Tong v Tong
[2024] ACTCA 27
•29 August 2024
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
COURT OF APPEAL
Case Title: | Tong v Tong |
Citation: | [2024] ACTCA 27 |
Hearing Date: | 20 February 2024 |
Decision Date: | 29 August 2024 |
Before: | Mossop ACJ, Loukas-Karlsson and Taylor JJ |
Decision: | 1. The appeal is dismissed with costs. 2. The affidavit of Suqin Zhu Tong affirmed 12 October 2023 and Edmund Hao Wen Tong affirmed 12 October 2023 are admitted into evidence on the cross‑appeal. 3. The cross-appeal is dismissed with costs. |
Catchwords: | APPEAL – EQUITY – Undue influence – appeal on ground that primary judge erred in finding that inter vivos transfer was result of undue influence – where primary judge found relationship gave rise to presumption of undue influence – where presumption was not rebutted – whether open to primary judge to find presumption of undue influence – consideration of combined force of circumstances – no error established – appeal dismissed APPEAL – TRUSTS – Constructive trusts – appeal on ground that primary judge erred in finding that property was held by the deceased’s sister on trust for the benefit of the deceased – where primary judge found the deceased considered property to be his own – where primary judge found the deceased to have paid his sister amount equal to his equity in the property – whether open to primary judge to find existence of constructive trust – no error established – appeal dismissed STATUTES – INTERPRETATION – Interpretation of r 5413 of Court Procedures Rules 2006 (ACT) – where respondents’ cross‑appeal sought to “amend” orders of primary judge – whether reference to “amend” is different to “appeal” – whether rule places lesser burden on respondent seeking to amend – whether seeking to amend requires party to establish error – establishment of error required – no error established – cross‑appeal dismissed |
Legislation Cited: | Administration and Probate Act 1929 (ACT), s 32(2) Court Procedures Rules 2006 (ACT), rr 5413, 6906 Federal Court Rules 1979 (Cth), O 52 r 22 Supreme Court Act 1933 (ACT), s 37N(3) Supreme Court Rules 1937 (ACT), O 86 r 30 Trustee Act 1925 (ACT), s 70 |
Cases Cited: | Allcard v Skinner (1887) 36 Ch D 145 Armouti v Nenes [2022] ACTCA 3; 17 ACTLR 237 Bank of Montreal v Stuart [1911] AC 120 Baumgartner v Baumgartner (1987) 164 CLR 137 Belhaven and Stenton Peerage [1875] 1 App Cas 278 Fox v Percy [2003] HCA 22; 214 CLR 118 Goldsworthy v Brickell [1987] Ch 378 House v The King (1936) 55 CLR 499 Johnson v Buttress (1936) 56 CLR 113 Jones v Dunkel (1959) 101 CLR 298 Jovanovic v The Queen [2015] ACTCA 29 Leighton v The Queen [2017] ACTCA 55 National Westminster Bank plc v Morgan [1985] AC 686 Permanent Mortgages Pty Ltd v Vandenbergh [2010] WASC 10; 41 WAR 353 Quek v Beggs (1990) 5 BPR 11,761 R v Hillier [2007] HCA 13; 228 CLR 618 Richardson v Richardson [2022] ACTSC 363; 20 ACTLR 37 Royal Bank of Scotland plc v Etridge (No 2) [2002] 2 AC 773 Thorne v Kennedy [2017] HCA 49; 263 CLR 85 Tong v Tong (No 2) [2023] ACTSC 336 TS v DT [2020] ACTCA 43 Union Fidelity Trustee Co of Australia Ltd v Gibson [1971] VR 573 Whereat v Duff [1972] 2 NSWLR 147 Wu v Wu [2024] ACTCA 8 Yerkey v Jones (1939) 63 CLR 649 |
Texts Cited: | Explanatory Statement, Supreme Court Amendment Rules 2002 (No 3) (ACT) |
Parties: | Duc Khai Tong (First Appellant) Le Ngoc Tong (Second Appellant) Edmund Hao Wen Tong (First Respondent) Suqin Zhu Tong in her capacity as litigation guardian of Lin Yi Tong (Second Respondent) Suqin Zhu Tong in her capacity as litigation guardian of Raymund Jun Wen Tong (Third Respondent) Suqin Zhu Tong in her capacity as litigation guardian of Desmund Xuan Wen Tong (Fourth Respondent) Suqin Zhu Tong (Fifth Respondent) |
Representation: | Counsel S Chapple SC with H Morrison ( Appellants) D Hassall ( Respondents) |
| Solicitors Dobinson Davey Clifford Simpson ( Appellants) Maxwell & Co Barristers and Solicitors ( Respondents) | |
File Number: | ACTCA 28 of 2023 |
Decision Under Appeal: | Court/Tribunal: ACT Supreme Court Before: McWilliam J Date of Decision: 30 June 2023 Case Title: Tong v Tong Citation: [2023] ACTSC 163 |
THE COURT:
Introduction
1․This is an appeal and cross-appeal from orders made by a judge of the Supreme Court of the Australian Capital Territory, who determined the respondents’ claims relating to the estate of Quoc Khai Tong, who died on 17 June 2019.
2․Because all parties have the same surname, they will be referred to by their first names in these reasons.
3․The first appellant, Duc Khai Tong, is Quoc’s brother. The second appellant, Le Ngoc Tong, is Quoc’s sister.
4․The fifth respondent, Suqin Zhu Tong, was Quoc’s wife. The first, second, third, and fourth respondents (Edmund, Lin, Raymund and Desmund) are Quoc’s children, presently aged 19, 17, 16 and 9, respectively. Suqin is the litigation guardian of the youngest three children.
5․At its core, the claim made by Suqin and the children before the primary judge was one for family provision. However, as a result of payments made by Quoc to Duc and Le before he died and a complex web of financial and property transactions between Quoc, Duc, Le and their mother Khanh Thi Ha (Khanh), Quoc’s estate had only a modest value at the time of his death. The claim by Suqin and the children challenged the inter vivos payments on grounds that included that they were procured by undue influence. They also sought relief in relation to two residential properties in Canberra, one being in the suburb of Kambah and the other in the suburb of Richardson. The primary judge found that the payment to Duc was the result of undue influence and should be set aside: Tong v Tong [2023] ACTSC 163 (hereafter “J”). She found that the Richardson property was held by Le on trust for Quoc and, hence, formed a part of his estate. She dismissed the claim in relation to the Kambah property. She also removed Duc as the executor of Quoc’s estate and removed a company controlled by Duc and Le, Fortitude Investment Group Pty Ltd (Fortitude), as the trustee of a trust set up to benefit the children.
6․Duc and Le have appealed against the decision of the primary judge, contending that:
(a)the primary judge erred in finding that the inter vivos transfer of $360,000 to Duc was the result of undue influence;
(b)the primary judge erred in finding that the Richardson property was held by Le on trust for the benefit of Quoc; and
(c)the primary judge erred in making a contingent alternative finding that the inter vivos transfer of $290,150 to Le was the result of undue influence.
7․If successful, the result of the appeal would be to exclude from Quoc’s estate the amount of $360,000 and to leave the legal and equitable title to the Richardson property in the hands of Le. That would have the effect of achieving a corresponding diminution in the overall value of the estate and, hence, the value of the residue of that estate which was to be held on trust for Quoc’s children.
8․As noted, the primary judge removed Duc as executor of Quoc’s estate. He was replaced by the ACT Public Trustee and Guardian (Public Trustee). The estate was not named as a party to the appeal.
Decision below
9․The primary judge (J [1]-[18]) set out the basic circumstances and then identified issues that required determination.
Basic facts
10․In summary, the relevant facts were as follows.
11․Quoc died on 17 June 2019. He had earlier been diagnosed with stage IV colon cancer. As at the date of Quoc’s death, he had been married to Suqin for 15 years. Their children were then aged 14, 12, 11 and 4.
12․Quoc was also survived by members of his extended family, namely, his mother, Khanh, and his five siblings. Duc and Le were two of them.
13․On 15 April 2019, two months before he died, Quoc received an advance death benefit of $1,027,804.33 as a result of a life insurance policy.
14․He then paid out a loan of $285,000, which was secured by a mortgage over the residential property in Kambah, of which he was the registered proprietor and in which his mother, Khanh, lived. Once that mortgage was discharged, the title to the Kambah property was transferred from Quoc to Le. The transfer was registered on 13 May 2019, being approximately one month before he died.
15․On 16 April 2019, the day after he received the insurance payout, he transferred $360,000 to Duc. Throughout April and May 2019, Quoc transferred amounts totalling $312,000 to Le.
16․These payments were “broadly referable to the amount owing on a home loan in Duc or Le’s name”: J [8]. In Le’s case, it related to a loan on the property in Richardson. The history of the Richardson property was as follows:
(a)Quoc purchased the Richardson property in 2005.
(b)Le acquired it from him in 2008, borrowing $285,000 and using savings to pay the balance of the purchase price and stamp duty. The total cost being $350,000.
(c)Quoc and Suqin then made weekly payments to Le. These payments started at $350 per week in 2008 and went up to $500 per week in 2017.
(d)Quoc and Suqin lived in the Richardson property up until his death. Suqin and the children continue to live there.
17․There was a dispute between the parties as to whether the weekly payments to Le were rental payments, or more in the nature of payments towards the loan and mortgage for what Quoc and Suqin viewed as being their family home.
18․Suqin became aware of the fact that Quoc had made large payments to Duc and Le in April and May 2019, and demanded that Quoc ensure that the money was returned. Both Duc and Le returned the money in mid-May 2019. However, later in May 2019, Quoc gave bank cheques “in broadly those respective sums” to Duc and Le: J [9]. Duc presented the bank cheque after Quoc had died. It is not clear when Le presented the cheque given to her.
19․On 10 May 2019, a deed was executed which created the Tong Family Trust (the Trust). This was done “apparently with Quoc’s knowledge or involvement”: J [10]. The trustee was Fortitude Investment Group Pty Ltd, of which Duc and Le were the directors and shareholders. Duc and Le were also the appointers of the Trust. The income of the Trust was to be distributed to the beneficiaries at the trustee’s discretion. On 20 and 22 May 2019, Quoc drew bank cheques in favour of Fortitude, totalling $225,000. These were also presented after he died.
20․Less than a week before he died, Quoc made a will, dated 12 June 2019. The will made further gifts of $70,000 each to Duc and Le, and $30,000 to his mother, Khanh. Quoc’s superannuation benefit was left to Suqin. The rest of the estate was to be transferred to the Trust to be invested for the benefit of the children’s education, health, and wellbeing, until the youngest surviving child reached 24 years of age. When each surviving child reached that age, the child was able to choose to take the whole of their equal share as a lump sum and cease being a beneficiary of the Trust.
21․Probate was granted to Duc, the executor named in the will, on 15 November 2019. The net value of the estate as at the time of the grant was approximately $340,000.
Issues
22․The primary judge (J [15]) identified that the respondents (who were the plaintiffs at first instance) made three categories of claim:
(a)complaints about financial transactions and real property transfers which occurred before Quoc died (the Undue Influence Claim);
(b)complaints about the terms of the will and whether it made adequate provision for Quoc’s wife and children (the Family Provision Claim); and
(c)complaints about the administration of Quoc’s estate and the Trust (the Estate Administration Claim).
23․The primary judge (J [18]) identified six issues arising out of the three categories of claim, which she then determined:
Undue Influence Claim
(a)Whether the testamentary gifts of $70,000 each to Duc and Le in the will were the product of undue influence or coercion (Issue 1).
(b)Whether the transfers of money or property to Duc and Le were the product of undue influence or unconscionable conduct (Issue 2).
Family Provision Claim
(a)What assets form part of the estate in light of the findings on Issue 2 (Issue 3).
(b)Whether the plaintiffs’ claim for family provision should succeed and, if so, what adjustment should be made (Issue 4).
Estate Administration Claim
(a)Whether Duc should be removed as executor of the Estate (Issue 5).
(b)Whether Fortitude should be removed as trustee of the Trust (Issue 6).
Undue influence - testamentary gifts
24․So far as Issue 1 was concerned, the primary judge identified that the findings that she made were largely overtaken by the conclusions that she reached, favourable to Suqin and the children, in relation to the claim for family provision. An alteration to the provisions made in the will effectively overtook whatever decision the court made on Issue 1. Despite this, the primary judge addressed Issue 1 in some detail. Her Honour made findings as to relevant events following Quoc’s diagnosis with stage IV colon cancer in November 2018 up until the execution of the will on 12 June 2019. The primary judge concluded (J [52]):
52.The circumstances in which the Will was both brought into existence and executed are troubling, but not to such an extent as to establish that Quoc was either too ill to exercise free agency or that the influence that Duc plainly exercised over his brother was so great as to be ‘undue’ or coercive in the sense of Quoc no longer exercising his free will, as explained in the authorities.
Undue influence – gifts of money and property
25․Issue 2 was the issue of central importance in relation to the value of the estate. The primary judge addressed the issue over 141 paragraphs. Before the primary judge, the respondents challenged three dispositions of property on the basis that they were the subject of undue influence upon Quoc by either Duc or Le. Those were:
(a)the transfer of the Kambah property from Quoc to Le;
(b)the payment of $360,000 from Quoc to Duc; and
(c)the payment of $290,150 from Quoc to Le.
26․Her Honour set out the principles applicable to an equitable claim of undue influence and unconscionable conduct taken from Permanent Mortgages Pty Ltd v Vandenbergh [2010] WASC 10; 41 WAR 353 at [166]-[176].
Kambah property
27․Her Honour then addressed whether the transfer of the Kambah property should be set aside because of undue influence. She examined, in considerable detail, the history of living and property ownership arrangements as between Quoc, Duc and Le. Those arrangements will be discussed further later in these reasons when addressing the grounds of appeal, but for now it is only necessary to summarise her Honour’s findings. In short, the primary judge found that the transfer of the title to the Kambah property into Le’s name was not actually a gift and so should not be set aside. That was said to be because Quoc had always held the asset on a common intention constructive trust for his mother, Khanh, or, alternatively, for Khanh and Le. Once that conclusion was reached, the payout of the loan and the transfer of the property involved the bringing together of the legal and beneficial interest in the Kambah property. If that conclusion was wrong, then the primary judge indicated that she would find that the presumption of undue influence had been rebutted by the circumstances surrounding the act.
Payment of $290,150 to Le
28․The primary judge then (J [96]) turned to address whether the payment of $290,150 to Le should be set aside for undue influence. Her Honour recorded that this was very much dependent upon who the beneficial owner of the Richardson property was. Although Le held the legal title to the Richardson property from 31 January 2008, the primary judge concluded that the beneficial interest in that property remained with Quoc until he died. Significant for this conclusion was that, although Le had become the registered proprietor of the property in 2008, there were transfers of money from Quoc to Le consistent with Quoc retaining the equity in the property and inconsistent with Le having purchased the property from him. The primary judge said that the paper trail in relation to the transfer of the Richardson property was consistent with it being an arm’s length sale. Her Honour continued (J [109]):
109.However, that is not the full story. When closer scrutiny is paid to the money flowing between Le and Quoc at the time, it can be seen that the “purchase” was more of a family arrangement. Quoc’s bank records in 2008 demonstrate that although the mortgage was taken over by Le and she paid various sums of money to Quoc, Quoc then repaid money to Le sufficient to retain equity, or an equitable interest, in the Richardson property at the time of settlement.
29․The primary judge set out her findings in relation to bank transfers between the parties, including a finding that an amount of $65,330, which was paid into Quoc’s bank account on the day of the settlement, was repaid to Le. Her Honour found that this, along with various other transfers in January and February 2008, indicated that a total of $117,988.04 was paid by Quoc to Le, representing his equity in the property after the mortgage was repaid.
30․The primary judge found that the effect of the shuffling of money was that Le essentially only took over Quoc’s mortgage, which required the taking over of the legal title to the Richardson property, in order to help him financially. She concluded that the transfer of the title to the Richardson property was a family arrangement which included Quoc still retaining the equity in the property. The primary judge examined other transactions between members of the Tong family and remarked that, when regard is had to the full history of how the family dealt with real estate, the name recorded on the legal title to a particular real estate asset was not a safe guide to who owned the beneficial interest: J [128]. Her Honour found that in the decade when Quoc and his family lived in the Richardson property and paid “rent” to Le, that gave Le a tax benefit. For almost the same length of time, Khanh, and at times Le, lived in the Kambah property and paid “rent” to Quoc, giving Quoc a tax benefit. Finally, she also found that Quoc treated the Richardson property as his own property and that Suqin treated the property as her own. It was in that context that the payment to Le to discharge the mortgage was made. The primary judge found that “in paying off the mortgage for the Richardson property, Quoc was not giving her a gift, but ensuring that he provided an unencumbered house for his children to live in”: J [148] The primary judge summarised her conclusions as to the beneficial ownership of the Richardson property as follows:
162.Drawing all those factors together, the requisite common intention for the establishment of a constructive trust between Le and Quoc is demonstrated by:
(a)The substantial payments made by Quoc to Le in respect of the Richardson property at the time of the title being transferred to her.
(b)The conversations Quoc had with Suqin about what he believed occurred when the title was transferred.
(c)The rental arrangement on paper being the same as the rental arrangements on paper in respect of other assets owned among the Tong family members, including the Kambah property.
(d)The evidence that Quoc and Suqin continued to take responsibility for the upkeep and improvements on the Richardson property.
(e)The substantial payment Quoc made to totally pay off the loan at the end of his life.
31․Because it was established that the Richardson property was held on constructive trust for Quoc, the $290,150 cheque provided to Le was not a gift or any benefit to Le but was, in fact, “plainly repaying the debt that Le had taken on for an asset to which he (and Suqin) were beneficially entitled”: J [148]. Therefore, whether it should be set aside for undue influence or unconscionable conduct fell away. As an aside, her Honour indicated (J [165]) that, had Quoc remained alive, Suqin would have had at least a 50 percent equitable interest in the Richardson property on a Baumgartner trust: Baumgartner v Baumgartner (1987) 164 CLR 137.
32․The primary judge also addressed an alternative claim that Le breached her fiduciary duty as a holder of Quoc’s enduring power of attorney when she accepted the cheque for $290,150. That would have been relevant if the transfer of the title to the Richardson property was to be made other than unencumbered, because Le did not in fact use the money for the purpose of paying off the loan on the Richardson property. However, because her Honour ordered that the title to the Richardson property be transferred “free of any encumbrance”, that claim fell away. Had it been necessary to determine whether Le was liable to account to the estate, the primary judge indicated that some further submissions would have been necessary.
33․Finally, the primary judge addressed the situation in which, contrary to her conclusion, the payment of $290,150 was a gift to Le. Her Honour indicated that, in that instance, “I would have found that such a gift was a result of presumptive undue influence which had not been rebutted and was therefore liable to be set aside”. She recorded that “[t]he reasons for that finding would have been similar to those that are set out below in the context of the next transaction” (i.e., the payment to Duc): J [171].
Payment of $360,000 to Duc
34․Her Honour then turned (J [172]) to address whether the gift of $360,000 to Duc should be set aside. She immediately recorded her conclusions that:
(a)The bank cheque given to Duc in the amount of $360,000 was a gift.
(b)As at May 2019, the circumstances were that Duc was in a position of ascendancy over Quoc, such that a presumption of undue influence arose from the gift.
(c)The presumption was not rebutted.
(d)Accordingly, the gift must be set aside.
35․Her Honour’s reasons then explained why she had reached the conclusions identified in points (a), (b) and (c).
36․So far as the conclusion that the transaction was a gift is concerned, there was no suggestion to the contrary.
37․The findings in relation to undue influence arose from “a number of overlapping features which combined to give rise to the presumption of undue influence”: J [174]. There were seven factors identified by the primary judge about which she made findings of fact. In summary they were:
(a)First, that there was already a close relationship between Duc and Quoc.
(b)Second, that the relationship of trust and confidence intensified in the last six months of Quoc’s life.
(c)Third, that Quoc was in seriously failing health.
(d)Fourth, that Quoc became increasingly isolated from Suqin.
(e)Fifth, that Quoc became dependent upon Duc for assistance with all facets of his life, whether it be work, medical, financial, or legal affairs.
(f)Sixth, that Quoc gave Duc formal authority or power over his affairs in various ways, including by executing an enduring power of attorney.
(g)Seventh, that Quoc perceived Duc to be someone who had moral and practical superiority.
38․The primary judge then found that the presumption had not been rebutted. Her Honour found that the gift was “extravagant”. She found it also to be “improvident”, having regard to the testamentary gifts in the will and the modest size of his estate, in circumstances where he was leaving four school-aged children. She found that “the value of the gift was so substantial and the transaction so improvident as to be inexplicable on the grounds of the ordinary motives on which ordinary persons act”: J [194].
Assets of the estate
39․The primary judge then turned to Issue 3, namely, what assets comprised the estate. That issue had been substantially resolved by the earlier findings, which meant that the Kambah property was not part of the estate, the Richardson property was part of the estate, and the $360,000 paid to Duc would form part of the estate once it was repaid. The primary judge made reference to the “somewhat confusing” evidence in the affidavit of Duc in his capacity as the executor, which was affirmed during the hearing. She also referred to the very significant legal costs that had been incurred by either side, indicating that she would reserve for later consideration any questions of proportionality of the legal fees.
Family Provision Claim
40․Issue 4 was the Family Provision Claim. Her Honour adopted the principles that she articulated in her judgment in Armouti v Nenes [2022] ACTCA 3; 17 ACTLR 237 which had been adopted in Richardson v Richardson [2022] ACTSC 363; 20 ACTLR 37 and gave a summary of them. She then considered whether adequate provision for the proper maintenance, education, and advancement in life of Suqin and the children was made in the will. She referred to the personal circumstances of Suqin, her sources of income, and her relationship with Quoc by the time of his death. She summarised the position as follows (J [229]):
229.Quoc had a moral duty to provide for his own wife and children which he failed to fulfil in the terms of the Will. He owed no such moral duty to either his siblings or his mother. Having regard to those circumstances and the payments Quoc had made (in particular, using part of the death benefit in relation to the Kambah property), along with expenses such as legal costs that will significantly deplete the residue, leaving further gifts to his mother and siblings is not consistent with that moral duty.
41․Her Honour found that Quoc appeared to have been unaware of the true value of his residual estate. She held that, even though the value of the estate would increase significantly as a result of the findings that she had made, once the legal costs of the proceedings were factored in, adequate provision had not been made for the maintenance, education, and advancement in life of Suqin and the children, primarily because the claims of the children were so strong. She considered the competing claims of each of the gift recipients and concluded that the estate did not extend to making any significant provision for Duc, Le and Khanh. Each of these gifts was reduced to $5000. Her Honour also found that she could make provision which accorded with Quoc’s very clear wishes that his children “be looked after” if the majority of the money formed part of the residual estate and the children were left as the only beneficiaries of the residue. Provision was made for Suqin by way of $40,000 and a 50 percent interest in the Richardson property.
Removal of executor
42․Her Honour then dealt with Issue 5, which was whether Duc should be removed as the executor of the estate. She set out s 32(2) of the Administration and Probate Act 1929 (ACT), which allowed the removal of an executor if the executor was “unfit to act in the office”. She referred to authorities that had explained the extent of that concept and examined Duc’s conduct, particularly in relation to Quoc’s superannuation benefit. She concluded that Duc was unfit to be the executor of the estate and that an independent executor would “be more appropriate to finalise the due and proper administration of the estate because such a person would have the ability to act independently and deal dispassionately with conflicts and to attend to the necessary steps to achieve such finalisation without delay”: J [255].
Removal of trustee
43․Finally, her Honour dealt with Issue 6, which was whether Fortitude should be removed as trustee of the Trust. She referred to s 70 of the Trustee Act 1925 (ACT), which permits the court to appoint a new trustee where it is appropriate to do so. She referred to the “scope for significant disagreement in the future” as to what may benefit Quoc’s children in relation to education, health, and wellbeing that would warrant a discretionary distribution from the Trust: J [261]. She concluded that an independent trustee was appropriate and that the corporate trustee did not, as presently governed, have the necessary skill set: J [262]-[265]. In that context, she referred to the letter sent by Duc and Le, purportedly in their role as directors of the corporate trustee, in relation to accommodation for Suqin and the children.
Orders
44․The primary judge deferred consideration of the question of costs.
45․Her Honour made orders:
(a)declaring that the Richardson property was held on trust in the following shares:
(i)50 percent for Suqin; and
(ii)50 percent for the children, in equal shares;
(b)requiring the repayment of the $360,000 from Duc to the estate; and
(c)adjusting the will so as to:
(i)make provision of $40,000 for Suqin;
(ii)reduce the gift to Duc from $70,000 to $5000;
(iii)reduce the gift to Le from $70,000 to $5000;
(iv)reduce the gift to Khanh from $30,000 to $5000;
(d)removing Duc as executor of the estate and appointing the Public Trustee;
(e)removing Fortitude as trustee of the Tong Family Trust and appointing the Public Trustee;
(f)requiring Le to transfer title to the Richardson property, unencumbered, to Suqin and the Public Trustee; and
(g)granting liberty to the parties to apply to the court “for the further working out of any orders necessary to give effect to” the preceding orders.
46․In a subsequent judgment, the primary judge dealt with a series of further issues, including the question of costs: Tong v Tong (No 2) [2023] ACTSC 336 (Tong No 2). One of those issues was whether Edmund, who was the eldest of Quoc’s children and was, by that point, no longer a minor, should be appointed as trustee of the Trust, either by himself or jointly with his mother, instead of the Public Trustee. The primary judge determined that this issue was not within the scope of the liberty to apply granted in the first judgment. Further, her Honour concluded that, in any event, even if it did fall within the liberty granted, she would have declined to do so, having regard to the potential for there to be competing or conflicting interests as between the proposed trustees and the other family members: Tong No 2 [28].
Grounds of appeal and cross-appeal
47․The grounds of appeal challenged the findings in relation to the gift of $360,000 to Duc, the beneficial ownership of the Richardson property, and the contingent finding in the alternative that the gift of $290,150 to Le was the product of undue influence. Each of the grounds of appeal will be set out where it is addressed below.
48․There is also a cross-appeal which seeks to “amend” the orders made by the primary judge which appointed the Public Trustee as trustee of the Tong Family Trust. What is sought instead is more closely aligned with what was sought in the first instance and rejected by the primary judge in Tong No 2, namely, that Suqin and Edmund be jointly appointed as trustees of the Trust. The details of the grounds upon which those orders are sought will be set out below, where the cross-appeal is dealt with.
49․The respondents submitted that the appropriate principle to apply to the review of the primary judge’s decision on the appeal is that in House v The King (1936) 55 CLR 499 at 505. Whilst decisions as to the grant of any equitable relief are discretionary, the decisions as to whether a transaction was the subject of undue influence or whether property was the subject of the existence of a trust are not discretionary ones. Although they may involve evaluative judgments in relation to which there may be room for reasonable differences of opinion, they are not, ultimately, discretionary. As a consequence, the approach to review of primary facts must be in accordance with Fox v Percy [2003] HCA 22; 214 CLR 118 at [22]-[27]. That requires the Court of Appeal to conduct a real review of the primary judge’s reasons, weighing conflicting evidence and drawing its own inferences and conclusions. It must involve appropriate allowance for the fact that the Court of Appeal has neither seen nor heard the witnesses and may not be able to share the ‘feeling’ of the case. It must recognise that the primary judge also has advantages that derive from the obligation to consider the entirety of the evidence, and the opportunity over a longer period to reflect upon that evidence and draw conclusions from it when viewed as a whole. Having given due respect to the weight and conclusion of the primary judge, the Court of Appeal must reach its own conclusion.
Ground 5 – Gift of $360,000
Ground of appeal
50․This ground of appeal is as follows:
(a)Her Honour erred in finding that the relationship between the First Appellant (Duc Khai Tong) and the later [sic] Quoc Khai Tong (the “Deceased”) was such as to give rise to a presumption of undue influence.
(b)Her Honour erred in finding that the relationship between the First Appellant and the Deceased was characterised by ascendancy on the part of the First Appellant and dependence and subjection on the part of the Deceased (Judgment at [187]), and in so doing:
(i)erred by inferring from the fact that the First Appellant assisted the Deceased in medical, financial and legal affairs, that the First Appellant was in a position of ascendancy over the Deceased (Judgment at [181]);
(ii)erred in finding that the First Appellant was in a position to exert influence by reason of the Deceased executing an Enduring Power of Attorney in which he appointed the First Appellant as his attorney (Judgment at [182]); and
(iii)erred in finding that the First Appellant had moral and practical superiority over the Deceased (Judgment at [183] - [186]).
(c)In finding that the First Appellant and the Deceased were in a relationship that gave rise to a presumption of undue influence, her Honour:
(i)erred in law by failing to consider whether the gift of $360,000 to the First Appellant could be explained by ordinary motives; and
(ii)failed to give any, or any sufficient, weight to the evidence that:
(A)the Deceased and the First Respondent were separated and had been living separately under the same roof from July 2015,
(B)the Deceased stated in a draft of his will that the First Respondent had initiated separation and divorce, and sought financial division of his assets, and
(C)the Deceased received two letters from lawyers engaged by the First Respondent on 23 May 2019, which asserted that their marriage had irretrievably broken down and that final separation had occurred in 2015.
(d)Her Honour erred in law in finding that any presumption that the gift of $360,000 was procured by reason of the undue influence of the First Appellant was not rebutted by evidence that the Deceased fully intended and desired the transaction without receiving any request or encouragement from the First Appellant (Judgment at [93]), and in that regard failed to give any, or any sufficient, weight to:
(i)the evidence that after receiving the gift of $360,000, the First Appellant returned those funds to the Deceased on 10 May 2019, and that subsequently the Deceased gifted those funds to the First Appellant for a second time, by presenting a bank cheque to the First Appellant in late May 2019; and
(ii)her Honour’s finding that the gift was “… clearly made out of love and deep gratitude and in that regard it was voluntary”.
Submissions
Characterisation of the relationship
51․The appellants noted that the primary judge did not make any finding that undue influence was proved as a fact. Rather, she found that the relationship was such as to give rise to a presumption of undue influence. They submitted that, in order for a relationship to give rise to such a presumption, it must be more than one of mere confidence and influence, and the stronger party must be in a position to exercise dominion or ascendancy over the will of the weaker party. The submissions then addressed each of the seven factors relied upon by the primary judge that were said to give rise to a presumption of undue influence. Each was dealt with separately and factual submissions were made about their significance. The ultimate submission was that the relationship was no more than one of trust and confidence and that there was no evidence of any psychological ascendancy on the part of Duc, nor any evidence of dependence and subjection on the part of Quoc. As a result, no presumption arose.
52․The submissions of the respondents appeared simply to assert that there was no error on the part of the primary judge. They pointed out that the primary judge’s findings in relation to a presumption of undue influence were based upon “a number of overlapping features which combined to give rise to the presumption of undue influence”: J [174]. They referred, in detail, to the evidence relating to the preparation of the Enduring Power of Attorney, the Tong Family Trust Deed, and Quoc’s will. They also referred to the preparation of Quoc’s Family Court affidavit, and Duc’s Family Court affidavit in which he affirms that he gave notice to the Commonwealth Superannuation Corporation that Quoc and Suqin intended to divorce. They also pointed to the subsequent conduct of Duc following Quoc’s death in seeking to have the superannuation benefits not paid to Suqin, despite the fact that that was directly contrary to the terms of Quoc’s will. They submitted that “one could not conceive of a relationship where there was greater dominance, ascendancy, control, subjection and dependence at the times when events occurred in relation to dispossession of the terminally ill Quoc’s assets to Duc and Le”.
Nature of the transaction
53․The appellants submitted, consistent with the decisions in Quek v Beggs (1990) 5 BPR 11,761 at 11,764 and Thorne v Kennedy [2017] HCA 49; 263 CLR 85 at [34], that, in addition to there needing to be a relationship of ascendancy or influence and dependency or trust, it must be shown that the transaction involves a substantial benefit which cannot be explained by ordinary motives or is not readily explicable by the relationship of the parties. They submitted that, in finding that the presumption of undue influence arose, the primary judge failed to consider that second limb. They submitted that this was a critical omission because the deterioration of the relationship between Quoc and Suqin provided a ready and complete explanation for that conduct. They pointed to the terms of Quoc’s Family Court affidavit prepared with Duc and sworn on 12 June 2019, as well as to the receipt of the two letters from Suqin’s lawyer on 23 May 2019.
54․This issue was not specifically addressed in the respondents’ written submissions. However, in their oral submissions, counsel for the respondents pointed to that part of the primary judge’s reasons where her Honour specifically addressed whether the transaction was justified by ordinary motives. He submitted that the marital difficulties that existed between Suqin and Quoc provided no basis upon which to remove assets from the children. He cautioned against treating the decision in Quek as if it was a statute establishing a two-part test.
Rebuttal of the presumption
55․The appellants submitted that courts of equity do not intervene on the grounds of folly, imprudence, or want of foresight on the part of the donor. They accepted that Quoc did not receive any financial or legal advice when deciding to gift the $360,000 to Duc. They pointed to the evidence that, having discussed the transactions with Suqin, Quoc refused to ask Duc and Le to repay the money. They submitted that the gift was a pure, voluntary, and well understood act, and that this is illustrated by Quoc having gifted Duc the money twice, once by way of bank transfer and once by way of bank cheque. They submitted that the primary judge should not have inferred that the transaction was not a well understood act because of its improvidence. They submitted that such an inference should not have been drawn in circumstances where there was no evidence to suggest that Quoc’s cognition was limited or that he did not understand what he was doing. They submitted that the conversation with Suqin on 1 May 2019 demonstrated that he understood what he was doing and his subsequent conduct of drawing a bank cheque for Duc indicated that he was engaged in a free, voluntary, and well understood act.
56․The respondents submitted that the primary judge’s finding that the presumption of undue influence was not rebutted was correct for the reasons that she gave. They pointed to the absence of independent financial or legal advice. They submitted that the judge correctly found that the transaction was so improvident as to be inexplicable on the grounds of ordinary motives on which ordinary persons act. In response to the submission that the deterioration in the relationship between Quoc and Suqin was an explanation for the conduct, they submitted that it did not provide any explanation as to why Quoc would give $360,000 to Duc rather than to his own children.
Decision
The equitable doctrine of undue influence
57․The equitable doctrine of undue influence was explained at some length by the Court of Appeal in Wu v Wu [2024] ACTCA 8 at [33]-[76]. Relevant for present purposes, is what is described in Wu as a “useful summary” provided in Quek at 11,764‑11,765:
A donor (or if he or she is deceased, a representative of his or her estate) will prima facie be entitled to have a gift set aside on the ground of undue influence upon proof of:
(a)facts establishing that the gift was made by the donor as a result of undue influence of the donee; or
(b)facts that give rise to a presumption that the gift was so made, unless the donee rebuts the presumption in the manner mentioned below.
A presumption of undue influence arises if it is proved –
(a)that at the time the gift was made there existed a relationship between the donor and the donee of such a nature as to involve reliance, dependence or trust on the part of the donor resulting in an ascendancy on the part of the donee; and
(b)that the gift is so substantial, or so improvident, as not to be reasonably accounted for on the ground of friendship, relationship, charity or other ordinary motives on which ordinary persons act: Allcard v Skinner (1887) 36 Ch D 145 at 185; Johnson v Buttress (1936) 56 CLR 113 at 134-5; Yerkey v Jones (1939) 63 CLR 649 at 675; Goldsworthy at 400-1.
In such cases, “the Court interferes, not on the ground that any wrongful act has in fact been committed by the donee, but on the ground of public policy, and to prevent the relations which existed between the parties and the influence arising therefrom being abused”: Allcard at 171.
…
The donee may rebut the presumption of undue influence, when it arises, by proving that the donor (i) knew and understood what he or she was doing; and (ii) was acting independently of any influence arising from the ascendancy of the donee: see Lancashire Loans Ltd v Black [1934] 1 KB 380 at 409 …
58․It is the presumption of undue influence, as distinct from any proved undue influence, that is of significance in the present case. For the purposes of this ground of appeal, the two matters necessary to establish a presumption of undue influence will be referred to as the first limb and the second limb. The first limb relates to the nature of the relationship. The second limb relates to the nature of the gift and whether it can be explained by ordinary motives.
Characterisation of the relationship
59․The issue raised by ground 5(a) and (b) is whether or not the first limb, as described at [58] above, was established. The primary judge’s ultimate conclusion (J [187]) as to the nature of the relationship was as follows:
187.The circumstances as a whole establish that, by the time Quoc handed over a bank cheque to Duc at the end of May 2019, Duc’s relationship with him was one of a position of ascendancy over Quoc. Quoc was in a position of physical and emotional dependence upon Duc, and reposed trust and confidence in Duc to such an extent that Duc was in a position to exert influence over Quoc. In respect of this transaction, applying the authorities discussed above, the relationship between Duc and Quoc was one of presumptive undue influence.
60․Her Honour’s reasons made it clear that she relied upon seven “overlapping features which combined to give rise to the presumption of undue influence”: J [174]. Because of the manner in which the primary judge reached her conclusion, while it is appropriate to examine each of the circumstances individually, it is necessary to ultimately consider their combined force. To adapt language used in a different context, it is necessary to consider the weight which is to be given to the united force of all the circumstances put together: R v Hillier [2007] HCA 13; 228 CLR 618 at [48]. The court in Hillier was approving a passage from Lord Cairns’ decision in Belhaven and Stenton Peerage [1875] 1 App Cas 278 at 279 in which he said:
My Lords, in dealing with circumstantial evidence, we have to consider the weight which is to be given to the united force of all the circumstances put together. You may have a ray of light so feeble that by itself it will do little to elucidate a dark corner. But on the other hand, you may have a number of rays, each of them insufficient, but all converging and brought to bear upon the same point, and, when united, producing a body of illumination which will clear away the darkness which you are endeavouring to dispel.
61․Thus, while in order to address the submissions of the appellant it is necessary to focus on the individual features, it must be firmly borne in mind that it was their combined force which led to the primary judge’s finding on the balance of probabilities that the relationship was such to give rise to a presumption of undue influence.
62․The first feature identified by her Honour was that there was already a close relationship between Duc and Quoc. Duc was Quoc’s confidante. That was said to be demonstrated by the close familial connection and history of financial and other family support given to Quoc by Duc throughout his lifetime. Duc deposed to Quoc trusting him and knowing that he was competent. The appellants submit that this finding was not challenged, but that it was a matter of little weight, with the evidence establishing that the relationship was one of “mere” confidence. If considered in isolation, that may well be true. However, the long-standing relationship of confidence between the two brothers provides an important context in which that relationship could, and apparently did, intensify at the end of Quoc’s life.
63․This was the second feature relied upon by the primary judge – that the relationship of trust and confidence between Duc and Quoc intensified in the last six months of Quoc’s life. She found that when Duc became aware that Quoc was dying, he “stepped up his level of involvement in Quoc’s life”: J [176]. Her Honour did not characterise this as indicating any ulterior motive but, because of the intensification of the relationship, found that “Duc assumed a critical role in Quoc’s care and the management of Quoc’s life and affairs from January 2019 when Quoc was undergoing chemotherapy and from then on until Quoc died”. She found that Duc and members of his family went to visit Quoc every day when he was in hospital. She found that Duc was Quoc’s “primary confidante”. She found that when Quoc was not in hospital, he would see Duc during the week for lunch and frequently meet him for coffee on the weekend. Duc would come to the Richardson property most weekends and take Quoc out for three or four hours. The appellants do not challenge this finding but submit that the spending of substantial time with Duc indicates that the relationship of trust and confidence was social and not related to business or finances. Once again, the point made is, to an extent, correct in that it is asserted that the increased contact between Duc and Quoc performed a significant social, as distinct from a business or financial, function. However, it is artificial to draw a sharp distinction between the social and the business or financial. The point made by the primary judge was that the relationship intensified over this period. That intensification and the increase in time spent with his brother (and away from his wife and children) provided the factual context for the increased influence on his brother’s part.
64․The third feature was that Quoc was in seriously failing health. The primary judge found that he knew from December 2018 that his illness was terminal, and he was in and out of hospital for chemotherapy. The primary judge found that that fact brought about an intensification of the relationship with Duc, as Duc wished to spend as much time with Quoc as possible because he was dying. The primary judge found, based on the evidence of a letter from Dr David Leong, a specialist oncologist, that Quoc’s health had declined between mid‑December 2018 and mid‑January 2019, that proposed surgery had been cancelled due to his poor condition, and that he had commenced palliative chemotherapy. The primary judge found that as at May 2019, Quoc described himself as “physically weak, under nourished from loss of appetite to eat, have no energy, tired and sleepy from the chemo medication and other medication to combat the side effects of the chemo treatment”. There was evidence before the primary judge that as he became physically weak, Quoc became increasingly argumentative and expressed his distress through anger and impatience. The appellants submitted that there was no evidence of any cognitive decline and that it cannot be inferred simply from poor physical health that a person is so affected cognitively that they are in a position of “dependence and subjection”.
65․Once again, if this factor was taken by itself, that submission would have significant merit. However, that is not how the primary judge addressed this issue. The grave and deteriorating nature of Quoc’s condition is plainly a very significant part of the context in which he conducted himself at the end of his life. It would be artificial to quarantine from any consideration of his decision-making in relation to very substantial gifts, the physical and emotional consequences of his rapidly progressing terminal illness.
66․The fourth feature described by the primary judge was that Quoc became increasingly isolated from Suqin towards the end of his life. She found that in the draft will of 16 May 2019, Quoc referred to Suqin as having commenced divorce and separation proceedings even before he received the letters from the family lawyer instructed by Suqin which were sent by email on 23 May 2019 and received by post on 28 May 2019. The primary judge referred to the discussions which had occurred between Duc and Quoc about this issue. She found that these discussions indicated that Quoc felt distanced from other people who may previously have balanced out the relationship of dependence upon Duc. Her Honour referred to the fact that Suqin had stopped coming to medical appointments from March 2019 and that the involvement of Duc and other family members in assisting Quoc with medical appointments, rather than him asking for her help, was a source of complaint by Suqin.
67․The appellants accept these findings but say that they are only of peripheral relevance. They point to the absence of any finding that Duc was involved in any way in isolating Quoc from Suqin and submitted that the fact that Quoc’s relationship with Suqin was deteriorating had no bearing upon the relationship between Quoc and Duc.
68․The submissions do not undermine the relevance of the primary judge’s findings. We do not accept that the fact that Quoc’s relationship with Suqin was deteriorating had no bearing upon the relationship between Quoc and Duc. To the contrary, that fact provides significant context for the increase in dependence upon Duc. The decline in the relationship with Suqin was significant because, as the primary judge pointed out, Quoc felt distanced from other people who may have balanced out his relationship with Duc. Once again, by itself, it may have been of modest overall significance, but its significance is to be considered as one of the seven overall strands identified by the primary judge.
69․The fifth feature was the finding that Quoc became dependent upon Duc for assistance with “all facets of his life, whether it be work, medical, financial, or legal affairs”: J [181]. The primary judge found that Quoc requested Duc’s help with obtaining life insurance payments, talking to his director at work, writing his will over a number of months, speaking to doctors, obtaining medical reports, drafting affidavits, corresponding with Suqin’s family lawyer, and printing whatever forms were necessary and bringing them to the hospital. She referred to Duc’s description of his role as Quoc’s “secretary or administrative assistant”.
70․The appellants correctly observed that, on one view, this is the strongest argument for a presumption of undue influence. However, they seek to dissect the functions undertaken so as to undermine the primary judge’s generalised finding. They identify that, in contrast, for example, to the circumstances of the respondent in Johnson v Buttress (1936) 56 CLR 113, Quoc was still capable of understanding the tasks that he needed to perform. Rather, they characterised his dependence upon Duc as being because it was easier for Duc to perform certain tasks owing to Quoc’s physical frailty and lack of energy. In his affidavit affirmed on 11 February 2022, Duc deposed that “[f]rom my observations Quoc was fully in command of his mental faculties. … The power of attorney was not used by me to make decisions on Quoc’s behalf, … but to assist where required to obtain information, forms and medical reports for Quoc”. Nonetheless, the characterisation of Quoc as merely using Duc as a means of performing physical tasks does not do justice to the combined effect of the apparent influence that Duc had over the different and significant aspects of Quoc’s life, in particular, those relating to his assets and estate.
71․The sixth feature was that Quoc had given Duc formal authority or power over his affairs in various ways. That included the execution of an enduring power of attorney appointing Duc and Le as his attorneys. Her Honour found that Quoc described Duc as the primary power of attorney with Le as a second attorney. Her Honour accepted that Duc did not actually use the power of attorney to make decisions on Quoc’s behalf but that he did use the power of attorney to obtain information, forms and medical reports for Quoc. However, her Honour found that the “critical matter” was that Duc was in a formal position to exert influence.
72․The appellants submit that this is not a factor that sheds any light on the nature or quality of the relationship between Quoc and Duc. They submit that the concept of the exertion of influence by the holder of a power of attorney over their appointor would be antithetical to, and inconsistent with, the purpose of the power.
73․It can be accepted that the existence of a power of attorney does not, of itself, demonstrate a power to “exert influence”. However, the existence of a power to make decisions on Quoc’s behalf and the limited use that was in fact made of that power was another indicium of the depth of the relationship.
74․The seventh feature, which partially overlapped with Duc’s involvement in assisting Quoc in his dying months, was that “Quoc’s perception of Duc was of someone who had moral and practical superiority”: J [183]. The primary judge found that this was in part because Duc and Le had better language skills and superior financial literacy. She also made reference to Quoc naming Duc as the executor of his will and his choice of Duc and Le over his own wife to manage the Trust for his children. The primary judge noted that Duc was “intimately involved” with the drafting of the will and setting up of the Trust. She set out the reference in the will signed by Quoc on 16 May 2019 to Duc and Le being “the two most responsible people in my family” and the statement made by Quoc to Duc that he had “complete faith” in Duc’s ability to manage the Trust. Her Honour said that the position of trust and influence went beyond reciprocal confidence and influence, moving to dependence and subjection.
75․The appellants submitted that the confidence that Quoc had in Duc to make good decisions did not indicate that the relationship went anything further than being of trust and confidence.
76․The conclusion reached by the primary judge (set out at [59] above) involved an evaluative judgment as to whether the relationship between Quoc and Duc went beyond a close relationship between brothers so as to involve reliance, dependence, or trust on the part of Quoc that resulted in ascendency or dominion, or some element of moral or practical authority or superiority and correlative dependence or subjection on the part of Duc. Although the most significant person, Quoc, could not give evidence, her Honour did see and hear Duc give evidence. Whilst her Honour made no particular reference to any impression that she gained of Duc, this court needs to bear in mind that the primary judge had some advantage over an appeal court in that the former had the benefit of actually observing the witnesses as they gave evidence while the latter is confined to reading the documents and transcript.
77․The conclusion reached was based on a variety of circumstances which, if viewed separately, may have led to a different outcome but, when taken together, led the primary judge to her conclusion. The weight to be given to the various factors that her Honour identified in determining whether the relationship was one in which a presumption of undue influence would arise, involved matters of impression and judgment. Of particular significance for the primary judge appeared to be the third, fifth, and seventh features identified and addressed above. Having examined the evidence, and notwithstanding the submissions made on behalf of the appellants in relation to the individual features, it is not possible to conclude that the primary judge erred in reaching the conclusion that she did. The significant increase in contact between Duc and Quoc, his terminal and deteriorating health condition, his increasing alienation from his wife, and Quoc’s perception of Duc’s language skills and financial literacy all meant that the conclusion reached by the primary judge that the relationship was one in which Duc was in a position of ascendency over Quoc was one which was reasonably open to her to make. It is not one which this court can say involved an error and, hence, not one which should be departed from.
Nature of the transaction
78․The issue raised by ground 5(c) is whether or not the second limb, as described at [58] above, was established.
79․As explained in Quek (at 11,764), the second limb is that “the gift is so substantial, or so improvident, as not to be reasonably accounted for on the ground of friendship, relationship, charity or other ordinary motives on which ordinary persons act”. In Thorne (at [34]) the second limb is described as being that: “the transaction is one, commonly involving a “substantial benefit” to another, which cannot be explained by “ordinary motives”, or “is not readily explicable by the relationship of the parties”” (footnotes omitted).
80․The authorities referred to in these passages from Quek and Thorne are Allcard v Skinner (1887) 36 Ch D 145 at 185; Johnson v Buttress (1936) 56 CLR 113 at 134-135; Yerkey v Jones (1939) 63 CLR 649 at 675; Goldsworthy v Brickell [1987] Ch 378 at 400‑401; and Royal Bank of Scotland plc v Etridge (No 2) [2002] 2 AC 773 at [21]. In order to understand what is involved in the second limb, it is useful to examine these authorities along with one other, the decision of the New South Wales Court of Appeal in Whereat v Duff [1972] 2 NSWLR 147.
81․In Allcard, Lindley LJ said (emphasis added):
Where a gift is made to a person standing on a confidential relation to the donor, the Court will not set aside the gift if of a small amount simply on the ground that the donor had no independent advice. In such a case, some proof of the exercise of the influence of the donee must be given. The mere existence of such influence is not enough in such a case; … But if the gift is so large as not to be reasonably accounted for on the ground of friendship, relationship, charity, or other ordinary motives on which ordinary men act, the burden is upon the donee to support the gift. So, in a case like this [a case involving gifts by a member of a religious order] a distinction might well be made between gifts of capital and gifts of income, and between gifts of moderate amount and gifts of large sums, which a person unfettered by vows and oppressive rules would not be likely to wish to make.
82․In Johnson, Dixon J introduced the application of the presumption outside the fixed categories of relationship where a person has ascendancy or influence over the other or there is dependence or trust on that others part. He continued (emphasis added):
When he takes from that man a substantial gift of property, it is incumbent upon him to show that it cannot be ascribed to the inequality between them which must arise from his special position. He may be taken to possess a peculiar knowledge, not only of the disposition itself, but of the circumstances which should affect its validity; he has chosen to accept a benefit which may well proceed from an abuse of the authority conceded to him, or the confidence reposed in him; and the relations between him and the donor are so close as to make it difficult to disentangle the inducements which led to the transaction.
These considerations combine with reasons of policy to supply a firm foundation for the presumption against a voluntary disposition in his favour.
83․It is notable that Dixon J, whilst referring to the substantial nature of the gift, did not make express reference to the second limb as described in Allcard. However, he did refer to the acceptance of a benefit “which may well proceed from an abuse of the authority conceded to him”. That is consistent with the circumstances being such as to give rise to the possibility of there having been an abuse.
84․The existence of the second limb was made clear by his Honour’s judgment three years later in Yerkey. There, Dixon J said:
But in the relations comprised within the category to which the presumption of undue influence applies, there is another element besides the mere existence of an opportunity of obtaining ascendancy or confidence and of abusing it. It will be found that in none of those relations is it natural to expect the one party to give property to the other. That is to say, the character of the relation itself is never enough to explain the transaction and to account for it without suspicion of confidence abused.
85․It is notable that his Honour, in articulating the second test, posited an enquiry targeted at whether it was possible to account for the transaction “without suspicion” of the confidence having been abused.
86․In Whereat, Asprey JA (with whom Holmes JA agreed) quoted (at 167-168) from Dixon J in Johnson as to when the first limb was satisfied, and continued:
Where those circumstances are established and the gift is substantial the court will, to borrow from the judicially adopted argument of Sir Samuel Romilly in Huguenin v. Baseley “look upon such a gift with a very jealous eye and very strictly examine the conduct of persons in whose favour it is made”.
The onus is upon the party seeking to set aside the gift to establish the facts from which the court will infer that a situation exists where undue influence may have been exerted. These situations will naturally vary from case to case. Once those facts have been shown to have existed, the presumption arises and the onus is then cast upon the donee to rebut it.
(Footnotes omitted)
87․His Honour subsequently (at 172) found that the circumstances were that an “improvident gift of a very large amount which otherwise would have fallen for distribution amongst her four children in equal shares” had been given solely to her younger son, “in whom she placed implicit and unquestioning trust”. He continued:
I am, therefore, of the opinion that in these circumstances the defendant is called upon to rebut the presumption by showing that so large a gift to him was the independent and well‑understood act of his mother in a position to exercise a free judgment based on information as full as that which he himself possessed.
88․In Goldsworthy, Nourse LJ (with whom Parker LJ and Sir John Megaw agreed) explained the circumstances in which a presumption of undue influence might arise and made some additional comments, which included:
Secondly, with relationships to which it does apply the presumption is not perfected and remains inoperative until the party who has ceded the trust and confidence makes a gift so large, or enters into a transaction so improvident, as not to be reasonably accounted for on the ground of friendship, relationship, charity or other ordinary motives on which ordinary men act. Although influence might have been presumed beforehand, it is only then that it is presumed to have been undue.
89․In Royal Bank of Scotland, Lord Nicholls referred (at [21]) to the second requirement as being “that the transaction is not readily explicable by the relationship of the parties”. After having referred to Allcard and Bank of Montreal v Stuart [1911] AC 120, he continued at [23]-[24]:
The need for this second prerequisite has recently been questioned: … Mr Sher invited your Lordships to depart from the decision of the House on this point in National Westminster Bank plc v Morgan [1985] AC 686.
My Lords, this is not an invitation I would accept. The second prerequisite, as expressed by Lindley LJ, is good sense. It is a necessary limitation upon the width of the first prerequisite. It would be absurd for the law to presume that every gift by a child to a parent, or every transaction between a client and his solicitor or between a patient and his doctor, was brought about by undue influence unless the contrary is affirmatively proved. Such a presumption would be too far-reaching. The law would be out of touch with everyday life if the presumption were to apply to every Christmas or birthday gift by a child to a parent, or to an agreement whereby a client or patient agrees to be responsible for the reasonable fees of his legal or medical advisor. The law would be rightly open to ridicule, for transactions such as these are unexceptionable. They do not suggest that something may be amiss. So something more is needed before the law reverses the burden of proof, something which calls for an explanation. When that something more is present, the greater the disadvantage to the vulnerable person, the more cogent must be the explanation before the presumption will be regarded as rebutted.
90․His Lordship then went on to consider the confusion that had arisen in relation to Lord Scarman’s reference to “manifest disadvantage” in National Westminster Bank plc v Morgan [1985] AC 686 in the context of wives guaranteeing their husbands’ bank overdrafts. His Lordship thought it was better to adhere more directly to the test in Allcard. That had the effect of making it less likely that in a husband and wife case a guarantee of one by the other would be seen as giving rise to a presumption of undue influence.
91․Notwithstanding that a multipart test is to be applied, it must be remembered that it is not a multistage process. The test for the existence of a presumption of undue influence and a determination as to whether or not any such presumption has been displaced occurs as part of the final determination of the case. All relevant facts will already be before the court. Thus, the determination of whether a presumption has been displaced will be made in light of the same evidence as the determination of whether any presumption arose in the first place. In addressing the second limb, all the evidence will be before the court. The second limb test articulated in Allcard must be understood as filtering out those cases in which the relationship between donor and donee is such as to remove the potential that the gift arises as a result of undue influence. The cases do not clearly articulate the threshold at which the potential for undue influence is sufficiently removed so as to avoid the enlivening of the presumption. Allcard refers to the gift being “reasonably accounted for” by ordinary motives. Johnson articulates the presumption arising where the benefit “may well proceed” from an abuse of authority. Yerkey refers to the relationship being not enough to account for the transaction “without suspicion of confidence abused”. All these formulations are targeted at the proposition that, in order to prevent the presumption from arising, the circumstances and relationship must be such that there is an insufficient indication of the potential for the involvement of undue influence to warrant its imposition.
92․In making this determination, the existence of a motive unrelated to the possible undue influence (“a strong independent motive”: Quek at 11,778) may be significant. However, it will only mean that the second limb is not satisfied if it sufficiently removes the potential of that motivation being “entangled” (to use Dixon J’s language) with the undue influence of the donee.
93․The determination of whether or not the second limb is satisfied must involve an evaluation of all the circumstances. As pointed out in Allcard, the nature of the gift will be of significance – “a distinction might well be made between gifts of capital and gifts of income, and between gifts of moderate amount and gifts of large sums”. Similarly, whether an alternative motivation reasonably accounts for the transaction may depend upon whether there remain aspects of the transaction that may have been the subject of undue influence. In Quek (at 11,778), the deceased was “clearly motivated by a desire to deprive her children of the opportunity of obtaining any substantial benefit from her estate”. However, that motivation was not sufficient to account for her choice of recipient of the property. Her selection of her pastor as the recipient of her gifts of real property was “difficult to reconcile with the absence of any influence arising from [his status] and his ascendancy associated with that status”.
94․In the present case, what is involved is a very substantial gift of money. The amount of $360,000 was a significant component of Quoc’s overall assets. The relationship between two siblings is not one in which it would be ordinary to expect such large gifts of money to be made. To adapt the words of Dixon J in Yerkey (which were in relation to gifts between a husband and wife) to the circumstances of gifts between two brothers, it could not be said that “there is nothing unusual or strange in a [brother] from motives of affection or even of prudence conferring a large proprietary or pecuniary benefit upon [his brother]”. Rather, “the character of the relation itself is never enough to explain the transaction and to account for it without suspicion of confidence abused”. However, it is said that Quoc had a strong motivation to remove this sum from the pool of assets from which it might potentially be claimed by his wife. That is certainly a strong independent motive. However, as in Quek, that is not a complete answer to the potential for the involvement of undue influence because it does not remove the potential for influence in relation to the choice of donee. That is particularly so because of the existence of his four children, in relation to whom he had clear moral obligations and to whom he may well have made a disposition in a manner that put the funds beyond the reach of his wife. Instead, the disposition to his brother carried with it no obligation to give any benefit to his children and was significantly greater than the disposition that he made at about the same time to his children via the establishment of the Trust.
95․The appellants are correct to point out that when the primary judge was considering whether the presumption arose, her Honour did not consider the second limb as so clearly articulated in Quek. Instead, her Honour considered (under the heading “A presumption of undue influence”) whether there was a presumption of undue influence only by reference to the first limb. However, when her Honour then considered (under the heading “The presumption was not rebutted.”) whether the presumption was rebutted in the circumstances, she did, in fact, consider the issue relevant to the second limb. It was at the end of that part of her reasons that she said (J [194]):
194.Having regard to Quoc’s circumstances at the time the gift was made, the value of the gift was so substantial and the transaction so improvident as to be inexplicable on the grounds of the ordinary motives on which ordinary persons act: Quek v Beggs (1990) 5 BPR 11,761 at 11,764 per McLelland J. The evidence before the Court was insufficient to rebut the presumption.
96․Notwithstanding that the primary judge did not follow the sequence in which the issue ought to have been considered, for the reasons given above, her conclusion on the issue raised by the second limb was still correct. The transaction was so improvident as to be inexplicable on the grounds of ordinary motives in the sense that the authorities require. The circumstances were such that the second limb was satisfied. As a consequence, notwithstanding the error in the manner in which the primary judge approached the issue, this ground of appeal is not made out.
Rebuttal of the presumption
97․The strength of the appellants’ ground of appeal lies in the fact that Quoc paid the money to Duc on two occasions. That indicates quite a determined desire to make the payment to him, even in circumstances where, after the first transfer, Duc repaid the money. The appellants place reliance upon the conversation on 1 May 2019 between Quoc and Suqin as demonstrating an awareness on Quoc’s part of what he was doing. In that conversation, Suqin discovered that Quoc had paid significant sums of money to both Duc and Le. However, at that stage he described the transactions as loans. On the same day that the money was repaid, Quoc drew a bank cheque for the same amount and gave it to Duc later that month.
98․However, the determination to make the payment is not sufficient to displace the presumption of undue influence. As the primary judge pointed out, that would have been relevant to the question of whether the transaction involved unconscionable conduct, but it is of little assistance in rebutting a presumption of undue influence. That was because whilst Quoc may have fully intended and desired the transaction, that may not be enough to displace the presumption of undue influence where the circumstances were insufficient to establish the requisite degree of independence and informed decision‑making.
99․In order to rebut the presumption that a transaction is the subject of undue influence, “it is incumbent upon [the donee] to show that it cannot be ascribed to the inequality between them which must arise from [the donee’s] special position”: Johnson at 135. The court must be satisfied that “the gift was the independent and well understood act of a man in a position to exercise free judgment based on information as full as that of the donee”: Johnson at 134. What has to be shown is that the formation of the intention to make the gift was free from the other party’s influence. This requires a close examination of the circumstances of the case. The stronger party may rebut the presumption in any manner available, having regard to the circumstances. However, in many cases, courts have placed particular reliance upon whether the transaction was improvident and whether there was independent advice.
100․There is no rule of law that requires the donor to have obtained independent financial and/or legal advice at the time of making a gift in order to rebut the presumption; however, the presence of such independent advice may be an important factor in determining whether the gift is the pure voluntary and well understood act of the donor: Union Fidelity Trustee Co of Australia Ltd v Gibson [1971] VR 573 at 577-578. In the present case, there was no evidence of any independent advice such as from a lawyer or an accountant.
101․Further, there can be no doubt that the gift was a large and improvident one. The findings of the primary judge (J [190]) on this point were undoubtedly correct:
190.Moreover, given Quoc’s financial circumstances, it was an improvident gift. At the time that Quoc gave the cheque to Duc in late May 2019, he had signed a will on 16 May 2019, the terms of which included the additional testamentary gifts to Duc, Le and his mother Khanh totalling $170,000. His entire estate was only worth $340,000 after liabilities were discharged. That is, at the time of the gift to Duc, Quoc had created circumstances where he was only leaving his young children around $170,000. The context to the gift thus includes a 49-year-old dying man leaving his four school-aged children collectively with half the amount of the gift given to his brother.
102․As pointed out earlier, the circumstances were such that they would explain a desire by Quoc for his estate not to benefit Suqin personally, but they were not sufficient to explain the generosity towards Duc in preference to his own children for whom he had a greater moral obligation. The improvidence of the transaction occurs in a circumstance where Quoc had been dealing closely with Duc in the months leading up to his death in relation to his will and the establishment of the Trust, and where Quoc had received no independent financial or legal advice as to the manner in which he dealt with his assets. Further, the conduct of Duc after Quoc’s death in seeking to prevent Quoc’s superannuation entitlements from being paid to Suqin (J [245]-[251]), when that was directly contrary to Quoc’s will, is a strong indication, which was not displaced by Duc’s evidence, that in May 2019 he was not a disinterested factotum but was, rather, prepared to act directly against Suqin’s interests and indirectly against the interests of the children. In those circumstances, the primary judge was correct to conclude that the presumption had not been displaced as it had not been proved that Quoc was acting independently of any influence arising from the relationship of ascendancy Duc had over him.
117․We consider that the finding in relation to the payment of $65,330, that it was an amount paid to Le, was an inference that could not be drawn in the circumstances. Taken together, the circumstances were insufficient to demonstrate that this payment was to or for the benefit of Le, unless it was assumed, as part of the circumstantial factors, that there was an intention to transfer $117,000 or thereabouts back to Le at the time of the transaction. To make that assumption would involve an element of circularity: assuming a transfer back of the whole of the net proceeds as a factor in proving that the intention was to transfer back the whole of the net proceeds. However, that conclusion does not mean that the primary judge’s ultimate conclusion that the Richardson property was held in trust should be disturbed.
118․As will be apparent from quoted paragraph 121, even though the primary judge found that it was more likely than not that the $65,330 was paid to Le along with the other amounts, her Honour’s conclusion was not dependent upon that finding being made. She found that, even if that payment was put to one side, because of the undoubted payments totalling $52,658.04, the family arrangement in relation to the transfer of the Richardson property could not be distinguished from the family arrangement in relation to the Kambah property. Her Honour then concluded (J [122]) that the shuffling of money enabled Le to support a claim that the Richardson property was an investment property. The fact that the primary judge’s conclusion was not dependent upon the full figure of $117,988.04 having been paid but could alternatively be based upon the undoubted payments totalling $52,658.04 was made clear by the subsequent reference to that alternative foundation when discussing her conclusions in relation to the Richardson property at [163].
119․The second aspect that the primary judge relied upon was the history of dealings between members of the Tong family. Her Honour was addressing the issue in the context of other family arrangements which had placed the legal ownership of particular properties with persons other than the beneficial owner of those properties. Her Honour had found that the Kambah property, of which Quoc was the registered owner, was held by Quoc on trust for his mother, a finding which is not challenged on appeal. Her Honour had also recounted the series of transactions relating to Quoc’s beneficial ownership of a property in Mackay in Queensland, of which Duc was the original registered owner, but then ownership was subsequently transferred to Le. Therefore, the proposition that residential real estate would be held by members of the family on trust for other members of the family and those other members of the family would make payments characterised as “rent” was something which was routine within the Tong family, rather than unusual.
120․Although not referred to in the judgment, there was some evidence of the manner in which the arrangements flowed through to provide tax benefits to the family members. Although Le’s tax returns were not produced to the court, there was evidence of the quantum of investment property losses in Quoc’s tax returns. The supplementary section of Quoc’s tax returns for financial years 2009-2010 and 2011‑2012 were tendered through Suqin. Each showed significant residential property losses were claimed in relation to the Kambah property which the primary judge found was held on trust for Khanh, or Khanh and Le.
121․The third circumstance relied upon by the primary judge was the evidence as to how Quoc treated the property himself. Her Honour found that it went beyond the conduct of a tenant. He undertook renovations to the laundry and constructed a large concrete slab, apparently intended for the purpose of building a shed. Although Le originally outlaid the expense, it was reimbursed by Quoc. Her Honour’s conclusion that Quoc and Suqin “continued to do whatever was desirable or necessary to maintain or improve the property, including expending significant sums of money,” was not challenged. The primary judge also referred (J [136]) to an “unguarded” answer by Le in cross‑examination, in which she gave an answer which appeared to recognise that the Richardson property was Quoc’s.
122․The fourth circumstance was Suqin’s treatment of the Richardson property as her own asset. This was an aspect of the primary judge’s reasons that was specifically challenged. Contrary to the submissions made on behalf of the appellants, the evidence given by Suqin about the nature of the transaction was significant. She gave affidavit evidence that, in October 2008, Quoc had made arrangements with Le in relation to the Richardson property so as to allow Le to claim tax deductions. Le then had the opportunity to give any evidence that she wished in relation to Suqin’s evidence. With this evidence having been admitted, the issue of what weight Suqin’s evidence ought to be given was a matter for the primary judge. Having regard to the advantage that her Honour had in having seen and heard both Suqin and Le give evidence and having regard to her Honour’s adverse conclusion about the reliability of Le’s evidence, it was open to her to place more weight upon Suqin’s evidence as to Quoc’s understanding of the nature of the agreement. It is certainly not the case that this court, having not seen and heard the witnesses give their evidence, must, because of the potential for Suqin’s evidence to be self-serving, reach a different conclusion as to the reliability of that evidence to that reached by the primary judge.
123․The primary judge’s conclusion was expressed at [162]-[164]:
162.Drawing all those factors together, the requisite common intention for the establishment of a constructive trust between Le and Quoc is demonstrated by:
(a)The substantial payments made by Quoc to Le in respect of the Richardson property at the time of the title being transferred to her.
(b)The conversations Quoc had with Suqin about what he believed occurred when the title was transferred.
(c)The rental arrangement on paper being the same as the rental arrangements on paper in respect of other assets owned among the Tong family members, including the Kambah property.
(d)The evidence that Quoc and Suqin continued to take responsibility for the upkeep and improvements on the Richardson property.
(e)The substantial payment Quoc made to totally pay off the loan at the end of his life.
163.The requisite detriment is established by Quoc at least paying substantial sums of money to Le in January and February 2008 ($117,988.04 or alternatively at least $52,658.04), $7,865 for the renovation works, and then $260,000 for the final payout of the loan. Other amounts may also arguably be included as constituting detriment, such as the rental payments on the basis that Quoc believed the payments to be for his own mortgage.
164.Accordingly, the plaintiffs have established that the Richardson property was held on constructive trust for Quoc. That means the issue of whether the transaction should be set aside for undue influence or unconscionable conduct falls away, because the $290,150 cheque provided to Le was not a “gift” or any benefit to Le.
124․Having regard to the variety of circumstances pointing to the conclusion that the primary judge reached, the absence of reliance for the purposes of the conclusion on establishing that the $65,330 was an essential component in her reasoning, and the capacity to rely upon the evidence given by Suqin about Quoc’s contemporaneous understanding of the arrangement entered into in 2008, the primary judge did not err in reaching the conclusion that the Richardson property was held on trust by Le for the benefit of Quoc.
Ground 7 – Gift of $290,150
125․Ground 7 is as follows:
(a)Her Honour erred in finding that, in the event that the $290,150 was a gift to the Second Appellant, the gift was a product of undue influence (Judgment at [171]), and in so doing:
(i)Erred in finding that the relationship between the Second Appellant and the Deceased was such as to give rise to a presumption of undue influence; and
(ii)Erred in finding that any presumption that the gift of [$290,150] was procured by reason of the undue influence of the [Second] Appellant was not rebutted, and in that regard, failed to have regard to, or give sufficient weight to the evidence that:
(A)Between 16 April 2019 and 10 May 2019, the deceased transferred $312,000 to the Second Appellant by way of bank transfer,
(B)The Second Appellant returned the funds of $312,000 to the Deceased, and
(C)The Deceased then gifted those funds to the Second Appellant for a second time, by presenting a bank cheque to the Second Appellant on 16 May 2019.
126․The submissions made on behalf of the appellants recognised that this ground only arose in the event that the appellants were successful in relation to the appeal against the finding of a constructive trust. Having regard to the conclusions above, it is not necessary to determine this ground of appeal.
The cross-appeal
127․The cross‑appeal is entitled “Notice of Cross Appeal to Amend Orders”.
128․It seeks to have Edmund and Suqin inserted as:
(a)joint executors of the estate in place of the Public Trustee; and
(b)joint trustees of the Tong Family Trust in place of the Public Trustee.
129․The grounds of appeal, identified in the Notice as “[t]he grounds for seeking the amendments of orders 4, 5 and 6”, are:
(a)Her Honour in making orders for appointment of the ACT Public Trustee and Guardian did not have the benefit of the fuller information referred to in the immediately preceding paragraph;
(b)it would be in the interests of justice that the amendments be made, having regard to the depletion of the Respondents’ family assets since the decease of their father and husband, and the likely impact of the ACT Public Trustee and Guardian’s charges and expenses on the Estate, the Tong Family Trust and the Richardson property; and
(c)Edmund Hao Wen Tong and Suqin Zhu Tong are suitable persons to be appointed as executors of the estate and trustees of the interests of the First to Fourth Respondents and the balance of convenience would support their appointment.
130․The reference in (a) to “the immediately preceding paragraph” is a reference to the further evidence that the respondents proposed to put before the court. That evidence was the subject of an application in proceeding dated 13 October 2023 which, by order of the Registrar, was put over until the hearing of the appeal. The evidence sought to be admitted is an affidavit of Suqin, dated 12 October 2023, and an affidavit of Edmund, dated 12 October 2023. An affidavit of Victor Michael Norman Chin, solicitor for the respondents, dated 13 October 2023, was read in support of the application.
131․The affidavits sought to be admitted contain much material which appears to have been drafted by a solicitor and which does not disclose relevant factual material to the court. However, the affidavit of Suqin disclosed that she would like to sell the Richardson house and move with the children to Queensland. She asserted that she was a capable financial manager. She said that she practised as an accountant in China for 10 years prior to moving to Australia and recorded the qualifications in financial services and business that she obtained after moving to Australia.
132․So far as Edmund is concerned, his affidavit indicated that he had completed Year 12 and had accepted an offer of a place at university but had deferred that place until 2024. It indicated that he was, at the time of preparing the affidavit, employed as a trainee at the Department of Defence. He asserted that he would be a suitable person to protect the interests of his siblings.
133․Both affidavits annexed a fee schedule of the Public Trustee but neither provided any analysis or estimate as to how those fees would apply if the primary judge’s orders were implemented.
Submissions
134․The submissions of the respondents were that they did not wish to “appeal” from orders 4, 5 and 6. Instead, they described their cross-appeal as follows:
8.The purpose of the Cross Appeal is not to appeal from all or part of Orders 4, 5 and 6 but to seek amendment of the orders made by Her Honour by removing the ACT Public Trustee and Guardian as executor and trustee and by appointing [Edmund] and [Suqin] jointly as executors and trustees.
135․The basis upon which they sought those amendments were that:
(a)the primary judge did not have the benefit of the further information that the respondents now seek to put before the court;
(b)it would be in the interests of justice, having regard to the likely impact of the Public Trustee’s charges and expenses;
(c)Edmund and Suqin are suitable persons to be appointed.
136․In oral submissions, counsel for the respondents submitted that because what was sought was an “amendment”, it was not necessary for them to demonstrate any error on the part of the primary judge in order to succeed on the cross‑appeal. That is said to be because r 5413 of the Court Procedures Rules 2006 (ACT), which relates to cross‑appeals, refers to a respondent wanting to “appeal from” or wanting “an amendment of” an order. He submitted that the language of “amendment”, therefore, does not involve a cross-appeal as such; rather, it involved asking for an amendment. No authority was pointed to in relation to this distinction.
137․The appellants (as cross‑respondents) neither consented to nor opposed the filing of further evidence.
138․They did submit, however, that, although styled as an amendment to the primary judge’s orders, it remained necessary for the respondents to demonstrate an error on the part of the primary judge within the principles stated in House v The King (1936) 55 CLR 499. They submitted that, having regard to the primary judge’s reasons given in the primary judgment and in Tong (No 2), the respondents had not demonstrated any error on the part of the primary judge. Whilst the appellants have no direct interest in the future administration of the estate or the Trust, they did not oppose but did not expressly consent to the orders sought by the respondents. Nevertheless, in order to assist the court as a contradictor, they support the observations made by the primary judge as to the benefits of appointing an independent person to administer the estate and the Trust.
Decision
Appeal or amendment?
139․It is first necessary to work out the nature of the cross-appeal in light of the submission made by the respondents that there was a distinction between appealing from an order and seeking the “amendment” of an order that would relieve the moving party from the need to establish error.
140․That submission cannot be accepted. The use of the word “amendment” is not intended to avoid the need to establish error. It is, instead, intended to cover the situation in which the cross-appeal seeks, if it is successful, to vary some part of the judgment appealed from. That is made clear when regard is had to the legislative history.
141․The predecessor of r 5413 was found in the Supreme Court Rules 1937 (ACT) at O 86 r 30, which, relevantly, provided that:
30 Cross-appeal
(1)A respondent who wants to appeal from part of a judgment, or to seek a variation of part of a judgment, need not begin a substantive appeal.
(2)However, the respondent must—
(a)file a notice of cross-appeal within 21 days after the day the notice of appeal is served on the respondent, or within any further time allowed by the Court of Appeal; and
(b)serve the notice on—
(i) the appellant (or each appellant); and
(ii) any other party to the proceeding in which the judgment appealed from was given, who is affected by the judgment that the respondent seeks.
(3)The notice of cross-appeal must state—
(a)what part of the judgment the respondent cross-appeals from or contends should be varied; and
(b)briefly, but specifically, the grounds of the cross-appeal; and either—
(i) the judgment that the respondent seeks instead of the judgment cross-appealed; or
(ii) the variation of the judgment that the respondent seeks.
142․Of particular relevance is subs (3), where, in describing the content of the notice of cross‑appeal, the Supreme Court Rules referred to the “part of the judgment the respondent cross‑appeals from or contends should be varied” and refers to the notice specifying either “the judgment that the respondent seeks instead of the judgment cross‑appealed” or “the variation of the judgment that the respondent seeks”.
143․Order 86 was inserted after the establishment of the Court of Appeal by the Supreme Court Amendment Rules 2002 (No 3) (ACT). The explanatory statement for the amendment to the Supreme Court Rules indicated that the amendment relating to the Court of Appeal were based on the Federal Court Rules which regulated appeals and set out the procedure to be followed: Explanatory Statement, Supreme Court Amendment Rules 2002 (No 3) (ACT). The relevant equivalent rule at the time was O 52 r 22 of the Federal Court Rules 1979 (Cth), which also referred to a cross‑appeal being necessary where a respondent wishes to “appeal from a part of the judgment or to seek a variation of a part of the judgment”.
144․Upon the transition from the Supreme Court Rules to the Court Procedures Rules in 2006, the rules relating to appeals and, in particular, the rules relating to cross‑appeals, were substantially remade. However, it is apparent that the legislative drafter responsible for the Court Procedures Rules did not wish to carry over the use of the word “variation” and, instead, preferred the word “amendment”. Multiple references to “variation” were removed from the rules and that was the case with newly made r 5413 as well. References to “varied” or “variation” that had before appeared in O 86 r 30 were removed and references to “amend” and “amendment” were included in their stead. The changes that were made to r 5413 were simply changes of drafting style, reflecting the legislative drafter’s preferences as to the language that should be used in Territory laws, as opposed to a specific effort to change the meaning or intent of the rule.
145․The earlier Supreme Court Rules and Federal Court Rules, which referred to the variation of the judgment on cross-appeal, were plainly intended to cover the situation in which a variation of the order appealed from was sought, rather than a wholly different order, and should not be viewed as creating a lesser burden on the respondent. The same requirements to justify such a variation as existed in relation to an appeal would apply, namely, the establishment of error. In light of this legislative history, which demonstrates that the word “amend” is intended to be the equivalent of “vary”, r 5413 is appropriately interpreted as not dispensing with the requirement to establish error as a condition for the success of the cross-appeal. It does not give to the Court of Appeal a general power, not conditioned upon the existence of an error, to amend the order the subject of the cross-appeal.
146․For these reasons, it is necessary on a cross-appeal to establish error on the part of the primary judge. In the present case, although the grounds in the cross-appeal are not formulated by reference to any error, it is possible to interpret them as impliedly asserting that, in light of the additional evidence, an error is established in the decision of the primary judge to appoint the Public Trustee as executor of the estate and trustee of the Trust.
Admission of further evidence
147․A ruling on the admissibility of the further evidence was deferred until the court’s judgment. Further evidence may be admitted on appeal pursuant to s 37N(3) of the Supreme Court Act 1933 (ACT). The general principles to be applied are described in Jovanovic v The Queen [2015] ACTCA 29 at [22]-[23]; Leighton v The Queen [2017] ACTCA 55 at [23]-[24] and TS v DT [2020] ACTCA 43 at [58].
148․The Originating Claim before the primary judge sought to remove Duc as executor of the estate and remove Fortitude, of which Duc and Le were the directors and shareholders, as trustee of the Trust. Instead, the claim sought to have Suqin substituted as the trustee of the Trust and the executor of the estate. The evidence led before the primary judge focused on the asserted unsuitability of Duc and Le and their company, Fortitude, to be the executor and trustee due to their own personal interests conflicting with the best interests of the children and because “they have betrayed the Deceased’s trust in them”.
149․During the course of proceedings, the primary judge raised with counsel the possibility of an independent executor and trustee being appointed. Counsel for the respondents at the trial recognised that as a possible course and did not make any submissions to the contrary. Counsel for the appellants were “comfortable for an independent person to be appointed”; however, they did specifically oppose Suqin being appointed as trustee. During the course of submissions, the primary judge appeared to contemplate that the parties would be given some further opportunity to identify a suitable person or entity, though counsel for the respondents stated that he was not aware of any independent person known to Suqin. The primary judge then raised with counsel that the Public Trustee was “not a bad option”, and provided, as an example, its experience in investing funds. In her judgment, her Honour concluded that it was appropriate to remove Duc as executor of the estate and Fortitude as the trustee of the Trust so that an independent executor and an independent trustee could be appointed. She did not give reasons in her judgment for appointing the Public Trustee as executor of the estate and trustee of the Trust.
150․The primary judge then allowed the parties to file further written submissions and evidence, addressing the question of costs and pursuant to the liberty to apply that had been granted. The respondents sought, pursuant to the grant of liberty to apply, to have Edmund individually or, alternatively, Edmund and Suqin jointly appointed as executor of the estate and trustee of the Trust in place of the Public Trustee. That was put on the basis of the potential for the fees and charges of the Public Trustee to deplete the assets of the estate and the Trust, as well as the increased inconvenience to the beneficiaries owing to the involvement of the Public Trustee.
151․In Tong No 2, the primary judge referred to her earlier reasons in which she had indicated (J [255] and [268]) that an independent executor and independent trustee would be preferable. Her Honour (at [28]) characterised the respondent’s request as being to place the funds in the hands of a private trustee “where the private trustees proposed are persons who may have competing or conflicting interests with other family members as to how to manage or spend the inheritance that was left to them”. Her Honour said that the “driving concern” in appointing the Public Trustee was to avoid further conflict and that the “appointment of the Public Trustee was made in full awareness that the child plaintiffs (who were not separately represented) had sought for their mother to be appointed as Executor and Trustee”: Tong No 2 at [29]. She pointed to the potential for Edmund to be influenced by his mother and the absence of any evidence that he had sufficient experience to manage the Trust or make decisions about a property asset of substantial size.
152․As a consequence, her Honour concluded that, even had she found that the application to replace the Public Trustee with Suqin or Edmund or both was within the scope of the grant of liberty to apply, she still would not have varied the orders made.
153․Insofar as the evidence sought to be admitted describes the educational and professional qualifications of Suqin, that evidence was available at first instance and could have been put on in support of the claim that Suqin should be appointed as executor and trustee. So, too, might evidence have been put on as to the costs involved in the appointment of the Public Trustee. The evidence of Suqin is that she provided no instructions to her counsel at the time that he discussed the possible appointment of an independent trustee with the primary judge. There was no evidence as to why, if the apparently reasonable statement by counsel for the respondents that “the Public Trustee could be appointed” might have been a matter of concern, the solicitor for the respondents did not take instructions at the time or seek to put on further evidence. However, it is also apparent that her Honour at that stage contemplated the possibility of further submissions being made on that issue, at least to the extent that, prior to making final orders, the parties be given the opportunity to provide names for potential alternative appointees as executor and trustee.
154․So far as the evidence in relation to Edmund is concerned, the potential for Edmund to be appointed as executor and trustee, either by himself or jointly with his mother, only arose upon him becoming an adult. That occurred in December 2022, after the primary judge had reserved her decision but before she had handed down her judgment. Although there appears to have been some form of hearing on 2 February 2023, it appears that, as a matter of substance, the potential for Edmund to be appointed as executor and trustee only arose after the conclusion of the case.
155․Given that:
(a)the primary judge was granting relief that was different to that which was sought in the respondents’ claim;
(b)Edmund only became a possible executor or trustee once he became an adult; and
(c)there were indications before the primary judge that she would hear the parties further prior to the appointment of an independent executor and trustee;
it is appropriate to admit the further evidence on the appeal so as to enable the court to deal with the point of substance.
No error established
156․As pointed out above, the primary judge found in Tong No 2 that the application by the respondents that her Honour vary the orders of the primary judgment so as to substitute Edmund individually or Edmund and Suqin jointly as executor and trustee was not within the scope of the grant of liberty. Her Honour further indicated that, even if it had been within the scope of the grant of liberty, she would have refused to vary the orders made in any event. The reasons that her Honour gave in relation to the substantive point included (at [28]-[31]):
28․ The plaintiffs’ request was in the nature of placing the funds [in] the hands of a private trustee (being the eldest son or widow jointly or severally), but in circumstances where the private trustees proposed are persons who may have competing or conflicting interests with other family members as to how to manage or spend the inheritance that was left to them.
29․ Those issues arise regardless of whether the first or fifth plaintiffs were appointed as sole or joint trustees the Tong Family Trust. It will be apparent from the reasons given above in the primary judgment that a driving concern in appointing the Public Trustee was to avoid further conflict, and that includes between the minor beneficiaries and their mother, the fifth plaintiff, as they get older. The appointment of the Public Trustee was made in full awareness that the child plaintiffs (who were not separately represented) had sought for their mother to be appointed as Executor and Trustee. Express reference was made to the fact that such relief was sought at [16] of the primary judgment.
30․ The proposition that the first plaintiff may be jointly responsible with his mother gives rise to a risk that the mother may seek to influence her son to make decisions that may not necessarily be in the best interests of his siblings. At the very least, it may put him in a difficult family position. Moreover, there was no evidence before the Court that the first plaintiff has sufficient experience to manage a family trust or to make decisions about a property asset of substantial size, or that his expertise extended beyond being anything other than a “bright and responsible young man”. By contrast, the Public Trustee is highly experienced, has express statutory duties and most importantly, is entirely independent from any party in the litigation.
31․ Accordingly, even if I had found the application made by the plaintiffs to replace the appointments of the Public Trustee with a family member (either the Deceased’s widow or eldest son or both) capable of falling within the liberty to apply, I would not have acceded to the request to vary the orders made.
157․Notwithstanding:
(a)the evidence of Suqin’s accounting qualifications and experience;
(b)the fact that Edmund is available to be appointed as executor and trustee by himself or jointly with his mother; and
(c)the evidence, in very general terms, concerning the rates charged by the Public Trustee;
the reasons given by the primary judge for the appointment of the Public Trustee remain valid ones. There is obviously a balance to be reached between the cost and complexity of the involvement of a paid and independent trustee such as the Public Trustee on the one hand, and the value of that independence on the other for the tasks of administration to be undertaken. Even in light of the additional evidence, no error is demonstrated in the conclusion reached by the primary judge. Having regard to the history of this case and the testamentary intentions of Quoc in establishing the Trust, the appointment of the Public Trustee remains the more appropriate option for the administration of those entities, notwithstanding the costs and complexities involved.
158․The cross-appeal will be dismissed.
Orders
159․The orders that of the Court are:
1.The appeal is dismissed with costs.
2.The affidavit of Suqin Zhu Tong affirmed 12 October 2023 and Edmund Hao Wen Tong affirmed 12 October 2023 are admitted into evidence on the cross‑appeal.
3.The cross-appeal is dismissed with costs.
| I certify that the preceding one hundred and fifty-nine [159] numbered paragraphs are a true copy of the Reasons for Judgment of the Court. Associate: Date: 29 August 2024 |
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