The Facts
Husband and wife buy property together
A husband and wife met in 1990. Two years later they married and bought a house, property P. They were described as tenants-in-common in equal share on the Torrens Title Register and the certificate of title. The husband was also owner of another property, property B.
The marriage was troubled and in 1999 the couple separated. They filed for divorce in 2000.
According to consent orders issued by the Family Court, the husband and wife would each be the sole legal and beneficial owner of one half of property P.
Property P used as location for running business
The husband and wife had a business partnership. Part of this business involved making polystyrene beer holders. This work was conducted out of various locations, including property P.
Between 1999 and 2004, the husband paid the wife $500 per week for this labour.
There were complications around these payments and periods when the husband would not provide the funds to the wife, which caused problems.
Wife sells property P without advertising on market or involving real estate agent
In 2003 the wife sold property P without notifying her ex-husband that the sale was taking place.
She did not contact a real estate agent in order to sell the property and she did not advertise it on the market in any way.
Instead she initially offered the property for sale to friends, but when this was not successful she found a buyer by approaching a person she saw leaving a property inspection of a unit that was advertised for sale not far from her house.
Wife’s cousin poses as ex-husband in meetings with solicitor
The wife met with a solicitor on several occasions in 2003 to discuss the ownership and sale of property P. She brought her cousin with her to these meetings to pose as her husband.
The wife told the solicitor that her husband did not speak English well and that was why he was not speaking during their meetings. The solicitor accepted this and spoke in English only to the wife.
There were assistants in the office who could speak the language of the husband. The wife and the solicitor both knew this, but did not ask these assistants to help translate for the husband.
The solicitor was not suspicious of anything, because the wife had forged statements which were supposedly from the husband and which referred to her as “my wife”.
Settlement of property and husband’s discovery of sale
Property P was sold in September 2003 for $269,000. The wife achieved this by forging her ex-husband’s signature on the contract for sale of property P, on a document purporting to authorise her to sell the property, another document authorising her to receive all the proceeds of the sale and on the transfer of the property to the buyers.
In October 2003 the wife received approximately $266,000, being the net proceeds of the sale of property P.
When the husband discovered that property P had been sold without his knowledge and contrary to the orders of the Family Court, he sued his ex-wife for violating his rights to the property, claiming $134,500 as his share of the property, plus interest calculated to November 2011, amounting to a sum of $234,547.
The husband also sued his ex-wife’s solicitor for negligence.
Expert commentary on the court's decision
Court finds ex-wife acted fraudulently
In the case of Chen v Gu: Chen v Nguyen [2011] NSWSC 1622, the court ruled in favour of the husband, Mr Hao Chen, who brought proceedings against his ex-wife, Ms Hui Qin Gu, and her solicitor, Mr Van Uu (Warren) Nguyen, over dealings related to a property in Penshurst which Mr Chen and Ms Gu had jointly owned.
The court determined that Mr Chen was entitled to succeed against Ms Gu and Mr Nguyen in the amount of $235,514, in addition to being entitled to an order for all of his costs of the proceedings.
Mr Chen was successful based on all the fraudulent steps taken by his ex-wife.
Who owned the property in Penshurst?
Mr Chen’s claim was based on his wife’s fraudulent actions and on section 120 of the NSW Real Property Act 1900, dealing with proceedings for compensation, which can be commenced in the Supreme Court by any person who suffers loss or damage in respect of any land as a result of fraud.
The court found that Mr Chen and Ms Gu were indeed equal owners of the property in Penshurst as tenants in common in equal share.
Mutual attacks on credibility
The question of the credibility of Mr Chen and Ms Gu and their respective witnesses assumed paramount importance in the case, as each of the protagonists went to great lengths to attack the credibility of the other.
While the court found that Mr Chen was “not a reliable witness”, he was also not found to be untruthful about any matter directly related to the core question of the case – that is, whether he and Ms Gu made a verbal agreement in 2000 in relation to the Penshurst property (as Ms Gu alleged) and whether or not he authorised her to deal with the property.
Multiple dishonest acts comprehensively destroy credibility
By contrast, Ms Gu’s credibility was found to have been “comprehensively destroyed” by the many steps she took to ensure that she obtained what was not provided to her at the Family Court property settlement.
This included bringing her cousin to meetings with Mr Nguyen to pose as Mr Chen while knowing that Mr Chen did not intend to execute the documents, not telling Mr Nguyen that she and Mr Chen had separated or were divorced, not appointing a real estate agent, trying to sell the Penshurst property to a friend without advertising it, lying to the purchasers about where her husband was and forging Mr Chen’s signature on multiple documents.
The judge concluded: “I am unable to accept anything Ms Gu says.”
Did Mr Chen agree to give Ms Gu his half interest in the Penshurst property?
Ms Gu maintained that Mr Chen had made a verbal agreement with her that she would have 100% ownership of the Penshurst property.
This was despite the fact that both Mr Chen and Ms Gu were named as owners on the certificate of title and that upon their divorce, the orders of the Family Court specified that each of them was the sole legal owner of one half of the property.
The court discussed a conversation Ms Gu alleged she had with Mr Chen regarding the division of their property, in which Ms Gu claimed they negotiated an arrangement where she received full ownership of the Penshurst property, while Mr Chen retained sole ownership of another property in Beverly Hills.
Ultimately the court determined that Mr Chen had a half interest in the Penshurst property and that Ms Gu had acted fraudulently. The consent orders of the Family Court were to be upheld and Ms Gu was found to be in contempt of those orders.
Was the solicitor negligent?
As the solicitor who assisted Ms Gu, Mr Nguyen was charged with negligence in regard to his contribution to her fraudulent behaviour. The court held that Mr Nguyen owed a duty of care to Mr Chen and that duty had been breached.
It would have been easy for Mr Nguyen to ask the “Mr Chen” who was presented to him for photo identification, such as a driver’s licence or passport. It was negligent of him as a lawyer facilitating a property transaction not to do so.
Tying up loose ends when a relationship ends
Human nature is full of flaws and fraudulent behaviour can affect anyone at any time.
If your relationship breaks up, it is important to ensure that your property is secured and all loose ends are tied.