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[2023] ACTSC 163
Supreme Court of the ACT
2023-06-30
McWilliam J
Original judgment source is linked above.
Source: the ACT Courts (www.courts.act.gov.au). Converted to plain text by ZoeLaw. Not the official version.
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: Tong v Tong Citation: [2023] ACTSC 163 Hearing Date: 28, 29 November 2022, 1 December 2022, 2 February 2023 Decision Date: 30 June 2023 Before: McWilliam J Decision: (1) The Court declares the property located in [address anonymised] Richardson in the Australian Capital Territory is held on trust as to 50% for the fifth plaintiff and the remaining 50% for the first to fourth plaintiffs in equal shares. (2) The gift of $360,000 to the second defendant is set aside, and the second defendant is to pay to the Estate of the late Quoc Khai Tong (Estate) the said amount within 28 days of the making of this order. (3) Family provision is made for the plaintiffs out of the Estate with adjustments to the terms of the Will as follows: (a) Provision of $40,000 is to be made out of the Estate to the fifth plaintiff. (b) In lieu of the gift of $70,000 to the second defendant, a gift of $5,000 is to be made. (c) In lieu of the gift of $70,000 to the third defendant, a gift of $5,000 is to be made. (d) In lieu of the gift of $30,000 to Khanh Thi Ha, a gift of $5,000 is to be made. (e) The first to fourth plaintiffs are to retain the benefit of the residual Estate in equal shares. (4) Pursuant to s 32 of the Administration and Probate Act 1929 (ACT), Duc Khai Tong is removed as executor of the Estate and the ACT Public Trustee is appointed as executor in his place. (5) Fortitude Investment Group Pty Ltd ACN 631 689 202 is removed from acting as trustee of the Tong Family Trust and the ACT Public Trustee is appointed as trustee in its place. (6) The third defendant is to do all things and sign all documents necessary to transfer the title to the property in Richardson referred to in Order 1 above free of any encumbrance to the fifth plaintiff as to a 50% share and to the ACT Public Trustee and Guardian as to a 50% share to be held on trust for the first to fourth plaintiffs. (7) Within 21 days of the making of these orders, the parties are to provide written submissions as to the orders sought and any evidence on the question of costs, including whether any further oral hearing is sought. (8) The parties have liberty to apply to the Court for the further working out of any orders necessary to give effect to Orders 1 – 6 above. Catchwords: SUCCESSION – FAMILY PROVISION – application by widow for family provision – whether testator’s will failed to make adequate provision for the proper maintenance of his widow and four children – where testator was married for over 15 years – where testator received an advance death benefit of over $1 million and distributed majority of benefit and jointly owned financial assets to his siblings in the context of foreshadowed divorce proceedings shortly before he died – family provision made out of the will. WILLS AND ESTATES – UNDUE INFLUENCE – whether testamentary gifts to testator’s siblings should be set aside on the basis of undue influence – where testator in advanced stages of cancer – where brother drafted the will executed by the testator and no independent solicitor involved or advice taken – whether testator’s free will was overborne. EQUITY – UNDUE INFLUENCE – whether transfers of real property and large financial sums to siblings were a result of undue influence – whether a relationship of ascendancy existed in respect of the testator’s brother – whether presumption of undue influence by relationship of ascendency rebutted – where gift of such large proportion as to be undue and no independent legal or accounting advice received – transaction set aside. TRUSTS – CONSTRUCTIVE TRUSTS – whether properties registered in the names of family members of the deceased (the mother and sister) were held on constructive trust for estate or child beneficiaries. Legislation Cited: Administration and Probate Act 1929 (ACT) s 32 Court Procedures Rules 2006 (ACT) rr 1700, 1732 Family Provision Act 1969 (ACT) ss 7, 8 Succession Act 2006 (NSW) Part 3.3 Trustee Act 1925 (ACT) ss 59, 70 Cases Cited: Allen v Snyder [1977] 2 NSWLR 685 Andrew v Andrew [2012] NSWCA 308; 81 NSWLR 656 Armouti v Nenes [2022] ACTCA 3; 17 ACTLR 237 Armstrong v Armstrong (1873) 8 Ir Eq R 1 Baumgartner v Baumgartner (1987) 164 CLR 137 Bourdales v Carroll [2007] NSWSC 1057 Bracher v Jones [2020] NSWSC 1024 Bridgewater v Leahy [1998] HCA 66; 194 CLR 457 Brown v NSW Trustee and Public Guardian [2012] NSWCA 431 Brown v The NSW Trustee & Guardian [2011] NSWSC 1203 Burke v Burke [2015] NSWCA 195 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 Dimos v Skaftouros [2004] VSCA 141; 9 VR 584 Estate Rofe [2021] NSWSC 257 Evans v Levy [2011] NSWCA 125 Fysh v Coote [2000] VSCA 150 Goodman v Windeyer (1980) 144 CLR 490 Green v Green (1989) 17 NSWLR 343 Haskew v Equity Trustees, Executors and Agency Co. Ltd (1919) 27 CLR 231 Henry v Hancock [2016] NSWSC 71 Hertzberg v Hertzberg [2003] NSWCA 311 Ilott v The Blue Cross [2017] UKSC 17; 2 WLR 979; 4 All ER 545 Johnson v Buttress (1936) 56 CLR 113 Jones v Dunkel (1959) 101 CLR 298 Jurkiewicz v Jurkiewicz [2013] ACTSC 89 McCarthy v McCarthy [2010] NSWCA 103 Mercanti v Mercanti [2016] WASCA 206; 50 WAR 495 Miller v Cameron (1936) 54 CLR 572 Monty Financial Services Ltd v Delmo [1996] 1 VR 65 Muschinski v Dodds (1985) 160 CLR 583 Permanent Mortgages Pty Ltd v Vandenbergh [2010] WASC 10; 41 WAR 353 Phillips v James [2014] NSWCA 4; 85 NSWLR 619 Pontifical Society for the Propagation of the Faith v Scales (1962) 107 CLR 9 Quek v Beggs (1990) 5 BPR 11,761 Richardson v Richardson [2022] ACTSC 363 Secretary, Department of Health and Community Services v JWB and SMB [Marion’s Case] (1992) 175 CLR 218 Sgro v Thompson [2017] NSWCA 326 Shepherd v Galea [2020] WASCA 152 Steinmetz v Shannon [2019] NSWCA 114; 99 NSWLR 687 Stott v Cook (1960) 33 ALJR 447 Thorne v Kennedy [2017] HCA 49; 263 CLR 85 Tomanovic Multiown Pty Ltd v Interlux Projects Pty Ltd [2021] NSWSC 190 Vigolo v Bostin [2005] HCA 11; 221 CLR 191 Watkins v Combes (1922) 30 CLR 180 Whereat v Duff [1972] NSWLR 147 White v Wills [2014] NSWSC 1160 Wingrove v Wingrove (1885) 11 PD 81 Texts Cited: J D Heydon, M J Leeming and P G Turner, Meagher, Gummow and Lehane's Equity: Doctrines and Remedies (LexisNexis Butterworths, 5th ed, 2015) Parties: Edmund Hao Wen Tong by their litigation guardian Suqin Zhu Tong (First Plaintiff) Lin Yi Tong by their litigation guardian Suqin Zhu Tong (Second Plaintiff) Raymund Jun Wen Tong by their litigation guardian Suqin Zhu Tong (Third Plaintiff) Desmund Xuan Wen Tong by their litigation guardian Suqin Zhu Tong (Fourth Plaintiff) Suqin Zhu Tong (Fifth Plaintiff) Duc Khai Tong in his capacity as Executor of the Estate of the late Quoc Khai Tong (First Defendant) Duc Khai Tong (Second Defendant) Le Ngoc Tong (Third Defendant) Fortitude Investment Group Pty Ltd ACN 631 689 2020 as Trustee of the Tong Family Trust (Fourth Defendant) Representation: Counsel W L Sharwood (Plaintiffs) S Chapple, H Morrison (Defendants) Solicitors Maxwell & Associates (Plaintiffs) DDCS Lawyers (Defendants) File Number: SC 655 of 2019 McWILLIAM J:
The late Quoc Khai Tong died on 17 June 2019, following a diagnosis of colon cancer. The parties to this proceeding are involved in a dispute about undue influence (or coercion, as it is sometimes described), family provision, and estate administration, including who should be the executor and who should control the testamentary trust set up for the children of the deceased.
The plaintiffs in the proceeding are the deceased’s surviving wife and four children. Suqin Zhu Tong, the fifth plaintiff, was married to the deceased for more than 15 years. Their four children, the first to fourth plaintiffs, were respectively aged 14, 12, 11 and 4 years old, as at the date of Quoc’s death.
The deceased was also survived by members of his extended family, being his mother, Khanh Thi Ha and his five siblings. Two of those siblings, Mr Duc Khai Tong and Ms Le Ngoc Tong, are defendants in this proceeding, the former in his role as executor of the Estate of Quoc Khai Tong (Estate) and separately in a personal capacity.
Given all parties share the same surname, I will hereafter refer to each of them by their first names to avoid confusion, and without any intended lack of respect.
The parties have come to Court over a number of things that happened in the months before Quoc died, when his illness was in the advanced stages and with that knowledge, Quoc was settling his affairs. This included paying out the mortgages over properties held by himself, Duc and Le (the effect of which was to significantly diminish the value of the Estate upon his death), setting up a trust fund for his children, and writing a will. In aid of understanding the plaintiffs’ claim, I will say a little bit more about each of those acts.
The repayment of various mortgages
On 15 April 2019, Quoc received an advance death benefit of $1,027,804.33, in respect of a life insurance policy he held with Metlife.
Following receipt of that money, Quoc paid out a loan of $285,000 which was secured by a property located in Kambah (the Kambah property), of which he was the registered owner, and in which his mother lived. Once the mortgage was discharged on 13 May 2019, that then allowed the title to the Kambah property to be transferred from Quoc to his sister, Le. The transfer was registered on 13 May 2019.
On 16 April 2019, Quoc transferred $360,000 to Duc. Over April and May 2019, Quoc transferred amounts totalling $312,000 to Le. Each of the total transferred sums was broadly referable to the amount owing on a home loan in Duc or Le’s name. In the case of the moneys provided to Le, the mortgage in question related to a property that Quoc had purchased in Richardson in 2005 (the Richardson property), in which he and his family had resided up until his death, and in which the plaintiffs still reside. Le had taken over the title from her brother in January 2008, borrowing $285,000 and using savings to pay the balance of the purchase price and stamp duty ($350,000). Quoc and Suqin had then paid weekly payments to Le, which in 2008 were $350 per week and by 2017 were $500 per week. There is a dispute over whether those payments made were rental payments or were more in the nature of payments of the loan and mortgage for what both Quoc and Suqin viewed as being their family home.
Both Duc and Le returned the money they had received from Quoc in mid-May 2019, following Suqin becoming aware of what Quoc had done and demanding that Quoc ensure the money was returned to Quoc. However, later in May 2019, Quoc gave bank cheques in broadly those respective sums to Duc and Le, with Duc cashing the bank cheque given to him after Quoc died. It is unclear on the evidence what date Le presented the cheque given to her.
The Tong Family Trust
On 10 May 2019, apparently with Quoc’s knowledge or involvement, a deed was executed, which created the Tong Family Trust (Trust). The Trust deed names the corporate defendant in this proceeding, Fortitude Investment Group Pty Ltd ACN 631 689 202 (Fortitude), as Trustee of the Tong Family Trust. Duc and Le are the directors and shareholders of Fortitude. The Trust deed also names Duc and Le individually as the appointors of the Trust. Among other terms of the Trust deed, the income of the Trust may be distributed to the beneficiaries at the Trustee’s discretion. The Trust deed defines a beneficiary as “a person who may become entitled to income or capital”, and permits additional beneficiaries to be added to the Trust.
Following receipt of the Metlife insurance payout, Quoc also drew bank cheques (on 20 and 22 May 2019) in favour of Fortitude totalling $225,000. Again, these were cashed after he died and now form part of the assets of the Trust.
The Will
Less than a week before he died, Quoc made a will dated 12 June 2019 (the Will). The terms of the Will made further gifts of $70,000 each to his siblings Duc and Le and $30,000 to his mother, Khanh. Quoc’s superannuation pension (or benefit) was left to Suqin.
The residue of Quoc’s estate was then to be transferred to the Trust, to be invested for the benefit of his children’s education, health and wellbeing until Quoc’s youngest surviving child reached 24 years of age. There was a further provision in the Will that when each surviving child reached 24 years of age, they were able to choose to take the whole of their equal share as a lump sum payment, and cease being a beneficiary of the Trust.
Probate was granted to Duc as the named executor in the Will on 15 November 2019. At the time of the grant, the net value of the Estate, excluding the Kambah and Richardson properties, was approximately $340,000.
The plaintiffs’ claim
(a) Complaints about certain conduct that occurred before Quoc died in the form of financial transactions and real property transfers (Undue influence claim); (b) Complaints about the terms of the Will, in that it is said not to make adequate provision for Quoc’s wife and children (Family Provision claim); and (c) Complaints about the administration of Quoc’s estate and the Fortitude Trust (Estate Administration claim).
Relief sought
(a) Declarations that certain inter vivos transfers of funds and real property, and two testamentary gifts made to Duc and Le, were each void or voidable for undue influence; (b) A declaration that the Richardson property is held by Le on constructive or remedial trust for the benefit of the Estate and orders transferring the titles to both the Kambah and Richardson properties back into the Estate; (c) Declarations that the plaintiffs are eligible for family provision and orders for provision out of the Estate in favour of each of the plaintiffs in such sum as the Court considers appropriate; (d) Orders for the repayment of the moneys that Quoc transferred to Duc and Le; (e) Orders in respect of the administration of the Estate and the Trust: (f) Orders removing Duc as executor of the Estate; (g) Orders removing Duc, Le and Fortitude as appointors, administrators and trustee of the Trust; (h) Orders appointing Suqin as executor of the Estate and trustee of the Trust; (i) Orders requiring the delivery up of the accounts of the Estate; and (j) That accounts be taken in relation to both the Estate and the Trust.
Issues
Undue Influence claim (a) Whether the testamentary gifts of $70,000 each to Duc and Le in the Will were the product of undue influence or coercion (Issue 1). (b) Whether the transfers of money or property to Duc and Le were the product of undue influence or unconscionable conduct (Issue 2).
Family Provision claim (a) What assets form part of the Estate in light of the findings on Issue 2 (Issue 3). (b) Whether the plaintiffs’ claim for family provision should succeed and if so, what adjustment should be made (Issue 4).
Estate Administration claim (a) Whether Duc should be removed as executor of the Estate (Issue 5) (b) Whether Fortitude should be removed as Trustee of the Trust. (Issue 6) Issue 1: Were the gifts to Duc and Le in the Will the product of undue influence?
This first issue is largely overtaken by the findings that are later made in these reasons concerning the plaintiffs’ claim for family provision. As a result of the later findings, the gifts of $70,000 to Duc and Le are reduced to $5000 each. I have nevertheless addressed the matter, lest the reasons on this point become significant on any appeal.
It is necessary to first explain what coercion or undue influence means in the context of testamentary bequests. In Estate Rofe [2021] NSWSC 257 at [129], Lindsay J explained that the concept of undue influence is (emphasis added):
…directed to whether the will (that is, the independent mind) of the testator was overborne in execution of a testamentary instrument so that he or she could not be said to have been a free agent and the instrument cannot be said to express his or her true intentions, but the intentions of another. In a probate case, “influence” is “undue” if it overbears the testator’s independent judgement. In probate law, “undue influence” is often described as “coercion”; but that word, standing alone is inadequate to describe the essence of the concept, which is the fact that (by whatever means) the will of the testator is overborne.
To be undue influence in the eye of the law there must be – to sum it up in a word – coercion….. the testator [must be] in such a condition, that if he could speak his wishes to the last, he would say, “this is not my wish but I must do it.”
The coercion may of course be of different kinds, it may be in the grossest form, such as actual confinement or violence, or a person in the last days or hours of life may have become so weak and feeble, that a very little pressure will be sufficient to bring about the desired result, and it may even be, that the mere talking to him at that stage of illness and pressing something upon him may so fatigue the brain, that the sick person may be induced, for quietness’ sake, to do anything. This would equally be coercion, though not actual violence.
In my view, constant importuning of an old and weakened person, with compromised testamentary capacity, is capable of overbearing the will of that testator, as much as more blatant forms of coercion. Here, I do not refer to the mere taking advantage of some relationship of influence under which the other party is susceptible. I refer to the situation where the testator effectively gives up and abandons free agency in order to stop being subject to incessant demands. A finding of undue influence for probate purposes may not be available where there is a basis for concluding that the testator has ultimately been persuaded to accept the demands of the particular beneficiary, even though the reasons given in support of the demands are wrong and unsupportable. The question is whether, in reality, the testator has made a “free” decision. However, where no reason can be found in the evidence that can explain the abandonment by a weakened and susceptible testator of the testator’s long-term cardinal testamentary intention, in the face of demands that are both incessant and obsessive, a conclusion of practical coercion may be available. That is the finding that I make in this case. Was Quoc’s will overborne in the present case?
While Quoc was certainly in a relationship of influence where his brother and sister were concerned, I do not find that his free will was overborne when he executed the Will.
That finding is based on the following factual context that emerged from the evidence.
Quoc was diagnosed with stage 4 colon cancer in November 2018.
On 1 January 2019, Quoc signed two documents appointing Duc and Le has his enduring power of attorney, both together and separately. He authorised them to do anything on his behalf with no limitations, including property and financial matters, personal care, health care and medical research matters. The power of attorney came into effect immediately.
From January to approximately March 2019, Quoc was undergoing chemotherapy in hospital. That caused significant fatigue on the first week of each treatment. Quoc required considerable domestic assistance. Suqin described Quoc as lying in bed with his eyes closed and not eating or drinking for several days after the first treatment. After that time, he remained weak, drowsy and confused. Suqin’s mother cooked food for him every day. Suqin stopped work to care for Quoc and his daily needs at the hospital.
Quoc came home from hospital in about March 2019. He was still undergoing chemotherapy but was advised to rest at home in between hospital visits.
Shortly before Quoc was discharged from hospital, he told Suqin to go back to work to earn some income to support the family, and that he would get his brother and sister to look after him.
Quoc’s mood also changed noticeably from about December 2019. After he was discharged from hospital, he started to complain about the food cooked for him.
In February 2019, he was informed that he would receive a lump sum payment from his life insurance policy.
On 13 April 2019, a lump sum death benefit of $1,027,804.33 was paid to Quoc, which was received into his account on 15 April 2019.
From 15 April 2019 over a period of about 2 weeks, Quoc provided sums of money to Duc ($360,000) and Le ($270,000).
On 1 May 2019, Suqin learned that Quoc had depleted the life insurance payout, to the point where he said, “I have no money left”. She threatened to see a lawyer if Duc and Le did not pay the money back to Quoc.
On 6 and 10 May 2019, Quoc provided further sums of $17,000 and $25,000 to Le.
On 10 May 2019, (Suqin believed the conversation occurred on 11 May but it seems more likely that this conversation was had on the morning of 10 May), Suqin and Quoc had a disagreement over whether to ask Duc and Le to pay the money back.
(a) Duc transferred $360,000 back to Quoc. (b) Quoc then drew a bank cheque for the same amount, $360,000. (c) Duc arranged for Minh Truong, a staff member of the Tax Practitioner Board, to create the Tong Trust by way of signing a trust deed (as Settlor).
Over 15 to 16 May 2019, Le transferred $290,000 to Quoc’s bank account in two separate payments. On 16 May 2019, Quoc then drew a bank cheque for $290,150, which he gave to Le.
On 16 May 2019, Duc gave Quoc a draft will and Quoc signed it, although it was not witnessed and Duc did not know Quoc had signed the document until after Quoc had died. The content is broadly the same as that contained in the Will that was later executed.
On 17 May 2019, Le made another transfer of $20,000 to Quoc.
On 23 May 2019, Quoc received two letters from AHL Lawyers about property settlement and parenting orders, which he provided to Duc.
Around this time Quoc gave Duc the bank cheque he had previously drawn for $360,000.
On 31 May 2019, Duc responded on Quoc’s behalf to the letters from AHL Lawyers.
On 11 June 2019, the day before Quoc signed the Will, Quoc visited Dr David Leong, the treating consultant medical oncologist (but notably not a geriatrician nor Quoc’s treating GP). Dr Leong later wrote a report on 22 August 2019, where he retrospectively expressed a view that he considered Quoc had “testamentary capacity” at the time of the appointment on 11 June 2019. The letter gives no details of what the doctor understood testamentary capacity to mean and does not address the particular legal requirements. However, it is unnecessary to go further into that as the present dispute does not raise lack of testamentary capacity with regard to the Will.
On 11 June 2019, Suqin and Quoc had a conversation about his draft will, parts of which Suqin had read. Quoc told her that he had not yet read the draft will, and that he had said parts of the document to Duc, but other parts were drafted by Duc. Quoc told Suqin that some parts were wrong but that he could amend it while he was alive. They did not specifically discuss the $70,000 gifts to Duc and Le during that conversation.
On 12 June 2019, Duc presented the Will to Quoc for signature in the following circumstances:
(a) Quoc was gravely ill (he would be dead in a week). He was observed by Suqin’s mother that day to be very weak. He even had difficulty standing up from a chair and required help. He had difficulty walking around inside the house and needed a cane. If he was standing and picked up anything, such as a cup or a paper, he would shake. (b) Quoc was at his brother’s workplace from at least 2pm and did not arrive home until about 9pm. (c) No independent solicitor was involved in either the preparation or execution of the Will. The evidence from Duc was that Quoc did not want to pay for a lawyer’s involvement. (d) The substance of the document that Quoc signed was the same as, although not identical to, the one that had been drafted by Duc on 16 May 2019. (e) The two witnesses to Quoc’s signature on the Will were arranged by Duc. They were staff at the workplace of the Australian Taxation Office and the Tax Practitioner Board, the latter being where Duc also worked. (f) One of the witnesses asked Quoc if he had read the will and he replied yes. She asked him to read the will and confirm that he understood the document. However, neither witness provided any evidence stating that the contents of the Will were translated for Quoc before he signed it and Quoc’s command of the English language was uncertain at best. (g) Duc left the room while Quoc signed the Will.
I gift my brother Duc Khai Thong of Kambah, Australian Capital Territory a sum total of $70,000 if he shall survive me, for his own use absolutely in recognition of past, present and future administration of my affairs. I gift my sister Le Ngoc Tong of Kambah, Australian Capital Territory a sum total of $70,000 if she shall survive me, for her own use absolutely in recognition of past, present and future administration of my affairs. … The decision to leave Suqin only my Superannuation [to] her is based on the following: Ongoing spouse relationship problems that began since 2015. Mental abuse I have endured whilst living together at …Richardson during my stage four colon cancer and chemo treatment. My fear of her money mismanagement, that may affect my children’s inheritance. Finally Suzin Zhu Tong has initiated children order and financial division of my assets as at 23 May 2019.
I have underlying concerns that Quoc did not in fact read and fully comprehend the terms of the Will before he signed it. He had said in an earlier conversation with Suqin that he had not read parts and that he intended to change parts.
Duc gave evidence that Quoc did not want to spend money on a lawyer. That evidence has been approached with a degree of caution, given that the only evidence about it came from Duc, the very person whose conduct is primarily under challenge. However, it is not disputed that Quoc received no independent legal or financial advice in his dying months.
At the time Quoc signed the Will, he was in a vulnerable condition. He was at his brother’s workplace, without independent assistance. From what other witnesses have said about the time of Quoc coming home, it seems to have been late in the afternoon or at night after attending to Quoc’s affairs. In any event, Quoc is likely to have been in a very poor state both physically and mentally.
The circumstances in which the Will was both brought into existence and executed are troubling, but not to such an extent as to establish that Quoc was either too ill to exercise free agency or that the influence that Duc plainly exercised over his brother was so great as to be ‘undue’ or coercive in the sense of Quoc no longer exercising his free will, as explained in the authorities.
The terms of the Will explain the gifts by reference to the efforts that had been, and were to be, expended by Quoc’s siblings on the administration of Quoc’s affairs. The evidence established that Quoc was living and acting with the daily involvement and consequent influence of his siblings and that the choices he was making at that time were largely borne of love and gratitude because of that dependency, but the testamentary gifts were still Quoc’s choices, in that he was not deprived of free will.
Issue 2: Were the transfers of money or property to Duc and Le the product of undue influence or unconscionable conduct?
Undue influence
The equitable doctrine of undue influence describes the circumstances where a benefit is taken either by, or at the suggestion of, a person who is in a position of either presumed or proven influence over another. In such circumstances, unless the contrary is proved, the person will be taken to have procured the said benefit by an undue exercise of that influence: J D Heydon, M J Leeming and P G Turner, Meagher, Gummow and Lehane's th Equity: Doctrines and Remedies (LexisNexis Butterworths, 5 ed, 2015) [15-025]. Chapter 15 of the same text provides a detailed and comprehensive discussion of the doctrine. However, in this case an overview of the relevant principles will suffice.
In that regard, a helpful summary is provided in Permanent Mortgages Pty Ltd v Vandenbergh [2010] WASC 10; 41 WAR 353 at [166]-[176] (Permanent Mortgages) (emphasis added):
The basis of the equitable jurisdiction to set aside an alienation of property on the grounds of undue influence is the prevention of the unconscientious use of any special capacity in or opportunity for the disponee to affect the disponor's will or freedom of judgment in reference to the transaction: Johnson v Buttress [1936] HCA 41; (1936) 56 CLR 113, 134. 167. The jurisdiction to set aside a transaction procured by undue influence is exercised on two bases. The first is where undue influence is proved as a fact. The second is where undue influence is presumed by reason of the antecedent relationship between the parties, and the presumption has not been rebutted: Johnson v Buttress (119); Union Fidelity Trustee Co of Australia Ltd v Gibson [1971] VicRp 69; [1971] VR 573, 575. The former is 'actual' undue influence and the latter is 'presumed' undue influence: Powell v Powell [2002] WASC 105 [120]‑[121]. 168. Actual undue influence requires proof that the transaction was the outcome of such an actual influence over the mind of the disponor that it cannot be considered to be the free act of the disponor: Johnson v Buttress (134). The source of power to practise such influence or domination over the disponor may not arise from an antecedent relationship, but may arise in the particular situation, or by the deliberate contrivance of the disponee: Johnson v Buttress (134). 169. Presumed undue influence arises in two ways. One is where there exists a class of relationship historically recognised by the law as raising a presumption of undue influence. The recognised classes include parent and child, guardian and ward, solicitor and client, doctor and patient, religious adviser and adherent and trustee and beneficiary: Johnson v Buttress (119, 134) (cf Meagher RP, Heydon JD & Leeming MJ, Meagher, Gummow & Lehane's Equity: Doctrines & Remedies (4th ed, 2002) [15095] as to the last mentioned class). 170. Dispositions from the latter to the former fall within the presumption. 171. The other is where, outside of those recognised categories, the plaintiff positively proves that there in fact existed an antecedent relationship between the parties, the nature of which was that the defendant was in a position to exercise dominion, power, or ascendancy over the plaintiff: Meagher, Heydon & Leeming, Equity: Doctrines & Remedies [15‑105]. 172. The recognised categories of relationship are marked by the characteristic that it is not natural to expect that 'one party would give property to the other. That is to say, the character of the relation itself is never enough to explain the transaction and to account for it without suspicion of confidence abused': Yerkey v Jones [1939] HCA 3; (1939) 63 CLR 649, 675. 173. Parents' dispositions to children can be explicable as being the consequence of parental love and affection without any suspicion of confidence abused. Accordingly, the parent/child relationship, insofar as it concerns dispositions from parent to child, is not a presumed relationship of influence. See Powell v Powell [130]; Wilby v St George Bank [2001] SASC 388; (2001) 80 SASR 404 [95]; Urane v Whipper [2001] NSWSC 796 [22]; Tessmann v Costello [1987] 1 Qd R 283, 293; ASB Bank Ltd v Harlick [1996] 1 NZLR 655, 660 ‑ 662. 174. Indeed, in the converse situation, for the purposes of the principle with respect to dispositions by the child in favour of the parent, undue influence is presumed, even though the child be an adult, unless the parent establishes that the child had at the time of the transaction been emancipated from the influence: Powell v Powell [131]; Meagher, Heydon & Leeming, Equity: Doctrines & Remedies [15075]. 175. Where a special relationship outside of the traditional categories is set up it is 'necessary to see the extent and nature of the confidence reposed and whether it involved any ascendancy over the will of the person supposedly dependent on the confidence': Jenyns v Public Curator (Qld) [1953] HCA 2; (1953) 90 CLR 113, 133. 176. The doctrine of undue influence looks to the quality of the consent, or assent, of the weaker party: Commercial Bank of Australia v Amadio (474); Bridgewater v Leahy [1998] HCA 66; (1998) 194 CLR 457, 478.
Principles relevant to the presumption of undue influence as it applies to this case
The issues in this case make it worth drawing attention to the difference between the use of the term “undue influence” in probate and in equity. When dealing with a testamentary gift in a will, whether there is undue influence is directed to whether there is an actual overbearing of free will, as discussed above. If there has been, then it may be said that the testator did not, by reason of undue influence, know and approve of the contents of the instrument propounded as the will. It is concerned with the existence of a testamentary intention rather than the quality of that intention or the means by which it was produced: Bridgewater v Leahy [1998] HCA 66; 194 CLR 457 (Bridgewater) at 474, [62]-[63].
By contrast, the equitable doctrine of undue influence that may arise in respect of transactions or gifts that occur outside the provisions of a will looks to the quality of the intention or consent, such that the donor may fully intend and desire the transaction of their own free will, yet an inference of undue influence may still arise: Bridgewater at 475, [63].
As to the first category of cases where undue influence is presumed, from the nature of the relationship itself, the presumption operating between a parent and child does not extend to siblings: Armstrong v Armstrong (1873) 8 Ir Eq R 1.
As to the second category of cases where undue influence is presumed, what must be shown is that at the time of each transfer, the transferee or recipient had come to occupy a position of ascendency or, power or domination over the donor, and that the donor had taken a position of dependence or subjection: Johnson v Buttress (1936) 56 CLR 113 at 119 (Latham CJ) and 134-135 (Dixon J) (Johnson); Whereat v Duff [1972] NSWLR 147, at 167-168; Thorne v Kennedy [2017] HCA 49; 263 CLR 85 (Thorne) at [30]-[36].
The weaker party need not have been reduced to a state of total subordination to the stronger party, but their judgmental capacity must at least be “markedly sub-standard” as a result of the will of the stronger party: Thorne at [32].
For the presumption to arise, it has been emphasised that the relationship must be one of ascendancy and dependence. In Brown v The NSW Trustee & Guardian [2011] NSWSC 1203 (Brown), Brereton J (as his Honour then was) said at [46] (emphasis added):
To establish such a relationship, more than mere confidence and reciprocal influence is required. For a relationship to be brought within the doctrine, it must go beyond one of mere confidence and influence to one involving dominion or ascendancy by one over the will of the other and, correlatively, dependence and subjection on the part of the other. It is not necessary to establish a relationship of actual dominion by one party over another, and it is enough to show that the party in whom trust and confidence is reposed is in a position to exert influence over the party who reposes it. But more is required than the influence that any person might have on another by making a recommendation or giving advice; as a minimum, it is necessary that one have some element of authority or superiority - which may be moral or practical, as distinct from legal - over the other.
Rebutting the presumption
Where a presumption of undue influence arises, the “presumption is rebuttable by the other party proving that the particular transaction or transfer, in its particular circumstances, was nevertheless the result of the weaker party's free will”: Thorne at [34]; see also Watkins v Combes (1922) 30 CLR 180 (Watkins) at 193.
The Court must be satisfied that “the gift was the independent and well-understood act of a man in a position to exercise a free judgment based on information as full as that of the donee”: Johnson at 134.
Determining whether the presumption has been rebutted is a factual question, requiring close examination of the particular circumstances of the case. The size of the gift is important. In Watkins, Isaacs J stated at 193 (citations omitted):
The first thing to ascertain in such a case is the true character of the transaction impeached. Is it a gift to the “confidant” of importance? If so, the burden at once is cast on the confidant to satisfy the Court that the transaction was free from “undue influence” but was the free outcome of the donor’s uninfluenced will.
See also Meagher, Gummow and Lehane’s Equity: Doctrines & Remedies [15-130 & 15- 135], where the learned authors drew from the authorities to note material rebuttal considerations, such as whether the gift was improvident and whether a person received independent advice. The case of Watkins is an example of those considerations being determinative. Knox CJ, Gavan Duffy and Starke JJ, stated at 187-188: …In the view which we take of the case it is sufficient to say that taking the evidence as a whole the conclusion is that during the year 1919 Mrs Reynolds was failing both physically and mentally. Probably her condition in both respects was variable, … assuming that she was competent to transact business, we have to consider whether, in view of the relation which existed between her and the defendants, this transfer or the gift of £100 should be allowed to stand. We have come to the conclusion that during her residence with the defendants … Mrs Reynolds’s mind was entirely under the dominion of the defendants, and that she was therefore, as they well knew, incapable of dealing with them on a footing of equality. A disposition of property by her to either of them, whether voluntary or for valuable consideration, made while this relation continued and without the benefit of independent advice, cannot stand.
However, although independent advice is important, it is not necessarily essential to rebut the presumption: Haskew v Equity Trustees, Executors and Agency Co. Ltd (1919) 27 CLR 231 (Haskew) at 234-235. The evidence must be taken as a whole in answering the ultimate issue described in Haskew at 235 as: “was it really the act of the party comprehending what he did and the result of his or her own free will?” Isaacs J went on (at 235) to say:
… that the question of independent advice is a subsidiary question the answer to which frequently comes in to help to determine the ultimate issue in the case. Unconscionable conduct
(a) One party to a transaction was under a special disability in dealing with another party, such that there was an “absence of any reasonable degree of equality between them”; and (b) The disability was understood by the stronger party to an extent that it was unfair or “unconscientious” for the stronger party to accept the weaker party’s agreement to the transaction in the circumstances in which it was given.
Where these elements are made out, equity imposes a presumption that the stronger parties unconscientiously capitalised on the weaker party’s special disadvantage, placing the onus on the stronger party to demonstrate that the transaction was fair. Should the transfer of the Kambah property to Le be set aside for undue influence?
The first thing to understand is the true character of the transaction in respect of the Kambah property. There is no dispute that Quoc paid out the loan over the Kambah property and then transferred the title to the Kambah property into Le’s name. However, as will be explained below, on the whole of the evidence, that conduct was not actually a gift. That is because Quoc had always only held such asset on constructive trust for his mother, Khanh, or alternatively for his mother and Le. Le’s belief is that her mother was the sole beneficial owner. I do not necessarily agree with her view, but it is not material to the issues in this case to specifically decide the point.
My finding that the interest in the Kambah property was not beneficially held by Quoc affects the operation of the equitable doctrine of undue influence or unconscionable conduct. Properly understood, Quoc’s actions in unencumbering and then transferring the property to Le were the bringing together of the legal and beneficial interest in the Kambah property asset, not a benefit. If I am wrong, and it is considered that the transfer of an unencumbered property to a family member is technically a benefit, any presumption of undue influence is rebutted by the circumstances surrounding the act.
Those conclusions derive from the following.
Tong family living arrangements up to 2004 – the purchase of the Mackay property
From approximately 1987, Khanh rented the Kambah property from the ACT Government as the family home for herself and her five children, including Quoc, Duc and Le. In 1994, Le moved out of the Kambah property. In 2000, Duc and Quoc also moved out of the Kambah property.
Quoc moved to live in Mackay in Queensland. At the time, he was unable to afford to purchase a home. Duc and his then-wife purchased a property in Mackay (the Mackay property) for $110,000, with an initial mortgage of $130,000 (to cover the stamp duty and costs associated with the purchase). Quoc was said to have been responsible for all repayments and outgoings, although it is not clear whether this was done directly or through Duc receiving ‘rent’ from Quoc, which was then applied to the mortgage repayments. Duc explained that he did not supply any records from that period because of the passage of time. However, Duc accepted in cross-examination that he would have claimed tax deductions on the Mackay property as an investment property.
In 2002, Le moved back into the Kambah property to live with Khanh.
In June 2003 Suqin moved into the Mackay property, where she and Quoc lived until November 2004. At that point, they rented out the Mackay property and returned to live in the Kambah property with Khanh.
The purchase of the Kambah property
Rearranging ownership (on title) of the Mackay property
In August 2005, following a breakdown in Duc’s marriage, Duc needed to sell the Mackay property as his then wife was also a co-owner of the asset. At that stage, Quoc was still unable to afford a mortgage. Le stepped in to purchase the Mackay property from Duc. The basis on which she did so was that although her name was on the title, Quoc would remain the beneficial owner and would again be responsible for all mortgage repayments and outgoings. Le’s evidence was that the Mackay property was tenanted at the time, and that Le received rent from the tenant at the Mackay property via a real estate agent. However, that was in name only, as the real estate agent’s rent statement indicates that the rental income was paid into an account belonging to Quoc.
In order to finance the purchase of the Mackay property, Le took out a loan of $240,000 comprising:
(a) $184,000 secured over the Mackay property; and (b) $56,000 secured over the Kambah property.
It was agreed that each component of that loan was for Quoc’s benefit.
These funds were used to discharge the existing mortgage of $110,000 and the capital gains tax on the sale of the Mackay property, which Duc recalled was about $23,000. The stamp duty was also paid out of that amount and the balance of the funds paid out to Quoc. In December 2005, Quoc applied those funds to the purchase of the Richardson property, the history of which is dealt with below.
The transfer of the Kambah property to Quoc
In approximately 2009, Le and Khanh transferred the Kambah property to Quoc. At the time it was valued at $405,000. The transfer was said to have occurred for reasons relating to sponsoring Suqin’s mother to come to Australia. Quoc did not have the Richardson property in his name at that time and was not registered as the owner of the Mackay property. It seems that he needed an asset in his name to enable him to take out a loan or access secured finance (for whatever reason).
When Quoc took over the asset, he also paid off the existing mortgages that were on the Kambah property, part of which included the $56,000 loan used to finance the purchase of the Mackay property. At the time, Quoc is reported by Le and Khanh to have said that the Kambah property would always belong to his mother, and I accept that evidence for present purposes.
From that point until 2019, the Kambah property was in Quoc’s name. He had control over the size of any mortgage. Khanh paid what was described as “rent” to Quoc. This commenced as $300 per week by fortnightly instalments. Quoc and Khanh signed a residential tenancy agreement.
By April 2019, the mortgage over the Kambah property was $285,000. Part of that was attributable to the balance of the mortgage when the Kambah property was transferred to Quoc. This was a loan entirely within Quoc’s control and at that point, the mortgage debt was, on paper, his responsibility.
Duc’s evidence was that he regarded the Kambah property as being owned by Khanh and Le because he saw Le renovating and maintaining the Kambah property after it was transferred to Quoc. He recalled Le replacing the floorboards at the same time as he replaced the floorboards in his house.
Who was the beneficial owner of the Kambah property?
What I have taken from this history is that there was a common understanding between Quoc, Khanh and Le that the beneficial owner of the asset was Khanh. Properly characterised, the arrangement was one of a constructive trust arising by common intention. Such a type of trust arises where there is a common intention or understanding that the person will acquire an interest in the property and the person acts to her detriment in reliance on that intention or understanding: Allen v Snyder [1977] 2 NSWLR 685 at 689-695; Green v Green (1989) 17 NSWLR 343 (Green) at 353-4.
Here, Quoc said to Khanh that the Kambah property would also remain Khanh’s home. That type of statement has been held to be relevant in establishing the necessary intention: Green at 356-7, but there are a number of other factors that may be drawn from the history above to establish the same position. These include the conversations Khanh had with Quoc at the time of the transfer and the fact that when Quoc took over the Kambah property, he paid out the mortgage secured by the Kambah property (recalling part of this loan, being $56,000, related to the Mackay property) but no more – that is, he did not pay full market value and Khanh may be said to have retained the equity in the Kambah property.
The asset was then made available to Quoc for the advancement of his family’s interests during his lifetime, through using the house to secure finance. Khanh acted to her detriment in doing so. She also acted to her detriment in telling Quoc to put the Kambah property in Le’s name when it was transferred.
In making that finding, I am mindful that a constructive trust is not a medium for the indulgence of idiosyncratic notions of fairness and justice: Muschinski v Dodds (1985) 160 CLR 583 at 615. It will not be imposed simply because to do so would be fair or just. However, untangling the financial affairs of the Tong family members requires a birds-eye view of the facts that stretches back decades.
That has a consequence for what occurred following Quoc’s receipt of the advance death benefit. On 15 April 2019, the day Quoc received his advance life insurance payment, he paid out the loan on the Kambah property. He had signed a transfer of the title over to Le at Khanh’s request on 1 March 2019. The transfer was registered on 13 May 2019, when the mortgage was formally discharged.
The plaintiffs contend that this transfer was a product of undue influence or alternatively unconscionable conduct. They relied on numerous matters to argue that the presumption of undue influence arose which they said was not rebutted. Without repeating the submissions in full, these included that Quoc was in the final stages of colon cancer, taking strong medication, had strong family bonds with his siblings, had a history of mutual financial support and intermingling of finances between his family members, and that he relied heavily on his siblings for advice and assistance, particularly in relation to financial matters. Compared with his siblings, Quoc had limited education and did not seek independent advice before he transferred the Kambah property.
Should the “gift” of $290,150 to Le be set aside for undue influence?
Again, the answer to this question depends very much on who the beneficial owner of the Richardson property was. In that regard, a similar reasoning process may be applied to the Richardson property as that set out above in relation to the Kambah property. It leads to the same conclusion of a constructive trust, only this time in favour of Quoc.
Although Le held the legal title to the Richardson property from 31 January 2008, the beneficial interest in the Richardson property remained with Quoc until he died. There are a number of reasons for this finding. They may be summarised as follows:
(a) Quoc’s payment of money to Le at the time of transferring the Richardson property to her in 2008 is both consistent with Quoc retaining the equity in the property as the beneficial owner and inconsistent with Le “purchasing” the property; (b) The history with regard to the Richardson property in the context of other real property assets is also consistent with Quoc retaining a beneficial interest or beneficial ownership; (c) Quoc’s treatment of the Richardson property from 2008 was also consistent with him being the beneficial owner, as demonstrated by (at least) his undertaking of renovation works; (d) Suqin’s treatment of the Richardson property, over many years, is consistent with her view that at least Quoc, if not Quoc and herself, beneficially owned the asset; and (e) Quoc’s treatment of the Richardson property as his own extended to him paying off the total mortgage debt over the property shortly before he died.
Each of those reasons is separately developed below under the headings (a) to (e). It requires discussion of bank statements, transfers and other documentary evidence. The summary above is to assist with what is admittedly the somewhat laborious analysis that follows.
However, the finding of a constructive trust in respect of the Richardson property, and the purpose for which the cheque was given to Le to pay out the said debts, meant that Quoc did not make a “gift” of money to Le. What at first might have been perceived (by both Le and the plaintiffs) as a gift to Le of a very large sum of money, was in fact Quoc repaying his family debts, specifically:
(a) $30,000 in credit card debt paid by Le but attributable to Quoc and his family (and Le also said the sum included repayment of the capital gains tax on the Mackay property), and (b) the mortgage over the Richardson property of $260,000, which was Quoc and Suqin’s family home.
Accordingly, the true character of the $290,150 cheque provided to Le was not a gift or a benefit to Le. It was the paying down of Quoc’s own liabilities, equalising the family ledger over his lifetime, in a way.
Once the true character of those transactions is appreciated, the undue influence or unconscionable conduct claim against Le in respect of the cheque falls away. Any failure by Le to apply the cheque monies as intended by Quoc is addressed separately below.
(a) Quoc retained the equity in the Richardson property at the time Le obtained legal title
The discussion that follows deals with the various sums deposited and withdrawn from bank accounts between Quoc and Le. The end result will be a finding that Quoc retained an equitable interest in the Richardson property at the time he transferred it to Le.
In December 2005, Quoc purchased the Richardson property. He paid $321,000. To finance that purchase, he used a combination of a home loan from the ANZ bank and the proceeds of sale following the transfer of the Mackay property from Duc to Le.
In late 2007, Quoc was said to have been facing financial difficulties. Le agreed to take over or “purchase” the Richardson property from Quoc for $350,000.
The catalyst for this arrangement was said to be to allow him to pay for Suqin’s mother’s visa application. Suqin disputed this. She did not believe that Quoc would have needed to raise funds to pay for her mother’s visa application given that Quoc had been transferred $12,000 by Suqin and $10,000 by her mother. Ultimately, nothing turns on the specific reason for Le taking the legal title to the Richardson property.
Le argued that she held the legal and beneficial title to the Richardson property from 31 January 2008. Her evidence was:
(a) That the transfer of the title from Quoc to her was a purchase, effectively an arm’s length transaction at market value. (b) That she paid $350,000, financed by – (i) a loan of $285,000 from Members Equity bank (the ME loan) and (ii) $65,000 of her own money. (c) The amount required to pay out Quoc’s mortgage with the ANZ Bank was $232,644. (d) The proceeds of sale, as recorded on the settlement statement, were $117,266.
(a) There are documents to support her taking out of a mortgage with Members Equity in the amount of $285,000; (b) There is also an unidentified deposit into Quoc’s account on 31 January 2008 of $232,324; and (c) There is an unidentified deposit into Quoc’s account on 31 January 2008 of $65,330.
The inference I have drawn is that the unidentified deposits came from the settlement monies provided by Le.
However, that is not the full story. When closer scrutiny is paid to the money flowing between Le and Quoc at the time, it can be seen that the “purchase” was more of a family arrangement. Quoc’s bank records in 2008 demonstrate that although the mortgage was taken over by Le and she paid various sums of money to Quoc, Quoc then repaid money to Le sufficient to retain equity, or an equitable interest, in the Richardson property at the time of settlement.
The detail underlying the finding that the transfer was a family arrangement and not a complete transfer of legal and equitable interest to Le is as follows:
(a) In the days leading up to the settlement, there are three deposits from LN Tong into Quoc’s bank account, totalling $91,896. (b) Then on the day of settlement, immediately following the unidentified deposit of $65,330, the same amount was withdrawn from Quoc’s bank account. (c) From 31 January 2008 and up to 21 February 2008, the ANZ bank statement for Quoc’s account in that time period records Quoc making various transfers totalling $52,658.04 to “Le Ngoc To”, with the last two letters of Le’s surname plainly being cut off from the description. (d) There is also a further unidentified withdrawal on 5 February 2008 of $25,536.41.
As to the unidentified deposit of $65,330, the plaintiffs submitted that the first unidentified withdrawal on the day of settlement was money being repaid to Le. If that amount is added to the amounts that the narrative indicates were payments to Le, it leads to the inference that Quoc repaid the $117,988.04 in what were described as the proceeds of sale (also described as the equity in the property after the mortgage was repaid).
The net result from the shuffling of money appears to have been that:
(a) Le paid to Quoc $157,226, (b) Quoc paid to Le $143,524.45, (c) Quoc therefore received $13,701.55. It was unclear who paid the stamp duty on the property, but the stamped duty that was paid was $12,250.00.
Alternatively, if it were assumed that the unidentified withdrawal of $25,536.41 was not a repayment by Quoc to Le, the amount Quoc would ultimately have received increases to $39,237.96. It is not necessary to make any finding about that amount.
What is critical is that, within two weeks of the settlement occurring, Quoc had transferred back to Le sums of money which totalled $117,988.04, slightly more than what he was formally recorded on the settlement sheet as having just received from her. The amount represented the equity Quoc had held in the asset (by reference to a market valuation obtained at the time).
If it were necessary to infer a reason for the slight discrepancy in the amount repaid to Le, I would attribute it to things like the mortgage discharge and bank draw down and conveyancing fees.
In making the repayment, Quoc arguably had at least a resulting trust in respect of the sums paid as a percentage of the purchase price at the time of the transfer. However, I have passed over that, as it is overtaken by the finding in respect of the interest in the entire property.
Counsel for the defendants took issue with any inference that the $65,330 was paid to Le because of the lack of a narrative to that effect on the bank statement. It was submitted that the Court could not draw such an inference from the evidence, because inferences may only be drawn from primary facts. Further, because the $65,330 was taken from Quoc’s bank account by withdrawal rather than by electronic transfer (as was the case for the other transfers or money to Le), that should lead to an inference that the money was paid to someone other than Le.
I disagree with both submissions. Le accepted in evidence that if the ANZ bank statement recorded the transactions as being made to her, then that was what occurred, and further, that her memory of the financial transactions at that time was poor. Both the bank records and oral evidence established as a primary fact that $52,658.04 was repaid to Le in the few weeks following the transfer of the Richardson property. The bank statement which would have disclosed either way whether the money went into Le’s account or not was not in evidence, but that does not mean that without it, the Court cannot draw any inference from the surrounding circumstances and transaction.
The $65,330 was withdrawn from Quoc’s account on the day of the settlement. The timing of the transaction is a primary fact that is consistent with the money being related to the Richardson property purchase. The amount withdrawn is also a primary fact. It is an amount that squarely ties in with Quoc repaying the equity in the Richardson property to Le. There is also a degree of common sense brought to bear on whether the inference may properly be drawn: the repayment of $65,330 to Le is consistent with Quoc acting according to fairness, so that he did not make any financial gain out of his sister, when she was doing him a favour by taking over the legal responsibility for the mortgage.
(b) The Richardson property in the context of other family assets
The purported purchase must also be put in context. The pattern of property dealings between the Tong family is consistent with the legal title to the property shifting among family members as and when it suited their particular financial needs at the time, but the beneficial ownership remaining with a different family member, who either was using or had used the particular asset as their family home.
In her oral evidence, Le agreed that the bond between her and her brothers and mother was so strong that they all helped each other out along the way whenever they needed financial help. She agreed that when her brother went through a divorce, everyone helped him manage his rearrangement of property interests so that the Mackay property could still stay in the family and the banks would be satisfied. It was agreed that the Mackay property was always beneficially owned by Quoc, notwithstanding that his name was never on the title.
Le also agreed that when Quoc was under financial pressure in the years 2007-2009, she took on the Richardson property to help Quoc out, saying “I bought it from him so he would have enough money.”
She further agreed that when she assisted her mother to buy the Kambah property in the first place and paid down the mortgage with her, the Kambah property nevertheless was treated, not as the Tong family home, but as her mother’s home. As I have found above, when Quoc took over the legal title to the Kambah house in 2009, that transfer did not affect the Kambah property continuing to be treated as Khanh’s home.
When regard is had to the full history of how the Tong family deal with real estate assets, in this particular family context, the name recorded on the legal title to a particular real estate asset is not a safe guide to who holds the beneficial interest.
Le argued that what occurred with the Kambah property was different, in that Quoc did not pay for the transfer of the Kambah property into his name, whereas she paid money at the time for the Richardson property. That argument is defeated in part by what has been found above in relation to Quoc retaining an equitable interest at the time of the Richardson transfer.
Moreover, that argument is defeated by the history of what had occurred in relation to the Mackay property (described above in the discussion and findings relating to the Kambah property). Le paid full value to take over the Mackay property from Duc, yet there was no contest that Quoc retained the beneficial interest in the Mackay property.
There is also an element of fair exchange or quid pro quo between the expenses of Le and Quoc for the Kambah and Richardson properties, such that the finding that the Kambah property was held on constructive trust is intimately connected with the factual reasons supporting the position that the Richardson property was also held on constructive trust.
(c) Quoc’s treatment of the Richardson asset as his own property
I think what is more persuasive than who paid the outgoings directly or indirectly is the fact that Quoc undertook significant renovations to the Richardson property. Quoc undertook renovations to the laundry and constructed a concrete slab, apparently for the purpose of building a shed. There was no suggestion that he sought or needed Le’s permission to do that work. The concrete slab cost $7,865. Although Le originally outlaid that expense, it was reimbursed by Quoc (supported by the bank records in evidence and accepted by Le through her solicitor’s correspondence). The evidence demonstrates that he and Suqin continued to do whatever was desirable or necessary to maintain or improve the property, including expending significant sums of money, which is consistent with Quoc being the true owner.
In an unguarded moment in cross-examination, Le said that she believed the $290,000 (approximately) was in part “for all the times I have helped him with renovation work at Mackay, at Richardson”. The statement was telling in two ways. The first is that Le grouped Mackay and Richardson together in the times when she helped Quoc. Mentally, they were Quoc’s properties. The second is that Le was saying she helped Quoc with renovation work at Richardson – that is, that she viewed Quoc as having the responsibility for Richardson, including the responsibility to pay for that work. Her role was to help him, not to be responsible for the renovation work at Richardson. Le confirmed she helped Quoc only “with the renovation work and the finance” in relation to the Richardson property. The person who takes responsibility for capital improvements on an asset such as home renovations is more likely to be doing so to benefit their own asset, rather than someone else’s.
Le denied that her evidence recognised that Quoc had an interest in the Richardson property when the question was squarely put to her, but the truth of that answer was belied by her earlier evidence and her demeanour in the witness box, which was of someone who had just realised what she had said and was then back-tracking. The point is, it was Quoc who controlled the renovation and maintenance work at Richardson, which is consistent with him treating the asset as his own and inconsistent with Le being the beneficial owner.
A further, admittedly small, indicator of how Quoc treated the Richardson property as being his responsibility appears from the bank records. The account into which Quoc transferred the “rent” money, as well as the money for the concrete slab, was identified on his bank statements as ‘QUOC TONG R N EXP’ (with the natural inference drawn from R N as standing for Richardson). That is despite the actual name of the account into which the money was transferred was ‘L N TONG’; an account held by Le. This is a small detail, from which Quoc’s intention may be inferred. While not decisive, Quoc’s intention that he was paying money into the bank account ‘QUOC TONG R N EXP’ is consistent with the view that Quoc treated the account in Le’s name into which he paid “rent” and other amounts, as actually being his account for the purposes of meeting the Richardson expenses, or at the very least, that he was paying the expenses for the Richardson property.
(d) Suqin’s treatment of the Richardson property as her and Quoc’s own asset
Suqin’s evidence was that the Richardson property was transferred to Le for tax benefit reasons but that Quoc and Suqin continued to view and treat the Richardson property as their own home. In October 2008, Quoc told her he had put the Richardson property in Le’s name as an investment property. The arrangement communicated to Suqin at the time was that he would continue to pay for all expenses for the Richardson property and Le would give him any tax benefits she received. That evidence is consistent with the evidence in relation to Quoc paying for the expenses for the Richardson property.
Suqin was the primary homemaker until 2009. She studied English and short courses to educate herself to get employment between 2009 and 2010. She worked as a housekeeper in 2011 and 2012. She worked as a night-time cleaner and casual day cleaner over mid-2012 to 2014. She looked after the children in 2014 and 2015. She then returned to cleaning in 2016. From October 2016 until June 2018, she worked full time as an account administrator. She then returned to cleaning for a short period before giving up work to look after Quoc and has worked intermittently after that time as a cleaner.
Suqin’s unchallenged evidence was that when she worked, she deposited most of her income into her husband’s bank account and that account was then used to pay the family’s expenses including to Le for the mortgage repayments, which she knew were being described as “rent” for tax purposes. Suqin’s evidence was that Quoc said to her that the “rent” payments and expenses were designed to be lower than the mortgage repayments so that Le could claim tax deductions that would then be returned to Quoc in cash.
Suqin also signed a number of residential tenancy agreements over the years. Again, she said this paperwork was to support the tax benefits being claimed by Le.
It is to be recalled that such arrangement is consistent with what occurred in relation to the Kambah property, where Khanh also signed residential tenancy agreements and paid “rent” to Quoc. I have similarly given little weight to the description of regular payments as “rent” as being indicative in any way of a beneficial interest being held by the person who received the “rent”.
Le said that she paid the outgoings on the Richardson property, which was corroborated by some of the more recent credit card statements she put into evidence. However, that is an example of why caution must be applied to taking isolated pieces of evidence which appear to support a particular position. The bank accounts that were in evidence showed a free flow of money between Le and Quoc (discussed further below) and that Quoc had a dedicated “Richardson expenses” account into which he transferred money, including the payments described as “rent” and money for the renovation works. I accept that the payments which were described as rent were Quoc’s continued payment of the mortgage and expenses on the property. Whether or not Le applied the rental income directly to the mortgage payments and outgoings was outside Quoc and Suqin’s control. I have therefore given little weight to the limited sample of credit card statements pointing to payment of some outgoings in respect of the Richardson property.
(e) The payment made by Quoc to discharge the mortgage
The clearest evidence supporting the position that Quoc retained the beneficial interest in the Richardson property is what he did at the end of his life.
The cheque that Quoc gave to Le was for a deliberately calculated amount and it was attributable to two payments. Le’s evidence was that before he drew the cheque, Quoc said to her, “How much do you still owe on the Richardson mortgage and how much did I borrow from you before to help me pay my credit card in the past?” She replied, “My mortgage is $260,000. You owe me about $30,000 for the credit card payments and the Capital Gains Tax that I paid for you on Mackay”.
Quoc then gave her a cheque for that amount. In doing so, Quoc was plainly repaying the debt that Le had taken on for an asset to which he (and Suqin) were beneficially entitled. Contrary to what was argued by Le, in paying off the mortgage for the Richardson property, Quoc was not giving her a gift, but ensuring that he provided an unencumbered house for his children to live in. As Quoc stated many times in the conversations recorded throughout the evidence, the children were his primary concern.
That is seen in part through Duc’s detailed evidence about numerous conversations where Quoc told him that he wanted the kids to be looked after, that he wanted to set up a trust for the children and “leave the majority of the estate to the trust so that they will be looked after.” Duc’s evidence was that there were ongoing discussions with Quoc about setting up the Trust and how best to invest the funds that Quoc would give to the Trust. They discussed things like paying for one child’s university education. They also discussed what was going to occur in relation to the Kambah property. In all those conversations, not once did Quoc raise anything about where the children would live. That complete lack of any discussion about where the children would live, or taking any steps to provide for the children’s accommodation, is consistent with a belief on the part of Quoc that he owned the Richardson property, he had taken care of any liability in respect of it, and it was where his children would continue to live in the future. Quoc even told Duc that he would prefer the Trust to invest in shares rather than real estate. It is unlikely he would have said that if there was any doubt that the children might not have somewhere to live.
Suqin’s evidence was that Quoc told her in May 2019 that he would transfer the house (being the Richardson property) to her. I accept that evidence as being credible and plausible. It was consistent with the evidence referred to above that Quoc treated the house as his own. It is true that the transfer did not occur before he died, but other evidence readily explains why Quoc did not take the step of ensuring the Richardson property was transferred back into his name (or Suqin’s name) to reflect the beneficial interest position prior to his death: he knew he was dying, shortly after that conversation he thought he was in the process of divorcing Suqin, and he no longer trusted Suqin in respect of financial matters where his children were concerned. It is no coincidence that Quoc gave the cheque to Le on 16 May, the same day he signed the first iteration of the Will where he refers to Suqin having commenced family law proceedings.
Conclusion with regard to the Richardson property and its consequences for the $290,150 cheque given to Le
(a) The substantial payments made by Quoc to Le in respect of the Richardson property at the time of the title being transferred to her. (b) The conversations Quoc had with Suqin about what he believed occurred when the title was transferred. (c) The rental arrangement on paper being the same as the rental arrangements on paper in respect of other assets owned among the Tong family members, including the Kambah property. (d) The evidence that Quoc and Suqin continued to take responsibility for the upkeep and improvements on the Richardson property. (e) The substantial payment Quoc made to totally pay off the loan at the end of his life.
The requisite detriment is established by Quoc at least paying substantial sums of money to Le in January and February 2008 ($117,988.04 or alternatively at least $52,658.04), $7,865 for the renovation works, and then $260,000 for the final payout of the loan. Other amounts may also arguably be included as constituting detriment, such as the rental payments on the basis that Quoc believed the payments to be for his own mortgage.
Accordingly, the plaintiffs have established that the Richardson property was held on constructive trust for Quoc. That means the issue of whether the transaction should be set aside for undue influence or unconscionable conduct falls away, because the $290,150 cheque provided to Le was not a “gift” or any benefit to Le.
For completeness, I would add that because of the history of the relationship between Quoc and Suqin, and her personal monetary and domestic contributions to the mortgage payments and outgoings or rent (however described) over a 16-year marriage in the belief that she and Quoc were contributing to their own property, had Quoc remained alive, it is likely that she would have in turn have established at least a 50% equitable share of that beneficial interest in the Richardson property by way of a Baumgartner trust: Baumgartner v Baumgartner (1987) 164 CLR 137. It is not necessary to deal with that potential further legal consequence here, as the same result is arrived at through the context of the family provision claim.
Further and alternative findings in relation to the $290,150 cheque
Counsel for the defendants argued that if the Richardson property were held to be subject to a constructive trust in favour of Quoc’s Estate, the asset should not be required to be transferred to the Estate unencumbered, as that would result in a windfall to the Estate, arising from the fact that Le initially took out the ME loan in 2008 with $232,644 being used to pay off Quoc’s mortgage. However, that submission is answered by the finding that $260,000 of the total cheque amount provided by Quoc was a payment to Le for that very expense.
As a separate reason supporting the transfer of the Richardson property back into the Estate unencumbered, it is relevant that at the time the cheque was given to Le, she held an enduring power of attorney for Quoc. The plaintiffs challenged the enduring power of attorney itself, as being procured by undue influence. The plaintiffs separately pleaded that the $290,150 cheque was a transaction that occurred while Le held the enduring power of attorney in respect of Quoc’s financial affairs and that it would be unconscionable to retain the money. The plaintiffs sought an order requiring Le to account for that transaction (among others).
However, the plaintiffs did not directly plead that the receipt of the cheque itself was retained in breach of Le’s fiduciary duty. Had it been a finding material to the outcome of the proceeding itself, it may have been appropriate to give the parties the opportunity to address the position where the Court found that the enduring power of attorney was valid, and that there may have been unconscionability in retaining the $290,150 but on a different basis, namely that as Quoc’s enduring power of attorney, Le was under a fiduciary duty not to retain a benefit for herself. She also had an express duty contained in Schedule 2 of the enduring power of attorney document that she signed that unless expressly authorised by the enduring power of attorney, she must avoid transactions which result or may result in conflict between her duty to the principal and her own interest.
The findings relevant to the question of breach of fiduciary duty include:
(a) That the majority of the money provided by Quoc was directly referable to what was sufficient to discharge the mortgage in respect of the Richardson property. Le knew that fact, because she was the person who Quoc asked to communicate the total value of the loan and the other monies Quoc owed to her. (b) The Court has found that the purpose of Quoc giving the money to Le was to pay out the loan secured by the Richardson property. (c) On evidence belatedly supplied to the Court after hearing, it transpired that Le did not in fact apply the money for the purpose for which it was given to her. (d) In cashing the cheque and retaining the money rather than applying it to the loan secured by the Richardson property which has been found to have been held on constructive trust, Le appears to have acted contrary to her fiduciary duties (whether or not she understood that at the time, in light of her mistaken views about the Richardson property and the cheque). (e) Where a defendant is a fiduciary who has obtained or retained property for herself when under a duty to obtain or retain it for the plaintiff, the plaintiff will be entitled to the benefit of a constructive trust over the property or its traceable proceeds.
To the extent that Le did not apply the $260,000 to pay down the mortgage as she was obliged to do, in the event the Richardson property were to be transferred to the Estate subject to the outstanding loan, it may have been appropriate to hear from the parties further (even by a brief written submission) as to whether Le was liable to account to the Estate on that basis.
Finally, if contrary to the analysis above, the $290,150 was in fact a gift as opposed to Quoc restoring the family ledger by paying his liabilities before he died, I will briefly record that I would have found that such gift was a result of presumptive undue influence which had not been rebutted and was therefore liable to be set aside. The reasons for that finding would have been similar to those that are set out below in the context of the next transaction. Once that money had been returned to the Estate, it would have been dispersed to pay out the mortgage liability over the Richardson property. That may then have affected the findings made with regard to the family provision claim below, but it is not necessary to address that outcome because of the primary finding made that the cheque provided to Le was not a gift.
Should the gift of $360,000 to Duc be set aside?
(a) The bank cheque given to Duc in the amount of $360,000 was a gift. (b) As at May 2019, the circumstances were that Duc was in a position of ascendancy over Quoc, such that a presumption of undue influence arose from the gift. (c) The presumption was not rebutted. (d) Accordingly, the gift must be set aside.
The transaction was a gift
A presumption of undue influence
Taking the evidence as a whole, as at the end of May 2019, there are a number of overlapping features which combined to give rise to the presumption of undue influence.
First, there was already a close relationship between Duc and Quoc. Duc was Quoc’s confidante. That is demonstrated by the close family connection and the history of financial and other family support given by Duc to Quoc through his lifetime. Duc deposed to Quoc trusting him and knowing that he was competent.
Second, that relationship of trust and confidence intensified in the last six months of Quoc’s life. When Duc found out Quoc was dying, it is clear that Duc stepped up his level of involvement in Quoc’s life. That does not mean that he had any ulterior motive in doing so. I accept that he wished to spend as much time as possible with his brother in his final months of life. However, because of the intensification of the relationship, Duc assumed a critical role in Quoc’s care and the management of Quoc’s life and affairs from January 2019 when Quoc was undergoing chemotherapy and from then on until Quoc died. Duc and members of his family went to visit Quoc when he was in hospital every day. From the evidence provided by Duc and Suqin’s evidence about her observations of the pair, Duc was Quoc’s primary confidante. When Quoc was not in hospital, he would see Duc during the week for lunch and frequently met him for coffee on the weekend. Suqin observed Duc coming to the Richardson property most weekends and taking Quoc out for three to four hours before dropping him back at home.
Third, Quoc was in seriously failing health. He knew from December 2018 that his illness was terminal, and he was in and out of hospital for chemotherapy. That brought about the intensification in the relationship with his brother, as his brother also deposed to wanting to spend as much time with Quoc as possible due to the fact that he was dying. But Quoc’s illness also had a physical consequence relevant to Quoc being in a position of dependence. A letter from Dr Leong, consultant medical oncologist, dated 20 June 2019, detailed the rapid decline in Quoc’s health from the month after his initial consultation on 18 December 2018 (that is, by 18 January 2019). He referred to the disease being too widespread to be amenable to any form of curative therapy. The doctor referred to Quoc as having:
…a particularly aggressive strain of bowel cancer, and true to this he rapidly deteriorated in the month or so between the initial consultation and proposed palliative surgery to prevent complete bowel obstruction. Specifically, his liver disease had enlarged to a point where he became jaundiced with a grossly enlarged and painful liver. In parallel he significantly deteriorated to a point where he has required hospitalisation from the day of proposed surgery, which was cancelled owing to his unwellness. He was commenced on palliative chemotherapy which resulted in a brief response, however the tumour developed resistance quickly with the consequence that he was subsequently found to have tumour progression on his latest CT scan earlier this month, and succumbed to this condition on 17/6/2019…
I am physically weak, under nourished from loss of appetite to eat, have no energy, tired and sleepy from the chemo medication and other medication to combat the side effects of the chemo treatment. …
Fourth, Quoc became increasingly isolated from Suqin. The draft will of 16 May 2019 referred to Suqin having commenced divorce and separation proceedings. This was before Quoc received any letters from the family lawyer instructed by Suqin which were sent by email on 23 May and received by post on 28 May 2019.
That is corroborated by Duc’s evidence, which included Quoc disclosing to him on numerous occasions what was going on at home, and Quoc’s negative views about his treatment by Suqin (whether mistaken or otherwise). The discussions between the pair serve to reinforce the relationship of confidence between Quoc and Duc, but separately disclose that Quoc felt distanced from other people who may previously have balanced out the relationship of dependence upon his brother. In an affidavit signed by Quoc for anticipated family law proceedings, Quoc states that Suqin stopped coming to his medical appointments from March 2019 (such as chemotherapy treatment, blood tests and CT scans), which meant that Quoc resorted to either taking public transport or calling his siblings to give him a lift. Indeed, the involvement of Duc (among other family members) in assisting Quoc with his numerous medical appointments rather than asking for her help was a source of complaint by Suqin in a conversation that she recorded between herself and Quoc.
Fifth, Quoc became dependent on Duc for assistance with all facets of his life, whether it be work, medical, financial, or legal affairs. Quoc requested Duc to help him with obtaining life insurance payments, talking to Quoc’s director at work, writing his will over a number of months from January 2019, speaking to doctors and obtaining medical reports, and drafting affidavits and corresponding with a family lawyer instructed by Suqin. Duc’s help extended to the printing of whatever forms were necessary and bringing them to hospital, as Quoc did not have a printer. Duc became what he described as Quoc’s “secretary or administrative assistant”.
Sixth, Quoc gave Duc formal authority or power over his affairs in various ways. They included executing an enduring power of attorney in January 2019, appointing Duc and Le as his attorneys. Quoc described this to Duc as Duc acting as the primary power of attorney, with Le as a second attorney (in essence, a back-up) in case Duc could not perform those duties. Duc’s evidence, which I accept, was that he did not actually use the power of attorney to make decisions on Quoc’s behalf, except for the non-resuscitation form at the hospital on the morning Quoc died. But he did use the power of attorney where required to obtain information, forms, and medical reports for Quoc. The critical matter, however, is that Duc was in a formal position to exert influence.
Seventh, and partially overlapping with Duc’s involvement in assisting Quoc in his dying months, Quoc’s perception of Duc was of someone who had moral and practical superiority. In part, that was because objectively, Duc and Le had better language skills and superior financial literacy to Quoc. Quoc named Duc as the executor in his Will and chose Duc and Le over his own wife to manage the Trust for his children when he died. Duc was intimately involved in both drafting the will and setting up the Trust, even though Duc’s evidence was that he felt he knew less than Quoc about trusts at the time.
I have told [Suqin] that I have entrusted the establishment and running of the Trust to the two most responsible people in my family. My brother Duc Khai Tong and sister Le Ngoc Tong. …
Further context to that is provided by Duc, who recalled Quoc saying to him: I want to make sure that the kids are looked after. I have complete faith in your ability to manage the trust rather than waste money in paying professionals to do so on our behalf.
I have cited those examples to illustrate separate ways in which Quoc accorded to Duc a clear position of trust and influence that went beyond reciprocal confidence and influence, moving to dependence and subjection.
The circumstances as a whole establish that, by the time Quoc handed over a bank cheque to Duc at the end of May 2019, Duc’s relationship with him was one of a position of ascendancy over Quoc. Quoc was in a position of physical and emotional dependence upon Duc, and reposed trust and confidence in Duc to such an extent that Duc was in a position to exert influence over Quoc. In respect of this transaction, applying the authorities discussed above, the relationship between Duc and Quoc was one of presumptive undue influence.
The presumption was not rebutted.
The Court must be satisfied that the gift was the independent and well-understood act of a man in a position to exercise a free judgment.
The size of the gift at $360,000 was, on any view, extravagant.
Moreover, given Quoc’s financial circumstances, it was an improvident gift. At the time that Quoc gave the cheque to Duc in late May 2019, he had signed a will on 16 May 2019, the terms of which included the additional testamentary gifts to Duc, Le and his mother Khanh totalling $170,000. His entire estate was only worth $340,000 after liabilities were discharged. That is, at the time of the gift to Duc, Quoc had created circumstances where he was only leaving his young children around $170,000. The context to the gift thus includes a 49-year-old dying man leaving his four school-aged children collectively with half the amount of the gift given to his brother.
It is critical in this case that Quoc did not receive any independent financial or legal advice at any time before making the gift. He may have trusted Duc more and not wanted to spend money on such advisers, but the reason why he did not get advice is immaterial. The fact remains that he did not have any independent advice, let alone any appreciation that he well-understood what he was doing.
The authorities focus attention on whether the gift was improvident. Objectively here, in his attempt to be generous to his beloved brother, it was plainly an improvident thing for Quoc to pay off his brother’s mortgage, giving Duc in a single payment significantly more than Quoc was leaving to his four young children combined; money upon which they needed to survive when he died.
Duc pointed to the fact that he did not know about the gift when it was initially transferred to his bank account, and that he then transferred the money back, before it was ultimately given to him a second time by Quoc drawing a bank cheque. I would have considered those matters to be relevant to the question of whether the gift was the product of unconscionable conduct on the part of Duc, but they are of little assistance in rebutting a presumption of undue influence. As the authorities to which I have referred above make clear, Quoc may have fully intended and desired the transaction without receiving any encouragement or request from Duc, yet still the doctrine of undue influence will intervene if the circumstances are insufficient to establish the requisite degree of independence and informed decision-making by the donor. Quoc’s gift was clearly made out of love and deep gratitude and in that regard it was voluntary. However, it has not been shown to be free, in the sense that it was not an independent and well-understood choice.
Having regard to Quoc’s circumstances at the time the gift was made, the value of the gift was so substantial and the transaction so improvident as to be inexplicable on the grounds of the ordinary motives on which ordinary persons act: Quek v Beggs (1990) 5 BPR 11,761 at 11,764 per McLelland J. The evidence before the Court was insufficient to rebut the presumption.
Issue 3: What assets comprise the Estate?
(a) The Kambah property does not form part of the Estate. (b) The Richardson property, unencumbered, will form part of the Estate following orders to be made to give effect to the above finding. (c) The $360,000 paid to Duc will also form part of the Estate, again following orders to be made setting aside the gift for undue influence.
(a) a share portfolio of $107,820.48, (b) a bank balance of $98,139.87 and (c) funds held in the trust account of the legal representatives for the Estate of $28,607 in provision for legal fees.
That $28,607 figure was said to represent the estimated costs and disbursements including counsel’s fees, to bring the matter to the conclusion of the proceedings. The Executor has previously paid $43,928.25 in legal fees.
There is also a separate reference in the same affidavit to the “value of the estate assets” which was said to comprise $221,492.16 “in estate bank accounts”. Again, there was a reference to the estate assets also including funds held in the solicitors’ trust account of $28,607 on account of legal fees. However, it was not clear whether that amount was the same amount that had been included as part of the Trust assets (and therefore not part of the Estate), or whether it was a separate amount held in trust for the Estate’s separate legal fees.
Compounding the confusion, the solicitor representing the defendants affirmed an affidavit setting out what he said were the legal costs for the four defendants. He deposed to joint legal costs and disbursement having been incurred by the defendants as amounting to $286,865.34. It is unclear how much of that figure are legal costs that have been paid, and whether the figure includes the $28,607 figure referred to in Duc’s affidavit as being currently held in the solicitor’s trust account.
It appears from the evidence that has been put before the Court that the residual amounts or net value of the Estate currently includes the $170,000 in testamentary gifts to each to Duc, Le and their mother Khanh, which have yet to be paid. The Will made provision for specific bequests (although it used the word “requests”) to:
(a) Quoc’s mother in the amount of $30,000, to be paid annually in $6000 instalments, and (b) $70,000 each to Duc and Le for their own use absolutely.
The plaintiffs are to receive the remainder of the Estate; Suqin as beneficiary of Quoc’s superannuation benefits gifted to her expressly by the terms of the Will, and Quoc’s children as residual beneficiaries in equal shares.
As will be apparent, it is unclear on the evidence what the net value of the Estate is, but following the findings made earlier in these reasons, it will include an additional $360,000, plus the value of the Richardson property, from which will be deducted the gifts pursuant to the terms of the Will (subject to any family provision claim below).
However, the Court cannot ignore the extant legal costs to be paid out of that residual amount, and the true legal costs of the parties are concerning. Following the hearing and at the request of the Court, the solicitors for each party provided their unassessed (solicitor and client) costs and disbursements. As I have said above, the defendants’ total legal costs are $286,865.34, although not all of this amount may ultimately be paid out of the Estate, given that there are four defendants. The plaintiffs have similarly advised that their unassessed solicitor and client costs and disbursements are currently $286,886.22. It was said that this is likely to increase to somewhere in the order of $300,000 when the invoices for the transcript of the hearing are included.
I will reserve for consideration any questions of proportionality of legal fees once any arguments about the question of costs in this proceeding have been agitated.
Issue 4: The Family Provision claim – should further provision be made for the plaintiffs out of the Will?
Applicable legislative provisions
The claims for family provision arise under the Family Provision Act 1969 (ACT) (FP Act). Section 7 of the FP Act sets out who is eligible to make a claim. It includes both a child and a partner of the deceased person (ss 7(a) and 7(c)).
On an application by a person entitled, s 8 of the FP Act empowers the Court to order the provision it thinks fit to be made out of the estate (s 8(1)). The critical threshold and considerations are set out in ss 8(2), 8(3) and 8(4) (emphasis added):
(2) The Supreme Court shall only make an order under subsection (1) if satisfied, in consideration of the criteria set out in subsection (3), that as at the date of the order, adequate provision for the proper maintenance, education or advancement in life of the applicant is not available— (a) under the will of the deceased; or (b) if the deceased died intestate—under the law applicable to that intestacy; or (c) under that will and that law combined. (3) The criteria for the Supreme Court’s decision under subsection (2) in relation to the deceased and the applicant are as follows: (a) the character and conduct of the applicant; (b) the nature and duration of the relationship between the applicant and the deceased; (c) any financial and non-financial contributions made directly or indirectly by or on behalf of either or both the applicant and the deceased to the acquisition, conservation or improvement of any of the property or financial resources of either or both persons; (d) any contributions (including any in the capacity of homemaker or parent) by either the applicant or the deceased to the welfare of the other, or of any child of either person; (e) the income, property and financial resources of the applicant and the deceased; (f) the physical and mental capacity of the applicant, and the deceased (during his or her life), for appropriate gainful employment; (g) the financial needs and obligations of the applicant and the deceased (during the life of the deceased); (h) the responsibilities of either the applicant or the deceased (during his or her life) to support any other person; (i) the terms of any order made under the Domestic Relationships Act 1994, section 15 with respect to the property of the applicant or the deceased; (j) any payments made to either the applicant or the deceased by the other, under an order of the court or otherwise, in respect of the maintenance of the other person or any child of the other person; (k) any other matter the court considers relevant. (4) The Supreme Court may regard an application for provision out of the estate of a deceased person by a single person as an application made on behalf of all the persons entitled to make applications for provision out of the estate of the deceased person. Applicable legal principles
In Armouti v Nenes [2022] ACTCA 3; 17 ACTLR 237 (Armouti) at [78]-[98], I summarised the principles applying on applications for family provision. That summary has subsequently been adopted in Richardson v Richardson [2022] ACTSC 363 at [106]. The Court is required to consider whether adequate provision for the proper maintenance, education and advancement in life of the applicant is available under the will, having regard to the considerations set out above. If it is not, then the Court is to make such provision as it thinks fit.
However, what is important to emphasise in the circumstances of this case is that in the Territory, the Court may only make provision out of the assets that form the actual Estate. That is why it was necessary to first determine what that Estate comprised. If this case were brought in New South Wales, Suqin may have been able to seek a notional estate order as part of the one family provision claim (see, for example, Succession Act 2006 (NSW), Part 3.3), to recover the property Quoc distributed prior to his death. Absent any such legislative scheme in the Territory, the plaintiffs are limited to a claim by way of family provision of the $170,000 in specific bequests made in the Will to Quoc’s mother, brother and sister.
Without repeating the totality of what was said in Armouti, the following principles are what I have extracted as points applying to the circumstances of the present case.
First, the Court will not interfere with the testator’s freedom to leave their estate to whomever they choose, unless there is some proper basis for doing so under the legislation: Pontifical Society for the Propagation of the Faith v Scales (1962) 107 CLR 9 (Pontifical Society) at 19 (per Dixon CJ, McTiernan J agreeing); and see Armouti at [78] and the authorities there-cited.
In Pontifical Society Dixon CJ said at 19 (emphasis added):
The words “proper maintenance and support”, although they must be treated as elastic, cannot be pressed beyond their fair meaning. The Court is given not only a discretion as to the nature and amount of the provision it directs but, what is even more important, a discretion as to making a provision at all. All authorities agree that it was never meant that the Court should re-write the will of a testator. Nor was it ever intended that the freedom of testamentary disposition should be so encroached upon that a testator's decisions expressed in his will have only a prima facie effect, the real dispositive power being vested in the Court.
Second, bearing that important caution in mind, an order may be made if it appears that the testator has failed to discharge a duty to make provision for the maintenance, education or advancement of his widow or children. But it must appear, firstly, that such a duty existed and, secondly, that it has not been discharged: Stott v Cook (1960) 33 ALJR 447 at 453-454.
Third, in making such an assessment about duty, the Court takes into account community expectations and judgments of the fair and reasonable person in the community: Burke v Burke [2015] NSWCA 195 at [124]; Andrew v Andrew [2012] NSWCA 308; 81 NSWLR 656 (Andrew) at [95]; Hertzberg v Hertzberg [2003] NSWCA 311 at [34], McCarthy v McCarthy [2010] NSWCA 103 at [20] and Evans v Levy [2011] NSWCA 125 at [51]. It is not always self-evident what the community expects, or what its standards or values are: Phillips v James [2014] NSWCA 4; 85 NSWLR 619 at [113], per Basten JA. The Court must be cautious not to extrapolate general principles from statements in authorities based on a particular factual assessment of circumstances by reference to human and societal values: Andrew at [18].
In Henry v Hancock [2016] NSWSC 71 (Henry), Brereton J, as his Honour then was, explained the approach the Court is to take at [68]-[69] (emphasis added):
It is important also to bear in mind the principle articulated by Young J, as he then was, in Stewart v McDougall, in explaining that the court's role is limited to making adequate provision for an eligible person's proper maintenance and advancement: It is important to state what the Family Provision Act permits a Court to do and what it does not permit a Court to do. The Act recognises that Australians have freedom to leave their property by their will as they wish with one exception. The exception is that a person must fulfil any moral duty to make proper and adequate provision for those whom the community would expect such provision to be made before they can leave money as they wish. Thus, in these cases, one does not ask if the will is fair, one does not ask if the testatrix divided her property equal, one does not as a judge ask how would I have made a will had I been the testatrix. What must be asked is did the testatrix fail in her moral duty to those who have a claim on her. Even if the Court comes to the view that the question should be answered in the affirmative, the Court still does not remake the will, but only alters it to the extent adequate provision is made for the eligible person in respect of whom the testatrix failed in her moral duty. 69. Formerly, the yardstick which was applied was that of the wise and just testator. Nowadays, it is fashionable to couch it in terms of “community standards”, although I am not at all sure that this is any different from the moral obligation of a wise and just testator and, as has not infrequently been pointed out, there is no ascertainable external community standard to guide the decision, which involves a broad evaluative judgment unconstrained by preconceptions and predispositions, and affording due respect to the judgment of a capable testator who appears to have duly considered the claims on his or her testamentary bounty – subject to the qualification that the court’s determination is made having regard to the circumstances at the time of the hearing, rather than at the time of the testator’s will or death.
… the words “adequate” and “proper” are always relative. There are no fixed standards, and the court is left to form opinions upon the basis of its own general knowledge and experience of current social conditions and standards.
A multifaceted approach to the question is necessary, in that what is “proper” requires “an evaluative judgment that has regard to all relevant circumstances, not merely the parties’ financial circumstances”: Sgro v Thompson [2017] NSWCA 326 (Sgro) at [6], citing Vigolo v Bostin [2005] HCA 11; 221 CLR 191.
It is not the case that once there is an eligible claimant and a demonstrated need for maintenance, the testator’s wishes cease to be of any weight. Such wishes as set out in the terms of a will may be “overridden”, but “they are part of the circumstances of the case and fall to be assessed in the round together with all other relevant factors”: Ilott v The Blue Cross [2017] UKSC 17; [2017] 2 WLR 979; 4 All ER 545, at [47].
Fifth, where it is evident that a capable testator did give due consideration as to the adequacy of provision for a particular claimant, that will not of itself be determinative of any subsequent claim for family provision. The issue is how freedom of testamentary disposition is factored into the assessment: see Steinmetz v Shannon [2019] NSWCA 114; 99 NSWLR 687, per White JA at [50] – [54].
That consideration is strengthened by the sixth principle, which is that the court’s determination under s 8 is to be made having regard to the circumstances at the time the court is considering the application, rather than at the time of the deceased’s death or the time the Will was made: Henry at [69]; Sgro at [83].
Is adequate provision for the proper maintenance, education or advancement in life of the plaintiffs available under the Will?
Suqin and Quoc were married for almost sixteen years. Suqin’s occupation was primarily as the homemaker and her contribution in that regard was significant. She supported Quoc as the primary income earner by working as a cleaner, but she had spent the past fourteen years raising the four children with Quoc, applying any income she did earn to the joint family living endeavour. On the evidence before the Court, Suqin contributed the majority of her financial and non-financial resources to Quoc and their four children.
Suqin’s current financial circumstances are modest. She has $150,000 in the bank and shares valued at $25,000. She does not appear to have any superannuation in her own right of any value. She deposes to her main income as being the spousal superannuation benefit.
She is now the sole provider for her four children and her elderly mother, who lives with them. She is forty-eight years old. She has limited income, working full-time as a cleaner and providing for the four children and her mother. Given her education and experience, she appears to have very little ability to improve her income by working in another type of employment and there was no suggestion to that effect in the cross-examination.
Her expenses were set out in her affidavit in detail and I accept that they are reflective of her true expenses. Putting to one side any question of paying rent/mortgage payments due to the findings made above, she still has to pay out of her cleaning wage for the internet service, electricity, health and car insurance, groceries, medication, car maintenance, maintenance to the Richardson Property, and parking. She also has the additional expenses for her children’s transport, extracurricular activities, camps and school fees and meals when they are out anywhere. The family do not live a flamboyant lifestyle, and I accept Suqin’s evidence that given her modest income, these basic living expenses for six people would have put her and the family at risk of homelessness if the Richardson property had not been found to be an asset held on constructive trust.
Separately Suqin receives a family assistance payment from Centrelink of $1,147.86 fortnightly, and other Centrelink benefits of less than $1000 a month. Her mother receives an age pension of $2096 per month.
To the extent that Quoc was not happy at the end of his marriage and life, that is not a product of any disentitling conduct on the part of Suqin. On the contrary, the complaints and things that led to fights between Quoc and Suqin were properly characterised as the ordinary friction of daily family living. Suqin did not attend some functions with Quoc’s side of the family, which it seems Quoc did not like, but, on the whole, over the years, she did participate in Quoc’s interactions with his own side of the family. Suqin was exasperated with Quoc not attending to projects he had around the house or housework. She got cross when he was playing video games rather than attending to family needs. With all the demands that come with raising a family of four, her consternation about such matters is unremarkable.
Issue 5: Should Duc be removed as executor of the Estate?
(2) This section applies if an executor or administrator— (a) remains out of the ACT for more than 2 years; or (b) wants to be discharged from the office of executor or administrator; or (c) after the grant of representation or appointment— (i) refuses to act in the office; or (ii) is unfit to act in the office; or (iii) is incapable of acting in the office.
…the Court will not lightly exercise its discretion to remove a person who has been chosen by the testator as the personal representative. However, it is the welfare of the beneficiaries and the protection of their interests in the estate which must be regarded by the Court as the paramount considerations in exercising the discretion.
The jurisdiction to remove a trustee is exercised with a view to the interests of the beneficiaries, to the security of the trust property and to an efficient and satisfactory execution of the trusts and a faithful and sound exercise of the powers conferred upon the trustee. In deciding to remove a trustee the court forms a judgment based upon considerations, possibly large in number and varied in character, which combine to show that the welfare of the beneficiaries is opposed to his continued occupation of the office. Such a judgment must be largely discretionary. A trustee is not to be removed unless circumstances exist which afford ground upon which the jurisdiction may be exercised. But in a case where enough appears to authorise the court to act, the delicate question of whether it should act and proceed to remove the trustee is one upon which the decision of the primary judge is entitled to special weight.
The principles stated in Miller v Cameron referred to a trustee and the duties of a trustee. In Fysh v Coote [2000] VSCA 150 (Fysh) (at [20]) they were applied to the removal of an executor, “so long as one took account of the fact that the jurisdiction is being invoked so as to deny an executor the right to perform his or her duties as such”.
In each of Dimos and Fysh, the appellate court approved of Ashley J’s discussion of the discretion to act in Monty Financial Services Ltd v Delmo [1996] 1 VR 65, where his Honour held that unfitness could be constituted "by matters such as unwarranted delay in administration of the estate, failure to communicate with beneficiaries, failure to account, and unreasonable delay in paying beneficiaries their entitlements" (at 73) and that unfitness to act also “does comprehend a situation in which an executor has a conflict of duty and interest in carrying out his executorial duties” (at 82), although his Honour was careful to note that "not every conflict of duty and interest ... should result in removal of an executor" (at 83). His Honour repeated that the Court should not lightly set aside the intention of the testator that a particular person be that person’s executor (at 83).
In this jurisdiction, Master Harper discussed a number of authorities from which the applicable principles for the discharge of a named executor are drawn in Jurkiewicz v Jurkiewicz [2013] ACTSC 89 at [19]-[22]. It is unnecessary to set out all the examples of first instance judgments to which his Honour referred. They are consistent with the principles set out above, being a recognition that the named executor is ordinarily entitled to carry out the role, and that the exercise of the jurisdiction to discharge an executor (whether statutory or inherent) keeps in view the due and proper administration of the estate and the interests of the parties beneficially entitled.
One example that was cited by Master Harper and that may have some consonance with the situation here is Bourdales v Carroll [2007] NSWSC 1057, where Young CJ in Eq directed a grant of letters of administration in favour of the Public Trustee rather than the executor named in the will, in circumstances where there was a dispute within the family. On fine balance, his Honour decided that it would be cheaper in the long run to have an independent person administer the estate.
The Court takes into account the whole of the evidence, which established that the blood relations of the testator and the wife of the testator plainly do not get on and neither trust each other to competently manage the Estate or the Tong Family Trust. While I tend to the view that friction between family members may not of itself be sufficient to displace a named executor, there are features of the relationship here which demonstrate that Duc as the executor has allowed his personal view of Suqin to affect his judgment in the proper administration of the Estate.
I give Suqin Zhu Tong my superannuation benefits for her own use absolutely whether [or] not she remains my spouse or our marital status has changed to separated or divorce[d]. …
On 12 July 2019, the Commonwealth Superannuation Corporation (CSC) approved the payment of Quoc’s superannuation spouse benefit to Suqin. It explained that she was eligible to receive a pension of $40,601.86 per year, payable for life. The statement of reasons of a delegate of the CSC dated 11 July 2019 refers to the delegate having read and considered the Will, and also to an affidavit from Duc dated 12 June 2019 where he refers to Quoc telling him in May 2019 that he wanted to apply for divorce.
On 1 August 2019 – that is, at a time before probate had even been granted to Duc – he wrote to the CSC and appealed or requested a reconsideration of the delegate’s decision to award the superannuation spouse benefit to Suqin. The CSC advised Suqin that she would not be paid the superannuation benefit until the reconsideration process had been finalised.
Duc then delayed the progress of the reconsideration process, on the basis that he was needing to gather further evidence and was still awaiting the grant of probate. On 23 August 2019, he communicated to a different officer at the CSC that “I am in no rush to finalise this at this point”.
Duc confirmed under cross-examination that he both knew of the provisions of the Will set out above (because he had drafted them), and that he understood that it was Quoc’s express wish that Suqin receive the superannuation benefit regardless of what their marital status was upon his death. Yet in a subsequent email to the CSC which appears to have been written in 2020, he wrote:
As the Executor for my late brother, I feel compelled to honor his final wishes and ensure Suqin is not eligible for what she is not eligible for. I wish to extend my appeal process until such time as the family provision claims are dealt with by the supreme court (I think it will be over by JUNE 30 this year) as a lot has progressed so far …
On 10 June 2021, Duc again wrote to the officer at the CSC dealing with the reconsideration application and requested a temporary withdrawal. Under cross-examination he emphasised that he did not withdraw his request for reconsideration, he only temporarily withdrew it. Further, even though he was not considering reactivating his objection to the payment, as at 29 November 2022 when he was giving evidence, he had not written to the CSC to tell them that, stating only that he had planned to do so.
The above evidence demonstrates that in relation to Suqin, Duc was not administering the Estate in accordance with the terms of the Will. At the very least, he was the cause of significant delay in the distribution of the superannuation spouse benefit to Suqin as named sole beneficiary. His view that Suqin was “not eligible” was completely at odds with his late brother’s final wishes as expressed in the Will, which were very clear that the gift to Suqin was independent of any particular marital status.
I do not think it necessary to pinpoint whether Duc’s conduct was a product of ill will towards a particular beneficiary or stubbornness based on a misconceived view. The position is simply that by making the reconsideration process dependent on the progress of this proceeding, and then refraining from finalising the process, Duc was not acting in the interests of the parties beneficially entitled, and unfairly delaying the due administration of the Estate.
The family friction and his personal view about whether Suqin was or should be “eligible” for the superannuation benefit left to her by Quoc in the Will means that in the whole of the circumstances, he is “unfit” to be executor of the Estate. I am persuaded that he is “unfit” to be executor of the Estate in the broad sense that term is used as explained above.
As a separate reason, the failure of the Executor to either seek judicial advice or step aside as executor when the requirement arose to investigate the sizeable transfer of money by Quoc to Duc for undue influence, is a further indication supporting his removal as executor now. The Estate’s obligation to act in the interests of the beneficiaries arguably brought with it an obligation to at least investigate that cause of action on behalf of the Estate. There is also a question over whether the Estate should have pursued Le for that part of the $290,150 paid to her that was for the repayment of the mortgage over the Richardson property (which has ultimately found to be held on constructive trust) and which was not applied to the mortgage. That cause of action has been effectively agitated by the plaintiffs through the relief sought in this proceeding, but again, the action against Le was one that on one view, should have at least been investigated or the subject of an application for judicial advice by the Estate.
In any event, this is a case where I am satisfied that going forward, an independent executor would be more appropriate to finalise the due and proper administration of the estate because such a person would have the ability to act independently and deal dispassionately with conflicts and to attend to the necessary steps to achieve such finalisation without delay.
Issue 6: Should Fortitude be removed as Trustee of the Trust?
In closing submissions, counsel for the defendants, Mr Chapple, drew the Court’s attention to s 70 of the Trustee Act 1925 (ACT) (Trustee Act), which permits the Court to appoint a new trustee whenever it is appropriate to do so. He did so in the context of a submission that he knew would potentially result in the section being applied against his clients’ primary desired outcome on this issue (although not directly against their interests).
That was an example of the considerable assistance given to the Court throughout the hearing by the executor’s legal representatives regarding the legal principles applying in this case. The diligence with which the written and oral submissions were prepared and the helpful exchanges with counsel during the hearing, particularly counsel for the Estate, exemplified the significant service provided by officers of the court and is worthy of mention in these published reasons.
In this case, it is appropriate to appoint a new trustee. The passage from Miller v Cameron, referred to above, applies equally to whether a trustee should be removed and a new trustee appointed in its place. Because Duc and Le are the controllers of the Tong Family Trust, they will have ongoing interaction with Suqin as the mother of the beneficiaries of the trust, three of whom are under eighteen. That interaction will be regular and of many years’ duration.
The terms of the Will also include conditions for the beneficiaries’ receipt of gift or property. They include (clause 8 of the Will) that the beneficiaries “must not impede the Executor in their duties”. If they have done so, “that Benefactor’s share of the residue may be reduced or withheld or revoked at the discretion of the executor”.
Clause 11 of the Will then provides:
The entire residue of my estate will be transferred to the Tong Family Trust to be invested and only the profits of the trust to be distributed at the discretion of the trustee for the benefit of my children’s education, health and wellbeing until the youngest surviving child of mine becomes 24 years of age.
Having read the affidavit evidence and seen each of the individual defendants and Suqin discuss their dealings with each other, there is scope for significant disagreement in the future as to what may benefit Quoc’s children with regard to their education, health and wellbeing so as to warrant a discretionary distribution from the Trust. That is particularly the case where the person making any requests for distribution for those purposes, at least until each child reaches adulthood, will be Suqin.
Given the conduct of Duc referred to above in relation to his decision-making vis-à-vis the superannuation spouse benefit, and the evident conflict arising from the present litigation, it is not hard to envisage circumstances where the directors of the trustee might refuse an otherwise reasonable request made by Suqin for reasons that Suqin considers to be trivial or spiteful against her. Even a perception that a refusal is so based may in turn generate further litigation. I am not saying that is the likely conduct of either Duc or Le, but it is an example of what could occur due to the broad discretionary wording of the Will. In the circumstances of this case, I have formed the view that the interests of the beneficiaries are better served if there is an independent trustee to manage the fund.
I am also mindful of the inherent parens patriae jurisdiction of the Court in respect of minors. It extends as far as necessary for the protection of children and those persons who from their legal disability cannot look after themselves and are in need of protection: Secretary, Department of Health and Community Services v JWB and SMB [Marion’s Case] (1992) 175 CLR 218 at 258–9 per Mason CJ, Dawson, Toohey and Gaudron JJ, 279–80 per Brennan J.
Although a corporate trustee has been established, from a practical perspective, it will be managed by the individual defendants, neither of whom have financial planning or professional trustee qualifications. Duc is a public servant working in the area of information technology and Le is also an information technology professional. The evidence did not otherwise demonstrate either had the skill set for determining the appropriate investment strategy for the ongoing benefit of children over a lengthy period, which is what will be required in order to act in accordance with the terms of the Will and the terms of the trust deed.
My view that an independent trustee is appropriate and that the corporate trustee does not, as presently governed, have the necessary skill set is reinforced by evidence that the Trustee has already misapprehended the role and scope of its duties. Duc and Le, purportedly in their role as directors of the corporate trustee, have corresponded with Suqin in the following terms:
10 March 2020 RE: RENTAL PROPERTY/ TONG FAMILY TRUST We write on behalf of Fortitude Investment Group Pty Ltd, the Trustee for the Tong Family Trust (the Trust). For a number of months now the Trustee has attempted to provide you with assistance in locating appropriate accommodation for you and your children in recognition of the fact that a) you are not paying any rent and remaining on the property owned by Le Tong is untenable in the long term; and b) it is in your children’s best interests to have secure accommodation. …. In the interests of your children, we have undertaken to inspect several properties and put considerable efforts to talk to agents. We have submitted tenancy applications to secure suitable accommodation for you and your family. We have now secured a rental property at [Monash] … We attach the Real Estate Agent’s confirmation that we have secured the property. Arrangements can be made with the Agent if you wish to inspect the Monash property. Considering the rent cost of this property, the Trustee now makes this further offer of assistance to you: 1. Payment of, or contribution to, rent of up to $480/week; 2. Rental bond of $1920; and 3. Contribution to removalist costs of $1,000. Total Contribution over 12 months: $27,880 This financial assistance will conclude at the expiry of 12 months from the lease commencement date or the resolution of any family provision claim made by you in the Estate of the late Quoc Khai Tong (whichever is sooner). This offer of assistance is made on the basis that you will accept the offer by 11 March 2020 and vacate the Richardson property by 22 March 2020. This correspondence will be used as evidence that the Trustee has considered the needs of your children and have made considerable efforts to help secure appropriate rental accommodation close to the Richardson area.
The plaintiffs did not agree to the offer. However, it is no part of the role of the Trustee of the Tong Trust to decide where the children are to live in circumstances where their mother is alive, let alone taking the extraordinary step of securing a property with a real estate agent on their behalf, and worse, making any financial assistance out of the Trust for accommodation for the children limited as to time or dependent on the resolution of a family provision claim made by the children’s mother. There is an obvious conflict of interest in a director of the Trustee personally seeking to evict the child beneficiaries from their family home through proceedings in ACAT while at the same time as the corporate Trustee was suggesting it had ‘considered the needs’ of the children and made considerable efforts to help secure appropriate accommodation.
Whilst s 70 of the Trustee Act does not require the Court to find fault or inadequacy on the part of the trustee before removing them, the conduct of the Trustee to date, acting through its directors, reinforces the need for an independent trustee to manage the Tong Trust.
An independent and experienced trustee is preferable, both from an investment perspective (to ensure confidence in the protection of the Trust assets), as well as from the more personal family perspective. Someone independent would reduce the opportunity for ongoing conflict between the mother of the beneficiaries, who has primary responsibility for the education and welfare of Quoc’s children, and the trustee who has been given the financial means of assisting with that task.
Accordingly, the corporate trustee will also be removed from continuing to manage the Trust for the benefit of the child plaintiffs.
Costs
Overall, the plaintiffs have been substantially successful on the claims for relief. They are likely to be entitled to the payment of their costs out of the Estate on the ordinary basis.
Rules 1700 and 1732 of the Court Procedures Rules 2006 (ACT), govern the costs with regard to Duc in his capacity as the Executor of the Estate, and Fortitude as the corporate trustee of the Trust, subject to the exception provided in r 1732(3).
Section 59(4) of the Trustee Act also permits a trustee to “reimburse himself or herself, or pay or discharge out of the trust property, all expenses incurred in or about the execution of his or her trusts or powers.”
There may be matters currently outside the Court’s knowledge which bear upon the question of costs, and the parties may also wish to deal with other questions relating to costs, such as whether the costs ought be limited, or a fixed sum ordered, to achieve proportionality to the dispute in question. The parties may also wish to be given an opportunity to discuss and agree the question of costs in light of these reasons, so as to avoid incurring further legal expense.
In those circumstances, it is preferable to give the parties an opportunity to be heard on any appropriate orders to be made about costs. Conclusion
The consequences of the above findings are as follows:
(a) An order for family provision for the plaintiffs will be made, with an adjustment to the Will to reduce the testamentary gifts to Khanh, Duc and Le to an amount of $5,000 each. (b) No order will be made in respect of the unencumbered Kambah property in which Khanh and Le reside. (c) The Richardson property is properly characterised as being held by Le on constructive trust and thus constituting an asset to be held on trust for the children as residual beneficiaries in equal shares. (d) Consequential upon the finding that the Richardson property is held on constructive trust and the family provision claim: (i) Le will be required to transfer the Richardson property to Suqin and the Public Trustee on behalf of the first to fourth plaintiffs in equal shares, (ii) Upon such transfer, the Richardson property is to be unencumbered, or alternatively, the property may be transferred with Le to account to the Estate in an amount equivalent to the value of the loan that is secured by the Richardson property. (e) There will be no adjustment to the superannuation benefit under the Will, with the result being that it will continue to be paid to Suqin (providing a monthly source of income until she dies). (f) Following the setting aside of the gift of $360,000 to Duc, he will be required to repay the equivalent amount to the Estate. (g) The four children will remain entitled to the residue of the Estate, which includes the funds presently held in the Trust less any costs payable as a result of these proceedings and their interest in the Richardson property, with such Trust to be managed by the Public Trustee.
I cannot leave this case without stating that all aspects of the present litigation – the causes of action, the evidence, the arguments, and the duration of the hearing – would have been less complex, less costly, and more efficiently managed if legislative reforms that have been introduced elsewhere providing for the designation of notional estate had also existed in this jurisdiction. The circumstances giving rise to this proceeding demonstrate the utility of such provisions. Orders
The orders of the Court are as follows:
(1) The Court declares the property located in [address anonymised] Richardson in the Australian Capital Territory is held on trust as to 50% for the fifth plaintiff and the remaining 50% for the first to fourth plaintiffs in equal shares. (2) The gift of $360,000 to the second defendant is set aside, and the second defendant is to pay to the Estate of the late Quoc Khai Tong (Estate) the said amount within 28 days of the making of this order. (3) Family provision is made for the plaintiffs out of the Estate with adjustments to the terms of the Will as follows: (a) Provision of $40,000 is to be made out of the Estate to the fifth plaintiff.
(b) In lieu of the gift of $70,000 to the second defendant, a gift of $5,000 is to be made.
(c) In lieu of the gift of $70,000 to the third defendant, a gift of $5,000 is to be made.
(d) In lieu of the gift of $30,000 to Khanh Thi Ha, a gift of $5,000 is to be made.
(e) The first to fourth plaintiffs are to retain the benefit of the residual Estate in equal shares.
(4) Pursuant to s 32 of the Administration and Probate Act 1929 (ACT), Duc Khai Tong is removed as executor of the Estate and the ACT Public Trustee is appointed as executor in his place. (5) Fortitude Investment Group Pty Ltd ACN 631 689 202 is removed from acting as trustee of the Tong Family Trust and the ACT Public Trustee is appointed as trustee in its place. (6) The third defendant is to do all things and sign all documents necessary to transfer the title to the property in Richardson referred to in Order 1 above, free of any encumbrance to the fifth plaintiff as to a 50% share and to the ACT Public Trustee and Guardian as to a 50% share to be held on trust for the first to fourth plaintiffs. (7) Within 21 days of the making of these orders, the parties are to provide written submissions as to the orders sought and any evidence on the question of costs, including whether any further oral hearing is sought. (8) The parties have liberty to apply to the Court for the further working out of any orders necessary to give effect to Orders 1 – 6 above.
I certify that the preceding two-hundred and seventy seven [277] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Justice McWilliam
Associate: Date: 30 June 2023
Tong
Tong [2023] ACTSC 163
(1987) 164 CLR 137
(1983) 151 CLR 447
(1980) 144 CLR 490
(1989) 17 NSWLR 343
(1919) 27 CLR 231
(1936) 56 CLR 113
(1959) 101 CLR 298
(1936) 54 CLR 572
(1985) 160 CLR 583
(1962) 107 CLR 9
(1992) 175 CLR 218
(1960) 33 ALJR 447
(1922) 30 CLR 180
(1939) 63 CLR 649
(2001) 80 SASR 404
(1953) 90 CLR 113
(1998) 194 CLR 457
During the course of the day on 10 May 2019:
The above summary was subsequently approved at appellate level (and therefore represents persuasive authority in this jurisdiction) in Mercanti v Mercanti [2016] WASCA 206; 50 WAR 495 at [381]; and more recently in Shepherd v Galea [2020] WASCA 152 at [101].
I accept all those facts and they will be material to the consideration of the transaction in respect of Duc below. However, the characterisation of the transfer of the Kambah property is not that it was a gift, because the asset was not Quoc’s to give. In isolation, it is understandable how the plaintiffs would view the transfer of the Kambah property at the end of Quoc’s life as a gift to his mother and sister. But taking the whole of the circumstances into consideration includes the context of ownership over the course of Quoc’s life. What appears to be a gift of an unencumbered house was in fact a transfer of an asset held on constructive trust since 2009 back to the equitable owner, Khanh, who then nominated Le as the person to hold the title. Viewed in the light of the history of the asset, to the extent that any presumption of undue influence arose in respect of Le in relation to the Kambah property (a matter about which I do not need to decide here), it has been rebutted.
Added to this is the absence of contradicting facts. Le said she did not remember what the amount was for, and she did not produce her bank records after 31 January 2008 in response to a notice to produce seeking those documents. It is not necessary to go so far as to draw a Jones v Dunkel (1959) 101 CLR 298 inference from the failure to produce (a course for which the plaintiffs contended), as I consider the inference that the unidentified money was paid to Le in relation to the Richardson property purchase to be reasonably open from the other surrounding circumstances without it. But the absence of such evidence simply means that there was no evidence that Le did not receive that unidentified payment from Quoc in addition to the $52,658.04.
On the balance of probabilities, I find that it is more likely than not that the $65,330 was paid to Le along with the other amounts that she accepted as having been paid to her at the time. However, even if the $65,330 were put to one side, Le’s attempt to distinguish the family arrangement in relation to the Kambah property from the family arrangement in relation to the Richardson property ignores Quoc’s repayment of the other significant sums of money totalling $52,658.04 to her.
As the plaintiffs submitted, what occurred was a shuffling of money between Le and Quoc to effect on paper the sale of the property for $350,000. That was an amount that matched the property valuation for stamp duty purposes and that enabled Le to support any claim that the Richardson property was an investment property. What really happened was that Le effectively only took over Quoc’s mortgage which required the taking over of the legal title, to help her brother out financially.
The conclusion that the Richardson property transfer was another family arrangement which included Quoc as seller still retaining the equity in the property defeats Le’s argument that she became the beneficial owner at the time of the transfer. Quoc’s conduct in paying the moneys referred to above to Le is consistent with Quoc demonstrating an intention to retain his equitable interest in the Richardson property and inconsistent with Le obtaining a beneficial interest. Even though Le could no longer recall (in the witness box) receiving any money back from her brother from the day of the sale and shortly afterwards, or give any explanation as to what those sizeable amounts were for, the fact that she accepted those payments at the time demonstrates her knowledge of that same position.
For about a decade, Le owned the Richardson property, during which time she paid the mortgage and the outgoings. Quoc and his family lived in that property and paid “rent” which gave Le a tax benefit. Conversely, for almost the same length of time, Quoc had a mortgage and paid the outgoings for the Kambah property in which Khanh lived (with Le also living there at various points during that period). They also paid “rent” which then gave Quoc a tax benefit. Le did this indirectly, as Khanh’s evidence was that she made payments to her.
In respect of the Kambah property, although Quoc paid the outgoings, Le paid for renovations to it, such as fixing the roof, painting the property and installing new floorboards. In respect of the Kambah property, I took that as pointing against Quoc holding the beneficial ownership of the Kambah property. The same logic applies to the Richardson property. This is discussed separately under the next heading.
It is important to acknowledge these threads through the evidence because each factual finding on the Richardson property leading to the conclusion that there was a constructive trust is not made in a vacuum – the family asset matrix is tightly interwoven across decades. Had a different finding been made in relation to the Kambah property, that would likely have had a consequence for the reasoning in respect of the Richardson property and vice versa.
No tax returns were put into evidence. Some were produced by Le pursuant to a notice to produce, but it was not clear what years they covered and no party ultimately tendered them. Le’s evidence about why tax returns for other years were not produced was simply that she did not have them. Whether she took any steps to request them from the ATO was not explored in cross-examination.
For the majority of the factual findings to be made in these reasons for judgment, I have not found it necessary to make any general findings about the credit of Le. However, Le gave some evidence in her affidavit that Quoc told her when he gave her the cheque “you can use it how you want”. I reject that evidence as self-serving and implausible, having regard to the other pieces of the evidentiary matrix on this point.
First, it is inconsistent with Quoc telling Suqin that he was “paying out the mortgage”, which was Suqin’s evidence and that he would transfer the house to her. He could not have carried out that transfer with the house still subject to a sizeable mortgage in someone else’s name.
Second, it is inconsistent with the sum of money being very specifically calculated on the basis of the two debts, the amounts of which were communicated to him by Le.
Third, having regard to Quoc’s clear intention and concern for his children’s future, it is highly unlikely that, at the expense of their welfare, he would pay off the mortgage for the Richardson property, on the basis that Le would be free to do with the property what she wished with it in the future, including being at liberty to continue charging his family rent when he had paid off the mortgage and to seek to evict his children from the only family home they had ever known shortly after his demise. The more likely scenario is that Quoc was paying off the mortgage for what he believed was his house, so that his children’s future housing needs would be taken care of.
I consider Le’s belief that Quoc said she could use the money however she wanted to be at best unreliable or wishful thinking, and at worst, made up to suit her own ends.
That is the extent of the finding about any witness’s credit that is necessary to dispose of these proceedings in my view. However, because the evidence was not all one way in this case, to avoid any suggestion that the findings above on whether a constructive trust arose were against the weight of other evidence in the proceeding to which I have not referred, I will briefly record that I formed the view Le was a generally unreliable witness and I did not accept any of her evidence unless it was independently corroborated. Even then, the documentary records were approached with caution because of the lack of the complete financial records produced by Le.
Under cross-examination, Le was reluctant to accept even facts that were uncontroversial and her answers in those respects put her at odds with her own affidavit evidence. This included being asked to confirm that Quoc had initially purchased the Richardson property. Le said she did not know that fact, which was contrary to what she had said in her affidavit, where she explained not only that Quoc had purchased the Richardson property, but how he had purchased it.
A second example of something uncontroversial not being accepted under cross-examination is where Le said she was not aware whether Quoc had a mortgage on the Richardson property. Counsel for the plaintiffs then had to draw out Le’s confirmation in the witness box that she knew she bought the Richardson property from Quoc and remind Le of the settlement sheet which Le had put into evidence when she “purchased” the Richardson property from Quoc, which disclosed the payout of the mortgage to the ANZ. Le’s affidavit evidence records Quoc telling her at the time he purchased the Richardson property that he was getting a loan from the ANZ bank in order to finance the purchase.
A third example is when Le was then asked whether she had a conversation where Quoc told her he owed money on his house. She denied that. Again though, her affidavit records Quoc telling her “I am not able to borrow any more” and Le goes on to say in the affidavit “I recall [Quoc] was an APS 4 in the public service at the time and with a wife and young baby, the Bank would not lend him any more money.” The underlying premise of both those statements is that he had already borrowed some money.
Further, Le said she could not recall whether she had a close financial relationship with her brother at a particular period in time before she took over the Richardson property. She was then taken to a lengthy history of significant transfers between herself and Quoc demonstrating the free flow of money between the pair, including around the time of the Richardson property purchase by Le. She still did not accept the proposition, but reached a point where she agreed that she had a poor recollection of important financial and contractual matters from around that period.
These indicative but not exhaustive examples suffice to explain why I felt Le was a poor witness and generally I have preferred Suqin’s evidence where it contradicts that given by Le. That is not to say that there were not inconsistencies in Suqin’s evidence. There was a whole sideshow of evidence about two letters sent by a family law solicitor. Suqin’s evidence was that she at no stage instructed the family lawyer who she consulted that she wanted a divorce. What she saw the lawyer about was how to stop her husband giving away all his money and assets before he died. Ultimately, that solicitor was tracked down and called to give evidence and it seems that what was sent were form letters that may have been prepared by someone other than him, and which may not necessarily have been sent on Suqin’s instruction. However, overall, the difficulties with Suqin’s evidence were generally attributable to her lack of proficiency in the English language, her lack of involvement in the details of the financial arrangements between Quoc and his family members, or her lack of access to documents.
Again, the terms of the will signed by Quoc on 16 May 2019 refer to this elevated view of Duc (as well as Le):
Accordingly, the gift must be set aside.
Fourth, it is important to understand the two words I have emphasised in the words of s 8(2) set out above, “proper” and “adequate”. Much has been said about them, including in Goodman v Windeyer (1980) 144 CLR 490 at 502:
In affidavits each signed for anticipated family law proceedings, both Quoc and Duc referred to the fact that Suqin did not sleep in the same bed as Quoc after the fourth child was born and Quoc noted that they did not have sexual intimacy after that time. Suqin’s evidence, which I accept, was that the sleeping arrangements arose because of her attending to the needs of her children and not because of a separation in her relationship with Quoc. Again, a child sharing their parent’s bed, which causes one of the parents to sleep elsewhere on an ongoing basis, is both plausible and consistent with what might be viewed as a common life experience of many families with young children. I agree that it is not necessarily indicative of marital disharmony. In any event, that matter carries no weight in assessing whether the testator here fulfilled his undeniable moral duty to provide for his family under the Will.
Suqin and Quoc remained legally married until the day he died. Quoc knew that when he died, he was leaving Suqin as the sole parent with limited means of earning incoming and four children under eighteen. The real disagreement between Suqin and Quoc arose when Suqin discovered that Quoc had been paid the sizeable advance death benefit which she believed would enable her and the children to live after Quoc died, and then dissipated it among other family members, rather than retain it for the benefit of his own children. Had the benefit been paid after Quoc died, it was plainly money that would have been paid into the Estate for the residual beneficiaries, being the four children.
Quoc had a moral duty to provide for his own wife and children which he failed to fulfil in the terms of the Will. He owed no such moral duty to either his siblings or his mother. Having regard to those circumstances and the payments Quoc had made (in particular, using part of the death benefit in relation to the Kambah property), along with expenses such as legal costs that will significantly deplete the residue, leaving further gifts to his mother and siblings is not consistent with that moral duty.
I have taken Quoc’s wishes as the testator into account. They were broadly as expressed in part of the Will itself. In that regard, without engaging in whether he authorised every word of what was written down by his brother, I have accepted that Quoc had a particular view about Suqin and what he thought was sufficient to discharge any duty he may have had to her and the children as a result of that view. However, Quoc appears to have been unaware of the true value of what the residual estate for his children would be, of the additional legal expenses that would be incurred by the Estate, and of the fact that there will be ongoing management costs of the Trust incurred by the involvement of the Public Trustee in the light of findings I have made below that an independent administrator of the Trust must be appointed.
I have also taken account of the findings that I have made above in respect of the undue influence claim and the finding that the Richardson property forms part of the Estate as a result of it being held on constructive trust. The value of the Estate increases significantly as a result of those findings. However, again once the legal costs of the proceedings are factored in, I am still of the view that adequate provision for the proper maintenance, advancement and education in life for each of the plaintiffs is not available under the Will, primarily because the claims of the children are so strong.
I have considered the competing claims of each of the gift recipients, but the financial circumstances and income earning capacity of Duc and Le are far superior to that of Suqin and the four children. More significantly, they did not raise any competing claim based on financial circumstances or dependents. Khanh now lives in an unencumbered house with Le that was made possible by Quoc paying out the mortgage in respect of that property.
Ultimately, the gift recipients are not the people to whom Quoc had any moral duty. In a small Estate, with four children involved, and a wife of almost sixteen years who has extremely limited means to support them on her own, the Estate simply does not extend to making any significant provision for them. An adjustment to each of the gifts is therefore appropriate.
The gifts to Duc, Le and Khanh will each be reduced to $5,000. Such adjustments are appropriate to take account of Quoc’s testamentary freedom and wishes, but it is necessary to reduce them to reflect the extent that Quoc failed in his moral duty, having regard to the principles set out above and the modest size of the Estate, particularly having regard to the legal costs of the proceedings.
A further way in which the Court may take account of the testator’s testamentary freedom, balanced against his moral duty to provide for his wife and children, is for the majority of the moneys to form part of the residual Estate and to leave the children as the only beneficiaries of the residue. In that way, the family provision is made directly to the children, which most closely accords with Quoc’s very clear wishes while he was alive and in the terms of his Will.
However, the increase in funds available for the children’s proper maintenance, education and advancement will indirectly reduce the burden on Suqin, making the children less dependent on her present income. To that end, it is appropriate to order that additional provision be made to Suqin out of the Estate in two ways. First, Suqin will receive provision by way of a 50% interest in the Richardson property. Second, provision will be made by way of a sum of $40,000. The remainder of the assets (including the other 50% interest in the Richardson property) will form part of the residual Estate and therefore be held on Trust for the children.
The only specific gift left to Suqin in the Will was Quoc’s superannuation benefit. The terms of the Will include the following: