GONGSUN & PALING
[2020] FamCAFC 244
•30 September 2020
FAMILY COURT OF AUSTRALIA
| GONGSUN & PALING | [2020] FamCAFC 244 |
| FAMILY LAW – APPEAL – Appeal from orders made by a judge of the Supreme Court of New South Wales – Financial Agreement – De facto relationship – Where s 90UM(1)(f) of the Family Law Act 1975 (Cth) applies – Where the subject property was only registered in appellant’s name – Where the respondent executed a will leaving the property to the appellant – Undue influence – Where the findings made by the primary judge were inadequate to support a conclusion of undue influence – Unconscionable conduct – Where although a ground of appeal succeeded, the orders remain supported by the primary judge’s undisturbed conclusions in relation to unconscionability – Where circumstances of special disadvantage were identified by the primary judge, namely the respondent’s “infatuation” with the appellant and his consequent “vulnerability” – Where the primary judge found that the respondent was entitled to 50 per cent of the property on the basis of equitable principles and would have arrived at the same outcome under s 90SM of the Family Law Act 1975 (Cth) – Appeal dismissed. FAMILY LAW – APPEAL – PRACTICE AND PROCEDURE – Where appellant made an oral application to amend the Notice of Appeal to include a further ground of appeal – Where the proposition referred to in the proposed ground of appeal was put to the appellant in cross-examination – Amendment refused. FAMILY LAW – APPEAL – NOTICE OF CONTENTION – Where the respondent challenges the primary judge’s determination that there was an intention to transfer the beneficial interest in the property to the appellant – Interpretation of s 90SA of the Family Law Act 1975 (Cth) – Notice of Contention dismissed. |
| Family Law Act 1975 (Cth) ss 90SA, 90SM, 90UB, 90UF, 90UL, 90UM |
| Bridgewater v Leahy (1998) 194 CLR 457; [1998] HCA 66 Calderbank v Calderbank [1975] 3 All ER 333 Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 |
| APPELLANT: | Ms Gongsun |
| RESPONDENT: | Mr Paling |
| APPEAL NUMBER: | EAA | 24 | of | 2020 |
| DATE DELIVERED: | 30 September 2020 |
| PLACE DELIVERED: | Cairns |
| PLACE HEARD: | Sydney (via video link) |
| JUDGMENT OF: | Aldridge, Watts & Tree JJ |
| HEARING DATE: | 22 April 2020 |
| LOWER COURT JURISDICTION: | Supreme Court of New South Wales |
| LOWER COURT JUDGMENT DATE: | 2 August 2019 |
| LOWER COURT MNC: | [2019] NSWSC 1022 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Bedrossian |
| SOLICITOR FOR THE APPELLANT: | North Shore Lawyers & Associates |
| COUNSEL FOR THE RESPONDENT: | Mr Zipser |
| SOLICITOR FOR THE RESPONDENT: | Vaarzon-Morel Solicitors |
Orders
Appeal No. EAA 24 of 2020 is dismissed.
The Amended Notice of Contention in Appeal No. EAA 24 of 2020 is dismissed.
Within 14 days of these orders:
(a)Any application for costs is to be made, filed and served;
(b)Any affidavit material in support of such application is to be made, filed and served; and
(c)Any written submissions in support of that application for costs are to be made, filed and served.
Within 28 days of these orders, the respondent to any application for costs is to:
(a)Make file and serve any affidavit sought to relied upon to resist the application; and
(b)Make file and serve any written submissions resisting the application for costs.
Within 35 days of these orders, any party seeking an order for costs is to make, file and serve any affidavit material and written submissions strictly in reply to any material filed under order (4) hereof.
Otherwise the decision of the Full Court in relation to any application for costs is reserved.
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 Gongsun & Paling has been approved by the Chief Justice pursuant to s 121(9)(g) 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).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY |
Appeal Number: EAA 24 of 2020
File Number: 106176 of 2017
| Ms Gongsun |
Appellant
And
| Mr Paling |
Respondent
REASONS FOR JUDGMENT
Introduction
On 2 August 2019, for reasons then delivered, a judge of the Supreme Court of New South Wales made orders declaring that Ms Gongsun (“the appellant”) held 50 per cent of her interest in a residential property at Suburb B (“the Suburb B property”) on trust for Mr Paling (“the respondent”). Relevantly, there were also orders made appointing trustees for sale of the Suburb B property, and the distribution of its net proceeds of sale.
By Notice of Appeal dated 29 October 2019, the appellant challenges those orders. The appeal is resisted by the respondent, who also relies upon an Amended Notice of Contention filed with leave on 22 April 2020 to uphold the primary judge’s orders.
At the hearing of the appeal, the appellant sought to amend the Notice of Appeal to include a further ground of appeal, which application we dismissed by an order made on 22 April 2020. It is convenient to now include the reasons for that decision in the judgment arising from the appeal itself.
For the reasons which follow, the appeal fails.
Background
The respondent was born in Australia in 1936, and is turning 84 years of age this year. It appears that, prior to meeting the appellant in 2009, he had never been in a significant relationship or married. At the time when he met her, the respondent was retired and living in his home in Suburb C, in D Town (“the Suburb C property”). He had lived there since 1993.
The appellant was born in Country E in 1960, and is presently 60 years of age. She married in Country E and there was a child of that marriage. Ultimately, however, she separated from her spouse, and in 2002, when aged 42 years, she moved to Australia. Her son moved to Australia the following year.
The parties met in early February 2009. At that time, the respondent was 72 years of age and the appellant about 49 years of age. The appellant’s first language is the G Language, which the respondent did not speak at all. His only language is English, in which the appellant was not then proficient. Notwithstanding the communication difficulties, the parties formed a species of friendship.
On 17 September 2009, the parties signed a financial agreement (“the BFA”), which recited that they then proposed to enter into a de facto relationship. According to the BFA, the appellant had no assets, and apart from $12,000 in cash, the respondent only had the Suburb C property (at [6]).
Pursuant to the BFA, the appellant became increasingly entitled to an interest in the Suburb C property, the percentage being dependent upon the length of time of the parties’ de facto relationship. If the relationship lasted one year (or part thereof), she would be entitled to a 15 per cent interest in the Suburb C property; if two years (or part thereof), 25 per cent; three years (or part thereof), 35 per cent; four years (or part thereof), 45 per cent; and five years (or part thereof), 50 per cent. There was no provision for any further increase, and indeed Clause 4.1 provided that the appellant “shall not be entitled to claim any amount exceeding 50 [per cent] of interest in the [Suburb C property] regardless of the period of the relationship.”
Thereafter, the appellant moved into the Suburb C property. However, by at least 27 October 2009, being something less than only six weeks after the BFA was signed, the respondent had resolved to sell the Suburb C property, and by contract dated 7 December 2009, did so for $895,000. By contract dated 15 December 2009, the Suburb B property was purchased for $660,000, albeit in the appellant’s sole name.
Subsequently, on 9 February 2010, the sale of the Suburb C property settled simultaneously with the purchase of the Suburb B property. The funds used to purchase the Suburb B property were derived entirely from the sale proceeds of the Suburb C property. The following day the parties moved into the Suburb B property.
On 23 July 2010, the respondent executed a will leaving all his property to the appellant. In the event she predeceased him, his siblings were to receive legacies, but the appellant’s son was to receive the residue.
The respondent left the Suburb B property and entered a nursing home in April 2017. The parties seem to agree that, whatever was the nature of their relationship, it thereupon terminated, having endured for a little less than seven and a half years.
A significant issue in dispute before the primary judge was whether or not the parties had ever in fact been in a de facto relationship. For her part, the appellant contended that after the parties commenced cohabitation, she had only ever been the respondent’s reluctant friend, and later carer, but had never been his de facto partner. For his part, the respondent contended that at all relevant times they had lived together in a de facto relationship. That issue was resolved in favour of the respondent, and no appeal has been brought from that determination.
The respondent also asserted that his gift of the Suburb B property to the appellant was only of the bare legal title, and not of any beneficial interest, in consequence of which the appellant held the property pursuant to a resulting and/or constructive trust in the respondent’s favour, albeit only to the extent of 50 per cent. In the alternative, the respondent contended that if there had been a transfer of the beneficial interest, that transfer was the product of undue influence or unconscionability, and therefore the gift should be set aside. However, again, he did not contend that there should be a complete setting aside of the gift, but rather it should be set aside only to the extent of 50 per cent.
In part that might have been because of a claim which the respondent pressed in the alternative, namely that if his primary case failed, then there should be a property settlement pursuant to s 90SM of the Family Law Act 1975 (Cth) (“the Act”), given the breakdown of the parties’ de facto relationship. He contended that under that provision, a just and equitable settlement would see him entitled to a 50 per cent interest in the Suburb B property, but otherwise each party ought retain the property in their possession or under their control.
In broad terms, the primary judge found that the gift of the Suburb B property was not restricted solely to the legal interest, but determined that it was the product of both undue influence and unconscionability. To cover the eventuality that his Honour was mistaken in so determining, the primary judge also made findings in relation to the respondent’s claim for a property settlement, and concluded that, had his Honour not found that the respondent was entitled to 50 per cent of the Suburb B property on the basis of equitable principles, his Honour would have arrived at the same outcome under s 90SM of the Act (at [71]).
The appellant’s application to amend the notice of appeal
Towards the conclusion of the hearing before us, in light of an argument that had been advanced by the respondent, counsel for the appellant orally sought to amend the Notice of Appeal to include Ground 5 as follows:
The [primary judge] denied procedural fairness to the appellant by making a finding, including at judgment 31 (7) and judgment 31(18), that the respondent was willing to do whatever the appellant asked of him, but without that proposition being put to the appellant in cross-examination.
(Transcript 22 April 2020, p.73 lines 3–7)
We dismissed that application, because it is plain that the proposed ground of appeal was futile. At page 144 of the transcript, the following questions and answers appear, in the course of counsel for the respondent cross-examining the appellant who was using an interpreter:
Q. Did you find it strange that [the respondent] was so agreeable to your proposal to live in [Suburb B] so you could be near your boyfriend and also to live in [Suburb B] so that your son could move into the house to live with you and [the respondent]?
A. INTERPRETER: Yeah, we agreed. Because he knew that I was not able to do a lot of things, for example, in the past three years, if I needed to go to the hospital my boyfriend helped me; he helped me a lot of things, so he agreed.
Q. On you version of events did it cross your mind that there might be something wrong with [the respondent’s] thinking process, that he is so agreeable to do whatever you tell him you want?
A. INTERPRETER: No, because he said he was very, very lonely and we were just – I’m just a carer of him and even he – if he wanted to be my husband I wouldn’t want this kind of person to be my husband. Just a carer, just a carer.
(Transcript 27 June 2019, p.144 lines 37 to p.145 line 2)
It was contended by the appellant that the second question was unfair, in that it in fact comprised two questions. We reject that suggestion. The second question comprised only one question, although it was honed to restrict its breadth by reference to the respondent being “so agreeable to do whatever you tell him you want?”
It is therefore simply not correct to assert that the proposition referred to in the proposed ground of appeal was not put to the appellant in cross-examination; plainly it was. The proposed ground of appeal was doomed to fail, and hence futile. Therefore the amendment of the Notice of Appeal to include the proposed ground would have been an improper exercise of discretion, and accordingly we dismissed the application on 22 April 2020.
The appeal and amended notice of contention
Overview
The appeal challenges the primary judge’s findings that the gift of the Suburb B property was the product of undue influence or unconscionable conduct. The Amended Notice of Contention challenges the primary judge’s determination that there was an intention to transfer the beneficial interest in the Suburb B property to the appellant, and in the alternative, should that not succeed, then seeks to nonetheless uphold the decision as being either justified on a presumed relationship of undue influence, or if not, then a just and equitable division of the parties’ property under s 90SM of the Act. A significant issue in contention between the parties is whether or not the BFA is binding; if it is, then the respondent seeks to have it set aside in order for the Court to be able to exercise jurisdiction under s 90SM.
After we have traversed the pertinent aspects of the primary judge’s reasons, we shall address the grounds of appeal in the order that they appear in the Notice of Appeal, and then go on to briefly address the grounds raised by the Amended Notice of Contention.
The primary judge’s reasons for judgment
The primary judge collectively dealt with the three issues of the claimed resulting trust, undue influence, and unconscionability. Having stated some relevant legal principles (at [30]), his Honour continued by making specific findings of fact as follows (at [31]):
(1)The [respondent] and the [appellant] did live together in the [Suburb C] Property from around late September 2009 and then from February 2010 at the [Suburb B] Property (based on the [respondent’s] evidence and on [the respondent’s nephew’s] evidence).
(2)The [respondent] did not tell the [appellant] that he wanted to give the [Suburb B] Property to her because he felt he had only half a year left to live (see CB 100 para 3(b) in response to the [appellant’s] affidavit at CB 166 para 29, and also see my conclusions as to his health).
(3)The [appellant] encouraged the [respondent] to sell the [Suburb C] Property either because she did not like it or because she wanted to move to [Suburb B] for reasons that suited her: see para 20 of the [respondent’s] affidavit of 9 March 2018 at CB 95. She told [the respondent’s sister] that she did not want to stay in [Suburb C] because it was too far from her son: CB 108. At T133.21-29, she answered rather revealingly in response to my question:
HIS HONOUR
Q. […] you've told us that you said you did not want any part of the [Suburb C] house; you didn't want any share in that house. Is that right?
A. INTERPRETER: Correct, it was not under my name. My name was not on the property.
See, also, T55.9-14.
(4)The [appellant] was well aware of the contents of the Financial Agreement – namely that if she lived in a de facto relationship with the [respondent] for 1 year she would obtain a 15% interest in that property and if she lived with him for 5 years she would obtain a 50% interest in that property.
(5)The [appellant] thought that she could persuade the [respondent] to buy the [Suburb B] Property and she was correct in that assessment. She told the [respondent] that she wanted to establish a child care centre. The [appellant] looked for and made contact with the real estate agent to sell the [Suburb C] Property: T143.
(6)The [respondent] and the [appellant], contrary to the [appellant’s] denial, did have a period of sexual relations once the [appellant] had moved into the [Suburb C] Property and whilst at the [Suburb B] Property: see paras 16 - 18 and 29 of the [respondent’s] affidavit of March 2018, [the respondent’s nephew’s] evidence and [the respondent’s sister’s] affidavit at CB 109 para 10. Those relations may not have continued for a long period after 2010 but it is not necessary to determine when they ceased.
(7)The [respondent] was in 2009 desperate for love and affection and was a very lonely man. He was very keen to commence a relationship and willing to do whatever the [appellant] asked of him. He remained affectionate towards her throughout the period that they lived together, as evidenced by his comments to [the neighbour] (T85 – T86), and the presents he gave the [appellant] for her birthday (T24.42 – T25.2), even during cross examination (T20.44-48) and some of the photographs in Exhibit 2. The [respondent] took steps to keep her happy with, for example, a security camera (T85.9-30), and would have liked her to have a piano in the house: T85.15-19.
(8)The [appellant] did most, if not all, of the cooking at their home, and did the laundry, on her evidence, CB 176 para 101.
(9)The [appellant] and the [respondent] went on trips together, including at least two trips to [Country E]. The [appellant] went on a number of trips to [Country E] on her own and the [respondent] looked after himself on those occasions: see the [respondent’s] affidavit of 9 March 2018 at CB 97 and [respondent’s sister’s] affidavit at CB 109 para 11.
(10)The [respondent] would pick the [appellant] up from the Club when the [appellant] went there to meet friends. They would sometimes go to the Club together and play the poker machines: T77.45.
(11)The [respondent] and the [appellant] would occasionally go shopping together, but at other times he would do his own shopping.
(12)The [appellant] persuaded the [respondent] to exchange his Subaru for a Commodore (see para 27 of the [respondent’s] affidavit of 9 March 2018). Both the [respondent] and the [appellant] drove the car.
(13)The [appellant] was well aware that the [respondent] had prepared a Will in 2010 by which he left his estate to her. He gave her a copy of it and she knew that she was the sole beneficiary of his Will. In relation to the 2010 Will, it should be noted that it was revoked by a Will made on 23 March 2017 (CB 103-105).
(14)As at February 2010 he introduced the [appellant] to [the neighbour] as his wife: see T85.10 and [the neighbour’s] Statement at CB 266. In his Will of 2010 the [respondent] described the [appellant] as his “partner”: see CB 281. At a later time, and I infer when his health was failing in or after 2015, he described the [appellant] as his carer: see T85.34 – 44. In relation to the description of “carer”, it does seem that the [appellant] had an incentive to be so described since she apparently applied for and obtained a carer’s pension. There is some evidence from [the respondent’s sister] relevant to the [appellant’s] attempts to have the [respondent] placed in an aged care facility in early 2017: CB 110 para 14. There are a number of letters written by the [respondent] which the [appellant] tendered (CB 276 - 279) that were not adequately explained by her but seem designed to assist the [appellant].
(15)The [appellant] arranged for the sale of the [Suburb C] Property and the purchase of the [Suburb B] Property.
(16)The balance of the proceeds of sale of the [Suburb C] Property was paid initially into a joint account in the name of both the [respondent] and the [appellant], but the [appellant] controlled those monies and later placed the monies in her own name. She managed the finances of the household: see [the respondent’s nephew’s] evidence at CB 114-15. I do not accept the [appellant’s] explanation as to why she took over the finances, but rather see it as another example of her domination over the [respondent], albeit after the purchase of the [Suburb B] Property.
(17)I find that the [respondent] and the [appellant] were in a de facto relationship from September 2009 until April 2017, including within the definition of s 4AA of the [Act]. From 2015 or 2016, as the [respondent’s] health declined, the [respondent] probably also came to regard the [appellant] as his carer.
(18)As at December 2009 the [respondent] was very keen to maintain the de facto relationship with the [appellant]. He appears to have been willing to do whatever she wanted and to ensure that she stayed with him. His evidence is that the [appellant] told him she wanted to move to [Suburb B] to buy a bigger house out of which she could operate a child care centre (CB 95 para 20 and CB 100 para 3(c)) and the [respondent] agreed to that even though he did not like the idea of a two storey house. This situation clearly continued well beyond that time as is evidenced by him giving her the balance of proceeds and making the Will in her favour. I conclude on the balance of probabilities that the sale of the [Suburb C] Property was brought about at the instigation of the [appellant], that the choice of the [Suburb B] Property was solely hers and that she wanted that property in her name because she thought that would be in her best interests.
His Honour continued as follows:
32.The [respondent] says that he cannot recall having said that he did not want his siblings to benefit or that he would like to give his property to the [appellant] because he only had half a year to live: see CB 100. On the contrary, he said that he had always had a strong relationship with his siblings: CB 100 para 3(a). Hence, I do not accept the [appellant’s] assertion that he made either of those statements. He does not recall having drafted the Will to which I earlier referred, but I find that he did execute the Will on the date which it bears, and it is another indication of his feelings towards the [appellant], albeit after the purchase of the [Suburb B] Property.
33.In [the conveyancing solicitor’s] undated statement, which [the conveyancing solicitor] adopted in the witness box, she gave a version (at para 10) as to what the [respondent] told her was his reason for the gift to the [appellant]:
“10. I asked [the respondent] why he did that [give a gift to the appellant]. [The respondent] said to me that “I want to give the [Suburb B] Property to [the appellant]. Please put [the appellant’s] sole name on the property title. I am old and I want her to have that.”
At [34], his Honour recited some of the further evidence of the conveyancing solicitor under cross-examination, including an answer that the respondent told her in English words to the effect “[h]e said the same thing, he said I want [the appellant] to have this property, I want … her to look after me. That’s why he gave the property to her. I said okay, you better put it in writing because I am a conveyancing solicitor, I don’t want to get involved in the other matters.”
At [43], his Honour continued:
Whilst I do not think the matter is free from doubt, and whilst I do have some doubt as to the accuracy of [the conveyancing solicitor’s] testimony, the absence of clear evidence from the [respondent] as to what he said to the [appellant] leads me to conclude that the [respondent] did intend, as at December 2009, to bestow his entire interest in the [Suburb B] Property on the [appellant], not simply the legal title.
His Honour then said at [45]:
If the [respondent] did intend in December 2009 to make a gift of his entire interest in the [Suburb B] Property, as I think is more likely, then I find that he did so:
(1)Because he was elderly and lonely, and infatuated with the [appellant]. He was unable to appreciate that his decision to do so when they had spent very little time living together in a de facto relationship (on his case) and no time living together (on the [appellant’s] case) was a very imprudent decision, and entirely disregarded his own interests.
(2)Either unaware that the [appellant] intended to maintain her relationship with her boyfriend (on his evidence) or aware that she did (on her evidence), making the gift even more unwise.
(3)In circumstances where, not three months before, he had entered into the Financial Agreement that protected him to a degree that the gift did not.
(4)In circumstances where, on the [appellant’s] evidence, she had no real interest in any relationship with him and no affection for him whatsoever but regarded him as a lonely and desperate old man who she could not imagine wanting to live with and, on his evidence, because he hoped for a normal romantic and physical relationship.
Whilst the primary judge did not there articulate an actual finding in relation to either the resulting trust claim, or the claim of undue influence, later in his Honour’s reasons, his Honour said:
48.Whilst I have dealt with the matter as an undue influence case, it can also be framed as unconscionable conduct on the part of the [appellant] in attempting to retain the benefit that she has obtained by reason of the [respondent’s] infatuation with her and his vulnerability. The transition from the substance of the Financial Agreement to complete ownership by her of the [Suburb B] Property was a dramatic shift and has not been explained in any convincing way as in the interests of the [respondent]. It was very imprudent and I reject the submission made in DCS 4(b) that it reflects “mature financial planning”. The [appellant] knew that the [respondent] had a fixation about her (T52.45-47), that he was an “old, lonely, desperate man” (T53.7) and the transfer was not in his financial interests (T56.6-22); and see T56.39-41, T54.33-34, T55.20, T98 and T102.
Appeal – Ground 1
The first ground of appeal provides as follows:
1.The [primary judge] erred in concluding (Judgment [45] and [48]) that the Respondent’s gift of the full legal and beneficial interest in the [Suburb B] Property to the Appellant was the subject of undue influence and in concluding that it ought to be set aside (at least as to 50%), because:
(a)there was an insufficient evidentiary foundation for those conclusions, including because there was no evidence from the Respondent himself that the acquisition of the [Suburb B] Property in the Appellant’s name was other than his own independent and well-understood act and one involving an exercise of his own free judgment;
(b)there was no finding made by his Honour that the manner in which title to the [Suburb B] Property was to be held upon its acquisition (or the Respondent’s decision in respect thereof) was:
(i)ever the subject of any request or demand made, or pressure exerted, by the Appellant towards the Respondent; or
(ii)was otherwise the subject of any positive conduct on the part of the Appellant capable of being classified as constituting undue influence;
(c)there were multiple uncontested facts or positive findings of fact made by the [primary judge] (including at Judgment [5], [18(9)], [38], [43]) expressly or implicitly supporting the conclusion that the Respondent had a positive desire to gift the entirety of the [Suburb B] Property to the Appellant; and
(d)the [primary judge] failed to give any, or sufficient, consideration to the relevant facts and circumstances (as were undisputed or as were positively found by his Honour), which provided a rational basis for the Respondent’s decision (free from any undue influence) to have the property registered in the Appellant’s name, including the fact that the Respondent and Appellant were already in a de facto relationship (Judgment [11]), which involved a sexual relationship (Judgment [31(6)]) and the Appellant contributing to the household (Judgment [31(8)]).
(As per the original)
In Thorne v Kennedy (2017) 263 CLR 85 (“Thorne v Kennedy”), the plurality of the High Court summarised the relevant principles relating to undue influence as follows:
30.In Allcard v Skinner, Lindley LJ said that “no Court has ever attempted to define undue influence”. One reason for the difficulty of defining undue influence is that the label “undue influence” has been used to mean different things. It has been used to include abuse of confidence, misrepresentation, and the pressure which amounts to common law duress. Each of those concepts is better seen as distinct. Nevertheless, the boundaries, particularly between undue influence and duress, are blurred. One reason why there is no clear distinction is that undue influence can arise from widely different sources, one of which is excessive pressure. Importantly, however, since pressure is only one of the many sources for the influence that one person can have over another, it is not necessary that the pressure which contributes to a conclusion of undue influence be characterised as illegitimate or improper.
31.In 1836, in a passage which was copied verbatim by Snell thirty years later, Story said that a person can be subjected to undue influence where the effect of factors such as pressure is that the person “has no free will, but stands in vinculis [in chains]”. He explained that “the constant rule in Equity is, that, where a party is not a free agent, and is not equal to protecting himself, the Court will protect him”. In 1866, this approach was applied in equity by the House of Lords, recognising undue influence in a case of pressure that deprived the plaintiff of “free agency”. In 1868, in probate, Sir James Wilde also described undue influence as arising where a person is not a “free agent”. In Johnson v Buttress, Dixon J described how undue influence could arise from the “deliberate contrivance” of another (which naturally includes pressure) giving rise to such influence over the mind of the other that the act of the other is not a “free act”. And, in Bank of New South Wales v Rogers, McTiernan J characterised the absence of undue influence as a “free and well-understood act” and Williams J referred to “the free exercise of the respondent's will”.
32.The question whether a person’s act is “free” requires consideration of the extent to which the person was constrained in assessing alternatives and deciding between them. Pressure can deprive a person of free choice in this sense where it causes the person substantially to subordinate his or her will to that of the other party. It is not necessary for a conclusion that a person’s free will has been substantially subordinated to find that the party seeking relief was reduced entirely to an automaton or that the person became a “mere channel through which the will of the defendant operated”. Questions of degree are involved. But, at the very least, the judgmental capacity of the party seeking relief must be “markedly sub-standard” as a result of the effect upon the person’s mind of the will of another.
33.An example which illustrates the characterisation by a court of a lack of free will sufficient to amount to undue influence is the decision of this Court in Johnson v Buttress. In that case, Mr Buttress was a 67 year old man, who was “wholly illiterate, not very intelligent, and of little or no experience or capacity in business”. He made a voluntary transfer of land to a relative of his wife. The land was his only property and his only means of livelihood. When he made the transfer he did not understand that he had parted with the land irrevocably. After Mr Buttress died, the administrator of his estate brought an application to set aside the transfer. The trial judge set aside the transfer on the basis of undue influence. This decision was upheld in this Court. Although other members of the Court relied upon a presumption of undue influence, which is considered below, one member of the Court, Starke J, concluded that it was open to the trial judge to find that undue influence arose without any presumption. His Honour upheld the conclusion of the trial judge that the circumstances of the transfer invited the inference that it was “not the result of the free and deliberate judgment of the deceased”.
34.There are different ways to prove the existence of undue influence. One method of proof is by direct evidence of the circumstances of the particular transaction. That was the approach relied upon by the primary judge in this case. Another way in which undue influence can be proved is by presumption. This presumption was relied upon by Ms Thorne in this Court as an alternative. A presumption, in the sense used here, arises where common experience is that the existence of one fact means that another fact also exists. Common experience gives rise to a presumption that a transaction was not the exercise of a person’s free will if (i) the person is proved to be in a particular relationship, and (ii) the transaction is one, commonly involving a “substantial benefit” to another, which cannot be explained by “ordinary motives”, or “is not readily explicable by the relationship of the parties”. Although the classes are not closed, in Johnson v Buttress Latham CJ described the relationships that could give rise to the presumption as including parent and child, guardian and ward, trustee and beneficiary, solicitor and client, physician and patient, and cases of religious influence. Outside recognised categories, the presumption can also be raised by proof that the history of the particular relationship involved one party occupying a similar position of ascendency or influence, and the other a corresponding position of dependency or trust. In either case, the presumption is rebuttable by the other party proving that the particular transaction or transfer, in its particular circumstances, was nevertheless the result of the weaker party’s free will.
(Footnotes omitted) (Emphasis added)
Absent from his Honour’s reasons, is any finding that the respondent’s will was substantially subordinated to that of the appellant. Particularly, there was no finding or determination that the judgemental capacity of the respondent was “markedly sub-standard” as a result of the effect upon his mind of the appellant’s will. It therefore follows that the findings made by the primary judge were inadequate to support a conclusion of undue influence, whether presumed or actual.
Further, as the appellant convincingly demonstrates, there was no evidence whatsoever from the respondent, either that he had not understood what he was doing, or that his will had been overborne by the appellant. Moreover, not only did he not give evidence that he had been, or felt, pressured to acquire the Suburb B property in the name of the appellant, but there was no direct evidence even of any request by the appellant for that to occur (appellant’s Summary of Argument, paragraph 23(a)–(b)).
It follows that Ground 1 is made out, and it is therefore not necessary to descend to any further analysis of its various sub-grounds.
Appeal – Ground 2
The second ground of appeal provides as follows:
2.The [primary judge] erred in concluding (Judgment [48]) that the Appellant was guilty of unconscionable conduct in seeking to retain the full legal and beneficial interest in the [Suburb B] Property and in concluding that, as a consequence, the gift of that proprietary interest ought to be set aside (at least as to 50%), because (in addition to the matters identified in respect of Ground 1 above):
(a)there was an insufficient evidentiary foundation for any finding by the [primary judge] that the Respondent’s affection for and attraction to the [appellant] constituted a special disadvantage;
(b)there was an insufficient evidentiary foundation for the finding that the Respondent was “willing to do whatever the [Appellant] asked of him” (Judgment [31(7)]) and for the findings at Judgment [45] and, in any event, those findings were insufficient for a conclusion that the Respondent was in a position of special disadvantage vis-à-vis the Appellant;
(c)there was no evidence that the Appellant asked the [respondent] to place title to the [Suburb B] Property solely in her name;
(d)there was an insufficient evidentiary or legal foundation for any conclusion that the Appellant was guilty of taking any inequitable or unconscientious advantage of her relationship with the Respondent; and
(e)the [primary judge] failed to give any, or sufficient, consideration and weight to the relevant facts and circumstances (as were undisputed or as were positively found by his Honour), which provided a basis, consistent with equity and good conscience, for the Appellant retaining her legal and beneficial interest in the property, including the fact that the Appellant and Respondent had been in a meaningful personal relationship (involving sexual relations, the sharing of domestic duties, and personal companionship), to which the Appellant made material tangible and intangible contributions over an extended period of time.
(As per the original)
In Thorne v Kennedy, the plurality of the High Court summarised the relevant principles relating to unconscionability as follows:
38.A conclusion of unconscionable conduct requires the innocent party to be subject to a special disadvantage “which seriously affects the ability of the innocent party to make a judgment as to [the innocent party’s] own best interests”. The other party must also unconscientiously take advantage of that special disadvantage. This has been variously described as requiring “victimisation”, “unconscientious conduct”, or “exploitation”. Before there can be a finding of unconscientious taking of advantage, it is also generally necessary that the other party knew or ought to have known of the existence and effect of the special disadvantage.
39.In Commercial Bank of Australia Ltd v Amadio, Deane J said that the equitable principles concerning relief against unconscionable conduct are closely related to those concerned with undue influence. The same circumstances can result in the conclusion that the person seeking relief (i) has been subject to undue influence, and (ii) is in a position of special disadvantage for the purposes of the doctrine concerned with unconscionable conduct. For instance, in Diprose v Louth [No 1], the trial judge, King CJ, observed that both doctrines were satisfied where the defendant “was in a position of emotional dominance which gave her an influence over the [plaintiff] which she exercised unconscientiously to procure the gift of the house”. Before the High Court in that case, Mr Diprose relied only upon the ground of unconscionable conduct.
40.Although undue influence and unconscionable conduct will overlap, they have distinct spheres of operation. One difference is that although one way in which the element of special disadvantage for a finding of unconscionable conduct can be established is by a finding of undue influence, there are many other circumstances that can amount to a special disadvantage which would not establish undue influence. A further difference between the doctrines is that although undue influence cases will often arise from the assertion of pressure by the other party which might amount to victimisation or exploitation, this is not always required. In Commercial Bank of Australia Ltd v Amadio, Mason J emphasised the difference between unconscionable conduct and undue influence as follows:
“In the latter the will of the innocent party is not independent and voluntary because it is overborne. In the former the will of the innocent party, even if independent and voluntary, is the result of the disadvantageous position in which he is placed and of the other party unconscientiously taking advantage of that position.”
(Footnotes omitted)
It is well established that in order to succeed in relation to a ground of appeal alleging an error of fact, the finding must be “glaringly improbable” or “contrary to incontrovertible facts” (Whisprun Pty Ltd v Dixon (2003) 200 ALR 447 at [99]; Fox v Percy (2003) 214 CLR 118 at [28]–[29]).
We have already recited the relevant parts of the primary judge’s reasons which detailed his Honour’s basis for concluding that there was undue influence, which were said to also justify a finding of unconscionability. It appears from the reasons (at [48]) that there were two overlapping circumstances of special disadvantage identified by the primary judge, namely the respondent’s “infatuation” with the appellant, and his consequent “vulnerability”. This ground of appeal particularly asserts that the evidence did not provide a sufficient basis for a conclusion of special disadvantage in either respect. We do not accept that argument.
A useful starting point is to acknowledge that although the primary judge generally rejected the evidence of the appellant, she being “a wholly unsatisfactory witness whose evidence I am unable to accept unless corroborated by independent reliable evidence” (at [19(4)]), implicitly his Honour did not adopt such an approach where her evidence was against interest. As but one example, the primary judge’s findings that the respondent was “lonely, and infatuated with the [appellant]” (at [45(1)]) was plainly based on the appellant’s evidence, both in her trial affidavit (“I pitied him as a lonely old man” – appellant’s affidavit filed 5 July 2018, paragraph 14) and her oral evidence (“I felt that he was lonely, and the self-pity” and “[Q:] … you were aware that he had a fixation about you? [A:] …Yes…” – Transcript 24 June 2019, p.52 lines 43–46). Therefore the evidence relied upon by the primary judge was not restricted just to the evidence of, or led by, the respondent.
There can be little doubt that the finding of infatuation was well open on the evidence. From the outset of their relationship the respondent would cry if the appellant advised him that she would no longer have coffee with him. The suggestion by counsel for the appellant that this was done in a playful way must be rejected, given the appellant’s own evidence that her response to being told of his crying was “I felt pity towards [the respondent]” such that she thereafter resumed having coffees and meals with the respondent (appellant’s affidavit filed 5 July 2018, paragraphs 18–19)
There was also evidence that the respondent had threatened suicide in connection with wanting to be with the appellant all the time (Transcript 27 June 2019, p.133 lines 34–38). Again, the attempt by the appellant’s counsel to suggest that was undertaken jokingly does not sit well with what the appellant told the conveyancing solicitor in relation to such threats, namely that “he scare me” (Transcript 25 June 2019, p.102 lines 37–39).
There was also evidence from the respondent’s nephew that, even when the parties were living in the Suburb C property, the appellant had taken control of the respondent’s money (respondent’s nephew’s affidavit filed 3 April 2018, paragraph 12), which continued when the parties moved to the Suburb B property (respondent’s nephew’s affidavit filed 3 April 2018, paragraph 18).
Likewise, there were the terms of the respondent’s will executed on 23 July 2010, which are at least consistent with a continuing infatuation at that time.
We are conscious that it has been said that “[d]escribing commitment as ‘infatuation’ is rhetorically powerful but conclusory” (Thorne v Kennedy at [96] per Gordon J). However, here, the primary judge did not baldly reach that conclusion, but rather identified the matters which justified that conclusion as we have set out above.
We are well satisfied that the evidence supported the primary judge’s findings to the effect that the respondent’s infatuation rendered him vulnerable, in the sense that he was unable to appreciate the stark improvidence of the acquisition of the Suburb B property in the appellant’s sole name. Indeed, given that it, and the balance proceeds of sale of the Suburb C property (of which the appellant assumed control) were the respondent’s only assets of significance, the statement by Mason CJ in Louth v Diprose (1992) 175 CLR 621 at 626 is apt, namely “it was so improvident, judged in the light of the respondent’s financial position, that it is explicable only on the footing that he was so emotionally dependent upon, and influenced by, the appellant as to disregard entirely his own interests.” Whilst, of course, this case does not involve a manufactured crisis, such as that which prevailed in that matter, nonetheless in this case there is no other sensible explanation for why, in September 2009, the respondent only intended to gradually give the appellant an interest in the Suburb C property, capped at 50 per cent, and yet just a short time later gave her ownership and effective control of all his assets.
As to whether the retention by the appellant of the Suburb B property remained unconscionable at trial, it was well open to the primary judge to so conclude. Particularly:
(a)The respondent was otherwise without assets of any substance;
(b)Whilst the appellant might have expended monies on the respondent and the Suburb B property, she had effective control over all the respondent’s assets, including the funds derived from the balance of the proceeds of sale of the Suburb C property; and
(c)The BFA remained operative, in the sense that no party had sought to terminate it under s 90UL of the Act. Indeed, somewhat ironically, before the primary judge, and again before us, the appellant continued to positively rely upon the BFA to thwart any s 90SM claim by the respondent. It, of course, provided for a maximum entitlement of the appellant of 50 per cent (albeit of the Suburb C property).
Finally, whilst we acknowledge that improvidence or hardship alone does not establish unconscionability (Kakavas v Crown Melbourne Ltd (2013) 250 CLR 392 at 401), that is not the situation here. Rather, here, the respondent’s vulnerability arising from his infatuation with the appellant is front and centre stage.
It is educative to compare the facts of this case with the facts in Bridgewater v Leahy (1998) 194 CLR 457. There, the majority of the High Court recognised that the emotional vulnerability of an uncle to his nephew meant that the relevant dealings between them saw them “meeting on unequal terms” which resulted in “a grossly improvident transaction” (at [123]). The passive acceptance of the benefit thereby obtained enlivened equity to set it aside as unconscionable (at [122]). That is precisely the situation here, save that here, the improvidence of the transaction is even greater than that which prevailed in that case.
It therefore follows that the second ground is not made out.
Appeal – Ground 3
The third ground of appeal provides as follows:
3.The [primary judge]:
(a)erred in concluding (Judgment [48]) that the transition from the substance of the Financial Agreement to complete ownership by the Appellant of the [Suburb B] Property was a “dramatic shift” and erred in concluding that such a shift had not been explained in any convincing way as in the interests of the Respondent; and
(b)in reaching the conclusions at Judgment [48] as to the existence of a “dramatic shift” and in relying upon those conclusions as a foundation for finding the existence of unconscionable conduct, failed to give any weight to the facts and circumstances which provided a rational basis for the Respondent’s decision.
(As per the original)
Under the BFA, as at the time of the purchase of the Suburb B property, had the parties’ relationship then terminated, the appellant would have been entitled only to 15 per cent of the Suburb C property. Had the relationship continued for five or more years, then the maximum entitlement which the appellant would have had was to 50 per cent of the Suburb C property. Therefore, even though the Suburb B property was worth less than the Suburb C property, the value of the vested interest which the appellant obtained at the time of the purchase of the Suburb B property, was far greater than would otherwise have been the case had the relationship then terminated or indeed, had it survived past five years. There is no error discernible in the primary judge’s conclusion that represented a dramatic shift, as plainly it was.
We are not satisfied that the primary judge failed to give any weight to the matters relied upon by the appellant as establishing a reasonable basis for the respondent to make the gift to her. They are adequately addressed in the reasons that we have recited earlier.
The third ground of appeal is not made out.
Appeal – Ground 4
The fourth ground of appeal provides as follows:
4.The [primary judge]:
(a)erred in concluding (as appears to have occurred at judgment [30(3)], [48]) that there was sufficient evidence of a relevant disability or weakness on the part of the Respondent as at September 2009 for there to be a shifting to the Appellant of the onus of proving that the transaction was fair, just and reasonable;
(b)ought to have concluded that the onus of establishing the factual and legal basis for his claims for relief remained with the Respondent at all times and in all respects; and
(c)further or alternatively, erred in failing to conclude that any such onus of proving that the transaction was fair, just and reasonable that fell upon the Appellant had been satisfied by the Appellant (or had been satisfied by reason of the existence of facts and circumstances, which were uncontested in the Court below or which were positively found by his Honour).
(As per the original)
The premise of this ground of appeal is that the primary judge at some stage shifted the onus to the appellant. We are not satisfied that is what the primary judge did. Particularly, while at [30(3)] of the reasons when traversing relevant principles, the primary judge did acknowledge the possibility of a shift in onus, his Honour did not have recourse to that at [48]. Even if his Honour did, the evidence amply supported that the transaction was neither fair, just or reasonable.
It therefore follows that this ground of appeal is not made out.
Outcome of the appeal
Although one ground of appeal succeeds, the orders remain supported by the primary judge’s undisturbed conclusions in relation to unconscionability. Therefore the appeal must fail.
Given that the appeal fails, it is strictly unnecessary for us to go on to deal with the Amended Notice of Contention. However, it is convenient to nonetheless deal with it briefly, as it was fully argued before us, and in the event that our conclusion in relation to the appeal is in error, as shall be seen, it provides a further basis for maintaining the outcome determined by the primary judge.
Amended Notice of Contention – Ground 1
The first ground provides as follows:
1.The [primary] judge found at [43] of his judgment dated 2 August 2019 that “the [respondent] did intend, as at December 2009, to bestow his entire interest in the [Suburb B] Property on the [appellant], not simply the legal title”. This finding is not correct. In December 2009 the respondent intended to only bestow, and only bestowed, the legal title in the [Suburb B] Property on the appellant. If the Court of Appeal agrees, it remains the case, as recorded by the [primary] judge at [1] and [47], that the respondent “seeks only a declaration that he owns 50% of” the [Suburb B] Property.
(As per the original)
At [42] of the primary judge’s reasons, his Honour said as follows:
42.There is some evidence which suggests that it was not the [respondent’s] intention to bestow his entire interest in the [Suburb B] Property on the [appellant] in December 2009. First, there is the fact that he made a Will in July 2010 giving his entire estate to the [appellant]. If the [appellant’s] claim is correct, the [respondent] had no assets left other than his interest, at that time at least, in a joint term deposit which would pass to the [appellant] on his death. Secondly, the [appellant] said at T148.29-33:
A. INTERPRETER: I only recall that [the respondent] was very lonely and he insisted to give the property to me after he passes away and he didn’t want to give it to his siblings. I only can recall that [the conveyancing solicitor] told me that it was a gift from [the respondent], and [the respondent] said, “You must put [the appellant’s] birthday and I want her to remember it forever.” [Emphasis added]
At T149.6-26, the [appellant] retracted her evidence of “after he passes away”. At para 64 of her affidavit the [appellant] deposed to a conversation in which the [respondent] said to her:
“I put the property under your sole name in order to save you troubles in case my brothers and sisters want a share of it.”
The [appellant] was cross examined on this paragraph and there was some confusion (see T150 – T151) but she confirmed that what was deposed to in para 64 was her evidence and added that the [respondent] had said “no troubles”. Thirdly, there is the Department of Housing document referred to at [21(8)] above.
(As per the original)
We have already set out the reasons at [43] earlier in this judgment.
We are satisfied that there was a sufficient evidentiary basis for the conclusion that there was an intention to give the beneficial, rather than legal, interest in the Suburb B property to the appellant. Further, as the appellant correctly argues, it is very difficult to see that the transfer of bare legal title comprises a gift of anything, and there is no challenge to the finding of a gift per se. That is sufficient to deal with this ground of the Amended Notice of Contention, which would fail.
Amended Notice of Contention – Ground 1A
This ground provides as follows:
1A.The [primary] judge found at [45] that, if the [respondent] intended in December 2009 to make a gift of his entire interest in the [Suburb B] Property, the gift was vitiated by undue influence. If the [primary] judge did not rely on the presumption of undue influence in arriving at this finding, the respondent relies on the presumption of undue influence to support this finding on appeal.
This ground may be shortly dealt with. It appears clear that the primary judge did not rely upon a presumed relationship of influence. Such a presumption could not arise on the facts of this case. The authority relied upon by the respondent (Quek v Beggs (1990) 5 BPR 11,761) does not assist him; here there were no findings made by the primary judge of a relationship between the parties involving reliance, dependence, or trust. Infatuation does not necessarily involve such notions, and on the facts of this case, it did not.
Amended Notice of Contention – Ground 2
The second ground provides as follows:
2.The [primary] judge found at [70] that, in considering the respondent’s claim under s 90SM of the [Act], “the just and equitable outcome pursuant to s 90SM would be that the [respondent] and [appellant] should each have a 50% interest in the proceeds of the [Suburb B] Property following sale”. If:
a)the [primary] judge erred in his conclusions concerning the respondent’s claim based on the equitable doctrines of undue influence and unconscionable conduct; and
b)ground 1 of this notice of contention is dismissed,
the decision below should be affirmed by the making of the following orders:
a)if the effect of s 90SA of the [Act] is that the respondent is unable to be granted relief under s 90SM unless the financial agreement between the parties dated 17 September 2009 (“the Financial Agreement”) is set aside, an order under s 90UM of the [Act] setting aside the Financial Agreement; and
b)an order under s 90SM of the [Act] altering the interests of the appellant and respondent in the [Suburb B] Property so that the respondent has a 50% interest in the [Suburb B] Property.
(As per the original)
There are three distinct limbs to this ground. The first is that the BFA is ineffective to capture all of the property of the parties, and hence by virtue of s 90SA of the Act, it is not a bar to division of their property under s 90SM of the Act. The second is that the sale of the Suburb C property meant that “in the circumstances that have arisen since the [BFA] was made it is impracticable for the agreement or part of an agreement to be carried out” so as to engage s 90UM(1)(f) of the Act. The third seeks to rely upon the primary judge’s assessment as to a just and equitable provisional division of the property of the parties.
In respect of the first limb and whether the financial agreement applied to the Suburb B property, the primary judge said:
53.I read s 90SA(1) as requiring consideration of whether the parties have in an agreement dealt with the property of the relationship or either of them – if they have, that is sufficient even if the agreement has not dealt with all the property of the relationship or either of them. I do not think it is likely that the legislature intended that a party could bring proceedings for orders under Division 2 of Part VIIIAB in respect of property A of one of the parties if the binding financial agreement dealt with another property, B, of that party.
We disagree about the primary judge’s statement as to what the legislature intended. Section 90SA of the Act only excludes the ability to deal with property to which a Pt VIIIAB financial agreement applies. In this case, the parties entered into an agreement pursuant to s 90UB of the Act. That section provides that people contemplating entering into a de facto relationship can make a written agreement with respect to certain matters in the event of the breakdown of the de facto relationship (s 90UB(1)(a)). Section 90UB(2)(a) of the Act provides that those matters can be, amongst others, about “how all or any” (emphasis added) of the property of either or both of the spouse partners at the time when the agreement is made, or at a later time, is to be distributed. Consequently, the Act clearly allows an agreement to deal with particular property (and by way of the operation of s 90SA quarantining it from future dispute), whilst leaving the remaining property available to be the subject of a determination under s 90SM of the Act. In this case, the operative clauses of the financial agreement only dealt with the Suburb C property.
However, it is not necessary to otherwise consider the first two limbs, as the BFA, on the evidence, is simply presently inoperative. That is because there is no evidence of, nor reason to otherwise suspect the existence of, a separation declaration. Absent such a declaration, the BFA presently “is of no force or effect” (s 90UF(1) of the Act).
Therefore we only would need to consider the s 90SM claim. As to that, before us, it was not contended that, if the BFA was set aside, a division of the property of the parties, such that each received 50 per cent, was other than just and equitable. Whilst the material before the primary judge as to the parties’ financial circumstances was sparse, it appears as though the parties had not properly prepared for this aspect of the litigation, nonetheless, on the limited materials, we are indeed satisfied that, for the reasons his Honour gave, the outcome was well within the reasonable exercise of the Court’s discretion. No error of the kind identified in House v The King (1936) 55 CLR 499 was identified.
It therefore follows that, had it been necessary, this ground of the Amended Notice of Contention would have succeeded.
Outcome of the Amended Notice of Contention
Had it proved necessary, we would have concluded that the Amended Notice of Contention succeeded, such that there should in any event be orders that the Suburb B property be sold, and that the net proceeds of sale be divided equally between the parties. However, as it is not necessary to so conclude, the Amended Notice of Contention ought be dismissed.
Costs
The parties sought to defer any argument as to the costs of the appeal, as one or more of them sought to rely upon Calderbank offers which had been made, and hence could not properly be disclosed prior to the disposition of the appeal. As discussed with the parties at the hearing of the appeal, we will order a timetable for the provision of materials and argument in support of any costs applications as may now be made.
I certify that the preceding seventy-three (73) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Aldridge, Watts & Tree JJ) delivered on 30 September 2020.
Associate:
Date: 30 September 2020
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