FEDERAL COURT OF AUSTRALIA Xiang Du Pty Ltd v Adelaide Investment Corp (Australia) Pty Ltd [1999] FCA 713 XIANG DU PTY LTD, GUO GUANGCHANG AND DU JIN XIANG v ADELAIDE INVESTMENT CORPORATION (AUSTRALIA) PTY LTD (ACN 083 258 235) NO SG 108 OF 1998 O'LOUGHLIN J 31 MAY 1999 ADELAIDE IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY SG 108 OF 1998 BETWEEN: XIANG DU PTY LTD, GUO GUANGCHANG AND DU JIN XIANG Applicants AND: ADELAIDE INVESTMENT CORPORATION (AUSTRALIA) PTY LTD (ACN 083 258 235) First Respondent MR CHRIS WYPYCH Second Respondent MR ALBERT GHASSIBE Third Respondent MR KYM KYONG CHOI Fourth Respondent JUDGE: O'LOUGHLIN J DATE OF ORDER: 31 MAY 1999 WHERE MADE: ADELAIDE THE COURT ORDERS THAT: 1. There be judgment for the applicants against the respondents jointly and severally in the sum of $405,000 (which sum is inclusive of interest). 2. The respondents shall jointly and severally pay the applicants' costs which costs are to be taxed in default of agreement. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY SG 108 OF 1998 BETWEEN: XIANG DU PTY LTD, GUO GUANGCHANG AND DU JIN XIANG Applicants AND: ADELAIDE INVESTMENT CORPORATION (AUSTRALIA) PTY LTD (ACN 083 258 235) First Respondent MR CHRIS WYPYCH Second Respondent MR ALBERT GHASSIBE Third Respondent MR KYM KYONG CHOI Fourth Respondent JUDGE: O'LOUGHLIN J DATE: 31 MAY 1999 PLACE: ADELAIDE REASONS FOR JUDGMENT 1 This is a story of deceit. As a result, it is as complex as it is devious. Before engaging in the exercise of fact finding in areas of dispute, it will be helpful if the principal characters are identified and if the uncontentious facts are set out. The Parties to the Litigation 2 The parties to this litigation entered into discussions with respect to the acquisition of some part or parts of the site of the former Queen Victoria Hospital ("the hospital site"). They were looking for a property in which they could establish a residential school for Chinese students. Their discussions were unsuccessful and the applicants now seek damages from the respondents alleging, inter alia, that the respondents engaged in misleading and deceptive conduct, that the respondents breached their fiduciary duty to the applicants and that they (the applicants) have suffered consequential damages. 3 The first named applicant Xiang Du Pty Ltd ("Xiang Du") was incorporated in Australia on 22 July 1998. It has two shareholders – the second named applicant Guo Guangchang ("Mr Guo") and Du Jin Xiang ("Mr Du") the third named applicant. Both these gentlemen were, at the relevant time, residents of Shanghai. Mr Guo holds fifty one percent of the issued shares in the capital of Xiang Du and Mr Du is the owner of the remaining 49 percent. Mr Guo is able to speak, read and understand English but, as he acknowledged during the course of his evidence, his abilities have limitations. Mr Du cannot speak or understand any English; he gave his evidence through an interpreter. It would appear that both gentlemen are quite wealthy; there was evidence, for example, that Mr Du has already invested in excess of $1m in a funeral business in Sydney that is operated by the fourth respondent Kym Kyong Choi ("Mr Kym"). The remaining respondents are Albert Ghassibe ("Mr Ghassibe") and Chris Wypych ("Mr Wypych"), two business associates of Mr Kym, and Adelaide Investment Corporation (Australia) Pty Ltd ("AIC"), a company in which each of the other respondents has an interest. The Commencement and Conduct of the Proceedings 4 In circumstances that will be described in more detail later in these reasons, Mr Du arranged to deposit $200,000 in the bank account of AIC on 23 July 1998. Later Mr Guo deposited $250,000 in the same account on 3 August 1998: the amount credited by the bank was only $249,995 because a $5 bank fee was debited against the deposit. In my opinion, that is a charge against the deposit holder and Mr Guo is to be acknowledged as having deposited $250,000. When the dispute between the parties occurred, the applicants quickly instituted proceedings in this Court, filing their initiating proceedings on 28 August 1998. At the same time, the applicants sought injunctions restraining the respondents from dealing with the funds that had been deposited by Messrs Du and Guo. But, as events transpired, the respondents had already disbursed some of the money. Ultimately however, as a result of orders made by the Court, two sums, totalling $310,102.06, were paid into Court on 4 and 11 September 1998 by or on behalf of AIC. 5 The applicants pressed for an early trial. They submitted that the action could proceed on affidavits instead of pleadings, and that they (the applicants) could rely on the affidavits that they had filed in support of their application for injunctive relief. The respondents agreed to this proposal; AIC, together with Messrs Ghassibe and Wypych, were represented by Mr Rice of counsel and Mr Kym was represented by Mr Costi. Both counsel agreed that it would be appropriate to proceed on affidavits and they handed up, without objection, affidavits by their clients (or, in the case of Mr Wypych, a draft of an affidavit that he intended to execute). When, in due course, he gave evidence in the trial, Mr Wypych adopted the contents of his unexecuted affidavit and the document was received as Ex R11 and as part of his evidence in chief. (For ease of reference, I will henceforth refer to this unexecuted document as Mr Wypych's affidavit). For reasons that will shortly become apparent, the affidavits of Messrs Ghassibe and Kym were not tendered in the trial. I have not therefore referred to them for the purposes of these reasons. 6 Counsel estimated that five days would be required for the trial. The matter was therefore listed for hearing and the trial commenced on 14 September 1998. After eight consecutive days of hearing, the matter had only progressed to the close of the applicants' case; at that stage, other commitments of the court meant that the matter had to be adjourned off indefinitely. Because it had become apparent that the trial could no longer be disposed of expeditiously, and because it had emerged that there were complex questions of fact to be resolved, the Court made orders that the matter was thereafter to proceed on pleadings. The applicants were ordered to file and serve a statement of claim by 5 October 1998 and the respondents were ordered to file their defences by 2 November. Orders were also made that the respondents were to file and serve such of their affidavits upon which they intended to rely within seven days and statements of witnesses (if any) within six seeks. The applicants filed their statement of claim. No further material was supplied by or on behalf of the respondents save for a short statement from an intended witness (who, in the ultimate, was not called). 7 At a directions hearing on 16 December 1998 (at which all respondents were represented by counsel) an order was made that the trial would resume on 22 February 1999; on the same day the Court made a further order extending until 29 January 1999, the time within which the respondents were to file and serve their defences and such cross-claims as they may wish to prosecute. It was on this occasion that the Court was advised that Mr Kym was in ill-health and it also appeared as if some (and perhaps all) respondents were in financial difficulties and unable to afford continuing legal representation. 8 There was a further directions hearing on 5 February 1999. By that time the solicitors for AIC and Messrs Ghassibe and Wypych had filed a notice that they were no longer acting. However, Mr Patel, a solicitor (not associated with the previous solicitors) appeared on behalf of those respondents for the limited purpose of seeking an adjournment. (Initially, Mr Patel had acted for Messrs Ghassibe and Wypych during the course of their negotiations with the applicants but when litigation threatened, fresh solicitors were retained because Mr Patel perceived a possible conflict of interest). Mr Patel said that his clients, including AIC, were in dispute with their former solicitors over fees and that the former solicitors had refused to hand over their file. However, no explanation was proffered to show what steps, if any, the respondents had taken to resolve those difficulties. I do not know when they arose; I do not know whether they did or did not affect the filing of defences; I was not given any explanation for the failure to comply with the earlier orders of the Court. I was left to assume that somehow the dispute with the solicitors rendered the compliance with the orders of the Court impossible. I cannot accept such a proposition. The respondents had known since late September that they were required to file and serve their defences and they had known since 16 December that this matter was listed to resume on 22 February; it was their responsibility to order their affairs so that they would be ready to proceed. One is left to wonder whether the respondents would have made any application for an adjournment (before 22 February) if the Court had not set the matter down for a directions hearing on 5 February. 9 The position with respect to Mr Kym was different. Whilst his solicitors referred to his illness, they also conceded, in a letter dated 29 January 1999 to the solicitor for the applicants, that they had been unable to obtain any instructions from Mr Kym. Medical certificates advised against long car travel and air travel but it was not suggested that he was unfit to attend Court to give evidence. Mr Kym is a resident of Sydney but this Court could have sat in Sydney to accommodate his health problems. No such application was made however. Mr Kym's solicitor was present in court on 5 February as a matter of courtesy to the Court but without instructions; his firm later filed a notice that they were no longer acting in the matter. 10 When the action was called on for hearing on 22 February, Mr Wypych appeared in person; no other respondent appeared. Mr Wypych said that he was representing all respondents but, as he was unable to present any written authority, I informed him that, whilst I would hear him and what he had to say (both on his own behalf and in the interest of the other respondents) I could not regard him as having any authority to make statements that would bind the other respondents. Thus, it was because of their absence and lack of representation that I did not receive the affidavits of Mr Ghassibe and Mr Kym in the trial. Mr Wypych asked that the matter be adjourned but that application was refused. I was satisfied that all respondents were aware that the matter was proceeding before the Court that day. Not only were they represented by counsel on 16 December, they were represented by solicitors on 5 February. Furthermore, AIC, Mr Ghassibe and Mr Wypych were served on 17 February 1999, on behalf of the applicants, with a notice of motion seeking an order for summary judgment. The return date in that notice was also 22 February 1999. A copy of that notice of motion was served on Mr Kym's solicitors before they filed their notice that they were no longer acting on his behalf. 11 Both Mr Du and Mr Guo gave evidence. In addition, the applicants called as witnesses, Mr Haynes, a land agent, Messrs Wood and Hooper, two property developers, Mr Hack, an independent third party who attempted to involve himself in the transaction, and a Mr Meng. Mr Wypych gave evidence and he called the applicants' solicitor, Mr Obst, as a witness for the defence. The subject of Mr Obst's evidence was of no relevance to the issues that were in dispute and it is not necessary to make any reference to it. 12 Upon the conclusion of the further hearing of the matter (on 23 February) I was satisfied that the applicants had made out their case; I therefore announced that there would be judgment in their favour in the sum of $390,000 plus interest at a rate to be specified with costs on a scale to be determined. (I was told from the Bar Table that $60,000 had been applied by the respondents in ways that had benefited the applicants, thereby reducing the applicants' claim from $450,000 (the total of the two sums of money that had been paid by Mr Du and Mr Guo to AIC) to $390,000). I also ordered that the monies held by the Court to the credit of this action, $310,102.06 be paid forthwith to the applicants or as they may direct. On the occasion of announcing my decision, I further ordered that there be a stay against the further enforcement of the judgment for a period of twenty one days from the publication of my reasons; I also extended the time for the lodgement of any notice of appeal for the same period of twenty one days. I said that I would publish my reasons in due course; what follows are those reasons. The Hospital Site 13 The Queen Victoria Hospital ceased operations over two years ago. It has remained largely unoccupied and unused since then. It occupies a large area of land in the inner eastern suburbs of Adelaide fronting Fullarton Road to its west. It is bounded on the north by Grant Avenue and by Swaine Avenue on the south. The plan that is Annexure "A" to these reasons ("the current plan") is Filed Plan Number 27011. The site of the hospital is represented by allotments 2 to 13 inclusive on that plan plus allotment 5 in Filed Plan Number 142258; allotment 5 has a frontage of 12.19 metres to Swaine Avenue by a depth of 45.72 metres and abuts allotment 13 in Filed Plan Number 27011. Allotment 1 in Filed Plan Number 27011, which is separated from the balance of the land by the road marked "new road", is not part of the hospital site. As is apparent from an examination of the current plan, the hospital site, which has an irregular eastern boundary, has vehicular access from Grant Avenue, Swaine Avenue and from the east via Hunt Lane. 14 There are several buildings on the hospital site but it will be sufficient to identify four of them. Their locations have been marked on a proposed plan of subdivision of the hospital site that is Annexure "B" to these reasons. That plan can be called "the subdivisional plan" to distinguish it from the current plan. A comparison of the subdivisional plan with the current plan shows that the subdivisional plan does not include allotment 1 from filed Plan Number 27011 but does include allotment 5 from Filed Plan Number 142258. 15 The first of the buildings on the hospital site is that known as "the Tower building". It is a multi-storey skyscraper and, in its day, it served as the principal hospital building. It is located in the north-western section of the site at the corner of Fullarton Road and Grant Avenue and is said to be built on allotments 5 and 6 of the current plan. However, a part of the building encroaches onto allotment 7 of that plan. The Tower building, together with some additional land for car parking is represented by allotment 7 in the subdivisional plan. The next building is Queen's House, a heritage-listed two-storey building that fronts Fullarton Road to the south of the Tower building. Its location, with its adjoining land is more easily identified by reference to the subdivisional plan. It is the allotment of land numbered 8; allotment 9, as marked on the subdivisional plan, is Wilson House; Carroll House and allotment 5 from Filed Plan Number 142258 have been added together to become allotment 10 in the subdivisional plan. Although it does not appear from an examination of the subdivisional plan, evidence was led that Carroll House is destined to be demolished so that nine building allotments can be created out of the allotment of land that is marked 10. 16 The car-parking facilities for the former hospital are to be found, first, in the southeastern corner bounded by Hunt Lane to the north and Swaine Avenue to the south. It is intended that this land will become part of the nine building allotments. The remaining car park fronts Grant Avenue. In the subdivisional plan it is represented by the six proposed building allotments numbered 1 to 6 and by the vacant land immediately to the south of those allotments. If the subdivisional plan is finally approved, the only car parking facility of any size that will remain will be the site of the present car park to the south of the six Grant Avenue allotments; that car parking facility is intended to form part of allotment 7 in the subdivisional plan and will be available to service the Tower building. 17 There are therefore five identifiable parcels of land in the subdivisional plan and as they were repeatedly referred to throughout the evidence, it is helpful to identify them at the outset: · The first parcel of land, called "the Grant Avenue land", is that comprising the six proposed building allotments fronting Grant Avenue; · The second parcel of land, called "the Swaine Avenue land", is that comprising the nine proposed building allotments fronting Swaine Avenue; · The third parcel is the Tower building. Its boundaries are intended, by the proposed subdivision, to include, first, allotments 5 and 6 in the current plan, secondly, so much of the land in allotment 7 of the current plan as is the subject of the building encroachment, thirdly the area of land to the south of the Grant Avenue land that is ear-marked for car parking and finally the rights of way that lead to and from Grant Avenue and Swaine Avenue; · The fourth parcel is Queen's House, which is allotment 8 in the subdivisional plan; · The fifth and last parcel is Wilson House, which is allotment 9 in the subdivisional plan. 18 The Queen Victoria Hospital was originally owned by the South Australian Government. However, as a consequence of its decision to close down the hospital, the Government decided to sell it. The hospital site was purchased in December 1996 by Latipsoh Nominees Pty Ltd ("Latipsoh") for $2.5m – an apparently unusual name until it is spelt backwards. It is accepted that Latipsoh was and is a nominee for the Burnside Hospital Trust. The Burnside Hospital is situated on Kensington Road, a short distance from the site of the Queen Victoria Hospital. No evidence was led on the subject, but the Burnside Hospital Trust must have had a change of heart for Latipsoh placed the hospital site on the market for sale. On 30 January 1998, it granted an option to Messrs Wood and Hooper, or their nominees, to buy the whole of the site for $3.275m. 19 The option period commenced on 30 January 1998 and, subject to a right of extension, expired at midnight on 29 April 1998. The fee that was paid for the grant of the option was $15,000. Messrs Wood and Hooper had the right to have the period of the option extended for a further period expiring at midnight on 30 June 1998. In order to exercise that right, they were required to give notice of the extension by paying an extension fee of a further $30,000 before 29 April. Messrs Wood and Hooper paid the additional $30,000 and obtained an extension of the option. In the event of the option being exercised, the $15,000 and the $30,000 would be applied in part payment of the purchase price. 20 The matter of significance, for the purpose of these proceedings, is that in June 1998, Messrs Wood and Hooper controlled the situation. They had an apparently enforceable option to acquire the whole of the hospital site; if a party wished, at that stage, to acquire any part of the hospital site, that party had to deal with Messrs Wood and Hooper or their agent. The Value of the Hospital Site 21 Following upon the grant of the option by Latipsoh, Messrs Wood and Hooper caused the subdivisional plan to be prepared. They also engaged Mr Haynes to sell the whole of the hospital site in accordance with the subdivisional plan. Mr Haynes said in evidence that he had no difficulty in obtaining contracts for the sale of the fifteen intended building blocks comprising the Grant Avenue land and the Swaine Avenue land. Those sales, for a total gross sum of about $1.7m were, however, all subject to Messrs Wood and Hooper exercising their option to acquire the whole of the site by 30 June 1998. This they failed to do and, so they claimed, those sales are no longer enforceable. Nothing turns on this point save that the existence of the contracts is some evidence of the value of those two parcels of land. There was evidence suggesting that some of the individual building blocks could be sold for as much as $120,000 each. If that figure were to be a constant, it would give a total value to the fifteen blocks of about $1.8m, made up of $720,000 for the Grant Avenue land and $1,080,000 for the Swaine Avenue land. On the other hand, by letter dated 24 August 1998, Mr Wood wrote Mr Neville Obst, the solicitor for the applicants, setting out his "break up of the values that he then attributed to the different parcels of land …". Those values were as follows: 1 The Grant Avenue land $ 500,000 2 The Swaine Avenue land $ 800,000 3 The Tower building $2,800,000 4 Queen's House $ 750,000 5 Wilson House $ 600,000 $5,450,000 Mr Wood went on to say in his letter however, that if the land were to be sold as a whole, he and his partner, Mr Hooper, would accept $4.5m for an unconditional assignment of their contract of purchase. 22 Earlier, during the course of an inspection of the hospital site on Monday 22 June, Mr Haynes had given to Mr Hack a copy of a valuation that Messrs Wood and Hooper had obtained from Messrs Knight Frank: ("the Knight Frank Valuation"). Mr Wood said, during the course of his evidence, that this valuation was a "projection"; it was said to be based on the final approval of the subdivisional plan, the completion of the works and the payments of the costs that were an essential part of obtaining that approval. That valuation can be summarised as follows: The proposed 15 allotments (based on the Contracts for sale) $1,710,000 The Tower building 3,250,000 Queen's House 850,000 Wilson House 700,000 $6,510,000 23 I find that Mr Hack, and through him, the respondents, would have therefore been aware of these potential values during the course of their subsequent activities but they would not have known of the attitude to value that is to be found in Mr Wood's letter of 24 August 1998 to Mr Obst. 24 Mr Wood explained at p 275 of his evidence that his purpose in obtaining the Knight Frank valuation was to determine the value of each of the separate parcels of land upon the premise that council approval had been obtained for the development that he and Mr Hooper, as developers, proposed. Mr Wood acknowledged that it was very unlikely that he and Mr Hooper would be able to sell the whole of the hospital site for the prices specified in the valuation; he would expect a lot less. 25 Without attempting to be exact, it will be convenient to proceed upon the premise that the Grant Avenue land could be worth up to $500,000 and that the Swaine Avenue land could be worth up to $800,000. 26 Mr Haynes did not have the same success with the balance of the land. He found difficulties in his attempts to sell the Tower building, Queen's House and Wilson House. Messrs Wood, Hooper , Haynes and Hack 27 I move now to a consideration of the contentious facts, but before doing so, I set out my findings on credit with respect to those who gave evidence in the trial. 28 Messrs Wood, Hooper and Haynes all gave evidence on behalf of the applicants. I accept them as honest and reliable witnesses. They were not involved in the relationship that existed between the applicants and the respondents; they dealt with them as if they were all members of the same group. Their evidence was impartial and because of its impartiality it was of value. 29 Mr Hack was also called as a witness for the applicants. I cannot, however, give the same weight to his evidence as that given to Messrs Wood, Hooper and Haynes. The most disconcerting feature of his evidence was that he openly admitted to a willingness to gain a profit at the expense of the Chinese applicants when he was supposedly representing them during the course of the negotiations. He claimed that his activities were "commercial" and he apparently saw nothing wrong in participating in a substantial secret profit at the expense of those whose interests he was allegedly representing. 30 It was part of the applicants' case that Mr Hack had been introduced to them as a "government man"; they also claimed that they had been led to believe that they would be purchasing the hospital site from "the government". These allegations were substantially corroborated by Mr Haynes; he said that during the course of a conversation, Mr Hack had said to him that the Chinese investors "think they are buying from the Government". This misrepresentation, in which Messrs Hack, Ghassibe, Wypych and Kym participated, was quite important for, as I find, it induced in Messrs Guo and Du a false sense of security. They believed that "the Government" would not – as would a private person- ask them to pay a price for the Hospital site that was in excess of its value. They were induced into believing that the involvement of "the Government" gave some aura of respectability to the transaction. Mr Hack denied this but I unhesitatingly accept the evidence of Mr Haynes in preference to that of Mr Hack. It was clear that Mr Haynes had a low opinion of Mr Hack but I do not believe that he would deliberately make such a statement knowing that it was false. I find that in his negotiations with the applicants, Mr Hack, even though he claimed to represent the purchasers, held himself out as a representative of the Government; I also find that he held out to them that the Government was the vendor of the land. I further find that this holding out was done with the connivance of the respondents. This is another example of how the Chinese were deceived. 31 In coming to this adverse conclusion about Mr Hack, I was influenced by another contradiction in his evidence. Mr Hooper had given his evidence before Mr Hack. Like Mr Haynes, he had no time for Mr Hack. He had become so irritated by the way in which Mr Hack had conducted himself that he refused to have any further discussions with him. Mr Hooper then went on to say that Messrs Ghassibe and Wypych had fallen out with Mr Hack. Mr Hack denied this when he gave his evidence. I believe Mr Hooper in preference to Mr Hack. It also explains why, towards the end of the saga, the role played by Mr Hack noticeably diminished. During the course of these reasons I have made findings that are highly critical of the credit and conduct of Mr Hack. While not a party to these proceedings, Mr Hack was a witness who played a central role in the negotiations that I have described. It was therefore necessary to examine his character and conduct closely in order to explain the factual matrix involved in this complex commercial dealing. Messrs Kym, Ghassibe and Wypych 32 It was Mr Kym who first hit upon the idea for a hostel and school for Chinese students. Following upon Mr Du's commitment to invest in the funeral business, Mr Kym approached Mr Du sometime in May or early June 1998, asking whether he would be interested in such a project. At about the same time, Mr Kym spoke to Mr Ghassibe, telling him of his idea and of his proposal to invite Mr Du to participate in it. Apparently, the Department of Immigration has (or, at least at that time, had) a policy that allowed resident visas to foreign nationals who were prepared to invest in Australia, particularly in low growth areas of which Adelaide was one. Mr Ghassibe approached Mr Wypych. According to Mr Wypych, Mr Ghassibe explained the project to him, identified Mr Kym and Mr Du, and asked whether he (Mr Wypych) knew of any buildings in Adelaide that might be suitable for the school. 33 Mr Wypych telephoned an Adelaide business associate, Mr Michael McGrath who, in turn, referred Mr Wypych to a Mr Graham Hack. Mr Hack, who played a pivotal role in the subsequent negotiations, learnt that the hospital site was available for purchase through a Mr Matthew Luscombe. Mr Luscombe had, in turn, acquired this information from Mr Jonathan Haynes, a licensed land agent, who had been commissioned to sell the whole of the hospital site. In the meantime, while this was happening, Mr Du had signalled his interest in the project and was making arrangements with Mr Kym to visit Adelaide. Mr Du said in evidence that Mr Kym had initially said that the whole of the hospital site could be bought for $4m. 17 and 22 June: Messrs Hack, Ghassibe and Wypych visit the Hospital Site 34 On 17 June 1998, Mr Ghassibe and Mr Wypych travelled to Adelaide. They were met by Mr Hack who showed them several buildings, one of which was the hospital site. Mr Wypych claimed that Mr Hack had said that the price for the Tower building was $3.8m. Other evidence suggests that Mr Hack may have said that the price was $3,500,000. Much time was devoted to this discrepancy of $300,000 and serious allegations of secret commissions were made. There can be no doubt that Messrs Ghassibe and Wypych were intent on making a substantial profit out of this transaction and it is more probable than not, that this was an attempt by them to achieve that profit at the expense of, and without the knowledge of, the ultimate purchaser (whoever that might be). 35 There was another inspection of the hospital site by Mr Hack, Mr Ghassibe and Mr Wypych on Monday 22 June 1998. During the course of that inspection, Mr Haynes was present together with another person from his office; Mr Luscombe also attended. When asked during the course of his evidence, to explain in what capacity he was acting when he arranged that meeting, Mr Hack described himself as "an introducer to the property". Over and above the $300,000 commission that Messrs Ghassibe and Wypych were hoping to obtain if the sale of the hospital site could be organised, I find that Mr Hack was independently seeking to extract for himself some unspecified payment for his services. 36 According to Mr Hack, he informed Mr Ghassibe and Mr Wypych that three buildings were available for sale and the group therefore inspected each of the three buildings. As Carroll House was destined for demolition, his reference to the three buildings must be taken to be a reference to the Tower building, Queen's House and Wilson House. Mr Haynes' evidence was that he showed the party over the whole of the hospital site and gave them copies of photographs and the subdivisional plan. He said that during the course of the inspection, Mr Hack told him that he had a prospective buyer for the whole site. According to Mr Haynes, Mr Hack said that the purchaser was a Chinese national. Mr Haynes said that he responded to Mr Hack, telling him about the contracts for the sale of the fifteen building blocks, but adding that "Wood and Hooper would consider an offer for the purchase of the whole of the site". Mr Hack's statement was false. He did not have a prospective buyer; he had not been retained by anyone to act as a purchasing agent. He was hoping, somehow, to work his way into the transaction and profit from it. 23 and 24 June: Mr Du visits the Hospital Site 37 In the late evening of Tuesday 23 June, Mr Du arrived in Adelaide from Shanghai via Sydney. Mr Hack drove him to the hospital site but they only made a visual examination from the car. On Wednesday 24 June there was a further inspection of the site. The same people attended as had attended on the preceding Monday together with Mr Du and Mr Kym (who had accompanied Mr Du from Sydney). Although he was pressed to make a commitment, Mr Du returned to China, saying that he wished to discuss the project with his business associate, Mr Guo. However, he left Adelaide having given the impression that he was favourably disposed to participating in the project. 38 During the visit to Adelaide, Mr Kym had acted as Mr Du's interpreter. It was Mr Du's evidence, which I accept, that Mr Kym told him that Mr Hack was a "government man" and "that the price of $4m was very cheap and that we would be buying the Queen Victoria Hospital site direct from the government". 39 Even though Mr Du may have been told by Mr Kym in the initial stages of their discussions that the whole of the hospital site was available for $4m, the effect of any such representation ceased to have any effect when Mr Du visited the hospital site. On that occasion, when the party was in the Tower building, Mr Kym told Mr Du that the purchase price for the Tower building and its vacant land at the rear was $4m. Mr Du said that he remonstrated with Mr Kym asking "Why change, you tell me whole hospital". According to Mr Du, Mr Kym replied, saying that he did not know why there had been a change. I find that, at this stage, Mr Du and, subsequently, through him Mr Guo no longer had a belief that the whole of the property was available for $4m. 40 Upon his return to Shanghai, Mr Du contacted Mr Guo; they talked about the project. Mr Kym also visited Shanghai and the three men had several discussions about the project. 41 As a result of these discussions, a proposal evolved to purchase either the hospital site or at least a part of it. Mr Guo, in par 10 of his affidavit that was sworn on 14 September 1998, (Mr Guo's affidavit) said that Mr Kym had said that the proposal was to buy the whole of the site, that the site was owned by the Government, and that the hospital buildings could be changed into a school and accommodation for Chinese students. It was contemplated that as many as 500 students might be enrolled. I find that Mr Guo is mistaken about the whole site being the subject of the proposed sale; that may have been told to him at an earlier stage however – perhaps before Mr Du made his visit to Adelaide The Proposal for a Joint Venture 42 According to Mr Du, Mr Kym suggested that they should engage in a joint venture. This assertion was corroborated by Mr Wypych who said that during Mr Du's visit to Adelaide there were discussions with him about a joint venture. In pars 17 and 18 of his affidavit, Mr Wypych said: "17. We had also had discussions with Mr Du concerning operating the English school on the basis of a 50/50 joint venture between the Chinese interests and AIC. 18. We advised Mr Du that AIC would sponsor Mr Du as a resident to Australia provided he made a commitment of $500,000 to the purchase of the QVH Tower building for the purposes of conversion to a language school." When he subsequently gave oral evidence, Mr Wypych confirmed the contents of these paragraphs. However, he claimed that the joint venture did not extend to the purchase of real estate; it was only intended, so he said, to cover the business of running the school. I reject that evidence. It is inconsistent with what Mr Du and Mr Guo believe and it is contrary to the document that his own solicitor, Mr Patel, prepared. 43 Mr Patel had, at a later stage, prepared a document for the joint venture. Although it was never executed and, indeed, although some of its contents were never agreed, the recitals as compiled by Mr Patel show the intentions of his clients, Messrs Ghassibe and Wypych, at least. Those recitals are set out hereunder: "A. The parties hereto desire to carry on the business of providing accommodation and schooling facilities ("Schooling Facilities") to students from China. B. Adelaide Investment and Xiang "[i.e., the first applicant]" have agreed to go into a joint venture to provide such facilities at Adelaide and elsewhere in Australia C. The parties have agreed to carry on joint venture by means of a limited liability company called Winthorpe Pty Ltd which would own accommodation and schooling premises including fixtures and fittings and Queen Victoria College Pty Ltd shall organise and run boarding house and school. D. The nominal capital of Winthorpe shall be $10 million divided into 10 million ordinary shares of $1 each. E. Winthorpe shall purchase the Tower building delineated in Pink in the Plan annexed hereto in the former Queen Victoria Hospital Complex ("the Tower") at a price of $3.80 million. F. Xiang shall subscribe $3 million to the capital of Winthorpe and shall be issued 3 million shares in Winthorpe. G. Xiang shall actively market the schooling facility in China and procure enrollment of students in batches of between 500-800 commencing from 1st November 1998 at an agreed fee of $18,000.00 per year per student. H. Adelaide Investment has undertaken to subscribe its share of $3 million to the capital of Winthorpe progressively by carrying out at its own costs all renovations, alterations and modifications of the Tower and providing all furnishings, fixtures and fittings for accommodation, kitchen and school such that the completed facility shall accommodate between 500-800 students. I. Adelaide Investment shall be issued shares in Winthorpe in proportion to its actual expense incurred in carrying out the renovation, alteration, modification of the Tower and in providing the furnishings, fixtures and fittings as aforesaid. J. The capital of Queen Victoria College Pty Ltd shall be ten million dollars ($10,000,000.00) divided into ten million ordinary shares of $1 each which shall be subscribed by Xiang and Adelaide Investment in the same proportion as their respective share bears to the total subscribed capital of Winthorpe. K. The Joint venture commence from the 7th September 1998." 44 A draft of the joint venture was sent by facsimile transmission to Mr Guo in China. He studied it and made several alterations. However, those alterations were never accepted by Messrs Kym, Ghassibe and Wypych. I find that, ultimately, the negotiations with respect to the joint venture broke down and that no joint venture ever existed between the parties. However, I find that the intended joint venture extended to the acquisition of the Tower building and I further find that although one or more companies were intended to be used, all the respondents were intended to be interested parties in the joint venture with the applicants. 45 I am therefore satisfied that the parties to this litigation, at all material times, intended that there would be a joint venture for the entire project: that is, the ownership of the relevant land and the conduct of the business of the residential school. This finding accords with the evidence of Messrs Du and Guo and the document that was prepared by Mr Patel. 24 June: The Exercise of the Option 46 30 June was fast approaching; it was the last day for Messrs Wood and Hooper to exercise their option, unless they could get a further extension. It is a reasonable inference that all parties would have then known (and subsequent events verified) that to get an extension they would have to pay a further extension fee. I find that Messrs Wood and Hooper and their agent Mr Haynes pressured Messrs Hack, Ghassibe and Wypych to fund some part of that extension fee. 47 On 24 June, Mr Kym drew a cheque for $30,000 on the account of his company, Cosmopolitan Funeral Services Pty Ltd. At this stage, it needs to be emphasised that although Mr Du was still in Australia, neither he nor Mr Guo had committed themselves - but the signs were propitious. The cheque for $30,000 was drawn in favour of Wexmore Pty Ltd, a company that was controlled by Mr Hack. It was put to Mr Du in cross-examination that Mr Kym had paid over that money under the authority of a general Power of Attorney that he (Mr Du) had granted to Mr Kym. Mr Du denied that he had given Mr Kym any Power of Attorney; he claimed that Mr Kym had told him that the document that he had signed (and which was, in fact, a Power of Attorney) had the limited purpose of assisting Mr Kym in Mr Kym's attempts to obtain a resident's visa for Mr Du. At about the same time as he gave Mr Hack the cheque for $30,000, Mr Kym also handed over $20,000 to Mr Ghassibe for general expenses. I accept Mr Du's evidence about his signature on the Power of Attorney. As this complicated story unfolds, it becomes apparent that it was merely the first of many occasions when Mr Kym mislead either Mr Du or Mr Guo or both of them. 48 Document 26 of Ex A1 is a rather strange document dated 24 June. It was written by Mr Hack on behalf of Wexmore. It is addressed to Mr Du and it carries a heading: "Re: PURCHASE OF QUEEN VICTORIA HOSPITAL TOWER" Its opening sentence read: "We wish to confirm that we have negotiated an option on your behalf for 30 days on the above property". 49 The letter proceeded to state that the option fee was $50,000, payable as to $30,000 that day and $20,000 on Monday 6 July 1998. It stated that the purchase price was "$3,5000,000" but it is clear that it was meant to be "$3,500,000". Finally the letter stated "that the contracts (sic) will be ready for your return visit …". Mr Du acknowledged that his signature appears on Document 26 but he denies that the contents were made known to him. He said that Mr Kym told him to sign it, saying that it was only "a draft". I accept the evidence of Mr Du; such evidence as was adduced satisfies me that Mr Kym knew, on and from 24 June, that Mr Hack was negotiating to obtain an option to purchase some part of the hospital site. It was for this reason that Mr Kym drew the cheque for $30,000 and handed it to Mr Hack to assist him in obtaining the option. 50 It would be reasonable to infer, from the contents of Document 26, that the amount of $30,000 was to be paid to the person who either owned – or at least, controlled – the hospital site. But that did not transpire. $15,000 only was paid to Messrs Wood and Hooper; the remaining $15,000 was divided between Messrs Ghassibe, Wypych and Hack. Mr Hack explained that this was done to cover his expenses and those incurred by Mr Ghassibe and Mr Wypych. However, he did not suggest that he had Mr Kym's authority to disburse the money in this fashion. 51 When questioned about these payments Mr Wypych was noticeably evasive, claiming that the subject was irrelevant. In my opinion, it was highly relevant. The probabilities are, and I find, that Mr Kym did not know that Messrs Hack, Ghassibe and Wypych were lining their own pockets at his expense. 52 The conduct of Messrs Ghassibe, Wypych, Kym and Hack in this critical period of June and July 1988 is very difficult to understand unless I state my ultimate conclusions at this stage. The first of the critical findings is that all respondents together with Mr Hack were willing to act at the expense of the applicants. They saw an opportunity to make money for themselves if they could induce Messrs Du and Guo to buy some part of the Hospital site. They did not, however, have a fixed plan; on the contrary they were prepared to make their profit in any way that might eventuate; that attitude, in part, explains why the plans for the purchase were continuously changing as they sought different avenues from which they might benefit themselves. Mr Kym could see the potential for the establishment of a profitable venture and he went along with the other three in their joint efforts to get control of the applicants' money. I find that Mr Du and Mr Guo placed their trust in Mr Kym. Mr Du, in particular, could not understand English. He relied on Mr Kym to explain documents to him and he signed documents on Mr Kym's advice. I accept Mr Du's evidence wherever it implicates Mr Kym in unacceptable behaviour. 53 The enormity and brazenness of the conduct of the respondents and Mr Hack is disclosed by Document 30, a photocopy of some hand written notes. According to Mr Hack, it is in Mr Wypych's handwriting but Mr Hack acknowledged that his initials and Mr Ghassibe's initials appear on the document. To understand this document it is first necessary to state my findings about the intentions of the respondents and Mr Hack. They intended to offer Messrs Wood and Hooper the amount that Messrs Wood and Hooper wanted for the hospital site – or some part of it - by having the Chinese purchasers pay an inflated price for the Tower building so that they could acquire other parts of the site at a substantially reduced price. 54 The first entry in the notes is: "Purchase Price $3,850,000" I find that to be a reference to the intended purchase price of the Tower building. One particular contract for the Tower building originally showed a purchase price of $3,850,000 but it was altered and the ultimate figure was $3,800,000. The next entry that is important is: "350,000 to Allan" I find that Allan is Mr Allan Meng, the witness for the applicant, and a former employee of Mr Kym. The subject of this payment is discussed later in these reasons under the heading, "$350,000: commission." 55 The notes then proceed with the following entries: Land (1) ) QVB (2) )owes us $500,000 Wilson (3) )Sell QVB (2) at $750,000 leaves us $250,000+ Split 4 ways Plus $84,000 Stamp Duty on Purchase Price This highly significant endorsement is to be interpreted as follows: Mr Wypych is noting that his group will be acquiring land ("the Grant Avenue land") plus Queen's House plus Wilson House at a cost of $500,000 and $84,000 for the Stamp Duty; the proposal is that they sell the Queen's House for $750,000 which will leave them with a cash surplus of $250,000 plus the Grant Avenue land and Wilson House. The cash is to be split "four ways" - the four participants in the split being Messrs Ghassibe, Wypych, Kym and Hack. All this would, of course, be effected without the applicants' knowledge or participation. Furthermore, it would be effected at a point of time when Mr Kym has already been identified as a co-venturer with Mr Du and, as becomes apparent later in these reasons, at a point of time when Messrs Ghassibe and Wypych were assuring Messrs Du and Guo that they were looking after their interests. When this was put to Mr Wypych he agreed with it; he saw nothing wrong in profiting at the expense of the applicants. The fact that they were to be induced to enter into a contract to purchase the Tower building at a price in excess of that sought by the vendors was, in Mr Wypych's opinion, acceptable conduct. 56 Mr Du was aware that there was a possibility that Mr Kym and his group might purchase some other part of the hospital site independently of the Tower building. In par 18 of his affidavit that was sworn on 14 September 1998 ("Mr Du's affidavit"), Mr Du acknowledged that Mr Kym had told him on several occasions, that if Mr Du and Mr Guo did not buy the site as part of a joint venture "we will buy it ourselves". That statement cannot, however, be taken to mean that Mr Du knew, or ought to have known, that Mr Kym and the others were planning to buy a part of the hospital site cheaply by tricking Mr Du and Mr Guo into paying a higher price than was necessary for them to acquire the Tower building. But what Mr Kym did not know was that Messrs Hack, Ghassibe and Wypych were more than willing to take advantage of Mr Kym. As a result, on the one hand, Mr Kym was a co-conspirator in the respondents' conduct towards Messrs Guo and Du, but, on the other hand, he was separately a victim of the actions of his co-conspirators. The last factor to bear in mind is Mr Hack; he owed no loyalty to anyone other than himself. His conduct is more easily understood if this factor is appreciated. But although I found his behaviour to be highly reprehensible, there was a curious feature about Mr Hack's evidence. It was this: he so lacked commercial scruples, that he freely told of his conduct and, more importantly, of the conduct of the respondents. In those unusual circumstances, much of his evidence was therefore acceptable. $350,000: Commission 57 In the first place, this figure of $350,000 for commission must be reduced by $50,000 to accord with the diminution in the purchase price from $3,850,000 to $3.8m. I find that the consequential figure of $300,000 was intended to be paid as the commission that Mr Ghassibe and Mr Wypych were seeking for having introduced the Chinese to the project. Mr Meng when questioned about this commission, and the suggestion that it was to be paid to him, disclaimed any knowledge of it. I have no reason to doubt Mr Meng, I am satisfied that he was telling the truth. Nevertheless, and unbeknown to him, he was to have been the unsuspecting conduit through whom the secret commission of $300,000 would be paid. 58 Independent support for the proposition that a secret commission was to be paid comes from the evidence of Mr Wood. At page 301 of the transcript he was questioned by Mr Rice, counsel for AIC and Messrs Ghassibe and Wypych. Mr Rice asked: ". . . Do you have any recollection of being told that the price increased to $3.8m because of a commission payable to a Chinese man? ... Yes. Yes, I do recall that. Yes, I do recall there was $300,000 to be paid." Mr Wood acknowledged that if the transaction had been settled he and Mr Hooper would have been responsible for the payment of that amount. When asked whether he knew the identity of the payee he said: "We were told it was a gentleman who worked for the Chinese Government who facilitated transactions in Australia for Chinese people." 59 But, said Mr Wood, no name was mentioned. This figure of $300,000, although payable by Messrs Wood and Hooper, did not affect their end of the transaction. As Mr Wood said, he and Mr Hooper had fixed upon the minimum dollars that they would accept and this figure of $300,000 was added to that minimum. He went on to explain that, although the $300,000 commission had been identified to him as an amount payable to a Chinese gentleman, nevertheless, the arrangement was that he and Mr Hooper were to pay that money to Mr Hack's company, Wexmore. 30 June - Wexmore and Kinship 60 On 30 June 1998, Messrs Wood and Hooper entered into an agreement with Wexmore Pty Ltd ("Wexmore") and Kinship Group Pty Ltd ("Kinship"). Mr Hack, who is an undischarged bankrupt, acknowledged that both these companies were controlled by members of his family. However, as it is clear from the evidence that Mr Hack was the only member of his family who was involved in negotiations with respect to the hospital site, the probabilities are, and I find, that these companies were vehicles of convenience to be used because of Mr Hack's bankruptcy. Under this agreement, Messrs Wood and Hooper granted Wexmore an option to take an assignment of their rights to acquire from Latipsoh the portion of the hospital site that was referred to as the "W-land". That land was defined in the agreement to mean allotments 5 and 6 in Filed Plan 27011 (that is, the current plan). Subject to the problem of the encroachment, this was the Tower building at the corner of Grant Avenue and Fullarton Road. By the same agreement, Messrs Wood and Hooper granted Kinship a like option to acquire the "K-Land". The "K-Land" was defined so that it meant allotments 2, 3, 4, 7, 8, 9 and 10 in Filed Plan 27011 (or, the Grant Avenue land, Queen's House and Wilson House). The effect of these two options was that allotments 11, 12 and 13 of Filed Plan Number 27011 and allotment 5 of Filed Plan Number 142258 were retained by Messrs Wood and Hooper. This retained land was that parcel of land in the subdivisional plan that has earlier been referred to as the Swaine Avenue land. 61 The price payable by Wexmore to Messrs Wood and Hooper for the "W-Land" in the event of it exercising the option, was $3,075,000 and the option fee was $30,000. That fee was payable by two instalments of $15,000 each; the first instalment was payable on the signing of the agreement (ie 30 June) and it was paid on that date out of the $30,000 that had been advanced by Mr Kym: see par 47 above. The second instalment was payable fourteen days later, but that instalment was not paid on its due date. 62 By letter dated 14 July 1998, Mr Hack wrote to Messrs Wood and Hooper concerning the further payment of $15,000 that was due for payment that day. The letter explained that Mr Du and his group had been delayed and would not now be arriving in Adelaide until about Tuesday 21 July. Mr Hack requested that the payment of $15,000 be varied so that $5,000 would be paid on 20 July and the balance of $10,000 on 28 July. Messrs Wood and Hooper agreed to the variation and $5,000 was, in fact, paid by Messrs Ghassibe and Wypych to Mr Wood on 20 July 1998. Document 28 is a photocopy of Mr Hack's letter with Mr Wood's notation that he and Mr Hooper agreed to the variation; it also contains Mr Wood's endorsement dated 20 July 1998 acknowledging receipt of $5,000. 63 The arrangements in respect of the option to acquire the "K-Land" were markedly different. The option fee was only $10.00 and the purchase price was only $100,000 - a gross under value as Mr Hack acknowledged. As has already been mentioned, the Grant Avenue land alone had a likely value of up to $500,000. The values for Queen's House and Wilson House in the Knight Frank valuation, although admittedly projected values based on the completion of the subdivision, were set down at $850,000 and $700,000. Mr Hack's opinion on value was supported by Mr Haynes who, in his affidavit dated 14 September 1998 said on this subject: "There was an obvious bias in the value of the allotment (sic) in that the Wexmore option was inflated and the Kinship option undervalued." 64 However, in addition to the payment of their respective purchase prices (in the event of the options being exercised) Wexmore and Kinship had a joint obligation to pay Messrs Wood and Hooper an "assignment fee" of $500,000. The result of these transactions, if all options had been exercised, may be summarised as follows: · Latipsoh would have received $3,075,000 from Wexmore, $100,000 from Kinship and the option fees that had been earlier paid; · Messrs Wood and Hooper would have retained ownership of the Swaine Avenue land valued at up to $800,000 and would have received the "assignment fee" of $500,000; · Kinship would have acquired the Grant Avenue land, Queen's House and Wilson House for $600,000 (i.e., $100,000 plus the assignment fee of $500,000) which would have been a gross under-value; · Wexmore would have acquired the Tower building at a cost of $3,075,000; · Wexmore would have then been in a position to sell the Tower building to the Chinese at a substantial profit as they had been led to believe that they would have to pay $3,800,000; · Messrs Ghassibe and Wypych and perhaps Mr Kym, but not Mr Hack, would have shared in a secret commission of $300,000. 65 Neither Mr Hack, Mr Ghassibe nor Mr Wypych had the funds to implement this convoluted scheme. The same cannot be said with certainty about Mr Kym but it can be said that there is no evidence that points to him offering to act as banker. The conclusion that I draw is that the four of them plotted to have the applicants fund the whole, or substantially the whole, transaction so that they could end up, at minimal cost, with the Grant Avenue Land, Queen's House and Wilson House. Naturally, the profit that would be made by the four conspirators would not be known to the applicants. According to Mr Guo, in par 32 of his affidavit, he had no knowledge that Mr Hack or Wexmore had obtained an option to purchase any part of the hospital site. I accept his evidence. 66 However, the scheme did not eventuate: the conspirators started to fall apart and, later, the Chinese started to become suspicious. 7 July – Latipsoh extends the option 67 Messrs Wood and Hooper were able to obtain a further extension of their option from Latipsoh. Those parties executed a deed of variation dated 7 July 1998. For a further fee of $30,000 the option period was extended to 31 July 1998 and, in the event of Messrs Wood and Hooper paying a further fee of another $30,000, it could be extended to 31 August 1998. Other variations included a small alteration to the purchase price, changing it to $3.335m with the opportunity to obtain a discount of $30,000 for an early settlement. Both extension fees were paid and, in due course, Mr Haynes gave notice that his clients had exercised their option. Mr Guo's visits Australia – 25 July 1998 68 Prior to him coming to Australia to inspect the hospital site, Mr Guo, as has been earlier stated, had met Mr Kym in Shanghai with Mr Du and had discussed the project with Mr Kym extensively. When Mr Kym returned to Australia the two men continued to discuss it by telephone. Mr Guo said, and I have no reason to disbelieve him, that Mr Kym had said that "we would be buying the hospital direct from the Government at the lowest price so that we did not need to investigate the price for the Queen Victoria Hospital site." Whether or not Mr Kym knew of the falsity of this statement is not to the point. He made it and he intended that Mr Guo would rely on it; it was false and he must take the consequences for the falsity of his statement. 69 When Mr Guo arrived in Australia on 25 July 1998, he spent his first night in Sydney where he met and had dinner with Mr Kym and Mr Du. Neither Mr Ghassibe nor Mr Wypych were present at the dinner and, as at 25 July 1998, Mr Guo did not know that they were involved in the purchase of any part of the hospital site; Mr Kym had merely told him that "Two people were assisting him". 70 Mr Guo flew to Adelaide on 26 July 1998 with Mr Du and Mr Kym. Mr Ghassibe and Mr Wypych met the party at the Adelaide Airport and transported them to the Adelaide International Hotel at North Adelaide. Sometime during the course of the day, Mr Ghassibe and Mr Wypych told Mr Guo that they were partners in AIC, holding equal shares with Mr Kym. 71 Upon his arrival at the hotel, Mr Guo met Mr Hack for the first time. At the hotel, and before inspecting the hospital site, the group had a meeting at which they discussed the method of purchasing the property. According to Mr Guo, Mr Kym proposed a joint venture saying that Mr Du and Mr Guo should contribute $3m to the purchase of "the QVH site" and that he (Mr Kym) and Mr Ghassibe and Mr Wypych "would make progress payments of $3m." According to Mr Guo, Messrs Ghassibe, Wypych and Kym told him that they could not pay the $3m "for government tax reasons". Mr Guo said that he did not understand this and nor do I. The probabilities were, and I find, that they knew that they could not raise their $3m. I accept Mr Guo's evidence about the subjects that were discussed on this day. Mr Guo claimed that he told Messrs Ghassibe, Wypych and Kym that "unless they were prepared to pay $3m at the same time as Mr Du and myself we would not do business." 72 Mr Guo also claimed that, at that meeting, he was insistent upon dealing direct with the Government. He still believed that the hospital site was owned by the Government. He said that he was told that this was not possible but that Mr Hack was a "Government man" and that the only way he could negotiate the price was with Mr Hack. 73 Following upon this meeting, the party proceeded to inspect the hospital site. As has been stated earlier, Mr Guo had previously been told that the whole site was available for $4m. However, Mr Guo acknowledged in cross-examination that, during the inspection, Mr Kym told him that the purchase price was for the Tower building and that other parts of the land had already been sold. 74 Notwithstanding what representations may have earlier been made to Mr Guo about the whole site being available for $4m, he now knew, as a result of what was said during the course of this inspection on the 26 July, that the Tower building and the car park was the land which was under consideration and that its proposed purchase price was $3.8m – not $4m. 75 During the visit to the hospital site, there were discussions between Mr Guo and Messrs Ghassibe, Wypych and Kym about forming a joint venture to buy the property. However, Mr Guo was emphatic that neither Mr Du nor he agreed to buy the property nor to form a joint venture at that stage. It was suggested that a draft contract could be prepared but again Mr Guo repeated that he was not prepared to enter into any agreement to purchase any property until he had investigated all the details and determined that they were accurate. He also said that he and Mr Du were concerned to ensure that neither Mr Ghassibe, nor Mr Wypych nor Mr Kym receive any money from the sale and purchase of the hospital site. I find that Mr Guo took a much harder approach to the transaction than Mr Du. 76 On the day following the inspection of the hospital site, there was a further meeting at the Adelaide International Hotel. Those in attendance were Messrs Du and Guo and Messrs Ghassibe, Wypych, Kym and Hack. Mr Guo said that at this meeting he stated that the price for the Tower building and car park was too high and that he wanted to appoint an agent to investigate the price. Mr Guo continued, in par 48 of his affidavit: "Mr Hack told me that negotiating with the Government was very difficult but that he would try to get a better price. I was told "this is Australia not China". Mr Ghassibe got angry that[sic] "he did a lot of work to get the cheapest price and that you don't believe me". I said "don't cheat me with the price, I will investigate it, I will know the price". Ghassibe said words to the effect "We would never cheat a partner. We guarantee that you are getting the lowest price. Trust me, I will not cheat you, I will be gaoled if I do"." I accept Mr Guo's evidence that an exchange such as that described by Mr Guo took place at that meeting. I further find that what Mr Ghassibe said was said in the presence of Mr Wypych and Mr Kym and that they did not, by words or conduct, dissociate themselves with that statement. In all the confusion that surrounds these events, what Mr Ghassibe said to Mr Guo in the presence of Mr Du on that occasion is a basis for my subsequent finding that there was a fiduciary relationship subsisting between the respondents and the applicants. Although they were not then partners or joint venturers, they were working towards the objective of a joint venture; that was the background against which, first Mr Du and then Mr Guo deposited their moneys with AIC. 77 Shortly after his arrival on his second visit to Australia, one or other of the respondents handed Mr Guo a typed letter for his signature. It was dated 19 August 1998 and was addressed to Adelaide Investment Corporation Pty Ltd. It contradicts, in two important respects, the information that had earlier been given to the applicants. In the first place it called for Xiang Du to acknowledge that AIC has "agreed to purchase the whole Queen Victoria Hospital land" (but no price was specified). Secondly it called for Xiang Du to propose that the joint venture acquire the Tower building from AIC at the price of $3m. Mr Guo said that he refused to sign the letter. This is merely another example of how the proposals and the prices were continuously changing. Documents 7 And 8 – 28 July 1998 78 On about 28 July 1998 two contracts were prepared for execution. In each contract the vendor was named as "Queen Victoria Hospital Apartments P/L"; the vendor, the correct name of which was Queen Victoria Apartments Pty Ltd, was the company that Messrs Wood and Hooper proposed to nominate as the purchaser of the hospital site in the event of them exercising the option. In the first contract, the purchaser, as originally named, was Xiang Du Pty Ltd, the first named applicant. However that name was struck out and replaced by Winthorpe Pty Ltd. In the second contract, the purchaser was Winthorpe Pty Ltd. Winthorpe was incorporated on 13 July 1998 and it was intended to be the corporate vehicle for the conduct of the joint venture between the applicants and the respondents: see par 43 hereof where reference is made to it in the recitals to the draft joint venture agreement. 79 The first contract was expressed to be in respect of allotments 5 and 6 in the current plan for the price of $3.8m – that is, it dealt with the Tower building without reference to the encroachment, without reference to the land for car parking and without reference to the rights of way to and from Grant Avenue and Swaine Avenue. The second contract related to all the remaining land other than the Swaine Avenue land. The purchase price for the land in this second contract was $584,000. That figure was made up of the actual purchase price of $500,000 plus a purchaser's contribution of $84,000 towards stamp duty. This contract also grossly undervalued the land to which it related. These contracts, which reflect the respondents' plan as disclosed in Mr Wypych's notes (see Document 30 and 48 to 51 hereof), were the attempt by the respondents and Mr Hack to put together some deal out of which they could profit at the expense of the applicants. 80 But the efforts of the four conspirators came to nought. Mr Wood, who is a Licensed Valuer, was asked to express his opinion on the values attributed to the respective pieces of land in Documents 7 and 8. He said he did not think that the contracts reflected the true value of the properties. He said that he thought that it was Mr Hack who had apportioned the prices. That piece of evidence was received de bene esse under objection on the ground that it was irrelevant. Having regard to the manner in which the evidence has unfolded, I regard it as highly relevant. In my opinion, the evidence establishes that, at that particular stage in the negotiations, Mr Hack was working in close association with the respondents; anything that Mr Hack did or said of a material nature was done or said with their prior approval or, at least, their concurrence. 81 Although Mr Wood thought that it was no concern of his as to how the intending purchasers (whom he regarded as related parties) were going to settle their contracts, he nevertheless recalls asking Mr Hack why the respective purchase prices had been chosen; he said that he asked Mr Hack whether Mr Hack understood that the Stamp Duties Office would independently assess the values; according to Mr Wood, Mr Hack replied that he was aware of the Stamp Duties Office procedures and that the purchasers would be paying additional stamp duty for the values shown for the land in the Kinship Agreement; Mr Hack said "It is the way the parties wanted to buy it." 82 If, by that answer, Mr Hack was purporting to infer that the parties included the Chinese then that was a false statement. If his use of the word "the parties" was limited to himself, Messrs Ghassibe, Wypych and Kym then indeed it was a truthful statement. 31 July 83 On 31 July Mr Ghassibe or Mr Wypych arranged with AIC's bank for it to supply two "bank-marked" cheques: one in favour of Wexmore for $30,000 and the second in favour of Messrs Wood and Hooper for $50,000. These monies came from the account which held the deposit that Mr Du had made. At that stage, no other monies had been deposited in that account. A photo copy of the bank's cheque in favour of Wexmore in the sum of $30,000 dated 31 July 1998 appears as Document Number 20 in Ex A1. On the same day, 31 July 1998, Wexmore drew two cheques, each for $10,000, for the benefit of Messrs Ghassibe and Wypych. Copies of those cheques appear as Document Number 21 in Ex A1. 84 It was Mr Hack's evidence that, when he distributed $10,000 to Mr Ghassibe and $10,000 to Mr Wypych, it had been intended that a like amount would be sent to Mr Kym. This did not occur. However, according to Mr Hack, Mr Kym later recompensed himself to the extent of $17,600 for expenses out of the monies in the AIC account. (In fact, it would appear from the bank statement, Document 12, that the amount of the cheque was $17,380). It was Mr Wypych's evidence that the advance to him of $10,000 was a personal loan from Mr Hack; I do not believe him. 85 These exercises are further examples of Messrs Hack, Ghassibe, Wypych and Kym helping themselves to funds to which they were not entitled. Mr Du had deposited his money with AIC as a sign of his good faith and for the exclusive purpose of purchasing some part of the hospital site. It had never been suggested that any respondents would have any right to access those moneys to reimburse themselves. I have no difficulty in accepting the evidence of Mr Du (which, in every respect, was supported by Mr Guo) that he stated, in the clearest possible terms, that no part of the monies that he had paid to AIC were to be used without his prior permission. At that stage, no joint venture had been consummated. The money had been remitted from China to Australia as an indication of Mr Du's bona fides – of his willingness to become a purchaser of the hospital site, or at least, some part of it – and of his willingness to participate with the respondents in some form of joint venture. It stands to reason that he would not permit any part of his funds to be used by the respondents or by Mr Hack as recompense for any expenses that the respondents may have incurred (or purportedly incurred) during the course of their preliminary investigations into the project. 86 In his affidavit, Mr Du said that Mr Kym was pressing him to send some funds to Australia as a sign of his earnest. He claimed that Mr Kym said to him that if he and Mr Guo intended to do business in Australia and buy the hospital site it was "important to send us some money to prove our intention to invest". Mr Du then went on to say that "Mr Guo and I agreed with Mr Kym to send an amount of $200,000 before we came to Australia to inspect the Queen Victoria Hospital site". This piece of evidence, which was not otherwise contradicted, indicates a commonality of interest between Mr Du and Mr Guo indicating that, irrespective of actual sources of the two sums of money that were advanced, they were acting jointly. Mr Du continued in his affidavit: "I told Mr Kym that he could not use the money, that it was to be held until everything relating to the new business was agreed." Mr Du said that Mr Kym agreed to this; he also said that Mr Kym never sought his permission to use any part of money. 87 In particular Mr Du said that he did not authorise Mr Kym or any other person to make the payment of $30,000 to Wexmore nor did he authorise Mr Kym or any other person to pay $50,000 to Messrs Wood and Hooper. He did not authorise Mr Kym or any other person to pay $17,380 to Mr Kym's company, Cosmopolitan Funeral Services. As to these expenses, he said in his affidavit that Mr Kym had paid his own airfares between Australia and China and that he, Mr Du, had paid Mr Kym's expenses in Shanghai including hotel accommodation and daily expenses. On the other hand, Mr Kym had paid the same type of expenses on Mr Du's behalf when Mr Du has visited Australia. On such occasions Mr Du had paid his own airfares. 88 I accept Mr Du's evidence on this subject. Not only is it uncontradicted, it has the ring of truth about it. At that stage, Mr Du and Mr Guo had not committed themselves to the purchase of the site; there is no evidence that Messrs Ghassibe, Wypych, Kym and Hack had been authorised to incur expenses on behalf of Messrs Du and Guo. It is unrealistic to consider that Messrs Du and Guo would, in such circumstances, authorise the use of their funds for the general expenses of these men. I accept Mr Du's evidence. The Meeting with Mr Swincer 89 Mr Wood said that he recalled attending a meeting at the office of Mr Swincer, a Land Broker. I find that Mr Swincer had been retained to act on behalf of the applicants although how that came to happen is not clear. Mr Wood remembered that Mr Swincer was very concerned about the encroachment of the Tower building over allotment 7. Mr Wood was also aware that the contract in respect of lots 5 and 6 (for the Tower building) made no provision for car parking. Mr Wood said that it was his understanding that Mr Swincer was acting for the Chinese interests. He came to this conclusion because of Mr Swincer's objections to the encroachment: they indicated that he was acting for Messrs Du and Guo because Mr Swincer said "I can't allow my clients to buy property where there's an encroachment". Mr Wood had one meeting with Mr Swincer at the hospital site. Mr Wood could recall that Mr Hack was present but he was not sure whether Messrs Ghassibe and Wypych were present. 90 The circumstances that led to a termination of negotiations between the applicants and the respondents did not come out clearly in evidence. It would seem however, that the applicants withdrew on or shortly before Mr Obst wrote his initial letter demanding repayment of the monies that the applicants had remitted to AIC. The probabilities therefore are that the concerns expressed by Mr Swincer, coupled with the continuous changes in the project, caused the applicants to withdraw from negotiations shortly before 21 August 1998. The Changing Deal – Mr Wypych's evidence 91 In pars 27 and 28 of his affidavit Mr Wypych says that it was his understanding from Mr Hack that the Tower building was for sale at $3.8m. There were two other buildings, namely Queen's House and Wilson House which were also available for purchase but at an additional cost. Later, according to Mr Wypych, they found out that the whole of the hospital site may be available for purchase apart from some land which would be retained by Mr Wood and Mr Hooper. On that basis, Mr Wypych claims that a proposal was made to Mr Du that there be a joint venture whereby Mr Du would buy the Tower building for $3m and AIC would buy the balance of the site for $1.75m. This proposal was translated to Mr Du by Mr Kym. This occurred before Mr Guo arrived in Adelaide on or about 26 July 1998. 92 In par 34 of his affidavit Mr Wypych said that Mr Du, through Mr Kym, advised Mr Ghassibe and Mr Wypych how to structure the proposal for Mr Guo. According to Mr Wypych, Mr Du advised them to put an initial price on the Tower building of $4m "and play on Mr Guo to negotiate the price down to $3.8m." This assertion contradicts an earlier assertion in par 30 of Mr Wypych's affidavit in which he said that the proposal to Mr Du was that Mr Du would buy the Tower building for $3m. This is of course, highly confusing, but much of Mr Wypych's written and oral evidence was confusing. I would not be confident about relying on it without corroborating evidence. 93 Mr Wood, at p 284 of the transcript, admitted to confusion about the various discussions that took place because as he explained "every time we spoke to anyone the deal was changing, and I guess from my point of view I took very little notice of it until it was in writing." 94 At p 289, Mr Wood gave examples of how the negotiations changed from time to time. He said that, at one stage, Mr Haynes reported to him that there was a proposal that Mr Wood and Mr Hooper should assign their option upon the arrangement that Messrs Wood and Hooper would have transferred back to them the whole of the site other than allotments 5 and 6 for which Messrs Wood and Hooper would pay $1m. Mr Wood said that he told Mr Haynes that he was not interested in doing such a deal. Mr Wood was not sure on whose behalf the offer was made, but he added that he understood it was on behalf of Mr Ghassibe and Mr Wypych. 95 He then referred to another proposal; this time it was proposed that there would be an assignment of portion of the hospital site which would leave Messrs Wood and Harley with the Grant Avenue land plus about $395,000 in cash. That proposal was discussed at a restaurant, "The House of Chow", and it followed a meeting at the Adelaide International Hotel at North Adelaide which was attended by Mr Hooper. Mr Wood said "From memory the proposal was that Chris and Albert, or whatever company they were going to set up to do this particular transaction, would take over all the land except (the Grant Avenue land)... They would pay the cost of subdivision to create the individual allotments in that subdivision plan and pass the sum of $395,000 as an assignment fee"(see p 290). Mr Wood explained that the figure of $395,000 had been calculated by fixing upon an assignment fee of $350,000 plus $45,000 option fee "that we had paid". According to Mr Wood everybody agreed to that proposal which was to be implemented by way of a mere assignment of their option. It was Mr Wood's understanding that Mr Patel, the solicitor for Mr Ghassibe and Mr Wypych, was to prepare the necessary documents. Messrs Ghassibe and Wypych contacted Mr Patel and instructed him to act on their behalf. Mr Patel prepared a document that he described as a "Deed of Assignment and Assumption". The parties to that document were Messrs Wood and Hooper, Latipsoh and a company called Cosmas Pty Ltd. Cosmas was a company that was incorporated on 18 August 1998; it is owned and controlled by Messrs Ghassibe and Wypych. The Deed which was signed on behalf of Cosmas was presented to Messrs Wood and Hooper but they declined to sign it as Mr Haynes had earlier rung Mr Wood and said that the purchasers were unable to find the $395,000 that was to be payable on the execution of the documents. They were only able to raise $100,000. Mr Wood said that he told Mr Haynes "We're not interested. We have an agreement. If you don't comply with that agreement we're not interested in doing business"(p 290). There is no evidence to suggest that this contract was even submitted to Latipsoh. The Deed contemplated Messrs Wood and Hooper assigning the whole of their interest in the Latipsoh option agreement to Cosmas in return for a payment of $395,000 and a transfer back by Cosmas to Messrs Wood and Hooper of the Grant Avenue land. It is notable that Messrs Du and Guo had not been included in this exercise. Having regard to the date of Cosmas' incorporation, the probabilities are that it was prepared after Mr Guo and Mr Du had withdrawn from negotiations. Mr Wypych 96 The evidence of Mr Wypych was, for the most part, difficult to understand, and, in some areas, I am forced to conclude that it was false, and knowingly false. The whole thrust of his evidence, as best as I could understand it, was tainted because of his total lack of commercial scruples. He saw nothing wrong in supposedly acting on behalf of the applicants whilst, at the same time, endeavouring to structure a deal in such a way that he and his "partners" would profit at the expense of the Chinese. And yet, despite the fact that he and his fellow respondents had strenuously defended every aspect of the applicants' claim, he volunteered, during the course of his evidence that he would agree to the return to Mr Guo of his $250,000. That was an example of the confusion in this evidence. 97 Mr Wypych claimed, during the course of his evidence that Mr Du had told him that if their negotiations were unsuccessful the respondents could retain the $200,000. His evidence at p 594 was: "Mr Du stated categorically that he liked the transaction and if and when – by some chance if the deal didn't go ahead, that money was rightfully owed to Adelaide Investment." I find that statement wholly unacceptable. I do not believe Mr Wypych. I am satisfied that Mr Du made no such statement. 98 Issues that were raised by Mr Wypych in his evidence which must be rejected for various reasons are as follows: · The $200,000 was not Mr Du's money; it came from a man called Meng (not the witness Mr Meng). Therefore, according to Mr Wypych's evidence, Mr Du had no right to claim it. This claim is, in my opinion, absurd. In the first instance, it fails to explain why the assertion therefore means that Mr Wypych and his fellow respondents can retain the money. Secondly however, the identity of Mr Meng as the source of the payment on Mr Du's behalf had been clearly stated in early affidavits and, far from raising this particular "defence" earlier, Mr Wypych, on two occasions, in his affidavit had acknowledged that this particular sum of money had been sourced from Mr Du. · The monies that he and Mr Ghassibe took for expenses were authorised by Mr Kym. As Mr Kym did not give evidence, that claim cannot be refuted. But it is clear to me that Messrs Du and Guo never authorised these payments and Mr Wypych had no cause to think that they might have authorised them. · Mr Wypych and Mr Ghassibe did a lot of work for Mr Du, his family and other Chinese associates in obtaining visas for them for which Messrs Ghassibe and Wypych had not been paid. If, by this evidence, he was raising some claim against Mr Du, it was never put in cross-examination of Mr Du (at which point of time Mr Wypych was represented by counsel). As a justification for using Messrs Du's and Guo's money without authority, or as a justification for refusing to hand over the balance remaining, the claim is without any foundation. · Mr Du had said that Mr Wypych and the others could keep the money (that is the $200,000) if the deal did not go through. This statement was supposedly made through Mr Kym, who was acting as an interpreter, during a meeting at the Adelaide International Hotel at which Mr Ghassibe was present. It was put to Mr Wypych that such a proposition had never been put in cross-examination to either Mr Du or Mr Guo. He was asked whether he had told his solicitors of that assertion and, after the subject of privilege had been explained to him, he said that he was told by his solicitors that "it was just our word against theirs – there's no documentation." In my opinion this is a complete fabrication. Mr Du did not make any such statement. Fiduciary Relationship 99 The recognition by the Courts of the existence of a fiduciary relationship and the duties arising as a consequence of that relationship has developed with the objective of ensuring that holders of positions of trust or power do not abuse their authority to the detriment of those who are vulnerable and dependent upon them; the law has developed case by case, largely by analogy. As Gibbs CJ explained in Hospital Products Ltd v United States Surgical Corporation (1984-1985) 156 CLR 41 at 68: "The authorities contain much guidance as to the duties of one who is in a fiduciary relationship with another, but provide no comprehensive statement of the criteria by reference to which the existence of a fiduciary relationship may be established. The archetype of a fiduciary is of course the trustee, but it is recognized by the decisions of the courts that there are other classes of persons who normally stand in a fiduciary relationship to one another – e.g., partners, principal and agent, director and company, master and servant, solicitor and client, tenant-for-life and remainderman. There is no reason to suppose that these categories are closed. However, the difficulty is to suggest a test by which it may be determined whether a relationship, not within one of the accepted categories, is a fiduciary one." 100 Mason J, in the same case, in addressing the same subject, also acknowledged that the categories of fiduciary relationship are not closed. His Honour referred to them as "relationships of trust and confidence or confidential relations". He then described the critical feature of those relationships in this manner: "… the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position. The expressions "for", "on behalf of", and "in the interests of" signify that the fiduciary acts in a "representative" character in the exercise of his responsibility, to adopt an expression used by the Court of Appeal."(96-97) 101 Much the same was said by Gaudron and McHugh JJ in Breen v Williams (1996) 186 CLR 71. Referring to the remarks of Gibbs CJ and Mason J in Hospital Products Ltd v United States Surgical Corporation, their Honours said: "Australian Courts have consciously refrained from attempting to provide a general test for determining when persons or classes of persons stand in a fiduciary relationship with one another. This is because … the term "fiduciary relationship" defies definition." (106) 102 In par 28 of his affidavit, Mr Du said that he believed everything that Mr Kym told him about the hospital site and the price for which it could be purchased. Because he did not speak English, he said that he relied upon Mr Kym to tell him the truth and to ensure that the business which was being proposed for the joint venture would be conducted fairly so that both parties put in the same money and also shared the same risks. These findings, coupled with the findings that I have made about Mr Ghassibe's statement at the Adelaide International Hotel, (see par 75) fortify me in concluding that a fiduciary relationship existed between the applicants on the one hand and all respondents on the other at the times when Messrs Du and Guo deposited their monies with AIC. I find that an essential term of that fiduciary relationship was that those monies were to be held for the benefit of the intended joint venture to acquire the Tower building and to establish the residential school. Misleading and Deceptive Conduct 103 I find that Mr Ghassibe, Mr Wypych, Mr Kym and Mr Hack all participated in misrepresenting the position to Mr Du and to Mr Guo. The particular false representation that was made to the applicants was that the purchase price of the Tower building was $3.8m. I do not take into account the legal and technical difficulties dealing with encroachments and approvals for subdivisional plans; I rely on the bald misrepresentation that the price required by the vendors for the Tower building was $3.8m. This was false and it was known to be false by each of Messrs Kym, Ghassibe, Wypych and Hack. They "loaded" the price of the Tower building so that they could thereby purchase Queen's House, Wilson House and either the Grant Avenue land or the Swaine Avenue land for a vastly reduced price. I further find that Messrs Du and Guo relied upon the misrepresentation which I have identified. These representations were ongoing from the time that the applicants were introduced to the subject of the hospital site and even though there were changes and variations the essential misrepresentation remained – that is, the applicants were to be tricked into paying a higher price for the Tower building so that the respondents could purchase some other parts of the site at a reduced price. 104 The conduct of the respondents was further misleading and deceptive in holding out to the applicants that they would be purchasing the property from the Government and that Mr Hack was a "Government man". The applicants relied on that misleading and deceptive conduct and were induced to act to their detriment as a result of that conduct. As Mr Guo said in par 89 of his affidavit: "By reason of the fact that I reside in Shanghai and that I was not familiar with the Queen Victoria Hospital site I have depended on the second, third and fourth respondents to make proper disclosure to me …". 105 Relying on these misrepresentations, first Mr Du and later Mr Guo deposited their money in AIC's bank account. The Applicants' losses 106 Their losses were the two sums of money that were advanced - $200,000 and $250,000 – and, arguably, their travelling, accommodation and other expenses. However the applicants have been content not to press for reimbursement of those expenses. They will be satisfied to get back their $450,000 plus interest and costs. I do not consider, in any event, that it would be appropriate, despite my many adverse findings against the respondents, to order that they pay the incidental costs and expenses that were incurred by the applicants as a consequence of the failed joint venture. Putting to one side questions of dishonesty, the fact remains that an attempt was made by businessmen to join together in a joint venture. That attempt failed just as many business transactions fail. The failure was brought about in this case because the applicants came to the conclusion that they could not entrust the respondents with their investment. But the applicants would have incurred the same type of expenses even if they had been dealing with trustworthy people but had otherwise failed to reach agreement. These were investigatory expenses and were of a nature that are regularly incurred by business people as they test the possibility of various business ventures. Conclusion 107 Many proposals for the purchase of some part of the hospital site were advanced and rejected during the months of June, July and early August. They need not all be canvassed in detail. It is sufficient, in my opinion, to make the following findings of fact: 1. The respondents collectively invited the applicants to enter into a joint venture to acquire some part of the hospital site and to conduct the business of a residential school on terms to be agreed. 2. The respondents induced the applicants to remit a total of $450,000 to the account of the first respondent as a sign of the applicants' good faith. 3. The applicants made it clear that no part of the moneys were to be used pending final agreement about the terms of the joint venture. 4. The respondents, as intending joint venturers with the applicants, acted in a manner that was contrary to the interests of the applicants in their negotiations to acquire parts of the hospital site: specifically they induced the vendors to increase the price of the property that the applicants would be buying and to decrease commensurately the price of the property that the respondents would be buying. 5. In breach of the terms under which the monies had been deposited by the applicants, the respondents caused the applicants' funds to be expended without the permission of the applicants and are liable to account for that breach. 6. The parties failed to agree the terms of a joint venture: the reason for the deposits of the $450,000 having ceased, it was an implied term of the arrangement between the parties that the moneys would be refunded. 7. The applicants having acted to their detriment as a result of the misleading or deceptive conduct of the respondents are entitled to an award of damages to compensate them for their losses. 8. The arrangements between the parties were such that a fiduciary relationship subsisted whereby the respondents undertook a responsibility to act in the best interests of the applicants in their investigations surrounding the purchase of some part of the hospital site and the creation of a joint venture. In breach of that fiduciary duty, the respondents acted in a manner that was contrary to the interests of the applicants and are therefore responsible for the losses that they have suffered. 108 Subject to the question of interest, I quantify the applicants' damages at $390,000. That figure has been arrived at by deducting, at the applicants' invitation, the sum of $60,000 from the total of the deposits of $450,000. Interest 109 The applicants are entitled to interest on the amount of $390,000: see s 51A of the Federal Court of Australia Act 1976 (Cth). The relevant rate of interest is "such rate as the Court or the Judge, as the case may be, thinks fit" and the interest can be calculated "for the whole or any part of the period between the date when the cause of action arose and the date as to which judgment is entered." In this case it would seem to me to be fair to limit the period in respect of which interest is charged so that it commences with the institution of these proceedings on 28 August 1998. Having regard to the diminishing rates of interest over the last few years I consider that it would be reasonable to take a "broad brush" approach and apply an interest rate of 7 per cent for a period of nine months. Some allowance, however, must be made for the fact that the moneys in Court, although not interest bearing, were available to the applicants as from 23 February 1998. I will factor that into my calculation in fixing a lump sum for interest in the sum of $15,000. 110 There will, therefore, be judgment for the applicants against all respondents jointly and severally in the sum of $405,000 with party and party costs that are to be taxed in default of agreement. Counsel for the applicants sought indemnity costs but, despite the respondents' behaviour, I do not think that such an award would be warranted. I certify that the preceding one hundred and ten (110) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice O'Loughlin. Associate: Date: 31 May 1999 Counsel for the Applicant: Mr G A Stevens Solicitor for the Applicant: Messrs Obst & Associates Counsel for the first, second and third Respondents: Mr M N Rice (up to 23 September 1998) Solicitor for the first, second and third Respondents: Messrs Michell Sillar (up to 4 January 1999) Counsel for the fourth Respondent: Mr C P Costi (up to 23 September 1998) Solicitor for the fourth Respondent: Messrs Grope Hamilton (up to 16 February 1999) Date of Hearing: 14-18, 21-23 September 1998, 22 and 23 February 1999 Date of Judgment: 31 May 1999 '