DE VARDA Joseph v FOCH Charles and Others [2002] NSWSC 1216

New South Wales Supreme Court

CITATION : DE VARDA Joseph v FOCH Charles and Others [2002] NSWSC 1216 FILE NUMBER(S) : SC 20246/99 HEARING DATE(S) : 25,26,27,28,29 November 2002 JUDGMENT DATE : 19 December 2002

PARTIES : JOSEPH DE VARDA v CHARLES FOCH & OTHERS JUDGMENT OF : Davies AJ

Plaintiff: Person COUNSEL : Defendants: Mr M Pembroke SC Mr D Williams SOLICITORS : Plaintiff: Person Defendants: Ebsworth & Ebsworth CATCHWORDS : PROFESSIONAL NEGLIGENCE - whether solicitor negligent in transaction involving Cambodian land - whether conflict of interest - whether sufficient for solicitor to say that he asked for one party only - whether solicitor had duty of care to other party with whom he dealt LEGISLATION CITED : Fair Trading Act 1987 - s 42, s 68 Hill v Van Erp (197) 188 CLR 159 Perre v Apand Pty Ltd (1999) 198 CLR 180 Hawkins v Clayton (1988) 164 CLR 539 CASES CITED : Waimond Pty Ltd v Byrne (1989) 18 NSWLR 642 Astley v Austrust Limited (1999) 197 CLR 1 Alexander v Perpetual Trustees WA Limited [2001] NSWCA 240 Gran Gelato Ltd v Richcliff (Group) Ltd [1992] Ch. 560, 574 DECISION : See Paragraph 126

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION Professional Negligence List

DAVIES AJ

19 DECEMBER 2002

20246/99 Joseph DE VARDA v Charles FOCH and Others

JUDGMENT 1 DAVIES AJ: In these proceedings, the plaintiff, Joseph de Varda, seeks damages for alleged professional negligence on the part of the second defendants, the partners of Watkins Tapsell, Solicitors. The first defendant Charles Foch has died since the institution of the proceedings and no order is sought against him. 2 The case is an unusual one, not least because the conduct of Mr Matthew Coates, the partner of Watkins Tapsell with whom Mr de Varda had contact, was conduct which I would not have expected of a competent and honest solicitor. Whatever he thought he was doing, Mr Coates assisted Mr Foch to extract US $390,000 in gold bullion and cash from Mr de Varda. 3 The apparent villain was Mr Charles Foch, the first defendant. As he died after the commencement of the proceedings and his version of events is unknown, no firm determination can be made as to the extent to which he may have acted in good faith although recklessly, on the one hand, or fraudulently, on the other. Mr Foch, who was of French descent and held himself out to be a descendent of General Foch, seems to have been a person of considerable charm and persuasiveness. He was a long term friend of Mr de Varda and both Mr de Varda and Mr Coates appear to have allowed Mr Foch to encourage them into actions which on their part were foolish. Mr Foch had a history of dealings in other countries. In particular he was a dealer in arms. He boasted of transactions with Colonel Rambuka at the time of the first coup in Fiji. He had property and assets in Cambodia. 4 In 1997, Mr Foch became concerned about his personal safety if he went to Cambodia. He was concerned to liquidate and remove whatever assets he had in that country. On 10 April 1997, Mr Coates wrote on Mr Foch's behalf to the Department of Foreign Affairs seeking advice, which was not forthcoming. The subject transaction in these proceedings was part of the liquidation. 5 The plaintiff, Mr Joseph de Varda, described himself as a writer, an artist and a businessman. He grew up in Egypt where he studied biochemistry. Subsequently in his career, he undertook research into cancer and, in particular, sought to interest the Prime Minister of India into promoting a cancer cure which Mr de Varda had developed. In evidence are copies of articles in Indian newspapers discussing Mr de Varda's views. Mr de Varda has been in Australia for many years and has principally been a dealer in gem stones and gold bullion. He also claims to have developed a cure for baldness, although he apparently lost the formula as a result of ill health brought about by the transaction with which this case is concerned. 6 It is difficult to form a firm view as to Mr de Varda's activities. If he has ever had any useful records of his gem stone and bullion dealings, he has not produced them. He gave evidence that many of his documents were lost when in the possession of an elderly barrister, Mr Partridge. He said that he has not lodged a tax return in recent years because of losses, but he did not produce any tax returns. According to his oral evidence, he kept gold bullion and gemstones not only in a safe at his home, but also in a safe elsewhere. He declined to answer questions, which might disclose the whereabouts of a literary work that he was writing, a work that was extremely confidential. 7 Notwithstanding the difficulties presented by Mr de Varda's evidence, I gained the impression after listening to him, and seeing him in the witness box, that he was a basically honest person. I am satisfied that he believed at least the essential evidence that he gave to the Court. Mr de Varda is an intelligent although volatile and emotional person. My impression of him is that he was not making an exaggerated or false claim. In his conduct in court he was restrained. He withdrew claims for damages, which I suggested, were too remote. Although his statement of claim and the affidavits filed on his behalf suggested fraud on the part of Mr Coates, when asked by me as to whether he was pursuing those claims, he said that he was not, as he would claim fraud only if he had personal knowledge of it. This was a significant concession on Mr de Varda's part, particularly as the defendants themselves alleged that Mr de Varda's claim against them was a fraudulent claim. Mr M Pembroke SC, with whom Mr D Williams of Counsel appeared for the Watkins Tapsell submitted that Mr de Varda was a very intelligent man, somewhat erudite, very, very cunning. I did not gain the impression that Mr de Varda was cunning. My impression was that he was genuine. I do not believe that he would have entered into the transaction which he did had he been cunning. 8 That is not to say that I accept all of Mr de Varda's evidence. I consider that Mr de Varda's recollection of detail was somewhat deficient and, in weighing up the probabilities of the case, I have taken into account the whole of the evidence. 9 Mr de Varda's first witness, Mr Patrice Charnay, is of French descent. He was excitable and emotional at times when giving his evidence. However, Mr Charnay had a good appearance and nothing in his evidence suggested to me that he was not telling the truth to the best of his ability. There were strange aspects of his evidence. At the relevant time, 1998, he appears to have been unemployed. His evidence was that, early in 1998, he agreed with Mr de Varda to go Cambodia, which he had never previously visited, and to establish a mill to produce paper from bamboo. He said that he agreed to pay Mr de Varda $1.4 million for the rights to do this and for certain boxes of plans. He also agreed to take a lease from Mr de Varda on the property in Cambodia with which this case is concerned and to do so at a rental of $54,000 per year. As Mr Charnay had no significant funds, it is difficult to see how he expected to be successful in the enterprise. However, allowance has to be made for the fact that Mr Foch took an active part in the discussions which occurred. As I have said, he appears to have been a persuasive person. Mr Charnay executed the lease, dated 5 February, 1998 which was drawn by Mr Coates. There is also in evidence a document entitled "Assignment of Designs", drawn by another solicitor and dated 27 February 1998, under which Mr Charnay agreed to acquire from Mr de Varda plans and blueprints for the paper mill in Cambodia for the consideration of $600,000. Mr Charnay's prospects of success in the establishment and running of the paper mill may have been delusional but I am satisfied that the basic story which Mr Charnay told was truthful. 10 The second witness called by Mr de Varda was Mr John Verren. Mr Verren is now an invalid pensioner. He appears to have led an exciting life. He knew many distinguished people including a general who was advisor to the Sultan of Brunei. Mr Verren gave his evidence well but I had the impression when listening to him that he was not always speaking from honest recollection. I gained the impression, which may have little foundation, that Mr Verren was inclined to improve a story. However, he gave evidence that he saw Mr Foch hand over 37 bars of gold to two men, Claude and Michel. I see no sufficient reason to reject that evidence. 11 Both Mr Charnay and Mr Verren acknowledged a financial obligation to Mr de Varda, Mr Verren because in late 1998 he took a parcel of diamonds worth $230,00 overseas on behalf of Mr de Varda and lost the diamonds whilst suffering from an attack of food poisoning. However, notwithstanding this financial obligation, I conclude that their basic evidence, insofar as it relates to Mr de Varda, should be accepted. 12 Although the evidence regarding the proposed paper mill in Cambodia stretches the imagination, it was no more extraordinary than the evidence given in cross-examination with respect to a foundry in the Philippines. Mr Foch, Mr de Varda and Mr Verren have led extraordinary lives. One may puzzle over their activities but there is no sufficient ground to reject the evidence that they engaged in the curious transactions, which were described. 13 The only evidence called on behalf of the defendants was that of Mr Matthew Coates, the partner who dealt with Mr de Varda. Mr Coates' affidavit evidence was clear and so also was his oral evidence. I consider that, on matters of detail, his evidence is more reliable than that of Mr de Varda. However, aspects of his evidence have led me to conclude that Mr Coates has not faced up to the full truth of the matter and that he has slanted his evidence in his own best interests. One is that, during his cross-examination by Mr de Varda, Mr Coates said that he did not know that foreigners could not own property in Cambodia. Indeed, paragraph 150 of his affidavit said, "I deny that I had knowledge that foreigners are not allowed to own any property in Cambodia". Yet, right at the start of the subject events, Mr Coates was informed by Mr Foch that only residents of Cambodia could be registered as owners of land in Cambodia. The evidence of Mr Coates to which I have referred was not truthful, at least in the sense of disclosing the whole truth. 14 Another aspect of Mr Coates' evidence which troubles me is that his affidavit evidence did not include any statement by Mr de Varda as to why he attended Mr Coates' office or as to the nature of the transaction, which Mr Coates was to document. Mr de Varda for his part said that he had spoken to Mr Coates on the previous day by telephone. Mr Coates denied this but did not include in his affidavit any statement by Mr de Varda explaining his presence in the office and what he sought to achieve. I consider that Mr Coates' evidence on this point was unduly simplistic and that he put out of his mind matters which would favour Mr de Varda's case. 15 Another aspect of Mr Coates' evidence which is unsatisfactory is that Mr Coates has not clarified what occurred to the agreement which he has described as "the original title deed". In a letter of 20 April 1998, he said that he had delivered it to be Mr Foch at his request. If Mr Coates regarded the document as a "title deed", it is inexplicable that he did not hold it for Mr de Varda, who had purchased the property. There are other unsatisfactory aspects of Mr Coates' evidence which will be mentioned in the course of these reasons. 16 In my opinion, Mr de Varda's affidavit and oral evidence presents a plausible and probably story. Mr Coates' affidavit and oral evidence do not satisfy me as to why Mr de Varda acted as he did or why Mr Coates acted as he did. I would not have expected Mr Varda to act as he did unless the general picture which his evidence conveyed was correct. I would not have expected Mr Coates to have acted as he did, whichever version be correct. 17 Relevant facts began in October 1997 when Mr Coates had a conference with Mr Foch. Mr Coates gave this evidence: "My first involvement with the property in Cambodia, the property the subject of these proceedings (the "Cambodian Property"), was on 24 October 1997, when I attended Foch in conference. During the course of the conference, Foch said to me words to the following effect: "I own a property in Cambodia and this is the agreement which I signed when I bought it. I need you to prepare for me an agreement to transfer one-half of my interest in this property in Cambodia to Nick Van de Borgh." 18 The agreement referred to read as follows: "AGREEMENT