Solicitors:
Merewether & Co Solicitors (Plaintiff/Cross-Defendant)
Juris Cor Legal (Defendant/Cross-Claimant)
File Number(s): 2015/211957
[2]
Judgment
HIS HONOUR: This is another family dispute about property. The plaintiff, Mr Joseph Huang, and the defendant, Mr David Zheng, are brothers. Their father, Mr Zhe Zheng, died on 29 January 2010. In these reasons I will call Joseph Huang and David Zheng by their first names. I do so for ease of reading and intend no disrespect.
On his death Zhe Zheng was the registered proprietor of a property at 4 Short Street, Lidcombe ("the Lidcombe property"). By his will he left that property to his younger son, David. He appointed his older son, Joseph, as the executor and trustee of his will. He gave the balance of his estate, wherever situated, to Joseph. Probate of the will was granted on 21 February 2011. On 13 May 2011 Joseph lodged with the Land Titles Office a transmission application and a transfer from him to David pursuant to the grant of probate. David became registered as proprietor of the Lidcombe property pursuant to that transfer by Joseph as executor.
Joseph claims that he provided the purchase moneys for Zhe Zheng's purchase of the Lidcombe property and that Zhe Zheng held the property on a resulting trust for him. Zhe Zheng emigrated to Australia in 1996 and lived with Joseph and his family in Keating Street, Lidcombe. Joseph says that the reason 4 Short Street was purchased in the name of Zhe Zheng was to obtain an exemption from stamp duty on the basis that Zhe Zheng was a first home buyer, and to obtain Commonwealth grants then available to first home buyers. He submits that because Zhe Zheng was not the beneficial owner of the Lidcombe property, David did not acquire beneficial ownership of that property pursuant to Zhe Zheng's will. He says that David acknowledged that Joseph owned the Lidcombe property and would deal with it as Joseph requested. He says he relied upon that acknowledgment in arranging for David to become the registered proprietor of the property.
Alternatively to the claim based upon a resulting trust, Joseph alleges that Zhe Zheng held the property on his behalf under an express or implied trust. In response to these claims the defendant pleads a defence based on the absence of writing and relies upon s 23C of the Conveyancing Act 1919 (NSW) or, to the extent the alleged trust arises from an agreement, on s 54A of the Conveyancing Act.
Joseph alleges that in about mid-November 2009 and later, after Zhe Zheng's death, in March 2010, David acknowledged to him that the Lidcombe property belonged to Joseph and he would deal with the house as Joseph requested. Joseph says that David made a similar acknowledgment on 19 October 2010 at a meeting with a solicitor, Ms Xialin (Kathy) Qiu.
Probate of Zhe Zheng's will was granted on 21 February 2011. In March 2011 Joseph travelled to Fuzhou in China and arranged for a property owned by Zhe Zheng and situated in Dou Chi to be transferred into David's name. On 13 May 2011 a transmission application and transfer was lodged for registration. David became the registered proprietor of the Lidcombe property.
David separated from his wife. He had been retrenched in 2009 following the Global Financial Crisis. On 15 January 2010 the Oregon Circuit Court made an order for immediate termination of his marriage. He was given custody of four children, but was responsible for paying a home loan of over US$300,000. From 3 March 2010 to 29 September 2014 Joseph Huang made 23 remittances of varying amounts to David totalling AUD$294,570. Joseph claims that these moneys were paid by way of loan. David says that they were gifts.
David considered moving to Australia with his children. Joseph initially contemplated that David's migration application would be resolved within 12 months. On 16 January 2010 Joseph and his wife signed a form to act as sponsors for migration of David and his children. David applied for a visa on 27 January 2010. It was not until 10 April 2014 that the Department of Immigration and Border Protection advised David that his application had been assessed as meeting the core criteria for the visa. The Department advised that the application had been placed in a queue and would progress to final processing when a place became available in the migration program and could be released from the queue.
On 29 September 2014 there was a telephone conversation between the brothers that was the start of the breakdown of their relationship. David told Joseph that his financial position was very difficult and he asked for more financial support. Joseph deposed that he told David he could only help support David's family's basic needs and could not support David's going into business for himself. On that day Joseph made what was to be the final remittance of AUD$4,607 (US$3,975). David acknowledged the receipt with thanks. On 2 October 2014 Joseph sent an email to David saying "You have to be self-reliant, starting by supporting yourself financially". Then between 2 October 2014 and 26 April 2015 there was no communication between the parties. In January 2015 David was removed as a director of an Australian company called Vista Administration Pty Ltd of which the plaintiff and his wife and eldest child owned 75 per cent of the shares. On 26 April 2015 David sent a long email, referred to later in these reasons, to Joseph in which he stated that according to their father's will he owned the Lidcombe property. He stated that he would travel to Australia for business activities and found it necessary to take the property back for his own use or rent part of it out. That ultimately led to the commencement of these proceedings.
In these proceedings Joseph claims that David holds the Lidcombe property on trust for him. He seeks a declaration that he is entitled to become the registered proprietor of the property and seeks orders to require the Registrar General to record him as the registered proprietor of the property. He also claims judgment for $294,570.33 plus interest being the amount of the remittances said to be loans by Joseph to David.
By his cross-claim David seeks payment of the amount of the rents received by Joseph from the Lidcombe property, less the expenses paid by Joseph. As at 2 March 2017 it was agreed that that amount totalled $77,764.11. David made no demand for the net rents of the Lidcombe property prior to filing his cross-claim. He gave evidence that in about February 2010 Joseph agreed with him that he, Joseph, would rent out the property on David's behalf and maintain it for him by paying the outgoings from the rental proceeds and would keep the remaining rental proceeds and give them to David in due course, but once David's immigration application was successful, David would manage the property by himself. Joseph denied such a conversation.
For the reasons which follow I have concluded that Joseph provided the whole of the purchase price of the Lidcombe property. I have concluded that the presumption that Zhe Zheng held the property on a resulting trust for Joseph has not been rebutted. I have concluded that David did acknowledge to Joseph that Joseph was the true owner of the Lidcombe property and that he, David, would deal with it as Joseph requested. I have concluded that Joseph relied on that representation in arranging for David to become the registered proprietor of the Lidcombe property and David is estopped from denying Joseph's title. I have concluded that Joseph is not precluded from asserting his beneficial interest in the Lidcombe property on the ground of illegality or unclean hands and that Joseph is entitled to a transfer of the Lidcombe property. I have rejected David's cross-claim for the net rents collected by Joseph. I have also rejected Joseph's claim that the remittances totalling AUD$294,570 were made as loans. I have concluded that they were gifts and are not recoverable.
[3]
Credibility Issues
I have reservations about the credibility of both Joseph and David. In assessing their credibility I have regard to the fact that they come from a Chinese culture with which I am unfamiliar. English is their second language. When Joseph was sworn to give evidence his counsel said that he would give evidence in English, but an interpreter was also sworn in case he had difficulties in understanding particular questions. The interpreter in question did not have the minimum required level for professional interpretation. On the second day of hearing when an appropriately qualified interpreter was available Joseph gave his evidence through the interpreter. This was a distinct improvement. But Joseph's answers were not always responsive. It was clear that his affidavits were not in his own words. His oral evidence lacked the sophistication and detail of his affidavits.
David's English was better and he did not require the services of an interpreter. I initially thought that David too frequently took refuge in asking for questions to be repeated so as to give himself time to think how he should answer the question. When I raised that matter with him, David said that he had difficulty with the tone of voice of counsel asking the questions. Mr Thomson of counsel asked his questions quietly and at a measured pace. But having regard to the fact that English is not David's first language I do not think that his frequent requests for repetition of the question is something adverse to his credit. Nonetheless, I do not accept him as a truthful witness.
Both Joseph and David gave answers in cross-examination which they later contradicted.
Joseph's credibility suffers from the fact that on his version of the facts he was a party to a fraud on the State and Commonwealth governments. On his version, he put the Lidcombe property in his father's name in order to obtain an exemption from stamp duty that would otherwise not have been available (Duties Act 1997 (NSW) from 1 January to 28 February 2009, s 73(1)). He assisted in procuring a First Home Owner Grant and a First Home Owner Boost from the Commonwealth for his father of $14,000 to which his father was not entitled.
In order to obtain equitable relief Joseph has now paid the stamp duty that, on his case, was payable on the purchase of the Lidcombe property in 2009. He has also repaid the two sums of $7,000 paid by way of First Home Owner Grant and First Home Owner Boost. He submits to a condition of the grant of relief that he pay any interest or penalties that may be payable. However, this does not change the fact that Joseph was prepared to defraud the State and Commonwealth governments. This obviously affects his credit.
Joseph also signed various documents that were inconsistent with his present case. Further, he gave instructions on at least two occasions to officers of the Commonwealth Bank and the St. George Bank that remittances to David were by way of gift. Those remittances he now says were by way of loan. His credibility on the issue of whether the remittances were loans or gifts is relevant not only to that issue, but to all issues in the case.
It appears from David's affidavit evidence that the first that he learned of his being the beneficiary of the Lidcombe property under his father's will was at a conversation over dinner with Joseph and his family when Joseph's eldest son, Andrew, said to him that "Grandpa has left that property to you". In cross-examination David said that he received a copy of the will when he received the form of sponsorship signed by Joseph for David's and David's family's migration to Australia. (According to David, the form he received was different from the form in evidence in these proceedings but he did not produce a copy of what he said was the form he received, and I do not accept his evidence that the content of the sponsorship form was different from that which he tendered as an exhibit in these proceedings.) In cross-examination David acknowledged receiving a copy of the will when he received the sponsorship form and spoke to Joseph about the Lidcombe property being left to him in his father's will. He said that he did not remember the content of his discussion with Joseph and that that was why he did not refer to it in his affidavit. I am satisfied that if David had had such a conversation with Joseph, it would have been to the same general effect as other conversations to which Joseph deposed, namely, to the effect that Joseph had paid for the Lidcombe property and was the true owner of it, and that this was acknowledged by David.
Just as I have reservations about Joseph's credibility, I also have reservations about David's credibility. Where their evidence conflicts, I have regard to the objective probabilities and to the evidence of a solicitor, Ms Xian (Kathy) Qiu. Her evidence was also challenged and I deal with that below. For the reasons given below, whilst I do not accept all of Ms Qiu's evidence, I accept that her file note is an accurate record of what was said by David at a meeting on 19 October 2010 where he acknowledged that the Lidcombe property belonged to Joseph and that he would not take his brother's property.
I have concluded that notwithstanding inconsistencies between Joseph's version of events and documents he authored or signed, and notwithstanding my reservations as to the detail of his affidavits, Joseph's evidence as to the substance of his dealings with Zhe Zheng and David in relation to the Lidcombe property should be accepted. However, I have concluded that Joseph has not established on the balance of probabilities that the various remittances to David were loans rather than gifts.
[4]
Background
Joseph was born in Fuzhou, China in 1957. David was born in 1960. Although they had the same parents, David and Joseph did not grow up together. David deposed that with the consent of their parents, Joseph was officially recognised as the son of his maternal uncle and his wife who were both revolutionary martyrs. He said that although they were brothers by blood, they were akin to cousins under Chinese law. It appears from his email correspondence after their dispute crystallised that David was resentful of what he considers to have been privileges that Joseph was said to have obtained as a child of revolutionary martyrs. But Joseph, perhaps from a sense of filial duty to his father, went to great lengths to assist David.
In 1980 David went to the United States of America to study and he later became a US citizen. He married in 1982.
In 1988 Joseph came to Australia. He acquired Australian citizenship. He is married to Mei Qin Huang. He has two sons, Andrew and Philip. In 1991 he purchased a property in Keating Street, Lidcombe with two other people and acquired sole ownership of that property in 1996. In 1995 Joseph applied to the Australian Immigration Department for his father Zhe Zheng to migrate to Australia. The application was approved. In 1996 Zhe Zheng moved to Australia and lived with Joseph and his family at the Keating Street property.
Joseph and his wife jointly owned a property at 2 Short Street, Lidcombe that abuts their property in Keating Street. In 2009 the owner of 4 Short Street, Lidcombe, that abuts 2 Short Street, died. Joseph negotiated the purchase of 4 Short Street. No one in Joseph's family was eligible for a first home owner's grant or an exemption from stamp duty on the purchase of a property by a first home owner. This was because Joseph and his wife already owned real estate, as did their son Andrew, and Joseph's younger son, Philip, was a minor. Zhe Zheng owned property in China, but did not own any real estate in Australia. It was for this reason that 4 Short Street was purchased in the name of Zhe Zheng.
The purchase price of 4 Short Street was $494,000. Stamp duty of $17,730 would have been payable on the contract for the purchase of the land had it been purchased by Joseph.
Joseph paid the deposit of $49,400 from his account with the St. George Bank. The cheque for the deposit of $49,400 was drawn from that account on 12 February 2009. As at 8 February 2009 the account had a credit balance of $19,085.62. On 9 February 2009 there was a cash deposit of $30,000 and on the same day a cash withdrawal of $10,000 leaving the account with a credit balance of $39,085.62. The account had an approved credit limit of $400,000. On the drawing of the cheque for the deposit of $49,400 the account went into debit to the extent of $10,314.38.
Joseph did not give evidence in his affidavit as to the source of the cash deposit of $30,000 to the account. In one sense, $20,000 of that deposit funded the cheque of $49,400. In another sense it did not, because Joseph did not require the cash deposit in order to draw the cheque.
In his affidavit Joseph did not say where the cash deposit came from. In cross-examination he said first that he could not remember where it came from. When asked whether his father gave him that money, Joseph said that he definitely did not. He said he could not remember whether it came from his wife or from his eldest son. Both Mei Qin and Andrew gave evidence. Neither gave evidence that she or he provided the cash deposit. Thus, there is no evidence as to the source of the $30,000 cash deposit. But Joseph was adamant that the money did not come from his father. Although I have reservations about Joseph's credibility, I accept his evidence in this respect. Zhe Zheng had an account with the Commonwealth Bank into which the $14,000 grants were paid. David did not suggest in cross-examination of Joseph, or by the tender of documents, that Zhe Zheng had money in that account or elsewhere that might have been the source of the $30,000 deposit. There was no evidence that Zhe Zheng had any substantial cash resources or assets.
The money used to pay the balance of the purchase price on completion was partly paid by Vista Administration Pty Ltd on Joseph's direction and partly paid from compensation moneys Joseph had received following an injury. It is not in dispute that Joseph provided either all, or all but $30,000, of the purchase price. I am satisfied that he contributed the whole of the purchase price.
Joseph has belatedly paid the $17,730 stamp duty that was avoided on the purchase of the property by its being put in the name of Zhe Zheng and has repaid to the Office of State Revenue the $14,000 First Home Owner Grant and First Home Owner Boost paid to Zhe Zheng.
After the Lidcombe property was purchased it was renovated by Joseph, assisted by friends. Joseph paid the expenses of the renovation amounting to about $39,000. Joseph took possession of the certificate of title. He paid the council rates, insurance, water and electricity charges in respect of the property. From mid-2010 rooms in the property were let to tenants. The rents were kept by Joseph and his wife.
On 17 September 2009 Zhe Zheng was admitted to Concord Hospital with a severe blood disorder that had been diagnosed as acute leukaemia. His condition was terminal. Joseph deposed that in October 2009 he had a conversation with his father to the following effect:
"Zhe Zheng said: 'I am very worried about David. He has four sons and they are very young. He has been in America for over 30 years and he does not have a business. Right now he is struggling to make a living. I really want him to migrate to Australia. Then you can help him. If I pass away you will be apart forever.'
[Joseph] said: 'I also hope that he can come to Australia. I have made inquiries with a migration agent. As David is already over 48 years old, if I use my company to do a 457 application it will not work.'
Zhe Zheng said: 'Is there some other way we can do this?'
[Joseph] said: 'David told me that he could apply as the last family member to migrate to Australia. He has asked me to be his sponsor for the visa. Because I am an Australian Citizen, that is not a problem. But Mei Qin and I are already financial guarantors for two other people. My guarantor period needs to be from November 2006 to November 2016. Our combined income is not enough to help David and his family. It is very difficult financially to help David migrate here. We would need Andrew and perhaps other friends to guarantee David.'
Zhe Zheng said: 'If we use my Will to transfer 4 Short Street to David, will it help his migration?'
[Joseph] said: 'This isn't the decisive criterion. But it will definitely help with his migration, because he can show that, if he migrates here, he already has a place to live.'
Zhe Zheng said: 'This is your house. If I do this, do you agree with it? After his migration he will return the house to you.'
[Joseph] said: 'If you want to do this, then I will agree to it. If he comes to Australia, he will have to live somewhere. One option is for him to live in the house.'
Zhe Zheng said: 'I have two apartments in China. One is at Dou Chi and I plan to leave that to David. The other is at Chan San and I plan to leave that to you. I will tell David about our conversation today.'"
Joseph's evidence of his conversations with his now deceased father must be treated with caution and scrutinised very carefully (Plunkett v Bull (1915) 19 CLR 544 at 548-9; [1915] HCA 14). However, as explained below, Joseph's evidence is corroborated both by the objective probabilities and by evidence given by Ms Qiu of what she was told by David.
Joseph attended on a solicitor, Mr Le Tang of Equiton Solicitors, in October 2009 with his father, who gave instructions for the preparation of his will. Joseph deposed that Zhe Zheng told the solicitor that he wanted to write a will to help David migrate to Australia by leaving the Lidcombe property to David, which it was thought would help his migration application. Joseph deposed that Zhe Zheng said that after the migration was completed David would transfer the Lidcombe property back to Joseph and that David was a good person and he, Zhe Zheng, believed there would be no problems. He gave instructions to Le Tang to leave all his property in China to Joseph. Joseph deposed that on the way home Zhe Zheng told him that the reason all the property in China would be left in his will to Joseph was because it would be strange if his will only dealt with his property in Australia and not property in China, and it would appear unfair if one brother got everything and the other got nothing. According to Joseph his father reiterated that he intended that the Lidcombe property was Joseph's and that he intended David to have his apartment in Dou Chi, and Joseph to have other apartment in Chan San.
Mr Le Tang was not called. He advised that he had no file note or memorandum in respect of the preparation of the will and did not recall the details of the conference, other than to say that the contents of the will was the result of the conference (Exhibit B). There is therefore no corroboration of Joseph's evidence from the solicitor who prepared the will. On the other hand, no adverse inference is to be drawn against Joseph from his not calling any such evidence.
Joseph deposed that in November 2009 Zhe Zheng told him that he had already told David about the will and made it very clear to him that the house was Joseph's and was not his and was not to be David's. David denied that there was any such conversation.
Joseph deposed that in about mid-November 2009 he spoke with David by telephone. Joseph deposed that there was a conversation between them to the following effect:
"[Joseph]: 'How is your immigration application going?'
David: 'I am still waiting for some documents. If I don't get these it will not meet the requirements.'
[Joseph]: 'I am your sponsor. Dad and I can only use the Will method to increase your financial status for your immigration. The rest is up to you.'
David: 'Dad has already told me the whole plan.'
[Joseph]: 'Right now is a difficult period of life for us. I hope Dad can quickly recover his health. I hope the house can be quickly renovated and rented out. I hope I can find a new business contract. Also I hope your immigration is successful. But don't forget, I am the true owner of the house.'
David: 'Yes, I understand.'"
Again, David denied the conversation.
David and his children lodged their immigration application with the Australian embassy in Washington on 27 January 2010. The application was supported by Joseph's completing a form as David's sponsor. As part of his undertaking as a sponsor Joseph agreed to ensure that adequate accommodation would be available for his relatives in Australia or, if necessary, that he would provide accommodation for them for up to two years from David's family's arrival in Australia, and would provide financial assistance as required to meet their reasonable living needs for up to two years from their arrival in Australia, and to meet health, medical and pharmaceutical needs. In cross-examination Joseph said that he intended and told David that David and his four children would live at the Lidcombe property. The property had been rented. Contrary to the submissions of counsel for David, I do not think that there was any inconsistency in Joseph's evidence in this regard. Joseph anticipated that it would take 12 months for the immigration application to be approved. Renting the property in the meantime was not inconsistent with Joseph's stated intention that the property be available for David and his family to live in.
The sponsorship form asked whether the relatives being sponsored would live with the sponsor when they arrived in Australia. Joseph answered that question "No". That was accurate. It was not intended that David and his children live with Joseph and his family in their property in Keating Street. In answer to the question "What accommodation do you propose for your sponsored relatives?". Joseph answered "He will resides [sic] at 4 Short St Lidcombe NSW 2141 which is his inheritance from our father. See the will attached." In cross-examination Joseph accepted that the Department would rely upon the information contained in the sponsorship form and accepted that if he had thought that any part of the form was incorrect he would have informed the Department. He acknowledged that he believed the contents of the document to be true. David relies on this as an admission that Joseph was not the real owner of the property. Joseph justified the answer on the basis that he intended that David and his family would live at 4 Short Street.
Zhe Zheng died on 29 January 2010. David arrived in Sydney on the day his father died. He remained in Australia on a visitor's visa. He lived with Joseph and his family and returned to the United States every three months to satisfy the requirements of his visa.
Joseph deposed that on 4 March 2010 he and David had a conversation to the following effect whilst they were driving:
"[Joseph] said: 'I didn't think that Dad would pass away so quickly. Even Dad didn't think it would be so soon. Last November the blood tests showed that his sickness was stabilising. How can it worsen so quickly so soon? I still feel very sad about this.'
David said: 'Right now all we can do is accept the reality. Get through this sadness and move on.'
[Joseph] said: 'Dad's Will is only for your immigration application. The house is under your name, but it is really my house. When you finish your immigration application, you have to return it to me. How the property should be dealt with now and in the future should be decided by me. This point I must clarify with you so you are clear.'
David said: 'This house was bought by you. Of course it is yours. On this point I am very clear. There are no questions about it. Whatever requests you have about how to deal with this house, just tell me at any time and I will do as you request.'
[Joseph] said: 'All [the] money I transferred to you has been borrowed. At the end of last year St George increased my loan by $150,000.'
David said: 'This is money that you borrowed from the bank for me. In the future I will repay the principal and interest to you. Our neighbour in China Chen Bao Le said that I would have four sons and it came true. He also said that I will become a big business man.'
[Joseph] said: 'I wish you well. I will keep a record of the transfers. But right now we must increase our income and reduce our expenses. We must be careful with spending every day. Plus you must quickly find a job to prevent depleting all our assets.'
David said: 'Dad has passed away. The eldest brother becomes the father. I will listen to you and your arrangements.'
[Joseph] said: 'We must all suffer and endure together for a while and wait for the immigration to be approved.'"
David denied the conversation. He denied that he had acknowledged to Joseph that the Lidcombe property was Joseph's.
David deposed that soon after Zhe Zheng's death Joseph's eldest son, Andrew, said words over the dinner table to the effect that "Uncle, Grandpa has left that property to you", and that at no time did anyone say anything to contradict what Andrew had said. However, David on his own evidence knew of the terms of the will before he arrived in Australia. Andrew gave evidence, which I accept, that before about the middle of 2011 he was not aware that Zhe Zheng's will provided for the Lidcombe property to be left to David. He denied the conversation to which David deposed. I accept that denial.
I accept Joseph's evidence as to the substance of the conversation to which he deposed in so far as it concerned David's acknowledging that the Lidcombe property was Joseph's and that David would deal with the house as Joseph requested. I think that is in accordance with the objective probabilities, given that Joseph provided the moneys for the purchase of the property and was providing financial assistance to David. It is also consistent with what David said to the solicitor, Ms Qiu.
Joseph and David attended on Ms Qiu on 19 October 2010. David and Joseph signed a power of attorney whereby David appointed Joseph as his attorney to execute any documents for any application to be made pursuant to Zhe Zheng's will. Ms Qiu knew Joseph because Joseph sponsored a child whose visa was at risk and had brought the child to Ms Qiu's office for assistance in connection with migration issues. Ms Qiu deposed that on an earlier occasion Joseph had told her that he had bought a house under his father's name and a family lawyer whom his father used had drafted a will that provided for the property to be transferred to his brother, and that this was done to assist with his migration application. Ms Qiu deposed that during the conference with Joseph and David there was a conversation to the following effect:
"Kathy [Ms Qiu]: 'Your brother, Joseph, is a very good man. He took my client and help my client a lot by bring him to our office to sign papers.
[David]: 'Yes, my brother is a very nice man and he also help me a lot.'
Kathy: 'Our Chinese culture is different to Western culture. Is no way Aussie people will do what you guy do. Use your money and buy property and put father name and transfer to your brother.
[David] shook his head, smiled and said : 'No, I will not take my brother's property. My father wants us together and always want me to migrate to Australia to stay with my brother. I will give back the property to my brother. I have not intention to take the property from my brother.
Kathy: 'Yes. Chinese people do things like this. Australian people will not do thing like this. I guess this is our culture. Brother and sister helping each other as family member.
[David]: 'Yes. I know the property is my brother. I will not take it. Is my brother property. I know that. Only my father wants to help me.
[Joseph]: 'Don't worry. My brother will not do that. This what my father wants and this is what I am going to do. Solicitor Qiu don't worry. I want to do what my father want me to do. Help my brother to migrate to Australia. My brother is not that type of person. He knows is my house. My younger brother will not take my house.'
[David]: 'Yes it is my brother's house. I will give back to him. He is only helping me for migration.'"
Ms Qiu deposed that she made a filenote during the conference and annexed a copy of it. The filenote was of six pages. In her oral evidence Ms Qiu said that all six pages were written during the course of the conference. The first two pages are markedly different in style from the last four. The first two pages contain short notes of topics, e.g.:
"2. Publication
A. 14 days publication
b. $520,000 property
3. probate - supreme court
4. public - 30 days
Distribute Executor
�
Transmission
�
Transfer
�
Brother"
The last four pages of the filenote appear to record words as spoken by Joseph, David, and by Ms Qiu herself. These are in substantially the same terms as Ms Qiu's affidavit. The filenote reads:
"Joseph: My brother speak English He can read the Power of Authory [Attorney].
David: Yes I am in America many years, the power of attorney is for [easy] my brother to sign paper to help me.
Kathy: our Chinese culture is different to Western culture is no way Australian people will do what you guy do use your money and buy property and put father name and Transfer to your brother.
David shake his head and smile: No. I will not take my brother's property my father want us together and always want me to migrate to Australia to stay with my brother. I will give back the property to my brother. I have not intention to take the property from my brother.
K: Yes Chinese people do things like this. Australian people will not do thing like this. I guess this is our culture Brother and Sister helping each other as family member.
David: Yes. I know the property is my Brother. I will not take it. Is my Brother property I know that only my father wants to help me.
Joseph: don't worry my brother will not do that. This what my father wants and This is what I am going to do [Lawyer Qiu] don't worry. I want to do what my father want me to do help my Brother migrate to Australia. My brother is not that type person He knows is my house.
[My brother will not take my house].
David: [Yes]. Is my brother House. [I will return it to him. It's only to help me migrate.]
K: Well only [what] our Chinese family do things like this, How is America.
David: Good
K: Do you like Australia?
David: Yes my family here. I happ[y] to migrate here with my family."
In cross-examination Ms Qiu said that the reason that that part of the filenote was much more detailed than the earlier part of the filenote was that she was concerned about the matter and felt uncomfortable and so did her best to write down everything that was said.
Ms Qiu was challenged on her evidence that she made the filenote whilst Joseph and David were talking and also whilst she herself was talking. In giving evidence in the witness box Ms Qiu did not speak at a slow pace. Unless she could write very quickly it was difficult to accept that she could have made a filenote of what she was saying contemporaneously with her speaking. At the end of her evidence, at my suggestion, but with the consent of both parties, she was asked to make a filenote in an hypothetical scenario where counsel sought her advice and she provided advice in relation to a conveyancing transaction. The note she produced in that exercise was similar in character to the first two pages of her filenote of the meeting on 19 October 2010, but did not attempt to set out verbatim what counsel or she said.
I do not accept Ms Qiu's evidence that the last four pages of the filenote were made during the course of the meeting. It follows that Ms Qiu was either mistaken in her recollection as to exactly when the filenote was made, or she was lying. She had no motive to lie and the defendant, properly, did not suggest that she did lie. The question then is, when was the filenote made? It appears from the original of the filenote that all six pages of the filenote were made in a book and the original pages were torn out from the book with an uneven tear. It appears from the original pages that they were kept sequentially. The same uneven line was produced when the six pages were torn from the book.
Ms Qiu had no occasion to prepare the last four pages on any later occasion when she acted for Joseph on the obtaining of probate and lodging of the transmission application. Everything points to the filenote having been made immediately after the meeting. I accept the filenote as an accurate report of what was said at the meeting. Contrary to his denial, I conclude that David acknowledged that the Lidcombe property belonged to Joseph and he promised that he would not take it. David acknowledged that the reason the Lidcombe property was left to him in his father's will was to help him migrate to Australia, and he acknowledged that he would return the property to Joseph.
Both Ms Qiu and Joseph were cross-examined on an affidavit made by Joseph on 9 February 2011 on the application for probate of Zhe Zheng's will. The affidavit was in the prescribed form. It included a paragraph 12 in which Joseph deposed that he annexed a statement of all assets of the deceased of which he was presently aware. The annexure was an inventory of property and referred to the Lidcombe property under the heading "Property Owned Solely by Deceased". It was the only property of the deceased so described. It was put to both Joseph and Ms Qiu that if, as they contended, the property was not beneficially owned by Zhe Zheng, but by Joseph, that this statement would have been false. The affidavit was relied upon as an admission by Joseph that Zhe Zheng beneficially owned the Lidcombe property.
It may well be that the affidavit is capable of being construed as an admission to that effect, although the prescribed form of the affidavit distinguishes between property owned solely by the deceased and property jointly owned by the deceased, rather than between property owned beneficially by the deceased and property of which the deceased was trustee (see precedent Form 117 - Part 78 rule 10(1)(a)(iii), SCR Form 96). But it is clear that neither Joseph nor Ms Qiu considered this question when the affidavit was prepared and signed.
As I have said, I have reservations about Joseph's credibility, not least because he was prepared to defraud the revenue and to mislead the immigration authorities. Moreover, for reasons below, I do not accept parts of his evidence that the remittances that he made to David or for the benefit of David's family were made by way of loan rather than gift. As Mr Condon SC who appeared for David submitted, rejection of Joseph's credit on that issue affects his credit on all issues. Moreover, the cross-examination of Joseph showed that he could not recount in the witness box all of the detail to which he deposed in his affidavit. Further, his mode of expression when giving evidence orally was quite different from what appeared in his affidavit suggesting that his affidavit owed much to the work of the lawyer or lawyers who assisted in its preparation.
Nonetheless, the essence of Joseph's evidence is corroborated by Ms Qiu's evidence, and in particular by her filenote, which I accept as an accurate record of what was said by Joseph and David at the meeting on 19 October 2010. It also accords with the objective probabilities. Joseph did provide the money for the purchase of the Lidcombe property. It is entirely believable that Joseph put the property in his father's name in order to take advantage of the first home owner's grant and the stamp duty savings available to first home buyers. It is probable that Zhe Zheng would have informed David of these matters when Zhe Zheng decided that the property should be left in his will to David to assist with David's migration application. It is clear that the will was used for that purpose.
In October 2010, at the time of the conference with Ms Qiu, David would have been lacking all proper feeling if he had claimed beneficial ownership of the property following his father's death, particularly as he was then staying with Joseph and Joseph was providing financial assistance to his family.
There is no dispute that one of the two properties in China that, by his will, Zhe Zheng left to Joseph, was transferred to David, which is consistent with the secret trust to which Joseph deposed, and which in turn is consistent with Zhe Zheng's acknowledging that the Lidcombe property was beneficially owned by Joseph. I do not accept David's evidence that the reason one of the properties in China was transferred to him was because this was required by Chinese succession law. There was no expert evidence to that effect. David did not give such evidence in his affidavits. Had he done so, the evidence could have been checked.
Joseph collected the rents on the Lidcombe property. He did not declare the rental income in his tax return as his income. However, I do not think that that omission is of particular relevance to the present issues. Whilst Joseph was generous to his father and brother and had strong family loyalty, he was perfectly willing to deceive the government and defraud the revenue.
David made no claim to the rents of the Lidcombe property before filing his cross-claim, even though he was in financial difficulties and was accepting Joseph's remittances that were either loans or gifts. Had David believed that he was the beneficial owner of the Lidcombe property he could be expected to have asked for the rents to be remitted rather than accepting gifts from his brother (on his case), or borrowing from his brother (on Joseph's case). David sought to explain his failure to ask for rental income of the Lidcombe property by saying that he and Joseph had agreed that Joseph would hand over the rents, net of expenses, once David's immigration application was successful. I do not accept that evidence. In any event, it does not explain why David made no claim to the net rental income over an unexpectedly long period of delay in David's immigration application being processed when David was under financial pressure.
David also relied upon a loan application that was apparently prepared for Joseph in about February 2015. The application was referred by the bank to its credit department for assessment on 23 February 2015. Joseph did not include the Lidcombe property as one of his assets. In cross-examination, he admitted that at this time he considered he was the true owner of that property. One of the reasons he gave for not disclosing the Lidcombe property as an asset in the application to the bank was that he was told by a broker not to disclose the property as it was not in his name. He could not recall who was the broker who so advised him. However, there was nothing at all improbable about such advice. It is unlikely that the bank would have placed any reliance upon the Lidcombe property, if offered as security, when it was not registered in Joseph's name.
I do not consider that the loan application is significant in determining Joseph's intentions as to the beneficial ownership of the property.
Probate of Zhe Zheng's will was granted on 21 February 2011. A transmission application and a transfer from Joseph to David were lodged for registration with the Land Titles Office. Shortly thereafter, David became registered proprietor of that property.
Joseph did not expressly depose that he would not have arranged for David to become registered as proprietor of the Lidcombe property if David had not given his assurance that he would deal with the property as Joseph requested. Such evidence would have been admissible (Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (No. 5) (1996) 64 FCR 73), but such self-serving evidence is often of little weight. It is not always necessary for such evidence to be led for a finding of reliance to be made (Dominelli Ford (Hurstville) Pty Ltd v Karmot Auto Spares Pty Ltd (1992) 38 FCR 471 at 481; Priestley v Priestley [2016] NSWSC 1096 at [140]). I am satisfied that Joseph did act in reliance upon David's assurances that he would give the property back to Joseph, that he had no intention of taking it from him, and his earlier assurance made directly to Joseph that he would deal with the property as Joseph requested.
An inference of such reliance could be drawn without direct evidence (Gould v Vaggelas (1985) 157 CLR 215 at 236; [1985] HCA 75). But there is clear direct evidence of reliance. On 2 February 2011, when Joseph instructed Ms Qiu to obtain probate for his father's will, she advised him that she did not think that transferring the property to David was a good idea in case he changed his mind and Joseph lost the property. Joseph told Ms Qiu not to worry about that and that his brother would transfer the property back to him. Ms Qiu made a filenote of that conference and I am satisfied that it accurately records her advice, and Joseph's rejection of it, in reliance upon his assessment that his brother would transfer the property back to him.
I am satisfied that but for the assurances given by David, Joseph would have asserted his beneficial interest in the Lidcombe property and not arranged for it to be transferred to David. (Priestley v Priestley at [119]-[137]; A Silink, "Causation in Equitable Estoppel" (2016) 43 (3) Aust Bar Rev 320).
Relations between the brothers deteriorated from the end of September 2014 when Joseph told David in a phone call that he could not afford to pay money to David to support his going into business on his own account, and was unwilling to borrow more money on his mortgage. He said that he could only support David's family's basic needs. David hung up. This conversation took place when Joseph made what was to be his last remittance to David of US$3,975. On 2 October 2014, Joseph wrote to David saying that David had to be self-reliant and start supporting himself financially. There appears to have been no communication between them until 26 April 2015. On 26 April 2015 David sent a long email to Joseph recording old grievances. David wrote:
"You claim 'Every cent of the money I sent is for the children. Do not misuse it.' So, 'Every cent of the money I sent' belongs to you? If that was the case, apart from thanking you on behalf of the children, I want to point this out: You have obliterated the contribution I made in Australia all these years altogether - unless you believe every cent of yours can be used as two cents - it was money for me as well as for the children!"
David appears there to be asserting that the payments that Joseph made were intended for his benefit as well as for his family's benefit, and were in the nature of a quid pro quo for work that David did for Joseph's company when David was living with Joseph from 2010. David concluded the email by asserting, for the first time, that he owned the Lidcombe property according to their father's will. This was the first time David made that assertion. He said:
"This property is being used by you right now. As I will travel to Australia for business activities every now and then, I find it necessary to take it back for my own use or rent part of it out. I hereby inform you that I, or a person authorised by me, hope to meet you on 9th of May at a time suitable for both sides to hand over and deal with relevant issues regarding this property. Please make preparation for it."
Both brothers in their correspondence professed fine sentiments. David concluded his email by assuring Joseph that he wrote "with as much a calm mind as possible and with my hand on my heart." He implored Joseph to read the email carefully in the same manner "as with a hand on your heart", and added:
"I hope against all hopes that this letter will help you be more objective, but I don't rule out the possibility of you becoming more subjective, which will lead to an all-out showdown between us. I am putting the choice in your hands."
Joseph was susceptible to such an appeal and threat. His actions demonstrated his loyalty to family and his desire to honour his father's wishes, and his own, to have good fraternal relations with David. Joseph responded to David's email of 26 April 2015 on 29 April 2015 saying:
"1. I am an ordinary person. Everyone makes mistake, and I beg for your forgiveness!
2. what has been given to you is yours. You completely decide when, where to handover and how to use it."
David responded on 1 May 2015 without any thanks, but in the following terms:
"You and I are both ordinary people, and we all make mistakes. The fact that we have realized that is an extraordinary turning point. May we encourage each other in our endeavour and with best respect!"
David arrived in Sydney on 7 or 8 May 2015. On 10 May 2015 he told Joseph that he had come back to Australia in order to take the Lidcombe property according to the will. Joseph told David that that provision was made to help David's immigration application. The immigration application had still not been finalised by May 2015. As noted above at [8], on 10 April 2014 the Department of Immigration and Border Protection had advised David that his application which included his four children had been assessed as meeting the core criteria for the grant of a Remaining Relative visa and had been placed in a queue. The Department advised that the application would progress to final processing when a place became available in the migration program and could be released from the queue. The Department advised that the placing of the application in the queue was not a guarantee that the visa would be granted and he would still need to continue to satisfy the core criteria for the visa at the time a decision was to be made on the application.
On 11 May 2015 David demanded that Joseph hand over the certificate of title. Joseph did so. He said that he feared that David would involve the police or turn up at his place of work and cause a scene, or go to his house and cause a scene, or possibly become violent. He was tired from lack of sleep and was worried about the issue. I accept that evidence. Joseph gave every appearance of a man governed by his emotions, unlike David who appeared reserved and self-assured. Whilst Joseph's email of 29 April 2015 was inconsistent with his claim to be the beneficial owner of the Lidcombe property, and his act in handing over the certificate of title arguably so (although as legal owner David was entitled to the certificate of title), I am satisfied that the explanation for that conduct was Joseph's desire to have good relations with his brother and his unwillingness to confront his brother. David showed no such unwillingness, but Joseph did.
[5]
Gift or Loan?
In March, August, November and December 2010 Joseph transferred $30,028, $11,718.44, $10,280.30 and $5,050, or their US dollar equivalents, to David's account in the United States. In 2011 he made eight similar payments ranging between $5,456.20 and $19,448.60 to David's account in the United States. In 2012, he made four payments ranging between $9,977 and $20,000, and in 2013 he made three payments of $10,019.80, $19,258.90 and $10,020. In 2014, he made three payments of approximately $10,000-$11,000, and on 29 September 2014 he made a final payment of $4,607 (US$3,975).
It was common ground that Joseph bore the onus of establishing that the moneys advanced were a loan and not a gift. As noted above at [43], Joseph deposed to a conversation with David in which David promised to repay with interest the amounts that Joseph had borrowed in order to transfer funds to David. There was no corroboration of that evidence.
Joseph deposed that in about January and February 2010 he had various conversations with David about David's financial situation. He deposed that in one of those conversations David said words to the following effect:
"I have been without work for a long time now. I still need to make mortgage repayment, pay for health insurance and all other living costs. A Lei is looking after the kids and the divorce agreement says that I have full financial responsibility for them. I don't have any income or savings at the moment to support them. My situation is very difficult and I need help."
Joseph deposed that he replied with words to the effect:
"I understand. I also don't have any work at the moment after losing the business contract but I will take money from my overdraft account and lend it to you for emergency use",
and that David replied:
"Thank you. Blood is thicker than water."
David denied the conversation.
The first transfer of funds which is the subject of Joseph's claim for repayment as a loan was a transfer of $30,000 (plus $28 in fees) on 3 March 2010. Joseph provided information to the Commonwealth Bank for the completion of the form for the international money transfer. The relevant form included a box, the completion of which was optional, entitled "Details of Payment - Optional …". On information provided by Joseph that box was filled in. The payment was described as a gift.
A later transfer made through the St George Bank on 18 December 2012 signed by Joseph also described the purpose of the transfer as being a gift.
When asked about these documents Joseph at times gave unresponsive answers. At one point in his cross-examination he accepted that the reason he told the bank officer that the transfer was a gift was because that reflected his understanding of the transaction. That concession was made after some prevarication in which Joseph said that he never thought about the matter, and that whether it was a loan or a gift was very complicated, and he never thought about the difference. When asked about the St George Bank document of December 2012 Joseph said he did not pay attention and never thought about whether it was a gift or a loan, and if David received the money, he was happy.
Counsel for Joseph referred to various expressions of gratitude from David to Joseph in email correspondence between August 2012 and October 2014. However, David's correspondence is consistent with his regarding the payments as having been made to him by way of gift rather than loan. In none of his correspondence does David express any intention of making repayments.
In the face of contradictory contemporaneous documents and in the absence of corroboration, I do not accept Joseph's evidence that his payments to David were loans rather than gifts. That is also consistent with the objective probabilities that point to Joseph's willingness to help David.
[6]
Conclusions
For these reasons I conclude that:
1. Joseph has not established that the payments made to David were by way of loan rather than gift;
2. the presumption that Zhe Zheng held the Lidcombe property on a resulting trust for Joseph has not been rebutted; and
3. Joseph arranged for the Lidcombe property to be registered in David's name in reliance upon David's representation to him that he acknowledged that Joseph was the true owner of the property, that he would not take the property from Joseph and that he would deal with the property as Joseph requested.
These conclusions dictate the outcome of the proceedings. David pleaded that any trust that arose between Joseph and Zhe Zheng should not be given effect to because on Joseph's case they engaged in a scheme to defraud the revenue and in a way to defeat the purpose of the First Home Owner Grant Act 2000 (NSW) and the relevant provisions of the Duties Act. However, understandably, no submissions were made in support of that defence. I accept the plaintiff's submissions that there was nothing in the scope and purpose of the First Home Owner Grant Act nor the Duties Act that required as a matter of policy that Joseph, who paid the purchase price, be denied his interest in the property. The present case is analogous to Nelson v Nelson (1995) 184 CLR 538; [1995] HCA 25. Joseph has met what would otherwise be an objection to his asserting his equitable interest under a resulting trust by having paid the stamp duty that was avoided and having repaid the First Home Owner Grant and First Home Owner Boost. He has frankly disclosed his conduct to the tax authorities and submits to any penalty or interest that might be charged. In these circumstances unconditional relief can be granted (Carantinos v Magafas [2008] NSWCA 304 at [62]).
The presumption of resulting trust (Calverley v Green (1984) 155 CLR 242; [1984] HCA 81) has not been rebutted. David submitted that this was a case in which the parties relied upon family ties of mutual trust and affection, but I accept Joseph's evidence that Zhe Zheng acknowledged that Joseph was the true owner of the property, just as I accept Joseph's evidence that David made the same acknowledgment.
The absence of writing is not a defence to the claim of a resulting trust (Conveyancing Act, s 23C(2)).
The conclusion that Zhe Zheng held the Lidcombe property on trust for Joseph is not sufficient to deny David's indefeasible title to the property arising from his registration as proprietor (Real Property Act 1900 (NSW), s 42). Joseph pleaded the fraud exception to indefeasibility under s 42 of the Real Property Act on the basis that David had dishonestly repudiated and continued to repudiate Joseph's beneficial interest in the Lidcombe property. For the reasons I gave in Ryan v Starr [2005] NSWSC 170; (2005) 12 BPR 22,803 at [81]-[83], I prefer the view that fraud for the purposes of s 42 of the Real Property Act requires a fraud to be committed in the act of acquiring a registered title. In this case Joseph, against his solicitor's advice, arranged for David to become registered as the owner of the Lidcombe property. In Sze Tu v Lowe (2014) 89 NSWLR 317; [2014] NSWCA 462 at [244] Gleeson JA, with whom Meagher and Barrett JJA agreed, left open the question whether the denial by a registered proprietor of a claim that the registered proprietor had acknowledged before registration, that involved a dishonest repudiation of a prior interest, could amount to fraud for the purposes of s 42. In my view the question is appropriately dealt with not on the basis of the fraud exception under s 42, but on the principle that s 42 does not exclude rights arising in personam between the registered proprietor and a person claiming a prior interest. Although no in personam claim based on principles of equitable estoppel was pleaded, counsel for David, properly, disclaimed the pleading point.
It follows from my conclusion that David represented to Joseph that he acknowledged Joseph as the true owner of the Lidcombe property, that he would not take the property from Joseph and that he would deal with the property as Joseph requested, and from my finding that Joseph relied upon those representations in arranging for David to be registered as proprietor of the Lidcombe property, that David is estopped from denying the truth of his representation that Joseph was the true owner of the property and from departing from his representations that he would not take the property from Joseph, but would deal with it as Joseph requested. It is unconscionable for David to deny the assumptions he induced Joseph to adopt and no lesser relief then holding David to the assumptions he induced Joseph to adopt is required to ensure his conscientious conduct (Giumelli v Giumelli (1999) 196 CLR 101 at [42], [50]; [1999] HCA 10). Joseph's personal equity outflanks David's reliance on s 42 of the Real Property Act.
[7]
Declarations and Orders
For these reasons I conclude that Joseph is entitled to the relief he claims in respect of the Lidcombe property, but is not entitled to recover the payments made to David that he claimed were made by way of loan. I make the following declaration and orders:
1. Declare that the defendant holds the property situated at 4 Short Street, Lidcombe (being folio identifier 7/1105420) ("the Property") on trust for the plaintiff.
2. Order that within 28 days the defendant do all that is necessary on his part to cause the plaintiff to be in a position to become registered proprietor of the Property, including by executing a Memorandum of Transfer of the Property in registrable form from the defendant to the plaintiff and delivering to the plaintiff the certificate of title to the Property.
3. Grant liberty to apply to the duty judge on three days' notice for any further order that may be required for the implementation of these orders, including if the defendant fails to comply with order 2.
4. Order that the plaintiff's claims for relief in paras 7 and 8 of the Amended Statement of Claim under the heading "Final Relief" be dismissed.
5. Order that the cross-claim be dismissed.
I will hear the parties on costs.
[8]
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Decision last updated: 27 April 2017