Chen and Chen and Ors
[2018] FamCA 828
•17 October 2018
FAMILY COURT OF AUSTRALIA
| CHEN & CHEN AND ORS | [2018] FamCA 828 |
| FAMILY LAW – PROPERTY – Application to set aside financial agreement between husband and third party who has lived in a de facto relationship unknown to the wife – wife ignorant of agreements being concluded – agreements set aside. |
| Family Law Act 1975 (Cth) |
| Bourke v Bourke [2009] FamCA 27 Chen & Chen and Anor (No. 2) [2017] FamCA 285 Cooper v Southern Portland Cement Ltd [1972] HCA 29; (1973) CLR 427 In the Marriage of Holley [1982] FLC 91-257 Lewski v Commissioner of Taxation [2017] FCAFC 145 Thorne v Kennedy (2017) HCA 49 |
| THE APPLICANT: | Ms Chen |
| THE 1STRESPONDENT: | Mr Chen |
| THE 2ND RESPONDENT: | Ms Quen |
| THE 3RD RESPONDENT: | C Pty Ltd |
| THE 4TH RESPONDENT: | Quen Pty Ltd (ACN …) |
| THE 5TH RESPONDENT: | E Pty Ltd (ACN …) |
| THE 6TH RESPONDENT: | Company F (ACN …) |
| THE 7TH RESPONDENT: | GPL (ACN …) |
| THE 8TH RESPONDENT: | Mr A Chen |
| THE 9TH RESPONDENT: | Mr B Chen |
| THE 10TH RESPONDENT: | Mr C Chen | |||||
| FILE NUMBER: | MLC | 5805 | of | 2016 | ||
| DATE DELIVERED: | 17 October 2018 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Cronin J |
| HEARING DATE: | 1–3, 15–17 November 2017, 12–15 December 2017, and 1 February 2018 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Dickson QC with Dr Dinelli |
| SOLICITOR FOR THE APPLICANT: | Taussig Cherrie Fildes |
COUNSEL FOR THE 1ST RESPONDENT: | Mr Wilson |
SOLICITOR FOR THE 1ST RESPONDENT: | Bowlen Dunstan & Associates |
| COUNSEL FOR THE 2ND AND 4TH TO 7TH RESPONDENTS: | Mr Strum QC with Dr Ingleby |
| SOLICITOR FOR THE 2ND AND 4TH TO 7TH RESPONDENTS: | Kenna Teasdale Lawyers |
| COUNSEL FOR THE 3RD AND 8TH TO 10TH RESPONDENTS: | Mr Puckey |
| SOLICITOR FOR THE 3RD AND 8TH TO 10TH RESPONDENTS: | Marshalls & Dent & Wilmoth |
Orders
Pursuant to Section 90UM of the Family Law Act 1975 (Cth), the financial agreement between Ms Quen and Mr Chen executed on 15 October 2015 is set aside.
All outstanding applications for financial relief are adjourned to a date to be fixed for determination by a judge.
Any party seeking a costs order arising under these orders and arising out of these proceedings may do so by written application to be filed and served by no later than 1 November 2018 and any response thereto be filed and served by no later than 21 November 2018 and that thereafter, subject to any determination of the trial judge, the costs applications be determined in chambers.
That all parties have liberty to apply on short notice for any other consequential orders arising out of these orders.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Chen & Chen and Ors has been approved by the Chief Justice pursuant to s 121(9)(GPL) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLC 5805 of 2016
| Ms Chen |
Applicant
And
| Mr Chen |
First Respondent
And
| Ms Quen |
Second Respondent
And
| C Pty Ltd |
Third Respondent
And
| Quen Pty Ltd (ACN …) |
Fourth Respondent
And
| E Pty Ltd (ACN …) |
Fifth Respondent
And
| Company F (ACN …) |
Sixth Respondent
And
| GPL (ACN …) |
Seventh Respondent
And
| Mr A Chen |
Eighth Respondent
And
| Mr B Chen |
Ninth Respondent
| Mr C Chen |
Tenth Respondent
REASONS FOR JUDGMENT
There are 11 parties to this proceeding. It relates to the discrete issue of whether a financial agreement should be set aside. There were a number of agreements between the various parties between 2011 and 2015 about financial matters culminating in lawyers drawing up, and the first and second respondents executing what was described as a binding financial agreement relying upon Part VIIIAB of the Family Law Act 1975 (Cth) (“the Act”) but the focus of these reasons is that final agreement. To the extent that the earlier agreements affect the rights of any, or all, of the parties to property, I have taken the view that the final agreement is the critical one that affects the wife. I find that her interests were ignored and the so called binding financial agreement must be set aside. To the extent that a party desires to argue that the earlier agreements have validity or are binding or do not affect the wife, I find that they are caught by s 106B of the Act and as such, I would set them aside. I intend to leave the parties to contemplate these reasons and decide whether they need further orders to deal with those agreements. To the extent that there is disagreement, I shall hear those specific issues.
As might be apparent from the number of litigants, there is a complex web of entities, parties and financial transactions. Over opposition from some parties, I made an order on 3 August 2017 to bifurcate the issue of the binding nature of the financial agreement between the second and third respondents. That agreement was executed on 15 October 2015. Unwinding the consequential and complex web of commercial interests will not be easy in the future.
The parties
For the purposes of these proceedings, all parties found anglicising names convenient and I have followed that lead.
Ms Chen and Mr Chen were husband and wife and I understand and accept them to be estranged and separated.
Mr Chen commenced a de facto relationship with Ms Quen while still not only married to Ms Chen but was living with her part of his time and raised three children to her. Mr Chen led a double life.
From her de facto relationship with Mr Chen, Ms Quen had two children. Both are under 18 years of age. At all times, Ms Quen knew of Mr Chen’s marriage to Ms Chen and the family Mr Chen had there.
A group of companies constitutes the 4th to the 7th respondents. They were joined because of property ownership rights and the need for orders to be implemented but they may have their own causes of action which are not immediately relevant.
During the marriage of Mr Chen and Ms Chen, three children were born to them. They are Mr A Chen (“Mr A”), Mr B Chen (“Mr B”) and Mr C Chen (“Mr C”). All three are now adults and each has a professional career. They are referred to either by their full names or as they were called by the other parties. They participated in negotiations between Mr Chen and Ms Quen that culminated in one of the agreements to which I earlier referred. That has been described as a deed of settlement. It was executed on 14 August 2015 including execution by the children. It was this “deed” that was said to be the prelude to the financial agreement executed only weeks later but the latter was specifically between Ms Quen and Mr Chen. The logic behind this final agreement is explored in these reasons.
Ms Quen’s assertion of agency
Ms Quen asserts Mr Chen and the three children were the agents of Ms Chen right through her dealings with Mr Chen. That is contentious and Ms Chen’s knowledge is disputed. Ms Chen and the children deny any such agency. Indeed, as will become apparent, Ms Chen’s case is that she knew nothing of numerous transactions and specifically, knew nothing of the financial agreement between Mr Chen and Ms Quen until shortly before these proceedings began.
Ms Chen maintains, supported by Mr Chen and the three children, she was oblivious to the discussions and settlements between Mr Chen and Ms Quen including various transactions between them as far back as 2011. There is an irony in Mr Chen also seeking to set aside the financial agreement having regard to the fact that he ignored the rights of Ms Chen but he conducted this proceeding on a different basis to Ms Chen. His argument is about the pressure he says he was under from Ms Quen. I return to that in a moment but suffice to say, I reject his argument.
Ms Chen’s argument
Ms Chen argues that she has been prejudiced by Mr Chen’s dealings with property interests that included hers. Because of the bifurcation order, the extent of Ms Chen’s interests remain obscure but that largely arises from the bifurcation order and incomplete discovery.
How to approach the issue
Despite limited witnesses, the hearing took about 11 days because the three main litigants’ lives and their transactions were pored over. That meant that many of their dealings were canvassed. To unravel what ultimately occurred but with a focus on what each (particularly the two women) knew, it is necessary to look back over what occurred from 2011.
As will become evident, most of the focus is on Ms Quen and Mr Chen and the evidence was largely silent on what Ms Chen was doing during that period. I accept however that her interests, even as yet not fully identified or clarified, were ignored by Mr Chen and Ms Quen.
What did Ms Chen know?
During the de facto relationship between Mr Chen and Ms Quen, Ms Chen did come to know of Mr Chen’s second family. That arose in 2013 when either Ms Chen confronted Mr Chen or he confessed to an “affair” but that knowledge did not until much later extend to what Mr Chen and Ms Quen had been doing in relation to property.
As the de facto relationship between Mr Chen and Ms Quen came to an end, one of the three adult children learned of it and told the others. There was an initial reticence to tell their mother Ms Chen albeit it would seem that she knew of the “affair” anyway. In what could only be considered almost bizarre, it was only after the execution of these agreements, including by the children, that Ms Chen was told what had been going on. The execution of the agreements by the children reflects poorly on them insofar as they did not tell their mother because the distinct flavour of the agreements involving them shows self-interest. That takes nothing away from the fact that Ms Chen still did not know of what Mr Chen and her own children were doing.
The issue
The critical question in these proceedings is whether agreements between Mr Chen and Ms Quen about the division of assets should be set aside on the basis that Ms Chen’s interests were ignored.
As earlier mentioned, Mr Chen joins with Ms Chen in seeking to set the ultimate agreement but he also says earlier agreements with Ms Quen were executed as a result of pressure and threats. Mr Chen says Ms Quen threatened that she would tell Ms Chen and his other family along with the relevant cultural community about their relationship. He maintains that Ms Quen threatened to prejudice his relationship with his children with Ms Quen; that is, that he would be denied time with them. For the following reasons, I reject those claims.
That leads to the question of the credibility of all the significant participants.
The parties as witnesses and credit issues
Language Barriers
The predominant cultural background of Mr Chen, Ms Chen and Ms Quen is Chinese.
Ms Chen and Ms Quen required interpreters and accordingly, their evidence was given slowly. It might be thought that in commercial litigation of this nature where the parties had been successful business people for many years, they would understand English well. However, I found that not to be the case in respect of both Ms Chen and Ms Quen. I saw no advantage to these participants having interpreters nor disadvantage to the other participants by the slow translation and delivery of the evidence.
Ms Chen
Ms Chen was tested in cross-examination about her role in a family business and what she understood had been occurring between Mr Chen and Ms Quen and later, her children. I find that Ms Chen was a person who showed little interest in the commercial activities involving Mr Chen. Her evidence about many things was simple.
To the extent that Ms Quen’s case was that Ms Chen was aware of what Mr Chen was doing with Ms Quen, I reject that.
It is argued by Ms Quen that Mr A was “representing” the interests of Ms Chen in negotiations and “arguably was acting as her agent”. “Arguably” in this context, means capable of being argued or viewed from a set of facts. Nothing in the evidence supports such a view and as much as Ms Chen was pressed on the issue, the matters that were put to her to highlight her lack of truthfulness, I find they showed a simple woman whose role in the family business and possibly even the family, was largely seen as menial.
Ms Chen was cross-examined about “deficiencies” in her affidavit, her attendances upon her lawyers with her son and on her own pursuit of a transfer of property by Mr Chen to her as an indication that she well-knew what was going on and wanted to protect her own property interests. However, all of the cross-examination just highlighted that Ms Chen knew of Mr Chen’s financial problems but nothing more. I found Ms Chen truthful.
To the extent that there were cultural issues at play here, I am satisfied that Ms Chen had a limited financial role in the marriage by comparison to the gregarious Mr Chen who mostly did what he liked. Mr Chen led a double life for many years without Ms Chen’s knowledge. There is no better evidence of that than Ms Chen’s reaction in the witness box on seeing a photograph of Mr Chen and Ms Quen and their children with Mr Chen’s mother.
There was also cross-examination of Ms Chen that she and Mr Chen had not separated as she described. Ms Chen denied that, and the evidence of the children corroborates the fact that, Mr Chen has been “sent to Coventry”.
Mr A’s role in negotiating with Ms Quen to the point of a concluded agreement looks, at first blush, like he was protecting Ms Chen’s interests and was her agent but a more careful look at the evidence around the time of the agreement being executed leads to the conclusion that Mr A was looking after himself.
Mr A’s assistance to Ms Chen in respect of court documents also leads to intrigue about his role. How could he remain silent when affidavits were being prepared for Ms Chen well-knowing the intricate web of deals that were going on between Mr Chen, Ms Quen and the children? I am satisfied that it was not until just before the proceedings that Ms Chen did learn of the financial agreement. Mr A was cross-examined and I had the opportunity to observe him. Having heard both Ms Chen and Mr A, I reject any suggestion that Mr A manipulated the evidence of Ms Chen to highlight her ignorance of the financial activities. Whilst Mr A’s self-interest must be the only other explanation, I am satisfied on the balance of probabilities that whilst the assistance Ms Chen received in the preparation of her affidavit was not disclosed, it does not mean that what Ms Chen said was not true. There is no evidence of Mr A having coached Ms Chen, nor any endeavour on his part to concoct her ignorance about all that had gone on.
I find Ms Chen’s relationship with Mr Chen was such that she accepted what he told her. She gave an example of various financial problems and risks of which she was aware associated with one of Mr Chen’s projects but only in a general way. She knew that Mr Chen was making decisions and, as she saw things, there were risks involved but she went along with his decisions.
An area where Ms Chen’s evidence was challenged was in relation to her involvement in the family business itself. She had placed her mobile telephone number in Chinese language advertisements seeking employees for the business but she otherwise denied active involvement. She was pressed about what she did when she received telephone calls from people responding to the advertisements. Her evidence was that she passed the messages on to Mr Chen. Each of the children corroborated the fact that Ms Chen was not involved in decision making. As a result of a consideration of all of those matters, I accept Ms Chen’s evidence.
Mr Chen
In final submission, counsel for the wife described Mr Chen as a witness of little credit. A similar submission was made by counsel for Ms Quen. Ms Quen’s counsel submitted that, arising from cross-examination, Mr Chen was “quickly and repeatedly manifestly revealed to be a liar”. Although those are strong words, I agree with them.
Mr Chen was a gregarious witness whose evidence showed that he would say whatever suited his purpose. When challenged about such things as specific money transactions, the best he could do was say that there were no records and all was “mixed up”. He then reverted to a mantra that it was all agreed between he and Ms Quen as to how financial things were to be concluded. Endeavouring to trace what happened to significant amounts of money was difficult and when challenged about mixing money, Mr Chen did not explain or, as in one case, when asked who received particular money, Mr Chen’s response was “no idea”. His answers were evasive. He talked of there being a “side deal” with Ms Quen to the written documents none of which had any clarity. Added to those matters was the double life that Mr Chen led. I would not accept his evidence as truthful unless it was independently corroborated; in the most important areas, it was not.
Ms Quen
Unlike assertions made about Mr Chen, counsel for the wife described Ms Quen as an evasive witness. I agree. There are a number of examples where her evidence was implausible. Ms Quen’s relationship with Mr Chen has to be viewed against the fact that she not only reaped benefits from having him as the face of the business after he “sold” it to her but she continued to negotiate with him thereafter despite having (on her version) a concluded financial settlement. When she was questioned about values of assets, and in particular, that various figures she used were “all very low” and “slighted” to her advantage, she initially responded saying she did not know, but then shortly afterwards denied that that was the case. She had relied on Mr Chen to translate documents for her and accepted his “recommendations” about transferring property to save on stamp duty. From her perspective, that reliance was inconsistent with a view that he was an untrustworthy person.
In respect of one statutory declaration for government revenue purposes, I find Ms Quen knew that the documentary assertions could not be justified and her mantra that she could not remember the details of the execution of the document, was unconvincing. Ms Quen also explained that figures inserted in the financial agreement were not “updated” before its execution. Bearing in mind all that had gone on, and with lawyers and an accountant involved, that explanation defies logic. These arrangements had gone on between Ms Quen and Mr Chen personally as well as with the professionals so the lack of “updating” does not make sense having regard to the importance Ms Quen placed on getting this financial deal finalised with Mr Chen whose approach to things financial must be seen as a “moving feast”. But lawyers were involved and Mr Chen went off to get a certificate signed that was attached to the agreement. Thus, I have concluded that Ms Quen well-knew the importance of accuracy. Mr Chen now raises that inaccuracy as a basis to set aside the agreement but as I shall observe later, I find Mr Chen’s cavalier approach to this whole arrangement leaves with the distinct view that he was urgently pursuing money from Ms Quen and he would have said and signed anything if it suited that purpose.
The recitals in the agreement have to be approached with caution in respect of the amounts involved but otherwise, they reflect what at least Ms Quen was pursuing. Cavalier or not, Mr Chen signed the agreement after he had had it explained by a lawyer. Thus, Ms Quen’s approach to accuracy must be described as “sloppy” but I do not accept that her approach was dishonest or fraudulent. That said, I find it necessary to say that I have approached Ms Quen’s evidence cautiously because of that sloppiness.
THE CHILDREN
Each of the three children, although parties, did not participate other than as witnesses. Their rights, if any, under the deals or arrangements are yet to be sorted out. They were to benefit financially from Ms Quen.
Each witness was questioned about the discussions with Ms Chen. I have already mentioned my intrigue with how Mr A conducted himself but each witness needs to be considered separately as to what they knew.
Mr A
Mr A’s evidence was that in 2014, he learnt from his sister of his father’s relationship with Ms Quen. By that time, Ms Chen already knew of Mr Chen’s affair with Ms Quen but not its extent. Mr A described his feeling as one of shock. He decided thereafter to protect his mother from the details including of the negotiations about settlement of property between Mr Chen and Ms Quen but it was hard to see how he was looking after Ms Chen’s financial interests.
Two significant issues arise which put Mr A’s credibility in the spotlight. First, why was he involved in the negotiations at all? The answer he gave was that, as a business man, he was desperate for money and had been very much involved in running a family company involved in property development. The evidence about projects at that particular time bears that out. One example of financial problems can be seen in Mr Chen’s venture H Pty Ltd. It went into liquidation at a time when there was a property development under way. Mr A was integrally involved in this property development through his interest in the development company. I find Mr A was keen to protect his own interests and to that extent, it is perhaps understandable that he would keep his mother away from a situation where, had she sought legal advice about what Mr Chen was doing, it may have all fallen apart because Ms Quen was a part of the development.
A second example of Mr A’s involvement was that he did not speak to Ms Chen about Mr Chen’s relationship with Ms Quen but then I accept Ms Chen knew at least a year before Mr A did. In cross-examination, it was bluntly put to Mr A that his version about both issues was “a load of rubbish”. His calm response was that it was the truth. I accept that his evidence is consistent with that of Ms Chen and also his sister.
Unusual though Mr A’s evidence may objectively seem, I find it plausible. He withstood cross-examination and did not deviate from his evidence. He is an intelligent, articulate, tertiary-educated man and he explained why he acted as he did. In respect of being involved in the negotiations between Ms Quen and Mr Chen, his evidence was that, despite the longevity of the discussions and his personal involvement, he was, he thought, acting in the interests of Ms Chen. How he was protecting Ms Chen was hard to see. I consider most of his actions were looking after his own interests. That said, I do not accept that he was acting as Ms Chen’s agent because that would require knowledge on her part about the decisions before they were made. I accept Mr A’s evidence as generally truthful.
Ms J
Ms J is a daughter of Ms Chen and Mr Chen. She spoke to Ms Quen by telephone in about October 2014. When Ms Quen telephoned, she introduced herself to Ms J as Mr Chen’s “girlfriend”. According to Ms J, the call was a shock and shortly afterwards, she spoke to her brother Mr A. A decision was then made between the siblings not to tell Ms Chen. It appears common ground between the three children that all was revealed in 2016 but at that stage, all of the financial agreements had been finalised.
In cross-examination, Ms J was pressed about what she understood Ms Chen knew. Like her brother, this witness was involved in the execution of the agreement before the final financial agreement. Ms J had an association with the solicitor who gave advice to Mr Chen and Ms Chen’s family. Like her brother, her participation with her father but her silence towards her mother seemed very odd but that does not detract from the fact that all objective evidence otherwise points to the fact that Ms Chen was kept in the dark.
Ms J was pressed about Ms Chen’s role in the family business. Her plausible response, consistent with that of Ms Chen, was that her mother was directed to do tasks (some might describe them as menial) such as placing advertisements and accepting telephone calls. There is no other reliable evidence to indicate family meetings or the like took place which might suggest serious involvement of Ms Chen in the various property development activities.
I am satisfied that Ms J did not discuss with Ms Chen the critical negotiations nor even that Mr Chen was entering into an agreement with Ms Quen encapsulated in documents about which Ms J was an integral part. That might also reflect poorly on the family relationships but that is not the test.
Nothing in the evidence of Ms J was otherwise remarkable. It was not suggested that she had conspired with her siblings or her parents to create the aura of ignorance about Ms Chen’s knowledge of the relationship between Ms Quen and Mr Chen. Thus, the essence of this witness’s evidence is that Ms Chen did not know of the dealing that Mr Chen was undertaking with Ms Quen. I accept that.
Ms K
Ms K is also a daughter of Mr Chen and Ms Chen and the twin sister of Ms J. She married in 2015 and said that at that time, she knew nothing about the Ms Quen and Mr Chen relationship. Because of her personal circumstances, she was kept out of the knowledge held by her sister and brother for some time about Mr Chen’s nefarious activities until April 2015. That corroborates the evidence of her brother and sister. She learned of the financial agreement in May 2016. She said that at that time, it was agreed with Mr Chen and her siblings that Ms Chen should be told about what had happened. That evidence is consistent with the evidence of Ms J.
In cross-examination, Ms K was asked about her knowledge of the financial dealings including those involving the company of which she was a shareholder. She described her role as not being involved in the business discussions. Despite being qualified as a lawyer and knowing of the negotiations going on between Ms Quen and Mr Chen, she did not seek advice nor did she tell Ms Chen of the documents that were being executed. I accept her explanation that this was a “difficult time”. She said she felt she had little option other than to sign documents as Mr Chen was pressuring her based on the need for money. This evidence is plausible because that is exactly the way Mr Chen behaved and consistent with the evidence of the siblings. I accept Ms K’s evidence.
Thus, whilst it is most odd, even curious, that three adult tertiary-qualified children would treat their mother as they agreed they did, the evidence all points to the fact that Ms Chen was oblivious to the dealings of Mr Chen and her own children.
Relevant background
As I have already mentioned, this hearing took a long time because of the challenging cross-examination but there were also many documents examined and traversed. A combination of all of that enables me to make findings about the history of the period from 2011 onwards with a view to what Ms Chen knew but also not forgetting Mr Chen’s argument that he was pressured and threatened by Ms Quen.
Mr Chen led his double life spending part of his time with Ms Chen and the three children (as they grew to adulthood) and the other part of his time with Ms Quen and their two children. Along the way, Mr Chen acquired assets and conducted businesses but the unusual feature was that some of his acquisitions involved Ms Chen and others, and Ms Quen together with the trust entity in which Ms Quen was involved. The main starting business was significant the profits from which seemed to enable the acquisition of these other assets.
To ensure that Ms Chen did not learn of his activities with Ms Quen, Mr Chen categorized purchases as belonging to the “Blue Team” and the “Green Team”. Mr Chen lied to Ms Chen about his extended absences on the basis that he was engaged in business activities. The evidence of the three adult children similar exposed the fact that Mr Chen had managed to have, and participate in, raising two younger children without those three (now adult) children knowing anything at all. That fact shows the elaborate lie that Mr Chen managed to perpetrate.
Two years before Ms Chen learned of his affair with Ms Quen, Mr Chen had already started transferring assets to Ms Quen but he also acquired property jointly with her without Ms Chen’s knowledge. Much of this financial activity stemmed from the primary business money which was conducted under a corporate entity.
As an aside but relevant to Mr Chen’s credibility, Ms Quen accused him of having an affair with another woman during their relationship and that caused tension. How Mr Chen managed all of this remains a mystery.
For the purposes of my findings, I have applied the standard of proof which is the balance of probabilities. The onus of proving any accusation falls to the person making it. In this case, Ms Chen asserts ignorance of Mr Chen’s activities and I accept that to the relevant standard. Mr Chen asserts pressure and threats by Ms Quen but I reject those on the basis that he has not satisfied me to anywhere near the relevant standard.
Applications
Ms Chen was the applicant. She sought orders that the financial agreement executed between Mr Chen and Ms Quen be set aside on one or more of the following bases, namely, that it was entered:
a)with reckless disregard for her interests;
b)to defeat an anticipated order or was likely to defeat an anticipated order under s 79 of the Act for the proper division of the assets “of the marriage”; that is, her marriage with Mr Chen; and/or
c)for a purpose or purposes that included defeating her interests in an application under s 79 of the Act.
Mr Chen’s position as identified by his amended response filed in February 2017 sought orders that:
a)The financial agreement be declared not binding;
b)The agreement be set aside (s 90UM (1)(a), (d), (e) and (h));
c)The deed of settlement dated 14 August 2015 and the transfer of the first tranche of shares in GPL to Ms Quen both be set aside (s 106B); and
d)There be property settlements with Ms Chen and Ms Quen under the s 79 and s 90SM provisions of the Act respectively.
Mr Chen’s outline of case justified the relief he sought on the following bases:
·The financial agreement was not binding because he was not provided independent legal advice and/or that advice was not about the effect on his rights and the advantages and disadvantages of entering into the agreement (90UJ(1)(b));
·The agreement was obtained by fraud on Ms Quen’s part because she did not disclose to Mr Chen that an entity she controlled had purchased a significant property 2 weeks before the agreement was signed and she had misrepresented the balance of her bank account;
·The agreement (by both Ms Quen and Mr Chen) was executed with reckless disregard for Ms Chen’s interests; and
·The agreement was void, voidable or unenforceable because of duress or undue influence by Ms Quen;
Ms Quen’s position was that Ms Chen’s application (and that of Mr Chen) should be dismissed but she also sought the enforcement of the agreement as against Mr Chen. Ms Quen’s position about Ms Chen may be said to be that:
a)Ms Chen derived considerable benefits from the arrangement;
b)Ms Chen’s position of “being in the dark” was implausible;
c)Mr Chen made repeated attempts to renegotiate, the context of which was that Ms Chen “became involved”, as did all of the adult children, in the deed of settlement executed in August 2015.
She argued that this was a commercial arrangement settled over a long period of time where Ms Chen’s interests “were acknowledged and protected” by Mr Chen with her “consent”. Nothing supports such a conclusion.
Whilst the agreement has a commercial focus and flavour, there were lawyers for all the participants who must have realised the underlying implications of the documents. That is, with Ms Chen not a party to the agreement under contemplation but with everyone knowing of her marital status with Mr Chen, not to mention her status as the mother of the adult children involved, it would have been easy to formally notify Ms Chen of what was being undertaken. The attempt by the draftsperson, presumably a lawyer, to cover the issue in one agreement was curiously clumsy because I consider it highlighted that the parties were dismissive of Ms Chen’s interests.
Ms Quen said, and Mr Chen did not seem to dispute, that discussions, and indeed some transfers of property, began in May 2011 and what followed over time was a series of transactions implemented with accounting “and other aspects of arms-length commerciality” along with considerable payment of money which Ms Quen in particular undertook to meet her obligations under the agreement with Mr Chen.
Mr Chen’s legal advice at the time of the execution of the financial agreement
The attack by Mr Chen on the independence of the legal advice he received before the financial agreement was executed was said to arise because the solicitor was arranged by Ms Quen and paid by her. This point can be quickly disposed of. From the beginning of the hearing, Mr Chen said he was calling the solicitor to give evidence but ultimately, he decided against doing so. The absence of the solicitor must mean that the presumption of regularity should be applied and despite what various documents suggested, the assertion by Mr Chen that it was not independent advice has little merit.
Mr Chen’s meeting with the solicitor may well have given rise to some questions about the professional approach the solicitor took. For example, Mr Chen said he went to meet this solicitor for the first time arranged by an accountant who had done work for at least Ms Quen. Mr Chen asserted that he went here carrying an envelope with cash provided by Ms Quen to pay for the advice and consultation fees. This was said to be an indication that the solicitor was some sort of puppet of Ms Quen because she was paying for this. That was denied by Ms Quen. I accept Ms Quen’s evidence that this meeting was not orchestrated by her but even if it was, it was Mr Chen’s own evidence that the discussion and/or advice was minimal. Minimal or not, without the evidence of the solicitor, the certificate stands unchallenged. Mr Chen’s evidence is that the solicitor read each page and both he and the solicitor signed each. In my view, based on Mr Chen’s lack of credibility overall, this ground has no merit and I do not intend to deal with it further.
The legal points
Ms Chen’s application focuses on sections 90UM and 106B of the Act. At this point, it is only necessary to deal with the specific provisions relied upon.
Section 90UM of the Act provides
(1) A court may make an order setting aside, for the purposes of this Act, a Part VIIIAB financial agreement or a Part VIIIAB termination agreement if, and only if, the court is satisfied that:
…
(d)a party (the agreement party) to the agreement entered into the agreement:
(i)for the purpose, or for purposes that included the purpose, of defeating the interests of that other person in relation to any possible or pending application for an order under section 79, or a declaration under section 78, in relation to the marriage (or void marriage); or
(ii)with reckless disregard of those interests of that other person
Section 106B(1) of the Act provides:
Transactions to defeat claims
(1)In proceedings under this Act, the court may set aside or restrain the making of an instrument or disposition by or on behalf of, or by direction or in the interest of, a party, which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order.
The various transactions involving Mr Chen and Ms Quen
The relationship between Mr Chen and Ms Quen began in 1998 with Mr Chen renting a flat and thereafter paying Ms Quen’s expenses even though she was also in receipt of a single Australian Government parenting payment which she said he arranged.
As the entitlement to a parenting payment requires parenting, the only child Ms Quen had was Mr Chen’s. How that came about was not explored. It has the flavour of Mr Chen’s “wheeler and dealer” approach and Ms Quen just went along with it.
The relationship in 1998 led to what Mr Chen described as an unofficial wedding ceremony in China where Mr Chen was presented to Ms Quen’s parents. It could not be said that Ms Quen did not know that Mr Chen was still married to Ms Chen. Two children were born to Ms Quen and in 2007, she and Mr Chen set up a trust known as the Quen Trust. Its purpose was said to be to benefit this new family with Mr Chen as the appointor.
Whilst these things were happening, Mr Chen also purchased properties in either his name or with Ms Chen as co-owner.
I have already mentioned the primary business. This was the main source of the family’s income and it was conducted by a company GPL (GPL). Mr Chen purchased real properties in the name of GPL and constructed the factory from which the company’s business operated.
GPL was incorporated in 1990 with the shareholders as Mr Chen and his two brothers with Mr Chen as the majority holder. Ms Chen did not have a legal interest in the company. The company conducted a successful business with a turnover of over $2 million per year.
Once Mr Chen met Ms Quen and commenced a relationship with her, he was involved in the purchase of 14 properties either using their joint names, her name or that of the Quen trust. As best I can determine, most of the money for the acquisitions came from GPL. Mr Chen’s purchases with Ms Quen and Ms Chen had the potential to lead to Ms Chen finding out about his activities so he invented the “blue” and “green” team identifications to ensure Ms Chen remained unaware of Ms Quen. Ms Quen knew of both the blue team and the green team purchases but I am satisfied that Ms Chen only knew of those that affected her. Thus, whilst Mr Chen has been the subject of criticism, Ms Quen assisted in these nefarious property activities.
As the years went by and the children became adults, property development was undertaken and C Pty Ltd was incorporated. Mr Chen’s three children were the shareholders as to 85 per cent and Ms Chen held 15 per cent but it was Mr Chen who controlled things. Some of the acquired investment properties required construction to be undertaken and that work was undertaken by C Pty Ltd. That is how that company and the three children became respondents to these proceedings.
2011 and the disposal of GPL
Mr Chen said that in 2010, being concerned with the operating costs of GPL, he put the business on the market. Like many things that Mr Chen did, he maintained this marketing was done in a secretive way. Ms Quen denied that saying that there was nothing secretive because there was an agent and it was put on the internet. Mr Chen’s expanded version in cross-examination was that he meant that he did not want the staff to know about the sale because of their entitlements. I understood that to mean that if he could have found a way around paying entitlements, he would have. It was more sinister than that however because he added that he also did not want his two shareholder brothers to know either. Mr Chen’s description, even of endeavouring to keep the potential sale away from the staff and his brothers, is implausible given how and where the potential sale (bearing in mind its size) was to take place. All of this reflects poorly on Mr Chen but then again, whilst Ms Quen maintained Mr Chen orchestrated it, she participated.
Ms Chen certainly knew about the business sale because, contrary to an inference that might have been drawn from her trial affidavit, she told the Court in cross-examination that she knew Mr Chen had sold it. That was because Mr Chen told her. As Mr Chen wanted to get his brothers out of the business as well, one might infer that Ms Chen knew that was happening too. However, Ms Chen’s evidence does not enable me to make such a finding. One way or the other however, the brothers would have to be paid out upon a sale and one might have expected that evidence about the movement of money to be transparent; such was not be the case.
Although Ms Chen knew the business was being sold, I find she did not know Mr Chen was intending then (and later) to transfer ownership by a sale of the shares in GPL, or some of them, to Ms Quen.
Ms Chen told the Court she worked in the office up until 1997 and was rarely on site after that time so it is unlikely that she would have been integrally involved in what was going on in 2011 but she must have known that change was occurring because Mr Chen’s brothers were leaving the business. That however is consistent with a sale. Mr Chen told anyone who needed to know that a wealthy Chinese businessman was buying it; that was a lie.
The formal transfer of ownership of GPL and how that occurred was not clear from the evidence and I have done the best I can from the various versions that each of Mr Chen and Ms Quen provided. Whilst there may have been a deliberate intention on Mr Chen’s part to sell the business to Ms Quen and on her part to acquire the shares, at least in 2011, that intention was not effected.
By May 2011, the relationship between Mr Chen and Ms Quen was already in some difficulty. This was said to have been caused by another relationship that Mr Chen had begun.
As to their financial positions at May 2011, Mr Chen had a number of assets and Ms Quen few. That must have been the case because Ms Quen had predominantly been involved in caring for the children however, Mr Chen said, and Ms Quen did not deny, in 2009, he was also in financial trouble over a development project and she “provided” him with $360,000. To the extent that she had an interest in property, Mr Chen set out in his affidavit (paragraph [36]) there were 14 properties acquired between 1999 and 2011. Ms Quen did not seem to dispute the inference that they came through the efforts of Mr Chen but her evidence (paragraph [22] of her affidavit filed 19 October 2017) was that 32 properties were acquired. It remains unclear how Ms Quen had any source of income other than of a modest amount such as to be able to acquire these interests.
In 1998, Ms Quen was 24 years of age and working in business and from 2001 to 2009, she was a Centrelink recipient. Nothing suggests she was wealthy or earning any other income of substance because Mr Chen was supporting her although it transpires that her father was wealthy but whether he provided funds, I am unable to say. Although it might be thought that Mr Chen’s main source of revenue was the business, he was also undertaking various property developments throughout that time and Ms Quen did not seem to dispute that.
Ms Quen asserted, and Mr Chen did not deny, that in May 2011, a “stocktake” of properties (and presumably GPL) was undertaken by she and Mr Chen and they reached agreement as to who was to retain which properties on the assumption that their personal relationship was coming to an end. On these lists were properties owned by the Quen Trust where Mr Chen was still the appointor. The trust also acquired properties and, having regard to its purpose as providing for beneficiaries who did not include Ms Chen or the adult children of Mr Chen, it is unsurprising that Ms Chen did not know about it. I am not aware of how it operated, or was funded, but must infer, because Ms Quen did not deny Mr Chen’s assertion as to their respective roles in the trust, that legally, the properties owned by the trustee (at least when acquired) did not belong to Ms Quen per se.
In May 2010, Mr Chen had transferred his shareholding in the trustee company to Ms Quen and resigned his directorship but he retained control over the trust because he was the appointor. Mr Chen was also a beneficiary of the trust. Thus, the trust was not necessarily Ms Quen’s property.
Ms Quen described the 2011 “stocktake” of the real properties as comprising two lists. Despite this being done on the basis of a separation from Mr Chen and thus the stocktake was to be the foundation for an agreement, I do not accept their relationship ended there. The first part of this stocktake or list which was those properties to be retained by “Mr Chen, Ms Chen and his children” and the second was for Ms Quen’s “family”. Ms Chen was not consulted and of course, she did not then know of Mr Chen’s financial activities with Ms Quen. Ms Chen was not informed that Mr Chen and Ms Quen had made the decision to alter the interests then apparent at least in respect of the properties in which Ms Quen had an interest.
GPL was not on either list because, according to Ms Quen, quite separate from these properties, she viewed it as hers under the sale arrangements with Mr Chen. As the secret marketing arrangement had not been successful, she said she decided to buy the business herself. Her written evidence was “it was agreed that I would buy the business, [GPL] from him and his brothers”. Ms Quen did not buy from Mr Chen’s brothers. She had no dealings with them because discussions were undertaken by Mr Chen. By the time of the separation agreement, any sale absolutely to Ms Quen, if that was what was intended, had not occurred. In respect of this separation agreement stocktake, nothing was finalised in any formal sense.
Mr Chen asserted that the money to fund the property acquisitions came from GPL before this “stocktake” or sale of the business and as I have already said, there is no other plausible evidence to the contrary. The interests of Ms Chen can only be relevant to the question of whether Mr Chen and Ms Quen did something in 2011 to defeat her claim to a property settlement and as such, the potential for that claim has to also consider the source of the properties being altered in 2011. Whatever interest Ms Quen had in 2011, Mr Chen seemed content to give her those properties even if the source of the funding was GPL or the indirectly-connected property developments. The actions of Mr Chen in acquiring interests to the exclusion of Ms Chen, are therefore of relevance if it is accepted that the acquisition money came from GPL.
Despite Ms Quen’s evidence that the failed market sale led her to buy the business, the GPL shares were not then transferred. In September 2011, and indicative of the fact that something was happening about the acquisition of the business by Ms Quen, Mr Chen executed a will which, subject to payments of debts and the like, Ms Quen was to receive all of his GPL shares. I have inferred from the execution of the will that Ms Quen was not then to have all of the shares of GPL which makes the suggested sale of the business to her problematic. This also raises the question of what Mr Chen was giving away or selling and again whether Ms Chen’s rights were ignored. I am satisfied they were.
It was Ms Quen’s evidence ([30] of her trial affidavit) that in the proposed market sale, Mr Chen wanted $4 million and she remembered an offer being made by someone of $3.8 million. That did not lead to a sale. As for her acquisition, she made no mention of the price that was discussed, or agreed, with Mr Chen. She recalled $2.8 million was mentioned but later in cross-examination, she said this was the figure being “negotiated”. As to why all this was not mentioned in her affidavit, she said that it was the initial “figure of the bargain”.
Various documents were put to her about the price being discussed and she said some of the figures were incorrect. Having regard to what Mr Chen wanted for its sale, she was asked whether the figure of $2.8 million which she seemed to maintain was the contract price was low but she did not think so. She added that she did not have “its history” and she was not sure of its “value”. That was an unusual statement coming from someone about to purchase a business with a large annual turnover, significant contracts, and employees.
Sometime after May 2011, a “tally” was commenced. This suggested that a financial deal had been struck between Ms Quen and Mr Chen and that there was a set amount that Ms Quen owed Mr Chen. On Mr Chen’s calculations, Ms Quen owed him $1.3 million. That was difficult to follow because I could find that no contractual arrangement about the business was concluded in May 2011. However, Mr Chen seemed to think he was selling but just what remains unclear on the evidence.
It was Ms Quen’s evidence and not challenged by Mr Chen that between May 2011 and November 2011, two properties from the “stocktake” that were to become the sole property of Ms Quen, were sold. These were both in L Street. It is common ground as between Mr Chen and Ms Quen that in 2006 and 2007, one property was purchased in the joint names of Mr Chen and Ms Quen and the other by the Quen trust. According to Ms Quen, Mr Chen retained the proceeds of their sales as part payment of her purchase of GPL. It remains unclear whether Ms Quen saw these properties as jointly owned and/or owned by the trust in which case, she had an interests anyway but it also happened before any formal contractual arrangement or transfer of GPL occurred.
Ms Quen maintained that the sale proceeds of the two properties were to be retained by Mr Chen notwithstanding he already had a legal interest in at least one of them. These purchases had occurred five years or more before the supposed sale of the business and Mr Chen says that the payments for the properties came from GPL. Viewed objectively, it is difficult to see this separation agreement or stocktake as having any legal or equitable certainty.
Despite the appearance of a sale in or around May 2011, Mr Chen retained 49 per cent of the shares in GPL. Whilst that ostensibly gave Ms Quen control, it showed Mr Chen’s continued involvement (as distinct from a clean sale of the business).
The transfer of ownership arrangement of the business was accepted by both Mr Chen and Ms Quen as one that could not be done openly. Ms Quen said that for her to take over the business whilst staff and Mr Chen’s brothers were there would not look good so her brother was used as the new buyer as a façade to indicate new ownership. Ms Quen’s argument was that Mr Chen orchestrated all of this. Even if he did, she acquiesced because it was for her benefit.
A change of ownership of the company was certainly taking place in 2011 and although Mr Chen asserted that he and Ms Quen arranged this “fake” sale, the staff were paid redundancies. I accept Ms Quen’s version is the more probable namely that whilst she participated in the sham, Mr Chen was the instigator. Neither party disputes these things were happening and after May 2011, Ms Quen was then “seen” in the business. Ms Chen would presumably have not seen her there because she was not integrally involved in it and in any event, Ms Chen knew it was being sold.
Mr Chen’s argument, as put in his counsel’s opening of his case, was that there had not been a division of property with Ms Quen in May 2011. Whilst that might be said of the business and GPL shares, that cannot be said of the real properties because they were listed in the separation agreement. Whether the agreement had any validity is a different issue. However, even there, the evidence shows that Ms Quen did not have control over the sale of the designated properties. That can be seen in that Mr Chen sold two properties and retained the money even if ostensibly as an offsetting of his debt. There was no apparent consensus and Mr Chen acted unilaterally.
I also accept that in May 2011 there was no property settlement with Ms Quen because not all of the shares were transferred. An agreement in any contractual sense has to have the parties of one mind and also some certainty about the terms. None of that was apparent here if what Ms Quen was intending to do was sever financial relations with Mr Chen.
Mr Chen’s description of how he obtained the shares of his brothers necessary to sell the business to Ms Quen was also confusing. He said their shares were transferred to Ms Quen in 2012. When he was shown the relevant share transfers, he agreed he signed one transfer using the name of one of his brothers. That is, he forged his brother’s signature; or did he? Mr Chen was not troubled about doing that sort of thing because the brother knew of the transfer of the business and by then, understood that it had been sold but not to Ms Quen. Mr Chen was unsure about the second brother’s transfer because he said the signature did not look the way he signed his brother’s name. This cavalier approach to signing documents did not trouble Mr Chen and, but for the absence of complaint by his brothers, it has a distinct air of dishonesty. What convinces me to ignore that distraction is that the family’s accountant was overseeing what occurred.
Whilst the acquisition of the shares of the brothers meant they had to be paid, even there, the arrangements were unusual. Mr Chen said that everything was verbal and he told his brothers the purchaser was a Chinese buyer. That was a lie but there is no evidence of complaint from anyone. He said he told his brothers that the acquisition money had not been paid to him and he would pay them when he got the money. When pressed in cross-examination, he did not remember the “exact figure” and maintained that did not matter because there were contra arrangements. This was said to be the family way Mr Chen did business. He guessed their interests were “probably” $800,000 in total. I have no understanding of how that payment was made but Mr Chen’s evidence was that the brothers have made no further claim.
Ms Quen’s threats and pressure on Mr Chen
Mr Chen’s evidence was that by November 2011, Ms Quen said she was not happy with her financial position, as distinct from her lack of formal control or ownership of GPL. He maintained that she pressured him to hand over control of the finances and control of the business on the basis that if he did not, she said she would tell Ms Chen and his brothers about their relationship and also stop his “access” to their two young children.
Of those three threats, the first relates to his brothers. It was difficult to get a sense of whether the husband’s concern was about the fake sale designed to get rid of employees or the fact that his relationship with Ms Quen would be exposed. In respect of the latter, Mr Chen was at pains to point out the shame and humiliation that would occur in the community including to Ms Chen.
In cross-examination, Mr Chen that these people would be upset that his “mistress” was the buyer rather than that he had a mistress. His evidence is that he was concerned that the brothers would find out that as a consequence of Ms Quen’s buying into the business, the brothers “had to retire early”. To the extent that Mr Chen maintains that Ms Quen applied pressure to him to do what she wanted, I find Mr Chen so unreliable as a witness that I do not accept that Ms Quen threatened him as he alleged.
Bearing in mind the vague nature of the evidence about how and when Mr Chen obtained the control of his brothers’ shares and how he paid for them, the brothers seemed to have happily moved on and were content to agree to give up ownership of the shares without signing any documents and without being paid in some definitive way.
It also seems that that this lack of payment of money did not trouble them because they were participating in contra deals with Mr Chen. What those were remains a mystery. None of that indicates a justification in Mr Chen to fear what his brothers might learn.
As the evidence in this case establishes, Mr Chen was a consistent negotiator. After the dust of an initial transfer of a tranche of shares to Ms Quen settled, Mr Chen was regularly seeking more money from Ms Quen. Mr Chen maintained that it was Ms Quen who wanted more money at least after May 2011 but I find she was pursuing what seemed, at least tentatively, to have been the completion of the sale of the business to her. It is improbable that he would have feared she would expose him in those circumstances because the transition was already under way.
The second pressure was said to be related to Ms Quen’s threat to tell Ms Chen about their relationship and the existence of their two children. I accept that Ms Chen did not find out about the affair until 2013 but the prospect of Mr Chen being worried about that as a basis for making financial arrangements with Ms Quen is fanciful. He was content to be involved in getting his brothers out of GPL on spurious grounds, at values subject to contra-dealing, and was content to be involved in scheming to get rid of staff, even if he had to pay them a redundancy.
Ms Quen was also content to accept some form of arrangement in which she did not have legal control so she could not have been troubled about what Mr Chen might do. The “separation agreement” arose at a time when Ms Quen accused Mr Chen of infidelity and yet she had participated in a relationship with him for years. All of that raises questions about whether or not she trusted Mr Chen. Despite her concerns, I find she continued with their relationship.
Mr Chen’s action to dispose of the business was calculated and clever. I do not accept his behaviour is consistent with fear of Ms Chen learning about Ms Quen. Most importantly, as the cross-examination exposed, Ms Chen was well aware of the sale of the business because Mr Chen had told her; it is just that he lied about the circumstances.
Mr Chen gave as a third fear of Ms Quen that she had threatened he would not have access to the two children. Mr Chen’s role with the children must have been limited anyway because of his living arrangements. There is no evidence. The relationship between Mr Chen and Ms Quen did not end at that time and Ms Quen was reliant upon Mr Chen’s language skills to deal with documents and he was also the main contractor in the business. With Mr Chen’s evidence being inherently unreliable, I would not accept that a threat by Ms Quen of stopping his time with the children would have made much difference to him.
It was not until Ms Quen’s lawyers became involved in February 2012 that there was any formal recognition of the transfer of all of the shares in GPL to Ms Quen. By the end of 2011, Mr Chen had transferred 51 per cent of the shares to Ms Quen. That is not consistent with a sale of the business.
With the various activities of Mr Chen and Ms Quen throughout 2011, I find that it is more probable than not that Ms Chen would not have known that the business was being sold to Ms Quen and more importantly, how that sale was being financed. As for what Ms Chen knew of Mr Chen’s brothers leaving the business, there is no evidence about their understanding of what was happening and how they would be paid so it is unlikely that Ms Chen would have known either. I accept she did not know of the “blue” team and the “green” team. Significantly, Ms Quen was a party to this whole arrangement and knew that Ms Chen did not know what was happening. That does her little credit.
The master list
Mr Chen’s version was that a “master list” of properties to be taken by Ms Quen as part settlement was compiled over a dinner in November 2011 during an argument about Ms Quen’s access to funds from GPL. Ms Quen denies any “stocktake” was done in November however there are indications that Mr Chen was endeavouring to negotiate some form of deal which was different to what Ms Quen had thought was their “separation agreement”.
I accept that what happened in November was that an argument did occur and Mr Chen was unhappy about it. At dinner, a document was prepared which was meant to show what assets Ms Quen was to retain. Mr Chen was unhappy about this deal and wrote on the paper that he accepted the property values as shown but he added “who is being bastard”. The flavour and tenor of that remark shows he felt pressured and Ms Quen was getting what she wanted but it highlights that contrary to Mr Chen’s assertions about pressure and threats for the reasons set out above, the main argument was about the quantum of the amount to be paid.
Ms Quen was asked about this November night, and in particular Mr Chen’s written words on the paper, but she said she had not noticed it until later. I do not accept that as it seems clear at least Mr Chen was angry that night. When asked what she understood Mr Chen to be saying, she said that the figures and accounts were vague. Whether Mr Chen was satisfied with the figures or not, it indicates that there was still no certainty about the finalisation of interests favouring Ms Quen. The dispute about a “tally” of assets and monies paid continued on and Mr Chen still held GPL shares.
In October 2015, when the controversial financial agreement was executed, a recital appears that notes that Ms Quen and Mr Chen:
agreed to certain property settlement terms in year 2011 after their separation. Parties have then proceeded to deal with their own property and financial affairs respectively based on the agreement reached in year 2011.
I do not accept that statement to be an accurate reflection of what occurred in 2011.
Ms Quen said that after Mr Chen executed his will in September 2011, the list of properties to which she became entitled, became clear. That however was dependent upon Mr Chen dying and Ms Quen recognised that by saying that:
[Mr Chen’s] will effectively supports the terms of our separation agreement.
Ms Quen then referred to “further discussions” with Mr Chen on 20 December 2012 where they agreed that she would pay him $4,217,780.40 “in exchange for the business, GPL, and for our construction costs concerning my development of certain properties that I was retaining (from the agreed list)”.
The reference to properties other than the interest in GPL led to cross-examination of Ms Quen by Mr Chen’s counsel. He asked about the value of the business which was shown in the financial agreement executed in 2015 as having a value of $400,000. She confirmed that she had agreed to buy it for $2.8 million. By the time the $800,000 was taken by Mr Chen from the sale of the two L Street properties, the figure dropped down to $1 million. In her affidavit, Ms Quen explained that she did not purchase the business from Mr Chen “and his brothers” for $1 million but that figure was the “balance” to be paid to Mr Chen as at 20 December 2012. The figures were not just fluid, they were rubbery.
Thus, Ms Quen would have the Court accept that all of the various properties, the business and the GPL shares and the construction cost arrangements meant that by December 2012, she owed Mr Chen $2.028 million. This was all part of what she argued was a commercial arrangement culminating in the final written agreement. I find it was not a commercial arrangement at all. The amount Mr Chen then sought included interest. Militating against a commercial arrangement is the fact that Ms Quen said Mr Chen demanded interest because he said he was paying interest on the money he owed his brothers from the acquisition of their shareholdings in the business. That is inconsistent with Mr Chen’s evidence that he could not be precise about his payments to his brothers because there were contra deals. If Mr Chen did seek interest from Ms Quen on that basis, it indicates that nothing was clear between he and Ms Quen about their respective entitlements.
At the years went by, more properties were developed and sold and Ms Quen gave Mr Chen more money. In Ms Quen’s view, she had paid Mr Chen just over $2.2 million but by February 2013, she thought she owed him $1.6 million and she paid him more under this tallying approach.
At an unspecified date but obviously after 2012, Ms Quen borrowed $1.5 million through the Quen trust. To secure that she used the personal property that she had considered hers under the agreement with Mr Chen and he was paid the money. By this time, Mr Chen had transferred 5,100 out of 10,000 GPL shares to Ms Quen so the “sale” of the business had not been completed. Eventually, Ms Quen became the owner of the majority shareholding in GPL but that was according to Mr Chen “to provide her with greater financial security”. Quaintly, he deposed to the transfer being without formal agreement “and no exchange of funds…..as the transfer was between spouses”. Ms Chen knew nothing of that arrangement.
On the transfer between “spouses”, Ms Quen was silent but she pointed to a document prepared by Mr Chen (LPQ-14) which appears as some form of tallying of what Mr Chen claimed she owed him. Her explanation as to why Mr Chen had retained the shares was that it was for his “convenience loan”. On the tally, Mr Chen had added:
Beginning to have arguments
I have concluded that the issues about ownership of these various assets, but in particular GPL, were not clear around 2012 notwithstanding the supposed agreements.
This transfer between spouses obviously needed to be presented to the relevant revenue office and the description Mr Chen gave was how it was presented. Despite this being said to be part of some sort of sale and indeed part of an on-going tallying of money owed to Mr Chen, the transfer was presented for revenue stamping as a transfer between spouses. The only basis upon which that would be done would be to overcome the payment of stamp duty. Again, this seemed to be how Mr Chen did business.
By February 2012, Ms Quen had control over GPL in the sense that she was the major shareholder.
Mr Chen’s attention seemed to be focused more on property development but he also had another venture in H Pty Ltd which ultimately failed and went into liquidation.
Despite what Ms Quen would have the Court accept was some form of agreement in 2011 to finalise their relationship, Mr Chen soon began asking for more money. Despite then being a minority shareholder, and what Ms Quen saw as an agreement, Mr Chen he refused to transfer to her the remaining 4900 shares in GPL. It remains unclear why, if she was the owner of the business subject only to the payment of what she had to pay Mr Chen, he continued to be a shareholder at all if there was an enforceable agreement. Again I am satisfied there was no finality by this time.
Mr Chen’s demands for more money seemed to emanate from the “tally” but in any event, Ms Quen and Mr Chen continued their “commercial” transactions (see [47] of Ms Quen’s trial affidavit). The nature of their personal relationship at that time became irrelevant.
Ms Quen devoted a number of paragraphs of her written evidence to the year 2013 during which she detailed payments made to Mr Chen and that he “continued to make further amounts on my behalf”. This latter statement was a reference to what Mr Chen was paying on her behalf. These payments were all adjusted in the tallying but that indicates the relationship was not finalised or at least the quantum of the agreement was not finalised.
The 2014 heads of agreement
In January 2014, Mr Chen prepared a document which formed the basis of what he said Ms Quen owed him. It claimed $774,370. Ms Quen wanted the balance of the shares but Mr Chen was not prepared to transfer them without more money being paid. Ms Quen seemed to accept that position because she went to her lawyers, M Lawyers, and had them draw what she described as a “heads of agreement”. Taking into account when Mr Chen’s calculation document was prepared in January, the heads of agreement was prepared quickly and executed on 15 January.
The recitals to the agreement referred to Mr Chen and Ms Quen as having been “business associates” for over 10 years and that they held the shares in GPL as to 49 per cent and 51 per cent respectively. The agreement acknowledged Mr Chen as the sole director of the company. Thus, this document acknowledged that notwithstanding the separation agreement and the master agreement of 2011, nothing had been finalised. The agreement reflected that there was to be a transition of ownership and control to Ms Quen. The agreement recital reflects that after Ms Quen “acquired the management and control of [GPL]”, Mr Chen paid out all of the employee entitlements and Ms Quen assumed “the management” thereafter. That was inaccurate.
Under this “heads of agreement”, Mr Chen was to remain as “nominal director” of GPL because he had to pay off loans he had taken out for his own purposes and $2 million worth of guarantees by GPL and the Quen Trust relating to Mr Chen’s borrowings but his shares were now to be transferred to Ms Quen. This was not just tidying up things from 2011, it showed that the contractual relations if there were any remained unclear until then. The heads of agreement said the parties intended to be legally bound by it but significantly, no mention of Ms Chen was made in the document.
Ms Quen’s evidence was that she and Mr Chen “began to implement the agreement between us”. That must mean that the January 2014 document was intended to encapsulate what Mr Chen and Ms Quen had agreed about dividing assets. The document prepared by lawyers has a very strong focus on a commercial or business arrangement as between Mr Chen and Ms Quen; Ms Chen was ignored. It notes (by recital) that the parties were pursuing “different forward business plans” but the evidence would suggest otherwise.
Despite the 2014 agreement, and the ending of business ties so that they could move “forward”, Ms Quen paid Mr Chen money but about the amounts, they continued to haggle. Correspondence shows they argued about who was changing the agreement and who controlled GPL. The Australian Taxation Office became involved in relation to GPL for tax accrued before 2011. That was a debt of $308,000. Mr Chen and Ms Quen argued about responsibility bearing in mind it occurred when Ms Quen had no interest in GPL. Because of the warranty given by Mr Chen in the heads of agreement, he was liable. Rather than adopt such a simple approach, the parties negotiated some contra arrangements involving C Pty Ltd. But even that did not result in a severance of their relationship.
In the middle of 2014, Mr Chen and Ms Quen were involved in a joint venture to develop property and Mr Chen asked for more money from Ms Quen because of problems he was having with H Pty Ltd. Mr Chen then told Ms Quen he “and ([Ms Chen])” were not happy with “the division of assets between our families and they would sue me”. There is no evidence that in September 2014 Ms Quen could have thought Ms Chen knew of what Mr Chen had been doing. That much can be concluded from her own statements in cross-examination about how she concluded that Ms Chen knew. However, Ms Quen’s evidence set out her contact with Mr Chen over the ensuing 10 months. In that period of 2014, there had been disputes about Mr Chen’s financial difficulties much of which seems to have arisen out of H Pty Ltd and the tax claim.
For the purposes of these proceedings, Ms Quen’s affidavit (paragraph [66]) said that she had requested Ms Chen to provide discoverable documents about whether inter alia, there “has been collusion between [Mr Chen], ([Ms Chen]) and the adult children.” It was said by Ms Quen that by October 2017, no response had been received but nothing in the evidence would enable a finding that there was any collusion. To the extent that this was an issue, no evidence, and certainly no document, was put that indicated an absence of documents from Ms Chen hampered Ms Quen in deciding whether there was collusion.
The awareness of the adult children
It was uncontroversial that in November 2014, Ms Quen contacted Mr C and the discussion about their father took place as described by two of the children. Ms Quen’s evidence was that after that conversation, she “attempted” to contact Ms Chen “to finalise an agreement”. That was a curious statement having regard to what actually happened over the ensuing eight months. She did not speak to Ms Chen. I find what occurred was that Mr Chen asked Ms Quen to contact Ms Chen. In cross-examination, Ms Quen said that Mr Chen told her to find Ms Chen’s number herself. Ms Quen did not speak to Ms Chen even if that telephone call was made. The fact that Ms Quen made the telephone call shows that Ms Quen knew that Ms Chen was likely to be affected by whatever decisions were being made with Mr Chen.
What did Ms Chen know?
Ms Quen’s evidence by affidavit about Ms Chen’s knowledge is limited. In her main trial affidavit, she said that she reserved the right (contrary to the rules of court) to rely on previous affidavits “in circumstances where I am not fully aware of the allegations to be made against me”. That was an odd statement having regard to her lack of evidence about the source of funding of the property acquisitions. Ms Quen’s evidence (at [22] of her affidavit) was that Mr Chen only owned one property as at 1998 and that during the course of their relationship, many were bought that ultimately were to be divided. That does not sit comfortably with what I have earlier mentioned about Ms Quen’s background, her financial position as a parent and the assertion by Mr Chen that the source of funds for such acquisitions came from GPL. Ms Chen’s interests (whatever they may have been) must have been, or at least should have been contemplated by Ms Quen as being involved in that list of properties.
Ms Quen said that Mr Chen told her in or around November 2014 that Ms Chen needed an assurance “that the property she held jointly with him would be transferred to her”. The only evidence that might indicate there was such a conversation between Mr Chen and Ms Chen came under scrutiny in the cross-examination of Ms Chen but it related to the period immediately after Mr Chen executed the financial agreement with Ms Quen. That issue arose as follows.
The financial agreement
Despite the fact that Ms Quen said she and Mr Chen had separated and indeed had reflected that in a separation agreement, it would appear they were still together in a personal sense in at least some part of 2014. Mr Chen deposed to an argument in April 2014 in the presence of not only the two children but also Ms Quen’s mother as a result of which he was “kicked out of” the residence at which they had been living and Ms Quen changed the locks. Ms Quen claimed this incident was a discussion, not in 2014, but in 2013 and pointed to some calculations that seemed to have been prepared around that time, so her version is more likely to be correct. It again matters little because it shows that the resolution of both personal and financial relationships was fluid after 2011.
By December 2014, Mr Chen said that he moved back to the home (although it must have been part time because of his continuing relationship with Ms Chen) but Ms Quen denied that she asked him to do so. That was an unusual choice of phrase because the connotation is that he did move back. Whatever occurred, it all came to an end in April 2015 because Mr Chen again said he was “kicked out of” the home. At this same time, Ms Quen had attended a firm of lawyers to prepare a deed of settlement. One might think that Ms Quen was seeking a permanent resolution to all of the disputes by that action but the nature of their business relationship in April 2015 could not have been that unworkable because in the previous December, that is, December 2014, Mr Chen incorporated N Pty Ltd.
Mr Chen was the sole director and shareholder and Ms Quen had customers of GPL satisfy invoices by payments into N Pty Ltd. That seems to have changed by July 2015 because Ms Quen incorporated her own company and opened a bank account into which GPL’s sales seem to have been deposited. The conclusion I have drawn from this evidence is that Mr Chen did what he usually did in business and Ms Quen was content to participate but something went wrong (although I am unsure what) as Ms Quen wrested control by having payments made into her own account. July 2015 is significant because in the month before, June 2015, the settlement deed was executed. Thus, one view is that the settlement precipitated Ms Quen taking control but that evidence is unclear.
In June 2015, O Lawyers wrote on behalf of Ms Quen direct to Mr Chen referring to a letter of offer that they had made on 17 April 2015. That timing seems to coincide with Mr Chen’s reference to being “kicked out of” the home.
The O Lawyers letter referred to Ms Quen and Mr Chen having had “private negotiations” and the lawyers then put a new proposal to Mr Chen. These private negotiations were hardly private. Mr A was involved in them when Mr Chen and Ms Quen met over dinner at a Melbourne restaurant. In May 2015, Mr A was messaging Ms Quen about joint venture conditions. He met with both Ms Quen and Mr Chen at a cafe and at the GPL site. Mr A and his sisters were to be included in the benefits under any agreement reached between Ms Quen and Mr Chen. Mr Chen in turn commenced negotiations in writing which included the involvement of the adult children and that he, Mr Chen, proposed that he be employed by GPL as a consultant.
It will be remembered that Mr B and Ms J knew of their father’s relationship in late 2014 and Ms K learned in April 2015. Again, April 2015 is the relevant time when Ms Quen was endeavouring to finalise her relationship with Mr Chen but as can be just seen, he was negotiating terms that included his future financial security and that of the children.
Of Ms Quen’s assertion that Mr Chen and the children were acting as agents for Ms Chen becomes relevant here. In an email Mr A sent Ms Quen in June 2015, he said that he understood the importance of keeping Mr Chen “under control”. He then referred to Ms Chen as being the best person to control Mr Chen. In a breathtaking statement, Mr A said that Ms Chen would act as “insurance” but to get that, Ms Quen would have to pay $50,000 per year. The evidence of the three children is that they did not tell Ms Chen about what Mr Chen was doing until the following year. At first blush, Ms Chen “controlling” Mr Chen and the children telling her what Mr Chen was doing appear inconsistent. However, the important fact that stands out is that Mr A’s email refers to Ms Chen controlling Mr Chen “if” a payment was made. He referred in the email to this idea emanating from a discussion during the previous evening with his sisters who “came up with an idea to guarantee” “control” of Mr Chen. All of that indicates to me that Ms Chen was still oblivious to what Mr Chen was doing and that Mr A was driving a hard bargain for himself. That can be seen in the other parts of the email.
The email from Mr A said he understood there was a “consent order” on offer. He told Ms Quen that he would “work hard” with his sisters to get them “to agree” to the new proposal. He then suggested that Ms Quen had to make sure she transferred $100,000 the following day because his sister had a “bill” for her mother’s “new house construction”.
Ms Quen’s evidence was also that in anticipation of a settlement, both Mr Chen and Mr A helped her refinance $600,000 of equipment with the intention that the money would be used to satisfy her obligations under the settlement. Mr Chen was in need of money at that time and so was Mr A so it is plausible that they would co-operate with Ms Quen but in their own interests and not necessarily those of Ms Chen. That also flies in the face of pressure of the nature alleged by Mr Chen.
I conclude on the balance of probabilities that the email between Ms Quen and Mr A shows he was looking out for himself and I am still satisfied that Ms Chen had not been made aware of what was occurring. In particular, the “insurance” was just a bargaining tool.
Only two weeks after the email, Mr Chen and Ms Quen signed a deed of settlement drawn by O Lawyers. It was witnessed by a constable of police at the Suburb P Police Station. I conclude that Ms Quen and Mr Chen went there together.
Like the earlier agreement drawn by lawyers, this agreement was distinctly commercial in nature but did not include the adult children although it mentioned that they were to subsequently enter into a “Deed of Restraint of Trade”. That was apparently to be done because the new agreement contemplated a “Consent Order and a Deed of Settlement” once the parties “have reached the agreements on settlement.”
The deed of settlement came about on 14 August 2015. Mr Chen’s evidence was that he “influenced” the children to sign the agreement and that they had done so reluctantly. I do not accept that. In September 2017, Mr A deposed in an affidavit that he would depose in greater detail as to the circumstances of his execution of the deed “at the appropriate time”. I found that odd bearing in mind he supported Mr Chen’s position to set aside the ultimate deed.
Having regard to the depth of the negotiations and their aggressive nature, including by Mr A, it would seem improbable that anyone was under influence or pressure. That can be seen by the fact that Mr Chen and Ms Quen attended (apparently together) at the Suburb P Police Station to sign what seems, in hindsight, to be a preliminary agreement to the ultimate deed.
The August deed also gave the appearance of finality. It indicated that it constituted “the whole and entire agreement among the Parties” and superseded all previous “understandings and agreements”. However, it contained this clause:
Parties agree to do all things and sign all documents to give effect to the terms of this Deed, including but not limited to entering into a consent order for family property settlement, entering into a Deed of Restraint of Trade, and Securities Agreement on the A$1,500,000.00 collateral.
Thus, it must have been understood by all participants that there was more to come to fix the “family property settlement” but that reference must also mean that Ms Chen’s interests still had to be considered.
Only weeks later, Ms Quen went to Mr Chen and asked him to sign a financial agreement under the Family Law Act 1975 (Cth). Why she had to do that is unclear because the August document undoubtedly anticipated something further was to come to finalise matters. Mr Chen described Ms Quen’s request as being based on legal advice and “to provide her with security against” Ms Chen making a claim. This was October 2015. To the extent that Mr Chen was implying that this was something new, I reject that as finality was an issue still to be sorted out.
Ms Quen’s evidence was simply that there was not much to negotiate and the terms had been agreed. She gave instructions to her lawyers to draw the financial agreement.
The disputes about how the financial agreement were signed were relatively modest given the short timeframe involved.
I have already mentioned that Mr Chen claimed that he was given cash by Ms Quen to pay Mr D and Ms Quen denied it. There is substance to Ms Quen’s position because an email was tendered in evidence dated 12 October from Mr Chen to Ms Quen’s then lawyers (and the drafters of the agreement) nominating Mr D as his solicitor and providing his email address. It was Mr Chen’s evidence that he obtained that solicitor through the accountant Mr Q. Mr Q had done work for all parties so it matters little. Mr Q’s notes were used in evidence but he was also not called as a witness for cross-examination.
Mr Chen saw Mr D on the day the agreement was signed. In cross-examination, he was taken through the agreement. He was insistent that he was not given legal advice but he agreed that Mr D went through “page by page” saying what each clause meant. Mr Chen would have known what each clause meant because the negotiations with his input had been going on for weeks including his execution of the August agreement. This document was in the English language and Mr Chen is completely conversant.
Mr Chen’s assertion in evidence was that Mr D was only “rubber stamping” the agreement and signing all the pages. I reject that. Two significant recitals to the financial agreement which, based on Mr D having read the document to him, he must have at least heard if not understood, read:
L. In year 2014, [Mr Chen] requested ([Ms Quen]) to enter into another property settlement agreement with him based on different terms and conditions.
O. By entering into this Binding Financial Agreement, ([Ms Quen]) and [Mr Chen] intend to formalize the agreed property division as previously set out in the Deed of Settlement dated 14 August 2015 (especially with respect to those terms in clauses 2.1 to 2.13 of the Deed of Settlement) in accordance with the Family Law Act.
I do not believe Mr Chen when he said that Ms Quen gave him the money to pay Mr D nor do I believe this exercise was “rubber-stamping”. Having said that, nothing in the period immediately before the execution of the financial agreement suggest that Mr Chen was under any pressure. At its execution, Ms Chen knew of Ms Quen so the earlier threat of exposure and embarrassment could not be relevant any longer. The adult children were not only aware of what Mr Chen had done but had participated in the agreement for what I can only consider were self-interested motives. The financial agreement was executed only a short time after the “Deed of Settlement” and in respect of that transaction, the children were involved.
Accordingly, I accept that Mr Chen was provided independent legal advice and that advice was about the effect on his rights and the advantages and disadvantages of entering into the agreement. I accept Mr Chen placed little importance on the agreement.
I accept that the deed of settlement dated 14 August 2015, along with the transfer of the shares in GPL to Ms Quen, were matters about which Mr Chen well-understood what he was doing but I still do not accept that Ms Chen knew about either.
The GPL Shares
Mr Chen seeks to set aside his own action in transferring the first tranche of shares to Ms Quen. Having satisfied myself that at that time, there was no contract for sale, I find that Mr Chen gave them to Ms Quen and not as part of any separation agreement or other arrangement. If it was intended to be some form of contractual arrangement, it was clumsy and its terms uncertain. If it is now suggested by Ms Quen that there was a contractual sale of the GPL shares in or around 2011, as Ms Chen did not know about it, I would set the sale aside on the basis that it was done with the effect of having defeated a claim by her. That is one of the issues that the parties will need to sort out. The execution of the Financial Agreement and the Accuracy of the figures
Mr Chen’s argument against Ms Quen for non-disclosure
Mr Chen asserted that Ms Quen did not disclose to him before the financial agreement was executed that she had purchased a property but also that she had misrepresented the balance of her bank account. I have no doubt that these two financial details were not provided by Ms Quen but I find that Mr Chen was not interested in the details of what Ms Quen owned because he just wanted money. He had significant input into the calculations prior to the agreement being completed. No fraud was perpetrated upon him even if Ms Quen had not told him of what she had. Ms Quen had not told Mr Chen about her interests in her father’s property (if that is what they were) but again, I find Mr Chen was not interested. He wanted money and quickly. As he conceded, H Pty Ltd was in trouble. Whilst there was some variation on the detail of the deed executed only weeks before, the financial agreement was really intended as a formalising of what had been then agreed.
Ms Chen’s Knowledge
Very shortly after Mr Chen signed the financial agreement, he transferred to Ms Chen his jointly held interest in two properties. Ms Chen did not explain in her affidavit why that happened and, in both cases, for state revenue purposes, the properties were transferred for “natural love and affection”. Ms Chen was asked why no mention was made of the transfers and her response was that she had not thought it necessary. More importantly, the question was asked why the transfers occurred. Ms Chen’s response was that Mr Chen had advised her to do it because there was a risk in the business and, as she was receiving the interests exclusively, she was not troubled. I accept that because Mr Chen’s H Pty Ltd went into liquidation not long later. I find that although it looks coincidental, there is no reason for me to disbelieve Ms Chen when she said that Mr Chen (and the children) had not told her of what had happened only days and weeks before.
Around the same period of months, it seems that National Australia Bank had taken Ms Chen’s two properties as security. Doing the best I can with the confusing evidence, I am satisfied that Ms Chen used up money under her control to achieve the release of those properties from the bank.
I find in those circumstances that there is no basis to say that Ms Chen was privy to any of the final arrangements between Ms Quen and Mr Chen in 2015.
Ms Quen’s position about Ms Chen must be initially drawn from her affidavits and how she puts the case in her case outline. However, it is the evidence arising from the cross-examination of Ms Quen that assists most here. A direct question was put to Ms Quen by senior counsel for Ms Chen to the effect that she knew Ms Chen was unaware of the relationship with Mr Chen. Her response was that she did not know. She confirmed that she had never asked Mr Chen about Ms Chen’s knowledge (and by implication any discussions they may have had) and that she had never spoken to Ms Chen. Senior counsel for Ms Chen asked Ms Quen whether she had assumed that Mr Chen had told Ms Quen about what was happening. Her response was to the effect that she knew that Ms Chen had raised the “DNA” issue with Mr Chen and she said that was before the agreement. She said that she understood that if the children did not belong to Mr Chen, she had no entitlement to property. It is not clear to me where that concept came from but she volunteered it. In any event, that supports the finding I am comfortable with that Ms Chen would have had no reason to seek such evidence until 2013 which of course, was before the agreement.
Ms Quen spoke to Mr A who told her that Ms Chen needed money to build a house and consequently, money was paid. She said that Mr Chen showed her a text message in which Ms Chen said she was to see a lawyer. Ms Quen therefore concluded that Ms Chen was aware of what was happening. The action of Ms Chen obtaining legal advice does not assist because it is equally consistent with her concerns about Mr Chen’s infidelity.
Ms Quen acknowledged that her assumption was not based on any contact with Ms Chen but rather, only on what Mr Chen told her. She knew that Ms Chen was a shareholder of C Pty Ltd and because that company was undertaking developments which presumably had been funded by money she provided to Mr Chen, she assumed Ms Chen was knowledgeable. She added to that information that she was aware from discussions with people she knew that Ms Chen was involved in employing workers. This was a reference to the advertisements in the Chinese newspaper. However, I am satisfied that the role Ms Chen there fulfilled was menial and that she was not involved in the business at all. The legal face of C Pty Ltd involved the children. Ms Quen knew that because through a friend whom she named, she said she did a “Google” search. Giving formal control to others in the family seems to be the way Mr Chen did business and he seemed to ignore their legal rights anyway. Whilst he was at pains to point out this was the Chinese way, his daughter said that she signed documents because that is what Mr Chen wanted. Ms Quen may have reached what she understood to be an agreement with Mr Chen but he ignored rights anyway.
Ms Quen’s assumption about Ms Chen’s knowledge also derived from the fact that she knew that Ms Chen and Mr A shared a common email address but nothing indicated that Ms Chen was exposed to the negotiations between Mr A and Ms Quen. In addition, I have the emphatic evidence of the children.
Thus, Ms Chen having any legal ownership of the shares in C Pty Ltd, the common email address, the role in employing workers and the nature of her relationship with her adult children does not assist Ms Quen in relying upon what either Mr Chen told her or any assumption by her.
Finally, there is an interesting approach for Ms Quen to protect herself from Ms Chen by including in the financial agreement an indemnity given by Mr Chen. Ms Quen approached Mr Chen in the middle of 2015 to insist that Ms Chen should be included in a consent order as should the children but that Mr Chen told her it was not necessary because an indemnity would suffice. Despite my finding about Mr Chen’s credibility, that conversation probably did occur. Having regard to such things as Mr Chen’s insistence that Ms Quen contact Ms Chen and Mr A’s demand for money for some “insurance” from Ms Chen, I consider it is implausible that lawyers would not have recognised the impending disaster relying upon Mr Chen to protect Ms Quen from what limited resources Mr Chen seemed to have. There was discussion about a consent order but common sense dictates that such an approach would have required some involvement by Ms Chen. The indemnity clause therefore just highlights that Ms Quen was concerned about Ms Chen undoing what had been agreed with Mr Chen and she took the risk.
It is also timely to note that the October 2015 agreement acknowledged not just the existence of Ms Chen but of the fact that Mr Chen and Ms Chen were still married to each other. Reference was also made in the recital that Mr Chen’s children had executed a deed of settlement in August 2015 “setting out the agreed property division between (Ms Chen) and Mr Chen, and other commercial arrangement between the parties”. Ironically, the lawyers drawing the agreement even made reference to “the parties” intending the agreement to settle and discharge “all financial matters” between them in substitution for the rights that they might have under Part VIII of the Act. Whilst the drafting went on to refer to other provisions relevant to a couple in a de facto relationship, the reference to that particular provision must mean that at least the lawyers turned their mind to rights of parties in a marriage yet Ms Chen’s rights remained unstated until the following appears in the agreement itself:
(XIV)[Mr Chen] agrees to indemnify ([Ms Quen]) and will keep ([Ms Quen]) indemnified against all claims (including all consequential loss and legal costs on a full indemnity basis) made by any of his family members in future (including by his wife ([Ms Chen])…whether or not the claims were made arising out of or in connection with, directly or indirectly, of any matters relating to the division of properties between [Mr Chen] and ([Ms Quen]) in year 2011 or pursuant to this Binding Financial Agreement.
There was therefore consideration to Ms Chen’s rights not just in 2015 but also concerns about protecting what had been happening in 2011 between Mr Chen and Ms Quen. The inference which I consider is open to me is that all concerned turned their minds to the fact that Ms Chen may have had rights arising from the sharing of the property interests held in 2011.
Reckless conduct?
Reference to “reckless” in s 90UM of the Act requires little consideration. Analogous to the use of the word in s 90UM of the Act, in Cooper v Southern Portland Cement Ltd [1972] HCA 29; (1973) CLR 427 Barwick CJ observed, in a case involving a property owner’s duty to a trespasser:
A proper sense of justice has always denied that there is an absolute rule that the occupier of land owes no duty whatever to a trespasser. He is said to come upon the land at his own risk - taking the land and all that is upon it as he finds it. But it seems always to have been recognised that humanity as a handmaiden to justice requires considerable modification of an absolute irresponsibility of the occupier based on his proprietorship or control of the land. He must do no wilful harm to the trespasser of whose presence he is aware. Knowledge of facts and circumstances upon which it would be reasonable to expect the presence of a trespasser, so that the occupier as good as knows of that presence, will be accounted as actual knowledge. Reckless disregard of that presence, or perhaps callous indifference to it, will rank with wilful conduct to attract liability.
Ms Quen was aware of Ms Chen as was Mr Chen. The presence of the recital and the indemnity to which I have referred confirms that. This was reckless in the sense of the knowledge of facts and circumstances which it would have been reasonable to expect, particularly with lawyers involved, that Ms Chen’s rights as a spouse of Mr Chen would need to be considered.
Agency?
Is there any basis at law to find Ms Chen’s actions created an agency in Mr Chen and/or the children?
In Lewski v Commissioner of Taxation [2017] FCAFC 145, a decision of the Full Court of the Federal Court of Australia (Perram, Pagone and Moshinsky JJ) their Honours said:
138Having found that the applicant had given her husband unfettered authority to handle her financial affairs and that he acted as her agent in relation to them, we consider that it was open to the Tribunal to conclude that the applicant was taken to have known of the distributions when Mr Lewski obtained knowledge of them. In NIML, Nettle JA, as his Honour then was, with whom Buchanan JA and Bongiorno AJA agreed, said at [38]-[40]:
38.We are concerned here with the law of agency, and whatever may be the law relating to notice in cases of liability for knowing receipt of trust property and knowing involvement in breach of trust, the law of agency, as it is stated in Bowstead [& Reynolds on Agency (17th ed, 2001), Art 97], is that:
(1) A notification given to an agent is effective as such if the agent receives it within the scope of his actual or apparent authority, whether or not it is subsequently transmitted to the principal, unless the person seeking to charge the principal with notice knew that the agent intended to conceal his knowledge from the principal.
(2) The law imputes to the principal and charges him with all notice or knowledge relating to the subject matter of the agency which his agent acquires or obtains while acting as such agent.
(3) Where an agent is authorised to enter into a transaction in which his own knowledge is material, or where the principal has a duty to investigate or make disclosure, the knowledge of the agent may be attributed to the principal whether it was acquired in connection with the agency or not.
39 For present purposes, the second of those rules may be put aside. The extent of its application is uncertain and in this country its scope of operation appears limited to instances where it is the duty of the agent to communicate knowledge to the principal [Sargent at 658-659 per Mason J]. Generally speaking, the idea seems to be that, where there is a duty to communicate, the consequent probability of communication is so strong that the fact of communication will be presumed (except in case of fraud). ...
40 The first and third rules are applicable. The juridical basis of the first rule is the subject of debate. The better view may be that it exists to prevent the “monstrous injustice” that a principal should have the advantage of what his agent knows without also the disadvantage of it. But however that may be, it is in effect a corollary of the idea that, once a principal constitutes an agent as agent for the purposes of receiving notice, the agent becomes the principal’s alter ego for that purpose. So, therefore, notice to the agent is effective as notice to the principal whether or not the agent actually communicates the notice to the principal.
(Footnotes omitted.)
I find in the present case based on the evidence of Ms Quen alone, she could not have presumed that Ms Chen knew of what was happening in respect of the financial agreement. The evidence of the recitals, the call to Ms Chen in which she did not speak, the discussions with Mr A and the fact that Mr Chen told her to find the telephone number for Ms Chen herself, all indicate that Ms Quen either knew that Ms Chen was oblivious to what Mr Chen was doing with respect to the financial agreements or alternatively, was reckless in not ascertaining the correct position particularly with lawyers involved in the drafting of the agreement.
To be Ms Chen’s agent, Mr Chen and the children had to have some form of apparent authority and the evidence does not support that conclusion. Nothing in the statements of Mr Chen satisfies me that Ms Chen had authorised him to do what he was doing. Mr Chen’s main objective was his own interests (and the same may be said of the adult children) and Ms Quen should have known that having regard to the way Mr Chen negotiated with her over the years.
All of the evidence points to the nominal role of Ms Chen in the business such that it is unlikely she would have been consulted about matters of this magnitude and to the extent that Ms Quen maintains that Mr Chen gave her assurances, the recitals to the agreement would indicate that she was reckless in relying upon Mr Chen’s indemnity on the assumption that an indemnity is only as good as the word of the person giving it. Nothing in this case would enable me to find that Mr Chen was authorised to enter into any transaction on behalf of Ms Chen.
Submissions
It is convenient to deal with the wife’s submissions first. She submitted that the evidence demonstrated that until shortly before the proceeding began, she did not know of the existence of the financial agreement and, in my view more importantly, did not know of the treatment in that agreement by Mr Chen and Ms Quen “of the many assets in which she had (or has) an interest”. For the reasons outlined above, I accept that submission.
Counsel for Ms Chen submitted that Ms Quen’s argument that Ms Chen was aware of the agreement and that her interests were not only considered but the subject of negotiation on her behalf by Mr Chen and the adult children should be rejected. For the reasons outlined above, I accept that submission. There is no evidence upon which I could find either knowledge or agency.
It was also submitted for Ms Chen that Ms Quen’s position was that regardless of all that had occurred, the agreement demonstrated an arm’s length transaction and ought to be respected and that such an argument should be rejected. I accept that submission. It was submitted that Ms Quen received millions of dollars of property “for next to nothing”. That may or may not be correct in value terms and in particular when the focus is undertaken on the real properties but nothing in the evidence suggests that Ms Quen paid the appropriate value for what she received for the shares in the business.
It was submitted that the agreement was entered into with reckless regard to Ms Chen’s interests. For the reasons already set out, I accept that. But so too, on the whole of the background of where these assets came from and how they were acquired from the initial period of the relationship of Ms Quen and Mr Chen, the agreement must be seen to have been entered into with the likelihood that it would defeat Ms Chen’s claim. There was little other reason for the indemnity clause.
Senior counsel for Ms Chen traversed the long factual dispute which the court heard over 11 days and because of the findings I have made above, I do not intend to repeat what was submitted. However, the submission made observations about credit and I have sufficiently dealt with those matters above. Credit had a part to play in this dispute but the facts themselves point to the absence of Ms Chen’s knowledge of what Mr Chen was doing and Ms Quen, who seems to have started the relationship with Mr Chen with very little, was reckless as to Ms Chen’s interests in the execution of the agreement.
As for Ms Chen’s knowledge of the agreement, senior counsel submitted that Ms Quen’s evidence was unreliable on the fundamental point of her having contacted Ms Chen. Even accepting that a telephone call was made, I accept no information was imparted. It was submitted that even had some discussion taken place, there is no evidence of Ms Chen knowing of the intricate details of what Mr Chen and Ms Quen were doing. Albeit that the evidence of Mr Chen is unreliable, I accept the point that he conducted various property purchases in such a way to avoid at least Ms Chen being aware of what he was doing (see for example, the “blue” and “green” “teams” concept). His dishonesty towards Ms Chen was breathtaking but Ms Quen was reckless in not taking Ms Chen into the negotiations.
On behalf of the husband, submissions were made that essentially relied heavily upon Mr Chen having some credibility. For the reasons already outlined, I reject his arguments about being pressured. To use the colloquialism, Mr Chen was right up to neck in this and was as reckless about Ms Chen’s rights as was Ms Quen. In a reply submission filed on 14 March 2018, Mr Chen endeavoured to argue that there was some consistency between what had occurred to him and that discussed by the High Court of Australia in Thorne v Kennedy (2017) HCA 49. In that case, the Court was concerned about unconscionable conduct and the exploitative effect of a party’s will not necessarily being overborne. That was not the situations here in any event. For the reasons set out above, there is little merit in Mr Chen’s case at all.
Reference was made to the argument about the absence of Mr D but in my view, the more significant point here is that the solicitors for Ms Quen were the ones who were drawing the agreement and that the role of Mr D was to explain what had been drawn. For the reasons already outlined, Mr Chen was integral to the negotiations but the solicitors for Ms Quen were content to have their client execute the agreement based upon an indemnity.
It was submitted on behalf of Ms Quen that there was no basis to find that Ms Quen and Mr Chen entered the agreement with reckless disregard for Ms Chen’s interests because she had never articulated what those interests were but further, that Ms Chen’s interests were “regarded” in the “process which led to the formation of the agreement”. This submission needs to be considered carefully.
Counsels’ submission focused first on the evidence of the adult children observing that at least in respect of Mr A, there was involvement in the preparation of Ms Chen’s affidavit which tainted Ms Chen’s evidence. I reject that. I was most unimpressed with Mr A’s approach to what I would describe as self-interest. I have been critical of his negotiations for example, with respect to the “insurance” but none of this shows that Ms Chen’s evidence was drawn to suit the evidence of her husband or her children. Mr A’s involvement in the negotiation with Ms Quen may very well have been intended to somehow protect his mother but in reality, it does not overcome the fact that Ms Chen did not know of what Mr Chen and Ms Quen were doing. It was put by Ms Quen that there was an agency involved here but the evidence does not support such a conclusion.
In respect of agency, it was submitted that the evidence showed that the children were protecting their mother’s interests but at no time can it be said that an agency could have been formed because I am satisfied that Ms Chen did not know what her children were undertaking.
Counsel for Ms Quen submitted that Ms Chen’s statement that Mr Chen had advised her in a particular way does not assist either. It did not address the succinct point of whether she was told by Mr Chen about (and was complicit in) decisions as between he and Ms Quen. Ms Chen learned of the relationship of Ms Quen and Mr Chen in 2013 but there is nothing in the evidence to identify that Ms Chen knew of the myriad of financial transactions in the years before that. After learning of Mr Chen’s liaison, the evidence shows that the children did not inform their mother of what their father was doing with Ms Quen and them.
In relation to the agency submission, it was put that knowledge is imputed by the concepts discussed in Lewski. I refer to their Honours observations which began with the fact that the trial judge had found the applicant had given her husband “unfettered authority” to handle her financial affairs and had acted as her agent. That was not the situation here. In Lewski, there was a positive finding that the applicant had given her husband an authority that could not be seen here. All of the evidence points to the fact that Mr Chen just did what he liked.
The reference in Lewski to NIML is also helpful. There, Nettle JA referred to the learned text of Bowstead that authority is effective if received within the scope of actual or apparent authority. What was accepted as between Mr Chen and Ms Chen? His activities and indeed, the evidence of Ms Quen that Mr Chen told her to not just ring Ms Chen but find the number at that critical time indicates that Ms Quen did not know what authority Mr Chen had. Had she called Ms Chen, she may have found out. Nothing in the evidence supports a conclusion that there was a positive interaction between Mr Chen and Ms Chen under which he was given the sort of authority in Lewski. I do not accept any agency situation arose.
Part of the submission [18] was that there was a concerted attempt by Ms Chen, Mr Chen and the children to portray Ms Chen as “a ‘know nothing’” but the cross-examination of Ms Chen showed that she had menial tasks within the business side of the family and that even after learning of the illicit relationship with Ms Quen, she inquired no further. No evidence suggested she obtained legal advice to protect her financial interests immediately after the 2013 confession by Mr Chen. Nothing in Ms Quen’s evidence indicated that she knew that Ms Chen knew what she and Mr Chen were doing.
Counsels’ submissions relied upon a variety of authorities dovetailing to a proposition that the court should not “second guess commercial decisions made during the course of the marriage”. I agree entirely, but that is not the situation here. Nothing indicates that Mr Chen kept Ms Chen informed of his various financial transactions during their marriage; indeed, the blue and green team concepts indicate otherwise. This case can be determined on the plain meaning of the sections in the Act and as such, the reference to Bourke below is important. I need to conclude:
a)There are proceedings under the Act;
b)There is an instrument or disposition sought to be attacked;
c)That disposition was made by the husband;
d)The disposition was made to defeat an anticipated order in the proceedings because on any view, Ms Quen wanted Mr Chen to indemnify her against any action by Ms Chen in relation to assets she retained; and
e)Albeit it is not clear what Ms Chen’s interests were, the agreement is sufficiently clearly drawn to indicate that Ms Quen thought what she was getting may defeat Ms Chen’s claim simply by seeking the indemnity. That gives rise to the point that a reasonable disponer (Mr Chen) would have objectively had in contemplation that Ms Chen would bring a claim in the years ahead (see In the Marriage of Holley [1982] FLC 91-257) but here, is the added fact that Ms Quen may objectively be seen to be contemplating the same because of the indemnity.
In respect of the last point, it is timely to observe that it was Ms Quen who sought a bifurcation of the trial because it was said it would be efficacious to do so. But there is another point made by counsel for Ms Chen in reply to the submissions of Ms Quen. It was submitted that Ms Quen had refused anything other than limited discovery. There is some substance to this as identified by Macmillan J in Chen & Chen and Anor (no 2) [2017] FamCA 285. Accepting that to be the case as I do, it is unreasonable then to say that Ms Chen has not pleaded with any particularity what her interests were. The evidence indicates that, as Ms Chen submitted, Ms Quen received significant assets without having the pay much for them but in any event, the genesis still seems to be from the business.
It was also submitted on behalf of Ms Quen that even if the various ingredients were shown to have existed, the court should not exercise its discretion here because of:
a)The gross deficiencies in the evidence of Ms Chen and Mr Chen; and
b)The bona fide commercial reliance of all parties on the financial agreement.
I reject that submission for all of the reasons set out above.
In the submission on behalf of Ms Quen, some time was spent examining how the agreement came into existence. I have already observed that Mr Chen went to Mr D but before that, he had terminated his then solicitor’s instructions intending to negotiate alone. Curiously, the husband was seeking consent orders around that time but the solicitors for Ms Quen wrote directly to him saying that given the offer made “poses complexities” it may have been difficult to “formalise the full offer in only one agreement or one set of Family Court Consent Orders. We propose that the parties enter into a deed of settlement containing the full offer once they have reached an agreement in principle and then formalise part of the offer …in a Part VIIIAB Financial Agreement” (my emphasis).
Ms Quen’s counsel submitted that thereafter Mr Chen knew what Ms Quen was proposing but it was not made clear why this agreement was difficult to formalise in court orders. One might speculate that a court might have asked about Ms Chen which was something that would not have occurred in an agreement that was otherwise foreshadowed. Much was made of this “framework” by Ms Quen but in my view, there was no other apparent reason for not having the agreements in a consent order. The fact that Mr Chen had urged that adds little to the issue.
It was Mr Chen who argued that the agreement was flawed by Ms Quen’s non-disclosure but in my view, little turns on that because of the absence of knowledge by Ms Chen. Suffice to say that even if Ms Quen had not provided full details of her financial position and I accept that is the case, Mr Chen was not particularly interested at the time. In my view, Mr Chen cannot argue that the agreement should be set aside for some fraud on him.
The relevant section of the Act is couched in discretionary language. In my view, that discretion should be exercised in Ms Chen’s favour for the reasons outlined but it is consequential that the agreement between Mr Chen and Ms Quen must be set aside because I consider that it had the effect of defeating Ms Chen’s claim.
Section 106B of the Act
Earlier, I set out the relevant provision in the Act. In Bourke v Bourke [2009] FamCA 27, Murphy J said:
[61]Accordingly, by reference to the terms of the section, I need to be satisfied that there is evidence upon which a trial judge could conclude that:-
· There are proceedings under this Act;
· There is an instrument or disposition sought to be attacked;
· That the instrument or disposition was made by or on behalf of, relevantly, the husband;
· That the disposition was, relevantly, made to defeat an existing or anticipated order in the proceedings;
· The disposition was, irrespective of intention, likely to defeat any such order.
I adopt his Honour’s elucidation of the section. I find here, the instruments and dispositions are as Ms Chen portrays them in her application. I find that in respect of both, they were made by Mr Chen without reference to Ms Chen. Particularly having regard to the GPL situation as I have found it, the disposition of those shares by Mr Chen was made to defeat an anticipated order in the proceedings. It must have been evident that with Mr Chen’s nefarious activities, Ms Chen would sooner or later discover the relationship and its financial ramifications. Even if that was not the case, the disposition of those shares was clearly likely to defeat any order that Ms Chen might have ultimately had the right to receive. In addition to the shares in GPL, the various real properties acquired by Mr Chen have all of the appearance of acquisitions either with Ms Quen or through the trust of which he had control until 2010, and that by virtue of Ms Quen’s age, experience and work life together with her role as a parent, it is more probably than not that the funding was provided by Mr Chen whose major source of income seems on the evidence, to have been GPL. That being so, I find that the disposition did defeat an anticipated order arising out of potential proceedings by Ms Chen or in the alternative, that what Mr Chen did was likely to defeat any such order.
I find that the application by Ms Chen must succeed. In respect of Mr Chen, as his evidence was totally unreliable, I would dismiss his application. However, that is immaterial because of the impact of the order upon the various transactions between Ms Quen and Mr Chen in so far as they affect Ms Chen.
I certify that the preceding two hundred and eleven (211) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 17 October 2018
Acting Associate:
Date: 17 October 2018
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