Lowe v Pascoe (No 11)

On 4 March 2021, I published my reasons (the Principal Reasons) for reaching certain conclusions in relation to two sets of proceedings arising out of the actions of the late Kut Sze Tu (KST). [1] On 30 September 2021, I published my reasons (the Supplementary Reasons) for further conclusions reached in relation to those proceedings. [2] In these reasons I shall use terms as defined in the Principal Reasons and the Supplementary Reasons.

A further question has now arisen as to the extent to which Mary and Geoffrey should be required to account for a benefit said to have been received from funds belonging to the Partnership. It is now common ground that Mary will bring to account a sum of $80,000 distributed to her from a St George interest-bearing term deposit. The question that remains concerns a payment.

It is common ground that a payment of $25,000 was made to Geoffrey on 4 March 1981. However, there is a dispute as to how the payment should properly be characterised. There is some evidence it was a repayment by KST on behalf of the Partnership to Geoffrey of a loan made by Geoffrey to KST for the benefit of the Partnership. On the other hand, there is also evidence that it was a loan made to Geoffrey from funds of the Partnership. If the latter is the correct characterisation, there is a further question as to whether the loan has been repaid.

A balance sheet included in the income tax return for the Partnership for the year ended 30 June 1981 records an unsecured loan to Geoffrey in the sum of $25,000, as an asset of the Partnership. The returns for the Partnership for the years ended 30 June 1982 and 1983 are not in evidence. However, balance sheets included in the tax returns for the Partnership for 1984 and 1985 do not record an asset of the Partnership consisting of an unsecured loan to Geoffrey. The Partnership returns were prepared by Mr Johnson Wong, who also prepared returns for Mary. However, he did not prepare Geoffrey’s personal tax returns.

Mr Wong was cross-examined on 17 August 2012. He said that he prepared the Partnership tax returns on instructions from KST and sometimes from Mary. He agreed that, during the course of doing work for KST, he came to know Geoffrey although he seldom saw him. Mr Wong said that he only came across Geoffrey’s name in relation to the distribution of income to him from the Partnership. He did not agree that he met Geoffrey on many occasions and did not meet him on more than half a dozen occasions. He said that he never spoke to Geoffrey on the telephone. It appears that Mr Wong was not asked specifically about the treatment of the payment of the sum of $25,000 to Geoffrey.

The matter of the payment of $25,000 was addressed in Geoffrey’s affidavit evidence. The matter was also raised in his oral evidence before Smart AJ on 18 June 2009, before Gzell J on 17 August 2012 and before me on 13 August 2020.

In his affidavit of 8 December 2006, Geoffrey said that, prior to the payment of the sum of $25,000, he had a conversation with KST concerning money that he said the Partnership owed him, in which he said to KST:

In a subsequent affidavit of 21 August 2007, Geoffrey said as follows:

On 18 June 2009 before Smart AJ, the following exchange took place in the course of Geoffrey’s cross-examination:

On 14 August 2012, in Geoffrey’s cross-examination before Gzell J, the following exchange took place:

In cross-examination of Geoffrey before me on 13 August 2020, the following exchange took place:

The FC Chow plaintiffs contend that the Court should find that the payment to Geoffrey was a loan from the funds of the Partnership and would not accept his allegation that he has repaid the loan. Thus, they say, in circumstances where Geoffrey has denied receiving the money as a loan, he should not be heard to say that he has repaid the loan.

There is no reason to doubt that Mr Wong prepared the tax returns for the Partnership for the years 1984 and 1985 on instructions from KST. Those returns do not record any indebtedness of Geoffrey to the Partnership. Whether that is because the payment of $25,000 was a repayment by the Partnership to Geoffrey or whether it was a loan by the Partnership to Geoffrey that was subsequently repaid is by no means clear. However, I consider that, in the circumstances, it is more likely than not that, by 30 June 1984, Geoffrey was not indebted to the Partnership in respect of a loan of $25,000. It follows that there is no basis for Mary and Geoffrey to bring any such payment to account.