Set v Tso
[2004] VSC 233
•1 July 2004
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL & EQUITY
No. 6684 of 2002
| TOM KON NYEAN SET | Plaintiff |
| V | |
| SONIA MAN CHI TSO | Defendant |
| AND | |
| SONIA MAN CHI TSO | Plaintiff by counterclaim |
| V | |
| TOM KON NYEAN SET | Defendant by counterclaim |
---
JUDGE: | SMITH J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 2, 3, 4, 7, 8, 9, 10 and 11 June 2004 | |
DATE OF JUDGMENT: | 1 July 2004 | |
CASE MAY BE CITED AS: | Set v Tso | |
MEDIUM NEUTRAL CITATION: | [2004] VSC 233 | |
---
De facto relationship – adjustment of property interests – debts to third parties.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr B. Guzzo | Lim & Associates |
| For the Defendant | Mr P. Clarke | Charles Chow |
HIS HONOUR:
Tom Kon Ngean Set (referred to at the hearing as "Tom") and Sonia Man Chi Tso (referred to at the hearing as "Sonia") lived together in a de facto relationship from May 1988 to October 2000.
Each has brought proceedings pursuant to Part IX Property Law Act 1958 seeking orders relating to the division of assets and payment of debts.
Tom’s writ filed 7 August 2002 sought declarations of trust as to the joint assets and credits in bank accounts of the parties, orders adjusting the interests of the parties in properties and sale proceeds. His writ also sought, inter alia, a taking of accounts and the making of all proper and necessary inquiries. Sonia’s writ filed in the County Court on 8 July 2002 sought, inter alia, an order for the sale of real property and the division of the proceeds as directed by the Court. It also sought:
(a)an order that the amount due to Man Chee Tso (Sonia’s brother) from the parties be paid to him or at his direction; and
(b)an order that the amount due to Pauline Poyu Chan (Sonia’s cousin) be paid to her or at her direction.
Sonia’s writ also sought an order adjusting the interest of the parties in their real and personal property as is proper pursuant to Part 9 of the Property Law Act 1958 and, alternatively, a declaration that the parties held real and personal property on trust in such proportions as the Court sees fit and any orders consequent thereon.
In the course of the hearing, the parties reached agreement that the net assets of the relationship should be shared equally between them. The parties also reached agreement that the following property should be divided between them:
(a)
Two properties of which they were joint proprietors - Unit 1, 69 Edward Street McLeod (agreed value $330, 000) and 21 Stewart Terrace (agreed net value $293, 135).
(b)
Shares in the following; Telstra (1400 shares agreed value $6,580), Coles Myer (560 shares agreed value $ 4, 710) and AXA (387 shares agreed value $ 1, 269).
(c)
Two motor vehicles - a Nissan Patrol (agreed value $26,000) and a Toyota Corolla (agreed value $11,000).
(d)
Superannuation entitlements - Tom's valued at $77, 825 and Sonia's valued at $14,000.
There are issues, however, about what other items should be included and what payments should be made out of the common property before it is divided.
•
Tom argues that there should be added by Sonia an amount of $50,000, it being an amount paid out of the proceeds of sale of a joint asset, 32 Borlaise Street McLeod by Sonia to her niece Rita Tso, the daughter of her brother Man Chee Tso.
•
Sonia argues that the following debts exist for which both are responsible and that they should be paid from any common property:
(i)
Loan from Man Chee Tso of $45,000 on 14 January 1991 - lent to Tom's brother and lost
(ii)
Loan from Man Chee Tso of $25,000 in July 1995 to purchase furniture and to pay debts.
(iii)
Money borrowed from Man Chee Tso totalling approximately $50,000 used to pay two cars – a Patrol and a Toyota.
(iv)
Loan from Pauline Chan of $80,000 - in July 1996.
I note that it has not been suggested at the hearing that interest is payable on these amounts.
Man Chee Tso and Pauline Chan are not parties to these proceedings. I confess to some unease about making decisions which concern their entitlements in those circumstances. But the issues must be addressed. Section 284 provides as follows:
“284. Duty of court to end financial relationships.
So far as is practicable a Court must make orders that will end the financial relationships between the domestic partners and avoid further proceedings between them.”
Only by addressing the issues raised as to the disputed sums can the financial relationship be ended and further proceedings avoided.
I note that under s 296 Property Law Act 1958 the Court must have regard to the interests of and make any order proper for the protection of other persons interested and there is a discretion given to have notice of the proceedings given to other persons and for the joinder of other persons to the proceedings. [1] Pauline Chan and Man Chee Tso have notice of the proceedings. Both participated in the proceedings by giving evidence but neither sought to intervene.
[1]S 296 (2).
As to the discretion to make a person a party to the proceeding, it is to be exercised on the application of that person or “if it appears to the Court that the person may be affected by an order under Division 2 or 3”. Here neither person made application – nor, for that matter, did the parties. There remains, however, a discretion to join them “if it appears to the Court that the person may be affected by an order under Division 2 or 3”. I assume for present purposes that in that situation, the Court may make a person a party on its own motion.
In the present case, the orders sought by Sonia, if made, will benefit Man Chee Tso and Pauline Chan and do not prevent them pursuing further amounts if they are outstanding. Bearing in mind that:
• they have not sought to be joined;
• Tom and Sonia have not applied for them to be joined; and
•to join them would have delayed the proceedings and added significantly to what is already an expensive application -
it does not seem to me that the Court should, of its own motion, make an order that Man Chee Tso and Pauline Chan, or either of them, be joined as a party.
The best, but not entirely satisfactory course to adopt in all the circumstances is to consider and rule upon the issues raised without adding further parties. I believe that practical orders can be made to give effect to any finding that the parties owe money to third parties and for the payment of that money out of the common property.
Credibility of Tom and Sonia
Before turning to the disputed financial transactions, it is necessary to consider the question of the credibility of the two key witnesses Tom and Sonia.
I regret to say that I formed an unfavourable view of their credibility. A particular reason for this view is their evidence concerning a number of documents relied upon by Sonia to support her case. I refer to the documents at Courtbook 131, 136, 139, 140, 154, 161 and 162 bearing dates from 11 January 1991 to 11 November 1997.
The early documents concerned the abovementioned $45,000 payment provided by Sonia's brother, Man Chee Tso for the use of Tom's brother in a property development. This money was lost along with a substantial amount provided by Sonia and Tom.
I accept that following the loss of her brother’s money Sonia felt under a moral obligation to repay him. The weight of the evidence is that the money was originally lent or invested directly into that venture through the corporate vehicle then used by Tom and Sonia, Sanjoe Pty Ltd. The first document,[2] a “Promissory Note” headed “Sanjoe Holdings Pty Ltd” and dated 11 January 1991, recorded an agreement by Tom and Sonia “as owners” of the company to borrow $45,000 for six months to 10 July 1991 at 8.5 per cent per annum. Sonia claims that she and Tom agreed that they should repay the money. She says that she set about documenting their obligation. Her evidence is that after the money was lost she prepared a “Promissory Note” bearing the date 10 September 1991 recording that “We hereby agree to have borrowed $46,912.50 from Man Chee Tso” and “had agreed to pay him at 10.25 per cent per annum at three years term from 19-9-91 …”[3] The next document produced, purportedly three years later on 10 September 1994, asserted that Man Chee Tso had “earned $12,515.09 interest of your $46,912.50 three years term deposit which we have had borrowed from you.” It sought his instructions about the return of his money or whether he wanted them to “invest your money” in the future.[4] This document was trying to do more than simply record a debt. It was trying to create the impression that there was a cash sum in existence which could be invested or returned. This was false.
[2]CB 131.
[3]CB 136, 137.
[4]CB 139.
In the next document[5] bearing date 15 September 1994, a different approach was taken. Tom and Sonia purported to offer Man Chee Tso the opportunity to be involved in a development proposal involving the construction of two units at the Edward Street Property. It offered Man Chee Tso a 60 percent interest in the redevelopment of the Edward Street property on the expressed basis that they needed his money to get the project started and needed his authorisation for that purpose. There was no money, however, it having been lost in the investment of Tom’s brother. In a document bearing date 20 September 1994,[6] however, which Man Chee Tso said he caused to be prepared, he purported to authorise Tom and Sonia to use the sum in question, $59, 425.59, as an investment fund and "in any way”. It also stated that,
“any dividend earned or loss incurred in any investment will be fully agreed and supported by me.”
It too was false. There was no investment fund to be used. Sonia claimed that the result of this transaction was that if a profit was made, Man Chee Tso would get a 60 percent share and so be paid back and that if there was a loss he would carry 60 percent. She says that the purpose was to make some money to pay him back.
[5]CB140.
[6]CB 141.
Thus at this stage, on the above documents, a debt became a non existent cash amount that had not been lost but had been invested for a three year term and then, though lost, was to be used to facilitate a property development in which Man Chee Tso could participate as a joint venturer. Sonia and Man Chee Tso are not now alleging such a joint venture.
The next document bears the date 1 October 1995.[7] In it, Sonia and Tom purport to assert that they had sold one unit at Edward Street and that Man Chee Tso had earned a profit of $36,061.80, being 60 percent of the net profit of $60, 103. It also stated “We have borrowed your money as a mortgage instead of from bank”. This was plainly fictitious. It also stated that it was agreed that they owed him
$96,061 80 on which they had now agreed to pay him interest at 10.50%.[7]CB 154.
Two further documents should be mentioned[8] bearing the dates 20 August 1997 and 11 November 1997. The first referred to two rental properties, at Borlase Street and Mavis Court , McLeod to be purchased for Man Chee Tso using money that Tom and Sonia had borrowed from the bank. The second purported to inform him about the value of “your two houses” and of an opportunity to sell them – for which instructions were sought. The houses were in fact bought and registered in the names of Tom and Sonia. Sonia does not now assert that Man Chee Tso had any interest in the two properties and the proceeds of sale of the two properties were dealt with on the basis that the properties were owned by Tom and Sonia.
[8]CB 161,162.
Tom gave evidence that these documents were all a sham, having been prepared for the purpose of supporting a migration application by Man Chee Tso. Thus, if his evidence is accepted, he and Sonia had agreed to provide false information to the Immigration Department. On that basis both had engaged in extremely dishonest behaviour.
Turning to their individual evidence about these documents, Tom maintained that the documents had been prepared in 1998/1999 using the same typewriter and signed by him with the same pen. This is plainly not so. Sonia, on the other hand, could not explain satisfactorily why the content of a number of documents bore so little relation to reality. The most blatant examples were documents 139, 140, 154 and 161 and 162. I am satisfied that these documents were false.
I note that Man Chee Tso was also involved in the creation of a false document - notably the document dated in 20 September 1994 which referred to a non-existent investment fund.[9]
[9]Courtbook 141.
The fact that most of the documents purport to provide evidence of non-existent assets held by Man Chee Tso in Australia lends strong support to the contention of Tom that the documents were prepared to support an application by Man Chee Tso to migrate to Australia. He, in fact, made an application in 1996 which was unsuccessful and took steps to make a further application in 1998/1999. That application did not proceed. A migration agent was involved - TST. No one was called to give evidence from that agency.
It is not necessary, however, to make a finding as to the reason behind the false statements in these documents. They were false and Sonia prepared them. She could give no satisfactory explanation for their content. She went to considerable trouble to prepare them. She advanced unsatisfactory explanations without any apparent difficulty or embarrassment—particularly for documents 161 and 162.
I find myself in the position therefore that I cannot rely upon any evidence of Tom, Sonia or, for that matter, Man Chee Tso, unless it is supported by independent evidence or particular evidence given by them is against their interests.
Some evidence with a degree of independence is to be found in a transaction that occurred in May 1997. It was common ground that in early May 1997 Sonia visited Mr Taylor, a solicitor. She sought his assistance to draw up documents to protect money that she said had been lent to her and Tom from Man Chee Tso and Pauline Chan and to draw up wills to avoid any fights between their respective children over the property at Edward Street McLeod, a property of which they were registered as joint proprietors. Mr Taylor drew up three documents which were signed by Tom and Sonia. The first was a deed of acknowledgment between them " in relation to the property known as unit 1, 69 Edward Street, McLeod". In it, the parties agreed, inter alia, that they had made contributions in different proportions to “the property” and by way of loans provided by Pauline Chan and Man Chee Tso. The deed also recorded their agreement to make irrevocable wills in favour of each other in relation to the property. The deed went on to record their acknowledgments as follows:
"1.That the proportions in which the price of the property has been contributed, after allowing for loans from other parties is:
(a) Sonia Tso $80,000.00
(b) Tom Konngean (sic) Set $20,000.00
2.That there is owing against the property sums secured for loans provided by, and amounting to:
(i) Chan Poyu Pauline $80,000.00
(ii ) Tso Man Chee $25,000.00
3.That on the sale of the property loans are to be repaid in priority to any moneys being made available to either of the parties, and the proceeds of sale, after paying the loans, are to be divided between the parties in the following proportions:
(a) Sonia Tso 80 %
(b) Tom Konngean (sic) Set 20 %"
At the same time, each executed a will. That executed by Tom appointed Sonia executor and provided that the whole of his estate should pass to Sonia and that the will so far as it affected the Edward's Street property was made in agreement with Sonia and was irrevocable without her consent. Sonia's will contained a similar provision about the irrevocability of the will so far as it affected the Edward Street property. She appointed Tom and her son Yau Yee Kin executors. She created an interest in the Edward Street property in favour of Tom "for his lifetime or until the property may be sold during his lifetime" on condition that he paid "interest at current market rates on the loans and pays all rates, taxes and insurances". Her will also provided that when the property was sold the proceeds were to be used to repay monies advanced in respect of the property by Pauline Chan and Man Chee Tso in priority to any other monies. The residue of sale proceeds was to be divided between Tom and “myself in the proportions of our agreement dated this day”. There was a residuary gift in favour of her son Yau Yee Kin.
Plainly the agreement reached favoured Sonia and her family. I am satisfied that at that time, and ever since the substantial sums were lost in late 1991 through the investment in Tom's brothers venture, Sonia had taken over the "driver's seat" in relation to their financial affairs. She was also better educated and came across as the sharper intellectually of the two. Notwithstanding her dominant position, I am satisfied that Tom well understood the substance of the agreement and wills and chose to go along with them. The documents had the advantage for him that any obligation to repay moneys owed by them to Man Chee Tso and Pauline Chan purportedly was subject to his life interest in the property.
The operation of the documents has been confused by the fact that Sonia has made a further will without the consent of Tom and has thereby repudiated the agreement. That may explain why Sonia now does not seek to have the agreement enforced. Tom has also raised other issues such as unconscionability.
It is not necessary, however, to resolve such questions. Tom now claims that he thought the documents were intended to operate only after the death of the first to die. Even if that be true, it is the admissions in the document that are significant. For present purposes the significance of the documents lies in what the parties admitted to be the position at that time about the loans for which they were jointly liable to Pauline Chan and Man Chee Tso. The deed of acknowledgement contains an admission by Tom that $25,000 was owing to Man Chee Tso and $80,000 to Pauline Chan. It also contains an admission by Sonia that $25,000 was owing to Man Chee Tso not the larger amounts stated in the above documents. Sonia in fact asserted in her evidence that the $ 25,000 referred to in the agreement related solely to the purchase of furniture and payment of debts. She said she had not included the $45,000 debt in the Deed because she regarded the various documents referred to above as adequately protecting Man Chee Tso. I do not accept that explanation. The agreement and the mutual wills provided security which was lacking in the other documents. Sonia would have well understood that and would have been concerned to protect her brother further if in fact there was a debt of $45,000 as now alleged. The content of the agreement rather lends support to Tom's evidence that the documents referred to above came into existence after the 1997 agreement.
The admissions in the 1997 agreement are significant in resolving what Tom and Sonia believed were third party debts that were in existence prior to 12 May 1997. With the benefit of this analysis, I turn to the matters that are in dispute.
The alleged loan of $45,000
On about 1 November 1990 Man Chee Tso advanced the sum of $45,000 directly to Sanjoe Holdings Pty Ltd, a company of which Tom and Sonia were shareholders and directors. I am satisfied that Tom had approached Sonia to obtain funds from her family to assist his brother, Kim, in a development project of his company, Wigby Pty Ltd, which was experiencing cash flow problems while finishing a development.
As noted above a " Promisary Note" was executed on about 11 January 1991 and signed by Tom and Sonia with the title “Sanjoe Holdings Pty Ltd”. Its content is slightly ambiguous but the loan was recorded in the books of the company. I am also satisfied from Man Chee Tso’s oral evidence that he saw himself at the time as investing the money with Kim. Sonia relies on her evidence and Man Chee Tso’s witness statement. The contemporaneous documents, however, including Sanjoe’s documents, do not support the conclusion that the debt was that of Tom and Sonia personally. Any doubts are removed by the Deed drawn up subsequently in May 1997 on the initiative of Sonia by a solicitor and signed by them both which, amongst other things, stated that they owed Man Chee Tso $25,000 only and attempted to secure that sum over the Edward Street Property.
The alleged loan of $25,000
The evidence relied upon by Sonia in support of this claim is that of herself and Man Chee Tso. According to that evidence, $25,000 was provided by Man Chee Tso to Sonia and, in cash, out of $40,000 which had been brought into Australia by him and his family for the purpose of a holiday in Australia and New Zealand. The loan was, according to their evidence, negotiated without any involvement of Tom. It does appear, however, that Sonia used at least some of the money to purchase furniture for the Edward Street property and so for their mutual benefit. Absent the 1997 agreement, however, I would not be prepared to accept the evidence of Sonia that the money was borrowed for the benefit of , and by, them both. In light of Tom's admission in the 1997 agreement, however, I am persuaded that $25,000 is owed by both to Man Chee Tso as a result of this transaction.
The alleged loan of $80,000 from Pauline Chan
The evidence of Pauline Chan was that she supplied the sum of $80,000 to Sonia by bank draft on 8 July 1996. The relevant discussions took place between the two women. Again, at the time, there was no discussion of Tom's involvement in the transaction. The evidence of the fate of the money is not entirely satisfactory but I am satisfied, on the documentary evidence, to the requisite standard, that $70,000 was deposited from those monies on 9 July 1996 into a joint loan account of Tom and Sonia to reduce the debt. A further sum of $10,000 was deposited at the same time into a term deposit account and later used for their mutual benefit by reducing the Edward Street loan account on 4 September 1997.
The issue remains, however, whether the introduction of those funds by Sonia simply represented part of her contribution borrowed from Pauline Chan or whether it constituted a joint liability. That issue is resolved in Sonia's favour by the admissions in the 1997 agreement.
In conclusion, I note, that counsel for Tom submitted in relation to the Pauline Chan loan, that any claim for that loan was statute barred, it having been made on 9 July 1996. The written and signed acknowledgment contained in the above Deed, however, revives the limitation period.[10]
[10]Limitation of Actions Act 1958 s 5, 24 (3) and 25.
The alleged loan of $50,000 from Man Chee Tso and the payment of $50,000 to his daughter
Sonia's evidence is that she withdrew money from an at-call account into which she had paid
• monies received from Man Chee Tso for the costs and expenses of his children who were studying in Australia and living with them; ` and
•money received from a Mr Chung for his daughter who was also studying in Australia and living with them.
It appears that in October 1998 Sonia and Tom bought two new motor cars - a Toyota for him for $21,930 and Nissan Patrol for her costing a net amount of $36,000 (after trading in her Honda Civic for $18,750). On about 16 October 1998 Sonia withdrew $21, 830 from the at-call account to pay for the Toyota. On 30 October 1998, the bank made loan money available in a joint car loan account and on the same day Sonia withdrew $15,000 from the at-call account and paid it into the loan account. She also claims that on 19 November 1998 she received a cheque from Man Chee Tso's wife for $10,000. She claims that that amount was paid into the car loan account. The documentation, however, is deficient or missing and the financial evidence is somewhat confusing.
Sonia's evidence was that she had the permission of Man Chee Tso to borrow these monies for the purchase of the cars. If that is true, approximately $50,000 is owed to Man Chee Tso unless it was repaid, as Sonia asserts by the payment of $50,000 to Man Chee Tso's daughter Rita. Alternatively, approximately that amount was taken without the authority of Man Chee Tso and used to benefit both and should be repaid. I am persuaded, therefore that Tom and Sonia owed $50,000 to Man Chee Tso.
Sonia, however, asserts that it was repaid by the payment of $50,000 into the custody of Rita Tso. Man Chee Tso accepts that he has been repaid. There is, therefore, nothing to be gained by Tom in recovering the amount of $50,000 paid to Rita even if it was not paid with his permission. If it is recovered, there will be, on the evidence, a joint debt to be paid of a similar amount.
Accordingly, neither amount need be considered in determining the net assets for division between Tom and Sonia.
Conclusion
It follows that out of the agreed joint property, an amount of $25,000 should be paid to Man Chee Tso and an amount of $80,000 should be paid to Pauline Chan. Orders should be made to give effect to these conclusions and to divide the net assets equally between the parties.
---
0
0
0