Quite often when parties bring a claim to court it turns out that they have been doing something which will get them in trouble.
For example, parties who need to establish the state of their financial affairs for the purpose of backing up some kind of damages claim may turn out not to have lodged any tax returns or to have failed to collect and remit any GST on their business takings.
Another quite common instance is when a party seeks to put documents in evidence on which stamp duty has not yet been paid. The court will not usually admit the document without an undertaking which can be relied upon (which generally means from the party’s solicitor) that the document will be stamped. If you can spot an unstamped document this can be an easy way to put a spoke in an opponent’s wheel, especially when an urgent application is being made. Judges are also quite capable of raising this objection of their own motion.
Sometimes parties have misrepresented their financial or personal situation to the government in order to obtain some kind of benefit. Many are the de facto partners who have also drawn Social Security payments as a single person (the dole or a pension, especially the supporting parent pension) to which they would not be entitled if the true situation were known to Centrelink.
Sometimes, usually in order to preserve or obtain some government benefit or other, people conceal their ownership or part-ownership of an asset by allowing someone else to become the legal owner. They are then vulnerable to the legal owner of the asset dealing with the asset without their knowledge or simply denying their interest.
This has been going on ever since, in the late middle ages, landowners transferred the legal ownership of their land to dummy owners of one sort or another in order to avoid the incidence of feudal dues. The idea of a trust, where the legal owner is subjected to obligations to the true, beneficial, owner, originates from this time.
Where the nefarious purpose is inextricably bound up with the case which a party seeks to advance, the approach of the courts has been to refuse to assist that party. The result then is that, as between two cheats, the other cheat would get away with it and the loss lie where it fell.
In recent years, the courts have become more sensitive to the potential disproportionality between the wrong-doing by the party seeking to make a case and the loss which that party would suffer as a result of this. In Nelson v Nelson, a case which is too complicated to describe in detail but which in particular involved a serviceman’s widow facing a loss of about $200,000 because she had wrongfully obtained a subsidised rate of interest on a loan of $25,000, the High Court rather creatively held that she should be given relief (and hence get that money to which her daughter, with whom she had fallen out, also laid claim) provided she repaid the Commonwealth Government the interest subsidy which she had received over the life of the loan. This is an example of what in equity (one branch of the law: too difficult to explain what it is here) is sometimes referred to as the requirement that a party come with “clean hands” to the court for assistance.
Another possibility remains in all cases that the judge may elect to refer the papers to the relevant authority to take such action as it sees fit.
A recent example of this is Jin v Yang  NSWSC 754.
Mr Jin, 78, met Ms Yang, 50, in December 2004. Both were divorced. They met through dating advertisements placed in Chinese-language newspapers. In April 2005 they took a holiday together to Alice Springs and after this decided to live together. At that time Mr Jin was living with his daughter in Carlingford and Ms Yang was living at Bexley. Mr Jin had applied for a residence through the Department of Housing, but had not at that time been provided with subsidised housing. He received benefits and allowances through Centrelink of $518.77 per fortnight and had declared foreign income from a pension he received from a Chinese government instrumentality of $14.76 per fortnight.
In July 2005, Ms Yang bought a property in Ashfield. Mr Jin provided half of the purchase price. They moved in together. Subsequently, Mr Jin was allocated a Housing Department unit in Milsons Point which he proceeded to sub-let at a market rate.
The relationship went sour by mid-2006, apparently because Ms Yang learnt that Mr Jin, who seems to have been quite a live wire for his age, was still maintaining a previous relationship with an old flame. (Lesson here for lovers: be careful what you write in your diary.) Mr Jin moved out (possibly to Milsons Point, though this is unclear.) He spoke to Ms Yang’s son, Keliang, about getting his share of the house back. Keliang did not tell him that in fact the house had by now been transferred to him. In a complicated series of transactions, Keliang became owner of the Ashfield property. Normally, this would not be a problem, since Mr Jin would be able to trace the proceeds into whatever they had been converted to in Ms Yang’s hands. However, in this case, a complicated series of transactions meant that Ms Yang now said that she did not have any of the proceeds left. Her account of what she had done with them was singularly unconvincing, and the judge found that it was most likely that it had found its way back to her son, Keliang.
Normally, if you become the transferee of property under the Real Property Act (which is most property and certainly most urban property in Australia), you obtain what is known as an “indefeasible” title, absent fraud. That means you will not be affected by any dodgy dealings by your predecessor in title or undisclosed or even, in some cases, disclosed interests in the property. Justice White held that Keliang (who did not return from China to take part in the proceedings and who had participated in a series of transactions with the effect of apparently putting both the property and the proceeds of the “sale” beyond Mr Jin’s reach when he knew of Mr Jin’s claim) had committed the requisite fraud so that the Ashfield property would be subject to a constructive trust as to Mr Jin’s half interest.
This was a great victory for Mr Jin, particularly because, as Justice White said:
41 Mr Jin has been shown to have made false statements in his affidavits. For example, he denied placing an advertisement for the Milsons Point unit when it was clearly proved that he did so, as he was eventually forced to concede. He appears to have understated substantially his income from his Chinese pension to Centrelink. He deposed that he had ended his relationship with Ms Fu in late 2004 or early 2005, when his diary shows that he had not. Although there was some ambiguity in the words used in his diary as to whether he was describing a continuing sexual relationship with Ms Fu, the context shows that he was. At some time he made “corrections” to an entry in his diary to describe his activity with Ms Fu. His evidence as to his sources of income was confusing and I attribute that, at least in part, to his not being frank in his answers.
42 Ms Yang was also not a credible witness. Apart from the direct contradictions between her affidavit and her oral evidence in relation to her son witnessing her signature to the contract of 27 May (referred to earlier) and her untruthful statement as to what was written in Mandarin characters on the document prepared on 6 September 2005, she gave other evidence I refer to later in these reasons concerning the disposition of sale proceeds of the Ashfield unit and the Canberra property which stretch credulity.
43 Mr Wilson [Ms Yang's barrister] submitted that if I found that neither party was credible then the plaintiff would fail because the plaintiff needed to show that the parties had a common intention that he acquire a beneficial interest in the Ashfield property. …. I do not accept his submission as to the consequence of finding that neither party is a credible witness. The question is, rather, whether the objective circumstances indicate that the payments were a gift to Ms Yang, or a loan, or were made with a view to both parties sharing the ownership of the property.
But there was a sting in the tail. His Honour said:
57 No defence of unclean hands was pleaded to Mr Jin’s claim to enforce a constructive trust. Nor was it submitted that Mr Jin should be refused relief on the ground of unclean hands. It was not suggested that the transaction was rendered illegal by any statute. Mr Jin asserted that the Department of Housing was aware that he was not living in the Milsons Point property and had let it to other tenants. He said that Centrelink had been made aware of Ms Yang’s claims and had investigated the matter and raised no issues about it.
58 I do not consider that his right to equitable relief should be made conditional on his taking any particular step in relation to the Department of Housing or Centrelink such as was ordered in Nelson v Nelson (1995) 184 CLR 538. The contrary was not contended. Nonetheless, when my published reasons are available I will direct that a copy be provided to the Department of Housing and to Centrelink.