Huang v Fu

Judgment 1These proceedings concern a property at Cherrybrook ( "the Property" ), the title in which is registered to the defendant, Ms Hsueh Fong Fu, purchased in 1995. 2There is no dispute that the purchase price of the Property and ancillary costs totalling $500,000 were paid out of the bank account of the plaintiff, Mr Powen Huang, in 1995. 3Mr Huang and Ms Fu lived in Taiwan and had been married until 1985. They had two children. In divorce proceedings in Taiwan, Mr Huang was given custody of the children, then respectively two years and five years of age. 4Following the divorce, Ms Fu emigrated to Australia with her parents and the children remained in Taiwan. Ms Fu, on a number of occasions, visited her children in Taiwan. 5There is no dispute that as a result of discussions involving Ms Fu on the one hand, and Mr Huang's father, Tzu-Ding Huang ( "Mr Tzu" ), and Mr Huang on the other, it was agreed that the two children would travel to Australia with their mother with a view to them residing permanently in Australia. There is no dispute that it was contemplated that a house would be purchased in which the children would live with their mother, avoiding the need for them to live with Ms Fu at Ms Fu's parents' home. 6For some period the children returned to Taiwan but over time they have chosen to permanently reside in Australia. There have, in recent times, been disputes between on the one hand the children, now adults, and Ms Fu on the other, in respect of which they have sought to involve Mr Huang. Mr Huang contends that it was only in the context of these disputes that Ms Fu now asserts that she has the sole beneficial interest in the Property. 7I have mentioned that the entire purchase price and ancillary costs were provided out of Mr Huang's bank account. It is agreed that of the $500,000 which Mr Huang provided for the Property, $250,000 had been given to him by his father. There is an issue as to how the $250,000 provided by Mr Tzu is to be characterised to which I shall return. 8It is now not disputed that in addition to transmitting the $500,000, Mr Huang had transmitted, directly, at least a further $101,050 to Ms Fu, intended to assist Ms Fu with the expenses of caring for the children. Mr Huang also sent money to Ms Fu's brother, approximately $55,000 of which Mr Huang says was provided to Ms Fu. Ms Fu accepts that she did receive some money from Mr Huang through her brother. The transmission of funds is potentially relevant to an assertion made on behalf of Ms Fu that Mr Huang engaged in unlawful conduct, but is also relevant to Mr Huang's credibility because in his affidavit he said that he had business dealings with his former brother-in-law but he admitted in cross-examination that he did not and that somehow the monies paid to his former brother-in-law assisted his former brother-in-law to avoid tax: see T29.41-T30.4. 9I do not think there was any dispute that by providing the funds to purchase the Property in Ms Fu's name, the beneficial interest would reside in Mr Huang and Ms Fu would only have the legal title to the Property (see Calverley v Green (1984) 155 CLR 242 ), unless Ms Fu establishes that the money was given in a different character. Ms Fu's case was that Mr Tzu had made a gift to her of $500,000 and since she could not establish that Mr Tzu had provided more than $250,000, her claim was that the plaintiff had also made a gift to her of the balance of the $500,000. It was accepted that no presumption of advancement applied in reference to Mr Huang (or Mr Tzu) since at the time of the gift, if made by Mr Huang (and Mr Tzu), Ms Fu was not Mr Huang's wife and had not been his wife for 10 years. 10Ms Fu also defends the claim on the basis of laches. Mr D P O'Connor of counsel, who appeared for Ms Fu, submits that for 15 years Mr Huang made no claim to the Property and that Ms Fu has changed her position given the absence of any claim by Mr Huang, but this submission is not supported by any evidence of Ms Fu as to what she did or refrained from doing because of the absence of any claim by Mr Huang (and see T56.10-15). Mr O'Connor also submits, on behalf of Ms Fu, that Mr Huang ought not be entitled to any relief because he failed to obtain the approval of Foreign Investment Review Board ( "FIRB" ) for the purchase of the Property, and his obtaining of any interest in the Property in 1995 would have been a breach of Australian law. I shall refer to this as "the FIRB point" . 11Ms Fu's evidence was that she had a conversation with Mr Tzu in Taiwan in late December 1995 or early January 1996 where Mr Tzu said to her: "if you take the children to Australia I will give you half million dollars Australian." 12Ms Fu says she spoke to Mr Huang shortly after and said: "I would like to buy a house with the money from grandpa." 13Mr Huang says he was present at the conversation referred to in [11] above between Ms Fu and Mr Tzu in which the following words were said: "Defendant: 'I want to take the children to Australia to study.' My father: 'Good idea. But where do they live?' Plaintiff: '...' [sic] My father: 'If the children go to Australia, I would provide some money to help buying a house for the children.'" 14Mr Tzu says he had a conversation with Ms Fu to the following effect: "Fu said: 'I am thinking about the possibility of bringing the children to live and study in Australia.' I said: 'ok, but where would the children be staying? If my son agreed I would assist him to buy a house for the children to live.'" 15Mr Huang and Ms Fu were both cross-examined on their affidavits but Mr Tzu, who is 90 years of age and frail, did not attend for cross-examination and neither side sought to have a videolink arranged so he could be cross-examined. 16Mr O'Connor submitted that Mr Huang was a very poor witness whose evidence could not be relied on. He submitted that Mr Huang had not answered questions responsively, had been evasive and had been reluctant to make admissions. Mr O'Connor also submitted that Mr Huang had been shown to have been untruthful in a number of respects: (1) Mr Huang had asserted in his affidavit that Ms Fu has paid to him 50% of the rent received by her from their son's girlfriend, but admitted in cross-examination that Ms Fu had not paid any amount, and said that she had agreed to pay him 50% of the rent. (2) Mr Huang asserted in his affidavit that he had business dealings with Ms Fu's brother but in cross-examination admitted that he did not. (3) Mr Huang had used false names in the documents transferring money from Taiwan to Australia. 17So far as is concerned, Mr Huang admitted that he had described the identity of the remitter falsely on two occasions (on one occasion he used Ms Fu's name and on one he used his father's name). Mr Huang's reason for doing so, namely that he was worried about the restriction of foreign currency control (see T20.40-41), was not challenged. 18So far as is concerned, it is true that Mr Huang admitted that he did not have business dealings with Ms Fu's brother. If Ms Fu's brother was paying out money to Ms Fu in fact on behalf of Mr Huang, but ostensibly for some other purpose, namely, to provide Ms Fu's brother with a tax benefit, that would be consistent with Mr Huang having no business dealings with Ms Fu's brother and with Mr Huang's obtaining no benefit from the transmission of funds in this way. 19In relation to , I gained the impression that Mr Huang had made a mistake in using the words "had paid" rather than saying that Ms Fu had "agreed to pay". 20However, I found it surprising that although Mr Huang said in his affidavit in reply that he had heard his father say to Ms Fu "if the children go to Australia, I would provide some money to help buying a house for the children", he did not say so in his affidavit in chief. 21I accept that the cross-examination of Mr Huang leads to some doubt as to Mr Huang's veracity but it is not sufficient to lead me to reject his evidence in its entirety. His claim that he paid half of the purchase price himself and obtained half from his father is now not in dispute. His claim that the $500,000 was for the purchase of the Property is not in dispute. Mr Huang's claim that he has provided additional monies to Ms Fu has also been established, although not to the full extent of the amount claimed: see paragraph 29 of Mr Huang's affidavit of 31 December 2010 and MFI 1 which summarises the evidence of $101,050 provided by Mr Huang to Ms Fu and Mr Huang says he provided a further $55,000 to Ms Fu (see paragraph 29.7 of Mr Huang's affidavit of 31 December 2010). During cross-examination, Ms Fu did not dispute that she received the $101,050 (see T64-65) and she admitted in cross-examination that she did receive some further monies from her brother sent by Mr Huang (see T65.1-7). I accept Mr Huang's evidence that he has provided at least $156,050 to Ms Fu in addition to the $500,000 paid for the Property. I do not think it was established that Mr Huang knew that he could not provide funding for the purchase of the Property or that he could not obtain an equitable interest in land by so doing without FIRB approval. 22Mr O'Connor submitted that his client, in contrast, was shown to be a straight-forward witness who made admissions readily when appropriate. Mr P G Cutler of counsel, who appeared for Mr Huang, conceded that Ms Fu had exhibited a good demeanour in the witness box. 23I think that Ms Fu's problems as a witness arise other than by reason of her demeanour, namely: (1) Her contention that she had received the $500,000 as a gift did not sit well with the fact that: (a) when Mr Huang asked her if he could be registered as the owner of the Property, she told him that he could not be registered because he was a foreign resident. She told him that she had raised the matter with the real estate agent and that is what she had been told: see T46.12-T47.50; (b) when Mr Huang asked, shortly after entry into the contract for purchase of the Property by Ms Fu, whether his name could be added to the contract, she told him it was too late. Initially Ms Fu said she had not asked the solicitor but when shown a letter from herself to Mr Huang in which she said she has done so, she agreed she had: T48-T50; (c) when Mr Huang suggested sale of the Property (in 2009), she did not challenge his right to an interest in the Property: see T58; and (d) when Mr Huang asked for a portion of the rent to be paid by their son's girlfriend, she did not ask him on what basis he would be entitled to that money. (2) To deal with the problem of (1) above, Ms Fu asserted at first that she had not thought about it (see T51.24), and later she described herself as "very honest and naive, innocent, and I'm still very young": see T51.48-T52.9 and also see T53.10-12. I do not think that that is a persuasive explanation, firstly because she did not need to be very sophisticated to assert the money was a "gift from your father" (which she says is what she believed: see T58.36-43), and secondly because I do not accept she was a nave person. She did not appear to be so in the cross-examination (although it was short) and she had already bought an investment property on the Gold Coast in March 1995. Ms Fu also purchased a property at Tea Gardens in the name of her daughter: see T55. She subsequently purchased another two properties in 2004 and 2007 and they were all negatively geared. (3) I have noted that Ms Fu admitted, in cross-examination, to having received some monies from Mr Huang through her brother (see T65.1-7), but it had been put by Mr O'Connor to Mr Huang in cross-examination (see T29.38) that she had received no money through this route. 24To the difficulties just mentioned, several other matters need to be added: (1) The words which Ms Fu says were said by Mr Tzu do not make any reference to a house or buying a house and even in cross-examination she sought to portray the offer made by Mr Tzu as one in which Mr Tzu was to give her AUD$500,000 just for taking the children to Australia: see T43.26-28, and see T27.37-45 at which Mr O'Connor put to Mr Huang that the money to be forwarded to the defendant was sent "to buy a house for the children to live in". (2) Mr Tzu's version of the conversation with Ms Fu (see paragraph C at page 150 of Exhibit A) does not involve providing any gift to Ms Fu and is not specific as to the amount of assistance he would provide to his son. (3) When Mr Tzu transferred money to his son's account, he paid only the equivalent of AUD$250,000 not AUD$500,000, and the fact that he paid the money to his son's account and not to Ms Fu directly is also of relevance. (4) There is no evidence from Ms Fu of a conversation by which Mr Huang made a gift to her of $250,000 or expressed such an intention. (5) It is important to remember that the conversations to which all these witnesses depose occurred more than 15 years ago. In that context, and in the absence of any writing, the failure of Ms Fu months later to deny Mr Huang's interest is of considerable significance. 25So far as Mr Huang is concerned, there is no evidence that he said anything indicative of a gift and his intention is the relevant intention: see J D Heydon & M J Leeming, Jacobs' Law of Trusts in Australia, 7 th ed (2006), LexisNexis Butterworths at . Nor am I persuaded on the evidence that Mr Tzu made a gift to Ms Fu of $500,000 or of any amount. Whilst I think it is possible to see the payment of the money by Mr Huang as a gift to the children in accordance with a presumption of advancement to them, neither Mr Huang nor Ms Fu made any such assertion. It was not asserted that Mr Tzu has a beneficial interest in the Property, and since Mr Tzu gave $250,000 to Mr Huang, it can be presumed to have been one for advancement of his son, albeit with the aim of thereby benefiting his son's children. 26It follows that Ms Fu has not, at least as to the $250,000 provided by Mr Huang, established that the money was provided to her as a gift. 27It follows that Mr Huang has the beneficial interest in the Property, and subject to the FIRB point, is entitled to a declaration to that effect and ancillary orders. 28I turn now to deal with the FIRB point. 29After the hearing and with the consent of Mr Cutler, Mr O'Connor sought an opportunity to address the fact that "some of the submissions....as concerns the Foreign Acquisitions and Takeovers act [sic] 1975 were not accurate." Mr Cutler accepted that he be entitled to do so. Written submissions were exchanged and received by the Court. Mr Cutler objected to the expansion of submissions beyond the stated purpose and I think he is correct in that opposition, as Mr O'Connor's submission go beyond correcting the errors made in relation to the Foreign Acquisitions and Takeovers Act 1975 (Cth)("FATA"). Mr Cutler's submission themselves went further than this topic, making reference to Ikeuchi v Liu [2001] QSC 54 . 30It was accepted by Mr Cutler that by providing the money for the purchase of the Property and obtaining a beneficial interest, Mr Huang was required to seek FIRB approval in 1995 and did not do so then and has not done so at any time since. Mr Huang indicated through his counsel that he was willing to now undertake to the Court to seek FIRB approval. 31Mr O'Connor, for Ms Fu, argued that the Court should not grant relief to Mr Huang even if it accepted the contention that he was the beneficial owner of the Property because he was in breach of Australian law. Mr Cutler responded by relying on Fan v Tang [2010] NSWSC 11, a decision of Slattery J. Mr O'Connor drew my attention to the High Court's decision in Nelson v Nelson [1995] HCA 25; (1995) 184 CLR 538, but submitted that that case, although authoritative, did not govern the present situation. Mr O'Connor submitted that Mr Huang had been told by Ms Fu that he could not obtain an interest in the Property. 32Before considering the legal position, I draw attention to several matters: (1)Ms Fu did not tell Mr Huang that he could not lawfully obtain an interest in the Property. What she told him was that he could not be the purchaser and secondly that his name could not be added as purchaser after the contract had been entered into. (2)Ms Fu did not tell Mr Huang that it was open to him to obtain FIRB approval. Mr Huang was not asked if he would have sought approval had he known it was possible to seek and obtain such approval. There is no evidence that Ms Fu knew that approval could be sought and obtained but I think that the position is not as black an white as Mr O'Connor wished to present it. . (3)Mr Huang is now willing to seek FIRB approval. (4)The purpose of the purchase of the Property was to house Mr Huang's children and Ms Fu whilst the children were in need of care. It was not simply an investment in real estate for the purposes of making a profit. 33In Nelson, all members of the High Court were of the view that the fact that the mother had provided purchase money for the purchase of a house in her daughter's name to enable her to obtain benefit under the Defence Service Homes Act 1918 (Cth) was not sufficient to refuse to declare a resulting trust. The majority however imposed a condition that the mother be denied the benefit she had obtained under that Act. Deane and Gummow JJ in their joint judgment said at 571: "In our view, as the price of obtaining the relief she seeks for the recognition and enforcement of a resulting trust in respect of the whole of the balance of the proceeds of sale of the Bent Street property, Mrs Nelson must be prepared to do equity according to the requirements of good conscience. That may involve consideration of more than the interests of the parties to the litigation. Here, good conscience calls for the taking by Mrs Nelson of steps sufficient to satisfy the demands of the underlying policy of the Act." 34Justice McHugh, who agreed with this approach, said at 612-613: "If courts withhold relief because of an illegal transaction, they necessarily impose a sanction on one of the parties to that transaction, a sanction that will deprive one party of his or her property rights and effectively vest them in another person who will almost always be a willing participant in the illegality. Leaving aside cases where the statute makes rights arising out of the transaction unenforceable in all circumstances, such a sanction can only be justified if two conditions are met. First, the sanction imposed should be proportionate to the seriousness of the illegality involved. It is not in accord with contemporaneous notions of justice that the penalty for breaching a law or frustrating its policy should be disproportionate to the seriousness of the breach. The seriousness of the illegality must be judged by reference to the statute whose terms or policy is contravened. It cannot be assessed in a vacuum. The statute must always be the reference point for determining the seriousness of the illegality; otherwise the courts would embark on an assessment of moral turpitude independently of and potentially in conflict with the assessment made by the legislature. Second, the imposition of the civil sanction must further the purpose of the statute and must not impose a further sanction for the unlawful conduct if Parliament has indicated that the sanctions imposed by the statute are sufficient to deal with conduct that breaches or evades the operation of the statute and its policies. In most cases, the statute will provide some guidance, express or inferred, as to the policy of the legislature in respect of a transaction that contravenes the statute or its purpose. It is this policy that must guide the courts in determining, consistent with their duty not to condone or encourage breaches of the statute, what the consequences of the illegality will be. Thus, the statute may disclose an intention, explicitly or implicitly, that a transaction contrary to its terms or its policy should be unenforceable. On the other hand, the statute may inferentially disclose an intention that the only sanctions for breach of the statute or its policy are to be those specifically provided for in the legislation." 35I do not think that Fan v Tang is of much assistance to the plaintiff, as in that case the foreign national had, after acquisition of the interest in land, written to the FIRB and the FIRB had responded noting that the plaintiff had obtained an interest by "operation of law" and that he was taken not to have acquired an interest in Australian urban land. No letter or response or the kind was written or received here. 36In the written submissions, my attention was drawn to s 38 of FATA which is in these terms: "An act is not invalidated by the fact that it constitutes an offence against this Act." 37Mr O'Connor submitted that the illegality has attached to the acquiring of an interest in land and said this made Nelson inapplicable because there the illegality "attached to the acquisition of the funds to purchase the property in dispute". Even accepting that the illegality here related to the acquiring of the interest in land, the illegality was not actually the acquiring of the interest per se, but rather the acquiring of the interest without notification to FIRB. 38In Ikeuchi, Muir J rejected the contention that the FATA prohibits the acquisition of land and said at [103] - [106]: "103 It will be apparent from the foregoing that s 26A is not directed to prohibiting agreements by non-residents to acquire Australian urban land or even the acquisition of such land. The section seeks to ensure the giving of notification to the Treasurer prior to the entering into of any such agreement to acquire so that the Treasurer may make a determination under s 21A. If the Act is to be construed as prohibiting the acquisition of land, the prohibition must thus be one which arises by implication. But, in my view, no such implication is possible in the light of s 38. 104 The defendant's counsel sought to draw support from Nelson v Nelson (1995) 184 CLR 538. It was argued that the plaintiff had engaged in unlawful conduct in failing to give the requisite notifications prior to acquiring interests in land. In consequence, equity would not assist his attempt to recover the real property or its proceeds. It was submitted that the giving of equitable relief would undermine the policy of the Act by making it advantageous for non-residents to conceal their acquisitions from the Treasurer. Mr Cooke QC, who appeared with Mr Varitimos for the defendants, pointed to passages in Nelson v Nelson which support the proposition that a resulting trust would not arise if the policy of an Act of Parliament would be thereby defeated: see, for example, per Deane and Gummow JJ (at 564). 105 In Nelson v Nelson though, all members of the court considered that, in cases which do not involve a statutory prohibition of the act or matter under consideration, the question of whether or not illegality would result in the denial of equitable relief was not to be determined according to some inflexible rule or principle. Instead, the approach taken was that the availability of equitable relief must be determined by reference to whether the purpose of the Act was such that public policy required the courts to deny equitable assistance: per Deane and Gummow JJ (at 569-571). 106 Although there is some force in the submission that the efficacy of the Act is capable of being subverted by conduct such as that engaged in by the plaintiff, the Act, by the anti-avoidance provisions of s 38A, expressly acknowledges and addresses that matter. It is apparent that this section and the penalties provided for in s 26A, were thought by the legislature to constitute sufficient deterrence against avoidance of the Act's provisions. Section 38, which expressly excludes invalidity as a consequence of breach, exists notwithstanding the acknowledgment of the prospect of avoidance implicit in s 38A. Consequently, I do not accept the submission that public policy requires the denial of equitable assistance to the plaintiff. Moreover, the evidence does not establish a belief on the part of the plaintiff that he was engaged in illegal conduct. He sought to avoid the application of the Act, not to breach its provisions." 39Section 38A of the FATA, which is referred to by Muir J in Ikeuchi , is in the following terms: "(1) In this section, scheme means: (a) any agreement, arrangement, understanding, promise or undertaking, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings; and (b) any scheme, plan, proposal, action, course of action or course of conduct, whether unilateral or otherwise. (2) Where: (a) a person or persons enter into, commence to carry out or carry out a scheme (other than a scheme entered into before the commencement of this section); (b) it would be concluded that the person, or any of the persons, who entered into, commenced to carry out or carried out the scheme or any part of the scheme did so for the sole or dominant purpose of avoiding the application of any provision of this Act in relation to any person or persons (whether or not a person or persons who entered into, commenced to carry out or carried out the scheme or any part of the scheme); and (c) the scheme or the part of the scheme has achieved, or apart from this section, would achieve, that purpose; the Treasurer may make any order under this Act that the Treasurer would have been able to make if the scheme or the part of the scheme had not achieved that purpose. (3) Subsection (2) does not authorise the making of an order prohibiting a person from doing any thing that has already been done by the person before the order is made." This section was not mentioned by either counsel at the hearing or in their written submissions. 40Leaving Ikeuchi to one side, I am not persuaded that Mr Huang knew that he could not obtain a beneficial interest in the Property without FIRB approval but accepting that he did, I think the result that he should be refused the relief sought is too draconian. In my view, the appropriate order should be that Mr Huang be required to notify the FIRB of his having obtained an interest in the Property in 1995 by provision of the purchase price and that should the FIRB require him to divest himself of the interest, he must do so. If the approach adopted in Ikeuchi were accepted, not only would the defence not be available to Ms Fu, but it could well be argued that there is no requirement to notify the FIRB. Given the plaintiff's concession that Mr Huang should (and would) notify the FIRB and my conclusion that that is sufficient, and given the absence of any reference by counsel to s 38A of FATA, I do not think it is necessary or appropriate to determine whether I should follow Ikeuchi. 41There was an aspect of the defence which seemed to be directed to the proposition that Ms Fu should be given an interest in the Property because she had brought the children up out of her own money, but there was no articulation of what that interest should be, as a percentage or otherwise. Also, it is clear that Mr Huang had provided money to Ms Fu over the years. Whether that has been sufficient to meet all of the needs of the children is unclear. As Mr Cutler points out, there is no claim made by Ms Fu under the Property (Relationships) Act 1984 (NSW) or under the Family Law Act 1975 (Cth), and there is significant doubt as to whether she would have any rights under either Act, given the termination of the parties' marriage in Taiwan in 1985.