Chong v Chanell

In Chong v Chanell, the plaintiff sought to recover funds advanced from China to the first defendant in Australia. The plaintiff alleged that the first defendant misused the trust funds by applying them to pay the second defendant and reduce her home loan, contrary to the plaintiff's instructions. The case was heard in a court of equity. The primary legal issues were whether the first defendant had the onus of proving that the application of the trust funds was in accordance with the plaintiff's instructions, and whether the plaintiff could trace the funds to the second defendant and seek restitutionary relief.

The court determined that the first defendant bore the onus of proving that the application of the trust funds was in accordance with the plaintiff's instructions. Since the first defendant could not meet this burden, she was required to account for the funds received as trustee. Regarding the tracing of funds, the court held that it was not established that the second defendant was aware of the breach of trust, nor was it proven that the property still existed in a traceable form. However, the court found that the plaintiff was entitled to an equitable charge over the first defendant's property for the amount used to pay down her mortgage.

Regarding the restitutionary remedy, the court found that the second defendant had established a change of position, having gambled away the funds. The court also held that it was not established that the second defendant did not act in good faith. Consequently, a restitutionary remedy was not available against the second defendant. The court further addressed costs, departing from the general rule and making a Bullock order, which would avoid creating an asset and corresponding liability for the husband and wife who were engaged in family property adjustment proceedings.