Lin v Lin
[2021] VSC 53
•15 February 2021
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST
S CI 2018 02053
| TSAI MEI CHUAN LIN (in her own capacity and as administrator of the estate of WEN CHIH LIN, deceased) and ORS (according to the attached Schedule) | Plaintiff |
| v | |
| SHIH-HSIEN LIN and ORS (according to the attached Schedule) | Defendant |
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JUDGE: | Mukhtar AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | Not required. Interlocutory applications determined on the papers. |
DATE OF JUDGMENT: | 15 February 2021 |
CASE MAY BE CITED AS: | Lin & Ors v Lin & Ors |
MEDIUM NEUTRAL CITATION: | [2021] VSC 53 |
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DISCOVERY – Action concerning intra familial dispute over administration of family trusts – Allegations of undue influence over execution of trust deeds to replace trustees – Scope of discovery – Legitimacy of subpoenas – Widespread defects in pleaded defence – Considerations for refusing or granting dispensation from requirement for corporation to act by solicitor.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr C H Truong, QC | Francis Lim |
| For the first, second, third and seventh defendants | The first defendant appeared in person |
TABLE OF CONTENTS
Summary of the dispute:.................................................................................................................. 1
The defence......................................................................................................................................... 5
The applications................................................................................................................................. 9
A brief procedural chronology...................................................................................................... 11
The 27 February hearing................................................................................................................. 13
Events after the 27 February hearing............................................................................................ 13
The plaintiffs’ application for further discovery....................................................................... 15
First and second category............................................................................................................... 15
Third and fourth category.............................................................................................................. 17
The defendants’ application for particular discovery under rule 29.08................................ 19
First category: emails between the plaintiffs’ lawyers and the accountants acting for the family trusts............................................................................................................................................. 19
Second category: a specific email dated around 26 or 28 February 2018 from the younger son to the plaintiffs’ lawyers)..................................................................................................................... 21
Third category: ‘all written communications’ between the sister and the plaintiffs and plaintiffs’ lawyers’........................................................................................................................................ 22
The plaintiffs’ objections to the Victoria Police subpoena..................................................... 24
The plaintiffs’ objections to the ANZ Bank subpoena............................................................ 27
The plaintiffs’ objections to the CBA subpoena........................................................................ 29
The plaintiffs’ objections to the NAB subpoena....................................................................... 30
The plaintiffs’ application to strike out various parts of the defence................................... 31
The older son’s application for a dispensation from rule 1.17(1) so as to represent the second, third and seventh defendants............................................................................................................ 35
Costs.................................................................................................................................................... 40
HIS HONOUR:
This judgment is given to state the reasons to coincide with the making of numerous Court orders that have been made on multiple interlocutory applications concerning mainly discovery, the legitimacy of subpoenas and the striking out of multiple parts of a defence.
Summary of the dispute:
This is quite an acrimonious dispute amongst members of a Taiwanese‑Australian family. Speaking compendiously, the dispute concerns the affairs of two family trusts and dealings with trust moneys. Separately from that, it also concerns questions of determining rightful beneficial ownership or co-ownership within the family of real property in Frankston and Dandenong. The part of the dispute with which this judgment is concerned is over who is lawfully entitled to control the two family trusts and trust assets, and, whether there have been dealings with trust moneys contrary to fiduciary obligations.
The members of the Lin family are: the father (who died on 18 December 2016); his elderly widow (who is 79 years of age and is the administrator of her husband’s deceased estate); and their two adult sons and their adult daughter.
For ease of narration, I shall identify the first plaintiff Tsai Mei Chuan Lin as ‘the mother’, and the second plaintiff Shih‑Kai Lin as ‘the younger son’. The third and fourth corporate plaintiffs, Javelin Towns Pty Ltd and W.C. Lin Nominees Pty Ltd can be identified as ‘the original trustee companies’; that is, the original trustee respectively of The Lin Family Trust and the Lin Family Trust No. 2. The mother is the director and secretary of each of the original trustee companies. The mother, the younger son and the two original trustee companies are the plaintiffs.
The first defendant, Shih-Hsien Lin, is to be identified as ‘the older son’ or interchangeably in this judgment, the ‘older brother’. The second and third corporate defendants, Wen Chih Lin Memorial Pty Ltd and Wen Chih Lin Memorial Pty Ltd No. 2, are to be identified as the ‘replacement trustee companies’ of the two family trusts, so called because those two companies came to be appointed (in controversial circumstances the plaintiffs say) to replace the two original trustee companies. The older son is the sole director and shareholder of the replacement trustee companies. Thus, presently and at all relevant times the older son has been in effective control of the administration of the two family trusts. Independently of that, the older son is also the sole director and shareholder of the seventh defendant, East Ocean Investments Pty Ltd. He uses that company as a vehicle for his share trading activities as a source of personal income.
For present purposes, the first, second, third and seventh defendants can be regarded as ‘the relevant defendants’. They are to be so grouped because they are proximate to the interests or activities of the older son. The other defendants (fourth, fifth and sixth) are not. They have been joined as necessary and proper parties so as to be bound by the outcome of the action. More particularly, the fourth defendant, Luxtron Pty Ltd, is a beneficiary of the second family trust. Its sole director and secretary is the mother. The fifth defendant is the Registrar of Titles who has been joined because part of the claim seeks declarations of beneficial ownership of land. The sixth defendant, Shu-Chen Lin, is the daughter of the mother and deceased father, and is to be identified as ‘the sister’ or interchangeably as ‘the daughter’. The materials from the older brother show a deep animosity towards his sister. He views her as the malign driving force behind this case that has for all practical purposes been brought against him. He accuses the sister of deceiving their mother into conducting this litigation with the object of removing him and his replacement trustee companies in order to take control away from him.
The two family trusts were established in 1989 and 1990 by the mother and father with the two original trustee companies as trustees. Those trustees bought real property in Victoria and earned money through rental receipts on those properties, as well as earning interest on money held on bank term deposits. The beneficiaries of the first Lin Family Trust are the members of the family; that is, the now deceased estate of the father, the mother and the three adult children. The beneficiaries of The Lin Family Trust No 2 are the those members of the family, and, the fourth defendant Luxtron Pty Ltd. That is a company owned and controlled by the mother.
This proceeding is targeted at the older son and the two replacement corporate trustees of which the older brother is sole director and shareholder. As an alleged accessory to wrongdoing, it is also targeted at the seventh defendant (the older brother’s share trading) company for wrongful and knowing receipt of trust funds appropriated by the older son from the family trusts. In essence, the declaratory relief sought in the proceeding, if granted, would result in the removal of the replacement trustees for breach of fiduciary duties at the hands of the older son as the controller, and the restoration of the original trustees to office so as to enable the mother to regain control of the two family trusts. It would also result in an accounting of the profits made by the older sons’ share trading company.
I shall avoid a detailed recital of the statement of claim. It is sufficient to summarise the principal allegations against the older son as follows.
The plaintiffs allege that the father became very ill in 2016 and that he had impaired mental capacity. He died in December 2016. Before then, on 27 June 2016, the father as Appointor under the two original trusts apparently signed a Deed of Resignation and a Deed of Appointment to make the older son the Appointor of both trusts. The older son, they allege, then made a Deed of Appointment and Removal of Trustee which had the effect of removing the original trustees and replacing them with the replacement trustee companies. That put him in control.
As a first limb of the claim, the mother and younger brother say that at the time of transferring control to the older brother, the father lacked the mental capacity and understanding of the meaning and effect of deeds that he signed. The plaintiffs’ case is put on a plea of undue influence, non est factum (‘it is not his deed’), or as resembling a case of equitable fraud by the older son in exploiting his father’s impaired faculties and his inability to conserve his own interests or the interests of others he was bound to serve as trustee.
As a second limb to the plaintiffs’ claim there are allegations of three wrongful appropriations of money by the older son from trust funds belonging to the Lin Family Trust No 2. It is alleged these occurred without the knowledge and consent of his mother who is the sole shareholder and director of the fourth plaintiff, the trustee. The first appropriation was $74,000 in October 2016 to his share trading company (the seventh defendant) for the purposes of share trading. That company is not a beneficiary of the family trusts. The second alleged appropriation was a transfer of $1.1 million from trust funds that occurred in May 2017 into the account of his share trading company. A third transfer of $150,000 is alleged to have occurred in July 2018. The older brother says the transfers were a loan from the trustees and the money has been paid back.
The relief sought by the plaintiffs is predominantly declaratory. Some of the declarations concern declarations concerning ownership of land in Dandenong and Frankston. That part of the claim does not concern the affairs of the family trusts and can be put to one side. Other declarations are sought concerning the three transfers of money by the older brother. The plaintiffs seek recovery of those ‘impugned’ transfers under statutory compensation provisions or as equitable compensation. They are restorative remedies. They also seek an account of profits gained by the seventh defendant as an accessory to the wrongdoing for the knowing receipt and use of those appropriated trust moneys.
The remaining declarations are significant as a matter of legal relations – see paragraphs E, F and G of the claim for relief. The plaintiffs seek a declaration that the Deeds of Resignation and Appointment executed by the father are invalid and ought be set aside. In the alternative, the plaintiffs seek an order that the replacement trustees be removed as trustees of the two family trusts and be replaced with the original trustees or independent trustees appointed by the Court. Such orders would remove the older brother as controller of the family trusts and reinstate the mother as an independent person as being in control.
The defence
The defence filed on behalf of the older son and the replacement trustees and the share trading company is expressed as being prepared by the older son. It is subject to widespread attack by the plaintiffs on the grounds that its contents are scandalous, embarrassing or irrelevant. They ask the Court to strike out those contents. Apart from those parts of the defence under attack, the essential elements of the defence can be isolated and summarised as follows:
(a) the older brother says that after his younger brother moved out of the family home, he, the older brother, became the sole carer for his later father and his mother for almost 15 years;
(b) for all but two years, his older sister ‘was never home to look after our parents or assist with family business works’;
(c) he started assisting his father on all family business since 1995 and helped resolve family disputes which occurred whilst his father was still alive;
(d) his mother has shown signs of memory loss since 2018 and does not understand what other people tell her and is vulnerable to exploitation by others;
(e) in the financial affairs of the trusts, he says there were ‘obviously incorrect’ balance sheets in the 2015 financial year which would result in financial losses for him from past accumulated cash entitlements and other financial losses; whereas his older sister would obtain major financial benefits from the incorrect financial statements;
(f) he says his father had full mental capacity to execute the Deed of Resignation and the Appointment of Appointor and ‘was fully aware of what was happening around him’, and ‘has mental capacity, English capability and fully aware of his own decisions’;
(g) his sister, ‘using fabricated events and a forged or edited audio recording as evidence’, obtained by deception intervention orders against him to force him out of the family home in 2017;
(h) the sister’s action in organising the sale of a property in Glenroy in November 2017, which had been purchased from funds from both family trusts, led the first defendant to make the decision to change the trustees;
(i) he says there was no basis to impugn any of the transfers of money because the mother at all times acquiesced in him having sole conduct of the affairs of both family trusts and, the moneys were loans that were fully repaid;
(j) the mother is under the influence of the daughter ‘and has been continuously been deceived by plaintiffs’ solicitor Francis Lim, who continued to provide [the mother] advice with questionable intent’; and
(k) even if any of the defendants acted in breach of trust, they acted honestly and reasonably and ought fairly to be excused for any such breach.
The plaintiffs filed a reply on 10 April 2020. That pleading is dominated by a response that much of the defence is embarrassing and ought be struck out. Otherwise, in essence, the reply states:
(a) the father’s conditions of Parkinson’s disease started to deteriorate from 2014 but was able to take care of himself until late 2015, by which time the mother was his main carer ‘except when he went out to visit his doctors accountants or solicitors’;
(b) the father became very sick in May 2016 and the older son ‘did some errands for him and did what the Deceased instructed him to do’ and ‘It was only after May 2016 when the Deceased became very sick that [the oldest son] became more involved with the business of the two Family Trusts which was mainly leasing of commercial properties through leasing agents and collecting rent’.
Thus, and avoiding the details, the two essential issues on the pleadings are:
(a) the enforceability of the Deeds of Appointment and Deed of Resignation; and
(b) the ‘impugned’ three transfers of money by the older son from the two trust estates and the use of those moneys by the older son’s share trading company for profit.
The mother says she wants to regain control of the two family trusts through the original trustee companies so she can sell the trust assets, wind up the family trusts and distribute the funds amongst the beneficiaries, along with a distribution of the estate of her deceased husband. The older brother wants to remain in control of the family trusts through the replacement trustees. He says wants to amend ‘The obviously incorrect FY 2015 balance sheets on all Lin Family related entities’ which he says, if left uncorrected, will result in his sister wrongfully obtaining the ‘major benefit’ at the expense of other family members, and to clarify what he says are the entitlements of family members. Further, he says his mother has come under the influence and control of his sister who is pursuing control of the family trusts in order to secure a greater proportion of the benefits than she is entitled to.
In addition, and as a recurrent theme throughout all his material, the older son is uninhibited in accusing and traducing the plaintiffs’ solicitor Mr Francis Lim, by accusing him of deceiving the mother (Mr Lim’s own client) and giving her advice with ‘questionable intent’, and telling the mother not to cooperate with her older son, as well as accusing Mr Lim of failing to inform the Court of various matters. He has filed long and discursive affidavits and written submissions alleging criminal fraud and conspiracy by the plaintiffs’ solicitors, his sister and his younger brother in pursuing this case against him at the expense of his mother’s proper understanding. He casts unpleasant and, I think, nasty aspersions.
I mean no disrespect to the older son, for discordant family affairs and fights can, when they enter the arena of litigation naturally lead to overwrought and obsessive accounts and personal attacks. But his corpulent materials in this case are heavily loaded with widespread and irrelevant content. One succinct example of the repeated allegations is contained in an email from him to the Court saying: ‘My mother continued to signing so many unknown legal documents including Affidavits without properly understanding what they are. This is why I kept fighting; not just to clear my name, but also for my mother who is unable to protect herself!’[1] This is a consistent theme in the older brother’s material going back to a letter he wrote to the plaintiffs’ lawyers (prior to this proceeding being issued) in March 2018 saying: ‘I replaced the trustee; as I can’t allow my mother to make random decisions while being deceived’.[2]
[1]Dated 4 May 2020.
[2]Paragraph 1 of page 53 of exhibit SHL-20 to the older son’s affidavit of 4 Dec. 2019.
Judging by the materials, in psychologic terms, the older brother reveals a very strong loyalty to his parents and sees himself as his father’s successor. He expresses this through control of the family trusts (which are named after his father) which he says was bestowed on him by his father. The fact of his mother suing him for return of control of the family trusts is, in this psychological picture, a sign of disloyalty and can only be understood by him as a conspiracy of others hoodwinking her. This informs his deep-seated need for his mother to remain loyal to the deceased father and his legacy. He sees himself as continuing this legacy. Hence he is adamant in his defence of his actions and his mother’s innocence, and vehement in his accusations of his sister and the mother’s lawyers who he thinks are engaged in conspiracy and fraud. This state of affairs has resulted in the older son’s material containing large amounts of irrelevant matters, (mainly historical events of family disputation and sibling rivalry) and open attacks on the integrity of the plaintiffs’ solicitors which, expectably, the solicitors have counter attacked and seek to have struck out as scandalous and vexatious.
In this judgment on the present interlocutory applications, the Court will not refer in any detail to this vast amount of his irrelevant material. As a stream of consciousness there is far too much of it to digest and assimilate. I shall confine myself in this judgment to salient facts, and to keep steadily in mind the two essential legal issues in the case which of themselves ought not be complicated, that is: ought the deeds be set aside as the product of undue influence, and did the older son make the three transfers of trust funds to the seventh defendant for his own benefit and were those transfers impugnable as a breach of trust or otherwise contrary to the fiduciary obligation?
The applications
There were five interlocutory applications made to the court. The first was an application by the relevant defendants for particular discovery of three classes of documents under rule 29.08. That application is made under a summons filed on 8 November 2019. It was filed by solicitors who later ceased acting.
The second application was a two-fold one by the plaintiffs for leave to amend their statement of claim (for a third time, and predominantly to insert a claim in equity for an account of profits from the use of appropriated trust moneys), and, for further discovery of documents from the relevant defendants referable to four categories of documents. That application was made by summons filed on 12 November 2019. The application for leave to amend the statement of claim was opposed at a time when the older son was represented in court by counsel. I granted leave to amend on 27 February 2020. So that application is out of the way. A third amended statement of claim was filed on 28 February 2020.
The third application is the hearing of objections made by the plaintiffs under rule 42A.08 to four subpoenas filed by the older son requiring production of documents to the Prothonotary. Three of those subpoenas were filed on 31 October 2019. They were addressed to the Commonwealth Bank, Victoria Police and the ANZ Bank. The fourth subpoena was filed on 26 November 2019. It was addressed to the National Australia Bank. The subpoenas are not confined to paper documents. The subpoena to the National Australia Bank sought CCTV footage of the reception area of a branch of the bank in Box Hill and audio recordings of telephone calls made by the older brother to a department of the National Bank. The subpoena to the Police sought audio recording of an emergency 000 call, as part of the saga in family relations which I will come to later. The subpoena to the ANZ Bank also sought CCTV footage.
To all of those subpoenas, the plaintiffs lodged letters of objection with the Prothonotary under Order 42A. They objected to inspection of any documents produced on the subpoenas on the grounds that the subpoenas served no legitimate forensic purpose, or were frivolous or vexatious and an abuse of process or were in the nature of a fishing expedition. Although the letters of objection speak of inspection of any of these documents, it appears to me that the objection really goes to the legitimacy of the subpoenas, principally on the grounds that they are vexatious or serve no legitimate forensic purpose. Thus, the appropriate remedy in that event on the objections would be for the Court ‘on its own motion or on the application of any party or of any person having a sufficient interest to set aside the subpoena in whole or in part or grant any other relief in respect of it’.[3]
[3]See rule 42A.01(2) and rule 42.04.
The fourth application is made by the plaintiffs to strike out the defence that was filed in response to the third amended statement of claim. That pleading was prepared by the older brother, after the defendants’ solicitors had ceased acting. But he has prepared the defence by building on further content to the pre-existing pleading. It was filed on 23 March 2020. It was filed not only for himself but on behalf of the two replacement trustee companies and his share trading company. All of those defendants are corporations of which he is sole director.
A good part of the plaintiffs’ application to strike out parts of the defence is made on the basis that the substantial amendments to the defences were scandalous, frivolous, vexatious or would otherwise prejudice, embarrass or delay the fair trial of the proceedings.[4] The plaintiffs attacked the defence as having contents that have the apparent purpose only of abusing or injuring the plaintiffs and making allegations that are indecent or offensive or scandalous that extend to attacking the integrity of the plaintiffs’ solicitors.
[4]See rule 23.02.
The fifth application is not made by summons but arose as a matter of necessity. It is an application by the older son for a dispensation with the requirements of rule 1.17(1) which states that ‘Except or otherwise provided by or under any Act or these Rules, a corporation, whether or not a party, shall not take any step in a proceeding save by a solicitor’. The relevant corporations are the two replacement trustees and the seventh defendant, the older brother’s share trading company. Although the plaintiffs originally objected on the ground that the older brother has shown himself to be not competent to prepare his own legal documentation or to responsibly conduct legal proceedings and he is therefore not suitable to, in effect, be acting for those companies, they have since then taken the position of leaving it to the court to determine where the interests of justice lie on the application for dispensation from this rule. That is they neither consent or oppose.
It is necessary to see these five applications in the context of the antecedent procedural history. This is to demonstrate that this proceeding has become protracted and disorderly and is descending into, as the older son once put it – ‘a street fight’. Whilst both sides struggled to contain their angst, the older son’s affidavits are particularly long, discursive and contain much that is irrelevant or worse. That all means, I think, that in this judgment, which of course requires analytical observance, the time has come for direct and resolute ‘no nonsense’ decision making to advance this case so that it can proceed to trial in a stable condition.
A brief procedural chronology
Although proceedings were commenced in June 2018, it was not until May 2019 that the Court was able to make routine procedural directions for discovery, a private mediation and a directions hearing in the Trusts Equity and Probate List. Affidavits of documents were filed by both sides following which a private mediation failed and new solicitors were appointed to the relevant defendants.
On 20 September 2019, the Court made orders for specific discovery by both the plaintiffs and the relevant defendants. Importantly for present purposes, those orders required the plaintiffs to make discovery of: ‘All written correspondence from or on behalf of the Plaintiffs or their solicitors to Morrows Accountants relating to the Lin family and the accounts of Lin family entities’.
As a result of those orders further affidavits of documents were filed by both the plaintiffs and the defendants. Requests were also made for further particulars of the pleadings. On 31 October 2019, the defendants issued the subpoenas to the police and the banks.
A directions hearing was heard before Moore J of the Trusts, Equity and Probate List on 1 November 2019. Three subpoenas had already been issued. The issue of discovery was still unresolved. Orders were made for the parties to issue cross applications for particular discovery.
The defendants filed their application on 8 November 2019. The plaintiffs filed their application on 12 November 2019. Those applications were listed before a Judge of the Trusts, Equity and Probate List on 6 December 2019. In between these dates the defendants issued their fourth subpoena to the NAB. On 6 December 2019, McMillan J ordered the discovery applications be listed before an Associate Judge on 27 February 2020 on an estimated hearing time of one hour. I cannot resist saying that this estimate given to the Court was not realistic. Added to the two discovery applications were the plaintiffs’ objections to the relevant defendants’ four subpoenas.
The cumulative applications resulted in a number of affidavits being filed. Before the Court for the 27 February 2020 hearing were written submissions from both sides as well as the following affidavits from the plaintiffs:
(a) 31 October 2019, sworn by Mr D Lim, the plaintiffs’ solicitor;
(b) 18 December 2019, sworn by the mother;
(c) 7 February 2020, sworn by Mr F Lim, the plaintiffs’ solicitor; and
(d) 21 February 2020, sworn by the younger brother.
The written submissions from plaintiffs’ counsel are dated 4 December 2019 and 25 February 2020.
For the defendants the following affidavits were sworn by the older son:
(a) 8 November 2019;
(b) 4 December 2019;
(c) 15 February 2020; and
(d) 26 February 2020.
The 27 February hearing
The Court convened on 27 February 2020 to hear three applications: the relevant defendants’ application for rule 29.08 discovery; and the plaintiffs’ application for leave to amend their statement of claim and for further discovery from the relevant defendants; and the plaintiffs’ objection to inspection of the four subpoenas.
The hearing on 27 February 2020 was dominated by discussion of the plaintiffs’ proposed amendments to the statement of claim. The application to amend was opposed by counsel then acting for the defendants. The amendments sought were not elaborate. They were confined to an allegation that money wrongfully transferred from the family trust to the seventh defendant, East Ocean Investments Pty Ltd, was applied by the transferee for profit. There was a concomitant amendment to make a claim for an account of profits from the recipient.
The amendments, I found, were sound as a matter of composition and legal competence. I made orders that day to allow the plaintiffs to file and serve that amended statement of claim with consequential orders for the defendants to amend their defence. The remaining applications for further discovery and objections to subpoenas were adjourned to a date to be fixed and subsequently listed for hearing on 6 May 2020.
Events after the 27 February hearing
Very soon after, on 2 March 2020 the defendants’ lawyers filed a Notice of Ceasing to Act. The older son became a litigant in person acting not only for himself but for second, third and seventh defendants are companies. He was told he had to apply for leave to represent those companies and obtain a dispensation from compliance with rule 1.17(1).
On 23 March 2020, the older brother filed an amended defence to the amended statement of claim for himself and the relevant defendants. The amended defence is 25 pages. Although it is based on the prior defence prepared by his previous lawyers, it contains much additional material.
On 1 April 2020 the Court made orders, in the predicament of the COVID-19 pandemic, for the remaining applications to be determined on written submissions. Further orders were made on 28 April and 6 May to deal with procedural issues. The conduct of the case then descended to my Chambers being used as a clearing house or wrestling ring for argumentative and combative e-mails between the parties.
The written submissions filed as a result of the 1 April orders have raised further disputations. The plaintiffs seek to strike out various paragraphs of the amended defence under rule 23.02, and object to the contents of two affidavits and their exhibits from the older brother, filed on 1 May and 24 May, on the grounds of admissibility and relevance.
As a result of the unruly correspondence, resulting extensions of time and proliferating applications, on 6 May the Court adjourned the pre-determined date for deciding the remaining matters to a date to be fixed, and for the decisions to be made ‘on the papers’. Therefore, to add to the material before the Court at the 27 February hearing and paper warfare, the following materials are also before the Court:
(a) the affidavit of Tsai Mei Chuan Lin, the mother, sworn 10 April 2020;
(b) the affidavit of Shih-Kai Lin, the younger brother, sworn 10 April 2020; and
(c) the plaintiffs’ written submissions dated 14 May 2020;
(d) two affidavits of Shih-Hsien Lin, the older brother, affirmed 1 May and 24 May; and
(e) written submissions of the older brother dated 2 May 2020.
The plaintiffs’ application for further discovery
The plaintiffs’ application for further discovery from the defendants seeks documents referable to four categories as described in a document awkwardly titled ‘Annexure A Schedule of Proposed Defendants’ Further Discovery Categories’ as referred to in the summons. The first and second categories relate to the change of control of the family trusts from the mother and father into the hands of the older brother in 2016 and 2017. The plaintiffs seek correspondence and preparatory documents for: the father’s resignation deed and appointment of the older brother in 2016 (category 1); and, the removal of the old and appointment of the replacement trustee companies in 2017 (category 2). The plaintiffs say that despite the discovery of many trust documents by the older son, no documents have been discovered by the defendants that relate to the transfer of control of the family trusts.[5]
[5]Plaintiffs’ affidavit of 31 October 2019, pars 5 to 16.
The third and fourth categories follow the plaintiffs’ amendments to their statement of claim in relation to the two transfers of money from the family trust to the older brother’s share trading company, East Ocean Investments. In particular, the plaintiffs seek documents that show: the transfers as being a loan; who authorised the loans; what East Ocean Investments did with the money; what profit was made as a result; any documents that show whether the money was repaid; how much was repaid; and, whether this included interest.
The plaintiffs say, as would be expected, that the older son controls the trusts and would have many trust records yet no documents have been discovered on matters described in these categories.[6]
[6]Plaintiffs’ affidavit of 31 October 2019, pars 17 to 28.
First and second category
For these categories, the older brother says[7] he has discovered the Deed of Resignation and Appointment of Appointer and that is all that is required. He then says he has already discovered documents that answer those categories. The documents he refers to in his affidavit of documents[8] as answering the category are copies of the Deeds, as well as email exchanges with the NAB dating from March to April 2016, a facsimile between his mother and a lawyer in November 2017, and handwritten notes (translated into English), also from November 2017. The older brother then says[9] there are no other documents to discover for those categories but he agrees to ‘look through those documents still unsorted’. The older brother’s 14 February 2020 affidavit repeats the assertions of the 4 December affidavit.[10] He also states that there are a ‘large volume of documents scattered in different locations with quite driving distances’.[11]
[7]Paragraphs 26 to 30 of his 4 December 2019 affidavit.
[8]Sworn 16 July 2019: documents 141, 142, 144, 145, 146, 157, 158 and 159.
[9]At paragraph 34 of his 4 December 2019 affidavit.
[10]See in particular paragraphs 30 to 61 of the 14 February 2020 affidavit.
[11]Paragraph 38 of the 14 February 2020 affidavit.
The transfer of control of the family trusts by way of the father’s Deeds of Resignation and Appointment is the predominant issue in this case. The plaintiffs say these deeds are invalid and seek to have them set aside so as to return control of the family trusts to the mother. Thus, the facts and circumstances concerning the procuration and making of the deeds are squarely in the field of pre-trial discovery of facts and documents and it is reasonable for the plaintiffs to undertake pre-trial investigation of facts and documents including properly called ‘trust documents’.
On the pleadings, these categories as sought by the plaintiffs are unquestionably relevant. It is reasonable to suppose there would be preparatory documents for the Deeds as well as subsequent documents allowing, for example, access to bank accounts. Indeed, the older brother doesn’t say there aren’t any more documents. Rather, he says there are more documents but they are unsorted and it will take him time to go through them. This appears to be an oppression point, but it is no basis for resisting further discovery, especially as he is in control of the family trusts.
In my view this application is justified plainly on the cardinal ground of relevance and high importance for the major issue of the validity of the deeds. The resistance to discovery is not valid. I will allow the application for further discovery from the relevant defendants for these categories. If there are more documents to sort and review in order to satisfy this category, as the older brother says, then time will be given him to do this. If, as a result of that process, there are no more documents to produce in answer to the category then the affidavit shall, as the rule requires, say so.
Third and fourth category
In his 14 February 2020 affidavit (which repeats the assertions of his 4 December 2019 affidavit) the older brother’s resistance is put on two grounds. The first is that he has already discovered documents that fit those categories.[12] The documents in the first discovery affidavit are cheque butts, bank statements and term deposit documents for the second family trust; and in the second discovery affidavit, a tax invoice for a car and the older brother’s records of telephone calls with an accountant between 27 February 2019 and 1 March 2019.
[12]See paragraphs 31 and 32 of the 4 December 2019 affidavit, citing documents 147, 156 and 184 of the first discovery affidavit, and documents 22 and 23 of the second discovery affidavit; paragraphs 45-46 of the 14 February 2020 affidavit, citing the same documents.
The second ground of resistance is that the documents would reveal business secrets.[13] The older brother says the dividends from East Ocean Investments, the seventh defendant, are his only source of income. The trading information contained in the documents would reveal his assessments and strategies and could be used, he says, by another trader to make money for themselves or be used against him. He goes on to say[14] that categories 3(c) and (d), and 4(c) and (d) are ‘irrelevant, oppressive and no forensic purpose’. This is despite already asserting in his 4 December 2029[15] affidavit that there are no more documents while also saying that he will need time to go through unsorted records to see if there are more documents.
[13]See paragraphs 49-51 of the 14 February 2020 affidavit.
[14]Ibid, paragraph 54.
[15]At paragraph 34.
In my view the documents sought are relevant. The manner in which money has been transferred from the family trust to the older brother’s share trading company, and whether it has been repaid, is squarely in issue. Of particular relevance is not only the characterisation of the money (that is, whether it was a loan and, if so, a loan on what terms?), but how the money was used by his company as recipient. If the money has been used to generate profits or a gain or benefit, then equity regards these profits as within reach of a claim for breach of fiduciary duty.[16] This was the principled basis for allowing, at the 27 February 2020 hearing, the amendments to the statement of claim. These categories of discovery follow those amendments. They are certainly relevant and of substantive and forensic significance to the plaintiffs.
[16]See Finn, Fiduciary Obligations, Ch. 18, [239]-[242]; Dal Pont Equity and Trusts in Australia (5th ed) [24.75]; and Singh v Singh [2001] VSC 82, [20].
The older brother’s resistance to discovery of these categories on the grounds of oppression appears to turn on the question of who has access to the documents. He fears the loss of trading information to rivals could result in those rivals benefiting at his expense. This strikes me as dubious. One rival in particular is named, that of the husband of his sister (his brother-in-law) which suggests his objection is part attributable to the family feud.
This ground of resistance was raised in the hearing of another subpoena objection before another Associate Judge of the Court on 5 September 2019. The orders made by the Judge on that occasion allowed for a restricted inspection regime whereby access to the documents was restricted to the relevant lawyers. A similar form of order can be fashioned for use in this situation to answer the older brother’s concerns.
There is a suggestion in the older brother’s materials that it would be impossible to trace what profit was made from those funds as the trust money was mixed in with other pre-existing money to create profits. Mixing may well have occurred, but before then the documents sought are those which show the application of the impugned funds and documents showing the financial returns that accrued before mixing.
The Court will allow the plaintiffs’ application for further discovery from the defendants for these categories. The orders will include an inspection regime that directs inspection, copying and access to the documents in response to categories 3(c), 3(d), 4(c) and 4(d) of Annexure A will be restricted to the plaintiffs’ lawyers. This ought mollify the older brother’s concern about his trade secrets.
The defendants’ application for particular discovery under rule 29.08
The defendants’ application for rule 29.08 discovery seeks discovery of a series of emails passing between the plaintiffs’ lawyers and the family trusts’ accountants, Messrs Morrows. It also seeks a specific email dated around 26 or 28 February 2018 from the younger son and the plaintiffs’ lawyers; and ‘all written communications’ between the sister and the plaintiffs and the plaintiffs’ lawyers.
The older brother says, in an affidavit sworn 8 November 2019, that the emails in the first two categories are relevant to whether the Deeds of Resignation and Appointment were validly executed and not tainted by the older brother’s undue influence. The last category – all written communication between the sister and the plaintiffs and/or the plaintiffs’ solicitors – is sought on the grounds of his stated belief that his sister has been and is still influencing the mother unduly in the conduct of this litigation.
This last category exemplifies the twists and intra-familial nature of this case. On the one side, the older brother is defending allegations by his mother and younger brother that he unduly influenced his father shortly before his death, and that is a key plank of the plaintiffs’ claim for the replacement trustees to be removed. On the other side, he is seeking documents that he says will support his allegation of the ongoing undue influence of his sister on his mother – a key plank of his defence that he should remain in control of the family trusts so as to keep them out of reach of his sister.
First category: emails between the plaintiffs’ lawyers and the accountants acting for the family trusts
This category is addressed in paragraph 7, 8 and 9 of the older brother’s affidavit of 8 November 2019. The older brother says the plaintiffs have discovered an email dated 5 September 2018 from the plaintiffs’ solicitors to the accountants (‘Morrows’) acting for the family trusts.[17] That e-mail attaches a letter. The older brother says no reply to that email has been discovered. He asserts it is likely there is a reply email. He also says he received an email from Morrows on 16 October 2018 in which Morrows say copies of the Deeds of Resignation and Appointment of Appointor were provided that day to the mother’s solicitor. From this, the older brother asserts there must be more emails in possession of the plaintiffs from Morrows about the family trusts which have not been discovered, or, that the e-mail is part of a chain of email that haven’t been discovered by the plaintiffs.
[17]See affidavit of documents sworn 24 October 2019, Schedule 1, item No 6.
The younger brother’s affidavit affirmed 21 February 2019 exhibits that 16 October email from Morrows to the plaintiffs’ solicitors.[18] That particular e-mail was not discovered in the plaintiffs’ second affidavit of documents sworn 24 October 2019. What is apparent is that there were fourteen e-mails passing between the plaintiffs’ solicitors and Morrows from 9 July 2018 to 11 October 2018. They have been discovered. What can be accepted is that one more e-mail of 16 October 2018 also passed from Morrows to the plaintiffs’ solicitor which was not originally discovered. But it has now. It is hardly the proverbial ‘smoking gun’. It does no more than attach copies of the Deeds of Resignation and Appointment of Appointor for each of the family trusts. In addition, the relevant chain of e-mails dated 6 October, 8 October, 11 October, and 16 October 2018 were attached, in full, to the plaintiffs’ written submissions of 14 May 2020. The younger brother has also sworn that there are no other emails or letters between the plaintiffs, their lawyers and the family trust accountants.
[18]At paragraph 4.
Thus the upshot is that the absence of the 16 October e-mail was rectified on affidavit prior to the hearing. That should have been the end of the matter. As for the email of 5 September 2018, the assertion by the older brother that there must be a reply is no more than an assertion. The sworn evidence from the plaintiffs is to the contrary.
For those reasons there are no grounds for an order for further or particular discovery.
Second category: a specific email dated around 26 or 28 February 2018 from the younger son to the plaintiffs’ lawyers)
This category is addressed in paragraphs 4, 5 and 6 of the older brother’s affidavit of 8 November 2019. The older brother says he has a specific memory of the email which was shown to him by his mother in May 2018. In his affidavit of 1 May 2020 the older brother says he has found the note on which he wrote down some of the contents of the email.[19] He notes the time, the email addresses, and then paraphrases some of the contents. The older brother then says:[20]
Those contents on the first few pages of this email contained no challenge as to my late Father’s mental status or mental capacity; therefore indicating not only no one in my family made any such challenge during my late father’s final year of life, nor did anyone made such challenge more than a year after his passing.
[19]At paragraphs 33-37.
[20]At paragraph 35.
He then quotes a section of what he wrote on the note which contains reference to an ‘interim order’ (presumably an intervention order that the materials show was obtained against him as part of the family conflict) and probate (presumably a reference to the Letters of Administration granted to the mother).
The asserted relevance of this email is in relation to the impeachability of the Deeds of Resignation and Appointment. The older brother says that the email from the younger brother does not contain any reference to, or express any concern over, the mental capacity of the father before his death. Therefore, its relevance is presumably its absence of concern by the younger brother as positive evidence of the father’s mental capacity. This looks like an attempt to adduce evidence of the absence of a prior consistent complaint, the use of which can be dubious in non-criminal cases.
In his affidavit of 8 November 2019,[21] the older brother notes that the younger brother was not a party to this proceeding at the time the email was written (the email was written in late February 2018 and this proceeding was initiated in June 2018). Further, the older brother says the email was shown to him by his mother (in May 2018) and in doing so any privilege attached to the email has been waived. The written submissions filed by counsel for the defendants for the 27 February 2020 hearing makes the submission that if the Court is satisfied that the email is relevant and not privileged, the Court can order discovery without having to finally determine the question of whether or not it exists.
[21]At paragraph 6.
The plaintiffs’ solicitor, Mr Francis Lim, says that he has no record of the email.[22] Further, Mr Lim says he has no email from the younger brother prior to April 2018. The younger brother’s evidence confirms the evidence of Mr Francis Lim, saying ‘I did not send any email to my solicitors … prior to April 2018’.[23]
[22]At paragraph 5 of his affidavit of 7 February 2020.
[23]See his affidavit of 21 February 2020, at paragraph 5(b).
The mother’s initial evidence was equivocal. In her affidavit of 18 December 2019,[24] she denies showing the older son an email and then states: ‘I do not know how Shih Hsien managed to read a copy of the said e-mail’. However, in a subsequent affidavit of 10 April 2020, the mother states: ‘I was unsure if such an email exists but I am sure I did not show him any email from Shih-Kai [the younger brother]’.[25]
[24]At paragraph 7.
[25]At paragraph 28.
All three deponents claim privilege in the event the email does exist.
The plaintiffs’ have already gone on oath to say the email does not exist. Any order for discovery of this email will simply result in more affidavits saying the same thing. The evidence from the older brother does not rise to showing that the opposing evidence ought not be accepted on objective grounds, and it appears prima facie that the disclosure of the communication would be privileged from production on the ground of client legal privilege. Accordingly, I would refuse the application for specific discovery of this category.
Third category: ‘all written communications’ between the sister and the plaintiffs and plaintiffs’ lawyers’
This category is addressed in paragraph 10 and 11 of the older brother’s affidavit of 8 November 2019. The older brother says: ‘I believe that the plaintiffs and their solicitors have been communicating extensively with Shu Chen [the sister] about the issues in the proceeding…’. He then recites instances in which his sister accompanied the mother on various attendances and gave her assistance, for example, with visits to the Box Hill branch of the National Australia bank and more seriously, arranging legal representation for her mother in Magistrates’ Court hearings in 2017 and 2018 in which the mother, and then the daughter, sought intervention orders against the older son under the Personal Safety Intervention Orders Act. He attaches significance to the fact that his sister (also known as Jenny Lin) is copied in to e-mail communications between the plaintiffs’ solicitors and Morrows, the accountants. In the older brother’s later submissions of 2 May 2020, he asserts that the plaintiffs’ affidavit cannot be relied upon, before going on making acrimonious allegations against his sister such as: ‘Shu-Chen exercises control over my mother that she effectively conducts this litigation for her own benefit’.[26]
[26]At paragraph 59.
The plaintiffs acknowledge there are documents that fit in to this category of documents as sought by the older son. The mother has denied what her son says adversely about the relationship between her and her daughter, and swears that her daughter assists her in communications between the mother and the plaintiffs’ solicitors ‘with the focus of dissolving the two family trusts’ a matter in which the daughter has a common interest, and an interest therefore adverse to her older brother’. She objects to discovery and inspection of this category of documents on the grounds of client legal advice privilege.[27]
[27]Paragraph 10 of her affidavit of 18 December 2019.
The plaintiffs’ solicitor Mr Francis Lim confirms that the mother is not a competent user of email and he sometimes communicates with her via email with the assistance of the daughter. He reiterates resistance to this category on the grounds of privilege.[28] He swears that all his communication to and from the daughter can be categorised in two classes: first, the daughter conveying instructions from her mother for the dominant purpose of obtaining legal advice; or, for the purposes of this litigation; and secondly, the daughter providing evidence as a witness in the litigation.
[28]Paragraph 8(h) of F Lim’s affidavit of 7 February 2020.
There is no distinct response from the older brother to these legal grounds of resistance to discovery, or more appositely, inspection. At a time when the older brother had legal representation, his counsel’s submissions of 26 February 2020 (at paragraph 22(c)) submitted that the documents are not privileged as they are not relevant to the issues in the proceeding prior to the amended state of claim of April 2019. As I follow this, it is saying that nothing is privileged before April 2019, at which time the dissolution of the two family trust was not sought as a remedy.
On the available evidence, whatever the evolution of the contents of the statement of claim, it is clear enough that the communication between the daughter and Mr Lim have the daughter in effect being the conduit for the mother as client, and the communications from Mr Lim as being of a confidential nature for the dominant purpose of providing legal advice.
An argument could be had whether the documents sought ought be discovered, leaving the question of privilege as a basis for resisting production. For reasons referable to my opening remarks about the troubled state of this litigation, I think there is no point ordering discovery when on the evidence the documents are, on the available facts, bound to protected from inspection on the evidence already adduced on this application. Moreover, this pursuit of discovery is not for a matter in issue, but as part of the older brother’s campaign against his sister and the plaintiffs’ lawyers. Thiscategory of discovery will be refused.
I turn now to the objections to the subpoenas.
The plaintiffs’ objections to the Victoria Police subpoena
The subpoena to Victoria Police Centre requests ‘2. Audio recording, in relation to 000 call made on 18 September 2017 from (03) 9836 6771 by Tsai Mei Chuan LIN or any other named person.’
The older son’s justification for this subpoena is stated in paragraphs 73 to 84 of his affidavit sworn on 14 February 2020 affidavit which has 34 exhibits. In that affidavit, he traverses a series of events that culminated in his mother obtaining an intervention order against him, as well as other events to do with the sister also applying for an intervention order against him under the Personal Safety Intervention Orders Act and bringing another Supreme Court proceeding against him over a property in Glenroy.
The older son’s affidavit shows just how hostile and tragic the family relations have become and how, so I would discern, that state of affairs has come to inform the defendants’ conduct of this case. I shall avoid the details of the older son’s 14 February affidavit and summarise it in the following way.
He says older son says that on the afternoon of 18 September 2017 he had an argument with his mother because she threw away ‘old family business documents without letting me check what she thought were useless old papers’. He says that during the argument she threatened to call the police in anger. She later she made a 000 telephone call. This led to him and his mother attending the Magistrates’ Court the following day in which, I gather, the Court made an interim intervention order of sorts which included an order that ‘the respondent and the applicant are not to discuss estate matters or trust business with each other in the absence of their lawyer or accountant’. The matter returned to court on 31 October 2017. On that occasion, his sister was in attendance with a barrister. The tension had escalated to the point of the mother requiring the older son to leave the family home unless he complied with certain demands, which he was unwilling or unable to do. He says that ‘later that morning, someone approach police, fabricated an event; and then used police to push for a full no‑contact order’. It is not clear, but I gather that an intervention order was then made against him. The insinuation in his materials is that the moving force for these intervention orders was his sister, who herself applied for an intervention order against him.
So what is the purpose of the subpoena to Victoria Police? After giving his account of the applications for intervention orders against him, the older son says:
This 000 phone call will proof and clarify many things; or at a minimum, will answer the question of whether my mother was really in physical danger, or was just angry at me when she made the phone call.
In Matthews v SPI Electricity Pty Ltd (No 12),[29] the relevant principles in determining whether a party is entitled to access documents the subject of a subpoena were summarised by Derham AsJ in this way:[30]
[29][2014] VSC 131.
[30]At [9]; see also Volunteer Fire Brigades Australia Inc v Country Fire Authority [2016] VSC 573 at [55] per J Forrest J.
(a)It is necessary for the party at whose request this witness summons was issued to identify expressly and precisely the legitimate forensic purpose for which the documents is sought;
(b)The identification of such a legitimate forensic purpose is to be considered by the court without inspecting the documents sought to be produced;
(c) The applicant for the witness summons must also satisfy the court that it is “on the cards”, or that there is a “reasonable possibility”, that the documents sought under the subpoena “will materially assist the defence”;
(d)A “fishing expedition” is not a legitimate forensic purpose and will not be permitted;
(e) The relevance of a document to the proceeding alone will substantiate an assertion of legitimate forensic purpose. There is no legitimate forensic purpose if the party is seeking to obtain documents to see whether they may be of relevance or of assistance in his or her defence;
(f)A mere assertion of bad faith by an applicant or that something might be found demonstrating bad faith is not enough – the criteria set out in (c) must be satisfied;
(g)In criminal proceedings a “more liberal” view is taken by a court in respect of the application of the test. Special weight is to be given to the fact that the document may assist the defence of the accused; and
(h)Where a party fails to demonstrate a legitimate forensic purpose, the Court should refuse access to the documents and set aside the witness summons.
To these consideration, the Court must also consider the now well-known provisions and ethos of the Civil Procedure Act, and its overarching purpose and obligations.[31]
[31]Volunteer Fire Brigades Australia Inc v Country Fire Authority [2016] VSC 573 at [56] per J Forrest J.
The plaintiffs object to this subpoena on the grounds that there is no legitimate forensic purpose for the documents as no part of the pleadings brings into issue the 000 call. The written submission provided by the older son’s Counsel (when he was acting for the 27 February 2020 hearing) contended that the issue of the influence of the sister on the mother (who was a director of the original trustees) was relevant to the dispute, and therefore provided a legitimate forensic purpose for the subpoena.
By his own revelation, the older son has filed this subpoena to see or show if his mother ‘was really in physical danger, or was just angry at me when she made the phone call.’ That is, he wants to show that the intervention order was not sought in good faith, or perhaps at the urging of his sister. This has nothing to do with the issues in the case which concern the validity of the deeds and the impugned transfers of trust moneys.
The plaintiffs’ objection to the subpoena is sound. Although the plaintiffs’ objection is to the inspection of any documents produced on the subpoena, then as I said in the beginning of this judgment, if the subpoena is not legitimate then the appropriate order is to it set aside as an abuse of process. I will order that this subpoena be set aside.
The plaintiffs’ objections to the ANZ Bank subpoena
The subpoena to the ANZ seeks documents or records (including CCTV footage) in relation to: an ‘Online Saver Account’; an ‘Access Advantage Cheque Account’; and,
4. Any records, statement, bank card number, any digital ID/or transaction ID referring to the bank card chip, memo, file note, receipt, CCTV footage including any records in your backup / achieve system in relation to withdrawal of a sum of $4,000 from ANZ Account (No. xxxxxx-xxxx xx451) made on 22 September 2016 over the counter at ANZ Box Hill Branch (situated at 10 Main Street, Box Hill VIC 3128), which could be used to identify the person who made the over-the-counter withdrawal in person by: (a) Wen-Chih LIN, not anyone else.
The written submissions provided by the older son’s counsel for the 27 February 2020 hearing say the relevance of the subpoena is the mental capacity of the late father.
Of course, the father’s mental capacity is squarely in issue in this proceeding on the question of the validity of the deeds. Questions of mental capacity or impaired faculties in cases of undue influence and non est factum are not uncommon in family based or deceased estate litigation. Such cases come to depend on medical, observational and circumstantial evidence of a person’s mental capacity and vulnerability. The evidence may be direct or by inference.
The deeds were made in June 2016. The withdrawal of money referred to in the subpoena was on 22 September 2016. In paragraph 19 of the older son’s amended defence he says ‘…the deceased had full mental capacity to execute the Deed of Resignation and Appointment of Appointor’. To that statement, he gave these particulars:
(1)St Vincent’s hospital has at least 3 mental tests of the Deceased during April - August 2016. Both Tsai Mei and Shih Hsien were present when these tests were done.
(2)The Deceased exercised his independence by not obeying instructions from Physiotherapist at St Vincent’s hospital. Tsai Mei and Shih Hsien were present when the Physiotherapist refused to continue treat the Deceased.
(3)In mid-July 2016, after the 2nd plaintiff found out that Deceased had appointed Shih Hsien as the new Appointor; 2nd plaintiff had a dispute in Surrey Hill Home in front of the Deceased & Tsai Mei; On 27 July 2016, the Deceased recorded Video message to Shih Kai demonstrating that the Deceased was fully aware of what was happening around him.
(4)On 22 September 2016; the Deceased went to ANZ’s Box Hill Branch and made an o0ver [sic] the counter withdraw of $4,000 cash by himself without assistance showing his mental capacity.
Thus it appears this subpoena is referrable to an element, or circumstantial fact, of the defence. Consistently with paragraph (4) of those particulars, the older son’s affidavit of 14 February 2020 states[32] that he accompanied his father to the ANZ Bank on 22 September 2016 when his father went to the teller and withdrew $4,000 cash, an act which required his father to swipe his card and key in his PIN number. He says the father then counted the $100 bills, put them in his wallet and put the wallet into his walking frame. From this, the older son is taken to be saying that if his father had the ability to personally administer that transaction, then that is evidence to challenge the allegation that his father lacked the capacity to execute the deeds of resignation and appointment.
[32]At paragraphs 62-65.
Of course, it may not follow that an ability to withdraw cash from a bank account therefore means the father was not under the older son’s undue influence in signing the deeds, which is a radically different act or test of mental capacity. But that would be a matter for trial and weighing up all the evidence from others about the father’s mental capacity to understand the nature and effect of legal documentation that seriously affected rights and entitlements.
The subpoena is referrable to something explicit in the defence. The plaintiffs submit there is no forensic purpose to this subpoena. I think there is some forensic purpose. Of itself it does not demonstrate capacity but the subject matter of the subpoena looks to prove what the older son will say is some evidence of capacity for a trial Court to consider. Whether or not, with other evidence, that is so will be a matter for the trial Judge to weigh up together with all the other evidence.
Therefore I will disallow allow the plaintiffs’ objection to this subpoena.
The plaintiffs’ objections to the CBA subpoena
The subpoena to the CBA was issued on 31 October 2019. It seeks any documents or records (including CCTV footage) in relation to the freezing in January 2018 of an account in the name of Luxtron Pty Ltd. That company is the fourth defendant. It is a beneficiary of the second family trust. It is controlled by the mother.
The older son’s affidavit of 14 February 2020 recites details of events involving his mother and bank transactions involving her company Luxtron at the Box Hill branch of the CBA in January 2018.[33] He says that he discovered that Luxtron’s account at the bank had been frozen ‘… after My Sister took My Mother to see one of their managers; had a chat; the Manager then frozen the Luxtron’s bank account afterwards’. He says the subpoenaed documents are relevant to the issue of his sister’s influence on his mother. Although Luxtron is a party to this proceeding, there are no allegations associated with the company or its bank accounts.
[33]At paragraph 70-72.
The written submission provided by the older son’s Counsel for the 27 February hearing identify the issue of the influence of the sister on the mother as relevant to the dispute and consequently providing grounds for saying there is a legitimate forensic purpose for the subpoena. I do not think that any ‘influence’ of the daughter on the mother is of any relevance to the principal issues of the validity of the deeds, or on the issue of the three impugned transfers. It will not be a matter of substantive evidence. At best, it might go in some way to trial Judge’s assessment of credibility or reliability of the evidence given by members of the family at trial. I take leave to say that as I judge the materials and the turmoil and the animosity, it is predictable that the daughter will say that she was protecting her mother in a situation where, rightly or wrongly, she viewed her older brother as acting improperly with the financial affairs of the family and serving his own interests.
I think there is no true legitimate forensic purpose to this subpoena. It is part of his personal campaign against the sister, and does not inform the two issues in the case. The plaintiffs’ objection will be upheld. I will order that this subpoena be set aside.
The plaintiffs’ objections to the NAB subpoena
The subpoena to the NAB seeks documents or records (including CCTV footage) of interactions of various members of the family and the NAB in relation to the accounts of the original trustee companies. The subpoena states specific dates on which the interactions are said to have occurred in the period between 23 March 2019 to 30 April 2019.
Again, the written submission provided by the older son’s Counsel for the 27 February hearing identifies the issue of the sister’s influence on the mother as giving the legitimate forensic purpose of seeking the documents under this subpoena. Again, the older brother’s affidavit of 14 February recites details of events that culminate with allegations of the sister’s influence on the mother.[34]
[34]At paragraphs 85-89.
For the same reasons given for setting aside the CBA subpoena, in my view there is truly no legitimate forensic purpose to this subpoena, and it will be set aside.
The plaintiffs’ application to strike out various parts of the defence
The Court’s order made 27 February 2020 allowed the plaintiffs to amend their statement of claim and consequently required the defendants to provide an amended defence. That was filed on 23 March 2020. In between those two dates the defendants’ solicitor filed a notice of ceasing to act.
The older brother, having become a litigant in person, filed an amended defence not only for himself but also on behalf of the second and third corporate defendants (the replacement trustees) and the seventh corporate defendant (his share trading company). Under rule 1.17 of this Court’s rules of civil procedure, ‘a corporation … shall not take any step in a proceeding save by a solicitor’. I shall deal later with the question whether there ought be a dispensation with this rule so as to allow the older son to act for the companies in this litigation. In weighing up the considerations for granting such a dispensation, the plaintiffs’ application to strike out a good part of the defence will come to inform the question whether the older son should be given leave to take steps for the conduct of this proceeding on behalf the other relevant defendants, rather than by a solicitor as the rule requires.
The older son’s defence is 25 pages long. Although it is based on the prior defence that had been prepared by his previous lawyers, he has added contents that go beyond responding to the plaintiffs’ amendments. Indeed, he states in paragraph 94 of his 2 May 2020 written submissions: ‘There was no mention in the order [the Court’s order made 27 February] that new defence must be limited to the new amendments made to the Statement of Claim’. Taking that liberty has now resulted in a widespread strike out application.
The amended defence makes changes that are mainly additions to the previous defence. These amendments clearly shows the hand of the older son. Of course allowances have to be made for a litigant in person and he ought not to be judged according to the standards of pleading expected of qualified lawyers. But, pleadings are an essential part of the fair conduct of litigation and the ultimate basis of the Court’s adjudication. Under rule 23.02 if any part of a pleading is scandalous, frivolous or vexatious or if it may prejudice, embarrass or delay the fair trial of the proceeding, then the Court may order that the whole or part of the pleading be struck out.
The contents of the defence repeat many of the older son’s personal grievances. The principal focus of his defence is to propound accusations against the integrity of plaintiffs’ lawyers in their conduct of the case, and against his sister in conspiring to hide matters from his mother. His charge of conspiracy against them ranges from not advising the mother properly on family trusts matters to falsifying affidavit evidence. The amended defence also contains a complaint that the amendments made to the statement of claim (the third in the proceeding) have not been marked up in accordance with the rules (specifically, rule 36.05); that is, all amendments corresponding to the various historical iterations should be displayed, not just the most recent amendments. In that regard, the originating motion was filed on 1 June 2018 with a statement of the relief or remedy sought; the first statement of claim was filed on 23 November 2018; an amended statement of claim (the second) was filed on 6 May 2019; and the current (third) version of the statement of claim was filed on 2 March 2020.
As a matter of presentation and readability, I think it is pardonable that the third amended pleading did not show (in multi coloured underlining) all of the previous series of amendment in their various types and forms. The document would have become awfully congested with strike throughs of redundant material.
This is a technical and pointless complaint. There is no disadvantage. Leave to amend having been granted, it is the latest amended pleading that counts. The third amended statement of claim dated 28 February 2020 was only slightly amended from its predecessor, and its authors identified the amendments. The older son has no grounds for complaint about the form or content about that pleading. Having filed a defence to that amended statement of claim, it is the defence to that latest pleading that now attracts attention.
The defence has 28 paragraphs. On my count, the plaintiffs seek to strike at 33 components of the defence. Their grounds of attack are stated in paragraphs 14 to 18 of their written submissions dated 13 April 2020 and are also to be found in plaintiffs’ reply to the defence filed on 10 April 2020. Broadly speaking, they seek to strike out content of the amended defence that is either scandalous because it attacks the integrity of the plaintiffs’ lawyers, or is embarrassing, or is irrelevant. To that I would add that the defence ‘pleads’ matters of evidence not facts; makes commentary; is argumentative; and will not focus on the two principal issues in the case concerning the validity of the deeds and the impugned payments, but seems to be more concerned with personal grievances.
The plaintiffs’ complaints about the older son’s amended defence mirror their complaints about the admissibility of the affidavit material that he filed in response to the strike out application. The plaintiffs have objected to the admissibility of the entirety of the older son’s affidavits of 1 May 2020 and 24 May 2020 on the grounds it contains scandalous, vexatious and irrelevant allegations. On the same grounds they have also objected to older son’s submissions dated 2 May 2020 and its exhibits.
History has repeated itself. This propensity of the older son to adduce material that attracts immediate objection by the plaintiffs on the grounds of being scandalous, vexatious and irrelevant was present at the time of the hearing of 27 February 2020. At that time the older son was represented by solicitors and experienced junior counsel. For that hearing the older son had filed four affidavits dated 8 November 2019, 4 December 2019, 14 February 2020 and 26 February 2020. The older son’s counsel for the 27 February hearing withdrew reliance on thirteen parts of the 14 February affidavit which attacked the integrity of the plaintiffs’ lawyers and made accusations against them and his sister of conspiring to hide matters from his mother and fabricating affidavit evidence. That withdrawal was a necessary concession and enabled the 27 February 2020 hearing to proceed in an orderly manner. Now, with an amended defence, there is a reintroduction and expansion of the same sort of material that had previously been withdrawn. For the present application, the older son’s affidavits of 4 December and 14 February 2020 are long rambling affidavits that re‑heat the same personal grievances. They are riddled with inadmissible material.
The older brother’s submissions in response to the strike out application are contained in his written submissions of 2 May 2020,[35] which culminates in the statement: ‘That plaintiff’s case is the one liable to struck out’. The older brother then responds paragraph by paragraph.
[35]At paragraphs 93 to 132 and 134 to 135.
I will say again that allowances have to be made for litigants in person. But the precepts of procedural fairness must prevail to prevent unfairness to the plaintiffs. In adjudicating interlocutory applications, there must be a keen eye to enabling the conduct of a fair and orderly trial. I think there is a serious problem in this case, not apparently attributable to the plaintiffs, which has caused great labours in these interlocutory applications, and it will impair its progress to trial. There is now a quagmire of materials that has caused much heat but no light. To allow pleadings to remain in an intolerably unsatisfactory state only makes matters difficult and frustrating at trial.
I think the plaintiffs’ exceptions to the contents of the defence are justified variously on the grounds of being scandalous, irrelevant and vexatious and being preoccupied with personal grievances. But, requiring the older son to re-write his defence will likely result in a reproduction of the same grievances. That will result in further objections, then further affidavits containing more objectionable material, and then further delays while those objections are heard and determined, followed by another round of re‑writing.
What is the course that will help minimise delay and disorder? I think the situation calls for an extraordinary or customised approach on the application to strike out many parts of the amended defence. It will be tedious in a judgment to go through each of the 33 objections one by one with an individualised narrative and determination. A different type of judicial intervention is called for.
In these trying circumstances, I have taken a photocopy of the amended defence as filed. Then, in red ink, as a surgical exercise, I have actually put a line through the contents of the defence that in my view ought be struck out under rule 23.02 on the various grounds put forward. Out of fairness to the older son, I have made the strike outs with a view to preserving material facts that go to the essential two issues in the case. I trust that demonstrates that I am not pleading the case for him. Administering the strike-out of the defence in this this way means, I trust, that the plaintiffs’ existing reply will still correspond and ‘match’ the undisturbed paragraph numbering of the defence.
Usually when a court strikes out the whole or part of a pleading, leave is given to re‑plead to enable a litigant to rehabilitate the pleading and not shut out a case sought to be made. In this case, with the extraordinary measure I have taken, I will not give leave to re-plead either carte blanche or in some specific way. The defence with the struck out parts as shown will stand as the defence. If the older son wishes to amend it again, he may apply in the ordinary way on summons for leave to amend for which he will have to furnish a proposed amendment.
This experience with the defence leads conveniently to the related question whether the older son should be given leave to take steps on behalf of the second, third and seventh corporate defendants, or whether they need to appoint solicitors to enable the fair and proper conduct of the case from now on.
The older son’s application for a dispensation from rule 1.17(1) so as to represent the second, third and seventh defendants
The rule is ‘Except where otherwise provided by or under any Act or these Rules, a corporation, whether or not a party, shall not take any step in a proceeding save by a solicitor’. I take leave to refer to observations I have previously made about this rule in The Big Apple Group Pty Ltd v Melbourne City Council[36] referring to the Victorian Court of Appeal decision in Worldwide Enterprises Pty Ltd v Silberman[37]:
[36][2019] VSC 147.
[37](2010) 26 VR 595.
[The rule] is not based on a technicality. It is recognised as being based on considerations central to the proper administration of justice, and the position of the other party to the litigation. By that is meant the public interest in ensuring litigation is properly conducted by those with an understanding of the legal issues and Court procedures and ethical duties to the Court and professionally trained or expected to: adduce only relevant documents; adduce and test relevant undocumented facts; expose the applicable law; and not propounding a case or defence that lacks a tenable basis.
…
The informing policy of rule 1.17 is that the benefits of incorporation bring with it the burden of having regard to the other party’s interests in litigation by not permitting the corporate litigant to conduct litigation without legal representation.
…
Otherwise, in Worldwide Enterprises v Silberman the following considerations were identified as informing the exercise of discretion to dispense with the rule:
(i)the manner in which the case has progressed at the time that the application for dispensation is made;
(ii)the manner in which the case can proceed in the future without a solicitor;
(iii)the complexity of the issues involved in the case;
(iv)whether the lack of disciplinary measures in relation to the person seeking to represent the company will affect the administration of justice;
(v)whether the case can be conducted in an orderly and responsible fashion without a solicitor;
(vi)whether there are financial considerations which would inhibit a company from obtaining legal representation;
(vii)the stage which the case has reached;
(viii)whether the defendant is likely to expend more funds in defending the claim absent a solicitor acting for the company; and
(ix)what effect, if any, permitting a company to appear without a solicitor will have on court resources and, particularly, the effect upon other litigants in the court list.
Following those considerations, the following can be said, bearing in mind that the older son’s previous solicitors ceased acting on 2 March 2020, the same day as the third amended statement of claim was filed.
The case is presently ‘stuck’ in the present controversies. There appear to have been delays attributable to both sides as the case changed shape and seemed to expand. Many affidavits, with much inadmissible material, have been filed by the older son. Relations between the older son and the plaintiffs’ solicitors appear to be combative, although I would say that the plaintiffs’ solicitor have had to endure many disparagements and denouncements from the older son about their conduct of the case. Co‑operation will be difficult.
The two issues in the case do not strike me as especially complicated, at least in the hands of competent lawyers receiving reliable instructions. The future progress of this case is in danger of becoming retarded, if it hasn’t already, by the pleadings and discovery issues and the underlying personal enmity shown by the older son. This danger of more delay and paper warfare intensifies when the older son says there are more boxes of trust documents yet to be sorted and discovered. This factor escalates with the plaintiffs’ claim for an account of the profits gained by the seventh defendant (the older son’s share trading company) from the application of trust funds. The older son has resisted discovery on that aspect of the case, saying it would be too difficult to separate one income stream of his share trading business in order to identify the derived profits.
One possibility is to give the seventh defendant (the share trading company) a dispensation from compliance with rule 1.17. As I see it, that company is the older son’s alter ego and he will therefore be fully conversant with the history of its financial dealings, whereas a lawyer, at much expense, will have to spend time, with his assistance in understanding the dealings in detail from corporate documents.
The Court could then insist on compliance with rule 1.17 only for the two replacement trustee companies. Assuming proper instructions, this would assist in proper professional attention being given to the two substantive issues of the case. But that would come at a cost to be borne by the trust funds, which would see a reduction in amounts available for distributions to beneficiaries. And even if the replacement trustees act by a solicitor, the older son remains a defendant personally and is not bound to appoint a solicitor and therefore is under no professional guidance in abstaining from repeating the baseless and scandalous allegations of impropriety against the plaintiffs’ lawyers, which has been productive of so much delay.
There is no evidence on the financial position of either the trust companies or the older brother’s share trading company except that the share trading company is his only source of income. The plaintiffs have chosen to not oppose the application and say nothing about impact on future distributions. As things stand, on 3 May 2019 Moore J made numerous procedural orders on an undertaking given by each of the replacement trustees (as were legally represented by solicitors and counsel) to not, without the consent of the plaintiffs, disburse or distribute any funds of the two family trusts except for proper trust expenses and liabilities and certain distributions. Thus it seems to me, unaided by anything from the plaintiffs, that it comes to this: where lies the interests of justice, having regard to the issues in the case and its very unstable history and the desideratum of reducing future delay? This is a matter of judgment and weighing up the competing considerations.
First of all, I think the seventh defendant, the share trading company ought be given a dispensation from rule 1.17. That company is, as I have said, the older brother’s alter ego and he will know its financial affairs intimately. The least troublesome course is to allow him to act for the company as its sole director and shareholder.
Secondly, the headline issue in this case is the validity of the Deeds of Resignation and Appointment. The case against the older son is that those deeds were procured by his undue influence over his father, with the result that the older brother gained control of the family trusts by means of the appointment of the replacement trustees. Thus, there are prevailing ’clouds’ over the older son’s position as controller of the trusts, and there is the prospect of the appointment of the replacement trustees being annulled if the deeds are invalid. That being so, and bearing in mind the fiduciary quality of the office of trustee, there is a qualitative legal tension in having the older brother acting for the replacement trustees without a solicitor in this litigation where his own conduct and validity of appointment is in issue.
My judgment is that in this state of affairs, combined with the disorder in this litigation so far, the replacement trustees really should have solicitors acting. I realise that, (unless the plaintiffs are going to dispute this) it will mean legal costs being paid from the trust estate and that will reduce whatever money is available for distribution. But, I urge, this case cannot keep going the way it has been going without a solicitor acting for the replacement trustees rigorously applying the obligations and ethos of the Civil Procedure Act. I see no other way to try and stabilise and advance this case, and above all, to get it into a state fit for a fair trial. Accordingly I would refuse the application to relieve the replacement trustees from compliance with rule 1.17. They must not take any step in the proceeding except by a solicitor.
I think to enforce rule 1.17 could assist another possible step. And that is mediation. I have ascertained from the Court file that a mediation was conducted by Mr William Lye QC on 11 September 2019 at the Law Institute of Victoria Mediation Centre. The mediation concluded without a resolution on Friday 13 September 2019. However, in a letter to the Prothonotary from the mediator the mediator reported:
Unfortunately, the Matter did not resolve to the satisfaction of the parties despite narrowing all the differences between the parties to only 1 principal matter. If that issue could be resolved, it would not only resolve this proceeding but the other Supreme Court proceeding Number S CI 2018 01192.
For as long as the older son remains a defendant in person it will not be possible to have a judicial mediation in this court. But, requiring the replacement trustee companies to have solicitors could enhance the prospects of another attempt at private mediation. I think such a prospect, in addition to the other factors I have identified, leads me to conclude that there ought be no injustice in insisting on compliance with rule 1.17 for the second and third defendants.
Costs
The orders I have provided invite the parties to file written submission on the question of costs. To that end, there are some matters that ought be exposed presently.
In his submissions of 2 May 2020, the older son asks that ‘any costs awarded against the plaintiffs be awarded against their legal representatives’.[38] That application is said to be under Order 29 of the civil procedure rules. It appears to be based on a complaint about delay caused by the plaintiffs’ amendments to their statement of claim since the commencement of the proceeding.
[38]See paragraphs 135 and 136.
Order 29 of the Court rules deals with discovery, not costs. The older son could be directed to s 29 of the Civil Procedure Act. That provision deals with sanctions for contravening the Act’s overarching obligations. Section 29(1)(a) gives the Court the power to make ‘an order that the [contravening] person pay some or all of the legal costs or other costs or expenses of any person arising from the contravention of the overarching obligation’. This section of the Civil Procedure Act is compensatory in nature and only arises in the event of the Court finding a breach of the overarching obligations.
The older son could also be directed to rule 63.23 of the Court rules. That rule allows the Court to order that a solicitor for a party pay costs ‘incurred improperly or without reasonable cause or to be wasted by a failure to act with reasonable competence and expedition’. That is, maybe this submission is saying: if the Court makes an order for the plaintiffs to pay some or all of the costs of the many applications, the Court should order that they be payable by the plaintiffs’ solicitors, not the clients – the clients being his mother, younger brother and the original trustee companies.
The substance of the complaint from the older brother appears to be delay.[39] He says that the interlocutory process in this action is being carried out by the solicitor for the plaintiffs in a manner that is unnecessarily extending the process and in a manner that is oppressive to the defendants. The plaintiffs’ lawyers deny there are any grounds for an order of that sort saying there is no evidence of ‘a serious dereliction of duty’.[40]
[39]See paragraphs 57 to 61 of his 24 May affidavit.
[40]See paragraph 13 of their submissions of 14 May 2020.
Beyond what is shown in this judgment, I will not conduct a judicial enquiry into the procedural timeline of this proceeding. I have seen enough in the determination of the applications to conclude that it would be unfair to attribute the delay to the plaintiffs’ lawyers. I think the delay is begotten of the nature of the case, the family enmity, and the conduct of the case largely by the older son attributable to the maintenance of his personal grievances and being an unrepresented litigant. Further, there have been no orders made so far for costs against the plaintiffs in the interlocutory journey. On 5 September 2019, Lansdowne AsJ made a costs order against the older son and his share trading company on a subpoena objection. On all other applications, costs have been reserved.
The orders I have made invite sequential submissions on costs from the parties. For the benefit of the older son, I should state there are no immutable rules about liability for costs. It is a matter of discretion. But, the discretion is seen to be appropriately usually exercised on the basis that costs follow the outcome, unless the ‘winning’ party has somehow conducted itself for the purposes of the application to make it unjust to obtain an order for some or all of its costs. In that regard, on the remaining submissions there should not be a repetition by the older son of the contention that the plaintiffs are undeserving of costs on the grounds of delay or the conduct of their solicitors. I have already stated there are no grounds for that contention.
The plaintiffs’ have been successful on the mutual discovery applications, the strike out application, and successful on all but one of the four subpoena objections. All that was non adversarial was the application by the replacement trustees and the share trading company for dispensation from the requirement under rule 1.17 for a solicitor to be acting for those companies. The plaintiffs took a neutral position on that application, leaving it as a matter for the Court to decide. That application can therefore be treated as being unopposed and to be decided on the Court’s perception of the outcome best serving the administration of justice and the fair conduct of the eventual trial according to the circumstances and the conduct of the case so far.
I am disposed to make an order that there should be no order for costs on the application of the seventh defendant for a dispensation from compliance with rule 1.17. That was an indulgence sought, and given. Likewise, I am disposed to order that there shall be no order for costs for the refusal to grant a dispensation for the replacement trustee companies. Both these matters are not concerned with the merits of the case.
Written submissions are be directed to the costs of the remaining applications. I ought give an indication of matters that ought be considered. First, I would need a lot of persuasion to award costs on anything but the standard basis. Secondly, the plaintiffs have been successful except on the objection to the inspection of the ANZ subpoena. Is there any reason why costs should not follow the outcome of each application? If so, how is the isolated outcome on the ANZ subpoena to be treated? Is it de minimis? What costs has the older son, as litigant in person, incurred anyway? Thirdly, does the Court have to concern itself with any collateral question whether costs against the trustee companies are payable from the trust estate?
As the Court’s orders show, the parties now have the opportunity to file successive written submissions (which I would emphasise must not exceed two pages) on the question of costs, including the questions I have raised.
SCHEDULE OF PARTIES
| S CI 2018 02053 | |
| BETWEEN: | |
| TSAI MEI CHUAN LIN (in her own capacity and as administrator of the estate of Wen Chih Lin, Deceased) | First Plaintiff |
| SHIH-KAI LIN | Second Plaintiff |
| JAVELIN TOWNS PTY LTD (in its own capacity and as trustee for The Lin Family Trust) | Third Plaintiff |
| W.C. LIN NOMINEES PTY LTD (in its own capacity and as trustee of The Lin Family Trust No. 2) | Fourth Plaintiff |
| - v - | |
| SHIH-HSIEN LIN | First Defendant |
| WEN CHIH LIN MEMORIAL PTY LTD (in its own capacity and as trustee for The Lin Family Trust) | Second Defendant |
| WEN CHIH LIN MEMORIAL PTY LTD NO. 2 (in its own capacity and as trustee for The Lin Family Trust No 2) | Third Defendant |
| LUXTRON PTY LTD | Fourth Defendant |
| REGISTRAR OF TITLES | Fifth Defendant |
| SHU-CHEN LIN | Sixth Defendant |
| EAST OCEAN INVESTMENTS PTY LTD | Seventh Defendant |
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