Kahlon v Kahlon

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
KAHLON & ANOR v KAHLON & ANOR
[2025] SASC 37
Judgment of the Honourable Associate Justice Bochner
SUCCESSION - ADMINISTRATION OF ESTATE - OTHER MATTERS
EQUITY - TRUSTS AND TRUSTEES - EXPRESS TRUSTS CREATED BY WILL
EQUITY - GENERAL PRINCIPLES - FIDUCIARY OBLIGATIONS - FIDUCIARY DUTY - ACCOUNT FOR BENEFITS GAINED
The applicants are the children of the deceased. The respondents are the brother of the deceased in his capacity as executor and beneficiary. The question that arises is who is the rightful owner of the proceeds of a life insurance policy. The proceeds were paid to the respondent in his personal capacity. The applicants contend that the proceeds belong to the estate.
Held: The application is dismissed.
Insurance Contracts Act 1984 (Cth), referred to.
McIntosh v McIntosh [2014] QSC 99; Brine v Carter [2015] SASC 205; Muschinski v Dodds (1985) 160 CLR 583; Misek v McBride [2017] NSWSC 406; Hospital Products Ltd v United States Surgical Corporation and Ors (1984) 156 CLR 41; John Alexander’s Clubs Pty Ltd and Anor v White City Tennis Club Ltd [2010] HCA 19; Burke v Public Trustee for the State of South Australia [2022] SASCA 64; Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226; Perry v Perry [2021] NSWSC 1669, considered.

KAHLON & ANOR v KAHLON & ANOR
[2025] SASC 37
CIVIL

The applicants are the children of the late Joginder Singh Kahlon (“the deceased”), who died on 24 September 2015. The first applicant is under the age of 18, and so this litigation has been conducted on her behalf by her mother, Ms Kaur, as her litigation guardian; the second applicant is an adult. The first respondent is the deceased’s brother, Mohinder Singh Kahlon (“Mr Kahlon”) in his capacity as executor of the deceased’s estate. The second respondent is Mr Kahlon in his personal capacity.
The question that arises in this litigation is who is the rightful owner of the proceeds of a life insurance policy, which were paid to Mr Kahlon in his personal capacity on 7 June 2019. The applicants contend that the proceeds belong to the estate.
The trial
The trial of this action was held over a number of days commencing in June 2024. The only witness to give oral evidence was Mr Kahlon himself. Mr Kahlon was unrepresented throughout the trial.
Mr Kahlon was assisted by a Punjabi interpreter. Unfortunately, the interpreter appeared to lack experience in translating in the court setting. She frequently spoke over the top of Mr Kahlon in Punjabi, said numerous times that she was “explaining” things to him, and often repeated, in English, things that he had in fact said in English. On a number of occasions, Mr Kahlon purported to correct her translation of some of the words or phrases that he said in Punjabi. These difficulties culminated on the second day of the trial, when the interpreter said:
“He said ‘Is it translated properly? Don’t just make it up.”[1]
[1] T159.3-5.
I understood this to mean that Mr Kahlon had asked the interpreter if she had translated the preceding words correctly and asked her not to make it up. At that time, I suspended any further hearing of the trial and arranged to have an independent audit carried out of the audio file of Mr Kahlon’s evidence against the transcript. This process took some time. At the end of it, the parties (who were provided with a copy of the report of the independent interpreter) advised that they did not take issue with any of the translation that had been provided throughout the trial. The matter resumed after this process was complete, with a different interpreter.
While Mr Kahlon speaks some English, there is no doubt that, for the purpose of trial, he required the assistance of an interpreter. I formed the view that Mr Kahlon endeavoured to answer truthfully all of the questions put to him, whether he provided those answers in English or Punjabi. At various times throughout his evidence, it became clear that there was a degree of misunderstanding between Mr Kahlon and Mr Crocker, who appeared on behalf of the applicants, about questions asked or answers given. I am satisfied that the misunderstandings were corrected through further questioning and clarification of answers.
Two written statements prepared by Mr Kahlon were admitted into evidence.[2] The first statement, R38, sets out a brief history of the deceased’s time in Australia from his arrival in 2002, including details about his farming activities, his marriage to Ms Kaur, the birth of his children, and the breakdown of his marriage. It is clear from this document that Mr Kahlon thinks poorly of Ms Kaur. In this statement, he refers to himself as his brother’s beneficiary.
[2] R38 and R39.
The second statement, R39, addresses the question of the deceased’s life insurance. Mr Kahlon says, in effect, that he attended the appointment with his brother to arrange the life insurance, to help interpret. Before this meeting, he and his brother had not discussed the prospect of his brother’s dying. The decision to insure his life for $400,000 was based on the monthly premium that would be required. In R39, Mr Kahlon further ventilates his dislike and distrust of Ms Kaur.
During his evidence, Mr Kahlon explained how these statements came to be prepared. He said:
A.So I always write in English, take the photo, and send them to my daughter, and then she type it up and print it off and send it back. She has made these words.
A.    * I don't know what mean is -[3]
[3]    * denotes evidence not through interpreter.
A.I've got no idea what does these words mean 'subsequent arrangement', because my daughter added up these words, and I've got no idea what does she mean from that. I never mentioned these words in my writing, but normally I would write in English and send that to my daughter, and she would write that up -
A.    * She make more clear.
A.And she make it - she made, like, change - settled the sentence structure and everything, and she make it more clear, and then she would send it back to me. But I've got no idea what these two words mean, 'subsequent'.
INTERPRETER:    Sorry, I explain that in Punjabi.
A.    So we never thought about anything would happen to him.
XXN
Q.After your daughter typed up what you've written and she sends it back to you, do you read it.
A.I would read, but sometimes some of the words I would not understand, and I just assume whatever she has written would be okay.[4]
[4]    T117.2-24.
It became clear that there was a number of words and phrases in both R38 and R39 that did not reflect Mr Kahlon’s evidence, either because he misunderstood a word, or because his daughter had changed some of his wording. An example of this is his description of himself as a beneficiary in the deceased’s will. It became clear that he did not have a clear understanding of the difference between an executor and a beneficiary,[5] and that other statements were not his own.[6]
[5] T133.34-135.17.
[6] T116.6-20.
Despite these difficulties with R38 and R39, I consider that they were largely consistent with Mr Kahlon’s oral evidence. I find that any inconsistencies were caused by difficulties that Mr Kahlon has with the English language and do not reflect a lack of honesty. I accept his explanation of the assistance that he received from his daughter in drafting his statements, and that she changed some of the wording so that it did not reflect his own words and understanding.
I am of the view that a number of discrepancies in Mr Kahlon’s evidence are explained by the fact that English is not his first language. An example of this is during the exchange between Mr Crocker and Mr Kahlon about whether the deceased had expressed an intention to subdivide his land, which Mr Kahlon denied in his defence. Mr Kahlon’s oral evidence was that he and his brother may have talked about subdividing, but there was no actual intention formed to subdivide. It seems that an inquiry was made to the council about the prospect of subdivision, but Mr Kahlon could not recall whether the council’s response came before or after the deceased’s death. It became clear that, in Mr Kahlon’s mind, there was a clear difference between a discussion about subdivision and the forming of an intention to subdivide. While the former may have occurred, the latter had not. Hence, his denial that his brother had expressed an intention to subdivide.[7]
[7] T141.11-145.36.
Mr Kahlon was asked about correspondence from his lawyer, which referred to the aim of the deceased to subdivide the land in order to pay off the debt secured over the farm. Mr Crocker suggested to him this letter, together with a reference in the deceased’s will about subdividing the land so as to leave the house block to his daughter and the farm land to his son, indicated that he was lying when he denied that his brother intended to subdivide. Mr Kahlon’s evidence remained consistent; that he and his brother may have had a discussion about subdividing, but otherwise, he could not remember. I consider that this exchange is further evidence of the language difficulty that Mr Kahlon experienced. His evidence was consistently that his brother may have talked about subdividing, and he gave instructions for his will which referred to subdividing the land. The instructions for the will indicate that the intention to subdivide was to create separate portions of the land for the deceased’s son and daughter; there is no reference in these instructions that the purpose of subdivision was to pay off debt. I accept Mr Kahlon’s evidence that, while he and his brother had discussed subdivision, and he was aware of the will instructions which referred to a subdivision of the land, he was not aware of any present intention held by his brother to subdivide. I note that Mr Bell was not called to give evidence about these instructions, nor was his file produced. As a result, it is not possible to determine whether the letter written by Mr Bell accurately reflected the instructions given by Mr Kahlon, or whether Mr Bell was influenced by the instructions that he obtained from the deceased in relation to his will.
The relationship between the deceased and Mr Kahlon
The deceased and Mr Kahlon were born in India. Mr Kahlon moved to Australia and gained permanent residency here in 1976. He established himself as a fruit grower and wine maker in the Riverland. For a period of time, the deceased moved between Australia, New Zealand and India; ultimately, he settled permanently in South Australia in 2002. At this time, he moved to the Riverland and commenced working and living with Mr Kahlon.
At the time of his settling in South Australia, the deceased had about $130,000, but no other assets. In 2003, Mr Kahlon helped the deceased to buy a property at Paringa, where he commenced his own farming operation. Mr Kahlon lent the deceased $150,000 to buy the property. There was no written agreement between the brothers; theirs was a relationship of mutual trust and confidence and no written agreement was required. Mr Kahlon’s evidence was that he trusted the deceased to repay him the money that he had lent; and the deceased in fact did so.[8] The evidence was that the deceased repaid the loan in full within about two years. The deceased began farming on the Paringa property, while still living with Mr Kahlon.
[8] T57.1-6
When the deceased first began farming on his own account, he relied heavily on Mr Kahlon. Mr Kahlon provided advice and experience, and also lent him equipment at no charge. In addition, the deceased could neither read nor write English and so was very reliant on Mr Kahlon’s assistance in this regard. It was Mr Kahlon’s evidence that, while the deceased spoke and understood English well, Mr Kahlon’s was better and so, “He would always take me along because I could speak and understand better English than him.”[9] There is no doubt (nor is it disputed between the parties) that Mr Kahlon provided invaluable assistance to the deceased when he was establishing his business and without that assistance, both pecuniary and advisory, it would have been difficult, if not impossible for the deceased to purchase the Paringa property and to make a success of his farming business.
[9] T101.21-22.
In June 2005, the deceased and Ms Kaur were married. The second applicant was born not long afterwards, and the first applicant was born in 2007. In 2011, the deceased and his family moved into a house that had been built on the Paringa property.
Not long after moving into the house at Paringa, Ms Kaur made an allegation of domestic violence against the deceased. The deceased was arrested and an intervention order was imposed. The deceased returned to live with Mr Kahlon.
The deceased continued to live with Mr Kahlon from August 2011 until January 2015. He was allowed to work on the Paringa property as long as he did not go within 100 meters of the house. During this time, Mr Kahlon lent substantial sums of money to the deceased, to pay farm related expenses including wages, and also to meet his legal expenses as he became involved in family law litigation with Ms Kaur. In addition, Mr Kahlon lent the deceased farm machinery and worked on the Paringa property to assist the deceased.
As with the earlier loan, the deceased and Mr Kahlon did not document any of their financial arrangements. Again, the arrangements were based on trust. There can be no doubt that Mr Kahlon implicitly trusted the deceased to repay his debts; the deceased, on the other hand was very reliant on Mr Kahlon for emotional, financial and practical support.
The deceased and Ms Kaur were divorced in January 2013; final orders for property settlement were not made by the Federal Circuit Court of Australia until February 2015. Pursuant to these orders, the deceased was to retain the Paringa property and was to do everything necessary to have Ms Kaur released from a guarantee in relation to a loan secured against the Paringa property. If he failed to have the guarantee released within three months of the date of the final orders, the Paringa property was to be sold.
Following the finalisation of the family law proceedings, Mr Kahlon lent the deceased $40,309.87, for various purposes, including furnishing the Paringa property and paying various debts. Again, there was no written record of this loan, and Mr Kahlon trusted the deceased to repay him.
Mr Kahlon was very clear about the level of trust that existed between him and his brother. He said in evidence that he would never have considered asking for something in writing from the deceased in relation to the money that he borrowed from Mr Kahlon:
So we can never even think about it…No, I would have never thought about it.[10]
[10] T63.23-28.
I accept that the brothers had a close relationship that was based on trust. I find that the deceased was dependent on Mr Kahlon for emotional and financial support and relied heavily on his advice and assistance in matters relating to his farming business. I am satisfied that there was a reciprocal bond of trust and confidence between the brothers.
The meeting with Ms Ly at the National Australia Bank in Renmark
At some time before 15 May 2015, the deceased met with Kathy Ly, the agri‑business manager of the National Australia Bank (“NAB”) in Renmark. Ms Ly’s evidence was given by way of an affidavit, which was tendered without objection.[11] Ms Ly was not required to attend for cross-examination.
[11] A2.
Ms Ly says, in her affidavit, that she knew the deceased, as she had assisted him with his day to day banking. She had not previously met Mr Kahlon, before the meeting with Mr Pethick, which I will come to. She does not explain the circumstances surrounding her meeting with the deceased. She simply says:
14.Joginder was a client of mine. I met Mohinder when he attended the financial planning meeting for Joginder. I knew they both had farms and grew grapes. As Mohinder was not my client I was not aware of his financial position or his business.
15.I had had some discussions with Joginder about life insurance. I thought that it would be good for him to meet with Gregg [Pethick].[12]
[12] Ibid, [14] – [15].
As a result, it remains unknown whether the question of life insurance was raised first by the deceased or by Ms Ly, nor is there any evidence about the context in which the discussion about life insurance occurred. Ms Ly says that she arranged for the deceased to meet with Gregg Pethick, a financial planner and that she and Mr Kahlon were both present at that meeting. She says that she does not recall having any official role at the meeting, other than to introduce the deceased to Mr Pethick.
Mr Kahlon was asked in cross-examination about the circumstances that led to Ms Ly’s introduction to Mr Pethick. He said that he attended the meeting with Ms Ly and the deceased, the purpose of which was to arrange to have the guarantee in Ms Kaur’s name removed from the certificate of title to the Paringa property, in accordance with the orders made by the Federal Circuit Court (as it then was). He was adamant that Ms Ly did not express concern (on behalf of the bank) about the deceased’s ability to pay his debts. The following exchange occurred between Mr Kahlon and Mr Crocker:
Q.Is this the true state of affairs. Your brother met with the bank to get the guarantee removed, however, they were concerned about him being able to repay.
A.    No, they were not concerned.
A.* No, if they say, then I can put guarantee. If they say no, then I can put guarantee there.
A.    If they had said no, then I would have put my guarantee on that property.
Q.I'm going to ask that question again because it's important and I want you to listen and then answer the question. Is it the case that your brother met with the bank to get the guarantee removed, however, they were concerned about him being able to repay.
A.    Nup, that was not the case.
Q.    That is not correct.
A.    * That's not correct, no.
Q.    Well, I'm suggesting to you that it is correct; what do you say about that.
INTERPRETER:    He said you can say as many times as you can, but it's not true.
A.So, if they didn't believe that my brother would return the money, they could have asked me to put the guarantee and I would have put the guarantee on.
XXN
Q.Well, I'm not asking hypotheticals. I put to you some words and I'm asking if those words are correct, that your brother met with the bank to get the guarantee removed, however, they were concerned about him being able to repay. Is that true.
A.So, they said 'How are you going to pay your bills? We are not going to lend you any more money. So, we are not going to give you any more overdraft, any more loans'.
Q.    So, you're saying those words are true.
A.    Yes, that's true.
Q.    So, no more overdraft, no more loans.
A.    Yep.
A.    * They ask 'How you pay your bill?' We said we got money.
A.    And then we told them that we have got money, we can pay the bills.[13]
[13] T68.36-69.38.
Mr Kahlon remained adamant that the bank did not express concern about the deceased’s ability to pay his debts, but said that it did tell the deceased that it would not lend him any more money, and asked, “Who is going to pay the money back.”[14] He went on to say that, when “the bank”, by which I assume he means Ms Ly, asked the deceased how he would pay his bills, Mr Kahlon and the deceased told her that:
…we pay bill, they said how you pay bill and we say we pay bill and we said we got the money, that’s what we said. I keep saying, you know, three to four times I keep saying the same.[15]
[14] T71.31-38.
[15] T72.24-27. See also T119.2-17.

He confirmed that, when he said “we”, he meant himself and the deceased.
Mr Kahlon’s evidence was that he was not aware that, if the guarantee was not removed within three months, the Court orders provided that the Paringa property would be sold. He believed that the guarantee needed to be removed, because the court case had finished. His evidence was to the effect that the deceased had an obligation to have Ms Kaur’s guarantee removed, and he (Mr Kahlon) was prepared to give a guarantee to the bank for the same amount if required. Mr Kahlon never turned his mind to what would happen if the guarantee was not removed.[16]
[16] T75.24 – 77.38.
There was then an exchange between Mr Crocker and Mr Kahlon about the nature of the “bills” about which the bank expressed concern. Mr Crocker put it to Mr Kahlon that the bills to which the bank referred were the bank loans. Mr Kahlon denied this and said that the bills were electricity bills, water bills and the like. Mr Crocker suggested that, because Mr Kahlon had talked about “repayment of bills”, he must have meant the bank loans, as electricity and water bills are not “repaid”.[17] I do not consider that Mr Kahlon understood the difference between “payment” and repayment”, and so do not accept that his use of the word “repay” signifies anything about the nature of the bills themselves.
[17] T79.29-81.24.
Mr Crocker further put to Mr Kahlon that the deceased’s wish to obtain life insurance was connected with the release of Ms Kaur’s guarantee. Mr Kahlon denied any such connection.[18] His evidence was that he did not know why his brother had decided that he needed life insurance.[19]
[18] T81.26-35.
[19] T82.2-4.
The first meeting with Mr Pethick
Mr Pethick met with the deceased and Mr Kahlon on 15 May 2015. As with Ms Ly, Mr Pethick’s evidence was given by way of affidavit which was tendered by consent.[20] He was not required to attend for cross-examination. Mr Pethick dictated a note about this meeting shortly afterwards and provided to the Court the voice recording and a transcript of this note. These documents were also tendered by consent.[21] In addition, Mr Pethick exhibited to his affidavit a document entitled “Client Profile”, which he filled out during the meeting and a one page document of hand written notes, that he made during the meeting. He used these documents to assist in the preparation of his affidavit.
[20] A3.
[21] A4 and A5 respectively.
Mr Pethick says that he met with the deceased at the Renmark branch of the NAB. Ms Ly was present, as was Mr Kahlon. This was the first time that Mr Pethick had met either of the deceased or his brother. Mr Pethick says that he recalls that the deceased told him that he had a farm at Paringa, which was 182 acres, and that he grew three varieties of grape. The deceased had a business mortgage loan in the sum of $760,000 which was secured over the Paringa property, he was divorced and had two children aged 8 and 10.
Mr Pethick described the meeting in his voice recording in the following way:
Fifteenth of May two thousand and fifteen at eleven thirty am at the Renmark branch: Present was Joginder and Mohinder Kahlon, both clients of agro-business manager Kathy Ly who was also present in today’s appointment. Today’s appointment was brought about [inaudible] some discussions that were had with Joginder about some life insurance in their last appointment, so Kathy felt it was appropriate that I come and have a chat with Joginder.
So, today’s discussion I started off in terms of trying just to get a bit of a picture as to what was, what his circumstances were around his asset position and income and just trying to basically get a feel for what needs we need to think about with respect to the life insurance side, but Joginder was very, not very forth-coming with any information, he, his brother as well, Mohinder sort of said along the line of can’t, can’t he just take out life insurance and I suppose in response to their concerns in question I said well look, certainly you can, you can certainly say to me if there is a number that you think that you’d wanna be insured for, for which, after some of their own discussions, they felt that four hundred thousand dollars was the number that they wanted to, well Joginder wanted to have for himself in the event of anything ever happening to him to help reduce debt or manage deb in the event of him passing.
Again, when it came to the discussions around the affordability of it, Joginder asked if I could give him an indicative price for which I did, soft of in the vicinity of around the four hundred a month was the number and Joginder was able to say that wasn’t an issue whatsoever, so he, he’s asked that if we could arrange some life insurance for him to, to the value of four hundred thousand dollars and wanted to keep the process very simple. He doesn’t want to go through the detail of me collating his details around asset liability and income and expense, doesn’t necessarily see, feel how that’s relevant when he just wants to take out life insurance.
So a very specific request and one that, as, as I felt you know was, obviously very much I had to deal with the fact that that’s what they want and don’t really want to go into great detail. They understood that by me not looking at their circumstances in detail, means that they could be over-insured, potentially under-insured but from their perspective they wanted to enact on their own, well Joginder wanted to enact on his own wishes, so, and that was fine. So, what I’ve done is we’ve, we’re looking to basically get some pricing put together and I’ll collate some information on the client profile and for what detail we need, the problem as I said, asset liability and income expense didn’t want to be disclosed and we didn’t go into too much detail about much more because that’s just not what they wanted to do so it was very much basic information collated on that client profile. We got as much done as we could…[22]
[22] A5.
Mr Kahlon’s evidence was somewhat confused about the nature of any conversation that he had with the deceased before the meeting with Mr Pethick. He said:
A.So anywhere he would go, to the lawyer, to the bank or anywhere, he would take me along with him.
Q.    Before you went along to the meeting you knew it was to discuss life insurance.
A.    Yes.
Q.    You must have asked him 'Brother, why do you want life insurance?’[23]
[23] T100.13-38.
Mr Kahlon then confirmed that, as recorded in Mr Pethick’s file note, the deceased told Mr Pethick about the Paringa property, that he had a business loan of $760,000 secured over the Paringa property and various other personal details. He agreed that the deceased was not very forthcoming about his asset and income position, and that he (Mr Kahlon) said to Mr Pethick, “Can’t he just take out life insurance?”[24] He said that he and his brother had a discussion about the premium and how much the deceased would have to pay each month. As to the amount of life insurance taken out, Mr Kahlon said:
A.So it was based on the premium money, that it's about $300, the premium money, that's how we thought about 400,000. So the main thing was about the premium money.[25]
[24] T104.21-23.
[25] T106.2-5.
Somewhat later, however, Mr Kahlon denied asking Mr Pethick the question, “Can’t he just take out life insurance?”:
Q.Mr Kahlon, you agreed with me that you said to Mr Pethick something along the lines of 'Can't he just take out Life Insurance'.
A.I never said anything. We went there to take the insurance. So he said you're turning around the question, but I'm just trying to explain to him as we discussed, you asked him the question earlier. I never said and we went there to get his insurance.
Q.So your evidence now is you never said something along the lines of 'can't he take out Life Insurance'.
A.No, why would I say that. Why would I say that? We went there to take the insurance, and that's the purpose it was.
Q. And Mr Kahlon didn't say words like that.
A. No, he said they never said - he said 'Why would I ask him that question'.[26]
[26] T107.6-21.
This answer was given through the interpreter, and when she said, “he said, ‘Why would I ask him that question’”, I understood her to mean that Mr Kahlon said that to her (which she then translated). That is, I understood Mr Kahlon’s answer to be “why would I ask him that question’, not “he said, ‘Why would I ask him that question’.
Mr Kahlon’s evidence was clearly that the monthly premium was the determining factor in the deceased’s decision to insure his life for $400,000. He rejected the suggestion from Mr Crocker that he had an interest in the amount of life insurance obtained by the deceased, because the deceased owed him more than $100,000:
Q.You must have known at this stage that your brother owed you $103,000. If he was to die, how were you ever going to get that back.
A. He said even one of my hair on my head cannot think things like that.[27]
[27] T108.11-15.
Mr Crocker suggested to Mr Kahlon that the amount of $400,000 was chosen by the deceased to help reduce or manage debt in the event of his death. This was firmly denied by Mr Kahlon:
Q.Did your brother say to Mr Pethick '$400,000 is the number so that if anything ever happens to me it will be there to help reduce debt or manage debt'.
A. I've got no idea whether he said that or not.
INTERPRETER: Sorry, let me explain again.
A.I can't remember what he said. One thing he's saying Mr Pethick, I don't know what he has written but, about his brother, he is saying 'I cannot remember if he's said anything or not about the debt', that 'If anything happens to me that debt will be covered'. So nothing was talked along those lines.[28]
[28] T110.1-11, see also T121.23-32.
He went on to say that he could not remember the word, “debt” being used at the meeting, other than at the commencement of the meeting, and in fact, he could not now recall whether Mr Pethick asked the deceased about his debt. He was adamant that he and his brother never discussed how his debt would be paid in the event of his death; in fact, they never considered that anything would happen to him.[29] His evidence was that he did not know what his brother intended to use the money for, in the event that he was injured and that, if he died, he expected the money to go to his brother’s estate.[30] He further said that it would be his brother’s choice what he used the money for if he was injured.[31] He firmly denied that either the deceased or Mr Pethick said that the money was to help reduce or manage debt if he died.[32]
[29] T117.18.
[30] T112.8 – 114.11.
[31] T115.7-8.
[32] T115.13-21.
Mr Crocker suggested to Mr Kahlon that, at the meeting with Mr Pethick, he had assured the deceased, either directly or tacitly, that he would use the insurance moneys to pay his debts if he died.[33] This suggestion was strongly rejected by Mr Kahlon.[34]
[33] T162.25-30.
[34] T162.31-32.
The second meeting with Mr Pethick
Mr Pethick says that he obtained two quotations for life insurance in the sum of $400,000 for the deceased. He says that the quote documents were prepared using the information that he had recorded on the “Client Profile”. The quotations were from MLC and Zurich. Mr Pethick prepared a Statement of Advice, which was dated 19 May 2015, and he then met with the deceased on 21 May 2015; Ms Ly was also present at this meeting, but Mr Kahlon was not. Mr Pethick gives the following description of this second meeting:
During my second meeting with [the deceased], I explained that Zurich was my recommendation and I covered off the SOA. I had Joginder sign at pages 14 to 16 of the SOA. I also went through the Zurich Wealth Protection Application form. I ticked the relevant answers as given to me by Joginder in his presence. As part of my meeting with Joginder, I also confirmed whom Joginder was seeking to list as his beneficiary for the benefit of the life insurance proceeds. Joginder requested to nominate his brother Mohinder to receive a 100% of the benefit, which was then written as per page 3 of the Zurich application as a part of the application process. I had Joginder initial each page relevant to the ‘life insured statement’. The letters “J.S” that appear on pages 5, 6, 7, 10, 11 and 12 of the Zurich Wealth Protection Application form were placed there by Joginder to confirm that all of the responses I had ticked were correct. I then had Joginder sign on pages 23, 29 and 35 of that document…[35]
[35] A3, [25].
Mr Pethick prepared a file note of his second meeting with the deceased.[36] I set out the file note in full:
[36] A12.
I met with Joginder to present his advice. Kathy Ly present also.
I covered the advice document in full. Given the nature of the advice and what was not disclosed, it was quite simple. Joginder had no questions, nor concerns and was happy to go ahead and get the application underway for the insurance.
Key points covered about why Zurich was the recommendation;
-     Terminal illness benefit available even though application age was over age 60.
-     No mandatory bloods required based on level of cover being insured for.
-     Costs v benefits worked in favour.
Other points to note;
-     I covered the stepped premium structure and the long term impact on pricing. Joginder demonstrated understanding here.
-     Beneficiary nomination covered and he wished place his brother as beneficiary of the cover. His thoughts were that Mahinder [sic] would take care of debt and family in light of receiving proceeds. I recommended he revisit his estate planning documentation given his circumstances.
Joginder wished to complete all necessary paperwork today and get underway. Advice document reviewed and signed, when then completed the insurance application. I asked the questions and ticked the relevant response by Joginder. Joginder reviewed all the responses and initialled at the top of each page to confirm all was correct.
OSP not opted into – as was not required. Joginder knows to call me if anything is needed relative to the insurance or claim.
Kathy was present through the whole appointment in support of Joginder and myself.
Paperwork finalised and applicatio nwill [sic] be forwarded to Zurich for processing.
Mr Pethick submitted the deceased’s life insurance application to Zurich and the policy was confirmed. The benefit amount was $400,000 and the monthly premium commenced at $304.51. The policy schedule, dated 27 May 2015, confirmed that Mr Kahlon was the nominated beneficiary and was to receive 100% of the benefit under the policy.
The deceased’s will
Mr Kahlon’s evidence was that he took the deceased to see his lawyer, Mr Bell, to have a will made, although he could not remember whether it was before or after the first appointment with Mr Pethick. He said:
A.Yeah, we went to Mr Bell, my lawyer, to make my brother's will. When he went to Mr Bell, who was my lawyer, because that person was preparing wills, so he went there, and he mentioned a house which he wanted to give to his daughter, but the person who was making bill - will - sorry, both names are kind of similar - he said 'You go and bring the measurement of that house'.[37]
[37] T118.7-14.
Ultimately, the deceased did not make his will with Mr Bell, but rather attended another lawyer to have this done. Mr Kahlon did not attend this appointment with his brother; in fact, his evidence was that he was not aware that his brother had visited another lawyer to have his will made until after the will had been made.[38] He was also adamant that the deceased did not discuss his testamentary wishes with him; he was simply present when the deceased gave instructions to Mr Bell.[39] The deceased’s last will was executed on 11 September 2015. He appointed Mr Kahlon as his executor and trustee. The will provided that, if he had subdivided the house block from the balance of the Paringa property, this would go to his daughter and the farming land would go to his son. Otherwise, he left his estate in equal shares to the applicants on their having attained the age of 18.
[38] T127.1-3.
[39] T131.5-12.
Mr Kahlon’s evidence was that he did not know that he had been appointed the deceased’s executor, and that, until his brother died, he never contemplated his brother’s death.[40] He said that he went to see Mr Bell after his brother’s death, and told him that his brother had the life insurance policy, which he was unable to locate.[41] He found out that he was the executor when he saw the deceased’s will for the first time.
[40] T122.2-35.
[41] T123.37-123.8.
Mr Crocker asked Mr Kahlon about his statement in R38, “In Joginder’s will, he had put me down as beneficiary, which I knew of as he had discussed with me in advance.” I understood Mr Kahlon’s evidence to be that the discussion that he referred to was that which occurred in Mr Bell’s office when he was taking instructions for the deceased’s will. They had no other discussion on this subject. This is consistent with Mr Kahlon’s evidence that he and the deceased had not discussed what would happen in the event of his death and I accept that it is the truth. Mr Kahlon was firm in his evidence that, when they were with Mr Bell, they did not specifically discuss who would pay the deceased’s debts; he accepted however, that as his brother’s executor, it would be his responsibility to look after everything.[42]
[42] T139.1-19.
Mr Crocker sought to link Mr Kahlon’s appointment as the deceased’s executor to his knowledge of the life insurance. In effect, he suggested that Mr Kahlon was appointed the executor because he knew that there would be $400,000 available to pay the deceased’s debts.[43] This was rejected by Mr Kahlon.[44]
[43] T165.5-8.
[44] T165.9.
On 20 March 2019 Mr Bell on behalf of Mr Kahlon wrote to Zurich and enclosed a Death Claim Application form, in order to claim the insurance moneys. In the application form, it is clear that Mr Kahlon applied for the funds in his capacity as executor of the deceased’s estate.[45]
[45] A27.
The debt owed by the deceased to Mr Kahlon
Mr Kahlon gave evidence about the money that he was owed by his brother. His evidence was that, at the time of the deceased’s death, he was owed a total of $103,000. He said:
I was told by the lawyers that he can take this money out of estate, but I took it out of the insurance money.[46]
[46] T93.32-34.
The following exchange then occurred:
Q.What I'm suggesting that you've done is the very thing your brother wanted you to do - use the insurance money to pay his debts.
A.So, he never talked about the insurance money; or never talked about his debt; or he would die; and never talked about the money he owed me; not talked about bringing the loan down, nothing.
Q.    Never talked about insurance money, never talked about debts.
A.    And never talked about the loan, bringing the loan down.
Q.    And never talked about the loan.
A.    And never talked about his debt.
Q.    Never, ever.
A.    * No, no.[47]
[47] T96.38-97.14.
My understanding of this evidence was that Mr Kahlon was told by the lawyers that he could seek repayment of his debt from the estate; he chose, on receipt of the insurance moneys, to treat his debt as paid. I accept Mr Kahlon’s rejection of Mr Crocker’s suggestion that his acceptance of the insurance moneys in lieu of payment of the debt by the estate indicated his understanding that he was always required to use the insurance moneys to pay the debts of the deceased.
Mr Crocker submitted that I should find that Mr Kahlon instructed Mr Bell that his debt had not been repaid in early 2020, despite Mr Kahlon’s denial to the contrary. Given that that statement appeared in a letter from Mr Bell to the applicants’ solicitor, I should have no reason to doubt that those were Mr Kahlon’s instructions.
I am unable to accept this submission. First, Mr Bell’s file was not in evidence, nor was Mr Bell called to give evidence on this question. Second, Mr Kahlon’s English is such that, in the absence of the assistance of an interpreter, I cannot be satisfied that he fully understood the questions that Mr Bell asked him in their meeting, or that Mr Bell comprehensively understood his answers. While Mr Kahlon’s English is adequate for the purpose of running his business and carrying out every day tasks, I do not consider that his understanding of English in an unfamiliar environment, dealing with unfamiliar concepts and against a background of emotional distress on the death of his brother, is sufficient to give me confidence that Mr Bell accurately recorded what Mr Kahlon told him, or believed he had told him.
Other evidence given by Mr Kahlon which Mr Crocker submits reflected poorly on his credibility

There was considerable confusion between Mr Kahlon and Mr Crocker about Mr Kahlon’s knowledge of his brother’s testamentary intention. In particular, there was confusion about what the deceased told Mr Bell as compared with the instructions that he gave the lawyer who drafted the will that he ultimately signed. Mr Crocker asked Mr Kahlon about his denial[48] of paragraph 9.A.17 of the revised statement of claim,[49] which pleads:
Prior to making his Will, the deceased had discussed his testamentary wishes with his older brother.
[48] At [9.A.17] of his revised defence, FDN 31.
[49] FDN 29.
In particular, he asked Mr Kahlon why he had denied that statement when he had given evidence that he had attended the appointment that the deceased had with Mr Bell. Mr Kahlon’s response was that he was present when his brother gave instructions for his will to Mr Bell, but not when he attended the lawyer who drafted the will that was executed by the deceased.[50]
[50] T154.10-25.
A further confusion arose about whether it was “common ground” that the life insurance moneys would be an asset available to the deceased’s executor to pay estate debt. Mr Crocker’s questions dealt with the appointment to make his will; Mr Kahlon’s answers dealt with the appointment with Mr Bell to obtain the grant of probate following the deceased’s death.[51] Once this misunderstanding was clarified, Mr Kahlon was clear that the life insurance money was not mentioned during the appointment with Mr Bell to take instructions for the deceased’s will.[52] There then ensued a discussion between Mr Kahlon and Mr Crocker about whether the insurance money was mentioned to Mr Bell; it was not clear to which appointment (the one to give instructions for the will or the one to obtain the grant of probate) either of Mr Kahlon or Mr Crocker referred.[53]
[51] T154.34-15.
[52] T155.16-21.
[53] T155.22-T156.38.
Given the level of confusion that existed in the Courtroom, I am unable to conclude that Mr Kahlon was not being truthful in the evidence that he gave. To the contrary, I consider that he was telling the truth: I am satisfied both that Mr Kahlon’s evidence was that the insurance moneys were not mentioned during the appointment with Mr Bell to take instructions for the deceased’s will, and he did tell Mr Bell about the insurance moneys when he was taking instructions to obtain the grant of probate, and that that evidence was true.
Mr Crocker further sought to impugn Mr Kahlon’s credibility by referring to the following sentence in his statement, A38:
He wouldn’t want me to give the children everything but only what they needed and wait until they are older and not under the guardianship of their mother in case, she tried to take it from them.
The following exchange took place:
A.    * Before insurance, I think. That time, no will, yeah, I think.
A.    So I think insurance was taken first and at that time, there was no will.
Q.    Just to be clear, insurance first, then the meeting with Ron Bell to get the will.
A.    Sorry, I think it was after we had taken the insurance.
INTERPRETER:    And that will is, he said, still there. I don't know what that is.
A.    * He said he haven't got now, no give me anything.
A.So I think the will might be still sitting with Ron because he hasn't done anything with that.
Q.    Ron Bell was your lawyer.
A.    Yes.
Q.    And you arranged the appointment for the will taking instructions, correct.
A.    So he was my lawyer for last 25 years. Yes, I made the appointment.
Q.And when you went to the meeting, as you've said before, your usual practice was you would do most of the talking on behalf of your brother.
A.    Yes.[54]
[54] T159.17-38.
I consider that the apparent inconsistency between Mr Kahlon’s statement in A38 and his stated belief that the insurance money was paid to him in his personal capacity is caused by the fact that English is Mr Kahlon’s second language. I accept his explanation that he believed that the money was given to him, but that he would give it to his niece and nephew if they needed it. Thus, he had a moral responsibility to provide for them if they need it.
The applicants’ case
The applicants’ case is brought against Mr Kahlon both in his personal capacity and in his capacity as the deceased’s executor and trustee. The case against him in his personal capacity is based on the creation of a secret trust or a constructive trust. With respect to his capacity as executor, it is based on the contention that Mr Kahlon preferred his personal interests to those of the applicants, whom he was bound to protect as a result of his appointment as executor.
With respect to the claim against Mr Kahlon as executor, the applicants say that, when he became aware that he was nominated as the beneficiary of the insurance moneys, he had a duty to inform the applicants (through their guardian, Ms Kaur) of this. At this point, he should have told them that he intended to pay the money to himself personally, despite the fiduciary duty that he owed, as executor, to them. They say that, at the very least, Mr Kahlon should have advised Zurich, at the time that he claimed the moneys, that the deceased was survived by two minor children.
In making this submission, the applicants rely on two authorities, McIntosh v McIntosh[55] and Brine v Carter.[56] In McIntosh, the Court said:
An administrator of an intestate estate has a duty to apply for payment of superannuation funds to the estate. The administrator has no proprietary right to the funds but has standing to compel the trustees of the fund to exercise their discretion to pay out the funds.
…
It is axiomatic that the legal personal representative would, if he or she did not have a conflict, make an application for the payment of the superannuation to the deceased member's legal personal representative. That application would be made as part of the administrator's duty to get in the estate. Unless the application is made and is successful the funds do not become part of the estate.[57]
(footnotes omitted)
[55] [2014] QSC 99.
[56] [2015] SASC 205.
[57] [2014] QSC 99 at [71] – [73].
In Brine v Carter, Blue J said:
Ms Carter knew since not later than 10 January 2013 that there were two superannuation benefits, the estate was an eligible beneficiary of the Flexi Pension benefit and its value was approximately $500,000. She accepted the position of executor on 16 January 2013. The entitlement to consideration of exercise of the trustee's decision in its favour was an asset of the estate.
Ms Carter as an executor owed a duty to disclose this information known to her to the other executors. She owed a duty not to pursue a personal benefit in circumstances in which there was a conflict between her duty and her personal interest. She chose not to disclose to her fellow executors the existence of two benefits until 14 or 15 February 2013 and not to disclose the value of the lump sum benefit or that the estate was an eligible beneficiary of it at all. She made positive representations that the only eligible beneficiaries were spouses and dependent or disabled children. While the other executors remained ignorant of the true position, she was advancing her own interests by obtaining information from UniSuper, expressing urgency and lodging a claim for payment of the benefit to herself.
In McIntosh v McIntosh, James McIntosh had three superannuation policies of a total value of approximately $450,000. He died intestate in July 2013 and his mother Mrs McIntosh was appointed administrator in September 2013. On 30 September 2013, Mrs McIntosh lodged death benefit claims with the superannuation trustees claiming that she had been financially interdependent with the deceased. Atkinson J held that Mrs McIntosh breached her duties as an administrator. Atkinson J said:
“It is essential to fiduciary duties that they include the core or irreducible minimum duties necessary for the legal personal representatives to perform their obligations ‘honestly and in good faith for the benefit of the beneficiaries.’ …
…
In this case there was a clear conflict of duty and interest contrary to her fiduciary duties as administrator. When the applicant made application to each of the superannuation funds for the moneys to be paid to her personally rather than to the estate, she was preferring her own interests to her duty as legal personal representative to make an application for the funds to be paid to her as legal personal representative. She was in a situation of conflict which she resolved in favour of her own interests. As such she acted … in breach of her fiduciary duty as administrator of the estate …
An administrator of an intestate estate has a duty to apply for payment of superannuation funds to the estate. The administrator has no proprietary right to the funds but has standing to compel the trustees of the fund to exercise their discretion to pay out the funds.
…
It is axiomatic that the legal personal representative would, if he or she did not have a conflict, make an application for the payment of the superannuation to the deceased member's legal personal representative. That application would be made as part of the administrator's duty to get in the estate. Unless the application is made and is successful the funds do not become part of the estate.
…
The failure of the applicant to apply for payment to herself as legal personal representative was in breach of her fiduciary duty to act in the best interests of the estate, for which she may be held liable by the court.”
Mrs McIntosh was an administrator whereas Ms Carter was an executor. This is not a relevant distinction because both owe the same fiduciary duties. Mrs McIntosh was the sole administrator whereas Ms Carter was one of four executors. If Ms Carter had disclosed what she knew about the superannuation benefits, recused herself from acting as executor in relation to them and left the other three executors to act alone on behalf of the estate in relation to them, for the reasons given below she would not have acted in breach of her fiduciary duties and there would be an important distinction between her situation and that of Mrs McIntosh. However, she did not act in that way prior to 4 March 2013.
Ms Carter acted in breach of fiduciary duty prior to 4 March 2013.[58]
(footnotes omitted)
[58] [2015] SASC 205 at [136] – [140].
While Blue J found that Ms Carter was not liable to account to the estate for the benefit that she received, that would not be the case here. The applicants did not learn that the insurance moneys had been paid out to Mr Kahlon until well after that had occurred; thus, there was no opportunity to apply to Zurich for the funds to be paid into the estate. As a result, he must account to the estate for the funds.
As to the case against Mr Kahlon in his personal capacity, Mr Crocker submits that, independent of his role as executor, Mr Kahlon accepted the position of a fiduciary as a result of the relationship of trust and confidence that existed between him and the deceased. This relationship is clearly demonstrated on the evidence, including the evidence relating to the money that Mr Kahlon had lent the deceased on the strength of oral agreements, and the other support that Mr Kahlon had given his brother during his lifetime. He relies on the words of Professor Finn, where he said:
“is, simply, someone who undertakes to act for or on behalf of another in some particular matter or matters. That undertaking may be of a general character. It may be specific and limited. It is immaterial whether the undertaking is or is not in the form of a contract. It is immaterial that the undertaking is gratuitous. And the undertaking may be officiously assumed without request. …Consequently, while it is customary to think of certain well known legal relationships as being fiduciary in character… it is erroneous to assume that the conflict of duty and interest rule applies only to a fixed class of legal relationships. It applies not because a person is a trustee or an agent, but because he has undertaken to act for on behalf of another”.[59]
[59] FDN 53 at [87].
Because of the position of trust that he held, the deceased gave Mr Kahlon control over the insurance moneys. Mr Kahlon thereby assumed a fiduciary position with respect to the moneys.
The applicants further submit that, even if they have not established that Mr Kahlon had taken on the position of a fiduciary with respect to the moneys, a constructive trust arose with respect to them. In this regard, the applicants rely on the following passage from Jacob’s Law of Trusts in Australia:[60]
The constructive trust differs in essential respects both from the express and the resulting or implied trust. It differs from the express trust in that it is raised by operation of law without reference to the intentions of the parties concerned and indeed largely contrary to the desires and intentions of the constructive trustee… The constructive differs … in that… the courts imply that a trust was actually intended and in the face of evidence to the contrary will discard the implication. In the case of a constructive trust, the inquiry is not as to the actual or presumed intentions of the parties, but as to whether, according to the principles of equity, it would be a fraud for the party in question to deny the trust. As Cardozo CJ put it, ‘When property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest, equity converts him into a trustee’. The trust is constructive in the sense that equity construes the circumstances by explaining or interpreting them; equity does not construct the trust, it attaches legal consequences to the circumstances. Moreover, the constructive trust demands the staple ingredients of the express and resulting or implied trust: subject matter, trustee, beneficiary and personal obligation attaching to the trust property.
(footnotes omitted)
[60] Meagher R P and Gummow W M C, Jacob’s Law of Trusts in Australia (6^th ed, Butterworths, 1997) at [1301].
It was clear that the deceased obtained the life insurance to reduce debt in the event of his death. This was stated in the first meeting with Mr Pethick, at which Mr Kahlon was present and repeated by the deceased at the second meeting. Mr Kahlon was well aware that, when he received the moneys, it was incumbent on him to use them to fulfil the purpose for which he knew they had been obtained. As a result, it would be unconscionable for him to keep them for his own benefit.
The applicants’ case is based, to a large extent, on inference. Mr Crocker submitted that I should draw the following inferences:
·That the bank was concerned about the deceased’s ability to pay the bank loan (rather than ordinary, day to day bills and other expenses), which is why Ms Ly suggested that he should take out life insurance;
·That there was a direct link between the removal of Ms Kaur’s guarantee and the deceased’s wish to arrange life insurance;
·That Mr Kahlon must have asked the deceased why he was taking out life insurance;
·That Mr Kahlon must have known that the deceased intended the life insurance moneys to be used to pay his debts in the event of his death;
·That Mr Kahlon is sophisticated enough and fluent enough in the English language to understand the difference between himself in his personal capacity, and himself in his capacity as executor of his brother’s estate; and
·That Mr Kahlon was motivated to defend this litigation by his strong dislike for Ms Kaur.
The applicants argue that any interest that Mr Kahlon obtained in the insurance moneys was conditional in that it was subject to an obligation that he held the moneys to pay the estate debts. As this has not occurred, Mr Kahlon is subject to an equitable charge or personal obligation to fulfil that condition. In support of this contention, the applicants rely on the following extract from Equity and Trusts in Australia:[61]
If A wishes to leave property to B, for B to make a payment to or perform an obligation in favour of C, A clearly wishes to benefit C. In these circumstances A may choose to establish a trust or may, more simply, make a gift direct to C. But in some circumstances, property may be left to B but subject to some “obligation” to C that is defined imprecisely in the language of the disposition. Such a disposition may be interpreted in at least four different ways distinct from trust: as a moral obligation, a condition, an equitable charge, or an equitable personal obligation. The critical inquiry here is to discover A’s intention at the time of the disposition, gathered from the language used to describe the obligation, the nature of the property given and the nature of the obligation itself.
The disposition may amount to a condition upon and subject to which the person takes a gift. A condition annexed to a gift, assuming it is intended to create a legally enforceable obligation, may be one of two types: a condition involving forfeiture for non-fulfilment, or one creating a mere personal obligation to fulfil it. …The intention of the donor communicated to the donee at the time when the latter accepts the property determines which type of condition exists. Either way, though, for a condition to be construed as having legal effect, it must be expressed in terms sufficiently certain to be capable of enforcement: where the alleged condition is uncertain, it is void and the donee ordinarily takes free of it.[62]
(footnotes omitted)
[61] G Dal Pont, Equity and Trusts in Australia (6^th edition, Lawbook Co).
[62] FDN 53 at [112] – [113].
The applicants say that the condition in this case was expressed in terms that were capable of being enforced: Mr Kahlon was present when the deceased expressed the intention that the insurance moneys were to be used to pay debt. This submission is supported by the following words of Brennan J in Muschinski v Dodds:[63]
A gift in return for assurances, though not amounting to a contract, is a gift on terms and the terms of the assurances express the terms on which the donor intends to make the gift and the donee’s understanding of the terms on which it is made. Subject to some few exceptions, a donor has a right to regulate the disposal of his gift: see Scot v. Haughton [1706] Eng R 20; (1706) 2 Vern. 560 (23 ER 963); Gibson v. Dickie (1815) 3 M.& S.463 (105 ER 684). That principle is applicable as well to gifts inter vivos as to testamentary gifts…
An assurance by a donee that he will use or devote the property given or its income for a particular purpose, or will hold it for a particular object … may therefore take effect as if the donor made the gift upon the terms of the assurance. Accordingly, the donee may take the property given either as a trustee or beneficially and, if beneficially, he may take it subject to defeasance if the assurance should not be fulfilled or subject to a personal obligation to fulfil the assurance or subject to a charge securing fulfilment of the assurance (particularly if it involves the payment of money).[64]
[63] (1985) 160 CLR 583.
[64] FDN 53 at [116].
In the further alternative, the applicants say that the circumstances of this matter led to the creation of a secret trust. They say that the facts demonstrate the elements necessary to establish a secret trust: intention on the part of the deceased to subject Mr Kahlon to an obligation in favour of the applicants; communication by the deceased to Mr Kahlon of that intention; and acceptance by Mr Kahlon of that obligation, either expressly or by acquiescence.
They say that this is established through a combination of the meeting with Mr Pethick to arrange life insurance, and the meeting at Mr Bell’s office to take instructions for the deceased’s will.
Mr Pethick’s contemporaneous file note records that the deceased wanted to have $400,000 to help manage or reduce debt in the event that he died. Mr Crocker submitted that this language either expressly or impliedly states an intention to create a trust. Mr Kahlon was present at this meeting, with the result that this intention was communicated to him.

At the meeting with Mr Bell, the deceased’s intention to make Mr Kahlon the subject of an obligation to use the deceased’s assets after his death, to pay the estate debts, for the benefit of the applicants, became even clearer. This intention was expressly communicated to Mr Kahlon during this meeting, by nominating him as the deceased’s executor. Mr Kahlon’s acceptance of this obligation is also clear: he was present at the meeting and heard his brother nominate him as the executor of his estate. Further, he acknowledged that it would be his responsibility to take care of his brother’s estate.
Mr Crocker submits that the ambit of the trust is determined by the account of the meeting at the bank given by Mr Pethick. He says that the Court should accept the evidence of Mr Pethick about the conversation between the deceased and Mr Kahlon at that meeting, in the context of the deceased’s wish to take out life insurance to reduce or manage debt if he died.
The close relationship of trust and confidence between the brothers supports the conclusion that a secret trust was created with respect to the insurance moneys. There is a long history of reliance, both financially and emotionally, by the deceased on Mr Kahlon. This easily leads to the conclusion that the deceased intended to entrust to Mr Kahlon the management of his affairs in the event of his death, including the payment of his debts, for which he had arranged the life insurance moneys.
Mr Crocker says that the meeting with Mr Bell raises an estoppel by convention. In this regard he referred to a number of authorities, including Con‑Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd[65] where the Court said:
Estoppel by convention is a form of estoppel founded not on a representation of fact made by a representor and acted on by a representee to his detriment, but on the conduct of relations between the parties on the basis of an agreed or assumed state of facts, which both will be estopped from denying.[66]
[65] (1986) 160 CLR 226.
[66] Ibid, at [244].
He also referred to Perry v Perry[67] where Robb J said:
[67] [2021] NSWSC 1669.
For present purposes, it is sufficient to note that the principles governing the operation of conventional estoppel are as stated by Tobias JA in Rydelar Pty Ltd v Euphoric Pty Ltd, with the agreement of Mason P and Campbell JA, as follows:
“[194] On the other hand, estoppel by convention is a form of estoppel founded upon an assumed state of affairs by the parties whether as to a matter of fact or a matter of legal effect which both will be estopped from denying: Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226. at 244-245 That assumed state of affairs takes as a given the terms of the contract as known to and understood by the parties but from which the parties have departed for the purpose of their furtherance of their relationship under the contract.
[195] As Dixon J therefore observed in Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641 at 676, belief in the correctness of the facts or state of affairs assumed is not always necessary. Parties may adopt as the conventional basis of a transaction between them an assumption which they know to be contrary to the actual state of affairs.
[196] In his recent book, Estoppel by Conduct and Election (2006) Sydney, Thomson Sweet & Maxwell, at 115 [8-001], KR Handley described estoppel by convention in the following terms:
‘When parties make a statement of fact or of mixed fact and law the conventional basis of their transaction … both are estopped from questioning its truth for the purposes of that transaction. Estoppels by convention can be created ad hoc, expressly, by a course of dealing, or by other acts and declarations. In such a case “there must be some mutually manifest conduct by the parties” with the intention of affecting their legal relationship.
“[197] In Amalgamated Investment & Property Co Ltd (In Liq) v Texas Commerce International Bank Ltd [1982] QB 84 at 121, Lord Denning MR observed:
‘To use the phrase of Latham CJ and Dixon J in [Grundt] … the parties by their course of dealing adopted a “conventional basis” for the governance of the relations between them … They are bound by the “conventional basis” on which they conducted their affairs. The reason is because it would be altogether unjust to allow either party to insist on the strict interpretation of the original terms of the contract - when it would be inequitable to do so having regard to dealings which have taken place between the parties.
“His Lordship also observed (at 121) that:
‘[t]here is no need to inquire whether their particular interpretation is correct or not - or whether they were mistaken or not - or whether they had in mind the original terms or not. Suffice it that they have, by the course of dealing, put their own interpretation on their contract, and cannot be allowed to go back on it.
“[198] The principles were restated by Lord Steyn in delivering the principal speech in The “Indian Grace” (No 2) [1998] AC 878 at 913, where his Lordship said:
‘ … an estoppel by convention may arise where parties to a transaction act on an assumed state of facts or law, the assumption being either shared … or made by one and acquiesced in by the other. The effect of an estoppel by convention is to preclude a party from denying the assumed facts or law if it would be unjust to allow him to go back on the assumption …
“[199] Recently the principles were restated by Brereton J in Moratic Pty Ltd v Gordon (2007) Aust Contract Reports ¶90-255 (89,904); NSW Conv R 56-172 (56,205), where his Honour observed (at 89,913 [30]; 56,215 [30]) that the doctrine of conventional estoppel precluded either party to a contract from denying an assumption which has formed the conventional basis of the relationship between them. Accordingly, it is necessary to determine whether the parties have in fact adopted such an assumption as the conventional basis of their relationship.
[200] His Honour then stated the matters necessary to establish conventional estoppel (at 89,914 [32]; 56,215 [32]) as being that:
(a)     the plaintiff has adopted an assumption as to the terms of its legal relationship with the defendant;
(b)     the defendant has adopted the same assumption;
(c)     both parties have conducted their relationship on the basis of that mutual assumption;
(d)     each party knew or intended that the other act on that basis; and
(e)     departure from the assumption will occasion detriment to the plaintiff.
[201] In noting the differences between promissory estoppel and conventional estoppel his Honour then observed with respect to the latter (at 89,914 [33]; 56,216 [33]) that it:
[33] … is focussed on the consensual basis of the parties' relationship: it operates when both parties have adopted the same assumption as the basis of their relationship, often without appreciating that any departure from the strict legal position is involved, so as to hold both parties to their common understanding.”[68]
(footnotes omitted)
[68] Ibid, at [346].
The applicants say that the Court must reject Mr Kahlon’s position which is that the deceased intended to benefit his brother over the interests of his own children. Mr Kahlon’s own belief, which he held until June 2019, that the money belonged to the estate, demonstrates how unlikely this proposition is. Further, Mr Kahlon said in his own statement, that the deceased:
…wouldn’t want me to give the children everything but only what they needed and wait until they are older and not under the guardianship of their mother…[69]
[69] A38.
The applicants contend that this statement is inconsistent with a belief that the insurance moneys were a gift to Mr Kahlon in his personal capacity. At the very least, Mr Kahlon knew that he received the insurance moneys subject to a condition that it was to be used for the benefit of the applicants.
The applicants say that, given the understanding between the brothers that the insurance money was to pay down or manage debt, that the applicants were the only beneficiaries of the deceased’s estate, and that Mr Kahlon would look after everything after the deceased’s death, Mr Kahlon is bound in equity not to use the insurance moneys for his own benefit, but to use them for the benefit of the applicants. As a result, the insurance moneys were trust moneys, or, in the alternative, were a gift that Mr Kahlon was to use for the benefit of the applicants.
The applicants say that I should reject as untruthful Mr Kahlon’s evidence that he did not ask the deceased why he wanted to obtain life insurance. They say that that would be Mr Kahlon’s natural reaction, on being asked to accompany the deceased to an appointment about life insurance, when he did not have life insurance himself.
The applicants further submit that I should treat with caution Mr Kahlon’s evidence about whether he asked Mr Pethick why his brother could not just take out life insurance. They note that, once Mr Kahlon was pressed about why he asked that question, he denied asking it. This should be treated with suspicion.
Mr Crocker submits that I should reject Mr Kahlon’s evidence about his daughter’s involvement in drafting his statement. He says that it is inherently unbelievable that Mr Kahlon’s daughter changed the words he used in his statement, to language that he did not understand and that did not reflect his meaning. I have already addressed this submission.
Mr Crocker says that there is a tacit admission in R38, that the insurance moneys were not given to Mr Kahlon in his personal capacity. By saying:
If my brother was alive I know he would not want me to give anything to Harpreet.
He wouldn’t want me to give the children everything but only what they needed and wait until they are older and not under the guardianship of their mother in case, she tried to take it from them.[70]
he acknowledges that the applicants were meant to benefit from the proceeds of the policy. This is inconsistent with Mr Kahlon’s position that the moneys were a gift to him in his personal capacity.
[70] FDN 58, [302].
Mr Crocker further submits that I should reject Mr Kahlon’s evidence that he did not know why the deceased appointed him his executor. Mr Crocker put to Mr Kahlon that the deceased appointed him his executor because he had assured his brother, either expressly or by implication, that he would use the insurance moneys to pay his debts. In particular, Mr Crocker relies on this passage from Mr Kahlon’s evidence:
Q.Okay, so this is the meeting with Greg Pethick on 15 May. The insurance with Mr Pethick. And so the $400,000 is final at this meeting with him. As part of that finality, if your brother were to die, who was going to look after his affairs.
A.* I only realised when it had already happened - when the doctor tell me he has passed away ... I had never believed before - before that, I never thought of.
Q.Well, I want to suggest, the fact that your brother only very shortly after this meeting, on 15 May, wanted to appoint you Executor - and in fact even with Ron Bell only a month after -
A.    No he never appointed me anything because ... alive and everything was fine.
Q.    He appointed you Executor in the draft will with Mr Bell, correct.
A.    Yes.
Q.    He appointed you the executor of the will that was admitted to probate.
A.    Yes.
Q.I'm at a loss to understand why he would appoint you the executor, a role to pay down debts, if he did not understand at the insurance meeting on 15 May that that was also your role.
A.    I have no idea why he made me the executor.
A.    * Yeah, he can have anybody if he want.
A.    If he had wanted, he would have made anyone.
Q.    You had no idea why he made you executor.
A.    I have no idea.
Q.    Is that a truthful answer, Mr Kahlon.
A.    Yes.[71]
[71] T164.23-165.15.
Mr Crocker submits that this evidence must be regarded as untruthful; in the context of their close relationship and the deceased’s ongoing reliance on Mr Kahlon, it is inconceivable that Mr Kahlon would not know why he had been named as his brother’s executor.
Mr Crocker submits that I should find that the deceased would not have nominated Mr Kahlon as his executor, if Mr Kahlon had not agreed to use the insurance moneys to discharge debt. Mr Kahlon accepted that it was his duty to look after his brother’s estate including the payment of his debts; this must have included payment of the bank debt, not just the debt owed to Mr Kahlon himself.
The applicants submit that the fact that Mr Kahlon was advised by both the insurance company and his lawyer that the money was paid to him personally, and not to him in his capacity as executor, does not change the true state of affairs. The insurance moneys were clearly held by Mr Kahlon on trust for the estate. In the alternative, the moneys were a gift to Mr Kahlon, on the condition that he use the moneys to benefit the applicants.
The respondent’s case
Mr Kahlon rejects the contention that his dislike of Ms Kaur has been the causative factor in this litigation. He does not dispute that he and his brother had a close relationship based on mutual trust and that he provided significant emotional and financial support to the deceased during his lifetime. He openly acknowledges his dislike and distrust of Ms Kaur, but denies that those feelings have in any way influenced the way he has managed the deceased’s estate or this litigation.
Mr Kahlon says that the meeting with Ms Ly was for no other purpose than to remove Ms Kaur’s guarantee, in compliance with the orders made by the Federal Circuit Court. The mortgage over the Paringa property was in good standing and was not the subject of discussion during the meeting as it was not affected by the Federal Circuit Court orders. Ms Ly, on behalf of the bank, neither requested further security for the mortgage, not did she require a replacement guarantee. If such a guarantee had been requested, it would have been provided by Mr Kahlon.
The bank’s questioning at this meeting centred on the deceased’s payment of his day to day bills and expenses and it was in this context that Ms Ly indicated that the bank would not extend his overdraft.
As to the meeting with Mr Pethick, Mr Kahlon says that the deceased told him he needed to obtain some insurance in case he became sick or injured. He and the deceased could not see the relevance of the questions asked by Mr Pethick about the deceased’s financial position; he agrees that the deceased’s financial position was only discussed in a very general way as a result.
Mr Kahlon says that there was no discussion at the meeting about what the insurance moneys would be used for in the event of his death. There was no discussion that the moneys would be used to pay the bank debt. The amount of $400,000 was chosen primarily based on the cost of the premium: the deceased’s main concern was that he was able to afford the monthly premium. The amount was clearly not related to the size of the bank loan, as it was only about half of the amount required to discharge this loan in full.
Mr Kahlon was not present at the meeting with Mr Pethick, where the deceased signed the documents necessary to take out the policy. He says that Mr Pethick’s account of the meeting supports the finding that the deceased considered the option of nominating his estate as the beneficiary of the policy and consciously rejected that option in favour of benefitting his brother. This, on its own, is sufficient to dispose of the applicants’ claim.
Mr Kahlon says that, at its highest, these facts establish that the deceased nominated Mr Kahlon as his beneficiary, knowing that he would look after the applicants. While a moral obligation may have been imposed, no trust or legally enforceable condition was created. This must be the case, given that Mr Kahlon did not know that he was the nominated beneficiary of the insurance policy until after the deceased’s death.
Mr Kahlon says that the mere fact that he understood that the role of executor included attending to payment of the estate’s debts could not possibly lead to the conclusion that there was an agreement between him and the deceased that he would use the proceeds from the life insurance to pay the deceased’s debt. The facts that Mr Kahlon knew that: the deceased wished to prepare a will; that he intended to nominate Mr Kahlon as his executor; that Mr Kahlon knew that he had life insurance; and Mr Kahlon knew that, as executor, one of his duties was to pay estate debts; do not create a sufficient foundation for a trust or an obligation that is legally enforceable.
From the date of the deceased’s death in September 2015, until 2019, Mr Kahlon believed that the insurance moneys belonged to the estate. It was only on the advice of the insurer that he treated the money as his own. He still benefitted the estate in this regard, because he then offset the debt of $103,000 owed to him by the estate against the insurance moneys, rather than seeking to recover this amount from the estate as he was entitled to do. He continued to act in the applicants’ best interests, by operating the estate’s business in a diligent and productive way, with the result that the estate debt has been reduced by more than half in the time since the deceased’s death. In addition, he offered financial and other assistance to the applicants which was always rejected by Ms Kaur.
Mr Kahlon rejects the submission of the applicants that he was not truthful in his evidence. He says that his credibility must be assessed against the background of his modest ability to speak and understand English. His English language ability is not sophisticated and lacks the subtleties and nuances of a person whose first language is English.
Mr Kahlon rejects the applicants’ contention that a constructive trust was created with respect to the insurance moneys. He relies on s 48A1(b) of the Insurance Contracts Act 1984 (Cth), which provides:
if the third party beneficiary is not the life insured, any money paid to the third party beneficiary under the contract does not form part of the estate of the life insured.
He says that, against the background of Mr Pethick’s account of both meetings with the deceased and also Mr Pethick’s own considerable experience in the industry, there can be no reason to doubt that the deceased intended Mr Kahlon to benefit personally from the insurance moneys. In light of the facts of this matter and the provision of s 48A1(b), there can be no reasonable basis for arguing that a trust of any sort has been created. The deceased knew that Mr Kahlon would receive the insurance moneys and that his estate would not benefit.
Mr Kahlon says that at the time that the deceased took out the life insurance policy he and his brother were not in a fiduciary relationship. At that time, not only was Mr Kahlon not the deceased’s executor, the deceased had not even made a will. Furthermore, Mr Kahlon did not know that he had been nominated as the beneficiary of the policy. In these circumstances, it is impossible for a constructive trust to be imposed.
Mr Kahlon submits that the facts of this matter are not sufficient to find a secret trust exists with respect to the insurance moneys. He relies on the decision of Slattery J in Misek v McBride[72] which sets out the three things that must be shown to establish the existence of a secret trust:
… In order to establish a secret trust a plaintiff must show three matters: (1) an intention on the part of the testator to subject the primary done to an obligation in favour of the secondary donee; (2) the communication by the testator of that intention to the primary donee (the prospective trustee); and, (3) the acceptance by the primary donee of that obligation either expressly or by acquiescence.[73]
[72] [2017] NSWSC 406.
[73] Ibid, [137].
He notes that the applicants do not contend that a secret trust has arisen in relation to a gift in the deceased’s will. As this is the circumstance in which most secret trusts arise, he questions whether this argument fails, simply because of the novel circumstance. In any event, he says that a secret trust has not arisen.

First, there is no evidence of any intention on the part of the deceased to subject Mr Kahlon to an obligation in favour of the applicants. Second, there is no evidence that the deceased communicated any such intention to Mr Kahlon. Third, there is no evidence of any acceptance by Mr Kahlon of that obligation.
The evidence is clear that the deceased named Mr Kahlon as the beneficiary of the insurance policy, without Mr Kahlon’s knowledge. In fact, Mr Kahlon did not discover that he was the beneficiary of the policy until four years after the deceased’s death. The mere fact of Mr Kahlon’s knowledge that the deceased had life insurance is not sufficient to give rise to the required obligation. Further, it cannot be inferred from the meeting with Mr Pethick that the deceased intended to create a trust with respect to the moneys so that Mr Kahlon could pay the estate debts as the identity of the beneficiary was not discussed at this meeting.
Mr Kahlon says that no inference can be drawn about the purpose for which the deceased wanted the insurance moneys. It is clear from both Mr Pethick’s file note and Mr Kahlon’s account of the meeting that the deceased did not want to discuss his financial position and could not understand why it was relevant to his taking out life insurance.
Similarly, the meeting with Mr Bell to discuss the deceased’s making a will does not provide a sufficient basis to find that a secret trust was created. While Mr Kahlon knew that he was to be appointed the deceased’s executor and he knew that the duties of an executor included the payment of estate debts, the life insurance was mentioned only in passing and not as a source of funds for the payment of estate debt.
Mr Kahlon submits that, just as the evidence does not support the imposition of a secret trust or a constructive trust, nor does it support the finding that the deceased imposed a personal equitable obligation on him to use the insurance moneys for the benefit of the estate. To establish that a personal, equitable obligation has been created, the applicants need to show that:
·The deceased formed the assumption that his estate would have a proprietary interest in the insurance moneys;
·Mr Kahlon knew that the deceased had formed an assumption that his estate had such a proprietary interest and remained silent about the fact that it was an erroneous assumption when he had a duty to inform him of that;
·Mr Kahlon’s conduct caused or materially contributed to that erroneous assumption by the deceased;
·Mr Kahlon induced the deceased to change their position in reliance on that assumption;
·The deceased or his estate would suffer detriment if Mr Kahlon were allowed to depart from that assumption; and
·It would be unconscionable for Mr Kahlon to depart from the assumption that the deceased’s estate would have the benefit of the insurance moneys.
None of this is established on the facts of this matter. Mr Kahlon did not know that he had been made the beneficiary of the insurance policy; only the deceased did. Thus, it was impossible for Mr Kahlon to make any representation as he was not, himself, aware of the facts of the matter. Without any representation, there can be no reliance, and no inducement.
As to the applicants’ allegation that Mr Kahlon has a fiduciary duty to account for the insurance moneys, Mr Kahlon says that this argument can only succeed if the moneys are found to be part of the deceased’s estate. As this cannot be the case, no fiduciary duty arises. No fiduciary obligation was created at the time that the insurance was taken out, and none has been created since that time. As the moneys do not form part of the estate, and there are no trust or equitable obligations attached to it, Mr Kahlon has no duty to account to the applicants for the moneys.
Consequently, Mr Kahlon says that the applicants’ claim must be dismissed.
Consideration
Before I consider the application of the legal principles that are relied on by the parties, it is necessary that I first make some findings of fact. I have already indicated some of these, but summarise them all here.
First, I accept that the deceased and Mr Kahlon had a close relationship that was based on mutual trust and confidence. The deceased was dependent on his brother for both financial and emotional support; in addition, Mr Kahlon provided him with practical assistance, including with interpreting in business meetings. It was usual for the deceased to have Mr Kahlon accompany him to appointments to assist his understanding of what was to be discussed.
Second, I am unable to determine who first suggested that the deceased should obtain life insurance. Neither Mr Kahlon nor Ms Ly says who first raised the subject.
Third, nor am I able to determine why the subject of life insurance was raised. The applicants have urged me to find that it was raised by the bank because it was concerned about the deceased’s ability to pay the bank loan once Ms Kaur’s guarantee had been removed. This is simply not borne out by the evidence. As I have already said, I do not consider that Mr Kahlon’s English is sophisticated enough to differentiate between paying (as with bills) and repaying (as with a loan). I have no reason to doubt his evidence that the bank’s concern was the deceased’s ability to pay his ongoing day to day bills and expenses, rather than his bank loan, which it appears was never in default. In any event, I am unable to find that there was any causative link between the removal of Ms Kaur’s guarantee and the deceased’s wish to take out life insurance.
Fourth, while I accept Mr Pethick’s account of what occurred at the first meeting with the deceased and Mr Kahlon up to a point, I have some reservations about the extent to which the motivation referred to by Mr Pethick were in fact expressed by the deceased. Mr Pethick says that the deceased was “not very forthcoming” with information and did not see the relevance of a discussion about his assets and liability position. It is also clear from Mr Pethick’s file note that the deceased was concerned about the affordability of the policy. As a result, when Mr Pethick says:
…after some of their own discussions, they felt that four hundred thousand dollars was the number that they wanted to, will Joginder wanted to have for himself in the event of anything ever happening to him to help reduce debt or manage debt…[74]
[74] A5.
I am not prepared to find that this was because of anything that the deceased or Mr Kahlon said to him. This is particularly the case, given that Mr Kahlon and the deceased spoke to each other in Punjabi, and so Mr Pethick would have had no way of knowing about what they were speaking. Given the reluctance of the deceased and Mr Kahlon to give any details to Mr Pethick about the deceased’s personal circumstances, it is just as likely that Mr Pethick simply made the assumption that he wanted the insurance moneys to help reduce debt if something happened to him. This is, after all, a common reason for people arranging life insurance, and a reasonable assumption for Mr Pethick to have made.
I further treat Mr Pethick’s file notes with caution, because it is clear that there was no interpreter present at the meeting. Mr Kahlon’s English, which was more proficient that his brother’s, is only modest and I can have no certainty that Mr Pethick completely understood the deceased and Mr Kahlon, and vice versa.
In the circumstances, I am prepared to accept Mr Kahlon’s evidence that he and the deceased did not discuss how his debts would be paid in the event of his death, either at the meeting with Mr Pethick or at any other time. The only person who could have assisted in elucidating what was discussed at the meeting was Mr Pethick, and he was not called to give evidence. His affidavit and file note are not sufficient to satisfy me that the deceased said that he wanted the insurance moneys to reduce debt if he died, or that there was any meaningful discussion about the amount of insurance, except in the context of determining the affordability of the premium.
Fifth, I reject the applicants’ submission that at the first meeting with Mr Pethick, Mr Kahlon, expressly or impliedly, told the deceased that he would use the insurance moneys to pay the deceased’s debt after this death. There is absolutely no basis for this submission. At that first meeting with Mr Pethick, the deceased did not nominate Mr Kahlon as the beneficiary of the policy and no other basis for the making of this submission has been put forward.
Sixth, I find that Mr Kahlon did not know that he had been nominated as the beneficiary of the policy until after the deceased’s death. He was not present at the second meeting between Mr Pethick and the deceased, and no other suggestion has been made as to how he would have discovered this information.
Seventh, I accept Mr Kahlon’s evidence that he and his brother did not discuss his brother’s testamentary intentions. While he was present at the meeting with Mr Bell when he took instructions for the deceased’s will, there is no evidence that there was any other time when the deceased’s testamentary intentions were raised when Mr Kahlon was present. He was not present when the deceased gave the instructions for the will that he executed; no evidence of any other conversation between the two has been produced.
Eighth, I find that Mr Kahlon was the obvious person to be appointed the deceased’s executor, given the close bond of trust and dependence between them. There is no evidence to suggest that the nomination of Mr Kahlon as the deceased’s executor was in any way related to the fact that Mr Kahlon was aware of his brother’s life insurance, and I find that there is no such relationship.
Ninth, I am unable to find that the deceased raised the question of subdivision of the Paringa property in order to reduce debt. In his will, the deceased refers to a subdivision of the property, with a view to the house being left to his daughter and the farming land being left to his son. This is clearly unrelated to debt reduction; rather it appears to be a way of dividing his estate so as to give a benefit to each of his children. Further, I accept Mr Kahlon’s evidence that, while there may have been a discussion about subdivision, no intention to subdivide was in fact articulated by his brother.
Tenth, while I accept that Mr Kahlon has strong negative feelings towards Ms Kaur, there is no evidence to suggest that they have motivated him to deal with his litigation in any particular way. I find that he was not motivated by his antipathy to Ms Kaur.
I note that Mr Bell referred to subdivision in order to pay off debt; in light of my reservations about the ability of Mr Kahlon and the deceased to communicate clearly in English and in the absence of evidence from Mr Bell, I am not prepared to find that this statement accurately represents instructions given by the deceased or by Mr Kahlon. It is not reflected in the deceased’s will, which does refer to subdivision. It is just as likely that there was a misunderstanding between Mr Bell and either or both of Mr Kahlon or the deceased, which led to Mr Bell’s assertion that the subdivision was to pay off debt.
I also address a number of matters which Mr Crocker has raised as inconsistencies in Mr Kahlon’s evidence and submissions.[75] The first is Agreed Fact 45, in the parties’ Statement of Agreed Facts.[76] This fact reads:
From 2 July 2019, Mohinder Singh Kahlon commenced to apply the Zurich policy proceeds for his own benefit and not for the benefit of the estate or the benefit of the deceased’s two children:
a)   On 19 July 2019 $125,000 was withdrawn by cheque;
b)   On 30 July 2019 $100,000 was withdrawn by cheque;
c)   By 1 August 2022 the balance in BSB 105-035 Account No. 054735540 was only $5,211.37; and
d)   By 31 August 2023 the balance in BSB 105-035 Account No. 054735540 was $967.57.[77]
[75] FDN 59.
[76] A1.
[77] Ibid, at [45].
Mr Crocker says that this is inconsistent with Mr Kahlon’s submission that he used $103,000 of the life insurance moneys to repay the deceased’s debt to him.[78] I assume the inconsistency that Mr Crocker refers to is that that could be characterised as a use to the benefit of the estate. I consider that this is a nuance, that one could not expect a self-represented litigant to understand: that by using the insurance moneys to pay an estate debt, the moneys were used for the benefit of the estate, not the creditor.
[78] Transcript of 2 December 2024. T15.17-32.
The second is Mr Crocker’s concern about paragraph 75 and 76 of Mr Kahlon’s submissions which reads:
The Respondent has no intention of using the insurance money for himself, other than to pay the costs to defend these proceedings and paying the debt owed to him mentioned but intends to use the balance of the money for the deceased’s children’s educational and other prudent needs.
The Respondent never wanted the life insurance money and still does not. He has no intention or desire to use any of it for himself. The Respondent is a wealthy successful businessman, and he has no need at all for this money.[79]
[79] FDN 59 at [75] – [76].
He says that this submission makes no sense in the context where all of the insurance moneys have been dissipated.
Mr Kahlon did not specifically address this inconsistency in his oral submissions. He said:
After my brother passed away, I was saying till 2019 that the insurance money will come into my brother's account. In 2019 the insurance called me and they said it is your money. They said don't put it into the estates. Give the premium of 1500 into his estates. And I did that. The bank has never notified me so far. I have never done anything for the loss of any kind for my brother or his children, and this case should never have brought into court, because I was ready to be agreed on anything with a community mediation.
I sent three people, and fourth was my wife, that I sent to ask Harpreet if she needed help, and she said 'No, I will go to the court'. What I can do.[80]
[80] Transcript of 2 December 2024. T25.17-30.
I take this to mean that although the money was for his personal benefit, he was always prepared to give the applicants whatever they needed.
Before I consider the various arguments raised by the applicants, it is useful, first, to consider the insurance policy taken out by the deceased. The policy specifically provides:
If there is only one policy owner who is also the life insured, the policy owner may nominate one or more beneficiaries to receive the Death benefit…in the event of death. If the policy owner makes a nomination we will pay the Death benefit directly to the nominated beneficiaries in the proportions specified in the nomination.
The nomination is subject to the following rules:
…
- a nominated beneficiary has no rights under the policy, other than to receive the nominated policy proceeds after a claim has been admitted by us (he or she cannot authorise or initiate any policy transaction)
- we may delay payment if the nomination or nominations become the subject of legal proceedings or external dispute resolution processes
- a court order or decision of an external dispute resolution process in relation to a nomination overrides the nomination.[81]
[81] A11, p 12 of 70.
The deceased nominated Mr Kahlon to receive 100% of the benefit under the policy. There has been no suggestion that this nomination was incorrect in any way. Mr Pethick’s file note of the second meeting does not suggest that the deceased intended to nominate Mr Kahlon in any capacity other than his personal capacity. In particular, he makes no suggestion that Mr Kahlon was to receive the benefit as executor or trustee. I further note that the application form clearly instructs:
Nominate your preferred beneficiaries below. Use their full name. The share of benefit sections must total 100%. If you wish for your estate to receive a proportion of your benefits, please write ‘my legal representative’.[82]
[82] A10, p 3 of 40.
I note Mr Pethick’s statement in his file note that the deceased’s “thoughts were that Mahinder [sic] would take care of debt and family in light of receiving proceeds.” This wording is not sufficient to allow me to conclude that the deceased expressed an intention that Mr Kahlon would receive the moneys on trust for the applicants, or that he would take the money subject to an obligation that he “would take care of debt and family”. Even if I were to find that receipt of the money was subject to such an obligation, there remains a significant uncertainty about what is meant by “take care of debt”. While this could mean “pay off”, it could also mean “manage responsibly” or “deal prudently with” or any one of a number of different things. It does not unequivocally place an obligation on Mr Kahlon, nor is there evidence that, even if the meaning of this statement was clear, Mr Kahlon was apprised of it.
Further, Mr Pethick must have raised with the deceased the question of his nominating his estate to receive the benefits. This is inferred by his statement that he recommended to the deceased that he “revisit his estate planning documentation.” It can be inferred that the deceased understood this because shortly thereafter he made arrangements to make a will.
Did Mr Kahlon breach any of his duties as executor?
There can be no doubt that, until June 2019, Mr Kahlon did not know that he had been nominated as the beneficiary of the life insurance. Until that time, he believed that the insurance moneys belonged to the deceased’s estate.
I am of the view that the case of McIntosh does not assist the applicants. In McIntosh, a mother, who claimed her deceased son’s superannuation funds, was found to be in breach of her duties as the administrator of her son’s estate when she claimed the superannuation funds for her personal benefit. This case is distinguishable from the present, because the mother was named as the non‑binding nominated beneficiary of the funds. Thus, the superannuation funds retained a discretion as to whom to pay the benefit. Further, she sought the benefit in her capacity as beneficiary, not administrator.
In this matter, Mr Kahlon did, in fact, claim the insurance moneys in his capacity as executor. On 20 March 2019, Mr Bell wrote to the insurance company, enclosing a “Death Claim Form”; on this form, the benefit is expressly sought by Mr Kahlon in his capacity of executor. On 11 June 2019, Zurich advised Mr Bell that the deceased had nominated a death beneficiary, and as a result, the proceeds would be paid to the person nominated, Mr Kahlon. The evidence shows that Mr Kahlon sought the benefit in his capacity as executor; Zurich paid it to him in his personal capacity as beneficiary.
Similarly, in Brine v Carter, Ms Carter claimed the deceased’s superannuation policies in her personal capacity, rather than in her capacity as executor. She in fact had actual knowledge that the estate was a potential beneficiary of one of the policies. Again, the trustee of the superannuation funds retained a discretion as to where the benefit should be paid; like McIntosh, this fact sets Brine v Carter apart from the facts of this case.
In these circumstances, I am unable to find that Mr Kahlon breached any duty as an executor. He claimed the insurance moneys in his capacity as executor, and in ignorance of the fact that he had been nominated the beneficiary of the policy. Zurich had no discretion about to whom the money should be paid; in accordance with the deceased’s nomination, it paid the benefit to Mr Kahlon in his personal capacity, as it was obliged to do.
Has Mr Kahlon breached a fiduciary duty (independent of any duty that he owed in his capacity as executor) owed to the deceased, resulting in the imposition of a constructive trust over the insurance moneys?
There can be no doubt that fiduciary relationships are not confined to existing categories of relationship and may be found to exist in relationships not previously identified by the authorities. The applicants contend that, on the basis of the personal relationship that existed between Mr Kahlon and the deceased, fiduciary duties arose, which were breached by Mr Kahlon when he retained the insurance moneys for himself.

In Hospital Products Ltd v United States Surgical Corporation and Ors,[83] Mason J set out the characteristics which identify a fiduciary relationship. He said:
Because distributor-manufacturer is not an established fiduciary relationship, it is important in the first instance to ascertain the characteristics which, according to tradition, identify a fiduciary relationship. As the courts have declined to define the concept, preferring instead to develop the law in a case by case approach, we have to distil the essence or the characteristics of the relationship from the illustrations which the judicial decisions provide. In so doing we must recognize that the categories of fiduciary relationships are not closed: Tufton v. Sperni; English v. Dedham Vale Properties Ltd. The accepted fiduciary relationships are sometimes referred to as relationships of trust and confidence or confidential relations (cf. Phipps v. Boardman), viz., trustee and beneficiary, agent and principal, solicitor and client, employee and employer, director and company, and partners. The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense. The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position. The expressions "for", "on behalf of', and "in the interests of' signify that the fiduciary acts in a "representative" character in the exercise of his responsibility, to adopt an expression used by the Court of Appeal.
It is partly because the fiduciary's exercise of the power or discretion can adversely affect the interests of the person to whom the duty is owed and because the latter is at the mercy of the former that the fiduciary comes under a duty to exercise his power or discretion in the interests of the person to whom it is owed: see generally Weinrib, "The Fiduciary Obligation", University of Toronto Law Journal, vol. 25 (1975), pp.4-8. Thus a mere sub-contractor is not a fiduciary. Although his work may be described loosely as work which is to be carried out in the interests of the head contractor, the sub-contractor cannot in any meaningful sense be said to exercise a power or discretion which places the head contractor in a position of vulnerability.
That contractual and fiduciary relationships may co-exist between the same parties has never been doubted. Indeed, the existence of a basic contractual relationship has in many situations provided a foundation for the erection of a fiduciary relationship. In these situations it is the contractual foundation which is all important because it is the contract that regulates the basic rights and liabilities of the parties. The fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract so that it is consistent with, and conforms to, them. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter the operation which the contract was intended to have according to its true construction.[84]
(footnotes omitted)
[83] (1984) 156 CLR 41.
[84] Ibid, at [96] – [97].
While Mason J was in dissent in Hospital Products, in the case of John Alexander’s Clubs Pty Ltd and Anor v White City Tennis Club Ltd,[85] the High Court acknowledged that the principles relevant to determining whether a fiduciary relationship exists outside an established category are those set out by Mason J.[86]
[85] [2010] HCA 19.
[86] Ibid, at [86].
I am not satisfied that the applicants have demonstrated that there was a fiduciary relationship between the deceased and Mr Kahlon. While there can be no doubt that they had a close relationship based on trust, and that Mr Kahlon offered financial, emotional and other support to the deceased, I do not consider that this is sufficient to establish a fiduciary relationship. This is particularly in circumstances where Mr Kahlon did not know that he had been named as the beneficiary of the deceased’s life insurance, and where he was not privy to the deceased’s saying to Mr Pethick that his brother would take care of his debt and family.
The loan arrangements between the brothers is not sufficient to establish a fiduciary relationship. All that is demonstrated is that Mr Kahlon trusted the deceased; not that they had the sort of relationship described by Mason J in Hospital Products. Mr Kahlon’s informal role as interpreter is also insufficient. Mr Kahlon’s evidence is that his brother spoke and understood English, although not as well as he did. It is impossible to determine the degree of reliance that the deceased placed on Mr Kahlon. In this regard, it must also be noted that, while the deceased often asked Mr Kahlon to assist him in this regard, this was not his invariable practice. He did not, for example, require his brother’s assistance at the second meeting with Mr Pethick, nor did Mr Kahlon accompany him to visit the lawyer who ultimately took his will instructions and drew up his will.
Added to this is the fact that Mr Kahlon did not in fact know that he had been nominated as the beneficiary of the deceased’s life insurance. Neither at the time that the deceased took out the life insurance policy, nor at the time that he gave instructions for his will, did Mr Kahlon know that he had an interest which might conflict with that of the deceased.
Finally, I consider that the requirement that Mr Kahlon “take care of debt” is so imprecise as to defy any clear meaning. As a result, the evidence is insufficient to allow me to conclude that there was a fiduciary relationship between Mr Kahlon and the deceased. The applicants’ argument that a constructive trust should be found on the basis that Mr Kahlon breached a fiduciary duty cannot succeed.
Did Mr Kahlon take the insurance moneys subject to an equitable personal obligation that he use them for the benefit of the applicants?
In Muschinski v Dodds,[87] Brennan J said:
A gift in return for assurances, though not amounting to a contract, is a gift on terms and the terms of the assurances express the terms on which the donor intends to make the gift and the donee's understanding of the terms on which it is made. Subject to some few exceptions, a donor has a right to regulate the disposal of his gift: see Scot v. Haughton; Gibson v. Dickie. That principle is applicable as well to gifts inter vivos as to testamentary gifts, though the rules relating to the effect of a donor's regulation of the property given have found more frequent expression in cases involving testamentary gifts where the regulation is expressed in the dispositive provisions of the will.
An assurance by a donee that he will use or devote the property given or its income for a particular purpose, or will hold it for a particular object, or will do a particular thing when given "in return for" a gift may therefore take effect as if the donor made the gift upon the terms of the assurance. Accordingly, the donee may take the property given either as a trustee or beneficially and, if beneficially, he may take it subject to defeasance if the assurance should not be fulfilled or subject to a personal obligation to fulfil the assurance or subject to a charge securing fulfilment of the assurance (particularly if it involves the payment of money). … A condition annexed to a gift may be of either of two kinds: a condition involving a forfeiture for non-fulfilment or a condition creating merely a personal obligation to fulfil it. A donee who takes a gift to which a condition of the latter kind is annexed incurs an equitable obligation to perform the condition: Countess of Bective v. Federal Commissioner of Taxation. Lindley L.J. in In re Williams; Williams v. Williams (67), said:
"... there is no difficulty in disposing of one's own property upon condition express or implied that the person who takes it shall do something himself, e.g., shall dispose of his property in a particular way indicated by the owner of the property which he accepts. Moreover, a condition of this kind is enforceable in equity, and need not amount to a common law condition - i.e., a condition involving a forfeiture of the property taken subject to the condition - if that condition is not performed."
A condition which creates a personal obligation may be enforced in equity by an order for compensation or, where appropriate, by a decree of specific performance: Gill v. Gill; Gregg v. Coates; In re Hodge; Hodge v. Griffiths. Whether a condition is such that its non-fulfilment involves forfeiture of the property given depends upon the intention of the donor communicated to the donee at the time when the latter accepts the property, that is, the intention which the donee reasonably understands to be the donor's intention from what the donor has said or done: cf. Calverley v. Green.[88]
(footnotes omitted)
[87] (1985) 160 CLR 583.
[88] Ibid, at [604] – [606].
Thus, the question here turns on what was communicated by the deceased to Mr Kahlon about his intention at the time that he accepted the nomination as beneficiary.
The difficulty that the applicants have is that they can demonstrate neither that the deceased communicated to Mr Kahlon that he intended Mr Kahlon to pay his debts with the insurance moneys, nor that he communicated to Mr Kahlon that he was in fact to receive the insurance moneys. All they can establish is that Mr Kahlon was aware that the deceased had taken out life insurance, and that he was aware that the deceased intended to name him as the executor in his will.
While Mr Kahlon has conceded that he was aware that his role as executor required him to pay the estate’s debts, the evidence cannot support a finding that the insurance moneys were given to him on condition that he use them to pay the debts of the deceased. Even if he was aware that the deceased had told Mr Pethick that his brother would “take care of debt”, this statement is too vague and imprecise to impose an enforceable obligation that Mr Kahlon use the insurance moneys to pay off estate debt. It is arguable that Mr Kahlon has, in fact, taken care of debt: his uncontradicted evidence is that he has run the deceased’s business in a careful and prudent manner, with the result that the mortgage over the Paringa property has been significantly reduced.
The applicants have not established that the insurance moneys are subject to an equitable personal obligation that they be used for their benefit or the benefit of the estate.
I further reject the submission that an estoppel by convention arose. To put it simply, the applicants have failed to establish that Mr Kahlon and the deceased had both adopted the assumption that Mr Kahlon would receive the insurance moneys and use them to pay off the estate debt.
Are the insurance moneys subject to a secret trust?
I have already set out at [110] the portion of Misek v McBride on which Mr Kahlon relies to demonstrate that a secret trust has not arisen. In Burke v Public Trustee for the State of South Australia,[89] Doyle JA had this to say about secret trusts:
[89] [2022] SASCA 64.
These are trusts that exist, and take effect, outside of the will. They arise in circumstances where the testator makes a gift to a person (the primary donee), but desires and tells the primary donee that he or she is to hold the gift on trust for another person or persons (the secondary donee). They are known as “secret trusts” because one reason for creating them is to keep the identity of the ultimate beneficiary out of the will, the will being a public document.
Where, on the face of the will, the primary donee takes beneficially and the trust is not disclosed, the trust is known as a “fully secret” trust. Where the will reveals the existence of the secret trust, it is known as a “half secret” trust.
The existence of a secret trust depends upon proof of the requisite intention, communication and acceptance, being:
•an intention on the part of the testator to subject the primary donee to an obligation in favour of the secondary donee;
• communication of that intention to the primary donee; and
•acceptance of that obligation by the primary donee, either expressly or by implication.
In the case of a fully secret trust, the communication to the primary donee may occur at any point during the testator’s life. However, as elaborated upon below, in the case of a half secret trust, it may be that the communication needs to be made no later than the time when the will is executed. [90]
(footnotes omitted)
[90] Ibid, at [402] – [405].
One question that Doyle JA does not address is whether a secret trust can arise outside of the context of a gift in a will. In this case, the applicants contend that a secret trust has arisen, in circumstances where the gift was not made to Mr Kahlon in the deceased’s will.
I do not consider that I need to answer the question of whether a secret trust can arise in contexts other than a gift in a will, because on the facts that have been proven, the essential criteria, as explained in Misek and Burke, have not been satisfied.
First, the applicants have not been able to demonstrate that the deceased intended to subject Mr Kahlon to an obligation in favour of the applicants. They have been able to establish that Mr Kahlon was aware that the deceased took out life insurance. They have also been able to establish that he was aware that the deceased intended to appoint him as the executor of his will. What they have not been able to demonstrate is an intention on the part of the deceased to subject Mr Kahlon to an obligation that he must use the insurance moneys for the benefit of the applicants. This is because what is established is that Mr Kahlon was not aware that the deceased had given him the insurance moneys.
Second, there is no evidence that, even if he had formed that intention, the deceased communicated it to Mr Kahlon. Mr Kahlon was completely unaware that he had been nominated as the beneficiary of the deceased’s insurance policy. As a result, it is impossible for him to be aware that he was given the moneys with the obligation that he was to use them for the benefit of the applicants.
Third, there is no evidence that Mr Kahlon accepted the obligation in favour of the applicants. Again, this comes back to Mr Kahlon’s ignorance that he had been nominated as the beneficiary of the insurance moneys. If he was not aware that he had been given the moneys at all, let alone with an obligation that they be used for the benefit of the applicants, then it is impossible for him to have accepted that obligation.
The closest that the applicants could come to showing that the deceased intended to give the moneys to Mr Kahlon subject to an obligation to use them for the benefit of the applicants is the evidence of Mr Pethick’s file note that the decease believed that Mr Kahlon would use the moneys to look after debt. As I have already discussed, the words “to look after” are so vague that it is impossible to discern any definite intention behind them. Further, I consider that knowledge of the insurance and knowledge of his nomination as executor are insufficient to amount to communication of intention by the deceased and acceptance of any obligation by Mr Kahlon. I consider that, if any intention on the part of the deceased can be ascertained (and I am by no means certain that it can be) it is more likely that he intended to impose a moral obligation on Mr Kahlon to care for his children in the same way that Mr Kahlon had cared for him.
To be clear, I accept Mr Kahlon’s evidence that the amount of $400,000 was chosen primarily by reference to the cost of the monthly premium. This is consistent with Mr Pethick’s file note which clearly recorded the deceased’s unwillingness to discuss his financial affairs and the fact that he was more interested in how much the insurance would cost. The evidence does not support a finding that the amount was chosen in reference to the size of the deceased’s debt. I reject any inference that Mr Kahlon and the deceased discussed the amount of insurance required during the first meeting with Mr Pethick; this was denied by Mr Kahlon and Mr Pethick has no basis for making this statement, given that the discussion between Mr Kahlon and the deceased was in Punjabi, which Mr Pethick could not understand. Consequently, I do not consider that the communication of intention and the acceptance of the obligation can be inferred or implied from either the meeting with Mr Pethick or the meeting with Mr Bell.
In all of the circumstances, the applicants’ claim must be dismissed.

[2025] SASC 37

21 March 2025