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[2024] ACTCA 29
appellant. The appeal was allowed. Except for the declaration preserving the appellant's right to reside in the O'Malley property for life or until he no longer desired, the primary orders were set aside. The...
The Court of Appeal found that the appellant had relied on his wife to make financial and property decisions and had deferred to her when the O'Malley home was given to their daughter. The gift was unusually large in the circumstances because the house was his home and only significant asset. The daughter did not establish that he acted independently of his wife's influence, and the Court therefore found undue influence. It rejected the argument that delay barred relief, because the appellant remained under his wife's influence until her death and the daughter had not shown sufficient prejudice from lost evidence. Rather than undo the entire transfer, the Court declared that the daughter held half the beneficial interest for the appellant, preserving the wife's gift of her own interest.
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1 cited instrument linked from this judgment.
The dispute concerned a home in O'Malley, Canberra, transferred in 2009 to the appellant's daughter, Angela Wu. At the time, Chin-Sheng Wu was 85. The O'Malley property was both his residence and, insofar as his assets were concerned, his only significant asset. The primary judge had found the transfer to be an unconditional gift [29]. The appeal asked whether that gift had been made in circumstances of undue influence or unconscionable conduct, whether laches prevented relief, and what remedy should follow [6].
This judgment followed an earlier appellate judgment in the same litigation, Wu v Wu [2024] ACTCA 8. That earlier decision identified errors of law in the primary judge's reasoning concerning aspects of the undue influence and unconscionable conduct claims and the defence of laches [2]. The Court of Appeal then heard submissions on whether to remit the matter for further findings or decide the remaining issues itself.
The Court chose to decide the case without remittal. It considered that it could draw its own factual inferences under ss 37N(2) and 37N(3) of the Supreme Court Act 1933 (ACT). The trial judge had no material advantage from assessing the respondent's credibility because she had not given evidence at trial. The primary judge's concerns about the appellant's evidence related to the reliability of his memory rather than demeanour, and the further evidence was limited [4]. The appellant was 100 years old, and the Court gave significant weight to reaching a final decision while he was alive [4]. By the time the further hearing occurred, his health had declined and he could not be cross-examined; the appeal proceeded on written submissions and about an hour of oral argument [5].
The Court allowed the appeal. It left in place the declaration that the appellant could reside in the property for life or until he no longer desired to do so. It otherwise set aside the primary orders and declared that the respondent held half the beneficial interest for the appellant, with that interest described as separate and severable [75].
The Court applied a two-part test for the presumption of undue influence: the appellant had to establish a relationship of ascendancy over him and a gift so substantial or improvident that ordinary motives could not reasonably explain it [12]-[15]. The Court found both parts satisfied.
First, the Court assessed the whole relationship, not the fact of marriage alone. It accepted evidence that Mrs Wu had managed important business, property and financial matters for decades. The appellant could not read or understand English beyond basic concepts, while Mrs Wu could. She had dealt with property transactions and communications, interpreted for him, and handled financial matters [17]-[19]. His evidence about the transfer was especially important: he said he signed because his wife asked him to, and that he always agreed with her because he did not understand English [21]. He also described trusting her rather than asking for an explanation [22].
The Court's conclusion was not simply that the appellant had limited language skills or that his wife took an active role in family affairs. It found that, in relation to financial and property decisions, he had consciously deferred decision-making to her and reposed unqualified trust and confidence in her [25]-[28]. The relationship had an “ascendant quality” because of the combined effect of the long history, his dependence, his inability to understand complex English documents, and his trust in his wife [25]-[26]. The Court said this created a responsibility to act in his interests when managing or disposing of his assets [27].
Second, the Court considered the nature of the gift. It accepted that a daughter may naturally be an object of a parent's affection, but said the presumption of advancement did not answer the question before it. The starting point was that the appellant intended to make a gift; the issue was whether the size and circumstances of that gift could reasonably be explained by the family relationship [30]-[31]. The property was his home and only significant asset. The Court considered the transfer extraordinarily generous, and beyond what a loving parent in his circumstances could reasonably be expected to give without more [29]-[31].
The respondent gave possible explanations connected with family and culture, including that she was pregnant with the appellant's first male descendant and that her parents were concerned about what might happen to the property if they travelled overseas [32]-[34]. The Court cautioned against treating a self-interested party as an expert on culture, but did not need to decide the cultural explanation conclusively. It reasoned that any cultural or emotional reason for making such an important gift made it particularly important that Mrs Wu ensure the transaction was free from her influence [33]-[34]. It also considered the suggestion that the gift would help the appellant qualify for an age pension. In the Court's view, giving away a valuable home at age 85 to obtain a social security benefit would itself make independent financial advice important [35].
The respondent did not rebut the presumption. The Court assumed in her favour, without deciding, that the appellant knew and understood that he was gifting the house. But knowledge of the gift was not enough: the respondent also had to establish that he acted independently of Mrs Wu's influence [37]-[39]. The Court found no substantive evidence of that independence. The solicitor involved in the transaction was not acting for or independently advising the appellant [40]. The respondent's argument that he would have agreed to the gift anyway did not address what he would have done absent the influence [41]-[43].
The judgment applied existing equitable principles rather than announcing a new general test. It expressly relied on principles set out in its earlier judgment in Wu v Wu [2024] ACTCA 8, including the elements of presumed undue influence and the requirements for rebuttal [12]-[15], [37]-[40]. The decision's contribution is principally its application of those principles to a family transfer where the donor's dependence concerned financial and property affairs, and where the recipient was a daughter who was not shown to have personally procured the influence.
The Court distinguished intention to give from independent decision-making. It treated the appellant's intended gift as the starting point, but held that intention did not resolve whether the gift was affected by undue influence [30], [37]-[43]. Put plainly, the question was not just whether he knew the property was being given away. It was also whether the choice was his own, independent of the ascendancy found in his relationship with his wife.
The judgment also explains how the size and practical consequences of a gift can matter. A family relationship may explain an ordinary gift, but it does not necessarily explain the transfer of the donor's home and only significant asset. The Court assessed the gift in the donor's circumstances rather than treating the parent-child relationship as conclusive [29]-[36].
On laches, the Court applied an approach focused on when the influence ended and whether the delay caused relevant prejudice. It treated the period after removal of the influence as the appropriate starting point for considering delay [47]. It also distinguished the fact of lost evidence from proof that the lost evidence could have changed the complexion of the case [49]-[52]. The judgment therefore does not state that a deceased witness is irrelevant to laches; rather, it requires consideration of the evidence lost and whether the claimant's inaction caused the prejudice relied upon.
For remedies, the Court used a tailored constructive trust rather than full rescission. It accepted that equitable relief should achieve practical justice and considered the effect of undoing the whole gift on the wife's interest, which was not subject to an undue influence finding [61]-[68]. The result illustrates that a finding of undue influence does not mechanically dictate that an entire transaction must be unwound. The remedy was limited to the appellant's affected interest [68]-[73].
At [25], the Court said that the relationship's necessary ascendancy did not arise merely because the parties were married. It arose from the circumstances of their relationship, including the appellant's lack of English proficiency and his absolute trust in his wife on financial matters. In plain English, the Court required evidence of actual dependence and influence, not simply a close family relationship.
At [26], the Court described the appellant as having “consciously abdicated his decision-making” about his assets in deference to his wife's intentions. That finding was central. The Court treated the appellant's evidence about how he signed the transfer and understood the valuation as evidence that the financial decision was effectively left to his wife.
At [31], the Court said that there is a point at which the family relationship alone cannot reasonably explain the size of an unconditional gift. It applied that reasoning to a home that was the appellant's only significant asset and his place of residence. The passage does not mean that large gifts between relatives are necessarily suspect; it shows why the scale and effect of this particular gift mattered when considered with the established ascendancy.
At [38]-[40], the Court clarified that knowing one is giving a house to a daughter is not, by itself, enough to rebut presumed undue influence. The recipient also needed to establish that the donor acted independently of the influence. The lack of independent advice was relevant because there was little else to show that the appellant's decision was his own.
At [49], the Court explained the evidentiary aspect of laches: the issue is not whether some evidence has disappeared, but whether evidence that could have cast a different complexion on the claim has been lost. Applied here, the death of Mrs Wu did not automatically establish prejudice. The Court examined the objective surrounding circumstances and the evidence actually available [50]-[52].
At [68], the Court selected a constructive trust over 50% of the property rather than declaring the entire transaction void. In ordinary terms, the respondent remained the registered owner, but half the beneficial ownership was recognised as belonging to the appellant. The Court chose this limited remedy to avoid extending the undue influence finding to the wife's interest and to avoid the practical uncertainty of equitable compensation [64]-[69].
The reasoning is most directly relevant to a substantial, gratuitous transfer where evidence shows that the donor relied on another person to make decisions about property or finances. The Court relied on a sustained pattern of dependence: the appellant's wife had long managed business and financial affairs, dealt with property matters, communicated in English, and assisted with interpretation [17]-[21]. The judgment therefore points to the importance of looking at the actual relationship and the particular subject matter of the transaction, rather than relying on labels such as spouse, parent or child [18], [25].
The size and consequences of the transfer also mattered. The gifted asset was the donor's home and only significant asset, and the donor was 85 [17], [29]-[36]. The reasoning is especially pertinent where the gift appears unusually generous in the donor's circumstances and leaves the donor without significant assets or accommodation security. The Court noted that detriment was not necessary to establish the relevant improvidence, although detriment existed on these facts [36].
The judgment also identifies evidence relevant to rebuttal: whether the donor understood the transaction, whether the donor acted independently of the influence, and whether independent legal advice was obtained [14]-[15], [37]-[40]. It does not treat any one of those matters as an automatic answer. Rather, it calls for a close factual examination.
For laches, the timing of the end of the influence, the claimant's knowledge, the timing of proceedings, and specific prejudice from delay are relevant [46]-[53]. A witness's death may form part of the circumstances, but the Court required more than the bare fact that the witness was unavailable [49]-[52].
Finally, the case is relevant to remedy where only part of a transaction is affected by the vitiating factor, or where full rescission would have consequences beyond the proven wrongdoing. The Court's remedy recognised the appellant's interest while leaving the respondent's legal title and the wife's gift of her interest undisturbed [64]-[73].
The judgment provided for analysis contains no later decisions applying, distinguishing or criticising Wu v Wu (No 2). Its decision date is 14 November 2024, and the text does not describe any subsequent judicial treatment. It is therefore not possible, from this judgment alone, to state how later courts have treated it.
The decision does refer to the earlier appellate judgment in Wu v Wu [2024] ACTCA 8. It says that the earlier decision identified errors of law in the primary judge's treatment of aspects of undue influence, unconscionable conduct and laches [2]. The present judgment then applied the principles set out in that earlier decision to the evidence on rehearing [7], [12]. That is the relationship between the two Wu decisions described in this source: the earlier judgment narrowed and clarified the issues; this judgment finally determined them and granted relief.
The Court also relied on a range of authorities for particular propositions, including Lee v Lee on appellate fact-finding [4], Thorne v Kennedy on undue influence and causation [26], [42], Orr v Ford and Bright v Legerton on prejudice and laches [49], and authorities on equitable rescission and remedies [61]-[68]. Those citations show the doctrinal foundations the Court itself invoked, but this judgment does not establish how any later court has applied its own decision.
The Court did not determine whether the alternative claim of unconscionable conduct independently succeeded. It set out the relevant concepts, including special disadvantage, knowledge and unconscientious exploitation, but declined to make findings that were unnecessary to decide the appeal [54]-[59]. The case therefore should not be read as resolving the respondent's knowledge or exploitation for that separate cause of action.
The Court also did not decide whether the appellant knew and understood the transfer in the sense relevant to rebuttal. It assumed that point in the respondent's favour and resolved the issue on the absence of proof that he acted independently of Mrs Wu's influence [39]. The decision establishes the importance of independence on these facts, but leaves the knowledge question open.
The cultural explanation for the gift was not resolved through expert evidence. The Court cautioned about relying on a self-interested party's account of culture and then put that issue to one side [32]-[34]. It did not decide whether the asserted cultural reasons were accurate or what weight they might carry on a fuller evidentiary record.
The judgment's remedial approach was specific to the circumstances presented. The Court declined full rescission because that could defeat the wife's gift of her interest, and considered compensation uncertain given the time that had elapsed and the absence of evidence about the respondent's financial capacity [64]-[69]. It does not determine what remedy would be appropriate if a recipient were personally responsible for the influence, if the donor were the sole owner, or if the evidence supported a precise compensation figure.
The Court also noted the practical reality of continued co-ownership and the parties' limited contact. It considered that issue but gave it little weight because the property was a home, the existing arrangement had been managed without contact, and the parties had agreed that the appellant could remain there during his lifetime [70]-[72]. Other co-ownership arrangements or evidence of significant property expenditure could present different remedial considerations.
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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 COURT OF APPEAL
Case Title: Wu v Wu (No 2) Citation: [2024] ACTCA 29 Hearing Date: 11 November 2024 Decision Date: 14 November 2024 Before: Mossop, Baker & McWilliam JJ Decision: (1) The appeal is allowed. (2) Save as to the declaration as to the plaintiff’s right to reside in [the O’Malley property] for life or until he no longer desires, the orders made in proceeding SC 410 of 2020 on 21 December 2022 are set aside. (3) The Court declares that the respondent holds the legal title to [the O’Malley property] as follows: (a) 50% of the beneficial interest in her own name; and (b) 50% on trust for the separate and severable beneficial interest of the appellant. (4) Subject to order 5, the respondent is to pay the appellant’s costs of the appeal and of the proceedings at first instance. (5) If either party seeks a variation of order 4 within 7 days of these orders, order 4 is stayed until further order. Catchwords: APPEAL – EQUITY – Undue influence – unconscionable conduct – whether presumption of undue influence established – whether defence of laches applies – whether remedial constructive trust appropriate APPEAL – PROCEDURE – remittal – whether to remit proceeding – appellant 100 years old – where further evidence limited in nature – where no advantage of trial judge in circumstances of this case – no order for remittal made Legislation Cited: Supreme Court Act 1933 (ACT) ss 37N(2), 37N(3) Cases Cited: Alati v Kruger (1955) 94 CLR 216 Allcard v Skinner (1887) 36 Ch D 145 Bathurst City Council v PWC Properties Pty Ltd [1998] HCA 59; 195 CLR 566 Bosanac v Federal Commissioner of Taxation [2022] HCA 34; 275 CLR 37 Bridgewater v Leahy [1998] HCA 66; 194 CLR 457 Bright v Legerton (1861) 45 ER 755 Brown v Brown (1993) 31 NSWLR 582 Calverley v Green (1984) 155 CLR 242 at 256 Concrete Pty Ltd v Parramatta Design and Developments Pty Ltd [2006] HCA 55; 229 CLR 577 Demetrios v Gikas Dry Cleaning Industries Pty Ltd (1991) 22 NSWLR 561 GJ v AS (No 4) [2017] ACTCA 7 Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; 200 FCR 296 Harris v Digital Pulse Pty Ltd [2003] NSWCA 10; 56 NSWLR 298 Johnson v Buttress (1936) 56 CLR 113 Kakavas v Crown Melbourne Ltd [2013] HCA 25; 250 CLR 392 Lee v Lee [2019] HCA 28; 266 CLR 129 Macguire v Makaronis (1997) 188 CLR 449 Orr v Ford (1989) 167 CLR 316 Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 Spence v Crawford [1939] 3 All ER 271 Stubbings v Jams 2 Pty Ltd [2022] HCA 6; 276 CLR 1 T Choithram International SA v Pagarani [2001] 1 WLR 1 Thorne v Kennedy [2017] HCA 49; 263 CLR 85 Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102 Watkins v Coombes (1922) 30 CLR 180 Wu v Wu [2022] ACTSC 360 Wu v Wu [2024] ACTCA 8 Parties: Chin-Sheng Wu (Appellant) Angela Chien-Kuang Wu (Respondent) Representation: Counsel D Moujalli (Appellant) M Hassall (Respondent) Solicitors Thomson Geer (Appellant) KJB Law (Respondent) File Number: ACTCA 7 of 2023 Decision Under Appeal: Court: ACT Supreme Court Before: Loukas-Karlsson J Date of Decision: 21 December 2022 Case Title: Wu v Wu Citation: [2022] ACTSC 360 The Court:
This appeal concerns whether a residential property in O’Malley (O’Malley property) owned by the appellant and his wife, Mrs Wu, was transferred to the respondent, being one of the appellant’s daughters, in 2009 in circumstances of undue influence or unconscionable conduct, thereby vitiating the transfer.
This Court has previously delivered judgment in Wu v Wu [2024] ACTCA 8 (Wu) on 12 July 2024, which held that the appellant had established errors of law in the primary judge’s reasoning in relation to aspects of each of the appellant’s claims of undue influence and unconscionable conduct, as well as in relation to the respondent’s defence of laches.
The reasons that follow proceed on the basis that they will be read in conjunction with the detailed reasons in Wu, where the facts that were challenged, the applicable legal principles, the relevant parts of the pleadings and the arguments made by the parties are all set out.
Reasons for declining to remit the proceeding
Following delivery of Wu, the parties were heard on whether to remit the proceeding (to the trial judge or to a different judge), or to finally determine the issues arising out of the appeal. The Court determined not to remit the matter and to finally dispose of the proceeding. Our reasons for so concluding were as follows: (a) The Court has the power to draw its own inferences of fact from the evidence and may receive further evidence: ss 37N(2), 37N(3) of the Supreme Court Act 1933 (ACT). (b) Where, in order to resolve the dispute, further findings of fact are to be made, it is usually appropriate for those further findings to be made by the trial judge, who may have had an advantage with respect to the credit of witnesses (as to which see Lee v Lee [2019] HCA 28; 266 CLR 129 at [55]-[56]). However, contrary to the submissions of the respondent, that is not a matter that featured in this case for three reasons: (i) First, the respondent did not give evidence in the hearing at first instance and there was no challenge to the findings of the primary judge concerning the evidence of Ms Karen Wu (the appellant’s other daughter); (ii) Second, the appellant’s evidence was discussed by the primary judge in detail in Wu v Wu [2022] ACTSC 360 (primary judgment) at [12]-[48]. To the extent that aspects of the appellant’s evidence were not accepted, the findings of the trial judge were expressly based on the unreliability of the appellant’s memory, as opposed to matters of credit based on the appellant’s demeanour or what the trial judge otherwise observed at trial: see, for example, primary judgment at [67]-[71], [103], [131(f)]. (iii) Third, the further evidence adduced was limited. The appellant did not call any further evidence. The respondent’s evidence was confined to one affidavit affirmed by the respondent, and the appellant indicated she was not required for cross-examination. Although, at the time, the issue of remittal was being considered, the respondent had indicated the appellant would be required for cross-examination, it was anticipated that any such evidence would be short. This was due to the cross-examination being limited to the one issue about which the respondent said she had made a forensic decision not to cross-examine at first instance, and now wished to address in light of how the proceeding unfolded on appeal. (c) Having regard to the above, the appellate court was in the same position as the trial judge to draw its own conclusions of fact on rehearing based on the transcript and documentary evidence. The Court took steps to ensure that each party was clearly on notice of, and had a reasonable opportunity to address, the case against it, and was in a position to make findings and draw conclusions more efficiently than if the matter were remitted and required a further listing. (d) Another reason for remitting a proceeding when further factual findings are to be made is so as not to deprive a party of a layer of appeal in the event that they wished to challenge a finding. However, given the lack of challenge to the respondent’s affidavit and the lack of further cross-examination of the appellant, there are very few remaining factual controversies and, following Wu, the legal issues have narrowed considerably. (e) Most importantly, the appellant is now 100 years old, and the parties are entitled to a judgment while the appellant is still alive. The most efficient resolution of the proceeding and the public interest in the finality of litigation carried significant weight.
Summary of findings
Issue 1: Was the transfer of the O’Malley property made in circumstances of undue influence?
The appellant argued there is a presumption of undue influence based on the proven dependence of the appellant on Mrs Wu in respect of his property and financial interests, which was not rebutted, and which vitiated the transfer of the gift of the O’Malley property by him and his wife to the respondent, as the third-party recipient of the gift of the O’Malley property.
The respondent continued to maintain that the appellant did not run any case before the trial judge based on presumed undue influence by Mrs Wu and should not be permitted to do so now.
As explained in Wu at some length at [77]-[102], the undue influence claim that was both pleaded and pursued was that the appellant was entirely dependent on his wife for managing his assets and finances on his behalf, that the decision-making process in respect of the O’Malley property was part of that deference, that the gift was made without the benefit of independent advice, and was immoderate and improvident in the circumstances at the time, and that the respondent was the beneficiary, knowing or otherwise, of the gift.
Notwithstanding the respondent may not have appreciated the legal and factual distinctions between the case in undue influence and that based on unconscionable conduct, or the nuances of the appellant’s case in undue influence, the appellant’s case has consistently been that the relationship of dependency on his wife was of such a nature as to give rise to the presumption of undue influence.
The applicable principles
The applicable principles are set out by reference to the relevant authorities in Wu at [32]-[76]. The appellant must establish that: (a) There was a relationship of ascendancy by Mrs Wu over the appellant at the time the gift was made; and (b) The gift was so substantial, or so improvident, as to not be reasonably accounted for on the ground of friendship, relationship, charity or other ordinary motives on which ordinary persons act.
If each of those matters is established, the presumption arises, not on the ground that any wrongful act has in fact been committed, but to prevent the relationships which existed between the parties and the influence arising from being abused.
The presumption may be rebutted by the respondent establishing that the appellant: (a) Knew and understood what he was doing; and (b) Was acting independently of any influence arising from the ascendancy of Mrs Wu.
As set out in Wu at [71]-[76], this is a factual question, requiring close examination of the particular circumstances of the case. The size of the gift is important, as is whether the person received independent advice.
Was there a relationship of ascendancy in the present case?
The appellant claimed a relationship of ascendancy involving the appellant’s dependence on Mrs Wu for all decisions about his assets and financial matters.
The appellant relied on the following general indicia of the development and existence of a relationship of total dependence upon Mrs Wu in relation to his property and financial affairs: (a) Age: As at 2009, the appellant was 85 years of age. (b) Length of relationship: As at 2009, the appellant and Mrs Wu had been married for almost half a century, having been married in Taipei in 1963. (c) Context to the relationship: The appellant and Mrs Wu never displayed signs of any disagreement. (d) Business relationship: From some time after their marriage until about the mid-1980s (that is, for almost 2 decades), the appellant and Mrs Wu operated a business together in Taiwan. (e) Business decisions and operations: (i) It was Mrs Wu who established and built up the business. She was the director of the company through which the business was carried on. The appellant became involved after the business was established. Although he may have been bestowed the honorific title by the workers of “the boss”, Mrs Wu remained the real controller of the business. All important business documents had to be presented to her for her signature. (ii) Mrs Wu dealt with the customers and buying agents in English when the appellant and Mrs Wu were operating the business together in Taiwan. (f) Relocation decisions: It was Mrs Wu who made the decision for the family to migrate to Australia in about 1985. (g) Appellant’s language difficulties: During his life in Australia, the appellant has never been able to read, speak or comprehend English other than where very basic concepts are involved, such as being able to recognise the dollar sign ($), and comprehend that the word “Mazda” indicates a reference to a car. He repeatedly gave evidence that he could not read English. When the appellant was: (i) Asked to point to the “transferor or seller” on a document, he pointed to the “transferee”; and (ii) Asked to identify the sale price on the transfer for the O’Malley property, he mistook the volume/folio number for the sale price. (h) Mrs Wu’s English proficiency: Conversely, Mrs Wu was able to speak, read and comprehend English. (i) Property purchasing decisions: (i) It was Mrs Wu who made the decision to purchase the initial family home in Farrer when the Wu family first came to Australia, even though the property was jointly purchased by the appellant and Mrs Wu. (ii) Similarly, even though the O’Malley property was jointly purchased by the appellant and Mrs Wu, it was Mrs Wu who found the property and who dealt with the real estate agents. The appellant did not have any dealings with real estate agents for this purpose. (iii) Mrs Wu lodged documents for registration of property interests affecting the appellant, including in relation to a property in Turner in 2000, and in July 2009 (shortly before the gift was made in August 2009) the correction of the appellant’s name in respect of a certificate of title for the O’Malley property. (j) Medical appointments: Mrs Wu interpreted for the appellant when he attended medical appointments. (k) Legal advice: In 2017, Mrs Wu interpreted for the appellant when they sought advice about the preparation of their wills and execution of their enduring powers of attorney. (l) Financial decisions: There was independent evidence to suggest that in 2015, Mrs Wu continued to manage the finances, as well as generally attending (through expenses debited from her bank account) to repairs, insurance and utilities in respect of the O’Malley property.
Was the gift so substantial, or so improvident, as to not be reasonably accounted for on the ground of relationship or ordinary motives?
Having established the necessary relationship of ascendancy, the nature of the gift itself arises for consideration. The O’Malley property was found to be an unconditional gift (primary judgment at [99]-[113]). Insofar as the appellant’s assets were concerned, it was the only significant asset owned by him. It was also the house in which he lived. It was plainly an extraordinarily generous gift to give, even to a daughter.
In that regard, it may be accepted that a daughter would be the natural object of the appellant’s love and affection, and doctrines such as the presumption of advancement confirm as such. However, contrary to the respondent’s submission, the presumption does not assist here. The presumption of advancement is a circumstance relevant to a donor’s intention, and specifically whether there was an intention of a gift: Calverley v Green (1984) 155 CLR 242 at 256; and Brown v Brown (1993) 31 NSWLR 582 at 589- 590. Where there may otherwise be a presumption of a resulting trust available on the evidence in a particular case (for example, where money is paid towards a property held in a child’s name), the presumption of advancement is a circumstance telling against a presumption of a resulting trust: Bosanac v Federal Commissioner of Taxation [2022] HCA 34; 275 CLR 37 at [14]-[15], [65], [115]. Assuming that the presumption may be employed in other contexts, what it is directed to was not in issue on this appeal. On the findings of the primary judge, the starting point is that the appellant gifted the O’Malley property and that he intended to do so.
There comes a point where the familial relation alone does not reasonably explain the size of the unconditional gift in the appellant’s circumstances. That is, the generosity of the gift was so extravagant as to move beyond what a loving parent in the appellant’s circumstances would reasonably give. That is especially the case where the gift constituted the family home in which the appellant lived and was his only means of accommodation, and where he had another daughter.
The respondent argued that the Court needs to be vigilant to ensure that the concept of what is “provident” is not infected by stereotypical Western values, with what may be an emphasis on individualism and ownership of material assets over family and lineage. This submission relates to the respondent’s evidence that at the time the transfer was made, she was “pregnant with [the appellant’s] first male descendant”. The respondent’s evidence was that “although this may not be significant in contemporary Australian culture” this was significant to her parents, the inference being that it was significant in the Chinese culture. The respondent assumed that the gift of the O’Malley property was being made to her due to the fact that she was pregnant with a boy. She did not ask questions about the reason, as “in Chinese culture it is regarded as offensive to question the actions or authority of one’s elders”.
Caution should be exercised in seeking to extract expert evidence about Chinese culture from a self-interested party. However, putting that issue to one side, the gift was, on any view, one of considerable importance. That means it was incumbent on Mrs Wu, who may well have had reasons based in Chinese culture for the gift, to ensure that the transaction was free from her ascendant influence: Watkins v Coombes (1922) 30 CLR 180 at 193.
Was the presumption of undue influence rebutted?
As the appellant submitted at first instance, the evidential onus shifted to the respondent to prove that the appellant: (a) knew and understood what he was doing; and (b) was acting independently of any influence arising from the ascendancy of Mrs Wu.
On the authorities referred to in Wu at [71]-[76], a finding that the appellant knew he was gifting the house to one of his daughters is insufficient to rebut the presumption. Independence of the influence is also required.
The Court had detailed submissions in respect of the lack of the appellant’s knowledge and understanding or otherwise. We will assume that in the respondent’s favour, without deciding the point, and move directly to the second aspect of the consideration, because it is clear and decisive. The respondent did not lead any substantive evidence in that regard. That is no criticism of her. Her evidence was that she was not present at the time the transaction occurred, nor did she communicate with her father at the time. Her mother informed her what was occurring, and she did not question the gift.
More importantly, the primary judge found, and it was not challenged on appeal, that the only solicitor involved in the transaction was not acting for or otherwise independently advising the appellant. There was thus very little that could be said to establish that the appellant’s decision to gift the property was nevertheless that of his own free mind.
For completeness, the respondent argued at first instance that causation was absent because the appellant would have agreed to gift the property to the respondent even if he had properly understood the nature of the transfer. The respondent relied on an exchange with the appellant in cross-examination where he said that he would have agreed to the gift in 2009, but subsequent events caused him to change his mind. There was some concern at the hearing that the transcript may have been incorrect, but that is immaterial because no version of the evidence dealt with the position absent Mrs Wu’s influence.
On the proper analysis above, the respondent’s causation argument falls away. As was stated in Thorne at [24]: …where undue influence is otherwise shown, an inference of the necessary causation or contribution is readily drawn if the particular transaction cannot reasonably be accounted for by “ordinary motives”.
The same reasoning applies here. Accordingly, undue influence has been established.
The consequence for the respondent as a volunteer
On the primary judge’s findings (primary judgment at [99]-[113]), the respondent was properly characterised as a mere volunteer. Applying the authorities discussed in Wu at [55]-[58], once the transaction is found to have been procured by undue influence, it does not matter whether the respondent knew of or was complicit in the influence or not.
The position may have been different if the respondent had been a bona fide purchaser without notice. However, on the facts as found, namely that the transaction was a gift, insofar as it affects the appellant’s interest in the O’Malley property, the fact that the respondent was in the position of a third party (volunteer) without notice of the undue influence operates to defeat the application of the doctrine of undue influence in the present case, subject to equitable defences considered next.
Issue 3: Does the defence of laches apply?
The applicable principles are set out (with reference to the authorities) and considered in the circumstances of this case in Wu at [124]-[128]. What must be established is that, through the plaintiff’s inaction, the defendant or a third party has been placed in a situation in which it would be inequitable and unreasonable to place him if the remedy were afterwards to be asserted. Lapse of time and delay are material considerations. The Court considers whether it would be unjust in all the circumstances to grant the relief sought. The circumstances include the length of the delay and the nature of the acts done during the interval which may give rise to prejudice or injustice. Ordinarily, it needs to be established that there was sufficient knowledge of the facts constituting the claim to relief.
In assessing delay, the Court considers the time within which the act in question should ordinarily have been done. It is the time beyond that point which properly constitutes delay. Here, the relevant date from which to assess the reasonableness of the time elapsed is the time after the removal of the influence under which the gift was made: Allcard v Skinner (1887) 36 Ch D 145 at 187.
In that regard, the evidence established that the appellant remained reliant on his wife in relation to his financial and health affairs and for any dealings in the English language until her death. Mrs Wu died on 23 April 2018. Following the obtaining of legal advice, proceedings were commenced in November 2020. The delay was not unreasonable.
In any event, the defendant has not established prejudice resulting from the unavailability of evidence. The mere fact that a witness who may have given relevant evidence is now deceased does not of itself establish prejudice. The question is not whether any evidence at all may have been lost, but whether evidence which may have cast a different complexion on the matter has been lost in the intervening period. A “Court of Equity will not allow a dormant claim to be set up when the means of resisting it, if unfounded have perished”: Orr v Ford (1989) 167 CLR 316 (Orr) at 344-345, citing Bright v Legerton (1861) 45 ER 755 at 760.
There was no suggestion that there was ever any independent legal advice obtained by the appellant which has since been lost.
Although it is a possibility that Mrs Wu may have given evidence that entirely contradicted the appellant’s evidence as to how their relationship operated over 50 years, the objective surrounding circumstances that were apparent from the evidence that was before the Court, including the further affidavit evidence of the respondent, make it highly unlikely that Mrs Wu was anything other than the key decision-maker in respect of the financial affairs and assets of the appellant generally, and the O’Malley property in 2009 in particular.
Further, whether the defence of laches should prevail in the present case is necessarily a matter of degree: Orr at 345. The circumstances of this case make reliance on the death of Mrs Wu as the means of establishing prejudice difficult. Assuming that any prejudice to the respondent only arises because of the death of her mother, then it was not prejudice that arose through the appellant’s inaction – the prejudice only arose at the same time that it first became reasonable for the appellant to bring a proceeding in equity, because it was only at that point that Mrs Wu’s operating influence may properly be said to have ceased.
Issue 2: Was the transfer made in circumstances of unconscionable conduct?
Given the findings in respect of undue influence and the defence of laches pleaded in answer to that claim, it is unnecessary to deal with this ground of complaint.
The applicable principles were discussed in Stubbings v Jams 2 Pty Ltd [2022] HCA 6; 276 CLR 1 at [39]-[45], discussed in Wu at [108]-[109] and [122].
A finding of unconscionable conduct requires three elements to be established, although not as separate elements, with the assessment made by reference to a precise examination of the facts and scrutiny of the exact relationship giving rise to the claim in equity: (a) A relationship that places one party at a “special disadvantage” vis-à-vis the other; (b) Knowledge of that special disadvantage by the stronger party; and (c) Unconscientious exploitation by the stronger party of the weaker party’s disadvantage.
As submitted by the respondent, determining the question in the present case will include assessing whether there was any moral obloquy on the part of the respondent vis-à-vis another family member, her father.
In circumstances where findings about whether the respondent had constructive knowledge or ought to have known of the special advantage, and further, whether the respondent unconscientiously exploited her father’s special advantage are not necessary to resolve the appeal, it is preferable to adopt the approach commended in Concrete Pty Ltd v Parramatta Design and Developments Pty Ltd [2006] HCA 55; 229 CLR 577, by Callinan J at [172] (footnote omitted): … as a general proposition, all civil courts, including intermediate appellate courts, should confine themselves to the issues which are necessary for the disposition of the case. …
As the issues necessary to dispose of the appeal have been addressed, we will refrain from proceeding to a concluded view about whether the alternative claim in equity should have separately succeeded.
Issue 4: Relief sought on appeal
In the event he succeeded on the appeal, the appellant sought: (a) a declaration that the transfer of the O’Malley property is null and void; (b) that the respondent holds the legal title to the O’Malley property on trust for the appellant; and (c) that the respondent pay his costs of the appeal and the proceedings at first instance.
As the appellant submitted, where the Court considers that equitable relief is justified, it should mould a remedy to achieve practical justice between the parties and in accordance with the exigencies of the particular case: Alati v Kruger (1955) 94 CLR 216 at 223-224; and Macguire v Makaronis (1997) 188 CLR 449 at 496.
The appellant sought a remedy of setting aside the gift, or the transaction or instrument giving effect to the gift, relying on Bridgewater v Leahy [1998] HCA 66; 194 CLR 457 at 493. If the appellant were the sole owner of the O’Malley property before the gift was made in 2009, there may have been no difficulty with restoring the parties to their original position.
Because the transaction is a gift, the Court is dealing with equitable recission in its exclusive jurisdiction: Demetrios v Gikas Dry Cleaning Industries Pty Ltd (1991) 22 NSWLR 561 at 574A, per Meagher and Handley JJA. It is accepted that this may be done in a less precise form of restoring parties to their original positions, focussing on whether they can be restored substantially to their original positions. That is consistent with achieving “practical restitution and justice”: Vadasz v Pioneer Concrete (SA) Pty Ltd (1995) 184 CLR 102 (Vadasz) at 111.
In Vadasz, a case admittedly dealing with a different factual context but discussing an analogous equitable principle, the High Court stated (at 114) that where the defendant is innocent, the court “will be less ready to pull a transaction to pieces” (citing Spence v Crawford [1939] 3 All ER 271 at 288). Similarly, here, this is not a case where the respondent was the errant fiduciary or has been otherwise found to have been personally responsible for the misconduct: see Harris v Digital Pulse Pty Ltd [2003] NSWCA 10; 56 NSWLR 298 at [334]-[335]. There has also been no finding of undue influence made insofar as the transfer related to Mrs Wu’s interest in the O’Malley property.
The appellant submitted that the consequence of equitable rescission would be that the O’Malley property was returned to the appellant and Mrs Wu as joint tenants and that, Mrs Wu having since died, her interest would pass to the appellant. We are not attracted to that course as it would result in an outcome that effectively extended the reach of the undue influence found on appeal to Mrs Wu’s interest. While equity may not assist a volunteer, nor does it strive officiously to defeat a gift: T Choithram International SA v Pagarani [2001] 1 WLR 1 at 11. A discretionary remedy that deprives the respondent totally of an interest in the O’Malley house would defeat Mrs Wu’s gift of her interest to her daughter and, in our view, is not an appropriate course.
Costs
The appellant achieved substantial success in the proceedings. The ordinary course that costs follow the event: Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 at [67]; GJ v AS (No 4) [2017] ACTCA 7 at [25]-[27]. If either party seeks a variation of the order with regard to costs, they are to notify the Court within seven days of these orders being made. Orders
For the above reasons, the orders of the Court are as follows:
(1) The appeal is allowed.
(2) Save as to the declaration as to the plaintiff’s right to reside in [the O’Malley property] for life or until he no longer desires, the orders made in proceeding SC 410 of 2020 on 21 December 2022 are set aside.
(3) The Court declares that the respondent holds the legal title to [the O’Malley property] as follows: (a) 50% of the beneficial interest in her own name; and (b) 50% on trust for the separate and severable beneficial interest of the appellant.
(4) Subject to order 5, the respondent is to pay the appellant’s costs of the appeal and of the proceedings at first instance.
(5) If either party seeks a variation of order 4 within 7 days of these orders, order 4 is stayed until further order.
I certify that the preceding seventy-five [75] numbered paragraphs are a true copy of the Reasons for Judgment of the Court of Appeal. Associate: Date: 14 November 2024
Wu
Wu
(1955) 94 CLR 216
(1993) 31 NSWLR 582
(1984) 155 CLR 242
(1991) 22 NSWLR 561
(1936) 56 CLR 113
(1997) 188 CLR 449
(1989) 167 CLR 316
(1995) 184 CLR 102
(1922) 30 CLR 180
The appeal was allowed. Except for the declaration preserving the appellant's right to reside in the O'Malley property for life or until he no longer desired, the primary orders were set aside. The respondent retained legal title, with 50% of the beneficial interest in her own name and 50% held on trust for the appellant as a separate and severable beneficial interest. Subject to a possible variation application within seven days, the respondent was ordered to pay the appellant's appeal and first-instance costs: [75].
Since the decision not to remit the proceeding was made, as events have transpired, the appellant could not be further cross-examined due to an age-related decline in his health since the original hearing. There was thus no additional oral evidence to be heard, and the further hearing proceeded by way of written submissions and approximately one hour of oral argument on 11 November 2024. This outcome reinforces the decision not to remit the proceeding. Issues for determination
The following issues remain for determination: (a) Whether the appellant has established undue influence in the circumstances of the transfer of the O’Malley property (Issue 1); (b) Whether the appellant has established unconscionable conduct in the circumstances of the transfer of the O’Malley property (Issue 2); (c) If either of the above causes of action succeed, whether they are defeated by the defence of laches (Issue 3); and (d) If the defence of laches does not apply, the ultimate relief that should follow (Issue 4).
A number of the above matters might be viewed as having little relevance to the character of the relationship between the two when it came to financial and property decisions, but it was submitted that the various matters above should not be viewed in isolation. Equity takes a comprehensive view and looks to “every connected circumstance”: Kakavas v Crown Melbourne Ltd [2013] HCA 25; 250 CLR 392 at [122].
Specifically in relation to the gift of the O’Malley property, the appellant relied on the following: (a) Mrs Wu informed the respondent that the O’Malley property would be transferred to her in March 2009. (b) Mrs Wu communicated with a solicitor for the provision of legal services to give legal effect to the transfer, including executing the transfer on behalf of the respondent as she was overseas. (c) Mrs Wu obtained the respondent’s address for the purpose of preparing the documentation to give legal effect to the transfer. (d) Mrs Wu requested the respondent to sign the contract schedule in relation to the transfer of the O’Malley property. (e) Mrs Wu obtained the valuation for the purpose of specifying the “consideration” on the transfer and communicated this to the respondent. (f) Mrs Wu paid the stamp duty so as to allow the transfer to be registered.
The appellant submitted that by the time the O’Malley property was transferred to the respondent in August 2009, the appellant’s dependence on Mrs Wu in relation to his property and financial interests had reached an apotheosis. He was 85 years of age and, for almost half a century, had reposed trust and confidence in his wife in relation to matters affecting his property and financial interests. In that respect, his conduct in falling in with his wife’s wishes had been entrenched for decades.
The most critical evidence supporting that conclusion is that which was given at the hearing (Wu at [88] and [93]): (a) As to why the appellant signed the contract in relation to the O’Malley property, he said, “My wife asked me to sign it. That’s why I sign it.” (b) When asked whether he discussed the valuation for the O’Malley property obtained in 2009, he said, “No discussion. I always agreed with my wife because I don’t understand English.”
The appellant also relied on the evidence of an incident that occurred in 2018, and whether he asked his wife for an explanation of the transfer of the O’Malley property to the respondent at that time. The answer was, “There was no need because I trusted my wife”. The appellant submitted this reflected his unwavering position through the years, and by inference, in 2009.
The respondent’s evidence addressed circumstances where Mrs Wu accommodated the appellant’s preferences in relation to things such as diet, social activities, restaurant outings and the purchase of food for family meals. However, this is not a case where it was argued that the appellant was incapable or disabled in every respect. As the appellant submitted, the relationship of ascendancy was confined to financial and property matters.
The respondent contended that overall, none of the evidence presented to the trial judge, including the evidence of the appellant himself, suggested that Mrs Wu was in a relationship of “ascendancy” over the appellant.
We disagree. Taking the whole of the circumstances of the relationship into account, as established by the evidence set out above, we accept the appellant’s submissions that it is clear that a relationship of dominion was established. The necessary ascendant quality of the relationship did not arise merely because the appellant and Mrs Wu were married. However, in this case, the fact of that relationship over decades created a special relationship of influence when it came to the appellant’s assets and financial affairs, brought about by his personal circumstances in terms of his lack of any proficiency in English, and in particular by his inability to read or understand complicated documents in English, combined with his development of absolute trust in Mrs Wu to take care of those matters for him.
When the appellant’s evidence as to his relationship with Mrs Wu and how this bore on his state of mind in 2009 is viewed as a whole, and giving significant weight to what he said in the witness box in respect of the transfer and valuation of the O’Malley property, the conclusion we draw is that the appellant was in a position, not merely where his judgment was “markedly sub-standard” (recalling Thorne v Kennedy [2017] HCA 49; 263 CLR 85 (Thorne) at [32]), but where he consciously abdicated his decision-making with regard to his assets in deference to Mrs Wu’s intentions. He reposed in her his unqualified trust and confidence to make decisions for his benefit and that of his family.
Whether Mrs Wu fully appreciated that fact at the time or not, that level of deference was sufficient to bring about the requirement or duty upon Mrs Wu, to use the language of Johnson v Buttress (1936) 56 CLR 113 at 134-135 (cited in Wu at [40]), to act in the appellant’s interests in managing or disposing of his assets or property interests.
It is telling that when the primary judge made findings concerning whether the respondent was in a position of undue influence, the primary judge mistakenly grouped the will of the appellant and Mrs Wu together (primary judgment at [180]-[181], set out in Wu at [28]). As the appellant had submitted to the primary judge, the evidence established that such a relationship of dependency had arisen between the two that, when it came to the appellant’s finances and assets, Mrs Wu’s will was the appellant’s will.
The same may be said in respect of another reason proffered by the respondent in her affidavit evidence, that her mother had told her “we were worried” that “if something happened to us when we are travelling overseas”, the respondent’s sister and her husband would inherit part of the house. Again, that the appellant and Mrs Wu were at the time estranged from their other daughter may have been an emotional driver on the part of Mrs Wu explaining why she would move to give away the family home in which she and the appellant lived before she and the appellant travelled overseas to meet their first-born grandson. Equity does not protect Mrs Wu from making an improvident decision that may be based in emotion or cultural practices. However, as explained in Wu at [1], [33]-[34], it does protect a person under her ascendant influence, and therefore not equal to protecting himself.
The respondent further argued that the gift was not improvident, because it allowed the appellant to claim an age pension to which he would otherwise not have been entitled, had the O’Malley property remained in his name. That submission only serves to emphasise the questionable nature of the transaction. At the age of 85, giving a highly valuable house away unconditionally, a property which was the appellant’s only source of accommodation, in order to get a social security benefit (if that was the reason), was unquestionably a matter about which independent financial advice should have been sought.
The circumstances were that the appellant had no other significant assets available to support him. It is not necessary to establish detriment, but here it exists and is indicative of the gross improvidence of the gift. Insofar as it affected the appellant’s interests, the transaction was so improvident as to not be reasonably accounted for on the ground of the familial relationship alone. As such, the presumption of undue influence in respect of the O’Malley property was perfected.
The respondent is in a difficult position, but on balance it is not an unreasonable or inequitable one. On the contrary, it would not be just to deny the appellant equitable relief on the basis established above. Accordingly, the defence of laches does not prevail in the circumstances of this case.
We have given consideration to whether equitable compensation is a more appropriate remedy, primarily because before the Court imposes a remedial constructive trust, it should first endeavour to find an otherwise appropriate equitable remedy that, having regard to the issues in the litigation, may be available to “quell the controversy”: Bathurst City Council v PWC Properties Pty Ltd [1998] HCA 59; 195 CLR 566 at [42].
The difficulty here is the length of time that has passed. Putting aside who has paid what expenses in respect of the property in the intervening period, requiring the respondent to pay equitable compensation to the appellant in respect of an asset now worth considerably more than its $1.225 million value in 2009 would be an entirely uncertain proposition. There was no evidence in the Respondent’s affidavit that her present financial position could accommodate such an order and whether she would have to sell the asset, for example, to pay the compensation. Given that the parties reached an agreement for the appellant to remain in the O’Malley property during his lifetime or until he no longer desires to do so, which was then the subject of an order (primary judgment at [234] and [259]), that would presumably be an outcome desired by no party.
Applying “considerations of principle and pragmatism” (Grimaldi v Chameleon Mining NL (No 2) [2012] FCAFC 6; 200 FCR 296 at [510]), we consider that the appropriate remedy is to impose a constructive trust in respect of 50% of the O’Malley property in favour of the appellant, rather than declaring the entire transaction to be null and void. It avoids the need for further dispute between the parties in evaluating any equitable compensation that might be payable as well as avoiding a disproportionate outcome if the property transfer were made subject to an order for equitable rescission (having regard to the degree of wrongdoing not extending to Mrs Wu’s interest in the gift).
Otherwise, there was no evidence that any party had contributed to the improvement of the property in the meantime to such a degree as to make the imposition of a constructive trust now inappropriate. The respondent alluded, in written submissions, to the Court giving the respondent a further opportunity to quantify the amount of her expenditure over the years. That opportunity was already given by the Court in permitting the respondent to adduce further evidence on the appeal, with the question of the form of any relief expressly canvassed with the parties.
It is the case that if a remedial constructive trust is to be imposed, the parties will have ongoing contact, at a minimum by being co-owners in a property asset that requires ongoing maintenance, as any residential home does. To that extent, they will be forced into a “working relationship” in circumstances where the respondent’s evidence is that she has had no contact with her father at all for several years.
However, to the extent that such a factor may sometimes be influential against the remedy contemplated, that factor should carry little weight here given the nature of the asset is not a business, the parties appear to have managed the current arrangement in recent years without contact, and the parties agreed during this proceeding to maintain the current arrangement – that is to permit the appellant to remain in the O’Malley property during his lifetime.
Overall, then, in the circumstances of this case, a remedial constructive trust is the appropriate remedy. The title to the O’Malley property will remain registered in the respondent’s name, but a declaration will be made that 50% of the beneficial interest in the O’Malley property be held by the respondent on trust for the appellant.
For an abundance of caution, we will include the words “separate and severable” in the declaration so that there can be no doubt that the proprietary interest that will be held by the appellant following the declaration is an interest that will form part of his estate and which he may dispose of as he sees fit.