NEW SOUTH WALES SUPREME COURT
Chong v Chanell  NSWSC 765
19-25 & 28 May 2009
EX TEMPORE DATE:
25 May 2009
Qingyi Chong (plaintiff)
Jane Haley Chanell (aka Jinghai Chong) (first defendant)
Wu Hong Wei (second defendant)
LOWER COURT JURISDICTION:
LOWER COURT FILE NUMBER(S):
LOWER COURT JUDICIAL OFFICER:
Mr M Aldridge SC w Mr R Tregenza (plaintiff)
Mr C Bridge SC w Mr B Levet (first defendant)
Mr T Morahan (second defendant)
Austin Haworth & Lexon Legal (Sydney) (plaintiff)
Kinghan & Associates (first defendant)
Zhang Shijing Lawyers (second defendant)
TRUSTS AND TRUSTEES - Plaintiff advances funds from China to first defendant in Australia to be applied in accordance with his directions – where first defendant applies moneys in payment to second defendant and in reduction of her home loan – whether in accordance with instructions of the plaintiff – questions of fact – where first defendant claims plaintiff authorised her application of trust funds – Onus of proof – Held: first defendant bears onus of proof and must account for moneys admittedly received as trustee.
REMEDIES – Tracing – Whether funds transferred from the first defendant to the second defendant can be traced in equity - whether second defendant aware of breach of trust - whether second defendant was a volunteer - whether assets still exist in a traceable form - Held: not established that second defendant aware of breach of trust - plaintiff failed to establish that property still exists in traceable form – Where funds used by the first defendant to pay down her own mortgage - Held: plaintiff entitled to equitable charge over first defendant’s property.
RESTITUTION – moneys had and received – tracing – whether in personam remedy available against second defendant – defence of change of position – where second defendant gambled away moneys advanced to him – Held: change of position established – not established that second defendant did not act in good faith - restitutionary remedy not available.
COSTS: Departing from general rule – Bullock order – where effect would be to create asset and corresponding liability of husband and wife who are engaged in family property adjustment proceedings.
Amalgamated Association v Danielson (1964) 128 NW 2d 9
Cambridge Electronics Australia Pty Ltd v McMaster  NSWSC 198
David Securities v Commonwealth Bank of Australia  HCA 48, (1992) 175 CLR 353
Gray v Gray  NSWCA 408
Heydon v Perpetual Executors Trustees & Agency Company (WA) Ltd  HCA 26, (1930) 45 CLR 111
Lipkin Gorman v Karpnale  2 AC 548,  4 All ER 512,  3 WLR 10
Pit v Cholmondeley  EngR 174; (1754) 2 Ves Sen 565, (1954) 28 ER 360
Re Diplock Estates  Ch 465,  2 All ER 318
Schmierer & Anor v Taouk  NSWSC 345, (2004) 207 ALR 301
R P Meagher and W M C Gummow, Jacob's Law of Trusts in Australia, 5th ed (1986), Butterworths
G P Stuckey KC and C D Irwin, Parker's Practice in Equity, 2nd ed (1949) Law Book Co of Australia
Lexis Nexis, Ritchie’s Uniform Civil Procedure NSW, r 46.75
Plaintiff entitled to judgement against the first defendant. Plaintiff entitled to a charge over the first defendant’s property. Judgment for second defendant. First defendant to pay plaintiff’s costs. No order as to costs as between plaintiff and second defendant.
IN THE SUPREME COURT
OF NEW SOUTH WALES
Monday, 25 May 2009
2509/07 Qingyi Chong v Jane Haley Chanell (AKA Jinghai Chong) & anor
JUDGMENT (ex tempore)
1 HIS HONOUR: Between 2001 and 2005 the plaintiff Qingyi Chong transferred or caused to be transferred, from the Bank of China at Macau and Shanghai in the People’s Republic of China, to US dollar accounts of his sister the first defendant Jane Hayley Chanell with the Bank of China in Sydney, sums in excess of AUD$5 million, to be dealt with by her in accordance with his directions. Ms Chanell has applied them, as to in excess of $1 million in reduction of a mortgage loan secured on her home at 51 Bayview Street, Tennyson Point, in the State of New South Wales, and as to the balance largely in payment to her now estranged husband, the second defendant Wu Hong Wei, for business purposes. Ms Chanell caused a further $264,360 to be transferred from her brother’s Australian dollar account to her husband. Ms Chanell says – but Qingyi Chong denies – that this was in accordance with his directions. Wu Hong Wei says that the moneys advanced to him by Ms Chanell were for the purposes of being gambled at Star City Casino and Crown Casino, and that to the extent they have not already been repaid to Ms Chanell, have been lost. A further $1 million was advanced by Qingyi Chong to Ms Chanell – he says as a loan at her request, but she says as reimbursement for advances made by her at his request to Wu Hong Wei – which was also applied by Ms Chanell in reduction of her mortgage loan account. Qingyi Chong sues for recovery of the sums advanced by him. The essential issues are, first, were the funds advanced those of the plaintiff, so that he is entitled to sue for their return; secondly, did Qingyi Chong direct or authorise application of the funds in reduction of Ms Chanell’s mortgage or in payment to Wu Hong Wei; and thirdly, if not, were the funds received by Wu Hong Wei in circumstances that they can be traced into his hands so as to make him responsible for their repayment.
Is Qingyi Chong entitled to sue?
2 So far as the first of those issues is concerned, there was some cross-examination of Qingyi Chong as to the source of his funds, and there was a suggestion that funds remitted by others to Australia at his request were remitted in the course of the transactions intended to deceive the Chinese authorities. Insofar as this is relevant to credit, I return to it below. For the purposes of these proceedings, Qingyi Chong did not need to establish how he may have accumulated his funds. It was he who remitted them to Australia – or, by arrangements made with third parties from whom he apparently purchased Australian dollars, caused them to be remitted to Australia. No defence of illegality nor of unclean hands has been pleaded. Qingyi Chong’s title to the funds is plainly superior to that of Ms Chanell, and he has standing to sue for their return.
Did Qingyi Chong authorise Ms Chanell to apply the funds as she did?
3 The main issue in the case is whether Qingyi Chong authorised Ms Chanell to apply his funds in the manner in which she dealt with them.
4 Qingyi Chong says that on each occasion on which he remitted money to Australia, he spoke with Ms Chanell on the telephone, told her of the remittance to be made to her account, asked that she transfer the funds to his Australian account (which he had opened, but given her authority to operate, during a visit to Australia in about January 2000) and – after about 17 June 2002 – at least on most occasions directed that she not tell Wu Hong Wei about the transaction or the money. Ms Chanell says that there was no direction to transfer the funds to Qingyi Chong’s account, but rather a direction to remit the funds to Wu Hong Wei – or in the case of the funds applied to her home loan, and the subsequent $1 million loan transaction, to apply them to her home loan account; she denies that Qingyi Chong ever instructed her not to tell Wu Hong Wei about the funds. Ms Chanell says that she believed that Wu Hong Wei was engaged in a steel import/export business, that Qingyi Chong was in some way supporting or assisting him, and that the advances to Wu Hong Wei were for the purposes of funding that business; she says that she has only subsequently discovered that the funds were not used for any such purpose, but gambled. Wu Hong Wei says that there never was any such business, that he never claimed that there was, and that Ms Chanell gave him the funds on the basis and for the purpose of their being gambled.
5 This is a case in which it is not possible to reconcile the competing versions which have been given; two of them must be quite false; the difficulty is in determining which of them is least probably so. There is a preliminary legal issue as to who in this respect bears the onus of proof. It is common ground that the funds received by Ms Chanell were not transferred to her beneficially, and that she held them to be dealt with in accordance with the directions of Qingyi Chong. Thus this is not a case in which it falls to the plaintiff to prove the basis on which the funds were advanced – for example, whether it was a loan or a gift or upon trust. To the extent that the plaintiff bears the onus of proving the basis of his advances, as I accept he would, it is admitted that Ms Chanell received the funds from Qingyi Chong as a trustee for him.
6 The question in this case is who bears the onus of proof in respect of payments made by an admitted trustee, as to whether or not they were in accordance with directions given by the beneficiary. The cases to which I have been referred by Mr Bridge, SC – in particular, Heydon v Perpetual Executors Trustees & Agency Company (WA) Ltd  HCA 26, (1930) 45 CLR 111; Cambridge Electronics Australia Pty Ltd v McMaster  NSWSC 198; Gray v Gray  NSWCA 408 and Schmierer & Anor v Taouk  NSWSC 345, (2004) 207 ALR 301 – do not answer this question; they are concerned with the anterior question of proof of the basis on which funds were advanced by a plaintiff to a defendant.
7 A trustee is accountable for the funds it receives and holds, which constitute the trust property. What that means is that a beneficiary of the trust is entitled as a matter of right to have the trustee account in common form for the trust assets. In order to obtain an account in common form, the beneficiary does not have to prove any breach of trust; it is an entitlement as of right arising from the relationship of trust. The account is required to list the trustee’s receipts and expenditures. When the trustee provides an account in common form, the beneficiary is entitled to object to any of the entries in that account. If the beneficiary wishes to assert that the trustee has in fact received more than is shown in the accounts, the objection is traditionally called a surcharge; the beneficiary bears the onus of proof on a surcharge. But if the beneficiary alleges that an expense has not been incurred, or has improperly been incurred, that is traditionally called a falsification and in a general taking of accounts, the accounting party – relevantly, the trustee – bears the onus of proof in respect of falsifications [Parker’s Practice in Equity (NSW), 2nd edn, Law Book Company; Ritchie’s Uniform Civil Procedure, [46.75]], although the case usually cited for this proposition, Pit v Cholmondeley  EngR 174; (1754) 2 Ves Sen 565, (1754) 28 ER 360, deals rather with the exception (where there are already settled accounts) than with the general rule where there are not already settled accounts. It follows from this analysis, and from the very principle that the trustee is accountable for the trust assets in its possession, that the trustee – here, the first defendant – must bear the onus of proof where authority for a disbursement by the trustee is put in issue.
8 Against that background, I turn to analyse the evidence. The principal contest is between the evidence of Qingyi Chong and that of Ms Chanell; the evidence of Wu Hong Wei is of less direct relevance.
Reasons for doubting the evidence of Qingyi Chong
9 It was said that Qingyi Chong never checked his Australian accounts to see if the money remitted by him to his sister had been deposited in them in accordance with what he claims were his instructions, and that that told against him ever intending that his moneys should be so deposited. He explained that he trusted his sister, and that in any event she produced spreadsheets to him on her periodical returns to China, showing the funds received. It does not seem to me that this matter tells significantly against his case; his explanation is not implausible, and it was admitted that Ms Chanell did indeed produce and provide such spreadsheets, although none were produced in evidence; if anything, there is force in Mr Aldridge, SC’s submission that it must be inferred that they would not have assisted Ms Chanell’s case.
10 It was said that Ms Chanell’s co-operation with Qingyi Chong’s lawyers, when he first instructed them before these proceedings were commenced, tells in favour of her version, and in particular that both she and Qingyi Chong accepted that the person who ought to repay the funds was Wu Hong Wei. However, I do not think that a mutual acceptance by brother and sister at that stage that the prime target should be her by then estranged husband tells against acceptance of Qingyi Chong’s version. The existence of a shared view that the moneys should be traced into the hands of the man who had last had them, and who – at that stage, so far as the evidence suggests, it was thought had invested them in some business – does not point to any such conversation between the plaintiff and the first defendant as the first defendant alleges, authorising or requesting her to pay the funds to Wu Hong Wei; it is equally consistent with her having informed Qingyi Chong that she had advanced funds to Wu Hong Wei by way of loan at the latter’s request. However, in his first affidavit, Qingyi Chong referred to his early meetings with his solicitors without disclosing the potentially significant fact that Ms Chanell was present at those meetings. Because its potential significance may not have been apparent, this is a small point, but a reason for entertaining some reservations about the reliability of his evidence.
11 It was suggested that Qingyi Chong advanced his current version (that he did not authorise Ms Chanell to pay his funds to Wu Hong Wei) only once it became apparent that the money was lost. I do not think that is entirely correct. On any view, he began making inquiries and requests for repayment of his money as soon as he was told that some had been “borrowed” by Wu Hong Wei. Although he only came to pursue it more vigilantly later, after the relationship between the defendants had broken down, there is no evidence that it was revealed to him, until after he had consulted lawyers, that the moneys had been gambled away and not invested in a business enterprise. There is no evidence that he ever advanced a version inconsistent with his current version.
12 Qingyi Chong would have it that he repeatedly instructed his sister in words to the effect, “Don’t tell Wu Hong Wei”. That aspect of his evidence does have an element of too much protestation on the point, as he had no reason to think that his moneys were being remitted to Wu Hong Wei. To my mind, this suggests that he might be prepared to overstate his case, and raises another reason for caution about unquestioning acceptance of Qingyi Chong’s evidence.
13 Then there is the extraordinary circumstance that Qingyi Chong was able to accumulate more than six million dollars in the People’s Republic of China and remit it to Australia. I do not think the evidence ever clearly explained how these funds were accumulated, but as I have said no defence of illegality or unclean hands was raised, and there was no need for Qingyi Chong to prove the source of his funds. While it may be surprising that so much money could be accumulated and remitted, it may be compared with the fact that, on Ms Chanell’s evidence, she accumulated significant assets in the period after she came to Australia, when her income tax returns and those of her company would suggest there were insufficient resources to do so. I do not think that the absence of a clear explanation of the source of funds in question tells significantly against Qingyi Chong’s credit or case.
14 It was suggested that the transactions by which Qingyi Chong procured third parties to remit Australian dollars from China to Australia in return for his Chinese RMB were intended to deceive the Chinese authorities and to evade foreign exchange laws of the People’s Republic. However, his explanations in cross-examination of those transactions were entirely consistent with those he had advanced in his affidavit. The transactions in question were made through the Bank of China, presumably with the knowledge of officials of that Bank. He did not claim immunity from self-incrimination in respect of these matters, when offered the opportunity to do so. He produced the business card of one of the intermediaries who facilitated the transactions. I am quite unsatisfied that these transactions were intended to deceive the Chinese authorities or evade any law of China.
Reasons for doubting Ms Chanell’s evidence
15 Ms Chanell’s initial response to Qingyi Chong, when asked by him for an explanation for the various transactions shortly after he first consulted lawyers – as related by both, subject to the qualification that she adds that she used the word “remit” rather than “lend” – was substantially consistent with the position she has maintained ever since was then her state of mind. Her evidence was at times argumentative and unfocused, but she was plainly emotionally upset and I would not attribute significant weight to that matter.
16 Ms Chanell did not offer any independent evidence to support her claim that she had available for use, whether as a deposit on the Tennyson Point property or otherwise, any funds of her own – which would seem unlikely having regard to her income tax returns and financial statements, and if such evidence existed in the form of bank accounts or otherwise she could surely have produced it. Moreover, she had no documentary evidence, not even a contemporaneous note, of any of the authorities or directions she claims her brother gave her, notwithstanding the enormous sums involved.
17 Notwithstanding her denials, Ms Chanell must have known that Wu Hong Wei was gambling during their marriage – as he was paying for dinners that she attended with casino chips, and she conceded that she did not believe his explanation for possessing those chips. She admits that in April 2006 she provided him with amounts of $80,000 on two occasions, to gamble at the Crown Casino. While the evidence about that particular transaction is very confusing, it appears very much as if it involved an attempt to win back money at the casino, to reimburse Qingyi Chong.
18 Her counsel asked, why would she give money to Wu Hong Wei, just to gamble it? There are two possible answers: one is that she and her husband were gamblers, in the sense that they were both accustomed to gambling and saw nothing unusual in gambling large sums of money; they had, after all, first met at the “High Rollers” room at Star City Casino; although she claimed to have given up gambling after 2002, it appears (from Exhibit SX20), that her attendances at the casinos, particularly in 2005 and 2006, were considerably more extensive than her evidence admitted. The second is that it was possible that she was deceived by her husband into thinking that the advances were for business purposes, consistent with Qingyi Chong’s version of her initial response to him.
Reasons for accepting Qingyi Chong’s evidence
19 There are several objective considerations that tell in favour of the probability of Qingyi Chong’s version. First, it must be asked why would he have opened an Australian bank account and given his sister authority to operate on it, unless he anticipated that the moneys he remitted to Australia would go into it. Secondly, it must be asked why would he have made such enormous advances of funds to Wu Hong Wei – having regard to the apparent imprudence of doing so and, more particularly, to his lack of knowledge of Wu Hong Wei and the absence of any relationship with him; indeed, it was not until late 2003 that Qingyi Chong first met Wu Hong Wei, and some time later that he learnt that his sister and Wu Hong Wei were married; yet by then, nearly USD$315,000 and AUD$2,905,000 had been advanced from his funds to Wu Hong Wei.
20 Thirdly, if Qingyi Chong intended his funds to be advanced to Wu Hong Wei, then why would he not have remitted them directly to Wu Hong Wei, rather than via his sister’s account?
21 Fourthly, Wu Hong Wei himself denies he had any financial dealings with Qingyi Chong. While Wu Hong Wei’s evidence must be viewed with considerable suspicion, and it is in his interest to distance himself from Qingyi Chong, this means that there is at least some corroboration of Qingyi Chong’s version, and more for the other.
22 Moreover, the suggestion that Qingyi Chong actually authorised Ms Chanell to pay his funds to Wu Hong Wei was, for a proposition so fundamental to the case, but lightly put to him in cross-examination.
23 The above reveals many more factors, of greater weight, that tell in favour of Qingyi Chong’s version than of Ms Chanell’s. That preference is fortified by the coincidence of something Ms Chanell said in cross-examination, with something that had earlier been attributed to her by Qingyi Chong. She was asked (T148) what she thought Wu Hong Wei was doing with the moneys given to him, and answered (emphasis added):
No, I always thinking he’s dealing with the business with my brother. That’s why money coming. They ask me transfer to his account. I only I’m only victim in the middle. They use me, they want this one. I never involved the gambling after after my marriage. Everybody can see it. If I want involve gambling people would never stop...
24 In his affidavit of 21 May 2007, Qingyi Chong sets out (at paragraph 54) a conversation he says he had with Ms Chanell on or about 18 April 2007, when he was seeking information to assist his case for the recovery of the funds. At the end of that conversation, he says, he asked Ms Chanell:
Why did you lend my money to Wu Hong Wei? What does his property settlement case and business have to do with me? I simply do not believe he has a steel business! You lent him all the money I asked you to deposit in to my account to a crook! You knew the moneys I remitted to you are for business investments and purchasing property for my son! They are my money and you did not even seek my permission before lending him the money?! What is your role in this whole deal?
Ms Chanell is said to have replied:
I am innocent and why should I be involved? Wu Hong Wei took your money. You should go and ask him to return the money to you. I did not use a cent of your money.
Qingyi Chong said:
I am the truly innocent person here. You were the person who lent my money to him without my permission and you should take up the responsibility.
Ms Chanell is said to have replied:
I don’t care. I am the most innocent person here. If you can, go and sue Wu Hong Wei and get your money back.
25 Although in her affidavit Ms Chanell denied those parts of the 18 April 2007 conversation, her spontaneous emotional response to the passage in cross-examination to which I have referred, is so similar to what was then attributed to her by Qingyi Chong, as to tell strongly in favour of the view that Qingyi Chong’s version is correct.
26 Accordingly, far from establishing on the balance of probabilities that the payments made by her in reduction of her home loan or to Wu Hong Wei were in accordance with the directions or authorities of Qingyi Chong, I am satisfied on the balance of probabilities that they were not, and I prefer the evidence of Qingyi Chong on that topic. It follows that even if I were wrong about where the onus of proof lies in this respect, the conclusion would not be different.
Can the funds be traced to Wu Hong Wei?
27 The next issue is whether Wu Hong Wei received the funds paid to him in circumstances such that they can be traced into his hands. The plaintiff relies on tracing both at common law and in equity.
28 So far as tracing in equity is concerned, the principles governing the right of a claimant to trace property into the hands of a third party who has received them include the following [Re Diplock’s Estate  Ch 465, 517, 557; Jacob’s Law of Trusts in Australia, 5th ed ]:
1. If the property has been transferred to someone who has taken the legal estate for value without notice of the claim, then the property cannot be followed [Re J Leslie Engineers Co Ltd  2 All ER 85];
2. If the transfer is to a volunteer who takes without notice and there is no question of mixing, the transferee holds the property on behalf of the true owner, whose equitable right persists against him [Strang v Owens (1925) 42 WN(NSW) 183];
3. If the volunteer expends the trust moneys (or mixed moneys) - such as for the purchase of dinners, or unsuccessful gambling - the money has disappeared, and there is no proprietary remedy.
29 As already mentioned it is common ground that the funds were not transferred to Ms Chanell beneficially, and that she therefore held them upon trust for Qingyi Chong. It follows from the conclusions already expressed that the payments to Wu Hong Wei were unauthorised, and in breach of the trust. In equity, funds could be traced into his hands as recipient, therefore, if he received them with knowledge of the breach of trust, or if he received them as a volunteer.
30 Qingyi Chong gives no evidence of any dealings with Wu Hong Wei save that there were none; Wu Hong Wei’s evidence is to the same effect. Ms Chanell said that she paid the moneys over in accordance with Qingyi Chong’s directions, but I have rejected that. Wu Hong Wei says that he was given the funds to gamble without any reference to their source and that he supposed, at least initially, that they came from Ms Chanell’s own assets – although at some later stage, in 2005 or 2006, he was told that moneys of her brother had been involved. The evidence does not establish that he knew, when he received the funds, of the breach of trust. However, he received them as a volunteer.
31 For the purposes of establishing an equitable proprietary remedy, a plaintiff must also establish that assets still exist to which that remedy can attach. The plaintiff has failed to do so. To the contrary, the evidence suggests that the funds no longer exist in Wu Hong Wei’s hands. It is true that Wu Hong Wei gave evidence that he had returned the funds, to the extent that they were not lost, to Ms Chanell, who had placed them in a cardboard box in her factory; but even if this uncorroborated and improbable story were true, it would not establish that there were traceable funds in Wu Hong Wei’s hands. Accordingly, an equitable proprietary tracing remedy is not available.
32 The question then is whether, notwithstanding that the property does not remain in existence, there is nonetheless available a common law remedy for moneys had and received. It is now established that a remedy for moneys had and received will lie against a third party recipient of funds paid by the plaintiff to the second party, in circumstances which would give the plaintiff a restitutionary claim against the second party, so long as the third party is not a bona fide purchaser for value without notice, [Lipkin Gorman v Karpnale Ltd  2 AC 548, in particular in the judgment of Lord Goff, at 572]. In that case, it was held that an innocent recipient of stolen money was obliged to pay an equivalent sum to the true owner, where it had not given consideration for it, and had thus been unjustly enriched at the expense of the true owner, and that the true owner could trace its property into the hands of the ultimate recipient, and obtain a judgment in personam for moneys had and received.
33 That principle may have application in the present case – subject to the defence of change of position, which is available in connection with restitutionary claims – as I have found that Wu Hong Wei received the funds as a volunteer. The onus of establishing the defence of change of position lies on the defendant. In my view, the second sentence of paragraph 3 of the Further Amended Defence sufficiently raises the defence.
34 Mere expenditure does not constitute a relevant change of position, nor does expenditure on ordinary living expenses, but expenditure solely in reliance on the security of the payment, from which the defendant no longer retains a benefit, qualifies [David Securities v Commonwealth Bank of Australia  HCA 48; (1992) 175 CLR 353, 385]. Thus money spent solely in reliance on the security of the payment, from which the defendant no longer retains a benefit – such as payment of a deceased’s hospital bill in reliance on an overpayment mistakenly obtained, or of the expenses of an overseas trip that would not have been undertaken without the windfall, is a relevant change of position [Amalgamated Association v Danielson (1964) 128 NW 2d 9; Lipkin Gorman v Karpnale  2 AC 548, 560.]
35 It is clear enough that the expenditure in question here – namely, Wu Hong Wei’s gambling expenditure – would not, and indeed could not, have been undertaken, but for the payments in question. In my view, a relevant change in position, sufficient to bring the facts within the defence, is established.
36 However, the defence of change of position is available only to those who act in good faith, that is, in the sense of an actual belief in the security of the receipt [Lipkin Gorman v Karpnale, 579-580]. Although the second defendant said that at first he assumed that the funds came from his wife, he admitted that at some stage he became aware that she was using funds obtained from her brother. Wu Hong Wei was asked (T216.46):
Q. In addition to the other monies that you got from your wife, you knew that your wife did not have from her own sources this amount of money to give you; didn’t you?A. INTERPRETER: I didn’t know in the beginning.Q. You found out at some stage that this wasn’t your wife’s money; didn’t you?A. INTERPRETER: Yes she told me later that some of the money was from her brother.Q. When did she tell you that?A. INTERPRETER: I can’t remember; maybe in 2005 or 2006.
37 None of the relevant advances to Wu Hong Wei were made in 2005 or 2006; the latest transfer of funds to him the subject of the claim, was on 1 April 2004, being item 43 in the Second Schedule in the Amended Statement of Claim. None of the transactions described in Exhibit PX08 were in 2005 or 2006. In those circumstances, I must conclude that Wu Hong Wei has changed his position on the faith of the payments to him, and that a restitutionary remedy for moneys had and received is not available against him.
38 It follows that the plaintiff is entitled to judgment against the first defendant for amounts – which I will allow counsel an opportunity to review – comprising (having regard to the allegations in and admissions on the pleadings) USD$357,948, plus AUD$3,573,006, plus a further AUD$264,360 transferred from the Citibank account. Of that, it would seem that $1,052,963 is traceable into the Tennyson Point property, and the plaintiff would be entitled to a charge for that amount on the Tennyson Point property. In addition, the plaintiff is entitled to judgment for the amount of the AUD$1,000,000 loan. There should be judgment for the second defendant.
39 It follows that the first defendant must pay the plaintiff’s costs. As between the plaintiff and the second defendant, the plaintiff has ultimately failed, but only because the second defendant has lost the funds that would otherwise have been traceable into his hands. Wu Hong Wei’s affidavit evidence left in doubt the extent of the funds he had received from the first defendant. The appropriate result, as between the plaintiff and the second defendant, is, as Mr Aldridge has submitted, that there be no order as to costs as between them.
40 The second defendant has foreshadowed an application for an inquiry as to damages pursuant to the plaintiff’s usual undertaking as to damages in connection with the freezing order obtained by the plaintiff. I think the appropriate course, rather than making an order for an inquiry now, is to reserve liberty to apply for an inquiry, when appropriate evidence showing that some damage has been suffered can be adduced.
41 I adjourn the proceedings to Thursday 28 May at 9.30am before me for short minutes.
Thursday, 28 May 2009 - Costs
42 When I gave judgment in these proceedings I heard argument as to the question of costs and I acceded to a submission made on behalf of the plaintiff that as between the plaintiff and the second defendant, whose defence ultimately succeeded, there should be no order as to costs. The orders have not yet been entered and remain within recall if I were minded to change them.
43 It has been put this morning that the second defendant, having succeeded, is, prima facie, entitled to an order for costs. I agree that, as costs ordinarily follow the event, such an order would ordinarily be made. The question is whether there is reason to depart from that position in this particular case.
44 There are, I think, at least two such reasons. The first is that which moved me, when I last considered the matter, to make no order as to costs – in particular, that a substantial part of the plaintiff's case against the second defendant involved having to prove what moneys had come into the hands of the second defendant, which the second defendant did not distinctly admit until cross-examined and confronted with documentation. As has been pointed out this morning, it is difficult to conceive that the second defendant could not have, at a much earlier stage, distinctly admitted the receipt of bank cheques of $900,000 and $750,000, which were then paid into the various casinos.
45 The second reason arises from the submission that the appropriate order would be that the plaintiff pay the second defendant's costs but be indemnified in that respect by the first defendant - in other words, a so-called Bullockorder. I agree that this is a case in which, were I to order the plaintiff to pay the second defendant's costs, it would plainly be appropriate that a Bullock order be made. That is because the first defendant's case was that it was the second defendant who owed the plaintiff the moneys in question, thus making it entirely reasonable and appropriate for the plaintiff to sue the second defendant in the alternative to the first.
46 However, in these proceedings, there was no suit or cross-claim between the first defendant and the second defendant, notwithstanding that each advanced different cases concerning the moneys advanced by the plaintiff. There are proceedings between them in the Family Court of Australia for adjustment and settlement of property interests consequent upon the breakdown of their marriage. In those proceedings, all the contributions of each of the parties will be taken into account, as will the assets and liabilities of each of them. If I were to make a Bullock order, that would ultimately result in a neutral net impact on the matrimonial property, in that the liability imposed on the wife be a corresponding asset of the husband. I think it is much preferable that the issues between them be resolved as a whole in the context of the Family Court proceedings. For me to pre-empt that outcome by a Bullock order would be practically without utility, as the Family Court would then have to take into account that the one had an asset and the other a corresponding liability as a result.
47 For that additional reason, I think the appropriate course is rather to make no order as to costs between the plaintiff and the second defendant, since the only alternative would be to order the plaintiff to pay the second defendant's costs but the first defendant to indemnify the plaintiff in that respect.