over which she had placed the Plaintiff's caveat? (iii) was [NAME] aware that the Plaintiff was claiming to be entitled to a lien over the Property by reason of having undertaken the work which interest might compete with [NAME]'s entitlement to a mortgage over the Property? (c) Did the Plaintiff act to his detriment in reliance upon the representation made to Sidis DCJ by [NAME]? (d) [NAME] come under any (and if so what) duty to advise the Plaintiff of the Plaintiff's solicitor's mistake having regard to the fact that [NAME]'s statements to Sidis DCJ were made by him as counsel for [NAME] not [NAME]? (e) If the answers to (a)-(d) are in the affirmative, was [NAME] thereby precluded (by application of principles governing abuse of process and estoppel) from: (i) asserting an entitlement to repayment of the loan alleged to have been made on 13 February 1998; (ii) relying on the Mortgage ? 137 Question 4 - Equitable lien or charge in equity? In respect of the Plaintiff's claim to an equitable lien or charge in equity: (a) Did the contract relied upon by the Plaintiff for the recovery of payment for work done by him for [NAME] contain a provision (express or implied) entitling him to any (and if so what) interest in the [NAME] so as on that basis to entitle the Plaintiff to an equitable lien or charge in equity over that property, or would otherwise such entitlement arise on the basis pleaded? (b) If the undertaking of the work pursuant to that contract gave rise to an interest in the Property, was in any event such interest extinguished when the Plaintiff left the Property in 1995? 138 Question 5 - Priority of mortgage over equitable claim? If the Plaintiff became entitled to an equitable lien: (a) [NAME] have notice of the lien? (b) If [NAME] had notice of the equitable lien, did he act unconscionably in registering the Mortgage obtaining thereby priority for the repayment of his loan? (c) Did the Plaintiff's interest prevail over [NAME]'s interest as mortgagee of the Property? (d) Was the conduct of [NAME] such as to prevent him from retaining the net proceeds of sale of the Property in partial satisfaction of the debt owed to him by [NAME]? 139 Question 6 - Conspiracy to injure? Did the creation of the loan, the entry into the Mortgage and/or the repayment of the loan by [NAME] involve: (a) an intention on the part of [NAME] and [NAME] to injure the Plaintiff; and (b) the undertaking of any (and if so what) unlawful acts or otherwise so as to constitute a conspiracy against the Plaintiff? 140 Question 7 - Damage to Plaintiff? If the answer to question 6 is in the affirmative, has the Plaintiff suffered any (and if so what) damage by reason of that conspiracy and its being carried into execution? Question 1 – Sham transactions? 141 The Plaintiff contends that there was no bona fide loan transaction between [NAME] on or by the 13 February 1998. There was thus no loan capable of being secured by the mortgage over the [NAME]. On the other hand, the First Defendant claims that there can be no doubt that the original loan was a genuine transaction, that it was established by the Affidavit evidence of both of the participants and corroborated by the bank records identifying the transfer of the funds from [NAME]'s account to [NAME]'s in February 1998. I turn now to consider that evidence in greater detail. 142 Clearly, on [NAME]'s own account, the agreement, if made, was oral. Not only was there no written agreement, there was no letter or contemporaneous diary note or other record produced, recording terms or referring to the loan. All there was, was the bank documents recording a transfer between an account in his name in a Hong Kong bank to an account in [NAME]'s at the same bank but bearing his PO box number. The only witnesses were [NAME] between whom according to [NAME], there was then and thereafter a continuing, close friendship; T, 579, 581. That is not necessarily fatal but such extreme informality for so large a sum, even between friends, is a factor tending against there being any genuine loan though consistent with the money being provided by [NAME] to [NAME] for investment on his behalf as further evinced by the common post office box number in the two addresses being [NAME]'s box number. This is particularly when considered in context with other factors. There were, it is true, the bank documents though with the same box number, namely [NAME]'s. Those documents of themselves provide no evidence as to the reason for the money transfer. It might have been equally a loan, or money made available to invest. Moreover, it should not be overlooked that the money belonged not to [NAME] but his mother; it was not as likely that he would be lending his mother's money to his friend, as against investing it for his mother. There is no evidence of a gift from mother to [NAME] her son. 143 The First Defendant contends that in late January or early February 1998 he and [NAME] had a conversation in Guangzhou China in which she requested a loan of capital to do some trading in the foreign exchange and share markets; Affidavit of [NAME] sworn 12 October 1999 para [4]. According to the First Defendant, [NAME] said that she was prepared to give him a mortgage over the property at [NAME] at an exchange rate of 0.58 and 9% interest for the $US430,000 promised; Affidavit of [NAME] sworn 12 October 1999 para [4]. 144 To elaborate, the money in question, as I have said, was money of [NAME]'s mother, not [NAME]'s, being compensation for resumption of his mother's house in China. She did no more than authorise him to remit the money out of China (Ex DX15 authority dated 1 October 1996, three certificates dated 6 February 1998, Foreign currency Sales Form debt 9 February 1998 and Remittance Acknowledgment dated 10 February 1998). That [NAME], a foreign exchange dealer at the time (T, 635) might be given the money to trade for his mother would be perfectly explicable. That he would lend it to [NAME] for her to trade as principal is rather less credible. What actually happened was that on 13 February 1998 [NAME] transferred the sum of US$430,580 from his account No. 275-321230 in the Hang Seng Bank in Hong Kong to [NAME]'s account in the same bank No. 275-308799: see statements of Bank Accounts Annexures "A" and "B" to Affidavit of [NAME] sworn 12 October 1999. But significantly, the address for [NAME] on [NAME]'s account was [NAME]'s own post office box in Chatswood, not [NAME]'s own address; see annexure B and T, 640. Clearly, a sum of US$430,580 changed hands. The Plaintiff contends that the transfer was facilitated solely for the benefit of [NAME] rather than [NAME]; T, 640.8-20. In support the Plaintiff also emphasises the absence of written records of the alleged conversations and the fact that [NAME] and [NAME] were the only persons privy to the alleged conversations; T, 640.50-59. 145 There are moreover a number of aspects of the claimed loan which cast doubt, cumulatively if not individually, on its genuineness, apart from what appears to be an unauthorised use of his mother's money. First, he is, on his account, lending totally unsecured and undocumented. Documentation and security only comes into being on [NAME]'s urgent instructions 18 months later, when clearly advice was then being sought by [NAME] on behalf of [NAME] and her mother in the circumstances of the Plaintiff's litigation and a proposal for disposal of the [NAME] land to [NAME]; see [152(b)] below. According to the note of 25 June 1999 to [NAME] of [NAME] from [NAME] (PX4 at 114) "In January 1998 both [NAME] and I agreed to make a transaction of US four hundred and thirty thousand to be given to [NAME]", and "a nominal interest rate was set …" adding "the funds would have been borrowed at an exchange rate of 0.59". Yet despite that apparently clear statement there were the following discrepancies: (a) the bank documentation shows that the money went between the two accounts, each bearing the same PO box of [NAME]'s, not in January 1998, as also stated (wrongly) in the mortgage, but on 13 February 1998; (b) the "nominal" interest rate (which [NAME], incredibly, equated to "normal" interest, despite his property and business sophistication, fluent English and use of the word normal in other context which showed he understood it as I explain further, below) became in the mortgage, for no apparent reason, 9%. (c) On top of that supposed substantial interest rate, the funds were inexplicably to be borrowed at an exchange rate of 0.59 (there is confusion also between 0.59 and 0.58 as the rate but nothing hangs on that), according to the note; thus despite this exchange rate being already greatly to the advantage of the lender and the disadvantage of the borrower, when the prevailing market exchange rate was 0.67; that would have cost [NAME] immediately the sum of A$102,588 if called up; the loan, being on-demand, could have been called up immediately to her substantial disadvantage. (d) The mortgage as documented refers to "the sum of $741,380 advanced on or about January 1998" when the loan advanced was in reality A$639,791.97; had the arrangement been as claimed, the mortgage would more appositely have been expressed as securing an advance of US$430,580, to be repaid in Australian dollars, to be converted at the (deemed) exchange rate of 0.59. 146 Thus, if one takes into account both the 0.59 exchange rate and the supposed 9% interest rate on top, the effective interest rate over the 18 months is exorbitant. The $102,588 increment corresponds over one year to an interest rate already over 16%. So onerous an arrangement does not accord with the kind of deal that a sophisticated exchange dealer like [NAME] would make against her interest. Although no evidence was given on the point, there is nothing to indicate that she was not in a position to borrow against the [NAME] on reasonable terms and the terms claimed by [NAME] to have applied were hardly reasonable, in particular a deemed unfavourable exchange rate of that order. Nor does it appear compatible in its onerousness with [NAME] and [NAME] being such good friends. It looks more likely a device to eliminate any asset in [NAME]'s hands available to meet the Plaintiff's judgment while restoring the money lost to the [NAME] where it could not be traced. 147 So far as my impressions of [NAME] as a witness, I found him intelligent and astute and certainly not someone who would confuse, with his sophistication and command of English, the word "nominal" for the word "normal", as he claimed. I found him at times to prevaricate as, for example, on whether in September 2000 his assistance had been sought to find [NAME] and [NAME]. He claimed to have no knowledge of where they were yet there was no suggestion that he was not a close friend of [NAME]'s on a continuing basis even if there had been tension (see [180] below) at some point in the arrangements with regard to [NAME]. Summing up, I formed the impression that [NAME] would not hesitate to do all he could to assist [NAME] and her mother in frustrating any future judgment that the Plaintiff might obtain and would not be excessively scrupled in how this was done. 148 It was thus hardly surprising that, faced with a claimed loan arrangement seemingly so one-sided against [NAME] of [NAME] made a diary note expressing his concern for "evidence of the loan occurring and of the agreement that it be secured" adding "made it clear I was only acting for him"; PX4, p115. If he were acting for [NAME], he might indeed have had a conflict. [NAME] follows this up with a letter of 19 July 1999 noting to [NAME] that "you are to provide me with evidence of the relevant transaction and the agreement that it be secured" and asking again "Will you please let me have this information for my file as soon as possible"; PX4, p124. All he ever got, it appears, was [NAME]'s bank statement with the Hang Seng Bank in Hong Kong, showing a deposit on 12 February 1998 of US$430,580 and a withdrawal next day of the same amount. [NAME], clearly in the First Defendant's camp, was not called to give evidence, nor [NAME]'s mother likewise, whose money was being used. 149 There is a further matter telling against the genuineness of the loan. When on 22 July 1999 [NAME] received the whole of the net proceeds of sale of the [NAME] totalling $804,467.99 (T, 634) he immediately transmitted most of the money out of Australia to his same bank account in Hong Kong (PX4, p132 and following, affidavit paras 18, 19 and 21). But he then "lent" to and applied for the benefit of, [NAME] a substantial amount of money (roughly $67,000); affidavit paras 23-25, He did so without security and without subsequently receiving payment or making any demand for repayment; T, 634. 150 In considering the Plaintiff's claim that the loan was spurious, it is also necessary to refer by way of background to the period prior to [NAME]'s instructions to [NAME] on 25 June 1999 to prepare the mortgage over the [NAME]. I turn first to [NAME]'s email of 4 April 1999 to [NAME] which records that "The house - I understand your concerns. But if I don't put a caveat on the house you will not be protected"; PX6 at 135. In cross-examination [NAME] claimed that he wanted first and foremost, to protect his own interests in the property but considered that in putting the caveat on the property he was also protecting [NAME]'s interests because she would not need to pay his loan to her out of a source other than the house; T, 621.439-T, 622.3. That claim lacks plausibility, as the caveat could have no effect on her liability if genuine, to repay the loan; it would merely freeze the capacity to sell the house while the caveat remained thus protecting [NAME] but not protecting her. [NAME] would as a financially sophisticated and astute property manager of a [COMPANY] have appreciated that, it can confidently be said. [NAME] also said that he understood [NAME] to be concerned that the anticipated litigation against the Plaintiff might be very expensive and that she was worried that [NAME] was pressing his claim; T, 621.25-37. 151 In the conversation said to have taken place between [NAME] in late January or early February 1998 in Guangzhou China, according to [NAME]'s affidavit account (para 4 of affidavit of 12 October 1999) [NAME] offered [NAME] 9% interest on the sum of US$430,000 advanced. Yet in the earlier letter of 25 June 1999, written just under four months earlier by [NAME] to [NAME], at [NAME], instructing him to prepare the mortgage on [NAME]'s property and at a time when it was yet to be known what would be the property sale price, [NAME] instructed Richard that a "nominal interest rate was to be set". [NAME] deposed in his affidavit of 12 October 1999 that at the time that he wrote the letter of the 25 June 1999 he understood the word "nominal" to mean "normal" and that the agreed rate of interest of 9% was consistent with this understanding. Two points in particular point to this being recent invention, and strongly militate against such an understanding, seriously undermining the credibility of [NAME]'s evidence on this crucial point. The first is [NAME]'s education and commercial experience. He obtained a Bachelor of Electrical Engineering in 1984 from the University of New South Wales, held a position as sales administrator with Mitsubishi Electric, was Product Manager with GEC, property manager of a [COMPANY], and Managing Director of [NAME] (an overseas company), the latter which required him to attend to financial management of the company (T, 570-572). [NAME], is [NAME]'s own evident familiarity in other circumstances with the correct meaning of the word "normal". This was reflected in his letter of 7 October 1997 to the Department of Immigration in which he stated that the Plaintiff "would not normally be permitted to get into Australia under the points system" and that the Plaintiff should be deported immediately "so that the [NAME] can return safely and get on with their normal lives" (PX17). 152 Against this commercial experience and other usage I do not at all accept [NAME]'s contention that he misunderstood the nature of the interest rate governing the mortgage between he and [NAME]. But his transparent lie about misunderstanding the meaning of "nominal" is highly significant as to his credit generally. It bespeaks a willingness to twist language to suit his case; here to maximise the sum owed to [NAME] to equate or exceed the proceeds of sale of the property paid across to [NAME]. This was, I infer, in order to protect the house and its proceeds to the greatest extent possible. [NAME] claims that he is owed even more than the value of the house as sold to the third party. As the earlier calculations make clear, even with the artificially set and inflated US exchange rate of the supposedly agreed 58 or 59 cents to the A$, the later known sale proceeds paid by direction in their entirety by [NAME] to [NAME] ($804,987.98) well exceeds the A$ equivalent of the loan at that rate (A$741,380). Faced with the apparently illogical conduct of [NAME] paying over more than [NAME] owed to [NAME] even on [NAME]'s version of what occurred, the 9% interest rate was, I infer, simply a "deus ex machina" concocted to make up the shortfall. There could be nothing "nominal" about an interest rate of 9%. That in turn casts such doubt on [NAME]'s account of there having been a loan at all, as distinct from trading by [NAME] on his own or mother's account through [NAME]'s foreign exchange dealership, as to lead me to conclude there never was a genuine loan by [NAME] to [NAME]. By then, 25 June 1999, without recourse to any documents in [NAME] whose admissibility is challenged: (a) the Plaintiff's claim against [NAME] was known and clearly a cause of concern to [NAME] and [NAME], with a hearing date looming on 28 July 1999 with no further delay likely to be countenanced; (b) As at 5 May 1999 [NAME] (briefed on the advice of [NAME] pursuant to instructions given by [NAME] to [NAME] at their conference with [NAME] on 30 April 1999; T, 600-1, PX6 at 43-4) is asked whether the [NAME] could be sold to [NAME] for a price ($750,000) exceeding what is then said to be owed to [NAME] ($600,000), and the $150,000 surplus then returned to China, without the Court setting aside the sale; also asked whether, if judgment were entered against the [NAME] "can such judgment be enforced against assets [which would on that analysis include the $150,000] held by the Defendant in Hong Kong and/or mainland China". This further undermines the case for there being a genuine loan at all, for here it is treated as only $600,000. Less than two months later, by the time the mortgage is signed, the so-called loan has climbed to over $800,000. It is escalated by the convenient discovery of the 9% interest, now added to the onerous deemed exchange rate of 0.59. Moreover, sale of the Property to [NAME] is not compatible with it being mortgaged to [NAME] already. There is no suggestion in the advice sought, that the property is already agreed to be mortgaged to [NAME]. Nor that he was asking about whether he could foreclose by having it transferred to himself. 153 Moreover, although [NAME] says that he asked [NAME] on 21 May 1999 to lodge a caveat against the Property in his own interests (and that was a matter of considerable importance to him), he never in fact lodged such a caveat and he never pressed [NAME] on performance of those instructions; T, 593-594, 604-611). In the same evidence, he denied having any discussion about [NAME]'s caveat with [NAME] on 24 May 1999 even though the objective evidence (summarised below) is that by title searches on 21 May 1999 [NAME] had notice of the caveat being on one only of the two title deeds relating to the property; and on 24 May 1999, at the very time [NAME] was conferring with [NAME] personally and with [NAME] by telephone, he received a copy of the caveat, supporting a likely inference that [NAME] discussed the caveat with [NAME] and [NAME] at that time. 154 Thus, as to notice of the Plaintiff's caveat being on one only of the two title deeds (the laneway of little value), the evidence is to the effect that, at the very time [NAME] and [NAME] were in conference on Monday 24 May 1999 (between 11 am and 12.42 pm or thereabouts), and in communication with [NAME] by telephone (between 11.55 am and 12.28 pm or thereabouts), [NAME]'s office received from his law stationer (at 12.06 pm-12.08 pm) a copy of [NAME]'s Caveat and the Deposited Plans referred to in the Folio Identifier searches of the Property ordered and received by [NAME] on Friday 21 May 1999. See PX6 p124-129, 130, 130-132, 161; Exhibit 7; PX16 (entry for 24 May 1999); [NAME] (entry for 11.55 am on 24 May 1999, recording a telephone call from [NAME]'s mobile phone to the [NAME] for a duration of 1,986 seconds, just over 33 minutes); and T, 609-610, 628-629 and 700-703. 155 The Chronology based on PX6 (with which PX7 should be read in relation to events occurring on 20-21 May 1999) provides a convenient means of identifying events of particular significance. In general terms, reference should be made to entries relating to 17 and 28 December 1998; 7, 20 and 28 January, 8 February, 4, 10, 11, 12, 19, 21 and 30 April, 5, 11, 17, 20, 21, 24, 25, 26 and 31 May and 11 June 1999. The following points, in particular, should be noticed: (a) In relation to references to a "caveat" in entries for 4 and 12 April 1999 and 20 May 1999: although [NAME] says that he asked [NAME] to lodge a caveat on the [NAME] to protect his (i.e. [NAME]'s) "lien" over the property, and he instructed [NAME] to obtain title searches for that purpose, he denies (T, 605) any suggestion that (on 21 or 24 May 1999 or otherwise) [NAME] reported to him the fact of [NAME]'s caveat or the existence of two title deeds for the Property. Although he says he was acutely concerned about his own interest in the Property, he says that he never followed-up his request that [NAME] lodge a caveat on the property to protect his "lien"; T, 605-612. Paragraph 4 of [NAME]'s email to [NAME] of 4 April 1999 (PX6 p135) betrays a concern on the part of [NAME], about [NAME]'s proposal of a caveat, which is inconsistent with any suggestion that she agreed in February 1998 to provide security in his favour. He says "the house - I understand your concerns. But, if I don't put a caveat on the house, you will not be protected". That is totally at odds with his instructions to [NAME] on 25 June 1999, that back in January 1988 "both [NAME] and I agreed that I would hold a mortgage over the property at [ADDRESS], [NAME]" (PX4, p114). If she did indeed agree to a mortgage, she could hardly object to the lesser intrusion of a caveat. And if she did not, as appears more likely, it is equally likely she did not agree to a loan either. (b) In relation to entries for 21 and 24 May 1999: These need to be assessed against the background that [NAME]'s caveat was lodged at the Land Titles Office, and was the subject of a "Registration Notice", on 20 May 1999 (PX4 pp107-109). [NAME] v [NAME] 156 Finally, there is a complete absence of any witness evidence in support of this alleged loan (and mortgage) transaction from other than [NAME] save the wholly untested evidence of [NAME] (in her District Court affidavit of 9 August 1999, DX14). The Plaintiff contends that this supports the drawing of adverse inferences against [NAME]. I agree; the cumulative effect of the evidence does suffice for this purpose. The Plaintiff invokes the principles of Jones v Dunkel (1959) 101 CLR 298 at 320-1, relying on the First Defendant not having called a number of witnesses, identified below. 157 I consider below the First Defendant's responses against the application of [NAME] v [NAME]. This is in determining whether the inference that I am already prepared to draw, that the loan and mortgage were shams, is strengthened because it can be assumed, conformably with the principles in [NAME] v [NAME], that any evidence from these witnesses would not have assisted the First Defendant's case. In so doing I must take into account any constraints on the application of those principles such as whether a witness was available to the First Defendant, or truly "in his camp". (a) [NAME] appear to be in China. It is put that there is no evidence that they were willing to give evidence, nor is there any way they could be required or compelled so to do. They are thus not available to be called, so taking them outside the rule in [NAME] v [NAME] . I agree with that proposition, as far as it goes. But the fact remains that they, as co-[NAME] have chosen not to give evidence in support of the position put by [NAME] in the District Court that there was this loan (see their DX14). Their failure to give that evidence in this Court in these proceedings, casts doubt, as against [NAME], of the veracity of this alleged bipartite arrangement. [NAME] is in those circumstances not in a position to rely on [NAME]'s untested evidence in her affidavit of 9 August 1999 in DX15. (b) [NAME] it is said could hardly be said to be in the First Defendant's camp so as to satisfy the rule in [NAME] v [NAME]. By the time of the hearing, [NAME] was not [NAME]'s solicitor, but had sued him for his fees. I agree; no [NAME] v [NAME] strengthening of inference is available as regards him. (c) the First Defendant called [NAME] (of [NAME]) who had the conduct of [NAME] defence, being the only matter in which [NAME] relevantly had instructions. He was cross-examined. It has not been shown says the First Defendant that [NAME], who supervised [NAME], would have given evidence that [NAME] was not in a position to give, so that the rule in [NAME] v [NAME] seems not applicable. Again, I agree. (d) [NAME] received instructions from the First Defendant to prepare the mortgage. He is in the First Defendant's "camp" with no suggestion that he was not available to be called. It is said against, that [NAME] had no knowledge of the transactions independently of the instructions he received from [NAME] and [NAME]. That however is by no means self-evident. The First Defendant in opposition says that "No doubt had [NAME] been asked to relate what he had been told by [NAME] or [NAME] there would have been vigorous and justifiable objection". That proposition though must depend on whether such an objection, based it can be taken upon legal privilege, would be sustained, or whether instead the exception from the privilege in s125 of the Evidence Act would apply. The exception applies, relevantly, where either the communication made or document prepared is (i) "in furtherance of the commission of a fraud", or (ii) for a communication or contents of a document which the client or lawyer "knew or ought reasonably to have known was made or prepared in furtherance of a deliberate abuse of a [statutory[ power". For reasons set out in my judgment of Kang v Kwan ([2001] NSWSC 698, 16 August 2001, unreported) I consider that the exception would have applied, so as to remove the relevant communications from the protection of legal privilege, insofar as they were made in furtherance of the commission of a fraud. Moreover, the Court's common law powers are preserved by s11 of the Evidence Act to deal with abuse of process. That was confirmed in Vander Lee & [NAME] v State of New South Wales & [NAME] ([2002] NSWCA 286, 30 August 2002, unreported) as also (by majority) that "power" in s125(1)(b) of the Evidence Act includes a power to bring proceedings. The preparation of a mortgage in the circumstances here prevailing was in furtherance of an abuse of the power (even if unwitting on the part of [NAME]). It is, moreover, a power conferred by statute. Such a mortgage would, unless the mortgage were set aside, or fraud found, prevail upon registration by the solicitors concerned over any prior unregistered equitable interests, such as the Plaintiff's claimed lien. Such an application of s125, hypothesised as being in course of trial, presupposes, not a final finding that there were furtherance of a fraud, or abuse of power, but merely, as s125(2) mandates, "reasonable grounds" for so finding. Hence I would consider the principle in [NAME] v [NAME] applicable to [NAME], so that the absence of [NAME] as a witness called by the First Defendant does strengthen an inference against the genuineness of the loan which is otherwise capable of being drawn. Likewise as to the sham character of the mortgage. [NAME] is an important witness, given his receiving instructions from [NAME], and the way he then pressed for further information as to the loan from [NAME]. I certainly would not consider [NAME]'s likely evidence as merely duplicative of others. (e) Similar objection was taken to the application of [NAME] v [NAME] to the failure to call [NAME]' Counsel. I reach the same conclusion about his absence as I do for [NAME]. (f) No express point was made in answer to the principle in [NAME] v [NAME] applying to the failure to call [NAME]'s mother, whose money was being used, but to lend to [NAME]. She is covered by [NAME] v [NAME]. (g) Finally, as to [NAME], it is said that she "was presumably as much available to the Plaintiff as to [NAME]". But that is not so; clearly she was in the [NAME]' camp. As to the evidence she might have given, that would depend on what was elicited having regard to the following matters submitted by the Plaintiff in its written submissions in chief (pp11-12), quoted below: "The fact that on Sunday 23 May 1999 [NAME] jointly appointed [NAME] as their agent (PX6 p121) in lieu of [NAME], after having: (i) received from [NAME] a copy of [NAME]'s letter dated 17 May 1999 and the enclosures with that letter, including the Brief dated 5 May 1999 addressed to [NAME] (T, 603); (ii) discussed those documents with [NAME] on 18 May 1999 (PX21 para 15); and (iii) received from [NAME] a letter dated 21 May 1999 calling for the [NAME] to be "transferred to [him] as soon as possible" and at their cost as to payment of stamp duty ([NAME] p43 paras 4 and 6); provides strong evidentiary support (corroborative of the protests recorded in [NAME] at p47 para 1 and p51 para 9) for a finding not only that neither of [NAME] believed that they were indebted to [NAME] or that he had an interest in the [NAME] but also a finding that, in truth, there was no indebtedness and [NAME]'s evidence to the contrary is false." 158 I agree with that proposition. 159 The principles in [NAME] v [NAME] would in my opinion apply to the failure by the First Defendant to call [NAME]. [NAME] 160 Finally, I need to deal with [NAME], whose admission at all, and then against [NAME], was strenuously opposed by the First Defendant. In so doing, I should emphasise that my conclusion that there was no genuine loan and that the mortgage was likewise a sham, does not need to rely upon that material. That conclusion sufficiently emerges from what has already preceded, though I consider [NAME] supports that conclusion. 161 [NAME] falls for considerations particularly as regards documents at pp43 to 52 inclusive. Those documents were admitted as against [NAME] pursuant to s63(2) of the Evidence Act conformably with s67 of that Act. Section 63(2) provides that the hearsay rule does not apply to: "(a) evidence of the representation that is given by a person who saw, heard or otherwise perceived the representation being made, or

(b) a document so far as it contains the representation, or another representation to which it is reasonably necessary to refer in order to understand the representation. " 162 Clearly enough, it was hardly practical to give notices in terms of s67 that such evidence would be adduced, given the lack of knowledge as to where [NAME] currently are to be found. 163 I should add that insofar as admissibility of these documents was resisted on the grounds that they were legally privileged, I have dealt with the basis for that being no impediment to their admission by reason of s125 and the exceptions there to be found, in my earlier cited judgment of 17 August 2001; see [157(d)]. It must be emphasised, as that judgment does make clear, that the admission of the documents depended upon a conclusion which I there reached, that there "are reasonable grounds for finding that fraud in the sense of alienation of property within intent to defraud creditors, did occur by reason of the disposition of the [NAME] and the associated mortgage, within the meaning of s37A of the Conveyancing Act 1919, where fraud is used in a sense that connotes dishonesty". I am now engaged in a final determination of these matters but the admissibility of that evidence does not depend upon the outcome of that final determination. Similarly, the decision rests upon what is said about whether there was an abuse of process, determined at a prima facie level, so as to constitute a dishonest abuse of power within the meaning of s125. That is dealt with at para 44 of the above judgment and provides an independent basis for the admission of the documents. 164 It is necessary now to consider the particular group of documents in [NAME] grouped as I will refer to them at pp43 to 52 inclusive. 165 The documents consist of a fax sent to [NAME], partner of [NAME], with handwritten annotations introduced by handwriting of the opening of the fax in the following terms, which make clear that the fax is from [NAME], as appears also from the handwriting. In other words, the fax on its face professes to be from [NAME] and much, if not all, of the handwriting which follows, appears to match that handwriting so far as the written annotations are concerned. I am prepared to infer the fax does emanate from [NAME]. 166 The critical document in this group is that contained at pp50 and 51 of the group of documents sent in the fax. There is however also relevance or potential relevance in the annotations at p47 being the letter written by [NAME] to [NAME], QC of 5 May 1999 earlier referred to where, at p47, Counsel's opinion is asked: "1. Can the property at [ADDRESS], [NAME] be sold at market price to [NAME]. [NAME] is owed approximately $600,000 by the [NAME]. The value of the property is estimated to be $750,000. The balance purchase price of $150,000 would be then returned to China.

2. If this is done is it possible for the Court to set aside the sale.

3. If judgment is entered against the [NAME] can such Judgement be enforced against assets held by the [NAME] in Hong Kong and/or mainland China." 167 Against para 1 quoted above appear the words in handwriting which I infer were written by [NAME], "[NAME] said so? What does this mean?!!" Against the first sentence in para 1 there are two large question marks as also against the [NAME], further indicating [NAME]'s apparent disavowal of a debt of even $600,000 being owed or providing a basis for selling the property to [NAME]. All this is in a context where the clearly apparent common purpose is to prevent the Plaintiff from effectuating any judgment should judgment be obtained, and in a context where [NAME] and [NAME] were seeking to have the hearing date vacated. 168 Whether or not [NAME] ever saw this handwriting, it clearly is materially relevant that [NAME] themselves, as evinced by the handwritten annotation of [NAME], were strongly questioning why [NAME] should say that he is owed approximately $600,000 and questioning what it meant. Given that [NAME]'s case requires that he and [NAME], without having had any record of the arrangement, had entered into such a loan arrangement, it is highly relevant when clearly enough [NAME] share a common purpose, that [NAME] strongly questions that any such loan was ever made at all. I should add that s57(2) of the Evidence Act provides that "…if the relevance of evidence of an act done by a person depends on the court making a finding that the person and one or more other persons had, or were acting in furtherance of, a common purpose (whether to effect an unlawful conspiracy or otherwise), the court may use the evidence itself in determining whether the common purpose existed." 169 Here, the evidence clearly points to a common purpose of avoiding the consequences of enforcement of any judgment should it be obtained, by removal of [NAME]'s property at [NAME] and any proceeds of sale therefrom, so such proceeds are safely out of the jurisdiction. 170 Turning to the document at pp50 and 51 of [NAME], the letter on its face purports to be to the First Defendant, [NAME], from [NAME] and indeed bears, at p51 the handwritten annotation "from [NAME]". 171 The First Defendant strongly opposes the admission of this document at all and certainly against [NAME]. Thus the First Defendant contends (see written submissions p13 para 40.4) that "the document may well have been prepared by [NAME] as a draft of a letter she proposed should be sent by [NAME], for [NAME]'s acceptance or rejection. But there was no evidence that the draft was adopted (if ever seen) by [NAME], and it was certainly not seem by [NAME]. It can provide no evidentiary basis at all upon which to found a contradiction of [NAME]'s and [NAME]'s evidence of their loan transaction of early 1998." 172 Further, the First Defendant in those written submissions, at 40.5.1, states "the Plaintiff appears to accept that the evidence did not establish that [NAME] had seen (or adopted) the document [PWS para 23 'whether or not [NAME] saw …']; the uncontradicted evidence was that he did not [t/s 570/11-13, 653/39].

Accordingly, the document could not constitute evidence of an admission by [NAME]." 173 It is further submitted by the First Defendant that the document at pp50-1 was not shown to be a business record of the [NAME]'s solicitors, [NAME], nor of [NAME]. That submission is elaborated as follows: "Its availability as evidence of what did or did not pass between [NAME] and [NAME] is not enhanced by its possession in the hands of [NAME]. Indeed, the evidence related in PWS para 23 does not establish that the document was ever in the hands of any such business (whatever business that was) - it appears to have been sent by [NAME] to Mr [NAME]'s facsimile number, and may have been passed to his spouse, [NAME], as an incident of their personal relationship as much as in the conduct of any business of [NAME]." 174 Finally, it is contended that it must be excluded under s69(3) of the Evidence Act which provides that the exclusion of the hearsay rule in relation to a document containing a representation where the documents is or forms part of the business records, does not apply "if the representation: (a) was prepared or obtained for the purpose of conducting, or for or in contemplation of or in connection with, an Australian or overseas proceeding, …" 175 I am satisfied that this group of documents including that at pp50-1 forms part of the business records of [NAME], as is clear from the opening annotation to the fax at p43. Quite clearly [NAME] played a role in the advice given. There is nothing to suggest that that role was purely as a friend and not connected to the business she conducted with her partner, [NAME]. 176 I am satisfied that s69(3) does not prevent the adducing of this evidence. As was said recently by Barrett J in Vitali v Stachnik [2001] NSWSC 303 [12]: "The purpose of the exclusion is … to prevent the introduction through this exception to the hearsay rule of hearsay material which is prepared in an atmosphere or context which may cause it to be self-serving in the sense of possibly being prepared to assist the proof of something known or at least apprehended to be relevant to the outcome of identifiable legal proceedings." 177 Here the "identifiable proceedings" then in contemplation were not the proceedings currently before me. Those earlier proceedings were proceedings in the District Court. Whereas, the proceedings before me are in this Court and were at the time not proceedings likely or reasonably probable but a mere possibility (compare [COMPANY] v [COMPANY] (NSWSC, Giles CJ CommD, 8 September 1997, unreported). The present proceedings before me deal with the outcome of events that had yet to occur, even if they were in the planning. 178 Finally, there is no question but that the material is relevant to the First Defendant's case. That case necessarily involves consideration of the extent to which [NAME] and [NAME] and in particular [NAME], shared a common state of mind. The relevant documents form part of a group sent by [NAME] to [NAME]' adviser. They include the principal opening document dated 21 May 1999, which [NAME] acknowledged is a copy of a letter or part of a letter he sent to [NAME], although he disclaimed knowledge of the length of the letter; T, 623, 643. 179 Finally, so far as the document at pp50-1 is concerned, and given the overriding context of the fax being sent following a telephone conversation between [NAME] and [NAME], the following should be found: (a) [NAME] has a connection with [NAME], as appears at PX6, p106, it being common ground that they are husband and wife; T, 547-8; PX21, para 26; (b) [NAME] authorised [NAME] to act on their behalf (PX6, p121); and (c) She seems to have done so as an officer of "[NAME]" (PX6, p106). 180 The foregoing reinforces that the document was accordingly part of the business records of [NAME]. It contains representations by [NAME] in circumstances in which they are not available to give evidence and thus should be admitted to show, at the least, the state of mind of [NAME]. 181 I turn now to the content of [NAME] and in particular the document at pp50-1. It was attempted to be suggested by the First Defendant in the written submissions that the letter was drafted by [NAME] for [NAME] to sign. That seems highly unlikely and I would find to the contrary were it necessary to do so. The letter is written complete with references to "[NAME]" or "my mother and I" and bears the clear stamp of an angry letter written by [NAME] with much of the anger directed at the lawyers. While on the state of the evidence I am not able to make a positive finding that the letter was actually sent to [NAME], and noting his denial that he received it, I am unable to make a finding one way or the other as to whether he did. However, even if he did not receive it, para 9, which I quote below, is highly relevant to the state of mind of [NAME], and thus the intrinsic improbability of there having been a genuine loan made by [NAME] to [NAME] in the terms he alleged or at all. I quote para 9 below: "9. What make you say that we owe you 600,000 to the lawyers? If you want to help us to transfer our house to you, you still don't need to create a case of owing you 600,000. And did not our house is worth 850,000, not 750,000? And what does it mean that the balance purchase price of 150,000 would be then returned to China? What does that mean? If like before, I could transfer the house to you as a gift, now that you are telling the world that I owe you money, if I give you the house, it would mean that I really owe you that much, have you ever considered my feelings? And where do you want me to transfer the money? If to China, then I would not be able to transfer it out of China later. I told you that you should not let the other side know that I have funds in Hong Kong, now you are telling them that, it seems you don't really care what happens to the assets under my name, if I transfer the house to you because I owe you, then the house under your name probably would be safe, but the funds under my name would not be safe, the court would still treat it as the same as the house under my name. Besides, I don't know what kind of action the court would take if it found that the house was transferred to you only days before the hearing. I hope you consider things on an overall scale, not just part of it." 182 Quite clearly the above quoted paragraph reflects a disavowal of there being a debt of $600,000 with the obvious corollary that for [NAME] to be consistent she would deny any debt of a larger figure also; especially significant is the reference to "create a case of owing you $600,000" [emphasis added] suggesting that any debt of that kind would be mere contrivance. Moreover, the concluding sentence makes clear that there is a consciousness that the transaction would not escape remedial action from the court clearly indicating that it was not seen as a legitimate or above-board transaction for the monies to be remitted out of Australia to Hong Kong or China. Conclusion 183 While the documentation in [NAME] and in particular that at pp50-1 is not necessary to reach the conclusion that both the alleged loan and the associated mortgage were a sham, since I have concluded independently of that material that both were shams, nonetheless the material is both admissible and strongly supportive of that conclusion, notwithstanding the strenuous protestations in the First Defendant's written submissions to the contrary. 184 It follows that I would answer question 1(1) and (2) that there was no bona fide loan transaction of 13 February 1998 but the transaction was a sham, and likewise the mortgage of 28 June 1999 given over the [NAME] was a sham in law; that is to say in accordance with the principles discussed in [NAME] v [NAME] 7 West Riding Investments Ltd [1967] 2 QB 786 at 802C-E, discussed in Esanda Ltd v Burgess [1984] 2 NSWLR 139 at 153C-154A and ICT Pty Ltd v Sea Containers Ltd (1995) 39 NSWLR 640 at 655G-656C). It represents a transaction in which the parties intended not to create those legal rights and obligations that they subsequently gave the appearance of creating; [COMPANY] v [NAME] (1988) 13 FCR 449. I find that there was no loan transaction of 13 February 1998 (merely a transfer, between accounts controlled by [NAME], of money belonging to his mother), nor any contractual commitment by [NAME] to provide a mortgage. I find that the mortgage of 28 June 1999 was merely a formal cloak to enable [NAME], with the aid of [NAME], to remove from the jurisdiction the proceeds of sale of the [NAME] so as to defeat any future judgment in favour of the Plaintiff. 185 It follows that the money received by [NAME] must be regarded as having been received by him on trust for [NAME] and, to the extent that he acquired any title in the money, it is liable to be set aside pursuant to s37A of the Conveyancing Act. Thus, at law as well as in equity the money must be treated as belonging to [NAME] and, therefore, available to satisfy the claims of [NAME]. 186 The foregoing answers both questions 1 and 2, though I should deal briefly with the matter of fraudulent conveyance under s37A of the Conveyancing Act. 187 Clearly, to the extent that any title was obtained to the money from the sale of the Property by [NAME], there was an alienation of property by [NAME] within the meaning of s37A of the Conveyancing Act. Though the Plaintiff had yet to obtain a judgment against [NAME], it did not follow that there was not an existing obligation of [NAME] to [NAME], the Plaintiff. That the claim was in dispute is not to the point since that dispute was ultimately resolved in favour of the Plaintiff. Whatever be the meaning of the word "creditor" in other contexts, it would clearly defeat the purpose of s37A of the Conveyancing Act were properly claimed indebtedness of this sort to be defeated because unliquidated or resisted, resistance being ultimately without foundation so far as the amount found for the Plaintiff. While the other view is arguable; that "creditor" requires a liquidated debt, having regard to authorities in the liquidation context (Roy Morgan Research Centre Pty Limited v Wilson Market Research Pty Limited (1996) 39 NSWLR 311 at 320-2; Mandarin International Developments Pty Limited v Growth Corp (Australia) Pty Limited (1998) 143 FLR 408 at 422), here reference is not to a specific creditor. Rather it is to "creditors" in the plural, for whom it is consonant with the protection intended to be conferred, that it should extend to contingent or prospective creditors. Compare s462(2) of the Corporations Law, which expressly includes among those able to bring proceedings for winding up, "a creditor (including a contingent or prospective creditor)", the parenthesis suggesting that creditor would even without these words of clarification, include a contingent or prospective creditor. 188 Indeed the notion that "creditors" should be so construed is supported by some of the cases where s37A has been applied. Thus it was applied to avoid a settlement made by a person about to embark on a hazardous business, to put his property beyond the reach of possible creditors; Mackay v Douglas [1872] LR 14 Eq 106; 41 LJ Ch 539; Re Mackay (1951) 16 ABC 18. Likewise, a conveyance to defeat a spouse's claim in matrimonial proceedings, itself prospective, was held to be within the section; Cadogan v Cadogan [1977] 3 All ER 381; [1977] 1 WLR 1041. Here, the only known creditor was the Plaintiff, apart from the spurious loan arrangement purporting to render [NAME] one. 189 It follows from the earlier reasoning that there was an alienation of property with intent to defraud the Plaintiff, rather than the mere preference of one creditor over another; that is, once it be concluded, as I have done, that there was no genuine debt owed by [NAME] to [NAME]. 190 Clearly the Plaintiff was a "person thereby prejudiced" within the meaning of s37A. 191 Finally, it could not be said that the [NAME], was a "purchaser in good faith not having, at the time of alienation, notice of the intent to defraud creditors" within the meaning of s37A(3). Having regard to my earlier findings, it is clear that [NAME] shared a common purpose of defrauding the Plaintiff as a creditor of [NAME]. This is so, though the debt had still to be liquidated and was disputed, ultimately unsuccessfully in terms of the amount awarded there was at the time a prospective debt of $108,345 (plus interest thereon). 192 The pleadings of the Plaintiff in the [NAME] of Claim at para 34A(c) correctly lays out the basis for inferring the requisite knowledge on the part of [NAME] so as to preclude his reliance on the defence in s37A(3). That basis overlaps with matters going to whether the loan and mortgage are a sham. It is also to be found at para 38(c) of the [NAME] of Claim. I am satisfied that the matters there pleaded are made out by the evidence particularised which is elaborated where necessary earlier in this judgment and in the chronology. I quote the relevant portion of the Statement of Claim as follows: "c. [NAME] contends that the knowledge of [NAME] (that [NAME] did not recognise any genuine indebtedness on her part to [NAME] referred to in sub-paragraph (a)(iii) hereof is to be inferred from: i. between 17 December 1998 and 27 May 1999 or thereabouts [NAME], for and on behalf and in the interests of [NAME], instructed [NAME] in the conduct of the District Court Proceedings. ii. the fact that, in providing those instructions, [NAME] instructed [NAME] to maintain 'total client confidentiality' and to 'act in the best and most favourable position and interest of [[NAME]] under [his] instructions' and 'to ensure that all assets owned by [[NAME]] are fully protected' as a matter of foremost concern to him. iii. the fact that, by an e-mail dated 4 April 1999 addressed to [NAME] acknowledged [NAME]'s concern about protection of her interest in the Property and urged her to allow him to 'put a caveat on the house' to protect her. iv. the fact that on or about 30 April 1999 [NAME], in conference with [NAME] and [NAME], provided instructions for [NAME] to be retained to express an opinion on arrangements involving a sale of the Property to [NAME] and the removal of assets of [NAME] from Australia, as well as questions relating to the enforceability outside Australia of any judgment [NAME] might obtain in the District Court Proceedings. v. the fact that on or about 5 May 1999 [NAME] was briefed in accordance with those instructions, and a copy of the brief and related documents was delivered to [NAME] on or about 17 May 199 by a letter addressed to him by [NAME]. vi. the fact that, between 20 May 1999 and 1 June 1999 or thereabouts [NAME], at various times had discussions with [NAME] and [NAME] about strategies of [NAME] relating to the District Court Proceedings, in circumstances in which [NAME] had discussed the topic of caveats with [NAME] on or about 20May 1999 and had obtained title searches relating to the [NAME], the [NAME] and the Caveat between 21 and 24 May 1999 or thereabouts. vii. the fact that the questions stated for [NAME]'s opinion on or about 5 May 1999 recorded a proposal by [NAME] inconsistent with the terms of the Mortgage later executed by him. viii. the fact that [NAME]'s instructions to [NAME] and [NAME] between 30 April 1999 and 17 May 1999 or thereabouts did not include any assertion of an entitlement to a mortgage interest in the Property or any part thereof ix. the fact that, having suggested to [NAME] (by his e-mail to her dated 4 April 1999) and to [NAME] (on or about 21 May 1999) that he might lodge a caveat against the Property, [NAME] did not at any material time lodge such a caveat. x. a typed letter dated 21 May 1999 addressed by [NAME] to [NAME], especially paragraphs 4 and 5 in which he recorded, inter alia, that 'our legal advisers strongly advice to transfer the house immediately' and 'any of your funds in Hong Kong may have to be moved in case Hong Kong still has reciprocal agreement with Australia'. xi. handwritten annotations of [NAME] (on a copy of a letter dated 17 May 1999 addressed by [NAME] to [NAME]) making, inter alia, reference to the Brief dated 5 May 1999 forwarded to [NAME], a letter dated 5 May 1999 written by [NAME] to [NAME], and an Advice of [NAME] dated 11 May 1999. xii. handwritten annotations of [NAME] (on a copy of a letter dated 5 May 1999 addressed by [NAME] to [NAME]) referrable to questions stated for [NAME]'s opinion. xiii. an undated letter (comprising 9 paragraphs on two pages) addressed by [NAME] to [NAME], apparently written on or about 19 May 1999, especially paragraphs 1, 2 and 9 (in which [NAME], inter alia, invited [NAME] to 'take all the documents out of the house now', directed him not to 'use fax I sent you with my signature on' and protested, in paragraph 9, about [NAME]'s instructions to their lawyers that [NAME] owed him $600,000.00). xiv. the fact that [NAME] continued on and after 26 May 1999 to be in communication with [NAME] in relation to the conduct of the District Court Proceedings, including the fact that he conferred with [NAME] and others on 28 and 30 May 1999, swore an affidavit in the interests of [NAME] on 31 May 1999, attended court on 1 June 1999 and conducted a view at the Property for the purposes of the District Court Proceedings on or about 8 June 1999. xv. the fact that [NAME] (on or about 23 June 1999) instructed real estate agents to sell the [NAME] and (on or about 25 June 1999) gave instructions to [NAME] to undertake work to effect the Mortgage and the Sale on an urgent basis, in the context of the then pending trial of the District Court Proceedings." 193 Thus to the extent that the mortgage and the loan agreement have any existence, that is to say are not nullities by reason of being shams, they and certainly any resultant disposition of property in the form of money payments) should be set aside pursuant to s37A of the Conveyancing Act 1919. 194 The Plaintiff is also entitled to an order that [NAME] account to him (or as the Court may direct) for all monies paid to him or at his direction from the proceeds of sale: (i) whether pursuant to s37A of the Conveyancing Act 1919 or by way of declaration that the relevant mortgage and loan are nullities, to the extent necessary to satisfy the entitlements of the Plaintiff under the District Court judgment and any entitlements to costs arising in the course of any appeal from that judgment and any entitlements to costs or damages in these proceedings, and (ii) requiring that [NAME] discharge his equitable obligations as necessary to pay to the Plaintiff the sum of $89,100 together with such interest as may be allowed by this Court and to satisfy his entitlements under the District Court judgment and any entitlements to costs arising in the course of any appeal from that judgment. 195 An order is also appropriate that [NAME] will hold on trust for [NAME], or as the Court may direct, so much of the property known as [ADDRESS], Castle Cove ("the Substituted Property") as represents for the purpose of these proceedings (as recorded in orders and notations made by [NAME] on 3 November 1999) and the proceeds of the sale of the [NAME] paid to him, or at his direction, as may be necessary to satisfy the entitlements of [NAME] under the District Court judgment. Question 3 - Estoppel? 196 There are strong indications which might justify an inference that [NAME] was aware that on 1 June 1999 before Sidis DCJ, when Counsel for [NAME] was making a statement to the effect that the [NAME] would be available to meet an order for the costs thrown away by the vacation of the hearing date, that it was not correct because the caveat applied only to the relatively valueless laneway. However, I do not need to reach a final conclusion on that matter in light of the conclusions I have earlier reached. I note that [NAME] strenuously denies that knowledge. 197 He faces some difficulty in that denial. [NAME], in para 10 of her affidavit of 20 February 2001, paras 9 to 10 and 13 to 19 of her affidavit of 31 August 2001 and at T, 525-535 and 537 gave evidence that he was present when [NAME] made his representations about [NAME]'s affidavit to Siddis DCJ on 1 June 1999, and when instructions were taken from [NAME] in conference on related questions "at Court", he was present. [NAME] indicated that he did not recall one way or the other; see T, 630, 643-4. Moreover I am satisfied that [NAME] made a genuine mistake in lodging on the Plaintiff's behalf the caveat on the wrong title. It is self-evident that had she known of her mistake she would have rectified it. He had reason to suppose [NAME] was ignorant of the mistake as the mistake had been made in the first place from her office and had not so far been corrected. There is nothing absurd in the notion that [NAME] might thus knowingly stand by while lawyers gave to the court incorrect information about the caveat. 198 On the other hand, there was evidence that [NAME] was absent from the court from time to time on 1 June 1999 and may have not been in court when [NAME] referred to the caveat and to the extent that [NAME] recalls otherwise, it is conceivable that her recollection was mistaken. 199 It does strain credulity to think that [NAME], who had title searches on 21 May 1999 and thus was on notice of the caveat being on only one of the two title deeds relating to the Property, failed to disclose that fact to [NAME], though again it is conceivable that he did. It will be recalled that on 24 May 1999 [NAME] was conferring with [NAME] personally and with [NAME] by telephone and at that time received a copy of the caveat. One would expect that [NAME] would have discussed the caveat with [NAME] and [NAME] at that time. 200 Thus despite my having some basis for concluding that [NAME] was aware of the mistake when the matter occurred in court, I ultimately am not satisfied to the level that I would need to be that he was in fact aware of the position and knowingly failed to correct it when [NAME] said what he did on 1 June 1999 before Siddis DCJ. However, there is no need for recourse to principles of estoppel in the present circumstances as the Plaintiff succeeds without it. Question 4 - Equitable lien or charge in equity? 201 Again it is not necessary for me to answer this question in light of my conclusions earlier reached. 202 However, I should deal briefly with this question. At the outset it should be made clear that the basis pleaded for such a claim to an equitable lien or charge in equity was not limited to the implication, if any, to be derived from the contract relied upon by the Plaintiff for the recovery of payment for work done by him for [NAME]. To the extent that reliance is placed on that contract alone, as distinct from the events that subsequently occurred involving unconscionable conduct of the kind I have earlier described, I would agree that ignoring the latter and viewing the contract alone there would not be the basis for entitlement to an equitable lien or charge in equity. I agree with the First Defendant's submission that it is clear that an agreement between a builder and a home-owner for building work could not, without more, create any interest in land, absent an express term in the building contract having such effect. I would also agree that it has never been the law that "building contracts confer any interest on a builder that can be categorised as a proprietary interest in land"; Graham H Roberts Pty Limited v Maurbeth Investments Pty Limited [1974] 1 NSWLR 93 at 104-5. The correct position is that expressed by Beech J in H. & G. & R. Nominees v Carlson Pty Limited (2000) V Conv.R 54-630 at 64,522 [30]: "… in the absence of an express contract with the building owner that he shall have a lien over a building in respect of work performed by him on the building, a building contractor has no lien over a building or the land on which it is situated in respect of such work, unless the building owner encouraged him to form such a belief or acquiesced in him forming that belief."

And see earlier at [15] - [29]. 203 Insofar as the Plaintiff contends that he was promised a right to reside in the residence while he was carrying out the work, I agree with what is said in the First Defendant's written submissions at paras 13 to 14 which I quote below: "13. Importantly, any such claim is defeated by the Plaintiff's own evidence. [NAME] deposed that he came to Australia in December, 1991; before that, he was told that he could live in the premises while he did the work [[NAME] 2.2.00 first para 3; Transcript page 125 lines 37-47, 126/37-42; 128/6-10; 127/44; 128/1-10; 131/8-12]. Based upon what [NAME] told him, his expectation was that he would live in the [NAME] house for two years [[NAME]. 2.2.00, 2nd para 3; T/s 128/45-50; 131/8-35]. After that, he wanted to leave [T/s 131/36-42]. And he continued to live in the house until he did leave, willingly, in 1995 [T/s 134/39-41]. 204 However, there is another basis for equity to allow an equitable lien or charge. It would be allowed as an alternative to a constructive trust to remedy the First Defendant's unconscionability. On the latter, I should interpolate there is no evidence that interests of innocent third parties would be affected so as to preclude the more expansive remedy of a constructive trust, though an equitable lien or charge is a more proportionate calibrated remedy. This is in contrast to the position in Giumelli v Giumelli (1999) 196 CLR 101 at 112, and 118 where a constructive trust remedy allowed below needed first to be set aside, because of its effect on innocent third parties; instead an equitable charge was substituted. That was held by the High Court to sufficiently vindicate the promises by the parents to register a particular lot in their son's name. 205 The relevant principle upon which an equitable charge or lien would be allowed in the present case stems, therefore, not just from the original arrangements for the Plaintiff to carry out renovations and building work upon the property of [NAME]. It finds its basis in the proposition that it would be unconscionable for [NAME], as the recipient of the proceeds of sale of the relevant property which he applied in purchasing his own Cameray property, to be permitted to hold that substituted property free of any means of asserting the claim of the Plaintiff, in circumstances where he participates in a scheme to injure the Plaintiff and benefit [NAME]; compare Morris v Morris (1982) 1 NSWLR 61 per McClelland J which anticipated the broader approaches of Gibbs CJ and Deane J in Hewett v Court (1983) 149 CLR 639 at 648 (Gibbs CJ), 668 (Deane J). 206 [NAME] v Court (supra) involved property which was specifically identified and appropriated to the performance of the relevant contract. The case was one where the remedy was granted in relation to the owner of the property and not someone claiming from that owner. But both Gibbs CJ and Deane J were careful to emphasise that cases recognising the existence of an equitable lien are not confined to one narrow category and that the list is not a closed one (per Gibbs CJ at 646). Deane J stated that "they [the tests] are formulated as a statement of what is sufficient rather than what is essential" (at 668), in setting out the major preconditions for an equitable lien in these terms (at 668): "(i) that there be an actual or potential indebtedness on the part of the party who is the owner of the property to the other party arising from a payment or promise of payment either of consideration in relation to the acquisition of the property or of an expense incurred in relation to it … (ii) that that property (or arguably property including that property …) … be specifically identified and appropriated to the performance of the contract; and (iii) that the relationship between the actual or potential indebtedness and the identified and appropriated property be such that the owner would be acting unconscientiously or unfairly if he were to dispose of the property (or, if it be appropriate, more than a particular portion thereof) to a stranger without the consent of the other party or without the actual or potential liability having been discharged … they [the tests] are formulated as a statement of what is sufficient rather than of what is essential." 207 There are also cases which have conferred the remedy of an equitable charge where application of the tracing rules would not have vindicated the claimant's rights. This was on the basis that such a charge would not operate to the detriment of innocent third parties in the way that a trust remedy might do; see in particular Lord Templeman in [COMPANY] v [COMPANY] of Commerce Trust Co (Bahamas) Ltd [1986] 1 WLR 1072 and generally the thorough treatment in [NAME] "The Equitable Lien Rediscovered: A Remedy for the 21st Century" (2002) 25 (1) UNSWLJ 1. 208 Thus in the present circumstances where the property in respect of which an equitable lien or charge is claimed can be clearly identified as derived from property upon which work was done by the claimant, and where it would be unconscionable for that claim in respect of that work to be defeated in a practical sense by the deliberate dissipation of the proceeds of sale of that property so as to defeat that claim, then without detracting from the capacity to provide a remedy by way of remedial constructive trust, where there are no innocent third parties who would be adversely affected thereby, an equitable lien or charge should also be available by way of alternative remedy, consistent with principle. I would so order here. Question 5 - Priority of mortgage over equitable claim? 209 Given my earlier conclusion that the mortgage was a sham and vitiated by fraud, registration of the mortgage could not prevail as a registered interest over any prior interest of the Plaintiff. The exception for fraud is recognised in ss42 and 43 of the Real Property Act 1900. While "there is no fraud in merely acquiring title with notice of an existing unregistered interest when taking a transfer with knowledge that its registration will defeat such an interest" ([NAME] v [NAME] (No. 2) (1988) 164 CLR 604 at 613, 614, 652-3) here there clearly was fraud. The mortgage was fraudulent and could not in any event prevail over the Plaintiff's interest. Question 6 - Conspiracy to injure? 210 I may deal with this issue briefly having regard to the answers to the earlier questions which make answering this question strictly unnecessary if the earlier answers are correct. 211 First, these arrangements occur with intent to injure, and have no legitimate basis in any genuine pre-existing debt or mortgage. 212 [NAME], the Plaintiff does have an equitable interest in the Property insofar as a remedial constructive trust or equitable lien are both available to vindicate the Plaintiff's claim and to redress the unconscionable conduct of the [NAME]. 213 It is then said that notwithstanding each of the foregoing, there is a fundamental flaw in the Plaintiff's "conspiracy" case in that damage is a necessary element of the civil cause of action; Lonrho Limited v Shell Petroleum Co Limited [1982] AC 173 at 188; Munnings v Australian Government Solicitor (1994) 118 ALR 385 at 389-90. 214 It is said that in this case the Plaintiff has failed to prove that he suffered any relevant damage resulting from the [NAME]' conduct. It is said that the Plaintiff's claimed loss of the capacity to levy execution of the property, if and when judgment came to be entered, is illusory, as at the time of the conspiratorial agreement or acts there was no District Court judgment whose execution was thus capable of being circumvented. 215 Then it is said that the evidence discloses no basis for concluding that the District Court judgment could not be satisfied from the assets of [NAME] (or her mother) presently available and within the jurisdiction, the argument being put in these terms (quoting from the First Defendant's written submissions) 55.2.1 There is no evidence of any attempted but unsuccessful execution by the [NAME] on the judgment. 55.2.2 [NAME] still owns, at least, the four-metre wide strip of land at the rear of the property. The land on which the residence stands was sold in 1999 for $825,000.00 [PX4 p.106]. The former laneway land is contiguous to that residential land and the neighbouring residential property to the south. Prima facie, the Court could expect that a parcel of land of almost 80 sq.m. in a residential area such as [NAME] would have some, perhaps considerable, value. 55.2.3 The Plaintiff, upon whom the onus remains to prove the necessary element of damage, failed to call any evidence as to the absence of value of the 80 sq.m. land, and certainly failed to establish that it had no value (the statement of [NAME] in annexure "D" to her 9.8.99 District Court Affidavit [Ex. PX19] (that the value of the land was "nil" is itself of nil weight, absent any demonstration by the Plaintiff of any valuation expertise of [NAME]). 55.2.4 Simply put, the Plaintiff failed to make good this essential element of his claimed cause of action." 216 The short answer to this argument is this. The Plaintiff had a good cause of action whose vindication was deliberately sought to be frustrated, though judgment had yet to be obtained, by the manoeuvrings that took place. Those manoeuvrings were by entry into sham transactions and fraudulent conveyances. They were unlawful, as well as fraudulent. Had they succeeded, there is no question but that the Plaintiff would suffer damage in that the later anticipated District Court judgment could not have been in any practical sense vindicated against assets of the relevant [NAME]. 217 To suggest that the four metre wide strip of land would be capable of satisfying the current judgment debt, with interest and the cost orders, apart from the substantial cost of the present proceedings, is a submission utterly without merit and which deserves emphatic dismissal. That [NAME] has described the value of the relevant four metre wide strip of land as "nil" does not require her to be an expert. She should know well enough the value of her own property or former property. No evidence has in any event been advanced to suggest to the contrary that her assessment is other than correct. But even if it were not correct, the value it would need to carry would on no basis conceivably satisfy the entitlement of the Plaintiff pursuant to the original District Court judgment with accruing interest and the costs associated with the lengthy hearings in this Court. The submission to the contrary is without foundation. 218 Thus were it necessary to determine this, I would conclude that the requirements for a conspiracy have been made out. Question 7 - Damage to Plaintiff? 219 In all the circumstances, given the amplitude of remedy available through an account, a constructive trust and/or equitable lien, such damage as the Plaintiff has suffered should be remediable in the relevant orders earlier contemplated. OVERALL

CONCLUSION AND ORDERS 220 The Plaintiff has succeeded in essentially all of its challenge to the [NAME]' conduct. I have indicated the orders that I consider warranted. I invite the parties by 19 December 2002 to submit orders giving effect to this judgment. Prima face costs should follow the event but the parties are invited to address me on costs if they so wish.

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