Proving fraud February 24, 2021
- It is not in dispute that the primary judge correctly held that s 140(2) of the Evidence Act applied to the proceedings with the consequence that when determining whether her Honour was satisfied of Mr Musa’s case on the balance of probabilities, she was to take into account from a non-exhaustive list of matters:
(a) the nature of the cause of action or defence, and
(b) the nature of the subject-matter of the proceeding, and
(c) the gravity of the matters alleged.
- It has been said that s 140(2) provides for no new principle: Palmer v Dolman  NSWCA 361 at  per Ipp JA (Tobias and Basten JJA agreeing); Bale & Anor v Mills (2011) 81 NSWLR 498;  NSWCA 226 at - (Allsop P, Giles JA and Tobias AJA). It reflects the principles stated in Briginshaw v Briginshaw, where Dixon J said at 362:
The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal. In such matters ‘reasonable satisfaction’ should not be produced by inexact proofs, indefinite testimony, or indirect inferences.
- It is well accepted that the principles in Briginshawv Briginshaw elucidate the list of matters in s 140(2): Director General of Department of Community Services; Re Sophie  NSWCA 250 at  per Sackville AJA (Giles JA and Handley AJA agreeing); Bale v Mills  at ; Bibby Financial Services Australia Pty Ltd v Sharma  NSWCA 37 at  (Gleeson JA, Beazley P and Barrett JA agreeing); El-Wasfi v State of New South Wales; Kassas v State of New South Wales  NSWCA 322 at  (Leeming JA, Simpson and Payne JJA agreeing).
- Importantly, the requirement stated in Briginshawv Briginshaw that there should be clear and cogent proof of serious allegations, does not change the standard of proof, but merely reflects the perception that members of the community do not ordinarily engage in serious misconduct: Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd at 171; Palmer v Dolman at 
- In a supplementary submission filed shortly before the hearing, Mr Musa departed from his written submissions in chief and in reply and submitted, for the first time, that the primary judge erred at J  in requiring “actual persuasion” that Mr Musa’s version of events is what occurred. Reliance was placed upon the remarks of the majority in Neat Holdings at 172 (Mason CJ, Brennan, Deane and Gaudron JJ):
When an issue falls for determination on the balance of probabilities and the determination depends on a choice between competing and mutually inconsistent allegations of fraudulent conduct, generalisations about the need for clear and cogent proof are likely to be at best unhelpful and at worst misleading. If such generalisations were to affect the proof required of the party bearing the onus of proving the issue, the issue would be determined not on the balance of probabilities but by an unbalanced standard. The most that can validly be said in such a case is that the trial judge should be conscious of the gravity of the allegations made on both sides when reaching his or her conclusion. Ultimately, however, it remains incumbent upon the trial judge to determine the issue by reference to the balance of probabilities. [Emphasis added.]
- Those remarks were made in the context of the particular situation in Neat Holdings where the central issue was whether projected takings of a business (Karajan), which had been sold to the appellant (Neat Holdings), had been knowingly misrepresented by the directors of Karajan. It was common ground at trial that Karajan’s claimed weekly takings of the business for the sale as recorded in the weekly takings book (before the sale) differed from Neat Holdings’ claimed weekly takings after it took over the business as disclosed in Neat Holdings’ weekly takings books to such an extent that they could not both be genuine. Each side had claimed that the other side had falsified the figures recorded in the relevant takings’ books. It was in that context that the majority observed in Neat Holdings that generalisations about the need for clear and cogent proof are likely to be at best unhelpful and at worse misleading.
- Senior counsel for Mr Musa acknowledged that the present case did not involve a choice between competing and mutually inconsistent allegations of fraudulent conduct. That concession was properly made. However, counsel went on to submit that the remarks in Neat Holdings at 172 had been extended by the Queensland Court of Appeal in Tabtill Pty Ltd v Creswick  QCA 381 at -. I do not agree.
- Tabtill involved an allegation in a cross-claim by Felix Creswick that his son, John, had, on many occasions, forged his signature on documents with the consequence that John and others within the Creswick family obtained benefits at his expense. John denied making the signatures, and contended that Felix had written the signatures, and continued the use of the disputed signature after he had accused John of forgery.
- The Queensland Court of Appeal noted that the trial judge had to consider two options: “[e]ither, Felix was using two signatures contemporaneously, or John had forged the disputed signatures” (at ) and that the case was “not the usual kind of case in which the only question is whether a particular signature is authentic”, because “[o]n John’s case Felix was in the habit of using two markedly different signatures at different times” (at ). It was in this context that the Court found that the parties’ cases involved “two distinct options, each involving very discreditable conduct” (at ) and it was incumbent upon the trial judge to make a determination, citing the observations in the majority judgment in Neat Holdings at 172 set out above.
- The present case is distinguishable on the facts from Tabtill because, unlike Tabtill, this proceeding involved the usual kind of case in which the only question is whether a particular signature is authentic and, if not, was Ms Alzreaiawi a party to the fraud: cf Tabtill at .
- Finally, Mr Musa submitted that this Court should extend the remarks in Neat Holdings at 172 to a case such as the present, because the primary judge was faced with “essentially a binary question”, namely whether Mr Musa signed or did not sign the transfer. There is another possibility, namely that Mr Musa may have forgotten that he signed the transfer and with the passage of time formed the view eight years later when giving his affidavit that he didn’t sign the transfer because he could not remember doing so. Against this, counsel for Mr Musa submitted that it was no more than a logical possibility since this proposition was not put to Mr Musa in cross-examination and was not part of Ms Alzreaiawi’s case. So much can be accepted.
- Nonetheless, in my view, no principled basis was advanced for extending the remarks in Neat Holdings to the present case. Moreover, to accept that submission would be inconsistent with the requirement in s 140(2)(c) of the Evidence Act in a case such as the present where fraud is alleged against a party. The primary judge correctly had regard to the gravity of Mr Musa’s allegation that Ms Alzreaiawi forged or was party to the forgery of Mr Musa’s signature on the transfer, in the sense referred to in Neat Holdings at 171, which is referred to at  above. There was no error in her Honour requiring “actual persuasion” on the balance of probabilities of Mr Musa’s version of events. As this Court said in Morley v Australian Securities & Investments Commission  NSWCA 331; (2010) 247 FLR 140 at  “[r]eferences in the authorities to “actual persuasion” should be understood as equivalent to the state of “satisfaction”, as that word is used in s 140”. (An appeal was allowed, but no exception was taken to this statement.)