LI v DENG [2010] NSWCA 266 | Case summary

A daughter brought proceedings against her mother to enforce an equitable interest in the family home based on a resulting trust, a constructive trust, or a proprietary estoppel. The case depended on disputed oral evidence and the trial Judge rejected the daughter's evidence that she had given her mother two amounts of $72,000 and $5,000. He relied on these findings when rejecting the daughter's evidence of significant conversations with her mother. On appeal: HELD the Judge's fact-finding about the payments was flawed and there had to be a new trial.

Thursday 14 October 2010 LI v DENG Judgment 1 HODGSON JA: I agree with the orders proposed by Handley AJA and with his reasons. 2 As pointed out by Handley AJA, the daughter's banking records showed only a small balance in March 1997, when (according to the daughter's evidence) she gave her mother $5,000. However, those records show withdrawals, including withdrawals of $1,700 and $2,400 on 3 December 1996 and 5 December 1996, $400 and $500 on 21 January 1997 and 24 January 1997, and $1,000 on 11 February 1997; and the question whether or not some or all of these amounts were retained in cash by the daughter was not explored in evidence. 3 The passage of cross-examination relied on by the primary judge to assert that the daughter conceded that, apart from the money given to her mother in 1994, she had no savings in March 1997 could possibly be understood in that way, but it certainly did not amount to a clear admission to that effect; and as pointed out by Handley AJA, during final submissions the primary judge indicated that he did not understand it in that way, and the mother's counsel accepted this. In those circumstances, in my opinion there was a significant denial of procedural fairness by the primary judge in treating the daughter as having made the admission in question, and using that as a material step in his fact finding. 4 It is common ground that the mother and daughter flew back to Australia from Hong Kong, leaving Hong Kong on 27 December 1996. This was a Friday. It was also common ground that on the following Monday, 30 December 1996, a little under $300,000 in US currency was taken to the Commonwealth Bank to be deposited there. On the mother's evidence, US$190,000 of this was obtained from some unspecified bank account in Australia, possibly with the State Bank. As pointed out by Handley AJA, this is glaringly improbable. There is a possibility that the Australian equivalent of US$190,000 could have been transferred from another account at the Commonwealth Bank; but that would be inconsistent with the mother's evidence that the money was taken to the Bank in US currency, and the mother's evidence about another bank account was vague in the extreme. 5 In my opinion the significant errors in the primary judge's reasons for preferring the evidence of the mother to that of the daughter mean that there must be a new trial. 6 MACFARLAN JA: I agree with the judgment of Handley AJA and also with the additional observations of Hodgson JA. 7 HANDLEY AJA: This appeal involves a claim by the appellant, the daughter of the respondent, to equitable interests in 92 Boundary Street Roseville, a residential property owned by her mother as registered proprietor. The daughter had alternative claims under a resulting trust based on her contributions to the purchase price, under a constructive trust based on a joint venture for the purchase and development of 90-92 Boundary Street Roseville, and under a proprietary estoppel. 8 The claims were based on disputed conversations between the daughter and her mother from 1994 onwards and were not based on documents, or corroborated by independent evidence. However many of the background facts were not in dispute, or were proved by documentary evidence. Gzell J rejected the daughter's evidence, accepted that given by the mother and dismissed the action. 9 The appellant faced a daunting task in seeking to challenge the Judge's credit based findings about disputed oral evidence. Mr Gunning, who appeared for the daughter, did not ask this Court to substitute positive findings in her favour but relied on errors in the Judge's fact finding to establish a case for a new trial. 10 In 1990 the daughter came to Australia from China on a Student Visa to learn English. In 1993 she commenced a Masters Degree in Fine Arts at the University of New South Wales. In October 1994 she visited her parents in China on her way to Tibet where she planned to study the local performing arts. She said she took $A72,000 with her in currency notes and left them with her mother for safekeeping. 11 The daughter claimed that this amount represented the balance of her savings of $80,000 since arriving in Australia. Her sources of income were said to include the sale of portraits, the repair of the stone lions in China Town, her wages as a kitchen hand, scholarships, student allowances and her earnings as a call girl and babysitter. She had an account with St George Bank but kept her savings in her flat. 12 The daughter said she told her mother that $A72,000 represented her savings and they could use the money to help buy a house in Australia together. Her mother said that she would keep the money and return it if they did not buy a house. The mother denied receiving $A72,000 from the daughter and denied the conversation. The daughter's evidence about her savings, the handing over of the $A72,000, and the conversation was not corroborated. 13 In July 1995 the mother visited the daughter in Sydney. They went to the State Bank at Chatswood where the mother converted $US60,000 she had brought with her to Australian currency and invested $A51,860 in two term deposits in her name (1/201-2). The certificates of deposit produced by the daughter are in evidence. The daughter said that the funds were later used for the deposit on 90-92 Boundary St (the property) (1/14 (44)). 14 The daughter earned $4800 for a sculptural study for the Darling Harbour Authority (DHA) which was paid into her account with St George Bank in October and November 1996. The bank statements are in evidence. In December she went to China to meet her parents and bring her mother, who by then had a migration visa, to Australia. 15 The daughter said that she and her mother counted out $US270,000 in currency notes that her mother had taken from the safe in her home. The mother was to take $US135,000 to Australia in a money belt and she asked the daughter to take the other $US135,000 in her money belt. The daughter said that she asked about her $A72,000 and her mother said that she had exchanged it at a good rate for US dollars and the proceeds were in the money they were counting. The mother denied any conversation about $A72,000. 16 The daughter said that she made two trips from mainland China to Hong Kong taking $US135,000 each time which she lodged in a bank safe deposit box. She produced a letter from the Hong Kong Shanghai Bank, Queen's Road Central, H-K, stating that the daughter had a safe deposit box with the bank between 23 and 27 December 1996 (blue 1/38). The daughter said she and her mother collected the money before they left Hong Kong on Friday 27 December 1996. They arrived in Sydney the next day. These dates are verified by the mother's passport which is in evidence. 17 On Monday 30 December the mother and daughter went to the Commonwealth Bank at Neutral Bay Junction (the Commonwealth Bank) where the mother deposited US currency and invested $A350,000 in a fixed deposit maturing on 30 March 1997. The certificate of deposit produced by the daughter is in evidence (blue 1/39, 2/369). 18 The mother denied counting out $US270,000 in currency notes with her daughter, denied arranging for her daughter to bring $US135,000 to Australia, denied sending her daughter to leave the money in a bank safe deposit in Hong Kong and denied collecting the money in Hong Kong before leaving for Australia. According to the mother they each brought in $US50,000 and the currency was declared to Customs on arrival. The Customs declarations were not in evidence. 19 The daughter said that when they were at the Commonwealth Bank she asked her mother to put the term deposit in both their names. The mother said that the money should be in her name to save any problems with Patrick Warner. The daughter married Patrick in November 1990, but although they separated in 1992, they were not divorced. The mother denied this conversation. 20 The mother gave different explanations for the source of the additional $US190,000 she said was used to acquire the term deposit of $A350,000. The amount referred to by the daughter was $US270,000. The explanations and her cross-examination will be reviewed later. 21 The daughter said that in March 1997 she inspected the property with her mother and told her it would be suitable. They could borrow the balance of the funds, subdivide and sell-off 90, and build a dual occupancy house on 92 which could be sold at a profit. Her mother asked who would do all the work and the daughter said that she would do it but would like half the profits. 22 The mother denied this conversation. She claimed that she discovered the property and decided to bid at the auction. She calculated that if she could buy it for $450,000 or less she could use the fixed deposit with the Commonwealth Bank and borrow the balance. The mother could not speak or understand English but her ability to discover that the property was for sale, inspect it, and assess its development potential without the daughter's assistance was not explored. 23 The daughter said that in the course of discussing finance with her mother the latter said that money was tight and she did not have any more. The daughter said that she had $5,000 which she later gave to her mother. Her mother asked the daughter to go ahead with the purchase and make the best profit she could and the daughter would get half. The mother denied receiving $5,000 and denied the conversations. 24 On 11 March 1997 the property was purchased by the mother for $A443,000 at auction. There was a dispute about what happened, but the mother was present and signed the contract. She borrowed $100,000 on mortgage to complete the purchase. 25 The daughter's claim to have given $5,000 to her mother at this time was not corroborated. She said that she used the money from the DHA and the RTA. The $4800 from the former was paid into her account in October and November 1996 but had been drawn out before 1 January 1997 when her credit balance was $5.60 (2/338). 26 The $4000 from the RTA was paid into her account in January but was also drawn out and on 1 March her credit balance was only $267.93 (2/338). There was no withdrawal of $5,000 or any substantial amount at or about the time of the conversation alleged. 27 The daughter said that her mother changed her mind and decided to live in Australia and build a family home on 92. The mother asked the daughter to arrange and manage the development and the building work. The profit would go into the new home and the daughter would be a half owner. 28 According to the daughter her mother said that the property should be in her name because the daughter's marriage "was not stable". She said that when she and her husband passed away the whole house would be the daughter's under "Chinese tradition". 29 The daughter asked her mother to write this arrangement down just in case anything happened. The mother said that she would not write these things down because that was like writing a will which was a curse. The daughter was the only member of the family in Australia and there was no point of writing it down. The mother denied this conversation. 30 The following findings about the history of the development were not challenged. 31 After the purchase was settled in April 1997 the mother and daughter moved in. 32 In June 1998 development approval was obtained for a resubdivision to create a vacant battleaxe block at the rear of the property. The mother decided to return to China and authorised her daughter to operate on her account at the Commonwealth Bank. 33 In August 1998 development consent was granted for the construction of the house on 92. On 9 September 1998 the mother executed a power of attorney in favour of the daughter who was visiting her mother in China. The daughter again asked for their arrangement to be written down because she didn't not want any trouble if her brother came to Australia. The mother refused. Her father supported her mother saying that they could be trusted and there was no need to write down the arrangement. The mother denied the conversation. 34 In February 1999 the sale of 90 was completed and the mortgage was discharged. In April building approval was granted for 92, and the parents paid a short visit to Australia. In May the daughter, acting under her power of attorney, signed a building contract in her mother's name for the construction of the new house. 35 In September that year the daughter left for California to take up a three-year scholarship having arranged for Mr Warner to oversee the building work while she was away. She and her mother returned to Sydney in October and December to check on progress. 36 In June 2001 the daughter returned to Sydney having completed her Masters Degree in Fine Arts in California. The house was completed that month, the final inspection certificate obtained, and the keys handed over. The daughter then returned to the United States. 37 In April 2002 the parents migrated to Australia and took up residence in the house and the daughter returned and joined Mr Warner in the ground floor. 38 The Judge rejected [61] the daughter's evidence (1/14 (42)) that the $5,000 came from the moneys received from the DHA and the RTA. This finding is supported by the daughter's banking records but there is a problem about her supposed concession relied on by the Judge that she had no savings in March 1997. She said in cross-examination (black 23): "Q. I am suggesting to you in March of 1997 you did not have $5,000 in cash, do you agree with that? A. No." 39 Later (black 34) she said: "Q. In 1997 you had no savings whatsoever, did you? A. I had a saving with Mum since 1994 and Mum come to Australia live with me rest of her life. This only between us, this no my brother. Q. Ms Li, other than what you say you gave your mother, the true position is in March of 1997 you had no savings whatsoever, did you? A. Yes, you're right. Q. And the true position is that - A. The savings all with my mother, sorry as savings with my mother. I gave to my mother." 40 This evidence does not support the Judge's finding [60] that the daughter conceded that apart from the money she had given her mother previously she had no savings in March 1997. Moreover the following exchange occurred during the final address of Senior Counsel for the mother (black 113): "… I'm sure there is a statement when she accepted she had no savings … The reference I had in mind is at transcript 34 line 20. I put to the plaintiff: 'Ms Li, other than what you say you gave your mother, the true position is that in March of 1997 you had no savings whatsoever, did you? A. Yes, you are right." His Honour: But that is other than the 5000 Counsel: Yes, I thought there was another one. May be I am wrong. If that is what I had in mind, and on reflection it is, I now see it does not have the force. But I accept there is no clear admission, but the objective evidence points to that conclusion." 41 Thus contrary to his firm view during final address, and the concession by Senior Counsel for the mother, the Judge reached the opposite conclusion in his final judgment [60] but did not explain why he had changed his mind. In my opinion, with respect, the Judge misunderstood the daughter's evidence on this not unimportant point. 42 The Judge relied on his findings about the alleged payment of the $5,000 in making his finding about the $72,000. He said [52]: "It was submitted that [the mother] accepted in cross-examination that more than $US100,000 was brought into Australia and that I should accept [the daughter's] evidence in preference to that of [the mother]. This submission was based upon [the mother's statement in cross-examination that she took $US290,000 to the Commonwealth Bank for conversion. But [the mother] was not moved in cross-examination from her continued statement that it was $US100,000 in cash that she brought into Australia and declared on arrival. Her evidence is consistent with her utilisation of $US190,000 in a bank account in Australia and $US100,000 in cash taken to the Commonwealth Bank for conversion and investment in the term deposit." 43 He said later [61]: "I reject [the daughter's] evidence that she gave her mother the $5,000. That puts in doubt her evidence of the alleged payment of $72,000 to her mother. Having accepted [the mother's] denial of the receipt of $5,000 from her daughter, I also accept [the mother's] evidence that she did not receive $72,000 from her daughter." 44 He concluded [63]: "I prefer the evidence of [the mother] to that of [the daughter] with respect to the conversations [the daughter] alleged she had with her mother." 45 The daughter's evidence about the $US270,000, how it was brought to Australia, and what happened at the Commonwealth Bank was in her affidavit of 27 January 2009 (1/9 (31) - 11(36)). She said that she and her mother went to the bank and exchanged $US270,000 for Australian currency and arranged the term deposit. 46 The mother said that she took $US290,000 to the bank which included the $US100,000 they had just brought in. Her first explanation for the availability of the additional $US190,000, was in her affidavit of 8 March 2009 (1/144 (58) - 145 (61)). She said they brought in $US100,000, and that "in preparation for my move to Sydney I transferred on or about 26 December $US190,000 from a bank in Shenzen into the Streamlined Account [with the Commonwealth Bank] that I opened during my visit to Australia the previous year." She previously referred to the opening of this account (1/141 (46)). 47 She said that on 27 December 1996 she and her daughter travelled by bus to Hong Kong and, after passing border control, they changed buses and went straight to the airport where they remained until they boarded their flight. 48 She said she went to the Commonwealth Bank on 30 December "to exchange the United States dollars that I brought with me to the Bank on this occasion" and used that money and the money in the Streamlined Account for the term deposit. 49 In an affidavit in reply of 4 June 2009 the daughter said (1/117 (17)) that the mother did not open the Streamlined Account at the Commonwealth Bank during her visit in 1995, but in 1997. 50 In a further affidavit of 17 July 2009 (2/278(8))the mother said: "I refer to paragraph 17 of the [daughters] reply affidavit. After reading [this] affidavit and on reflection I do not now believe that I opened the Streamlined Account during my first visit to Australia. I now believe I was mistaken in that. I believe it was opened sometime after I migrated to Australia, but I do not now recall when. However I did transfer the money as I have set out in paragraph 58 of my earlier affidavit. I opened two term deposits with the State Bank in my first visit to Australia and I now believe that the money was transferred into another account, possibly with the State Bank, but I do not now recall the details of that transfer because I do not have any documents or records concerning it." 51 In cross-examination the mother said that she put the money she had "left" or "the balance" into two bank accounts (Black 66, 67) with the State Bank (67, 71, 73). She said (73) that the only accounts she opened in Australia in July and August 1995 were the two term deposits with the State Bank (73). She then said that "later on", before she left Australia, she opened a savings account with the State Bank (73). She could not recall how much she deposited, but it was "just a little", "a few hundred" (73). This account, if it existed, could not be the source of the $US190,000 52 There are problems with this evidence. The term deposits were opened with the State Bank at Chatswood on 17 and 20 July 1995 (1/201). The mother referred to them in her first affidavit (1/141 (45)) but said nothing then about opening any other account during that visit. She returned to China on 12 August 1995 and did not come to Sydney again until December 1996. There is no documentary evidence that she had a third account in Sydney in December 1996. 53 The mother said nothing about going to Chatswood or anywhere else on 30 December 1996 to collect $US190,000 or to arrange for its transfer to the Commonwealth Bank. The Bank was subpoenaed to produce its records relating to the term deposit of $350,000 but, understandably after the lapse of time, nothing was produced. 54 The Court is entitled to view with some scepticism any evidence that $US190,000 could be collected in notes at a suburban branch of any Bank, or that the mother could have had a US dollar account at such a branch. 55 The mother said in cross examination that the daughter helped her count out the $100,000 (black 76), that she brought $US50,000 to Australia in her handbag, that "each of us bring $50,000" (black 78) and "we declare" (Black 79). She also said that she "brought" $290,000 in US currency to the bank, that "I took all my money to that bank" (Black 80), "$290,000" (Black 80 - 81). She said nothing in her oral evidence about a transfer from another bank in Sydney and nothing about going to another bank to collect US currency. 56 The mother's evidence that she took $290,000 to the Commonwealth Bank is of considerable importance because she had previously given different explanations for that deposit which involved a bank transfer from China. She had withdrawn her first explanation, and the probabilities and her evidence in cross-examination are destructive of the second. 57 The mother's evidence about the $290,000 in US currency substantially corroborates the daughter's evidence about the $US270,000. The daughter also explains how the mother came to have such an amount but the mother does not. 58 It is not clear that the Judge was assisted with submissions to this effect in final address, but the evidence is there, and the daughter is entitled to rely on it. 59 In the light of the other evidence the Judge's statement that the mother "was not moved in cross-examination from her continued statement that it was $US100,000 in cash that she brought in" [52] does not support his acceptance of her evidence on these issues. 60 Moreover the Judge's finding [52] that the mother's evidence was "consistent with her utilisation of $US190,000 in a bank account in Australia" is contrary to her evidence in cross-examination that she took $US290,000 in currency to the Commonwealth Bank and encounters the other difficulties referred to. 61 The Judge did not refer to the conflict between the mother and the daughter about the deposit of US currency in a safe deposit box in a bank in Hong Kong and their visit to that bank on 27 December 1996 to collect the money before they went to the airport. 62 The daughter's evidence was corroborated by the Bank's letter (1/38) which stated that she had a safe deposit box in Hong Kong between 23 and 27 December. The evidence does not reveal any other reason why the daughter would need a safe deposit box, or how, on the mother's evidence, the daughter could have closed the safe deposit on 27 December. The Judge did not refer to this evidence or its implications. 63 The Judge's findings about the sources of the funds used for the term deposit on 30 December 1996 and the reasoning behind those findings are inconsistent with the mother's own evidence in cross-examination that she "took" $US290,000 to the Commonwealth Bank. Her evidence about the source of the other $US190,000 is also glaringly improbable. 64 The Judge did not base his findings simply on the demeanour of the witnesses. His ultimate finding about the $5,000 was based, in part, on a supposed admission by the daughter in cross-examination that is not supported by the transcript. 65 His finding about the $72,000 was based on his finding about the $5,000, and on evidence by the mother of the source of the funds taken to the Commonwealth Bank on 30 December 1996 which was glaringly improbable and inconsistent with other evidence she had given. 66 The cumulative effect of these errors is such that the Judge's findings about the $5,000 and the $72,000 and his reasoning which led to these findings cannot stand and this Court must intervene: Fox v Percy [2003] HCA 22, 214 CLR 118. It is not necessary to consider whether this Court would be justified in substituting findings in favour of the daughter about these payments. Such findings, without more, would not entitle the daughter to an interest under a resulting trust, let alone an interest under a constructive trust or proprietary estoppel. 67 Before she could obtain equitable relief on any of these grounds the daughter would need further findings of fact based on her disputed and largely uncorroborated oral evidence about conversations with her mother. The background facts about her involvement in the acquisition and development of the property are equivocal since they may be explained by the family relationship. 68 The Judge based his rejection of the daughter's evidence about those conversations on his rejection of her evidence about the two payments. The necessary findings about the disputed conversations can only be made, if at all, following a new trial where the fact-finding will not be affected by the errors identified in the Judge's reasoning. 69 In my judgment therefore the appeal should be allowed and the following orders made:

LI v DENG

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Judgment (19 paragraphs)

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