SUPREME COURT OF QUEENSLAND
CITATION: Ikeuchi v Liu & Ors [2001] QSC 054 PARTIES: YUTAKA IKEUCHI
(plaintiff)
v
JILLY LIU
(first defendant)
IKEUCHI & LIU PTY LTD
(second defendant)
KEXIN LIU
(third defendant)FILE NO: Brisbane S6889 of 1999 DIVISION: Trial PROCEEDING: Civil ORIGINATING COURT: Supreme Court at Brisbane
DELIVERED ON: 2 March 2001 DELIVERED AT: Brisbane HEARING DATE: 4 – 15 December 2000 JUDGE: Muir J CATCHWORDS CONTRACT – GIFT – whether certain transactions constituted gifts made in contemplation of marriage – gifts returnable to donor upon failure of condition.
TRUSTS AND TRUSTEES – RESULTING TRUST – CONSTRUCTIVE TRUST – CREATION OF TRUST – whether presumption of advancement extends to parties to a defacto relationship – relevance of fault in the termination of a de facto relationship – whether a constructive trust should be imposed in the circumstances – retrospective imposition of constructive trust – time at which constructive trust arises.
CONTRACT – ILLEGALITY (BY STATUTE) – whether illegality bars claim to the beneficial interest in urban property pursuant to Foreign Acquisitions and Takeovers Act 1975 (Cth) – whether Act invalidates acts or interests.
: Foreign Acquisitions and Takeovers Act 1975 (Cth), ss 21A, 26A, 38, 38A
Atwood v Maude (1869) LR 3; Ch App, referred to
Barnes v Addy (1984) LR 9 Ch App 244, referred to
Baumgartner v Baumgartner (1987) 164 CLR 137, followedBertei v Feher [2000] WASCA 165, referred to
Calverley v Green (1984) 155 CLR 242, referred to
Cohen v Sellar [1925] 1 KB 53, consideredCommonwealth of Australia v Verwayen (1990) 170 CLR 394, referred to
Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373, referred to
Davies v Messner (1975) 12 SASR 333, referred toDunne v Turner, unreported, QCA 20 August 1996, referred to
Fradd v Blythman [1997] WASC referred to
Giumelli v Guimelli (1998) 196 CLR 101, referred to
Jenkins v Wynen [1992] 1 Qd R 40, referred toKais v Turvey (1994) 11 WAR 357, considered
Maquire v Macaronis (1997) 188 CLR 449, referred to
Moate v Moate (1948) 2 All ER 486, referred to
Muchinski v Dodds (1985) 160 CLR 583, considered
Nelson v Nelson (1995) 184 CLR 538, considered
Re Diplock’s Estate [1948] Ch 465, referred to.
Re Jonton Pty Ltd [1992] 2 Qd R 105, referred toRe Osborn (1989) 91 ALR 135, referred to
Strong v Owens (1925) 42 WN (NSW) 183, referred to
The Public Trustee v Kukula (1990) 14 Fam LR, compared
Warman International Limited v Dwyer (1995) 182 CLR 544, referred toWirth v Wirth (1956) 98 CLR 228, referred to
Yango Pastoral Company Pty Ltd v First Chicargo Ltd (1978) 139 CLR 410, referred to.
Zobory v Federal Commissioner of Taxation (1995) 95 ATC 4215, referred to.COUNSEL: RG Bain QC with PE Hack SC for the plaintiff
NM Cooke QC with MM Varitimos for the defendantsSOLICITORS: Grasso Searles Romano for the plaintiff
Price & Roobottom for the defendants
Introductory observations
Between about 6 and 9 September 1993, the plaintiff, a Japanese citizen, attended a business conference in Panjin City, Liaoning Province, China. On the second day of the conference he met the first defendant, a woman born in China, but then resident in Australia, and the holder of an Australian passport. The first defendant spoke Japanese and she and the plaintiff spent a considerable amount of time in each other’s company at the conference. A romantic attachment soon ensued.
In 1995 and 1996 the plaintiff purchased a number of parcels of real property in the first defendant’s name in Brisbane, constructed an expensive home for them both on one parcel and placed some millions of dollars in accounts in joint names. The couple lived together in Brisbane between about May 1994 and July 1998. From about April 1998 the first defendant commenced moving moneys out of joint accounts into accounts in her name or under her control. The plaintiff, alerted to this conduct on the part of the first defendant at the end of July 1998, commenced these proceedings seeking, inter alia, a declaration that he had the sole beneficial interest in the bulk of the moneys provided by him and in the real and personal property acquired by the use of such moneys.
The parties’ claims
The plaintiff asserts that the payment by him of moneys into joint accounts, the purchase of real property in joint names, the payment of the costs of construction of the house and the purchase of a motor vehicle in the name of the first defendant should be regarded as gifts in contemplation of marriage. It is submitted that, as the marriage failed to eventuate, the gifts are required to be returned. Alternatively, it is argued that the first defendant, in asserting title to such property, is acting unconscionably and the plaintiff is entitled to recover the beneficial interest in such property by means of the imposition of a constructive trust.
Alternatively, it is argued that the real property, having been paid for by the plaintiff, and the moneys having been placed by the plaintiff in joint names, but under the control of the first defendant are held by the first defendant on a resulting trust for the plaintiff. Claims are also made against the second defendant, a company controlled by the first defendant, and the third defendant, Kexin Liu, the first defendant’s daughter. They each received some of the subject moneys from the first defendant.
The defendants’ principal contention is that, as the plaintiff never intended to marry the first defendant, there were no gifts in contemplation of marriage. Rather, it is alleged that the plaintiff gave the property to the first defendant to gain and maintain her continued support for his application for permanent Australian residency.
In addition, the defendants contend that even if the plaintiff has a beneficial entitlement to the property he claims, the court should refuse equitable relief on the ground that he relies on his own illegal conduct to provide the basis for such relief.
The illegality is said to arise from non-compliance with the requirement of s 26A of the Foreign Acquisitions and Takeovers Act 1975 (Cth) that non residents give notice in writing to the Treasurer of intention to acquire an interest in Australian urban land before entering into any agreement to acquire it.
The first defendant also claims for the return of heirlooms valued by her at around $30,000,000, which she alleges were taken wrongfully by the plaintiff.
It is now desirable that I trace the parties’ social and financial dealings in some detail.
The commencement of the relationship between the plaintiff and the first defendant
Shortly after meeting the first defendant at the conference in Panjin City the plaintiff came to understand that the first defendant was an Australian resident with no matrimonial attachments. He informed her that he had been to Australia a number of times, that he liked the country and wished to live there permanently.
On about the third day of the conference, the plaintiff accepted the first defendant’s offer to take him sightseeing to a temple. The first defendant swears that during the previous evening the plaintiff asked her to marry him and that, in the ensuing discussion, he agreed to her request that he establish his bona fides by going with her to a Taoist temple and making a statement of marriage before the Gods. She swore that the visit to the temple resulted from this discussion and that, at the temple, marriage vows were exchanged. She further swore that she understood that the “ceremony constituted a valid religious marriage” under the Taoist religion in which she believed.. After leaving the temple, on her version of events, the plaintiff told her that his daughter was now 19 and when she turned 20 he would formalise their marriage in a church ceremony in Australia. The plaintiff denies these assertions and I do not accept the first defendant’s evidence about the exchange of marriage vows. There is other evidence, including that of the first defendant herself, which makes it plain that the plaintiff and the first defendant did not regard themselves as legally married at any time after the visit to the temple.
The plaintiff returned to Japan on 11 September 1993 and the first defendant returned to Melbourne after about another three weeks. However, they remained in fairly frequent telephone contact.
In December 1993, the plaintiff came to stay with the first defendant in her home in Werribee on the outskirts of Melbourne. Within a few days they and the first defendant’s daughter, Kexin (called Mandi until fairly recently), visited the Gold Coast where they stayed a few days before returning to Melbourne. Some two days before returning to Japan, the plaintiff invited the first defendant to join him on a holiday in Hawaii. She accepted the invitation and the two shared a room in a hotel in Honolulu for about four nights in February 1994. It is common ground that the relationship then became a sexually intimate one.
During 1994, the plaintiff paid a total of $713,479 into a bank account in the first defendant’s name in Brisbane. Amounts of $35,750 and $399,992 were paid into the account on 7 April and 15 March 1994 respectively. Further sums of $267,737 and $10,000 were deposited on 10 July and 28 November 1994.
Some of those moneys were used in April of that year to purchase a house at 22 Lynelle Street, Sunnybank Hills for a price of $367,500 in the name of the first defendant.
The first defendant claims the plaintiff told her that he would send her money to enable her to purchase a house in the Sunnybank Hills area, which he liked. She says that the plaintiff said that the house would be a gift as proof of his love. I do not accept that the plaintiff told the first defendant that he would give the property to her.
The plaintiff and the first defendant commenced co-habitation in the Lynelle Street house in about May 1994. Later that year they went on three trips, one to Singapore, Sri Lanka and Malaysia, another to Singapore and another to China and Japan.
The dispute and compromise in 1995
Shortly after returning from an excursion to Tasmania in January 1995, the plaintiff flew to Singapore to meet with his daughter. In the plaintiff’s absence, the first defendant listed the Lynelle Street property for sale and withdrew $488,000 from the plaintiff’s account with the ANZ Bank. The first defendant had become concerned about the plaintiff’s failure to secure a divorce from his wife. It is likely also that she, mistakenly, thought that the plaintiff and his wife were in the process of effecting a reconciliation.
In proceedings in the Supreme Court on about 27 January 1995, the plaintiff sought injunctive relief against the first defendant. The proceedings were compromised on 3 February 1995 after meetings extending over two days between the plaintiff, the first defendant and the plaintiff’s solicitors at the offices of the plaintiff’s solicitors, Minter Ellison. By the compromise agreement the first defendant agreed –
(a) to transfer $631,520 from her ANZ Bank accounts into an account nominated by the plaintiff;
(b) to transfer a Volvo car (which the plaintiff had purchased in the first defendant’s name) into the plaintiff’s name; and
(c) that, on the sale of the Lynelle Street property, the proceeds be “placed in a joint bank account owned equally by the plaintiff and the first defendant”.
The plaintiff agreed to pay off the balance, as at 2 February 1995, of the first defendant’s ANZ Visa card.
The compromise agreement recited that the plaintiff had transferred separate amounts of $35,750, $400,000, $267,737 and $10,000 into account No. 8288597-1 with the Metway Bank in the first defendant’s name and further sums of $412,105 and $77,270 into an ANZ Bank account No. 8687-13857 in his own name.
In the course of the settlement negotiations, the first defendant stressed her requirement that the plaintiff honour his promise to marry her. The plaintiff explained that he had delayed finalising his divorce pending conclusion of his daughter’s schooling. However, at least in the presence of his legal advisers, he declined to promise to marry the first defendant, insisting they discuss their future once the matter was settled.
The plaintiff’s solicitors kept comprehensive diary notes of the negotiations. They contain no reference to any assertion by the plaintiff that the Lynelle street property was a gift to the first defendant. She asserts that she did not read or understand the contents of the compromise agreement. I do not accept this. The negotiations between the plaintiff and the first defendant were quite protracted and it would be out of character for the first defendant to bind herself legally without knowing precisely how her interests were affected.
The conduct of the parties after February 1995
After the settlement of their dispute in February 1995, the plaintiff and the first defendant resumed a happy relationship. They appeared to their friends and acquaintances to be a contented and loving couple. Not long after the settlement the first defendant took over the effective management of the plaintiff’s Australian financial affairs.
The first defendant sold her Werribee house in April 1995 for $77,000.
On 13 August 1995, Hunt & Hunt, solicitors, were retained by the plaintiff for the purpose of making an application for permanent Australian residence.
The plaintiff transferred or caused the following sums to be transferred into his ANZ Bank account No. 8687-13857 on the dates listed below:
20/01/1995 489,375.00
10/07/1995 961,076.41
01/08/1995 29,629.64
06/10/1995 126,804.52
30/08/1996 4,500,000.00
12/01/1998 1,134,020.00
15/05/1998 294,985.25
Total $ 7,535,890.82
The following properties were purchased in the name of the first defendant from moneys transferred by the plaintiff into his ANZ Bank account:
(a) house and land at 8 Inca Street, Sunnybank Hills on or about May 1995 for a purchase price of $195,000;
(b) house and land at 344 Gowan Road, Sunnybank Hills on or about May 1995 for a purchase price of $120,000;
(c) house and land at 16 Mesquite Street, Sunnybank Hills on or about January 1995 for a purchase price of $165,00; and
(d) land at 123 Green Road, Park Ridge on or about July 1995 for a purchase price of $227,000.
All the parcels of land were purchased in the first defendant’s name for a variety of reasons. The plaintiff understood that he was required under the Foreign Acquisitions and Takeovers Act 1975 (Cth) to give notice of any such proposed acquisition to the Treasurer. In 1990 he had acquired a parcel of land in Australia, failed to meet conditions imposed by the Treasurer in respect of the acquisition and had sold the land at a loss. He had been informed that his non-compliance may be taken into account by the Treasurer in respect of any future land acquisition and therefore decided not to risk rejection by the Treasurer or complications arising from his previous conduct. Another consideration, particularly in relation to the Green Park property, was that, by purchasing the property in the first defendant’s name, the plaintiff perceived that he would be affirming his declared intention to make the relationship between them permanent. It is probable also that, before the acquisitions took place, the plaintiff and the first defendant discussed matters such as Foreign Investment Review Board requirements and that the first defendant encouraged the plaintiff to purchase the properties in her name.
On 12 January 1996, the plaintiff’s application for permanent residence (“the application”) was lodged. The plaintiff was informed by immigration authorities and understood that a decision on the application would not be made until the expiration of two years from the date of the application. He also understood that as the application was based on his defacto relationship with the first defendant, it would fail if the relationship failed.
The respective involvement of the plaintiff and the first defendant in the preparation of the application was a matter of some controversy at the trial. The plaintiff contended that because of his limited grasp of the English language the first defendant had the carriage of the application and that, generally, he signed documents without knowing the detail or even the general thrust of their contents. The first defendant’s understanding of English was distinctly better than that of the plaintiff and she did assume the conduct of the application on his behalf. For the most part, it was the first defendant who gave detailed instructions to the solicitors, and provided the requisite information and materials. The plaintiff played a rather more passive role in the matter but I am satisfied that he was provided with appropriate explanations by his solicitors and that he ensured that he understood the information provided by him to the immigration authorities. I am equally satisfied that the first defendant understood and approved of the content of the application and supporting materials.
In the application the plaintiff stated that the Lynelle Street property was “in the name of Jilly solely”. He then stated –
“We have also bought a block of vacant land in 123 Green Road … We have employed an architect to design a house for us to build on the land. This land is also solely in the name of Jilly Liu. We plan to spend $1.2 million in building the house together … We are going to share the building costs together.”
In a declaration lodged in connection with the application in January 1998 he stated that he had “just recently brought Jilly a new Mercedes SLK model as a gift to her”. A photographic album accompanying the declaration and a declaration by the first defendant contained a photograph of the first defendant standing beside the car. The caption beside it states “Jilly with her Mercedes SLK car, a gift from Yutaka late last year”.
The first defendant asserts that she was told by the plaintiff that the Green Road property was to be purchased in her name and that the building contract was to be in her name only as, in the case of the former, “it was his big gift to me for the future to prove…that he loved me” and, in the case of the latter, “to prove… he loved me and was going to marry me.” She also asserts that the plaintiff told her that if he did not marry her he would have no claim on the house and land. In relation to the other properties she claims that she was told by the plaintiff that they too were to be put in her name as proof of his love and intention to marry.
In her January 1998 immigration declaration, the first defendant referred to “our new home”, to the building contract being in joint names and stated “we have built our new home”.
The plaintiff swore in an affidavit used in proceedings against the first defendant in Singapore that the Green Road property was registered in the first defendant’s name “because of the restrictions on foreign ownership of land.” He swore to like effect in an affidavit filed in these proceedings on 28 July 1998.
The plaintiff and the first defendant entered into a contract with a builder for the construction of the house on the Green Road land for a price of $1,187,841. The actual cost of construction was $1,648,030. Both parties interested themselves in the building project but it was the first defendant who had the most active role in discussions with builders’ representatives and landscapers and in the selection of furnishings and fittings.
The plaintiff and the first defendant moved into the new house in about April 1997 and the builder’s final progress claim was submitted on 23 December 1997.
From time to time, the first defendant pressed the plaintiff to honour his declared intention to marry. Before the finalisation of his divorce on 8 August 1996 he explained his failure to marry on the need to achieve that end. After the finalisation of the divorce, he explained his delay in marrying on his desire to sell all of his Japanese property so that when marrying, he could transfer all his assets here and make a fresh start. He also referred to his desire that his daughter reach 20 years of age before he re-married.
The plaintiff and Kexin Liu were not able to form a comfortable relationship. Before Kexin and the first defendant moved to Brisbane to live, they had lived together in Werribee. Kexin was happy living alone with her mother and had commenced forming friendships at school. Kexin, an intelligent, determined and independent person, resented the plaintiff’s intrusion into her life. For his part, the plaintiff regarded Kexin as disrespectful and ill-behaved. Also he probably perceived her presence as a threat to the stability of his relationship with the first defendant.
Kexin was sent to a succession of schools in Brisbane. From the last term in 1994 Kexin either boarded at school or attended school from a residence in which she flatted with others. She refused to accept school discipline and was expelled from her last two schools. The plaintiff had made it plain that he had a poor opinion of Kexin’s conduct and that he did not want her to reside in the household with him. The first defendant, not surprisingly, was extremely unhappy about the plaintiff’s inability to accept her daughter and the consequent separation. These factors played a significant and perhaps dominant role in the first defendant’s actions in 1998.
The Inca Street and Mesquite Street properties were sold at a loss in the second half of 1997. The Gowan Road property was also sold at a loss in early 1998. The first defendant attended to these transactions on the request of the plaintiff but, unknown to the plaintiff, had the balance proceeds of sale paid into one of her own bank accounts.
The events of 1998
On 25 February 1998, the first defendant rented a storage unit with a view to storing some of her daughter’s and her own personal possessions in due course.
She sought advice from Hunt & Hunt concerning her entitlement to the moneys in joint accounts and the property in her name. Having received advice to the effect that she was entitled to a half share of property in joint names, she went to the Sunnybank branch of the National Australia Bank on 27 February and arranged for $2,125,576, the proceeds of a term deposit in joint names, to be deposited into an account in her own name. Earlier that month she had withdrawn $10,921 from the joint account and had deposited it in an account in her name.
On 27 February, the first defendant also spoke to an officer in the Immigration Department about the plaintiff’s application for permanent residency. She made a number of unflattering observations about the plaintiff and questioned whether he was simply making use of her to obtain permanent resident status. In a telephone conversation the previous day, she had asked if the plaintiff’s application could be deferred for the time being. In the communications on 26 and 27 February the first defendant was probably ascertaining the current status of the plaintiff’s application as well as determining whether it could be terminated by action on her part, and seeking to arrest its progress for the time being.
She wrote to the officer in the Department on 1 March 1998 discussing aspects of her relationship with the plaintiff and in particular, the plaintiff’s inability to accept her daughter. She spoke of the distress this was causing and concluded –
“I do not know how I can decide on choosing whom. In the past, I have chosen Ikeuchi, thinking that the child would leave me to lead her own life when she grew up. However, now I feel really perplexed. I think about a lot of things. I really need time. I plead that I be given three months to consider.”
The first defendant deposited the following money into accounts in her name with the National Australia Bank on 29 March 1998:
· T/D 450127164 $2,134,243.00
· T/D 450199707 $ 199,861.00
· T/D 450240423 $ 583,195.00
All of the money came from money which was either in accounts in joint names or had been, initially, in an account in the plaintiff’s name.
The first defendant caused Ikeuchi and Liu Pty Limited to be incorporated with herself as sole director, member and secretary on 20 April 1998. The Jilly Liu Family Trust was constituted by a deed dated 23 April 1998 prepared by Deacon, Graham & James solicitors on the first defendant’s instructions and Ikeuchi and Liu Pty Limited was appointed trustee. The discretionary beneficiaries were shown in the deed as the first defendant, the plaintiff and Kexin Liu. The residuary beneficiaries were the first defendant and Kexin Liu.
On 23 April 1998, the first defendant opened an account with the National Australia Bank and from moneys deposited in that account paid the following sums into term deposits in the name of the trustee of the Jilly Liu Family Trust -
· T/D 45 258 7928 $ 200,000.00
· T/D 45 261 0799 $ 580,000.00
· T/D 45 259 8066 $2,106,000.00
The first defendant transferred $70,000 to Switzerland on 5 May 1998. On 21 May 1998 she obtained from the proceeds of money in joint accounts, cash and travellers’ cheques to the value of $97,529.
On 20 May 1998, the first defendant wrote again to the Immigration Department mentioning the plaintiff’s inability to accept her daughter. She asserted that the plaintiff had agreed that Kexin could stay with them on holidays but that such arrangement would commence in about two years time. She said that she had not made up her mind as to whether she could accept such a condition and asked for “another three months time to consider the issue”.
On 9 June 1999, the first defendant caused $1,000,000 to be invested in the name of Ikeuchi and Liu Pty Ltd in the National Mortgage Fund, an investment fund. The money came from a National Bank term deposit in joint names.
After being informed by the plaintiff that he would be going to Japan on the 16th of June and returning on the 24th, the first defendant flew to Singapore on 17 June without informing the plaintiff. She opened an account with the United Overseas Bank, giving an address of care of Patricia Quek. Patricia Quek was the proprietor of a women’s underwear shop at which the first defendant had been a frequent customer.
On 6 July 1998, the first defendant went to the Browns Plains police station in the early hours of the morning alleging that the plaintiff had struck her on the left breast and left shoulder region. She swears that she did not proceed with the complaint or seek a domestic violence order lest such actions prejudice his application.
On the following day at the Commonwealth Bank, King George Square, the first defendant declared that the key to safe deposit box 3335, which was in the joint names of the plaintiff and the first defendant, had been lost. She arranged for the key to be changed and obtained another safe deposit box, number 3198, in her own name. On 8 July 1998 she returned to the bank and had access to box 3198.
With a view to storing the Mercedes SLK car, she rented a larger storage unit on 10 July.
On 22 July 1998, the first defendant transferred approximately AUD $2,400,000 from the trustee’s account into an account which she had opened for that purpose in Singapore. On the same day she deposited the sum of $100,000 into an account which she opened for her daughter with the National Bank. The money probably came from the first defendant’s cash management account.
On 23 July 1998, she made an airline booking for travel to Singapore on 25 July, and on to Peking on 29 July. She returned to the Commonwealth bank that day and opened both safe deposit boxes. The next day she visited her general practitioner, Dr Okada. When he telephoned the plaintiff to pick her up from the surgery, Dr Okada told him that the first defendant needed rest.
Without any prior warning to the plaintiff, the first defendant flew to Singapore on the 25 July. The plaintiff played golf in the morning and on arriving home found the first defendant’s handwritten note which read –
“Dear Yutaka
I feel so tired. I need have a rest little well. Don’t looking for me. Take care about yourself. Look after Ken Wellar. Please don’t drink too much.
Jill with love
25 July”.
(Ken was the family dog).
On 27 July 1998, the first defendant wrote from Singapore to an officer in the Immigration Department stating, inter alia, “I have decided to continue living with Yutaka Ikeuchi”.
On Monday 27 July the plaintiff went to the Sunnybank branch of the National Australia Bank and inquired into the state of the joint accounts. He then ascertained that some $3,500,000 had been taken from the joint account two to three months earlier.
The plaintiff moved swiftly to protect his interests. This action was commenced by writ of summons issued on 28 July 1998. The plaintiff flew to Singapore and, on 4 August 1998, obtained an injunction from the High Court of the Republic of Singapore restraining the first defendant from dealing with Singapore assets up to the value of AUD$2,500,000. The injunction remains in force.
The parties’ attempts to settle this matter failed, and the plaintiff’s statement of claim was delivered on 8 March 1999. On 9 March 1999 the first defendant made a complaint against the plaintiff at the Browns Plains police station alleging rape and acts of carnal knowledge by anal intercourse. The charges laid against the plaintiff in consequence of these allegations consisted of an act of carnal knowledge by anal intercourse between 11 August 1994 and 1 January 1995, three other such acts between 1 March 1996 and 1 September 1996; between 1 January 1997 and 11 April 1997, and six counts of rape. The rapes charged were alleged to have been committed: between 1 March 1996 and 1 September 1996; between 1 March 1996 and 1 November 1996; between 1 January 1997 and 11 April 1997, and on or about 6 July 1998. The plaintiff denies the allegations.
The first defendant swears that she intended returning to reside with the plaintiff after having medical treatment in China. She says that her actions in relation to the moneys was with a view to maintaining control over them and that she was apprehensive that the plaintiff would abandon her after gaining permanent residency status.
It is possible that on 27 July 1998 the first defendant had not finally resolved to leave the plaintiff and that her primary concerns were to secure her financial interests and to improve her bargaining position generally. It is not necessary for me to determine that question. What is apparent though, is that, over a period of months, the first defendant planned and implemented financial transactions with a view to securing ownership and control of much of the money brought to Australia by the plaintiff. She asserts that the plaintiff was aware at all times of the state of the various bank accounts and investments, and that her financial dealings, including the transfer of moneys to Singapore, were conducted with the plaintiff’s approval. I do not accept that evidence. I think it more probable that, after relinquishing control of his money to the first defendant, the plaintiff relied on her and made no attempt to keep himself informed of the details of the transactions effected by the first defendant.
The first defendant
The first defendant was born in Shenyang, Liaoning Province, Peoples Republic of China on 7 January 1950. She states that her family’s ancestry is from “the First Mandarin (Pure Yellow) of the Ch’ing Dynasty” which ruled China from 1644 to 1911 and that her father was a son of the brother of “the First Mandarin”. She completed her secondary education in Shenyang and was sent by the government to a “peasant camp” in 1970 and 1971 during the cultural revolution. From 1972 to 1974 she was a government guide at a trade exhibition or fair. From 1974 to 1978 she was employed in the organisational policy and procedures unit at the Shenyang Airport which was under the control of the Chinese Republican Airforce. She swears that she had a rank equivalent to the Australian rank of Colonel.
The first defendant married in September 1975. She separated from her husband a few months after her daughter Kexin was born on 18 September 1979. She was divorced in January 1980.
She graduated from Liaoning University with a degree in Chinese History in 1984. In 1987 she spent a year in Japan with her daughter studying the Japanese language. She swears that in 1988 with 300,000 Japanese Yen, lent to her by a businessman who had been a friend of her father, she set up a language college in Tokyo. She swears that she sold it in 1991 for a sum which left her with approximately AUD$500,000 after repaying the loan to her father’s friend.
Her second husband was an Australian resident whom she married on 27 April 1990. She migrated to Australia with her daughter in February 1991 and separated from her new husband several months later. She then purchased a house at Werribee for $125,000. On 7 July 1993 the first defendant became an Australian citizen. She divorced her second husband and the decree of dissolution of marriage became absolute on 26 September 1993.
She swears that at the time she met the plaintiff in 1993, she was in receipt of income of about $20,000 a year from her investments in Japan. It does not appear that she then had any employment in Australia or any other significant source of income.
The first defendant’s account of her financial affairs was uncorroborated, apart from evidence establishing her ownership of the Werribee house, jewellery valued at about $80,000 and expensive personal apparel. I consider it probable that her assets, at the time she commenced co-habiting with the plaintiff, substantially consisted of items of personal apparel, the house and about $80,000 in cash.
The plaintiff is an astute, intelligent woman who tends to impress those with whom she deals, whether on a social or business basis. The evidence suggests that she is also a person with considerable force of personality and determination. After she and the plaintiff commenced living together, she quickly assumed the overall management of his financial affairs in Australia. After it became apparent in 1998 that her relationship with the plaintiff had irretrievably concluded, she developed an intense dislike for him. As a result of this, and no doubt influenced by considerations of self-interest, she was plainly incapable of giving objective and unbiased evidence. Her approach to giving evidence was combative and it was clear that she would not answer questions in a way she perceived to be harmful to her cause. I found her singularly lacking in credibility.
The plaintiff
The plaintiff was born in Japan on 17 August 1947. His father was the managing director of Ikeuchi Kasei Company Limited, a manufacturer of plastic containers. He received a high school education and completed a law degree at Konan University, Kobe in 1969. He then worked for his father’s company until he was 25 years of age. He swears that he then started his own company, Ikeuchi Company Limited, which was also engaged in the business of manufacturing plastic containers. He swears that it expanded its activities to include acting as agent for major plastics companies. That company changed its name to Okura Kako Co Limited. He formed the company Okura Kosan Co Limited in approximately 1977 to manage real property investments.
He married on 5 May 1973 in Japan and obtained a decree of the dissolution of marriage on 8 August 1996. There was one child of the marriage, a daughter born on 4 March 1975, who resides in Japan.
I found it difficult to ascertain the true extent of the plaintiff’s assets. Apart from the money brought by him to Australia and the property acquired with it, he swears to owning real estate in Japan worth about A$1,000,000. His lifestyle and the way in which his money was invested in Australia give rise to the suspicion that his Japanese assets are more extensive than he claims. Although the plaintiff was not as plainly partisan as the first defendant in the way he gave his evidence, I formed the view that his evidence was unreliable.
The third defendant
The third defendant was born in Shenyang on 18 September 1979. Originally named Wang Mandi, she changed her name to Liu Kexin. Apart from a period of separation of about two years whilst the first defendant established herself in Australia and a period of a few months after her birth she and the first defendant lived together alone before May 1994.
She strongly resented the plaintiff’s attempts to exert authority over her and his place in her mother's affections – she was also extremely resentful of the plaintiff’s insistence that she lived apart from her mother. Although of well above average intelligence, her emotional disturbance prevented her from achieving scholastic results in secondary school commensurate with her intellectual abilities.
In February 1998 she travelled to Paris and undertook a course of study in fashion design which she completed at the end of 1999. She then undertook further studies in fashion design in London where she presently resides. She has a passionate dislike of the plaintiff. Recently, she alleged that he subjected her to an indecent assault on 20 March 1997. She also has strong affection for and loyalty to her mother. I found her to be a partisan and unreliable witness who was anxious to avoid assisting the plaintiff and damaging her mother's interests.
The plaintiff’s matrimonial intentions
I am unable to accept the defendants’ argument that the plaintiff never had an intention to marry the first defendant. In support of their argument the defendants rely, essentially, on three matters. Firstly, they point to evidence that the plaintiff made derogatory remarks to the first defendant, the second defendant and a number of the first defendant’s acquaintances about the personal habits of Chinese people and about their lack of probity in business dealings.
I am satisfied that the plaintiff does and did hold the Chinese race in low regard. However it does not follow that he could not and did not develop a sufficient emotional attachment to a woman of Chinese birth to cause him to want to marry her. The overcoming of general prejudices by personal attachments is a common enough experience. The plaintiff, as it happened, married a woman of a Korean background on 14 February 2000. There is no evidence of whether he holds Koreans in any greater or lesser regard than the Chinese.
The next matter relied on was the fact that, despite urging by the first defendant the plaintiff delayed marriage even after obtaining a decree of dissolution of marriage. Although the evidence does not suggest that the plaintiff took steps to expedite his divorce from his first wife, I do not accept that he deliberately delayed the divorce.
I consider it probable that by the time the Lynelle street property was purchased, the plaintiff intended to marry the first defendant and that he maintained that intention throughout 1995 and 1996. The first defendant expected and wished to marry the plaintiff until about the end of 1997 or the beginning of 1998. Her attitude then became ambivalent.
The plaintiff’s delay in marrying after August 1996 is difficult to explain. I did not find plausible the reasons he gave for the delay. It may well be that in 1997 the plaintiff felt some concern about the relationship and decided not to hurry events. However, the first defendant was unable to point to any utterances by the plaintiff or to any acts or conduct which served to demonstrate to me a change in attitude on his part. On 25 November 1997 he purchased a Mercedes Benz car for $90,541 and gave it to her. On 6 June 1997 he made a will leaving the whole of his estate to the first defendant. In 1997 the first defendant continued to have the management and control of the plaintiff’s financial affairs in Australia. Those matters hardly suggest the abandonment of an intention to marry. I find that it was not until the events of mid-1998 that the plaintiff decided not to marry and to sever his relationship with the plaintiff.
It was contended also that real property and cars were purchased in the first defendant’s name and that moneys were paid into joint accounts merely to advance the plaintiff’s application. I find that explanation of his conduct improbable. The plaintiff appears to be of at least average intelligence. He is experienced and seemingly successful in business. It is unlikely that he would have thought it necessary or desirable to place a substantial proportion of his wealth in the name and under the control of the first defendant, unless he considered the relationship to be a permanent one.
Finally, the first defendant points to the alleged rapes and two other acts of violence. As I do not find the first defendant credible generally and as the allegations of sexual offences receive no support from and are inconsistent with other evidence, I reject them. Even if I had accepted the first defendant’s evidence in this regard I think it likely that such conduct on the part of the plaintiff would have shed more light on his character and disposition than on his matrimonial intentions.
There is some corroboration of the first defendant’s allegations that the plaintiff assaulted her on an occasion in 1996 and on the evening of 6 July 1998. I accept that the first defendant was probably assaulted by the plaintiff on those occasions in such a manner as to cause the first defendant distinct bruising and considerable distress. However I do not regard these incidents as assisting in the determination of the existence or otherwise of an intention to marry.
The counterclaim in respect of the jewellery
The first defendant swears that on her father’s 80th birthday he gave her “some priceless family heirlooms some of which dated back to when the Ch’ing Dynasty commenced to rule in China in 1644”. They included:
(a) 25 pure gold 50 gram gold ingots;
(b) eight pure gold 100 gram gold ingots;
(c) three 3 carat light blue diamonds;
(d) six 2-3 carat yellow diamonds;
(e) nine 2-3 carat pink diamonds;
(f) various necklaces, bracelets and rings; and
(g) a pearl phoenix tiara shaped headdress.
A number of Chinese citizens swore to having seen a large quantity of antique jewellery and precious objects in the first defendant’s possession in China in 1997. Some of them ventured into considerable detail about what they had seen. The likelihood of the first defendant’s displaying heirlooms worth millions of dollars to persons outside her immediate family in China in 1987 may be thought to be modest. However, these witnesses were not required for cross-examination. Nor was the first defendant’s brother, Liu Nain Xun, who swore to the distribution of the family heirlooms in 1973 to members of the family by his late father on his 80th birthday. He swore that he remembered his father giving to the first defendant
“A large number of diamonds (although I cannot recall how many), a gold and pearl crown, green jade bracelets, a long green jade necklace and a night pearl stone.”
The first defendant swears that when she left the Green Road premises on 25 July 1998 the heirlooms were located in the floor safe in the house. She swears that she last saw them in about April 1998 when she opened the safe and showed them to her daughter. She does not explain why she left property of such great monetary worth and sentimental and historical value in the plaintiff’s possession in circumstances in which it would have been apparent to her that she was highly likely to be engaged in an acrimonious dispute with the plaintiff over ownership of real property and money. Because of that appreciation she had taken steps to secure her financial position by transferring money into accounts controlled by her, removed valuable property (including a Mercedes car) from Green Road, and dealt with the safe deposit boxes.
On 7 July 1999 she attended the Green Road property in company with Mr Somerville, a former business partner, and two police officers. She swears that she did not have opportunity to inspect the floor safe on that day.
However, from the first defendant’s own account of events, it does not seem that she asked for the safe to be opened. She explains that she “… did not have the opportunity to find if my (heirlooms) were missing”. She did have time though to inspect the premises to ascertain the whereabouts of various paintings and other decorations, items of personal apparel, items of personal jewellery, compact discs and tapes, herbs, spices and Chinese medicines. According to her, she interrogated the plaintiff asking “where are all my things. My jewellery. My shoes?” The jewellery to which she referred was not the heirlooms. Mr Sommerville, who gave evidence on the first defendant’s behalf, does not suggest that anything was said or done in relation to the heirlooms in the course of the inspection.
The first defendant gave the following account in relation to the heirlooms. She had them valued in Shenyang in 1987 at between US$15 million and $20 million. When she took up residence in her unit at the Shenyang airport in 1980, which she shared with another, she kept the heirlooms “in a secure box” in the unit. In Japan she kept them with her in her bedroom. When she took up residence at Lynelle Street she brought the heirlooms with her and placed them in a safe deposit box at the Commonwealth Bank, King George Square branch. She took the plaintiff to the bank on 2 August 1995 and showed him the heirlooms. On about 10 April 1997, at the plaintiff’s request, she put the heirlooms in the floor safe at Green Road. Towards the end of May 1998 when her daughter was on a visit from Paris she opened the safe and showed her the heirlooms. During an inspection of 123 Green Road, Park Ridge in late 1999, she found the heirlooms missing from the safe.
The premises in Melbourne in which the first defendant resided were burgled in mid-1992. In connection with the burglary the first defendant made a declaration to investigating police officers which included the following -
“I then went home to … and found that a lot of my property had been stolen. From my bedroom I had eight boxes full of clothes and bags which were in sealed boxes. All the clothes in my wardrobe were taken, all my jewellery was under my bed in a bag. …”
Later in the statement, she dealt with the recovery of some of the stolen property and said –
“When we were going through my property when I opened one of my brown bags and found my jewellery boxes inside, when I opened each of my jewellery boxes I found that all my jewellery was missing, some of this jewellery is very expensive and I received from my father and some presents and some I bought myself. My jewellery is the only property that has not been found that was stolen from my house.”
She swore in the trial of the person accused of taking her property that $80,000 was a reasonable value for the jewellery taken. She was cross-examined about the jewellery and the plain implication of her evidence is that all of the jewellery of value then owned by her was taken.
A policy of insurance taken out in respect of the Green Road property in September 1997 lists two items of jewellery under the heading “portable property”. It makes no mention of the heirlooms.
The only evidence which provides corroboration for the plaintiff’s contention that she placed the heirlooms in the safe at Green Road is provided by her daughter’s oral evidence which I do not accept. Nor am I able to accept the first defendant’s evidence generally in relation to the depositing of heirlooms in the safe at Green Road, or in relation to the plaintiff’s having seen them or his alleged retention of them. Not one of the first defendant’s friends or acquaintances residing in Australia who gave evidence on her behalf said anything about being shown any of the heirlooms or observing her wearing them. Yet the first defendant has a distinct fondness for acquiring and wearing expensive apparel. She said nothing in her many affidavits about her use or lack of use of the heirlooms. The contents of the insurance policy and her evidence in relation to the Melbourne robbery also lend support to my conclusion that if the first defendant ever brought heirlooms of great value to Australia she no longer had them by the time she commenced living with the plaintiff.
I therefore conclude that there is no substance in the first defendant’s counterclaim in this respect.
The allegations of illegality
Section 26A of the Foreign Acquisitions and Takeovers Act 1975 (Cth) (“the Act”) provides that where a person to whom the section applies enters into an agreement under which the person acquires an interest in Australian urban land and does not, before entering into the agreement, furnish the Treasurer with a notice stating the person’s intention to enter into the agreement, the person is guilty of an offence. In the case of a natural person, the penalty is a fine not exceeding $50,000 or imprisonment for a period not exceeding two years, or both.
The purpose of notifying the Treasurer is to enable the Treasurer, pursuant to s 21A of the Act, to make an order prohibiting the proposed acquisition or requiring a person to whom the section applies who has acquired land, to dispose of any interest in it.
Section 38 of the Act provides –
“An act is not invalidated by the fact that it constitutes an offence against this Act.”
The defendants contend that the plaintiff is a person to whom s 26A applies by virtue of the operation of s 5A of the Act. If the plaintiff’s arguments are correct, the plaintiff acquired an interest in the land purchased in the first defendant’s name as a result of the land being held on resulting trusts. It is argued by the defendants that, if there is or was a resulting trust, s 26A applied on the basis that, in respect of each parcel of land, the plaintiff entered into “an agreement by virtue of which he … acquire(d) an interest in … land”. The plaintiff gave no s 26A notice in respect of any of the parcels of land acquired in the first defendant’s name.
Having regard to the matters I will now address, it is unnecessary for me to express any concluded view on the merits of these submissions.
Whether the acquisition or holding of an interest in the real property is illegal depends on whether the Act, on its true construction, intends it to be illegal.[1]
[1]Yango Pastoral Company Pty Ltd v First Chicargo Australia Ltd (1978) 139 CLR 410 at 413-414 per Gibbs ACJ.
It will be apparent from the foregoing that s 26A is not directed to prohibiting agreements by non residents to acquire Australian urban land or even the acquisition of such land. The section seeks to ensure the giving of notification to the Treasurer prior to the entering into of any such agreement to acquire so that the Treasurer may make a determination under s 21A. If the Act is to be construed as prohibiting the acquisition of land, the prohibition must thus be one which arises by implication. But, in my view, no such no implication is possible in the light of s 38.
The defendant’s counsel sought to draw support from Nelson v Nelson.[2] It was argued that the plaintiff had engaged in unlawful conduct in failing to give the requisite notifications prior to acquiring interests in land. In consequence, equity would not assist his attempt to recover the real property or its proceeds. It was submitted that the giving of equitable relief would undermine the policy of the Act by making it advantageous for non residents to conceal their acquisitions from the Treasurer. Mr Cooke Q.C., who appeared with Mr Varitimos for the defendants, pointed to passages in Nelson v Nelson which support the proposition that a resulting trust would not arise if the policy of an Act of Parliament would be thereby defeated.[3]
[2](1995) 184 CLR 538.
[3]See eg per Deane and Gummow JJ at 564.
In Nelson v Nelson though, all members of the Court considered that, in cases which do not involve a statutory prohibition of the act or matter under consideration, the question of whether or not illegality would result in the denial of equitable relief was not to be determined according to some inflexible rule or principle. Instead, the approach taken was that the availability of equitable relief must be determined by reference to whether the purpose of the Act was such that public policy required the Courts to deny equitable assistance.[4]
[4]Per Deane and Gummow JJ at 569-71.
Although there is some force in the submission that the efficacy of the Act is capable of being subverted by conduct such as that engaged in by the plaintiff, the Act, by the anti-avoidance provisions of s 38A, expressly acknowledges and addresses that matter. It is apparent that this section and the penalties provided for in s 26A, were thought by the legislature to constitute sufficient deterrence against avoidance of the Act’s provisions. Section 38, which expressly excludes invalidity as a consequence of breach, exists notwithstanding the acknowledgment of the prospect of avoidance implicit in s 38A. Consequently, I do not accept the submission that public policy requires the denial of equitable assistance to the plaintiff. Moreover, the evidence does not establish a belief on the part of the plaintiff that he was engaged in illegal conduct. He sought to avoid the application of the Act, not to breach its provisions.
Imposition of a trust or trusts
Where a person purchases property in the name of another or in joint names and the other person provides none of the purchase money, whether the latter person acquires a beneficial interest in the property is generally dependant on the intention of the purchaser. Unless the relationship between the two persons is such as to give rise to a presumption of advancement, it is presumed that the purchaser did not intend the other person to take beneficially. In the absence of evidence to rebut that presumption, a resulting trust arises in favour of the purchaser.[5]
[5]Calverley v Green (1984) 155 CLR 242 at 246.
A presumption of advancement arises where a person purchases a property in the name of his wife. There is also authority which supports the existence of such a presumption where the purchase is made in the name of an intended wife in contemplation of marriage.[6] The presumption does not arise, however, in the case of property purchased in the name of a person with whom the purchaser is living in a defacto relationship.[7] The presumption ceases to operate if, as is the case here, the marriage fails to eventuate.[8] There is sufficient evidence of the intention of the plaintiff in this case to enable the presumption of advancement to be rebutted, at least in relation to a half share. The plaintiff intended that he and the first defendant would share the enjoyment of the real property purchased in the first defendant’s name equally. That intention also existed in respect of the moneys placed by him in joint names.
[6]Wirth v Wirth (1956) 98 CLR 228; Moate v Moate (1948) 2 All ER 486 and Kais v Turvey (1994) 11 WAR 357 at 360.
[7]Calverley v Green, supra, per Mason and Brennan JJ at 260.
[8]Bertei v Feher [2000] WASCA 165 para 14
Where a gift is made in contemplation of marriage by a person to his or her intended, the gift, as a general proposition, is regarded as conditional and the property is returnable if the engagement is terminated, at least where the termination is initiated by the donee, or by mutual consent.[9] In Jenkins v Wynen[10] McPherson SPJ expressed some doubt about the continuing authority of Cohen v Sellar in the light of the abolition, by s 111A of the Marriage Act 1961 (Cth), of the cause of action for breach of promise of marriage. The learned authors of 20 Halsbury’s Laws of England 4th ed,[11] state that the abolition of that cause of action has the result that a person, who makes a gift in contemplation of marriage on an express or implied condition that the gift is to be returned if the agreement is terminated, is not prevented from recovering the property by reason only of that person’s having terminated the agreement.
[9]Cohen v Sellar [1925] 1 KB 53 and Davies v Messner (1975) 12 SASR 333.
[10][1992] 1 Qd R 40.
[11]At par 50.
It is unnecessary for me to further consider the contractual position in light of the matters I will now address.
One of the plaintiff’s arguments is that the subject property should be fixed with a constructive trust in reliance on Kais v Turvey.[12] As was pointed out in the joint judgment of Mason CJ, Wilson and Deane JJ in Baumgartner v Baumgartner,[13] the constructive trust is a remedy which equity imposes “to preclude the retention or assertion of beneficial ownership of property to the extent that such retention or assertion would be contrary to equitable principle”. A constructive trust will be imposed in appropriate circumstances regardless of actual or presumed agreement or the intention of the parties.[14]
[12](1994) 11 WAR 357 at 361.
[13](1987) 164 CLR 137 at 148.
[14]Muchinski v Dodds (1985) 160 CLR 583 at 614.
Baumgartner was a case involving the pooling of financial resources by parties living in a de facto relationship. It was explained in the joint judgment[15] that-
“Their contributions, financial and otherwise, to the acquisition of the land, the building of the house, the purchase of furniture and the making of their home, were on the basis of, and for the purposes of, that joint relationship. In this situation the appellant’s assertion, after the relationship had failed, that the Leumeah property, which was financed in part through the pooled funds, is his sole property, is his property beneficially to the exclusion of any interest at all on the part of the respondent amounts, to unconscionable conduct which attracts the intervention of equity and the imposition of a constructive trust at the suit of the respondent.”
[15]At 149.
The joint judgment draws attention[16] to Deane J’s observations in Muchinski v Dodds[17] to the effect that a constructive trust will not be imposed “in accordance with idiosyncratic notions of what is just and fair” whilst acknowledging the relevance of notions of justice and fairness to “the traditional concept of unconscionable conduct”.
[16]At 148
[17](1985) 160 CLR 583 at 614
In Muchinski[18] Deane J elaborated on circumstances in which a court applying equitable principles would identify unconscionable conduct and give relief from it. After referring to the circumstances identified by Lord Cairns LC in Atwood v Maude[19] in which equity would prevent the assertion or exercise of legal rights where such assertion or exercise would constitute unconscionable conduct, Deane J said –
“Those circumstances can be more precisely defined by saying that the principle operates in a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specially provided that that other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do: cf. Atwood v. Maude, [20] and per Jessel M.R. Lyon v Tweddell[21]”.
[18]At 620
[19](1869) LR 3; Ch App at p 375
[20](1868) LR 3 Ch App at pp. 374-375
[21](1881) 17 Ch D. 529 at p531
The principle so expressed has been applied in a considerable number of cases including Kais v Turvey[22], Bertei v Feher[23] and Fradd v Blythman,[24] all of which are cases where payments were made in contemplation of a marriage which failed to proceed.
In this case, as I have found, the real property was placed in the name of the first defendant in contemplation of marriage. That was also the case in relation to the money deposited in joint accounts.
Because the plaintiff and the first defendant had marriage in contemplation they had the expectation of a permanent relationship. It was the existence of that expectation which provided the background against which the plaintiff, albeit with some other motivations, placed so many of his assets in the name and/or under the control of the first defendant. Both the plaintiff and first defendant had an expectation that the assets would be shared to their mutual benefit throughout the duration of their relationship. With that expectation, the plaintiff proceeded to divest himself of a large part of a considerable fortune established through inheritance and his industry over much of his lifetime.
In these circumstances, the conduct of the first defendant in insisting on sole beneficial interest in the real property, its proceeds and in one half of the moneys in joint accounts and in the monies transferred from joint accounts, is unconscionable and warrants the imposition of a constructive trust.
The defendants sought to avoid that result by arguing that, as the proposed marriage failed through the fault of the plaintiff, no trust should be imposed. In support of their contention they refer to judicial pronouncements, in the context of determining whether or not the conditions for the imposition of a resulting trust are satisfied, which refer to lack of fault on the part of the donor.[25]
[25]For example Kais v Turvey (1994) 11 WAR 357 at 364.
In the judgment of Ipp J in Kais v Turvey there is reference to a finding that the relationship was terminated through no fault of the “donor”. In the circumstances of that case, it is not surprising that a judgment addressing the question of unconscionability would refer to the absence of fault on the part of the plaintiff donor. However, it does not follow that if a relationship is terminated by a plaintiff donor, he or she is thereby disentitled from recovering property provided to the defendant during the relationship. It is difficult to justify a general principle or rule that no constructive trust will be imposed where the relationship is terminated by or through the fault of the plaintiff donor in a legal system which entitles a party to a marriage to a decree of dissolution without proof of fault. De facto relationships fail for a variety of reasons which do not necessarily entail “fault” on the part of either party. Often assessments about whether fault exists and, if so, where it lies will be inescapably subjective and different impartial observers will be capable of reaching different conclusions on a consideration of the same facts. Furthermore, the unconscionable conduct on which the plaintiff relies, namely the assertion by the first defendant of property rights, is not dependent for its existence on questions of fault in relation to the termination of the parties’ relationship.[26] I do not suggest however that a party’s role in the break-up of the relationship can never be a relevant consideration.
[26]c.f. The Public Trustee v Kukula (1990) 14 Fam L.R. 97 at 100-101
In Schmutz v Aras,[27] Bryson J said that -
“… a constructive trust of this kind is imposed…when a venture comes to an end ‘without attributable blame,’ but no great severity is in my opinion appropriate in applying the concept of attributable blame. In particular when family relationships break down and the continued association of closely related persons becomes intolerable and impracticable, it is in my opinion not appropriate for courts to seek to attribute blame, as such breakdowns are a human phenomenon which sometimes occurs, cannot really be avoided, was objectively foreseeable but was not actually contemplated by the parties when they entered the venture, and does not alter the claims in conscience to redress the situation by imposing a constructive trust where reliance on what would otherwise be the party’s legal or equitable rights is unconscionable.”
[27]Unreported, Supreme Court, NSW, Bryson J, 8 August 1995, 94003129 3129/94
If questions of fault are relevant for present purposes, I find that the plaintiff concluded, not unreasonably, that the first defendant had deserted him when he read her note on 27 July and found she had absconded and had taken large sums of money from bank accounts and many of her possessions from the Green Road house. The parties were unable to effect a reconciliation and their relationship then failed. I have discussed elsewhere the motivations for the first defendant’s conduct.
The orders sought by the plaintiff against the first defendant.
The plaintiff submitted that on the authority of the Commonwealth of Australia vVerwayen[28]; Warman International Limited v Dwyer[29]; Maguire v Macaronis[30] and Giumelli v Guimelli[31], the remedy given to the plaintiff should be shaped to effect “the minimum equity to do justice”. It was acknowledged that the first defendant was entitled to a credit for half of $382,013, the net proceeds of sale of Lynelle street which were received on 15 August 1997. The plaintiff was also prepared to allow interest on that sum for three and a third years at 10% per annum. It was further accepted that such part of the moneys spent or paid over by the first defendant prior to the end of her relationship with the plaintiff as the Court considered appropriate, could be applied in satisfying “the minimum equity.” However the plaintiff claimed an entitlement to equitable compensation for the interest earned on the moneys in the account in Singapore, legal costs of $271,263.24 and a living allowance totalling $34,200. Pending the trial of the action orders had been made, without prejudice to the ultimate entitlements of the parties, releasing moneys to the parties for the purposes of funding the action. The plaintiff’s share of those moneys amounted to $285,425. $600 a week had also been released on a similar basis for living expenses. The latter payments came to a total of $34,200.
[28](1990) 170 CLR 394, 429
[29](1995) 182 CLR 544, 561
[30](1997) 188 CLR 449, 476-7
[31](1998) 196 CLR 101, 113
The plaintiff pointed to particular expenses by the first defendant in 1998 as being money which could be applied in satisfying “the minimum equity”. Included in that category was money paid by the first defendant to or for the benefit of her daughter, and money paid to or for the benefit of her cousin, Zongxin Shao.
These moneys are as follows:
Payments for the sole benefit of the first defendant
· 2 April 1998 - deposit Shop 4 $5,000.00
· 14 April 1998 - purchase of property $23,400.00
· 21 May 1998 - cash/travellers’ cheques $97,529.00
· 4 June 1998 - cash/travellers’ cheques $50,000.00
· 7 July 1998 - cash withdrawal $5,000.00
· 22 July 1998 - Visa account $9,331.03
· 22 July 1998 - traveller’s cheques $8,149.42
· 22 July 1998 - cash withdrawal $15,000.00
$213,409.45
Payments for the benefit of the third defendant
· 24 January 1996 - $5,000.00
· 4 September 1996 - $3,000.00
· 10 September 1996 - $10,000.00
· 29 October 1996 - $25,000.00
· 6 August 1997 - $10,000.00
· 17 April 1998 - $5,025.00
$58,025.00
Payments to the first defendant’s cousin
· 5 May 1998 - $70,000.00
· 4 June 1998 - $5,349.87
$75,349.87
In Baumgartner [32] it was observed that “equity favours equality” and that where the parties have lived together for many years and pooled their resources “there is much to be said for the view that they should share the beneficial ownership (of the joint home and assets) equally as tenants in common, subject to adjustment to avoid any injustice which would result if account were not taken of the disparity between the worth of their individual contributions either financially or in kind.”
[32]Mason CJ, Wilson and Deane JJ at 149.
When taking into account respective contributions to shared assets non financial as well as financial contributions are to be taken into account[33] and in making required adjustments –
“The court, should, where possible, strive to give effect to the notion of practical equality, rather than pursue complicated factual enquiries which result in relatively insignificant differences in contributions and consequential beneficial interest.”[34]
[33]Muchinski v Dodds at 622 per Deane J, Baumgartner at 150 per Mason CJ, Wilson and Deane JJ and Dunne v Turner at para 3 per Pincus JA.
[34]Baumgartner at 150 per Mason CJ, Wilson and Deane JJ.
The first defendant contributed to the joint assets in a non financial way by generally acting as housewife and financial manager. She had by far the greater role in liaising with the builder in the course of construction of the Green Road property and also in landscaping and the selection of furnishings. As I have noted earlier the plaintiff largely turned over to her his financial affairs in Australia. She had the effective carriage of his immigration application and managed the home. She further assisted the plaintiff in making friends and potential business contacts by busying herself in community affairs, particularly those of the Logan Regional Economic Development Board, the Logan International Friendship Association and matters relating to the Chinese community. In my view, by her conduct and activities, the first defendant enhanced, in the plaintiff’s estimation, his social status. Social status was a matter of concern to him.
During the period of cohabitation the first defendant did nothing to increase the value of the joint assets except perhaps through her involvement in the construction of the house which may have saved some architectural and interior design costs and by saving some accounting expenses through her financial management. There is no suggestion that she made any advantageous investments on behalf of the parties or that she managed the parties’ financial interest with any particular skill. Although she handled the sales of real property it does not seem that she was instrumental in locating any of the properties purchased, with the exception of Lynelle street. It must be said also that some of her energies in relation to financial management were directed against the interests of the plaintiff.
Cohabiting with the plaintiff conferred some advantages on the first defendant. The plaintiff’s wealth provided a degree of social status, which was important to her, and assisted her in pursuing contacts in China and in the Chinese community in Australia. She was able to travel freely, to satisfy her taste for expensive clothes and to have her daughter educated in private schools in Australia and then in Paris and London. Access to money provided by the plaintiff also enabled her to finance a business activity of her cousin, Zongxin Shao.
The plaintiff claims to have been unaware that the first defendant was spending money provided by him on the welfare and education of her daughter. I conclude that the probabilities are that the plaintiff, in order to secure his interests in having the third defendant live away from him, gave at least implicit approval of the plaintiff’s providing her living and education expenses from the money provided by him.
The accountant retained by the plaintiff to prepare a report on his affairs and to investigate those of the first defendant was unable to find any evidence that money provided by the first defendant had been used in the acquisition of the subject real property and motor vehicles. The first defendant produced no documentary evidence to support her contention that the proceeds of sale of her Werribee house were employed for the joint benefit of herself and the plaintiff. I accept though, that the first defendant contributed some money, probably totalling no more than $50,000, to the joint benefit of the parties. Some of that money was probably spent on acquisitions in respect of the Green Road property.
The period of the parties’ co-habitation was too brief to favour an equal distribution of assets or anything approaching it, particularly in the light of the parties’ respective financial contributions.
In the light of the above considerations, I consider it appropriate that I should adopt, substantially, the general thrust of the plaintiff’s submissions and determine that the first defendant’s entitlement to the subject moneys is limited to $254,600, being the value of her interest in the Lynelle Street property and real property, including interest for about 31/3 years at a rate of 10 percent plus $80,000.00 and the Mercedes SLK car. In reaching this conclusion, I accept that some (but not a substantial part) of the moneys listed under the first heading in paragraph [125] are likely to have been used for normal living expenses.
The Mercedes car is in a different category to the real property and moneys invested. It was an outright gift, and I find that the first defendant has title to it. The plaintiff had no intention that there be any common enjoyment of it and was at some pains to make it plain that it was to be the first defendant’s own property. It is not unconscionable for the first defendant to seek to maintain her title to it. Nor is it unconscionable for the first defendant to seek appropriate pecuniary recognition for her direct and indirect contributions to the contested assets. The first defendant claimed title to the Volvo car. Title to it was resolved by the 1995 compromise and it seems to me that it stands to be dealt with in the same way as the bulk of the shared property.
Claims against the Second and Third Defendants
The plaintiff’s argument proceeded on the assumption that if a constructive trust were to be imposed in favour of the plaintiff in respect of the disputed money and property, the second and third defendants would be liable to account to the plaintiff for the money paid by the first defendant to them. The assumed basis for liability was that the second and third defendants had knowingly received trust property.
The above analysis is not without difficulty. There is authority for the proposition that a constructive trust may take effect from the moment at which the conduct which has given rise to its imposition occurs.[35]
[35]Zobory v Federal Commissioner of Taxation (1995) 95 ATC 4215; Muchinski v Dodds (supra) per Deane J and Re Jonton Pty Ltd [1992] 2 Qd R 105.
In the circumstances under consideration, a constructive trust is imposed, not merely because of the way in which shared assets were derived and held but because of the first defendant’s unconscionable conduct in claiming an excessive interest in the property supplied by the plaintiff. There is thus a difficulty in concluding that a trust existed before the date of its imposition by court order or, at the earliest, the time of the unconscionable conduct giving rise to the making of the order.
In Muchinski v Dodds,[36] Deane J acknowledged the possibility that a constructive trust of the type now under consideration although essentially a remedy, in personam, could be imposed retrospectively and that in such a case “its availability as such a remedy provides the basis for and governs the content of, its existence inter partes independently of any formal order declaring or enforcing it”.
[36](1985) 160 CLR 583.
Pincus J in Re Osborn,[37] by implication, accepted that an order declaring the existence of a constructive trust could be given retrospective effect. In Zobory v Commissioner of Taxation,[38] Burchett J quoted with approval the following passage from the Deane J’s judgment in Muchinski v Dodds:[39]
"Equity acts consistently and in accordance with principle. The old maxim that equity regards as done that which ought to be done is as applicable to enforce equitable obligations as it is to create them and, notwithstanding that the constructive trust is remedial in both origin and nature, there does not need to have been a curial declaration or order before equity will recognize the prior existence of a constructive trust: cf. Scott, Law of Trusts 3rd ed. (1967), vol. V, par. 462.4. Where an equity court would retrospectively impose a constructive trust by way of equitable remedy, its availability as such a remedy provides the basis for, and governs the content of, its existence inter partes independently of any formal order declaring or enforcing it."
[37](1989) 91 ALR 135.
[38](1995) 64 FCR 86.
[39]At 91
His Honour then continued –
"Where the title to property is acquired by one person under such circumstances that he is under a duty to surrender it, a constructive trust immediately arises ... The beneficial interest in the property is from the beginning in the person who has been wronged. The constructive trust arises from the situation in which he is entitled to the remedy of restitution, and it arises as soon as that situation is created."
Identifying the point at which a constructive trust arises or ought be imposed may present difficulties, particularly if the rights of third parties intrude.
Although these considerations give rise to some difficulties in applying the principles which find general expression in Barnes v Addy[40] to the conduct of the second defendant in receiving and retaining the money paid to it by the first defendant, I have concluded that it is accountable to the plaintiff.
[40](1984) LR 9 Ch App 244.
The first defendant was the guiding mind and controller of the second defendant. It was fixed with her knowledge at relevant times. It was thus aware, at best for it, that the first defendant was dealing with property in which the plaintiff had an interest with a view to wrongfully depriving the plaintiff of his interest. In those circumstances, the second defendant, having knowingly participated in conduct of the first defendant which was fraudulent and in breach of a fiduciary duty on the part of the first defendant, is liable to account to the plaintiff for the property of the plaintiff so acquired.[41]
[41]Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 at 378 and 396-7.
Until the making of an order declaring the existence of a constructive trust or, possibly until the occurrence of the conduct giving rise to the imposition of the trust, the first defendant had the ability to effectively transfer her interest in the subject property to the second defendant. Until that time, the plaintiff may have had an equity in such property but no equitable interest. It is unnecessary for me to decide that point and in the absence of argument from the parties, it is undesirable that I do so.
However, the transfer of the subject property to the second defendant was effected, to the knowledge of the second defendant, in the implementation of the first defendant’s unconscionable denial of the plaintiff’s interests in that property. Also, the second defendant gave no consideration for the transfer. In those circumstances, for the reasons advanced above, it is appropriate to declare that the subject moneys were subject to a constructive trust at the time of their receipt by the second defendant. It may also be the case that a constructive trust was imposed by operation of law at that time without the necessity for any court order.
As for the third defendant, the plaintiff seeks declarations that the sum of $100,000 in term deposit 4402456642613 and the sum of $11,427.97 in National flexi account 662528306 are held in trust for the plaintiff. Those accounts are in the name of the third defendant. The latter account has been operating since June 1996. One of its purposes appears to have been to meet the third defendant’s living expenses. There was a payment into the account on 18 February 1998 of $18,100 and about another $3,000 in total was paid in in the course of 1998. I see no reason why money in that account should be regarded as subject to a trust or why a constructive trust should be imposed. If the payments in the account were not made with the plaintiff’s implicit approval, as I have found, it has not been shown that the third defendant knew, or even ought reasonably to have known, that the payments in the account were not ones which the first defendant was lawfully entitled to make.
The $100,000 was deposited in the term deposit on 22 July 1998 by the first defendant as part of a number of transactions referred to earlier. The first defendant swears that the deposit was made with the plaintiff’s express approval. I do not accept that, but I doubt that the third defendant was made privy by her mother to the details of her financial dealings. My assessment of the first defendant is that she would have regarded herself as having the right to make the payments she in fact made to her daughter and would not have discussed the source of the funds with her. I do not regard the first defendant as fixed with any relevant knowledge in respect of these moneys at or immediately after the making of the deposit.
Before the money was dealt with in any way and perhaps even before the third defendant knew of its existence, the plaintiff obtained an injunction preventing the first and third defendants from using the money. In my view, the plaintiff can sustain an entitlement to the money in two ways. Firstly, on the basis that it is unconscionable for the third defendant to claim title to the money against the plaintiff. In claiming the right to the money, the third defendant is seeking to benefit from her mother’s wrongful conduct. The other basis for upholding the plaintiff’s claim is that, in my view, a constructive trust applied or ought be imposed with respect to the subject moneys at the time of their disposition. By making the deposit, the first defendant was unconscionably asserting title to the money contrary to that of the plaintiff.
Concluding Observations
I accept the plaintiff’s submissions that the first defendant must account to the plaintiff for the interest on the Singapore moneys. In respect of giving credit to the defendants for the moneys found to be theirs but claimed by the plaintiff and as part of the broad overall assessment required, my tentative conclusion is that the first defendant should be required to account to the plaintiff for three quarters of the advances on account of legal fees and living expenses. However, I will entertain submissions on that question.
I will hear submissions on the orders to be made to give effect to these reasons and on costs.
- AGLC
- Ikeuchi v Liu [2001] QSC 54
- Case
- [2001] QSC 54
- Decision Date
CaseChat Overview and Summary
The court examined whether the presumption of advancement, which traditionally applies to spouses, extends to parties in a de facto relationship. The court noted the distinction between the relationship statuses and the implications for the presumption of advancement. The court also considered the relevance of fault in the termination of the de facto relationship, finding that it may not be determinative of the imposition of a constructive trust. The court concluded that a constructive trust could be imposed retrospectively, determining that such a trust arises at the time of the relevant transactions. The court found that the illegality under the Foreign Acquisitions and Takeovers Act 1975 (Cth) did not bar the claim to the beneficial interest in the urban property, as the Act does not invalidate acts or interests but rather regulates them.
The Federal Court of Australia found in favour of the plaintiff, determining that certain transactions constituted gifts made in contemplation of marriage and were returnable upon the failure of that condition. The court imposed a constructive trust over the property in question, effective from the time of the transactions. The court held that the presumption of advancement does not extend to de facto relationships and that fault in the termination of such relationships is not determinative of a constructive trust imposition. Finally, the court ruled that the illegality under the Foreign Acquisitions and Takeovers Act 1975 (Cth) did not bar the claim to the beneficial interest in the urban property.
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