Lin v Lin (No 2)
[2022] VSC 542
•16 September 2022
| 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 others (according to the attached schedule) | Plaintiffs |
| v | |
| SHIH-HSIEN LIN and others (according to the attached schedule) | Defendants |
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JUDGE: | McMillan J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 17, 18, 28 February and 1 March 2022 |
DATE OF JUDGMENT: | 16 September 2022 |
CASE MAY BE CITED AS: | Lin & Ors v Lin & Ors (No 2) |
MEDIUM NEUTRAL CITATION: | [2022] VSC 542 |
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TRUSTS – Appointment of appointor of two discretionary trusts – Validity of deeds of appointment of appointor – Interpretation of trust deed – Principles of construction of trust deed – Plain and ordinary meaning of words used in trust deed – Byrnes v Kendle (2011) 243 CLR 253 – Schreuders v Grandiflora Nominees Pty Ltd [2016] VSCA 93.
LACK OF CAPACITY – Whether deceased lacked mental capacity to appoint defendant as appointor of discretionary trusts – Standard of mental capacity required – Whether deceased was capable of understanding general purport or broad operation of deeds of appointment – Distinction between lack of capacity and plea of non est factum – No finding of mental incapacity – Gibbons v Wright (1954) 91 CLR 423 – Petelin v Cullin (1975) 132 CLR 355.
UNDUE INFLUENCE – Whether deeds appointing defendant as appointor of discretionary trusts were the product of undue influence – Whether relationship of presumed undue influence existed – Whether transaction explicable on other grounds – Whether deeds of appointment invalid as a result – No finding of undue influence – Johnson v Buttress (1936) 56 CLR 113 – Thorne v Kennedy (2017) 263 CLR 85.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr F Lim, solicitor | Francis Lim Barristers & Solicitors |
| For the First and Seventh Defendants | In person[1] |
[1]Although Mr Shih-Hsien Lin, the first defendant, appeared in person and during the trial also represented the seventh defendant, the first and seventh defendants’ closing submissions dated 14 April 2022 were prepared by counsel.
HER HONOUR:
Introduction
This proceeding primarily concerns the control and administration of two family trusts established in 1989 and 1990 (‘the family trusts’). Issues of the rightful legal and beneficial ownership or co-ownership of two properties also arise, albeit peripherally. This is the second judgment in the proceeding. In the first judgment Mukhtar AsJ correctly described the proceeding as ‘an acrimonious dispute amongst members of a Taiwanese-Australian family’.[2] Many facets and details of the dispute, though described at great length in the voluminous evidence put forward by the parties over the four years that the proceeding has been on foot, are not of relevance to the issues with which these reasons are concerned. However, elaboration of some events and details is necessary to provide sufficient context and background to the issues addressed by these reasons.
[2]Lin & Ors v Lin & Ors [2021] VSC 53, [2] (Mukhtar AsJ).
Apart from the fifth defendant, the parties are members of the family in question and corporate entities controlled by these family members. Broadly, the plaintiffs challenge the validity of the first defendant’s appointments as appointor of the family trusts on the grounds of undue influence and/or lack of mental capacity. They also seek to impugn the first defendant’s subsequent actions in removing and replacing the original trustees of the family trusts, and in making three transfers of trust funds. Further, they challenge the defendants’ assertions that properties located in Frankston and Dandenong and owned by members of the family were purchased with loans from the family trusts and are therefore the legal and beneficial property of the family trusts, instead alleging that the properties were purchased with beneficiary distributions.
The first and second plaintiffs, Tsai Mei Chuan Lin (‘the mother’) and Shih-Kai Lin (‘Shih-Kai’), are the mother and the younger son of the family, respectively. The third and fourth plaintiffs, Javelin Towns Pty Ltd (‘Javelin Towns’) and W C Lin Nominees Pty Ltd (‘W C Lin Nominees’) are the original trustee companies (together, ‘the original trustee companies’) (collectively, with the mother and Shih-Kai, ‘the plaintiffs’).
The first defendant, Shih-Hsien Lin (‘Shih-Hsien’), is the older son of the family, and the second and third defendants, Wen Chih Lin Memorial Pty Ltd (‘Memorial No 1’) and Wen Chih Lin Memorial No 2 Pty Ltd (‘Memorial No 2’) are the replacement trustee companies and under the effective control of Shih-Hsien (together, ‘the replacement trustee companies’). The seventh defendant, East Ocean Investments Pty Ltd (‘East Ocean’), is an investment company of which Shih-Hsien is the sole director and shareholder. Shih-Hsien, the replacement trustee companies and East Ocean are the active defendants in the proceeding. The fourth, fifth and sixth defendants, respectively Luxtron Pty Ltd (‘Luxtron’), the Registrar of Titles and Shu-Chen Lin (‘Shu-Chen’), the daughter of the family, are not actively defending the proceeding, and have instead been joined as necessary and proper parties, so as to be bound by the outcome of the proceeding. Shu-Chen Lin (‘Shu-Chen’) gave evidence for the plaintiffs.
The relief sought by the plaintiffs is primarily declaratory in nature. It includes declarations of invalidity in respect of two deeds which purport to appoint Shih-Hsien as appointor of the family trusts; declarations that two deeds which purport to remove the original trustee companies as trustees of the family trusts and appoint the replacement trustee companies in substitution are invalid and ought to be set aside, alternatively orders for the removal and replacement of the replacement trustee companies; declarations that two transfers of trust moneys made by Shih-Hsien are impugnable as a breach of fiduciary obligations and/or a contravention of directors’ duties under the Corporations Act 2001 (Cth) (‘the Corporations Act‘), as well as orders for the return of trust funds; and declarations of the legal and beneficial ownership in respect of the properties located in Frankston and Dandenong.
Procedural history
Since its commencement in 2018, this proceeding has been characterised by a degree of ‘disorder’[3] with multiple summonses seeking various relief filed by the parties resulting in significant delay and utilising a great deal of the Court’s resources. There appears to be confusion between the parties as to the precise issues that require determination and the sequence in which the issues should be determined. Accordingly, it is useful to provide a brief overview of the conduct of the proceeding to date.
[3]Ibid [134] (Mukhtar AsJ).
The proceeding was commenced by originating motion dated 1 June 2018. The plaintiffs filed their first statement of claim on 23 November 2018. The relief sought in the plaintiffs’ originating motion and first statement of claim was limited to declarations concerning the rightful legal and beneficial ownership or co-ownership of the properties located in Frankston and Dandenong.
In early 2019, after the plaintiffs became aware that Shih-Hsien had removed the original trustee companies as trustees of the family trusts and dealt with trust funds, they sought to expand the scope of their pleaded case to encompass claims relating to this conduct. Following a directions hearing on 3 May 2019, the plaintiffs were granted leave to file and serve an amended originating motion and second amended statement of claim. On 6 May 2019, both documents were duly filed. The parties were also ordered to attend a mediation following the directions hearing on 3 May 2019. A private mediation conducted on 11 September 2019 failed to reach a resolution.
Following a further directions hearing on 27 February 2020, the plaintiffs were granted leave to file and serve their third amended statement of claim, which was filed on 2 March 2020 (‘the statement of claim’). By the statement of claim, the plaintiffs seek the following relief:
(a) A declaration that two deeds which purport to appoint Shih-Hsien as appointor of the family trusts are invalid;
(b) A declaration that two deeds which purport to remove the original trustee companies as trustees of the family trusts and appoint the replacement trustee companies in substitution are invalid, alternatively an order for the removal of the replacement trustee companies;
(c) A declaration that, in making various transfers of trust funds, Shih-Hsien acted in breach of his fiduciary obligations and/or in contravention of directors’ duties under the Corporations Act, and consequential orders for statutory compensation, alternatively equitable compensation or an account of profits;
(d) A declaration that, in respect of one of these transfers of trust funds, Memorial No 2[4] knowingly received trust property, and an order for equitable compensation, alternatively an account of profits;
[4]While the statement of claim seeks such a declaration as against the second defendant, being Memorial No 1, the various references to Memorial No 1 in other parts of the statement of claim in respect of the relevant conduct have all been amended to read Memorial No 2. Presumably, the reference to the second defendant in this part of the prayer for relief is the result of an error or oversight.
(e) A declaration that, in respect of two of these transfers of trust funds, East Ocean knowingly received trust property, and an order for equitable compensation, alternatively an account of profits;
(f) Declarations of legal and beneficial ownership in respect of the properties located in Frankston and Dandenong, alternatively declarations that the properties are held on constructive trust or resulting trust for particular members of the family; and
(g) An order for the return of the original title to the properties located in Dandenong.
On the same day, 2 March 2020, the solicitors acting for Shih-Hsien, East Ocean and the replacement trustee companies filed a notice of ceasing to act and Shih-Hsien became a litigant in person. Shih-Hsien was informed by the Court that he was required to seek leave to represent East Ocean and the replacement trustee companies and to obtain a dispensation from compliance with r 1.17(1) of the Supreme Court (General Civil Procedure) Rules 2015 (‘the Rules’).
Shih-Hsien filed an amended defence to the statement of claim (‘the defence’) on 23 March 2020, purportedly on his own behalf, as well as on behalf of East Ocean and the replacement trustee companies. As Shih-Hsien was a litigant in person, the defence was prepared by him personally and this gave rise to several issues. Not only did the defence recount Shih-Hsien’s many personal grievances against other family members, it also made serious accusations against the integrity of the plaintiffs’ solicitors. The plaintiffs filed their reply to the defence (‘the reply’) on 10 April 2020, which attacked many components of the defence as scandalous, vexatious or irrelevant.
Multiple interlocutory applications were made by both sides in the proceeding. On 15 February 2021, Mukhtar AsJ delivered judgment[5] in relation to these applications and, in addition, addressed discovery applications and objections to subpoenas. His Honour granted the plaintiffs’ application for parts of the defence to be struck out as scandalous, vexatious or irrelevant, pursuant to r 23.02 of the Rules.[6] His Honour also granted Shih-Hsien’s application for dispensation from r 1.17 in respect of East Ocean,[7] but rejected the same in respect of the replacement trustee companies, instead ruling that solicitors were required to be appointed to act on behalf of these entities.[8]
[5]Lin & Ors v Lin & Ors (n 2).
[6]Ibid [120]–[122] (Mukhtar AsJ).
[7]Ibid [132] (Mukhtar AsJ).
[8]Ibid [134]–[136] (Mukhtar AsJ).
At a directions hearing held on 8 September 2021 the Court fixed a trial date in March 2023 and the parties were ordered to attend a judicial mediation. This mediation was conducted over two days, with part occurring on 19 October 2021 and the remainder adjourned to 9 December 2021. No resolution was reached. Subsequently the plaintiff sought an earlier trial date due to the mother’s age and health issues. Shih-Hsien also sought an earlier trial date due to the need to comply with lodgement deadlines with the Australian Taxation Office. As a result, the proceeding was listed for trial over four days in February and March 2022.
On 17 January 2022, the plaintiffs filed their opening submissions, which included an overview of the relief sought and the key matters in dispute. There were several discrepancies between the relief claimed and issues described in these submissions and the matters pleaded in the statement of claim. Some examples include:
(a) While in the statement of claim, the plaintiffs sought damages, equitable compensation and/or an account of profit in respect of Shih-Hsien’s alleged dealings with trust funds, the plaintiffs’ submissions made clear that such claims are no longer pressed. However, it is alleged that a key matter in dispute is whether these transfers are impugnable as a breach of trust, despite no such claim having been previously raised.
(b) No reference was made to the declarations sought and claims made against Memorial No 2 or East Ocean in the statement of claim, and such claims are presumably no longer pressed.
(c) A new claim for relief is made in the form of an order that the family trusts be revoked and wound up pursuant to the inherent jurisdiction of the Court after settling debts, paying taxes and distributing any remaining funds to the beneficiaries.
(d) A new claim for relief is made in the form of an order that the replacement trustee companies return any trust funds received from the original trustee companies and account for any moneys belonging to the original trustee companies.
(e) A new claim for relief is made in the form of an order for the removal of a caveat allegedly lodged by Shih-Hsien over a property in Box Hill.
(f) It is alleged that a key matter in dispute is whether Shih-Hsien is a fit and proper person to be appointed as appointor of the family trusts, and whether he ought to be removed as such, despite the fact that no such allegation was made in the statement of claim.
(g) It is alleged that a key matter in dispute is whether the mother and Shih-Kai owe any money to the first family trust in relation to the purchase of the property in Dandenong, or at all, despite the fact that no such issue was raised in the statement of claim.
The trial commenced on 17 February 2022, and ran over the four days. During the trial, primarily due to the concerns about the complexity of some of the issues raised by the plaintiffs in light of Shih-Hsien’s status as a litigant in person, the lack of consensus between the parties as to the precise issues in dispute, and the time allocated for the trial, the parties were informed that the various issues arising on the statement of claim would be dealt with separately, such that the first part of the proceeding would be focused with the validity of Shih-Hsien’s appointment as appointor of the family trusts. Only those issues that relate to the appointment of Shih-Hsien as appointor will be conclusively determined at this stage, with the remaining issues to be addressed in due course.
Overall, nine separate issues need to be determined. This judgment determines three of the issues framed as questions as follows:
(a) Question 1: Should the appointor deeds be set aside on the basis of a failure to comply with the terms of the deeds of settlement for the family trusts?
(b) If no to question 1 — Question 2: Should the appointor deeds be set aside on the basis that the father lacked mental capacity at the time at which they were executed?
(c) If no to questions 1 and 2 — Question 3: Should the appointor deeds be set aside on the basis that they are the product of undue influence?
Shih-Hsien remained a litigant in person, acting on behalf of his own interests as well as those of East Ocean, from 2 March 2020 until 27 April 2022, except for a brief period up to and including the judicial mediation for which the Court’s Self-Represented Litigants Coordinator arranged for Shih-Hsien to receive pro bono legal assistance. It was only on 27 April 2022 — that is, after the trial had concluded part heard —that the Court was formally notified that Shih-Hsien had engaged new solicitors.[9] Shih-Hsien was therefore largely a litigant in person in the two years prior to the commencement of the trial and throughout the duration of the trial. The Court gave due consideration to the voluminous affidavits relied on by Shih-Hsien and the various interlocutory applications made by him throughout the course of the proceeding. He was given significant latitude during the trial, and afforded all of the allowances which ought to be made for a litigant in person.
[9]On 11 April 2022 Shih-Hsien communicated by email that he had obtained legal advice the previous week and on 14 April 2022 counsel forwarded submissions on behalf of the first and seventh defendants to the Court. However, it was only on 27 April 2022 that a notice of appointment of solicitor was filed by the new solicitors on behalf of the first and seventh defendants.
Factual background
Shu-Chen, Shih-Hsien and Shih-Kai are the adult children of Wen Chih Lin (‘the father’) and the mother (collectively, ‘the Lin family’). The father was born in 1938 and died on 18 December 2016. Letters of administration of the father’s estate were granted to the mother on 24 March 2017. The mother was born in 1941 and is currently 81 years old. Shu-Chen was born in 1971, Shih-Hsien was born in 1972, and Shih-Kai was born in 1976.
In 1989 the Lin family emigrated from Taiwan to Australia, save for Shih-Hsien, who had travelled to Australia two years earlier to complete his secondary school studies. Prior to emigrating, the father worked as a bank manager in Taiwan and had inherited substantial real estate assets, several of which were sold around the time the Lin family moved to Australia. Soon after their arrival in Australia, the father and mother made arrangements for the incorporation of several companies and the establishment of the family trusts. The father’s earnings and inheritance contributed to both of the family trusts and between 1989 and 1999 were used to purchase several properties in Victoria.
Creation of the family trusts
On 6 July 1989 Javelin Towns was incorporated and the father and the mother were appointed as its directors and shareholders on 16 August 1989. Luxtron and W C Lin Nominees were incorporated on 5 July 1990 and 13 August 1990 respectively, and the father and the mother were appointed as directors and shareholders of both companies on 6 September 1990.
On 17 August 1989, the Lin Family Trust (‘the first family trust’) was created by deed of settlement. The schedule to the deed of settlement sets out the relevant details of the first family trust. It identifies Peter Fraser, the father’s solicitor at the time (‘Mr Fraser’), as settlor, the father as appointor and Javelin Towns as trustee, and names the father, the mother and any children of their marriage as the primary and income beneficiaries of the trust.
On 11 September 1990, the Lin Family Trust No 2 (‘the second family trust’) was created by deed of settlement. The schedule to the deed of settlement identifies Mr Fraser as settlor, the father as appointor and W C Lin Nominees as trustee, and names the father, the mother and any children of their marriage as primary and income beneficiaries. However, in addition to the members of the Lin family, Luxtron is also named as a primary and income beneficiary of the second family trust.
The deeds of settlement which establish the family trusts are essentially identical. It is unnecessary to set out the terms of each deed in great detail, however, for the purposes of this proceeding the following clauses are relevant:
(a) The purpose of the family trusts is described at recital I as the settlor’s desire to make provision for the primary and general beneficiaries in the manner set out in the deeds of settlement.
(b) Clause 3 sets out the trustee’s powers and obligations in relation to annual net income determination and dealings with such.
(c) Clause 7 sets out the powers of the trustee, which include, inter alia:
(i) Under clause 7(a), a broad power to apply and invest trust funds at any time, whether productive of income or not, upon such terms and conditions as the trustee thinks fit in its absolute discretion;
(ii) Under clause 7(b), a broad power to advance and lend trust funds to any persons, companies or entities upon such terms as the trustee deems fit;
(iii) Under clause 7(i), a power to invest any part of the trust assets in the purchase of shares or stock in any company or corporation; and
(iv) Under clauses 7(r) and 7(s), a power to invest all or any moneys capable of being invested in any modes of investment or on deposit in any trading or savings bank or financial institution in Australia.
(d) Clause 9 entitles the trustee to exercise all powers and discretions set out within the deed or at law notwithstanding that the trustee, or a director or shareholder of the trustee, has or may have a personal interest in the result of such an exercise of the power or discretion, or may benefit either directly or indirectly as a result of the exercise of the power or discretion.
(e) Clause 13 provides that, subject to any express provision to the contrary, every discretion vested in the trustee is absolute and uncontrolled, and every power vested in the trustee is exercisable at its absolute and uncontrolled discretion. It further provides that the trustee is not responsible for any loss or damage caused by the exercise of a power or discretion.
(f) Clause 15 provides that the trustee may, with the written consent of the appointor, revoke, add to or vary any or all of the provisions of the deed of settlement.
(g) Clause 17(1) provides that the appointor, and on his or her death, such other person or persons as have been appointed to act as appointor (or his or her legal personal representative in default of any such appointment), is entitled at any time by instrument in writing to: (a) remove any trustee; (b) appoint any additional trustee or trustees; and (c) appoint a new trustee in place of any resigning trustee or trustee that ceases to be a trustee by operation of law.
(h) The ninth part of the schedule to both deeds of settlement identifies the father as the appointor of the family trusts, and sets out the following conditions:
Appointor:
Firstly: [the father] but only during his lifetime PROVIDED THAT [the father] may by Deed or Will (whether revocable or irrevocable) nominate any person or persons in substitution for himself to exercise all of the said powers during any period (whether or not extending beyond the life of [the father]).
Secondly: After the death of [the father] THE PERSON OR PERSONS NOMINATED BY HIM as herein before provided.
Thirdly: After death [sic] of [the father] and in default of such nomination by Deed or Will as aforesaid THE LEGAL PERSONAL REPRESENTATIVE of [the father] (or in the event of a dispute between those persons constituting the legal personal representative of [the father]).
(emphasis in original).
On 25 June 2012 deeds of variation were purportedly executed in respect of both of the original deeds of settlement for the family trusts, pursuant to the variation powers set out under clause 15 of the original deeds of settlement. However, presumably due to oversight, only the deed of variation in respect of the second family trust was put into evidence (‘the deed of variation’). The deed of variation varies clauses 1, 3, 7 and 17 of the original deed of settlement to the second family trust, in the following manner:
(a) An additional definition for ‘taxation law’ is inserted in clause 1;
(b) Original clause 3 is deleted and a new clause 3, which sets out the trustee’s powers and obligations in relation to annual net income determination and dealings in greater detail, is substituted in its place;
(c) Paragraph (c) of original clause 7, which provides for the trustee’s power to give any guarantee and/or indemnity for the payment of money or performance of a contract, obligation or undertaking, is deleted and a new paragraph (c) with broader powers in respect of the giving of such indemnities and guarantees is substituted in its place; and
(d) A new clause 17A is inserted after clause 17 of the original deeds, which provides that the legal personal representative of an appointor will act as appointor in circumstances where the appointor becomes incapacitated, for the duration of their incapacity.
Management of the family trusts
The mother deposed that the affairs of the family trusts were solely managed by the father until late 2015, and that she did not play an active role in the management of the family trusts but rather acquiesced to the father having sole conduct in this regard. However, she stated that the father would always speak to her about or inform her of any significant decisions or changes in respect of the family trusts.
The mother’s evidence was that the father prepared the books and kept records for the family trusts, and consulted with and instructed Morrows Pty Ltd (‘Morrows’), the accounting firm responsible for preparing financial reports and tax returns for the family trusts. Financial reports were prepared annually by Morrows for both of the family trusts and approved and signed by the father and the mother, until the financial year ending 30 June 2015.
The mother also gave evidence that distributions to beneficiaries were made annually, but rather than being paid out to the beneficiaries, these distributions were recorded as amounts owed to each beneficiary in the financial statements for the family trusts and taxed accordingly. These unpaid distributions would then be used by the father to pay for the Lin family’s living and medical expenses, the educational expenses of Shu-Chen, Shih-Hsien, Shih-Kai and their children, and to purchase real estate.
In contrast to the mother’s evidence that the father was solely responsible for the management of the family trusts, Shih-Hsien deposed to having provided significant assistance and support to the father in this regard. His evidence was that in or around 1995, he began accompanying the father to all meetings held with Mr Fraser, who at the time had carriage of all matters relating to the business entities operated by the father, including those operated through the family trusts. Shih-Hsien’s evidence was that from this time, he progressively became more involved in the management of the leasing businesses operated through the family trusts, including by assisting with hiring and supervising contractors, fielding and responding to complaints from tenants, and liaising with Mr Fraser and Morrows about legal and financial matters. After the father’s health deteriorated considerably in 2015, Shih-Hsien deposed that he began to collate and store bank statements, invoices and accounting documents and prepare tax returns for the family business entities, including the family trusts.
Purchase of properties in Victoria
Between 1989 and 1999, the Lin family acquired substantial real estate assets in Victoria. The first of these properties, located in Surrey Hills, was purchased by the father and the mother in 1989 for $340,000 (‘the Surrey Hills property’). The purchase was settled on 11 August 1989 and the father and the mother were registered as joint proprietors. Following the death of the father, the mother was registered as the sole proprietor of the Surrey Hills property on 13 April 2017. The Surrey Hills property remained the Lin family’s principal place of residence until March 2019, when it was sold for $2,180,000.
A second property, located in Box Hill, was purchased by W C Lin Nominees for $1,715,000, and settled on 1 November 1990 (‘the Box Hill property’). Part of the purchase price was comprised of funds derived from the second family trust, and the remainder was covered by a loan from the National Australia Bank. The Box Hill property has since been leased to generate rental income, which in turn has covered family expenses through disbursements from the second family trust.
In June 1992, the father and mother purchased a set of properties in Frankston for $2,950,000 (‘the Frankston properties’). Settlement was effected on 29 July 1992, and the father, the mother and Shih-Hsien were registered as joint proprietors. The Frankston properties were subsequently leased and managed as a partnership between the father, the mother and Shih-Hsien (‘the Frankston partnership’). Following the death of the father, the mother and Shih-Hsien were registered as joint proprietors of the Frankston properties on 13 April 2017.
The mother gave evidence that the purchase of the Frankston properties was financed partly with funds contributed by the father and the mother and partly with contributions from the family trusts. The mother deposed that the contributions made to the purchase price by the family trusts were not by way of loan, but rather as gifts, alternatively as distributions made to the father, the mother and Shih-Hsien by the original trustee companies in their capacities as trustees of the family trusts. However, the financial statements of the first family trust for the financial year ending 30 June 2015 record a receivable related party loan in the amount of $1,000,000, owed by the father, the mother and Shih-Hsien.
The mother’s evidence was that her intention and the intention of the father at the time of settlement was that the Frankston properties be solely for Shih-Hsien’s benefit. This intention was supposedly formed after several discussions between the mother and the father which took place at the Surrey Hills property in or around early 1992. The mother deposed that she, the father, and Shih-Hsien were registered as joint proprietors for several reasons, including that:
(a) Shih-Hsien was only 20 years old at the time of settlement, and still studying at university;
(b) It would prevent Shih-Hsien from ‘being cheated of the property’ in the future;
(c) It would enable the father and the mother to protect Shih-Hsien if any claims to the property were to be made following the breakdown of a future marriage; and
(d) It would mean that Shih-Hsien would become the sole proprietor following the deaths of the father and the mother.
A second set of properties was purchased in Dandenong for $970,000, with settlement taking place on 23 December 1994 (‘the Dandenong properties’). The father, the mother and Shih-Kai were registered as joint proprietors of the Dandenong properties. The Dandenong properties were subsequently leased out and managed as a partnership between the father, the mother and Shih-Kai (‘the Dandenong partnership’). Following the death of the father, the mother and Shih-Kai were registered as joint proprietors of the Dandenong properties on 13 April 2017.
The mother gave evidence that the purchase of the Dandenong properties was financed partly with funds provided by the father and the mother and partly with funds taken from both of the family trusts, and also possibly with funds derived from the Frankston partnership. The mother deposed that the contributions made to the purchase price by funds from the family trusts and possibly the Frankston partnership were not by way of loan, but rather as gifts, alternatively as distributions made to the father, the mother and Shih-Kai by the original trustee companies in their capacities as trustees of the family trusts. Her evidence was that, although she was unsure of how the funds were treated for accounting purposes, she had no knowledge of any loan being granted from either the family trusts or the Frankston partnership. Moreover, the financial statements for the family trusts for the year ending 30 June 2015 do not record any loans payable by Shih-Kai, either individually or jointly with the father and the mother.
The mother gave evidence that her intention and the intention of the father at the time of settlement was that the Dandenong properties be purchased solely for Shih-Kai’s benefit. She deposed that she, the father, and Shih-Kai were registered as joint proprietors for several reasons, including that:
(a) Shih-Kai was only 18 years old at the time of settlement;
(b) It would prevent Shih-Kai from ‘being cheated of the property’ in the future;
(c) It would enable them to protect Shih-Kai if any claims to the property were to be made following the breakdown of a future marriage; and
(d) It would mean that Shih-Kai would become the sole proprietor of the Dandenong Properties following the deaths of the father and the mother.
Finally, settlement of the purchase of a set of properties located in Glenroy for $1,350,000 occurred on 26 February 1999 (‘the Glenroy properties’). The purchase of the Glenroy properties was financed partly with funds provided by the father and the mother and partly with funds taken from the family trusts, and also possibly with funds derived from the Frankston partnership and the Dandenong partnership. Shu-Chen was registered as the sole proprietor of the Glenroy properties. In May 2018, the Glenroy properties were sold at auction for $3,795,000.
Deterioration of the father’s health
In June 2010, the father was diagnosed with Parkinson’s disease. The medical records tendered and the evidence provided by the other members of the Lin family show that a progressive deterioration of the father’s health occurred between this date and the date of his death in December 2016, albeit with periods of improvement interspersed throughout this time frame.
At the time of the father’s diagnosis, only the father, the mother and Shih-Hsien were living at the Surrey Hills property, both Shu-Chen and Shih-Kai having moved away several years earlier. The mother deposed that, following his diagnosis in 2010, the father began to rely upon Shih-Hsien for assistance with attending medical appointments and consulting with accountants and solicitors. Likewise, Shih-Hsien deposed that after the father became ill, Shih-Hsien stopped working and became a ‘full-time assistant’ to the father.
The father’s health began deteriorating more rapidly in or around 2015, and he was admitted to hospital several times over the course of that year. The father suffered a number of falls during 2015 and 2016, some of which resulted in hospital admissions. Around the middle of 2015, the father’s appetite waned and he began to eat less, with a consequential decline in his weight. In September or October 2015, the father was admitted to hospital with a fractured right clavicle following a fall.
The mother deposed that as the father’s condition worsened, he became more dependent on Shih-Hsien for his daily living activities, as the mother was also suffering from several health conditions at the time and was unable to provide the father with full-time care. The assistance provided by Shih-Hsien to the father included transporting and accompanying him to medical appointments, administering medications, feeding him and assisting with other personal care functions. Shih-Hsien also gave evidence that at this time, he began to assist with collating, recording, storing and preparing documents relating to the family trusts, including financial records and tax returns.
In June 2015, the father was referred to Professor David Williams, a neurologist and movement disorders specialist (‘Professor Williams’), following a subacute deterioration of his Parkinson’s disease. Between 3 June 2015 and the time of the father’s death, Professor Williams regularly consulted with, and conducted health assessments of the father. Professor Williams’ notes from the 3 June 2015 assessment and the report which followed this assessment discuss various physical manifestations of the father’s condition, and observe that the father’s memory was ‘down a little’, but make no mention of any cognitive impairment. However, Professor Williams’ notes show having discussed the potential for ‘cognitive changes’ as the father’s Parkinson’s disease progressed with members of the Lin family present for the assessment.
A medical report provided on 28 October 2015 by the father’s general practitioner, Dr Wai Cheung-Yap (‘Dr Cheung-Yap’), notes that the father suffered from several significant health conditions in addition to his Parkinson’s disease. Dr Cheung-Yap’s report notes that the father had been diagnosed with depression in 2015, suffered from diabetes, and was diagnosed with hyperlipidaemia in 2013, a condition characterised by high levels of fat particles in the blood that increases the risk of heart attack and stroke. At the time, most of the father’s daily living activities were ‘slightly impaired’, his levels of exercise and nutrition were inadequate, he was on several medications, and he had had falls in the past three months. However, the father’s cognitive status was assessed as ‘normal’.
The report that followed the next health assessment of the father conducted by Professor Williams, dated 10 November 2015, refers to a recent hospital admission, difficulties with oral intake and an associated risk of malnutrition, dizziness, severe constipation and difficulties with sleeping. The report also makes reference to the father’s ‘emerging Parkinson’s disease dementia’.
On 17 March 2016, a registered nurse from the Department of Health attended the Surrey Hills property to perform a medical assessment of the father, including a mini-mental state examination. The report that followed this visit, dated 24 March 2016 (‘the Department of Health report’), identifies the mother as the father’s primary carer, and notes that the mother provided assistance with personal care and administering medications. However, the Department of Health report also notes that Shih-Hsien assisted the father with several of his daily living activities and transported the father to medical appointments. It also records that Shih-Hsien assisted the father with practical banking tasks, corroborating Shih-Hsien’s evidence that he contributed to the management of record-keeping and accounting for the family trusts from 2015 onwards.
The Department of Health report notes that the father’s Parkinson’s disease and depression impacted on his daily functioning, and includes the following further observations about his condition:
(a) The father was able to dress himself and was mostly independent with transfers and ambulation;
(b) The father scored 20/30 on a mini-mental state examination, losing points for recall, orientation and concentration/calculation;
(c) The father was unable to complete an exercise involving drawing a clock face showing 11:10 hours. However, the father was able to form and write a short sentence in English, namely, ‘I am very happy you come to see me’;
(d) Key considerations included that the father had declining mobility with falls, declining cognition with increasing care needs, and was dependent on his family members for all activities of daily living; and
(e) The father’s family were unable to sustain his increasing care needs without support and respite.
The report also makes reference to a pending geriatrician assessment to ascertain the father’s competency. It is unclear whether this assessment was ever conducted.
On 26 April 2016, the father was again assessed by Professor Williams. The report from the assessment notes that the Lin family were ‘experiencing increasing difficulty caring for his symptoms of Parkinson’s disease, his poor mobility and his disrupted sleep’, however no mention of the father’s cognitive ability or mental capacity is made in the report.
On 12 July 2016, the father was assessed by Dr Michael Hum, geriatrician (‘Dr Hum’), at the St Vincent’s Continence Clinic at St George’s Hospital, with the assistance of an interpreter. The mother and Shih-Hsien were both present for the assessment. In addition to conducting an examination of the father’s physical health, Dr Hum administered a test using the Rowland Universal Dementia Assessment Scale (‘RUDAS’), in respect of which the father scored 25/30. Following the visit, a report was prepared for Dr Cheung-Yap (‘Dr Hum’s report’).
Dr Hum’s report notes several health conditions and physical ailments, and lists a number of medications that were prescribed for the father at the time. Notably, none of these medications has a therapeutic use for dementia or mental impairment. It is stated within Dr Hum’s report that the father could ambulate, shower and use the toilet independently, but had a tendency for poor sleep and issues with continence. In terms of the father’s cognition, Dr Hum’s report states that Shih-Hsien described the father’s memory as ‘generally good’, with ‘some reduced focus and concentration later in the day’. Dr Hum’s report notes that the father’s ‘recall of the shopping list was 6/8’ and ‘[v]erbal fluency was 8/8’ and that the father ‘performed well with praxis and visuoconstructional drawing’. No mention is made of any significant cognitive impairment within Dr Hum’s report, nor is any concern expressed as to the father’s mental capacity.
The final assessment of the father conducted by Professor Williams prior to his death was on 4 October 2016. The report that followed this assessment notes that the father was having difficulty sleeping and discusses the risks associated with a proposed surgery to address a swallowing disorder. While Professor Williams’ notes from the assessment refer to the father having ‘some confusoin [sic] at night’, again no mention is made of any cognitive impairment or decreased mental capacity.
On or around 14 December 2016, the father was admitted to hospital. He remained there until his death on 18 December 2016.
Breakdown of family relations
Occurring concomitantly with the deterioration of the father’s health was a gradual breakdown in relationships within the Lin family, as disputes emerged between Shih-Hsien and the mother, Shu-Chen and Shih-Kai.
In her witness statement, the mother described several instances of Shih-Hsien’s behaviour that she considered ‘caused stress and concern to [the father] when he was alive’. She also deposed that following the death of the father, Shih-Hsien ‘continued to act strangely and irresponsibly’. Shih-Kai deposed that, since 2015, his relationship with Shih-Hsien has been ‘very toxic’, and likewise described Shih-Hsien’s behaviour before and after the death of the father as ‘strange and irresponsible’. Shu-Chen similarly provided evidence of Shih-Hsien’s ‘strange and irresponsible’ conduct in recent years, and deposed to her ‘very toxic’ relationship with Shih-Hsien since around 2017.
It is unnecessary to recount in any detail the many events and altercations involving Shih-Hsien described in the witness statements of the mother, Shih-Kai and Shu-Chen. However, several events that occurred after 2010 and prior to the death of the father in 2016 and involved self-harming behaviour, or threats thereof, on Shih-Hsien’s part deserve mention, given their bearing on the issues in dispute. Briefly, and chronologically, these events include:
(a) On 23 December 2010, the father, the mother, Shih-Hsien and Shih-Kai were at the Surrey Hills property when an argument broke out between the mother and Shih-Hsien. The mother and Shih-Kai both deposed that during this argument, Shih-Hsien grabbed a knife and cut off the head of a Chinese buddha statute. Shih-Kai gave evidence that Shih-Hsien threatened to commit suicide during this argument, and further deposed that when Shih-Kai was attempting to calm Shih-Hsien down, Shih-Hsien stood next to the father and pointed the knife towards the father and waved it while speaking emotionally.
(b) The mother deposed that, on 14 March 2015, she and Shih-Hsien had an argument at the Surrey Hills property which culminated in Shih-Hsien injuring himself by forcefully and deliberately hitting his head against the refrigerator. Shih-Hsien was taken to the emergency room at the Alfred Hospital, and when medical staff attempted to verify what had happened, the mother alleges that Shih-Hsien stated that the mother had been trying to kill him.
(c) Shih-Kai deposed that, on or around 28 October 2015, Shih-Hsien forcefully and deliberately hit his head against the wall of the dining room at the Surrey Hills property. A photo of a wall bearing a large indentation, purportedly the result of this incident, was in evidence.
(d) On 7 November 2015, Victoria Police were called to the Surrey Hills property after a neighbour reported seeing Shih-Hsien sitting on the roof of the house. The mother and the father were inside the property at the time, and were unaware that Shih-Hsien was on the roof until the police arrived. Shu-Chen deposed that she received a call from the mother during the incident and attended the Surrey Hills property, where she communicated with police officers. The mother deposed that Shih-Hsien was assessed by the police incident response team, who recommended he seek psychiatric assistance.
(e) On 12 January 2016, Shih-Hsien was admitted to the Alfred Hospital for a period of two days after an ‘episode of deliberate head banging on concrete in the setting of conflict with family’ at the Surrey Hills property. Shu-Chen deposed that she called an ambulance after the incident and accompanied Shih-Hsien to the hospital. At the hospital, the mother and Shu-Chen met with the psychiatrist treating Shih-Hsien to discuss his condition.
(f) On or around 30 May 2016, Shih-Hsien forcefully and deliberately hit his head against the door of the father and the mother’s bedroom at the Surrey Hills property. The mother deposed that Shih-Hsien claimed that the reason for this was his frustration over the father’s refusal to eat. A photo of the damaged door taken by Shih-Kai shortly afterwards was in evidence.
Following the death of the father in December 2016, relations within the Lin family further disintegrated. While the mother, Shu-Chen and Shih-Kai all deposed that the cause of this breakdown was Shih-Hsien’s ‘strange and irresponsible’ behaviour, it is apparent that Shih-Hsien blames Shu-Chen for the increasing animosity.
On 12 April 2017, the mother executed an enduring power of attorney in favour of Shih-Hsien (‘the power of attorney’). The reason for the power of attorney was that she planned to travel to Taiwan for a period of several months, and wanted Shih-Hsien to lodge tax returns on her behalf during this time. The mother further deposed that just over a month later, on 24 May 2017, she realised that the power of attorney may have afforded Shih-Hsien too wide a power, and she became concerned that he might abuse this power. She deposed to having asked Shu-Chen to obtain a copy of the power of attorney from Shih-Hsien’s solicitor at the time, Vincent Ryan (‘Mr Ryan’), and after reading the power of attorney, she instructed Mr Ryan to prepare a document revoking it. A revocation of the power of attorney was executed by the mother at the Australian Representative Office in Taiwan on 1 June 2017.
On 18 September 2017, the mother called Victoria Police to the Surrey Hills property during an argument with Shih-Hsien. Shih-Hsien deposed that this argument arose because the mother had been disposing of documents without checking with him as to their importance. The mother deposed that Shih-Hsien became very agitated and the argument escalated, with Shih-Hsien smashing saucepans against the walls and floor of the kitchen. Two policemen attended the premises, and after speaking with the mother, applied for an intervention order against Shih-Hsien on the mother’s behalf. An intervention order granted on the same day prohibited Shih-Hsien from contacting, approaching or being within five metres of the mother, and from being within 200 metres of the Surrey Hills property. However, the mother gave evidence that this intervention order was set aside the following day in the Magistrates’ Court, and Shih-Hsien was permitted to return home.
On 31 October 2017, the mother was granted an interim intervention order against Shih-Hsien, which remains in force today (‘the intervention order’). The intervention order prohibits Shih-Hsien approaching or being within five metres of the mother, and from being within 200 metres of the Surrey Hills property, but permits him to contact her by letter, text message or email to negotiate property, estate and business arrangements.
Appointments of Shih-Hsien as appointor of the family trusts
On 15 June 2015, representatives of Morrows, including the father’s accountant, Eryan Lui (‘Mr Lui’) and a female lawyer, attended the Surrey Hills property to discuss the father’s will. The father, the mother, Shih-Hsien and Shih-Kai were all present for this meeting. However, Shih-Kai did not provide any evidence about this meeting in his witness statement or at trial, and there are several discrepancies in the evidence provided by the mother and Shih-Hsien in relation to the meeting.
Shih-Hsien’s evidence was that the meeting lasted somewhere between thirty minutes and an hour, and that in addition to the father’s will, various other matters were discussed, including the distribution of the father’s estate, who should be given the father’s financial power of attorney, and who should be appointed as appointor of the two family trusts. The mother’s evidence was that the question of who would be appointor of the family trusts was not discussed at all during this meeting.
On this particular subject, Shih-Hsien gave evidence that the father stated that he wanted Shih-Hsien to become appointor. His evidence was that Shih-Kai expressed dissatisfaction with this decision, and Shih-Hsien subsequently told the mother and Shih-Kai that he did not wish to be appointor, because he would feel awkward fielding requests for distributions from his siblings. Accordingly, Shih-Hsien’s evidence was that it was decided that the mother would instead become appointor following the death of the father.
Shih-Hsien deposed that some months later, following an admission to Box Hill Hospital, the father directed him and the mother to prepare a letter to Morrows instructing them to destroy any documents prepared at the meeting held at the Surrey Hills property on 15 June 2015. His evidence was that after this, the father never publicly discussed his intentions in relation to his will or power of attorney for fear of upsetting Shih-Kai.
During cross-examination, and seemingly in answer to a question about whether the father had disclosed his motivations for appointing Shih-Hsien as appointor of the family trusts, Shih-Hsien described an incident which allegedly took place in Taiwan in January 2016 wherein the mother was defrauded of her retirement fund by a false police officer.[10] Shih-Hsien’s evidence was that this event alarmed the father, prompting him to revert back to his original decision to appoint Shih-Hsien to succeed him as appointor of the family trusts, rather than the mother.
[10]In fact, this answer was actually provided in response to a subsequent question, which concerned a statement made by Shih-Hsien to the effect that he did not wish to be made appointor due to the awkward position he felt it would put him in with Shu-Chen and Shih-Kai. However, in light of the context and nature of the answer, it can be presumed that it was intended to be in response to the question of whether the father had told Shih-Hsien of his motivations for appointing Shih-Hsien as appointor of the family trusts, which had been asked shortly beforehand.
On 22 March 2016, the father, the mother and Shih-Hsien attended a meeting at the offices of Morrows. During this meeting, the father and the mother, as the company’s current directors and shareholders, appointed Shih-Hsien as a director of W C Lin Nominees. The mother provided evidence that there was no interpreter present during this meeting, and that she did not understand what was discussed. Shih-Hsien’s evidence was that he was made a director in preparation for his appointments as appointor of the family trusts, but that there was some delay, allegedly for administrative and taxation reasons, which prevented Shih-Hsien from being appointed as director of both Javelin Towns and Luxtron until 15 June 2016.
The mother deposed that, sometime in June 2016, the father told her of his intention to resign as appointor of the family trusts and appoint Shih-Hsien in his place, and asked her to accompany him to the offices of Morrows to sign the relevant documents. Under cross-examination, the mother agreed with the proposition that she knew that the father always wanted Shih-Hsien to become appointor. However, the mother’s evidence was that she did not understand the significance of this request at the time, as she was unaware of the scope of the powers held by an appointor.
Shih-Hsien gave evidence that on the morning of 27 June 2016, he received an e-mail from Morrows requesting that he, the father and the mother attend their offices that day, and attaching draft versions of two deeds of appointment and resignation of appointor for the family trusts. Shih-Hsien stated that he printed copies of these documents and showed them to the father, however they did not discuss the contents or nature of the draft deeds prior to the meeting.
Later that day, the father, the mother and Shih-Hsien attended the Melbourne city office of Morrows. To get there, they walked several hundred metres from the Surrey Hills property to Chatham Station, from where they travelled into Melbourne city by train. Upon arriving in the city, they again walked some distance to the offices of Morrows. Both segments of the journey took some time, as the father was using a walking frame and regularly needed to stop and rest. After reaching the office of Morrows around 2:00pm, the father, the mother and Shih-Hsien met with Graeme Marks, a director of Morrows Accountants (‘Mr Marks’), and Russell Krupp, a solicitor from Morrows Legal (‘Mr Krupp’). The meeting was conducted in English, with no interpreter present. During the meeting, Mr Marks and Mr Krupp spent between thirty minutes and an hour explaining the contents of the draft deeds of appointment and resignation of appointor prepared by Morrows.
At the conclusion of the meeting, identical deeds of appointment and resignation of appointor were executed in respect of both of the family trusts (‘the appointor deeds’). In substance, the appointor deeds provide for the resignation of the father and the appointment of Shih-Hsien as appointor of the family trusts from 27 June 2016, being the date of the deeds, in accordance with the powers set out under clause 17(2) and the ninth part of the schedule to the family trusts. Recital D of the appointor deeds provides that the father ‘desires to resign and irrevocably appoint’ Shih-Hsien as appointor, with immediate effect. The appointor deeds were signed by the father as resigning appointor and by Shih Hsien as new appointor, with their signatures being witnessed by Mr Krupp and Mr Marks, respectively. The appointor deeds were also executed by the original trustee companies, effected by signatures of two directors, namely the father and the mother.
Beyond these commonly agreed facts, there are again several discrepancies between the evidence provided by the mother and Shih-Hsien in relation to the conduct of this meeting. Shih-Hsien’s evidence was that there was much discussion during the meeting, and Mr Marks and Mr Krupp ensured that both the father and the mother understood the content and effect of the appointor deeds. Although Shih-Hsien did not interpret anything that was discussed during the meeting for the father, his evidence was that it was unnecessary to do so, because ‘[m]y father understood’. However, at times he would repeat the father’s words when the father spoke unclearly or Mr Marks and Mr Krupp could not understand his pronunciation. Shih-Hsien also deposed that the mother was ‘fully aware’ of what occurred during the meeting.
Shih-Hsien also gave slightly confusing evidence that during the meeting Mr Marks and Mr Krupp advised the father that the appointments of Shih-Hsien as appointor were revocable, in stark contrast to the clear statement to the contrary made in recital D of the appointor deeds. During his cross-examination, he stated that Mr Marks and Mr Krupp told the father that ‘according to the deed [he] can reverse it later on’. However, when the issue was raised again the following day, Shih-Hsien avoided answering the question directly, instead confirming that the father expressed an intention to resign permanently and that the father had been given the opportunity to make any amendments or changes to the appointor deeds prior to executing them. Finally, when asked directly whether Mr Marks and Mr Krupp had stated that the appointments could be revoked if the father changed his mind, Shih-Hsien responded that they had made such statements, ‘[n]ot in so many words but the same effect’.
In contrast, the mother’s evidence was that she did not speak at all during the meeting, the father only said a few words, she did not understand anything that was discussed in the meeting due to her poor command of English, and she did not know how much the father understood: ‘we just nodded our head when they were trying to explain to us the contents of [the appointor deeds].’ However, the mother also deposed (somewhat contradictorily) that at no point during the meeting did Mr Marks and Mr Krupp ask, nor did the father disclose, why the father wanted to resign and appoint Shih-Hsien as appointor.
The mother further deposed that at the time of the meeting, she did not understand the meaning and role of an appointor at all, and that her understanding of the function and effect of the appointor deeds was to delegate some of the day-to-day management of the family trusts to Shih-Hsien, to enable the continued operation of the family trusts. She gave evidence that she did not know the scope of power or responsibility of an appointor at the time of the meeting, and that these matters were not explained or interpreted to her or the father.
The mother also deposed that at the commencement of the meeting, Shih-Hsien said something to the effect that the attendees ‘should not mention this meeting to the Chinese accountant in this office who usually attended to us in the past,’ presumably referring to Mr Lui. Under cross-examination, Shih-Hsien denied making any such comment. His evidence was instead that the father had told him and the mother to keep the appointments confidential on or around 15 June 2016, prior to the execution of the appointor deeds.
Neither Mr Marks or Mr Krupp gave evidence in the proceeding, and thus the only evidence of what was and was not discussed at the meeting of 27 June 2016 was that provided by the mother and Shih-Hsien — both of whom displayed a tendency to evade questions during trial, and at times provided inconsistent and contradictory evidence. As such, it is difficult to make any positive findings in relation to what advice was or was not provided to the father during this meeting. However, on balance, Shih-Hsien’s account of the meeting is more convincing for two reasons.
First, the appointor deeds are short documents — they are each only three pages in length, including a cover page and a signature page. Their operative terms are contained on a single page. On the evidence of both the mother and Shih-Hsien, the meeting lasted between thirty minutes and one hour. Given the brevity of the appointor deeds and the length of the meeting, it is difficult to accept the mother’s evidence that there was no discussion of matters as critical as the circumstances surrounding the father’s resignation and appointment of Shih-Hsien as appointor, the consequences of this decision, and the scope of powers and responsibilities of an appointor more generally. Evidently, such matters are integral to the transaction effected by the appointor deeds and, presumably, would be topics raised by a solicitor during a meeting of the length and nature of that held on 27 June 2016.
Secondly, there is a contradiction inherent in much of the mother’s evidence relating to the meeting, namely the fact that she simultaneously alleges that she (and the father, for that matter) did not understand anything that was discussed at the meeting, while also positively asserting that several key matters were not discussed at all. This contradiction makes it difficult to place any weight on evidence given by the mother in respect of this meeting.
Shih-Hsien stated that at the time he was appointed as appointor, he did not fully understand the responsibilities, obligations and powers attached to the office. He gave evidence that sometime after the appointor deeds were executed but before the death of the father, he attended the office of Mr Ryan, to seek advice on the effect of the appointor deeds and his obligations as appointor. Shih-Hsien gave evidence that although Mr Ryan did not have time to explain the appointor deeds or the role of an appointor in any detail on this day, he did inform Shih-Hsien that one power held by the appointor was to appoint and replace the trustees of the family trusts.
Shih-Kai deposed that he discovered Shih-Hsien’s appointments as appointor on or around 16 July 2016, when he and Shih-Hsien had an argument regarding the payment of tuition fees for Shih-Kai’s children at the Surrey Hills property. The father, the mother and Shih-Kai’s wife and children were present at the time. Shih-Kai alleged that Shih-Hsien informed Shih-Kai’s children that he had the power and authority to make distributions from the family trusts, and that he would not make any distributions to cover their tuition fees. During the argument, Shih-Kai deposed that Shih-Hsien told him that he was now ‘in charge of’ the family trusts, however Shih-Kai did not know or understand the concept of an appointor at the time. Shih-Kai’s evidence was that he did not discuss Shih-Hsien’s appointments with the father at any time prior to his death, due to the severity of the father’s illness.
Shu-Chen deposed that she became aware of Shih-Hsien’s appointments as appointor when visiting the Surrey Hills property sometime after 27 June 2016. Her evidence was that Shih-Hsien told her in passing that he was now the appointor of the family trusts, but she did not take much notice of this at the time, as she was not aware of the implications of this or the powers of an appointor. She deposed that, for these reasons, she did not discuss the appointment of Shih-Hsien with the father prior to his death.
First transfer of trust funds
After being appointed as appointor of the family trusts, Shih-Hsien made various transfers of trust funds which the plaintiffs seek to impugn. The first of these was made on 27 October 2016, prior to the death of the father. Shih-Hsien issued and signed a cheque in the sum of $74,000 from a National Australia Bank account in the name of W C Lin Nominees, payable to East Ocean, and thereafter cashed this cheque into an account belonging to East Ocean (‘the first transfer’). East Ocean is a company used by Shih-Hsien as a vehicle for his share trading activities. It is common ground that these funds were subsequently used by East Ocean to undertake share and options trading for profit
Shih-Hsien characterised the first transfer as an unsecured loan, which he asserted was paid and received in accordance with the powers of the trustee as set out under clauses 7(b) and 7(i)(iii) of the deed of settlement for the second family trust. Both the mother and Shih-Hsien provided evidence that East Ocean repaid the funds in full, with interest, by 29 June 2018, into a Commonwealth Bank term deposit in the name of Memorial No 2. However, during the trial Shih-Hsien disclosed that approximately $44,000 of the loan amount had in fact not been repaid in cash, but instead used to purchase a car, which was registered as an asset of the second family trust.
The mother deposed that the first transfer was made without her knowledge and approval, and without the knowledge and approval of the father. Her evidence was that she only learned Shih-Hsien had made the first transfer on 23 March 2019, after visiting a branch of the National Australia Bank to enquire about accounts held by W C Lin Nominees. She further deposed that, if Shih-Hsien had discussed the transfer with the father or sought his consent prior to making it, the father would in turn have spoken to or informed her about the transfer, which she alleged did not occur. However, during the trial Shih-Hsien appeared to give evidence that the first transfer was made with the father’s knowledge, or that at the very least, the mother could not know whether the father was aware of or had approved the first transfer.
Second transfer of trust funds
In early November 2016, Shih-Hsien closed a term deposit account held by W C Lin Nominees with the National Australia Bank (‘the NAB term deposit’) and withdrew funds in the amount of $1,094,440. On 8 November 2016, Shih-Hsien attended the Commonwealth Bank, where he opened a new term deposit, again in the name of W C Lin Nominees (‘the CBA term deposit’), and deposited a National Australia Bank cheque issued by and payable to W C Lin Nominees in the amount of $1,100,000. According to the account documentation for the CBA term deposit, Shih-Hsien was the only individual authorised to operate the account.
Shih-Hsien’s evidence was that the father, the mother and Shu-Chen were all aware that the funds had been moved from the NAB term deposit to the CBA term deposit. He referred to a conversation between the father and himself in relation to the more favourable interest rate offered by Commonwealth Bank at the time, which he alleges the mother and Shu-Chen either overhead or were involved in. However, the mother’s evidence was that neither she nor the father were aware that the NAB term deposit had been closed or that the funds had been transferred out of the account. She deposed that, if Shih-Hsien had discussed the withdrawal with the father, the father would in turn have spoken to or informed her about the transfer, which did not occur.
Six months later, on 8 May 2017, Shih-Hsien closed the CBA term deposit and transferred the balance of $1,114,455.21 (being the opening balance of $1,100,000 plus accrued interest of $14,455.21) to a bank account in the name of East Ocean (‘the second transfer’). It is again common ground that these funds were subsequently used by East Ocean to undertake share and options trading for profit.
Like the first transfer, Shih-Hsien characterised the second transfer as an unsecured loan, which was paid and received in accordance with the powers of the trustee set out under clauses 7(b) and 7(i)(iii) of the deed to the second family trust. His evidence at trial was that this arrangement was documented and records were provided to Mr Lui. However, when questioned further, Shih-Hsien confirmed that the loan was not documented within the company minutes of W C Lin Nominees, but instead that the loan amount and interest rate were simply written on the deposit slip, as he alleged was his ‘father’s normal practice’.
Shih-Hsien’s evidence at trial appeared to be that the second transfer was made because the interest rate offered by Commonwealth Bank at the time was too low, and he considered that a more favourable interest rate could be attained by lending the money to East Ocean for investment. His evidence was that, in comparison to the 1.8 per cent interest rate available at Commonwealth Bank at the time, an interest rate of 2.6 per cent was paid on the loan to East Ocean. Both the mother and Shih-Hsien confirmed that East Ocean repaid this loan in full with interest by 29 June 2018, with the repayment made into a Commonwealth Bank term deposit in the name of Memorial No 2. Shih-Hsien’s evidence was that in the 13 months that the funds were held by East Ocean, they returned around $200,000 in profit from share trading activities, which profit was retained by East Ocean, less interest on the loan amount.
The second transfer was carried out while the power of attorney was still in force, under which Shih-Hsien was authorised to act on the mother’s behalf for both personal and financial matters. However, the mother deposed that she was not aware of the second transfer, nor did she consent to it. Her evidence was that, like the first transfer, she only learned that Shih-Hsien had made the second transfer on 23 March 2019. Under cross-examination, Shih-Hsien confirmed that the second transfer was made without the knowledge or consent of the mother.
Removal of original trustee companies
On 13 October 2017, Memorial No 1 and Memorial No 2 were incorporated, with Shih-Hsien appointed as director and sole shareholder of both companies.
Shih-Hsien gave evidence that, one month later, on 13 November 2017, he received a call from Mr Ryan, who informed Shih-Hsien that Shu-Chen’s solicitor had informed Mr Ryan that an auction had been scheduled for the Glenroy properties. Shih-Hsien deposed that after receiving this call, he travelled by train to Mr Ryan’s office to discuss the options available to him to prevent the sale.[11] One of the options raised during this discussion, according to Shih-Hsien, was to change the trustee of both of the family trusts. After Shih-Hsien elected to adopt this course, Mr Ryan prepared deeds of appointment and removal of trustee for both of the family trusts.
[11]The legal and beneficial ownership of the Glenroy properties is the subject of a separate proceeding and need not be discussed further here, save to note that Shih-Hsien argues that the Glenroy properties were purchased and maintained using funds from the beneficiary accounts of the family trusts, as well as funds from the Frankston partnership, and are therefore assets of the family trusts.
A deed of appointment and removal of trustee was executed in respect of each of the family trusts by Shih-Hsien in his capacity as appointor of both of the family trusts on the same day (‘the removal deeds’). The first of the removal deeds purports to remove Javelin Towns as trustee of the first family trust, and to appoint Memorial No 1 in its place, pursuant to the power to remove and appoint trustees set out in clause 17 of the deed of settlement to the first family trust. On the same basis, the second of the removal deeds purports to remove W C Lin Nominees as trustee of the second family trust, and to appoint Memorial No 2 in its place.
Over the course of the proceeding, Shih-Hsien has provided various justifications and explanations for his decision to execute the removal deeds. These include that:
(a) After he learned that an auction had been scheduled for the Glenroy properties, he felt that ‘lots of things were being done behind my back’ in respect of the family trusts and the properties owned by the Lin family.
(b) He wanted to prevent the auction of the Glenroy properties from taking place, and the advice he received from Mr Ryan was that while he had several options to achieve this end, the fastest and easiest was to change the trustees of the family trusts.
(c) The decision was precautionary, in the sense that he felt that the original trustee companies were ‘in danger due to [the mother’s] vulnerability and [Shu-Chen] was clearly targeting [the family trusts’] assets’. In this regard, the mother deposed that Shih-Hsien expressed a fear that Shu-Chen may convince the mother to use her position as director of the original trustee companies to sign documents forgiving a debt that Shih-Hsien alleged was owed to the family trusts by Shu-Chen in relation to the Glenroy properties. The removal of the original trustee companies as trustees and appointment of the replacement trustee companies in substitution was alleged to be in an effort to thwart any such conduct on the part of Shu-Chen.
(d) The mother had returned to Taiwan for an extended period of time between 12 November 2017 and early January 2018 and Shih-Hsien alleged that, in doing so, she had ‘abandoned her duty as director’ and thereby left the original trustee companies ‘in limbo and unable to function’.
(e) As a result of the intervention order, all direct communication had been cut off between the directors of the original trustee companies and the family trusts were unable to function.
The mother deposed that, sometime in late 2017, Shih-Hsien informed her that he had incorporated two companies and used his power as appointor of the family trusts to appoint these companies as trustees either together with, or in replacement of, the original trustee companies. She gave evidence that at the time, Shih-Hsien told her that the reason for him appointing the replacement trustee companies was that she was not co-operating with him in the management of the family trusts.
It is alleged that since Shih-Hsien gained control of the family trusts in 2017:
(a) He has failed to prepare financial reports for the family trusts, and failed to procure the preparation and lodgement of trust returns or tax returns for the family trusts by the replacement trustee companies, thereby exposing the family trusts to fines and penalties;
(b) He has failed to make any beneficiary distributions; and
(c) He has not applied the rental and interest income of the family trusts to pay for the living, medical or educational expenses of the beneficiaries of the family trusts.
Third transfer of trust funds
On 30 June 2018, Shih-Hsien issued and signed a cheque in the sum of $150,000 from a National Australia Bank account in the name of W C Lin Nominees, payable to Memorial No 2, and thereafter cashed this cheque into an account belonging to Memorial No 2 (‘the third transfer’). It is common ground that the third transfer was carried out without the knowledge or consent of the mother.
Question 1: Should the appointor deeds be set aside on the basis of a failure to comply with the terms of the deeds of settlement for the family trusts?
Applicable principles
The issues raised by this question largely turn on the proper construction and interpretation of certain clauses of the deeds of settlement for the family trusts. In this regard, the principles which underpin the interpretation and construction of commercial contracts apply equally to deeds of trust.[12] As such, where the words used in a trust deed are unambiguous, they should be construed according to their ordinary and natural meaning, in the context of the document as a whole.[13] In Schreuders v Grandiflora Nominees Pty Ltd,[14] the Court of Appeal observed:
[T]rust instruments are to be given their natural and ordinary meaning unless they have a special or technical meaning. The terms of an instrument must be construed in the context of the entire document and in such a way that renders them ‘all harmonious one with another’.[15]
[12]Byrnes v Kendle (2011) 243 CLR 253, 275 [59] (Gummow and Hayne JJ), 286 [102] (Heydon and Crennan JJ); Schreuders v Grandiflora Nominees Pty Ltd [2016] VSCA 93, [12]–[16] (Kyrou, Ferguson and McLeish JJA).
[13]Montevento Holdings Pty Ltd v Scaffidi (2012) 246 CLR 325, 332 [25] (French CJ, Hayne, Crennan, Bell and Gageler JJ); Re Rouse [2019] VSC 792, [87] (McMillan J).
[14][2016] VSCA 93.
[15]Ibid [21] (Kyrou, Ferguson and McLeish JJA).
The object of construction is to ascertain and give effect to the expressed intention of the parties by reference to the words used in the document, rather than the parties’ subjective intentions. As explained by Gummow and Hayne JJ in Byrnes v Kendle:[16]
The fundamental rule of interpretation of [a trust deed] is that the expressed intention of the parties is to be found in the answer to the question, ‘What is the meaning of what the parties have said?’, not to the question, ‘What did the parties mean to say?’[17]
Plaintiffs’ submissions
[16](2011) 243 CLR 253.
[17]Ibid 273 [53]. See also, 286 [105] (Heydon and Crennan JJ).
In the statement of claim, the plaintiffs allege that the appointor deeds are invalid, void and/or of no legal effect due to a failure to comply with the terms of the deeds of settlement for the family trusts. The basis for this allegation was explained in the particulars to this pleading as threefold:
(a) First, the plaintiffs submit that there is no express power in clause 17 of the deeds of settlement for the family trusts enabling an appointor to appoint a new appointor, nor is such a power conferred by any other provision within the deeds of settlement.
(b) Secondly, they submit that clause 17(2) of the deeds of settlement for the family trusts stipulates that an appointor who seeks to resign must give notice of their resignation to the trustees in writing. They contend that the father failed to give such notice to the original trustee companies.
(c) Thirdly, the plaintiffs submit that the appointments of Shih-Hsien did not comply with clause 17 and/or the ninth part of the schedule to the deeds of settlement for the family trusts. They allege that the combined effect of these provisions is that an appointor can only be appointed in substitution of another appointor, and submit that Shih-Hsien’s appointments thus did not take effect on the basis that the father remained appointor at the time at which the appointor deeds were executed, due to his alleged failure to give notice of his resignation to the original trustee companies.
No further mention is made of any of the above allegations in the plaintiffs’ written submissions, and it is unclear whether they are still pressed. However, in their closing address, the plaintiffs seek to raise new arguments under the paragraph of the statement of claim relevant to this allegation, namely, that on a proper construction of the ninth part of the schedule to the deeds of settlement for the family trusts, the appointor deeds automatically lapsed upon the death of the father. They submit that, properly interpreted, the ninth part of the schedule requires that any deed which purports to appoint a new appointor state three things, namely:
(a) whether the appointment is revocable or irrevocable;
(b) the period of the appointment; and
(c) whether the appointment extends beyond the lifetime of the father or not.
On this basis, the plaintiffs submit that as the appointor deeds did not specify any period for Shih-Hsien’s appointments as appointor, nor stipulate whether these appointments would extend beyond the lifetime of the father, the appointor deeds automatically lapsed upon the death of the father on 18 December 2016. As a consequence, the plaintiffs contend that the mother, as the father’s legal personal representative, became appointor of the family trusts on this date, pursuant to the ninth part of the schedule to the deeds of settlement for the family trusts.
First and seventh defendants’ submissions
The first and seventh defendants provide the following answers to each claim:[18]
[18]Though noting that it does not appear from the plaintiffs’ submissions that any of the three allegations set out in the particulars to this pleaded claim are still pressed.
The submissions made by the plaintiffs as to the consequences of this alleged undue influence are slightly confused. They contend, variously, that the appointor deeds are voidable if Shih-Hsien is unable to rebut the presumption of undue influence, as well as claiming that the appointor deeds are void ab initio as a result of Shih-Hsien’s purported undue influence, such that the appointments of Shih-Hsien as appointor did not take effect. They further submit that, as a result of clause 17 of the deeds of settlement for the family trusts, the mother is the lawful appointor of the family trusts, as the father’s legal personal representative.
First and seventh defendants’ submissions
The first and seventh defendants submit that, as the relationship between Shih-Hsien and the father does not fit within a recognised category of relationship giving rise to a presumption of undue influence, in order for the plaintiffs to prove that the appointor deeds were the product of undue influence, it is necessary that they establish either an antecedent relationship between Shih-Hsien and the father, the nature of which was that Shih-Hsien was in a position to exercise dominion, power, or ascendency over the father, or actual undue influence in the execution of the appointor deeds.
In the first and seventh defendants’ submission, the evidence before the Court establishes neither actual nor presumed undue influence on Shih-Hsien’s part. In first considering presumed undue influence, the first and seventh defendants submit that no antecedent relationship of dominance, power or ascendancy was established on the evidence available to the Court. They further note that, remarkably, there was no evidence put forward to show that the father’s will had been overborne by Shih-Hsien at any time, nor that the father feared Shih-Hsien or was subordinate to him in any way. Here they refer to the father’s refusal to eat despite Shih-Hsien’s entreaties to do so as an example of the father’s free and voluntary will.
While acknowledging that Shih-Hsien played a significant role in the father’s care as his health declined, and devoted extensive care to the father, the first and seventh defendants submit that Shih-Hsien was by no means the sole carer for the father. They refer to comments in the Department of Health report which establish that the mother was the primary carer for the father, and the fact that Shu-Chen also offered occasional assistance with the father’s care. Although acknowledging that there was clearly a substantial degree of physical dependency on the father’s part on both Shih-Hsien and the mother, the first and seventh defendants submit that it does not follow from this fact that Shih-Hsien was in a position to exercise power, dominion or ascendancy over the father so as to overbear his will.
Indeed, the first and seventh defendants submit that, as opposed to any dominion or ascendancy on Shih-Hsien’s part, the evidence establishes that Shih-Hsien’s relationship with the father was characterised by deep respect for the father’s authority, devotion to the father’s wellbeing, loyalty, obedience and respect. They refer to comments made by Shih-Hsien during his cross-examination to the effect that he would always obey the father’s instructions, as well as the fact that Shih-Hsien named the replacement trustee companies in memory of the father.
Citing the majority’s comments in Thorne v Kennedy,[105] the first and seventh defendants submit that the father’s appointments of Shih-Hsien are both easily explained by ordinary motives and readily explicable by the relationship which existed between the parties, and thus the presumption of undue influence cannot operate. They submit that, in the circumstances, Shih-Hsien was ‘the obvious choice’ for the role of appointor after the death of the father, given his prior appointment as director of Javelin Towns and W C Lin Nominees and the fact that the mother had never been actively involved in the affairs of the family trusts.
[105](2017) 263 CLR 85, 101 [34] (Kiefel CJ, Bell, Gageler, Keane and Edelman JJ).
In relation to the allegations of actual undue influence, the first and seventh defendants submit that there is no evidence of Shih-Hsien exerting any influence in the execution of the appointor deeds. To the contrary, they submit, the evidence shows that the father was the impetus for the appointments of Shih-Hsien as appointor, who told the mother of his intention to appoint Shih-Hsien, and who made the decision that he, the mother and Shih-Hsien would attend the offices of Morrows on 27 June 2016. The first and seventh defendants also refer to Shih-Hsien’s unchallenged evidence that at the meeting at which the appointor deeds were executed, the father declared his intention to resign as appointor and appoint Shih-Hsien in his place. Further, they note that the mother gave no evidence of any pressure being placed on the father at the relevant meeting or of having any concern of such at the time or in the ensuing months.
The first and seventh defendants also submit that it is appropriate in the circumstances to draw an inference that Mr Marks and Mr Krupp were satisfied that the father had been adequately advised and that he understood the transaction. They refer to the length of the meeting, being 30 minutes to an hour, and contend that there is no basis for impugning the reputation, integrity or ability of either Mr Marks or Mr Krupp.
Further, the first and seventh defendants reject the plaintiffs’ submission that the father was under Shih-Hsien’s actual undue influence as a result of his poor command of English, submitting that such a proposition is implausible for four reasons:
(a) The father was well-educated and had worked as a bank manager for many years prior to immigrating to Australia, and can thus be presumed to have been well-versed in financial matters and financial structures. He established the family trusts shortly after arriving in Australia, and it can be presumed that he understood the functions of, and offices associated with a trust, including the roles of a trustee and an appointor.
(b) Shih-Hsien gave unchallenged evidence that he did not need to interpret for the father at the meeting of 27 June 2016, because the father understood.
(c) Referring to the plaintiffs’ submissions regarding Shih-Hsien’s own command of English and Shih-Hsien’s comments that the father’s English was not as good as his, the first and seventh defendants submit that these comments do not take the matter very far, as Shih-Hsien actually proved to have quite a good command of English through his written submissions and witness statements and his conduct and comprehension during the trial.
(d) In the Department of Health report, which was produced three months prior to the execution of the appointor deeds, it is noted that the father was able to write a short sentence in English upon request. The first and seventh defendants submit that this sentence was written ‘in an educated hand with clearly formed letters’, and could not have been produced by someone who so lacks familiarity with the English language as to be unable to understand a careful explanation of the one-page appointor deeds.
In respect of the plaintiffs’ submission that the father was pressured into executing the appointor deeds by Shih-Hsien’s self-harming behaviours, the first and seventh defendants submit that this allegation was not pleaded, and was largely made on the basis of evidence that was irrelevant to the pleaded case and ought not to have been adduced, particularly as it was only adduced two days prior to the commencement of trial. For these reasons, the first and seventh defendants submit that the evidence regarding Shih-Hsien’s self-harm should be disregarded.
They further submit that this submission fails for three reasons. First, the statements made by the mother in relation to this behaviour exhibited concern for Shih-Hsien’s welfare rather than any power, dominion or ascendancy over the father. Secondly, they submit that much of the conduct relied upon in support of this submission is temporally removed from the execution of the appointor deeds, having occurred many years prior to or after the father’s death, and is therefore irrelevant to the question of undue influence. Finally, they submit that there is no evidential or logical link between Shih-Hsien’s self-harming behaviour and the execution of the appointor deeds, noting that there was no evidence of any threat on Shih-Hsien’s part, either express or implied, to self-harm if the appointor deeds were not executed.
The first and seventh defendants also take issue with the plaintiffs’ submission that the father was positively misled as to the meaning and effect of the appointor deeds by the alleged advice that the appointor deeds were revocable. They submit that there are three answers to this allegation:
(a) First, the allegation is unpleaded and cannot be raised for the first time in closing submissions in the absence of an application to amend the statement of claim. Further, such an application would be significantly prejudicial to the first and seventh defendants, in that it would deny them the opportunity to seek and adduce evidence from Mr Marks and Mr Krupp about the advice given in the meeting of 27 June 2016.
(b) Secondly, the allegation is based upon a misunderstanding of the answers given by Shih-Hsien during his cross-examination. The first and seventh defendants submit that it is clear from a reference that Shih-Hsien made to ‘schedule nine’ during questioning on this subject that any comments made by Mr Marks or Mr Krupp to revocability during the meeting were in reference to the ninth part of the schedule of the deeds of settlement for the family trusts, which relevantly provides that the father can revocably or irrevocably appoint another appointor in substitution for himself. The first and seventh defendants submit that is it evident from Shih-Hsien’s answers during cross-examination that any discussion of revocability was in relation to the right under the ninth part of the schedule, and arose in the context of the explanation that preceded the execution of the appointor deeds, rather than any suggestion that such a right existed under the appointor deeds themselves.
(c) Thirdly, if the father did believe that Shih-Hsien’s appointments were revocable, there is no evidence that the father ever sought to revoke them, and was instead content to leave the appointments in place to continue indefinitely after his death. Accordingly, the first and seventh defendants submit that nothing could turn on this point in any event.
Finally, the first and seventh defendants submit that there is no evidential support for the plaintiffs’ assertions that Mr Marks and Mr Krupp did not ask or know of the circumstances which led to the father’s resignation and appointment of Shih-Hsien, and that no advice was given to the father regarding the scope of an appointor’s powers or the effect of his resignation. They submit that, had these allegations been pleaded, they could have been the subject of evidence, but in the absence of such, these claims are speculative. Moreover, the first and seventh defendants submit that given the length of the meeting of 27 June 2016, it is implausible that a solicitor present to advise on the execution of the appointor deeds would not have given advice of this nature.
Consideration
As clearly established by the relevant authorities,[106] and not disputed by the first and seventh defendants, the father’s exercise of the power to appoint a new appointor of the family trusts in favour of Shih-Hsien is a transaction susceptible to the operation of the doctrine of undue influence. As such, if it can be established that this exercise of power was affected by undue influence on Shih-Hsien’s part, the appointor deeds will be rendered voidable.
[106]Harris v Rothery (n 90); Mercanti v Mercanti (n 61) [151] (Le Miere J), approved in Mercanti v Mercanti (n 61) 571 [381] (Newnes and Murphy JJA).
Although the relevant paragraph of the statement of claim refers to both actual and presumed undue influence, the plaintiffs do not appear to have made any written submissions aimed towards establishing any actual undue influence on Shih-Hsien’s part in the execution of the appointor deeds. Further, there was no evidence put forward that goes towards positively establishing the exercise of any actual undue influence over the father by Shih-Hsien. There is no suggestion that Shih-Hsien directly exerted any pressure or influence over the father to make the appointments in question, and on the evidence of both the mother and Shih-Hsien, the decision to appoint Shih-Hsien as appointor appeared to originate from the father. While there is a dearth of evidence as to how and by whom the preparation of the appointor deeds was initiated, and unsatisfactory evidence of how the meeting at which they were executed was conducted, in the absence of any indication that Shih-Hsien actually unduly influenced the father in either circumstance, a finding cannot be made that any such conduct has been positively established.
While it is not entirely clear if the submissions made by the plaintiffs in respect of the impact that Shih-Hsien’s self-harming behaviour purportedly had on the father are intended to be in support of a claim of actual or presumed undue influence, or both, any suggestion that this conduct amounted to actual undue influence is likewise not supported by the evidence. As the first and seventh defendants submit, there is no evidence that self-harming behaviour or threats thereof were ever used by Shih-Hsien in an effort to threaten or coerce the father into executing the appointor deeds. For these reasons, the first and seventh defendants’ submission that there is nothing in the evidence that establishes the exertion of any actual undue influence by Shih-Hsien ought to be accepted.
It is next necessary to consider the plaintiffs’ claim of presumed undue influence. As noted above, the relationship of adult child and elderly parent is not a class of relationship which is recognised as automatically giving rise to such a presumption.[107] Accordingly, for a presumption of undue influence to arise, it must be shown that the relationship between the father and Shih-Hsien was one characterised by trust, confidence, dependency or reliance on the father’s part, which in turn placed Shih-Hsien in a position to exercise dominion, influence or ascendancy over the father.
[107]Permanent Mortgages Pty Ltd v Vandenbergh (n 74); McIvor v Westpac Banking Corporation (n 74) [14] (Applegarth J); Daunt v Daunt (n 74).
As both parties agree, and the Court accepts, the evidence clearly establishes that the father was heavily dependent on Shih-Hsien for several years prior to his death. This was not limited to dependency in a physical sense. In addition to assisting with many of the father’s daily living activities and driving and accompanying the father to medical appointments, Shih-Hsien also provided a great deal of support to the father in the management of the family business entities, including the family trusts, over a period of many years. This included attending meetings with the father’s solicitors and accountants, liaising with tenants and contractors in relation to rental properties owned by the family trusts and other business entities, and collating and keeping records and financial documents in respect of these entities. Moreover, Shih-Hsien’s own evidence was that his English was better than the father’s, and it is reasonably likely that, at least to some extent and in some circumstances, the father relied upon Shih-Hsien’s assistance in this regard.
In addition to this, it is clear from the evidence that the father and Shih-Hsien shared a close emotional bond and spent a great deal of time in each other’s company, particularly in the final years of the father’s life. Undoubtedly, inherent in this close relationship, as well as the extensive involvement that Shih-Hsien had in the father’s personal and business activities over a period of many years, was a great deal of trust and confidence. When these factors are considered in combination with the father’s heightened vulnerability on account of his age, illness and comparably weaker English, it can be readily presumed that in the years leading up to his death, the father reposed a great deal of trust, confidence, reliance and dependency in Shih-Hsien, who in turn was likely in a position to exercise some degree of influence or ascendancy over the father. Accordingly, it can be concluded that the nature of the relationship between Shih-Hsien and the father was of such a nature as to give rise to a presumption of undue influence.
It is therefore necessary to consider whether the evidence put forward by Shih-Hsien has the effect of rebutting this presumption in the context of the execution of the appointor deeds. For several reasons, on the balance of probabilities, the evidence establishes that the appointment of Shih-Hsien as appointor of the family trusts was a voluntary and spontaneous act on the part of the father.
First, the transaction in question is not so improvident or substantial as not to be ‘reasonably accounted for … [by] ordinary motives’,[108] and is instead ‘readily explicable by the relationship of the parties’.[109] There are several reasons for this, including:
[108]Quek v Beggs (n 61) 11, 764 (McLelland J).
[109]Thorne v Kennedy (n 56) 101 [34] (Kiefel CJ, Bell, Gageler, Keane and Edelman JJ).
(a) Shih-Hsien’s evidence, which ought to be accepted, was that he had been involved in the management and affairs of the family trusts for many years prior to his appointment. As the father’s health deteriorated, Shih-Hsien took a more active role in this regard, including liaising with accountants and solicitors and managing tax and financial documents relating to the family trusts.
(b) The evidence shows that the father was aware of the seriousness of his condition and its potential to impact his ability to effectively manage the affairs and administration of the family trusts. For this reason, it would seem reasonable that he would make arrangements for his duties as appointor to be re-allocated.
(c) On her own evidence, the mother had very little involvement in the family trusts, despite her status as director of both of the original trustee companies, and there is no evidence that either Shu-Chen or Shih-Kai had any significant involvement in the management of the family trusts.
For these reasons, the first and seventh defendants’ submission that Shih-Hsien was the ‘obvious choice’ to succeed the father as appointor of the family trusts is accepted. By virtue of Shih-Hsien’s close relationship with the father and his familiarity with, and experience in, the management of the family trusts, the appointment of Shih-Hsien is readily explicable and reasonably accounted for on grounds other than the exertion of any undue influence.
Secondly, on the evidence of both Shih-Hsien and the mother, the idea of appointing Shih-Hsien as appointor of the family trusts apparently originated from the father, rather than any external source of influence. Indeed, Shih-Hsien’s evidence was that the father first expressed his intention to appoint Shih-Hsien as his replacement over a year prior to the execution of the appointor deeds, at a meeting with representatives of Morrows which was arranged to discuss the father’s final wishes. While no evidence was provided of how the meeting at which the appointor deeds were executed came about, or who made the request for the appointor deeds to be prepared by Morrows, the evidence that is available would tend to indicate that the father was the driving force behind Shih-Hsien’s appointment. Although not necessarily determinative of whether the appointment was free of undue influence,[110] it has been recognised that such a consideration can be ‘a substantial and important factor’ in establishing that a transaction was the product of a free, voluntary and informed will.[111]
[110]Spong v Spong (n 63) 549 (Griffith CJ).
[111]Christodolou v Christodolou (n 61) [107] (Kaye J).
Thirdly, the evidence suggests that the father was of strong-willed and determined character, and that his will not easily overborne. There were numerous instances described within the evidence of the father refusing instructions given or requests made by his family and medical professionals, including Shih-Hsien specifically. The impression given by much of the evidence of the mother, Shu-Chen, Shih-Hsien and Shih-Kai was that the father very much occupied the role of patriarch of the Lin family, and took responsibility for all major decisions that affected the family, even as his health began to deteriorate. The plaintiffs’ submission that the relationship between Shih-Hsien and the father had the consequence that he was ‘reduced entirely to an automaton’ or became a ‘mere channel through which the will of’ Shih-Hsien operated[112] was not borne out by the evidence, which instead tended towards the opposite conclusion.
[112]Quoting Thorne v Kennedy (n 56) 100 [32] (Kiefel CJ, Bell, Gageler, Keane and Edelman JJ).
Fourthly, despite the plaintiffs’ submissions to the contrary, on the evidence, it seems highly likely that the father understood the nature, effect and consequence of the transaction he was undertaking in executing the appointor deeds. The father was an experienced businessman, having worked as a bank manager for many years in Taiwan prior to immigrating to Australia. After his arrival in Australia, the father established both family trusts and several business entities, and purchased a number of properties in Victoria, some of which were subsequently leased for rental income. He was solely responsible for the management and operations of the family trusts and associated business entities for two decades, and regularly consulted with his solicitor and accountants as to the financial and legal affairs of these entities during this time.
In addition, while accepting that there naturally would have been some limitation on the father’s ability to communicate in and understand English, given that it was not his first language, the evidence establishes that the father’s command of English was at the very least adequate to comprehend an explanation of a relatively simple document such as the appointor deeds. Indeed, Shih-Hsien’s evidence, which was not challenged, was that prior to the meeting at Morrows on 27 June 2016 he printed copies of the appointor deeds for the father to review, and that during the meeting, it was unnecessary for him to interpret on the father’s behalf because the father understood. For these reasons, the plaintiffs’ submissions to the effect that the father did not understand the scope of powers and responsibilities of the appointor of the family trusts — an office he had personally occupied for many years — are rejected.
Finally, and relatedly, although there are serious deficiencies in the evidence relating to the meeting at Morrows on 27 June 2016 at which the appointor deeds were executed, on balance, it is more likely than not that the transaction was comprehensively explained to the father by Mr Marks and Mr Krupp during this meeting. This conclusion is supported by several factors, including the brevity of the appointor deeds relative to the length of the meeting and the fact that the meeting was attended by both a solicitor and an accountant of a reputable accountancy firm, who on all accounts engaged in a lengthy discussion and explanation of the transaction in question. Clearly, taken in isolation, this consideration would be insufficient to rebut a presumption of undue influence, given the inadequacy and unreliability of any evidence of what was actually discussed during this meeting, as well as the fact that any advice provided was not truly ‘independent’ on account of Shih-Hsien’s presence and the fact that Morrows was presumably also acting on behalf of his interests at the time.[113] However, considered in conjunction with the other matters discussed above, this factor lends support to the conclusion that the father’s execution of the appointor deeds was an informed and voluntary exercise of his free will.
[113]See Powell v Powell (n 37) 246–7 (Farwell J); Nattrass v Nattrass (n 89); Aboody v Ryan (n 89).
Further, in contrast to a scenario in which a solicitor who is primarily acting for the recipient of a gift or benefit also provides advice to the donor of the gift, Morrows had primarily acted for the father in both his personal and business affairs for a period of many years, including in relation to the management of the family trusts, rather than Shih-Hsien. In Christodolou v Christodolou,[114] Kaye J found that evidence of advice given to the plaintiff by her solicitor in respect of a transaction which she later alleged was the product of undue influence would serve to rebut the presumption, notwithstanding that the same solicitor also acted for the defendant transferee in respect of other related matters. Factors that were held by his Honour to be relevant to this determination were that the plaintiff was the solicitor’s ‘primary client’, and that the advice given to the plaintiff by the solicitor was ‘free of any consideration’ of the fact that he was also acting for the defendant in other related matters.[115]
[114][2009] VSC 583.
[115]Ibid [109].
Furthermore, little weight ought to be placed on the unclear evidence given by Shih-Hsien that Mr Marks and/or Mr Krupp stated that the appointor deeds could be revoked, and the submissions made by the plaintiffs in this regard. Given the reference made by Shih-Hsien to the ninth part of the schedule during this part of his cross-examination, and the generally confusing nature of his evidence on the topic, the first and seventh defendants’ submission that the most plausible explanation is that any discussion of revocability on the part of Mr Marks or Mr Krupp was in respect of the power to appoint a new appointor as described in the ninth part of the schedule is accepted. In the absence of any clear and positive evidence to suggest that Mr Marks or Mr Krupp did indeed erroneously or fraudulently represent to the father that the appointor deeds could be revoked, in spite of their clear and unequivocal wording to the contrary, it cannot be found that such representations were made.
In the above circumstances, on the balance of probabilities, it cannot be found that the father’s appointment of Shih-Hsien as appointor of the family trusts was the product of, or affected by, the exertion of any undue influence by Shih-Hsien. Rather, the appointment of Shih-Hsien was a decision made freely and voluntarily by the father, as an informed and independent exercise of his will. Accordingly, none of the grounds on which the plaintiffs seek to challenge the validity of the appointor deeds succeed, and the appointor deeds remain in effect.
Conclusion
The deeds of appointment and resignation of appointor executed by the father on 27 June 2016 complied with the deeds of settlement for the family trusts, and were not the product of a lack of mental capacity or undue influence.
Remaining issues to be determined
As mentioned at para [16] this judgment deals with three of the nine issues needing to be determined. The remaining six issues framed as questions are:
(a) If no to each of questions 1, 2 and 3 — Question 4: Are the removal deeds invalid and of no effect alternatively, ought they be set aside?
(b) If no to question 4 — Question 5: Should Memorial No 1 and Memorial No 2 be removed as trustees of the first family trust and the second family trust and replaced with Javelin Towns and W C Lin Nominees, respectively, pursuant to the Court’s inherent jurisdiction and/or s 48 of the Trustee Act (Vic)?
(c) Question 6: Did Shih-Hsien make the first transfer and the second transfer for his own benefit, and are those transfers impugnable as a breach of trust or otherwise contrary to his fiduciary obligations?
(d) Question 7: Are the mother and Shih-Kai the joint legal and beneficial owners of the Dandenong properties?
(e) Question 8: Are the mother and Shih-Hsien the joint legal and beneficial owners of the Frankston properties?
(f) Question 9: Is there money owed to the first family trust by the mother and Shih-Kai in relation to the purchase of the Dandenong properties?
The parties are to provide estimates as to the number of days needed for the trial of the remaining issues. The Court will fix a tentative trial date commencing 17 October 2022.
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SCHEDULE OF PARTIES
S CI 2018 02053
| 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 (ACN 007 274 259) (in its own capacity and as trustee for THE LIN FAMILY TRUST) | Third Plaintiff |
| W C LIN NOMINEES PTY LTD (ACN 007 455 987) (in its own capacity and as trustee for THE LIN FAMILY TRUST NO 2) | Fourth Plaintiff |
| - and - | |
| SHIH-HSIEN LIN | First Defendant |
| WEN CHIH LIN MEMORIAL PTY LTD (ACN 622 246 575) (in its own capacity and as trustee for THE LIN FAMILY TRUST) | Second Defendant |
| WEN CHIH LIN MEMORIAL NO 2 PTY LTD (ACN 622 246 619) (in its own capacity and as trustee for THE LIN FAMILY TRUST NO 2) | Third Defendant |
| LUXTRON PTY LTD (ACN 007 442 819) | Fourth Defendant |
| REGISTRAR OF TITLES | Fifth Defendant |
| SHU-CHEN LIN | Sixth Defendant |
| EAST OCEAN INVESTMENTS PTY LTD (ACN 122 892 095) | Seventh Defendant |
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