Wu v Wu
[2024] ACTCA 8
•12 July 2024
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
COURT OF APPEAL
Case Title: | Wu v Wu |
Citation: | [2024] ACTCA 8 |
Hearing Date: | 21 August 2023 |
Submissions last received: | 7 July 2024 |
Decision Date: | 12 July 2024 |
Before: | Mossop, Baker, McWilliam JJ |
Decision: | 1. Within 7 days of these orders being made, the parties are to provide agreed or competing short minutes of order giving effect to these reasons, including proposed orders for the further conduct of the proceedings, dealing with the question of remittal or final disposition. |
Catchwords: | APPEAL – EQUITY – Undue influence – unconscionable conduct – laches – gift of family home to daughter – whether error in assessment of relationship of ascendancy – whether error in analysis of special disadvantage – whether error in principles concerning delay in seeking relief |
Legislation Cited: | Supreme Court Act 1933 (ACT) ss 37N, 37O |
Cases Cited: | Aboody v Ryan [2012] NSWCA 395 Allcard v Skinner (1887) 36 Ch D 145 Bank of Montreal v Stuart [1911] AC 120 Bank of New South Wales v Rogers (1941) 65 CLR 42 Barbaro v Millington [2007] ACTCA 1 Barron v Willis [1900] 2 Ch 121 Billage v Southee (1852) 68 ER 623 Bridgeman v Green (1757) 97 ER 22 Bridgewater v Leahy [1998] HCA 66; 194 CLR 457 Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 Fox v Percy [2003] HCA 22; 214 CLR 118 Garcia v National Australia Bank Ltd (1998) 194 CLR 395 GJ v AS (No 4) [2017] ACTCA 7 Goldsworthy v Brickell [1987] Ch 378 Harris v Jenkins (1922) 31 CLR 341 Haskew v Equity Trustees, Executors and Agency Co. Ltd (1919) 27 CLR 231 Hsia v Fazarri [2020] HCA 35; 270 CLR 588 Huguenin v Baseley (1807) 33 ER 526 Jenyns v Public Curator (Qld) (1953) 90 CLR 113 Johnson v Buttress (1936) 56 CLR 113 Lamotte v Lamotte (1942) 42 SR (NSW) 99 Lindsay Petroleum Company v Hurd (1873-74) LR 5 PC 221 Nedby v Nedby (1852) 5 De G. & Sm. 377 Nowell v Palmer (1993) 32 NSWLR 574 Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 Poosathurai v Kanappa Chettiar (1919) LR 47 IA 1 Quek v Beggs (1990) 5 BPR [97405] Rhodes v Bate [1866] LR 1 Ch App 252 Saintclaire & Saintclaire [2015] FamCAFC 245 Schwanke v Alexakis; Camilleri v Alexakis [2024] NSWCA 118 Shephard v Galea [2020] WASCA 152 Stubbings v Jams 2 Pty Ltd [2022] HCA 6; 96 ALJR 271 Thorne v Kennedy [2017] HCA 49; 263 CLR 85 Tulloch (deceased) v Braybon (No 2) [2010] NSWSC 650 Watkins v Coombes (1922) 30 CLR 180 Wu v Wu [2022] ACTSC 360 Yerkey v Jones (1939) 63 CLR 64 |
Texts Cited: | Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies (LexisNexis Butterworths, 5th ed, 2015) R Bigwood, “The Undue Influence of ‘Non-Australian’ Undue Influence Law on Australian Undue Influence Law: Farewell Johnson v Buttress? Part II” (2019) 35 Journal of Contract Law 187 at 189, 211. |
Parties: | Chin-Sheng Wu ( Appellant) Angela Chien-Kuang Wu ( Respondent) |
Representation: | Counsel D Moujalli ( Appellant) P Walker SC with M Hassall ( Respondent) |
| Solicitors Thomson Geer ( Appellant) KJB Law ( Respondent) | |
File Number: | ACTCA 7 of 2023 |
Decision Under Appeal: | Court: ACT Supreme Court Before: Loukas-Karlsson J Date of Decision: 23 December 2022 Case Title: Wu v Wu Citation: [2022] ACTSC 360 |
The Court:
1․ In Johnson v Buttress (1936) 56 CLR 113 (Johnson), McTiernan J stated at 143:
No part of the jurisdiction of the court is more useful than that which it exercises in watching and controlling transactions between persons standing in a relation of confidence to each other…
2․ His Honour was quoting Billage v Southee (1852) 68 ER 623 at 626. The statement provides the context for the subject matter of the present appeal, namely an examination by the court in its equitable jurisdiction of a particular transaction in 2009. The transaction concerned was the transfer of a residential property in O’Malley (O’Malley property), in which the appellant currently resides, and in respect of which the respondent currently holds the legal title.
3․ The central questions on the appeal are whether the O’Malley property was gifted to the respondent in 2009 by the appellant and his wife in circumstances of undue influence, unconscionable conduct, or both.
4․ The appellant is Mr Wu, a now 100-year-old widower. He has two daughters:
(a) Karen, whom Mr and Mrs Wu adopted in 1965; and
(b) Angela who was born to Mr and Mrs Wu in 1970, is the recipient of the O’Malley house, and the respondent on this appeal.
5․ To avoid confusion, the appellant’s daughters will be referred to in these reasons by their first names without any intended disrespect.
6․ The appeal is from a judgment delivered by a single judge on 21 December 2022, whereby the appellant obtained a declaration of a right of residence in the O’Malley property, for the remainder of his life or until he no longer desires, but was otherwise unsuccessful in establishing claims for relief in equity, on the basis of either unconscionable conduct or undue influence, with the primary judge dismissing the appellant’s Amended Statement of Claim and ordering him to pay the defendants’ costs of the proceedings: Wu v Wu [2022] ACTSC 360 (primary judgment).
7․ On this appeal, apart from the declaration, the appellant challenged each of those orders, raising numerous complaints relating to both the law applied and the facts found. There was also a claim brought at first instance against the solicitor who was found to have acted solely for Angela when the O’Malley property was transferred to her. That aspect of the claim was dismissed by the primary judge and is not the subject of appeal. A separate debt claim against Angela was also dismissed and again does not give rise to any complaint on appeal.
Genesis of the dispute
8․ The appellant met his late wife, Pi Shia Wu, shortly after he was released from a Taiwanese prison. He had been incarcerated as a political prisoner between 1947 and 1957 because he had joined the Chinese Communist Party and was regarded as a spy by the authorities in Taiwan at the time. The couple married in 1963 and remained married for 55 years, until the appellant’s wife died from cancer in 2018.
9․ The family migrated to Australia in around 1985, leaving behind a successful clothing business, which they gifted to their godson. Karen’s personal relationships, including her marriage, did not meet approval with Mr and Mrs Wu, and the family relationship fractured. That is relevant context for the present litigation because, although Karen has long since reconciled with her father and has worked as a nurse in Canberra, caring for her father in his declining years in Australia, Mr and Mrs Wu’s objection to Karen’s marriage meant that Angela was a favoured daughter when the family home in O’Malley was transferred to her in 2009.
10․ Angela obtained a law degree and travelled overseas. She was overseas at the time of the transfer, has lived abroad for many years, and permanently resides in Tahiti. Following the death of her mother in 2018, Angela sought to make arrangements for her father to be placed in a nursing home and dealt with the ashes of her mother in a way that was against the wishes of her father. These events caused a fracturing of the appellant’s relationship with Angela. This litigation was commenced in November 2020.
11․ The circumstances surrounding the transfer of the O’Malley property to Angela are the source of the dispute. The transfer stated that Angela was to pay $1,225,000 by way of consideration. However, Angela never paid any of that sum, and the O’Malley property was found to be a gift to Angela by the primary judge: primary judgment at [111]-[113]. That finding is not contested on appeal.
12․ In the proceedings at first instance, and maintained on appeal, Mr Wu alleged that he signed the transfer to the O’Malley property in circumstances that his daughter Angela knew or ought to have known were unconscionable. Alternatively, it was alleged that the transfer was procured by undue influence, in circumstances where, among other things, Mr Wu did not speak English and was entirely dependent upon Mrs Wu for financial decisions and management of his assets.
The proceeding at first instance
13․ To assist with understanding the arguments on appeal, it is useful to explain, by way of broad overview, what occurred at the hearing. The appellant’s primary case at trial was that Angela had been sold the O’Malley property and had failed to pay the consideration of $1,225,000 (which was the amount recorded on the transfer) to the appellant and his wife. If that debt claim failed, the appellant sought to set aside the transfer on an equitable basis, either because of unconscionable conduct or undue influence.
14․ Because the primary case was on whether the transfer was enforceable and whether Angela had a liability to pay the consideration, the focus of the parties was on the proper characterisation of the transaction and whether it was a sale or a gift. The alternative claims in equity were then treated in a cascading manner, with the unconscionable conduct claim given more consideration and emphasis than the undue influence claim. As a result, the parties focused on what the appellant knew and intended, and what Angela knew and did. Whether Angela was a purchaser or a recipient of a benefit “with notice” was pleaded and was an issue depending on what the primary judge found in relation to the debt claim.
15․ Having read the entirety of the pleadings, submissions at first instance and the transcript, it is fair to say that the consequences of a finding against the appellant’s primary case, that the transfer of the O’Malley property to Angela was a gift, and what such a finding may mean for the appellant’s pleaded case on undue influence, was buried among the various other issues involved in this case (which were set out in the primary judgment at [7]). However, on appeal, with the debt claim having fallen away, the undue influence claim based on the transfer being a gift (as found by the primary judge and not challenged on appeal) emerged with greater prominence.
Complaints on appeal
16․ There were 10 grounds of appeal. Counsel for the appellant sifted the arguments to be pursued on appeal, helpfully reducing them to whether the primary judge erred in concluding the following:
(a)That relief was not available on the basis of undue influence (Issue 1);
(b)That relief was not available on the basis of unconscionable conduct (Issue 2); and
(c)If either of those two equitable doctrines were engaged, that they would have been defeated by the defence of laches (Issue 3).
17․ Issue 1 is addressed at [20]-[106] below. Issue 2 is dealt with at [107]-[123] below. Issue 3 is dealt with at [124]-[130] below.
18․ As part of dealing with these issues, the appellant challenged the following factual findings:
(a)The finding that the appellant was not completely reliant on Mrs Wu in relation to significant documents and dealings in English which affected the appellant’s interests (primary judgment at [164]);
(b)The finding that, at the time of the transfer of the O’Malley property, the property was not the only significant asset that the appellant possessed (primary judgment at [167]);
(c)The finding that because Angela was overseas at the time of the transfer of the O’Malley property to her:
(i)she would not have been aware of any special disadvantage to which the appellant was subject (primary judgment at [170]); and
(ii)she was not in a position to exert undue influence over the appellant (primary judgment at [179]).
19․ As will be explained in the reasons that follow, the appellant has established error in relation to the claims of undue influence and unconscionability, as well as in relation to the defence of laches.
Issue 1 – Did the primary judge err in finding that relief was not available on the basis of undue influence?
20․ The appellant’s complaint encapsulates error by the primary judge as to the law and in the application of the law to the factual findings made.
Reasons of the primary judge
21․ The primary judge’s findings with regard to undue influence are partly grounded in earlier factual findings her Honour made on other issues, such as fraud and concealment. Accordingly, it is appropriate to set out first some of the findings with regard to whether there was fraud and concealment in respect of the transfer. In the context of a limitation defence, raised by both defendants at first instance, the appellant had argued that at the time he signed the transfer document in 2009, it was concealed from him that his interest in the O’Malley property would be transferred to Angela, and that the transfer provided for Angela to pay monetary consideration in the sum of $1,225,000 (primary judgment at [119]).
22․ In the course of dealing with that argument, the primary judge found at [124]-[126]:
124.One key challenge to the plaintiff’s submission is that, in my view, it is clear that both facts pleaded to have been concealed are evident from the transfer form itself. Mr Wu was taken to the transfer form and while much of his evidence was that he could not now recall signing the form, he must have signed it as his signature was on the form. So much was conceded by Mr Wu in his evidence.
125. It was also clear from Mr Wu’s evidence that he could understand sufficient English to have been able to interpret at least the critical parts of the transfer form when he signed it. In particular, Mr Wu said he could recognise the name of the property and the dollar amount. Also in evidence was a drawing of Mr Wu of the symbol for the Australian dollar. I infer that Mr Wu could also have read the names of himself, Mrs Wu and Ms Angela Wu on the form.
126. In my view, having signed the transfer form, Mr Wu must have been aware at the relevant time that he was signing a transfer form for the O’Malley property and the form recorded an amount of money as consideration. That finding accords with Mr Wu’s evidence about what he could understand in English.
23․ The primary judge then dealt with unconscionable conduct, in the course of which her Honour made the following findings at [164]-[167] (emphasis added):
164. While I accept that the plaintiff’s evidence was that his wife’s English language skills were superior to his and that, accordingly, Mr Wu may have relied upon his wife to translate documents and explain some matters to him, this does not in my view extend to the level of reliance advanced by counsel for the plaintiff. Further, reliance on Mrs Wu to explain some aspects of certain documents where those documents are in English would not, in my view, be sufficient to find special disadvantage in circumstances where Mr and Mrs Wu made joint decisions concerning their property.
165. Having made that finding also disposes of the other arguments. To the extent that the plaintiff could not understand the relevant document he was signing (and on that matter I refer to my earlier finding that he could, on the balance of probabilities, understand the key aspects of the document), Mrs Wu was present with him at the time of transfer. As explained above, I have already indicated why I am not satisfied to the requisite standard that Mrs Wu would have concealed significant matters from Mr Wu. It follows, that Mrs Wu was present to explain the effect of the relevant document that Mr Wu was signing to him.
166.Further, and in the alternative, I am also satisfied, for the reasons explained above, that the transfer document was a relatively simple document. I accept counsel for the first defendant’s submission that this was not an example of a complicated financial instrument where the need for all terms to be explained was clear. This is also not an example, as in Amadio, where there is evidence that the contents of the document signed by Mr Wu were misrepresented to him by a person whom he trusted.
167.In contrast, the transfer form was a relatively simple document that had the effect of transferring a property from Mr and Mrs Wu to their daughter Ms Angela Wu. I note that at the relevant time it was not the only significant asset that Mr and Mrs Wu possessed.
24․ The emphasised words at [167] are one of the factual findings challenged. In that finding, the primary judge grouped together the assets owned by Mr and Mrs Wu. In doing so, her Honour overlooked the true factual position regarding Mr Wu’s property interests (as opposed to those of his wife) and his resources to draw upon in the future, which is a significant consideration in assessing whether the gift was improvident and what may be required to rebut any presumption of undue influence arising (discussed below).
25․ The evidence established that, at the time of the transfer in 2009, the appellant had no interest in any real property assets in Australia. He did have an interest in a residential unit in China, however there was no evidence of its value at the time, and there was no suggestion in the evidence that such an asset was of any significance. The asset was certainly propounded as being able to be utilised as accommodation or funds for the appellant’s retirement.
26․ Nor did the appellant have any significant cash resources from which to fund his retirement. The respondent pointed to a bank account in the appellant’s name in Taiwan. There was no evidence that the bank account had any significant value in 2009.
27․ The primary judge’s finding at [167] is not strictly incorrect insofar as it refers to the assets held by Mr and Mrs Wu. However, expressed in those terms, the finding masks the true position with respect to the individual assets of the appellant. While on the evidence, Mrs Wu may have had other assets of significant value, the appellant’s only significant asset was the family home in O’Malley in which he lived. The transaction in question was thus one by which the appellant gave away all, or practically all, of his property, being the home in which he lived.
28․ Returning to the reasons of the primary judge, her Honour dealt with undue influence at [172]-[186] of the primary judgment (emphasis added):
172.The first defendant correctly noted that courts have found undue influence in relation to gifts travelling from a parent to a child notwithstanding the presumption of advancement: Winefield v Clarke [2008] NSWSC 882.
173.Undue influence is concerned with circumstances where an individual’s will is overborne by another. Here the Court is not concerned with a recognised category of relationship where undue influence is presumed.
174.This leaves the plaintiff with two avenues to establish undue influence. First, where it is established that there was a relationship of influence between Mr Wu and Ms Angela Wu in 2009, such that Ms Angela Wu was in a position of ascendency, power or dominion over Mr Wu. Second, where there was actual undue influence in relation to the particular transfer itself.
175.Here the plaintiff submitted that Mr Wu did not turn an independent mind to the issue and his assent to the transaction was not independent or voluntary as he did not know that the transfer form stated a false proposition, namely that there was consideration on the transfer form.
176.The central issue with this submission is that, as I have found above, I am not satisfied that the consideration recorded on the form or any of the other surrounding circumstances establishes that there was an objective intention to enter legal relations.
177.Putting that matter to one side, however, I accept the submissions for the first defendant that undue influence is not established. This is the case for the following reasons.
178.First, in relation to actual undue influence in relation to the specific property transfer, I do not accept that there is sufficient evidence as to what Ms Angela Wu said to Mr Wu in relation to the transfer to establish undue influence. The evidence from Mr Wu was largely that he could not remember what took place, that is not evidence that Ms Angela Wu in some way pressured Mr Wu or Mrs Wu in relation to the transfer.
179.It also seems to me that the suggestion of undue influence in relation to the transfer cannot be made out in circumstances where Ms Angela Wu was overseas at and around the relevant time. The first defendant’s defence states that it was Mrs Wu who first raised the possibility that the property would be transferred into Ms Angela Wu’s name. That claim is consistent with the evidence that Mrs Wu took steps preparatory to the property being transferred.
180.In circumstances where it was Mrs Wu who first raised the matter with Ms Angela Wu it is unlikely that Ms Angela Wu would have exerted any undue influence over her father. Rather, the overall pattern of the evidence again was that Mr and Mrs Wu were at and around that stage of their lives taking steps to transfer their properties inter vivos to their children, with the bulk of the transfers to Ms Angela Wu. I am not satisfied that those transfers were anything other than Mr and Mrs Wu’s joint and free intention at the relevant time.
181.Overall, I am not satisfied that there was any actual undue influence in relation to the O’Malley transfer.
182.Similarly, I am not satisfied that there was some position of dominance of Ms Angela Wu over her father Mr Wu. That evidence is not consistent with the evidence that Mr and Mrs Wu made property transfers to both of their children before and after the O’Malley transfer. Again, it is clear from the evidence overall that Mr and Mrs Wu jointly made a decision to transfer property to their daughters and, due to a relationship breakdown with Ms Karen Wu, the bulk of the transfers were made to Ms Angela Wu.
183.That evidence does not, however, establish that there was or is some ongoing relationship of dominance by Ms Angela Wu.
184. That finding is further strengthened by the more recent history and Mr Wu’s evidence as to what occurred following the death of Mrs Wu. It is clear from that evidence that Mr Wu has not followed Ms Angela Wu’s suggestions in relation to his aged care arrangements. While that evidence, of course, post-dates 2009, it fortifies my conclusion that when Mr Wu was younger and in better health generally, he would not have been in a position of subjugation to Ms Angela Wu.
185. I find that the property transfer was not affected by undue influence.
186.In my view, in light of that finding and my finding in relation to unconscionable conduct it is not necessary to consider the first defendant’s submission that, in any event, there would be no causation as Mr Wu gave evidence that he “would have agreed” to transfer the property in 2009 but has now changed his mind.
29․ The emphasised words in the reasons above draw attention to the following:
(a)The primary judge’s concern was with whether undue pressure was applied, or whether there was a relationship of dominance, as between the appellant and Angela as the beneficiary, not as between the appellant and his wife, which was the deferential relationship expressly pleaded by the appellant, of which Angela was then alleged to have had notice.
(b)The primary judge’s assessment of the appellant’s decision-making capacity for the purpose of assessing influence was grouped with his wife’s “joint and free” decision.
30․ It is apparent from the above extract that the reasons at first instance proceeded solely on a bare statement of the law that undue influence is concerned with circumstances where an individual’s will is overborne by another. Again, while the statement is not necessarily wrong, its simplicity without more is apt to obscure the principles upon which the doctrine rests and in particular, an appreciation of the variety of ways in which the law will treat an individual’s will as being overborne, and the circumstances in which undue influence may be imputed to a third party, with the resulting transaction set aside as against that party as well.
31․ In the present case, the failure to properly appreciate the basis for the operation of the doctrine has led to an incorrect analysis by the primary judge of the facts as found by her Honour, most significantly seen in an evaluation of the wrong relationship of influence and a misunderstanding of the consequence in equity of the primary judge’s finding that the disposal of the O’Malley property to Angela was a gift. The error appears to have been a product of confusion by the parties, as will be discussed later in these reasons.
Foundational principles – the basis of the equitable jurisdiction being exercised
32․ Due to the apparent confusion at first instance, the following principles have been discussed in some detail, so as to explain the Court’s task in determining whether a gift (as found in this case) was “procured by undue influence”.
33․ Undue influence is an equitable doctrine that at its core protects people from the abuse of a power imbalance, either on the basis that no-one should be permitted to benefit from their own wrong, or as a matter of public policy arising from a relationship of influence: Allcard v Skinner (1887) 36 Ch D 145 (Allcard) at 171. The “constant rule” in Equity is that “where a party is not a free agent, and is not equal to protecting himself, the Court will protect him”: see Thornev Kennedy [2017] HCA 49; 263 CLR 85 (Thorne) at [31] (emphasis added) and the commentary there-cited.
34․ However, “folly, imprudence, or want of foresight” is insufficient to allow equity’s intervention in the transfer of property on the grounds of undue influence: Allcard at 183. The focus of the doctrine is on how a gift or benefit comes to be given, and on ensuring that such a gift or benefit is a result of a person’s “free exercise” of will, or a “free and well-understood act”: Bank of New South Wales v Rogers (1941) 65 CLR 42 (Rogers) at 61, cited more recently in Thorne at [31].
Two ways in which the equitable jurisdiction may arise
35․ The two different bases underpinning the doctrine, as explained in Allcard, means that there are two ways in which the doctrine may operate. The first way is actual influence over the mind of a person, variously described in the authorities as the alienor, disponor or the donor. Actual undue influence requires proof that in the particular situation, or by the deliberate contrivance of the disponee, the transaction was the outcome of such an actual influence over the mind of the disponor that it cannot be considered to be his or her free act: Johnson at 134. As the High Court in Thorne stated at [32]:
The question whether a person's act is "free" requires consideration of the extent to which the person was constrained in assessing alternatives and deciding between them. …
36․ As the present appeal does not concern the application of actual undue influence, it is unnecessary to deal further with that aspect of the doctrine.
37․ The second way is by presumed influence, which is not rebutted. Sometimes the two classes will overlap, such as where actual undue influence arises in the context of a relationship of confidence. Thus, in Johnson, Latham CJ stated at 119 (emphasis added):
The jurisdiction of a court of equity to set aside gifts inter vivos which have been procured by undue influence is exercised where undue influence is proved as a fact, or where, undue influence being presumed from the relations existing between the parties, the presumption has not been rebutted.
38․ Writing separately in Johnson, Dixon J similarly discussed the two different bases for the jurisdiction. In respect of the first, his Honour stated at 134 (emphasis added):
The basis of the equitable jurisdiction to set aside an alienation of property on the ground of undue influence is the prevention of an unconscientious use of any special capacity or opportunity that may exist or arise of affecting the alienor’s will or freedom of judgment in reference to such a matter. The source of power to practise such a domination may be found in no antecedent relation but in a particular situation, or in the deliberate contrivance of the party. If this be so, facts must be proved showing that the transaction was the outcome of such an actual influence over the mind of the alienor that it cannot be considered his free act.
39․ His Honour then explained the second basis (emphasis added):
But the parties may antecedently stand in a relation that gives to one an authority or influence over the other from the abuse of which it is proper that he should be protected. When they stand in such a relation, the party in the position of influence cannot maintain his beneficial title to property of substantial value made over to him by the other as a gift, unless he satisfies the court that he took no advantage of the donor, but that the gift was the independent and well-understood act of a man in a position to exercise a free judgment based on information as full as that of the donee.
40․ Insofar as the second aspect of the doctrine rests on a public policy principle, this was explained by Dixon J in Johnson at 134-5 as follows (emphasis added):
[The doctrine] rests upon a principle. It applies whenever one party occupies or assumes towards another a position naturally involving an ascendancy or influence over that other, or a dependence or trust on his part. One occupying such a position falls under a duty in which fiduciary characteristics may be seen. It is his duty to use his position of influence in the interest of no one but the man who is governed by his judgment, gives him his dependence and entrusts him with his welfare. 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.
41․ There are three points of significance in the emphasised words. First, a person who is in a relationship of influence has a “duty” with fiduciary characteristics, namely to use that position only in the interests of the person who entrusts him (in this case) with his welfare.
42․ Second, the public policy aspect of the doctrine is one of protection from possible abuse (the benefit ‘may well’ proceed from an abuse). Latham CJ similarly referred in Johnson (at 123) to the general policy of the law in relation to the presumption of undue influence being “directed to preventing the possible abuse of relations of trust and confidence.”
43․ Third, the doctrine does not extend to any gift or benefit no matter how trivial; it deals with a substantial gift of property.
44․ Following the High Court’s decision in Thorne, reservations among academic commentary have subsequently been expressed as to the ongoing relevance in Australia of the fiduciary characteristics underpinning the doctrine (articulated in Johnson above) insofar as it arises from a relationship of trust and confidence between the parties.[1] It is important to recognise that the decision in Thorne dealt with a particular situation, being the circumstances of a pre-nuptial agreement, and was based on a finding of actual undue influence, the source of which was excessive pressure: Thorne at [54]-[58]. The alternative case based on a presumption of undue influence (discussed below), which was argued to arise from the nature of the relationship of fiancé and fiancée, was rejected: Thorne at [35]-[36]. In short, the facts of Thorne did not call for any discussion of fiduciary characteristics underpinning the doctrine or how the potential for abuse gives rise to the presumption.
[1] R Bigwood, “The Undue Influence of ‘Non-Australian’ Undue Influence Law on Australian Undue Influence Law: Farewell Johnson v Buttress? Part II” (2019) 35 Journal of Contract Law 187 at 189, 211.
45․ The facts of the present case concern whether there was a proven relationship of influence. Appreciating that there may be broader implications to be drawn from Thorne and the language used, but confining our consideration of the case to the limited extent that it touched upon the substantive aspect of the doctrine, we respectfully do not understand the decision to be one that sought to depart from the above authority in Johnson, nor one that intended to depart from fiduciary characteristics applying to certain relationships. Indeed, at [34], the plurality in Thorne expressly cited Dixon J in Johnson at 134-5 in referring to “a corresponding position of dependency or trust.” In circumstances where the focus in that case was actual undue influence arising from a specific identifiable source, we do not take the absence of any discussion in Thorne of the fiduciary nature (and its abuse) underpinning the presumption of undue influence as an implied rejection of the previously established law set out above. There was no considered dicta in that regard.
Unpacking ‘undue influence’
46․ It is important to understand the type of ‘influence’ with which the doctrine is concerned, and when it will be found or taken to be ‘undue’. If one person procures another to make a gift (being the relevant benefit in this case) by so dominating his mind as to prevent him from exercising a free discretion, the will of the person will be viewed as not independent and voluntary, “because it is overborne”: Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 (Amadio) at 461. However, such a description does not mean that an actual overbearing of will is required before the doctrine will operate. As will be seen, the equitable doctrine extends more broadly than that. A person who gifts property may do so willingly, and in that sense independently and voluntarily, and yet the gift may still be the subject of complaint by reason of the quality of the donor’s intention or the means by which it was produced: Bridgewater v Leahy [1998] HCA 66; 194 CLR 457 (Bridgewater) at [73]-[76]; Amadio at 461, 474.
47․ Drawing from the extracts in Johnson above, ‘influence’ means a psychological (including emotional) ascendancy or influence by the donee over the donor, or a dependence or trust on his part. It is not necessary that the ascendancy amount to actual domination: Shephard v Galea [2020] WASCA 152 at [104] citing Quek v Beggs (1990) 5 BPR [97405] 11,761 (Quek) at 11,764 and Goldsworthy v Brickell [1987] Ch 378 (Goldsworthy) at 401 among others. In Thorne the point was made at [32] in this way (references omitted):
…It is not necessary for a conclusion that a person's free will has been substantially subordinated to find that the party seeking relief was reduced entirely to an automaton or that the person became a "mere channel through which the will of the defendant operated". Questions of degree are involved. But, at the very least, the judgmental capacity of the party seeking relief must be "markedly sub-standard" as a result of the effect upon the person's mind of the will of another.
48․ Accordingly, where there is a relationship of trust and confidence between the donor and the donee (discussed further below at [59] and following), that will establish ‘influence’. However, that people may influence each other in making decisions does not of itself invoke the undue influence doctrine. More is required. As stated in Watkins v Coombes (1922) 30 CLR 180 (Watkins) at 194 (citing Poosathurai v Kanappa Chettiar (1919) LR 47 IA 1):
… influence may be used wisely, judiciously and helpfully. But…more than mere influence must be proved so as to render influence, in the language of the law, ‘undue’. It must be established that the person in a position of domination has used that position to obtain unfair advantage for himself, and so to cause injury to the person relying upon his authority or aid.
49․ See also Harris v Jenkins (1922) 31 CLR 341 at 368 per Starke J.
50․ Influence will be “undue” if the donee takes improper advantage or makes “unconscientious use” (being the language of Dixon J in Johnson at 134) of the relationship or opportunity for influence. Such descriptions do not necessarily import a degree of moral turpitude or exploitation: Thorne at [39]-[40]; see also Rhodes v Bate [1866] LR 1 Ch App 252 at 262. A person may not consciously intend to exploit the confidential relationship and yet be found to have neglected or disregarded their duty (and thus to have acted improperly) by permitting the conflict in interests. For example, in Barron v Willis [1900] 2 Ch 121 (Barron) at [128], Lindley MR referred to a failure to see that the plaintiff in that case had independent advice in circumstances where the confidante was a solicitor, who had acted for the plaintiff, and the solicitor’s son stood as a beneficiary under a deed about which the plaintiff had sought advice. The failure was described as disregarding the solicitor’s duty, such that the transaction must be set aside “although he may have acted with perfect honesty. If he did in fact disregard his duty, the consequence must follow that the transaction which is impeached cannot stand”: Baron at [128].
51․ By way of further example, in Thorne at [30], the plurality of the High Court spoke of undue influence arising from widely different sources, one of which is excessive pressure. However, it was not necessary that the pressure be characterised as illegitimate or improper before the influence may be described as ‘undue’ (as opposed to duress, where such matters may have been relevant): Thorne at [57].
The evaluative nature of a finding of ‘undue’ influence
52․ Due to the focus of the doctrine being on the “quality of the consent or assent of the weaker party” (being the language used in Amadio at [13] and Thorne at [86]), and how the decision of the donor was made, there is a necessity to pay careful attention to the exact relationship in respect of which a person’s will has been subordinated and to the particular facts. In Thorne, the plurality referred at [43] to the evaluative nature by references to a passage from Jenyns v Public Curator (Qld) (1953) 90 CLR 113 (Jenyns) at 118-119, stating that the application of these equitable principles:
calls for a precise examination of the particular facts, a scrutiny of the exact relations established between the parties and a consideration of the mental capacities, processes and idiosyncrasies of the [other party]. Such cases do not depend upon legal categories susceptible of clear definition and giving rise to definite issues of fact readily formulated which, when found, automatically determine the validity of the disposition…
53․ The court is required to make an overall evaluation of whether the donor has been the subject of undue influence. The assessment of the will-power of a person is not an exercise of mathematical precision: Thorne at [62]. It requires a comprehensive view, which “looks to every connected circumstance that ought to influence its determination upon the real justice of the case”: Jenyns at 118-119, cited in Thorne at [43].
54․ In taking all of the connected circumstances into account, which may be inter-dependent on each other, some factors that have been adopted in Thorne at [59] as being “universally relevant” to the proof of undue influence (whether actual or presumed) include: the relation of the parties; the nature and terms of the transfer in question; the susceptibility of the transferor to the influence of the other; the opportunity of the other to exert undue influence; and the extent to which the transferor acted on the basis of independent advice.
Extension to third parties
55․ The doctrine was explained by the learned authors, J D Heydon, M J Leeming and P G Turner, in Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies (LexisNexis Butterworths, 5th ed, 2015) at [15-030] as follows (emphasis added):
…Thus the phrase the ‘presumption of undue influence’ really refers to the taking of a benefit by, or at the suggestion of, a person who is in a position of influence (presumed or proved) who will be taken, unless the contrary is proved, to have procured the benefit by undue exercise of that influence. …
56․ The emphasised words draw attention to the fact that the person in a position of influence (presumed or proven), and the recipient of the benefit do not have to be one and the same before the doctrine may operate. The doctrine of undue influence extends to third parties in a variety of circumstances. In Rogers, Starke J stated at 51:
…The inference of undue influence operates not only “against the person who is able to exercise the influence”, but “against every volunteer who claimed under him, and also against every person who claimed under him with notice of the equity thereby created, or with notice of the circumstances from which the court infers the equity…”: Bainbrigge v Browne (1881) 18 Ch. D at 196, 197.
57․ It can be seen that there is a distinction between third parties who are volunteers (such as recipients of a gift) and others who are not. Where the third party is a volunteer, the transfer of property procured by undue influence may be set aside regardless of whether the third party had notice of the undue influence or not. This is because equity will not assist a volunteer, and so where this occurs the recipient will be fixed with the consequences of the other’s undue influence and the transfer may be set aside: Huguenin v Baseley (1807) 33 ER 526 at 532, citing Bridgeman v Green (1757) 97 ER 22 (Bridgeman) at 25.
58․ That same principle was similarly made clear in Thorne at [25], again citing Bridgeman at 25, although the circumstances with which Thorne was concerned did not involve such a transaction. If the third party is not a volunteer, additional requirements such as notice of the undue influence or the circumstances giving rise to the undue influence apply: Thorne at [25], citing Rogers at 51-52.
Requirements for presumed undue influence
59․ Presumed undue influence is concerned with an antecedent relationship of dependence. The relationships which may give rise to such a presumption may be divided into two types:
(a)The relationship is one within a recognised or established class; or
(b)The relationship is otherwise proven to be one of dependence.
60․ The first type, being relationships falling within an established category historically recognised by the law, involves relationships where the authority or influence over the other is presumed. The recognised relationships include (non-exhaustively) parent and child, guardian and ward, solicitor and client, doctor and patient, religious adviser and adherent: Johnson at 119, 134.
61․ Dispositions from the latter (the weaker party) to the former (the stronger party) fall within the presumption because these are relationships where “you only have to look at the relative status of the parties in order to presume that the requisite degree of trust and confidence is there”: Goldsworthy at 401 per Nourse LJ. The recognised categories of relationship are marked by the characteristic that it is not natural to expect that one party would 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: Yerkey v Jones (1939) 63 CLR 649 at 675.
62․ Relevant to the appeal, parents’ dispositions to children are not an established relationship of influence where the presumption operates because the gift can be explicable as being the consequence of parental love and affection without any suspicion of confidence abused. The recognised category where influence is presumed applies only in one direction – where the child gives a gift to the parent – and it exists only for so long as the child is not emancipated, as to which, see Lamotte v Lamotte (1942) 42 SR (NSW) 99 at 103, referenced more recently in Hsia v Fazarri [2020] HCA 35; 270 CLR 588 at [74].
63․ The relationship between husband and wife (or wife and husband) similarly does not come within those established categories: Garcia v National Australia Bank Ltd (1998) 194 CLR 395 at [33]; Bank of Montreal v Stuart [1911] AC 120 (Bank of Montreal) at [137], relying on Nedby v Nedby (1852) 5 De G. & Sm. 377. In Bank of Montreal, the Privy Council explained at [137] (references omitted):
It is difficult to determine in any case the point at which the influence of one mind upon another amounts to undue influence. It is specially so in the case of husband and wife, for … “The relation constituted by marriage is of a nature which makes it as difficult to inquire, as it would be impolitic to permit inquiry, into all which may have passed in the intimate union of affections and interests which it is the paramount purpose of that connection to cherish.”
64․ In Saintclaire & Saintclaire [2015] FamCAFC 245 (Saintclaire) at [18], the Full Court of the Family Court of Australia adopted the following in Tulloch (deceased) v Braybon (No 2) [2010] NSWSC 650, (Tulloch) per Brereton J at [51] (emphases added):
A husband and a wife obviously are vis-a-vis each other in positions of trust and confidence and influence, but one does not ordinarily have over the other such authority as to make such relationships a presumed relationship of influence, nor (without more) a special relationship of influence. It is where the relationship is such that one party is seen or supposed to be in some way beholden, obliged, or disadvantaged in relation to the other, that such relationships are presumed or can be proved, and dominion or ascendancy is at least usually an important factor.
65․ Another way of putting that idea is that a husband/wife relationship is one where commonly each relies on the other to make many decisions for their benefit, either individually or collectively as a family unit. For example, in such relationships, one person may assume control of financial decision-making on a daily basis. Ordinarily, that fact does not, without more, create a special relationship of influence. Conversely, the fact that a person is in a spousal relationship does not ipso facto exclude the relationship from the application of the doctrine. There may be cases where a person in such a relationship is “in some way beholden, obliged, or disadvantaged” in relation to the other: Saintclaire at [18], citing Tulloch at [51]. However, the mere fact that one spouse may allow their affairs to be managed by the other for their personal convenience does not necessarily establish a relationship with the necessary ascendant quality.
66․ The second type of relationship which may give rise to the presumption, being those antecedent relationships falling outside an established class, was discussed in Goldsworthy, where Nourse LJ stated at 401 (emphasis added):
But there are many and various other relationships lacking a recognisable status to which the presumption has been held to apply. In all of these relationships, whether of the first kind or the second, the principle is the same. It is that the degree of trust and confidence is such that the party in whom it is reposed, either because he is or has become an adviser of the other or because he has been entrusted with the management of his affairs or everyday needs or for some other reason, is in a position to influence him into effecting the transaction of which complaint is later made. …in cases where functions of this sort constitute the substratum of the relationship, there is no need for any identity of subject matter between the advice which is given or the affairs which are managed on the one hand and the transaction of which complaint is made on the other. Nor, as will be shown, is it necessary for the party in whom the trust and confidence is reposed to dominate the other party in any sense in which that word is generally understood.
67․ The emphasised words are material for the relationship under consideration in the present appeal. What is required to demonstrate the position of ascendancy or power has already been discussed above by reference to Johnson at 119, 134-135.
68․ Three further points were made by Nourse LJ in Goldsworthy at 401 (emphasis added):
…First, it is not every relationship of trust and confidence to which the presumption applies. No generalisation is possible beyond the definition already attempted. 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. Thirdly, in a case where the presumption has come into operation the gift of transaction will be set aside, unless it is proved to have been the spontaneous act of the donor or grantor acting in circumstances which enable him to exercise an independent will and which justify the court in holding that the gift or transaction was the result of a free exercise of his will.
69․ The significance of the emphasised words is that there is a second requirement before the presumption will operate – not only must there be a relationship of ascendancy, but there must be a transaction so improvident as to not be “reasonably” accounted for on ordinary motives.
70․ A useful summary drawing the above principles together is provided in Quek at 11,764:
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…
Rebutting the presumption
71․ In Quek, McLelland J went on to deal with rebutting the presumption, stating at 11,765 (references omitted):
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…
72․ See also Johnson at 134-5; Watkins at 193, 195-6. Proof of the first element, without proof of the second, is insufficient to rebut the presumption: Schwanke v Alexakis; Camilleri v Alexakis [2024] NSWCA 118 at [189]-[190], adopting what was stated in Quek at 11,765 and citing Bridgewater at 475.
73․ Nor, in relation to the second element, is it necessarily sufficient to prove that the proposal to make the gift came from the donor, or that the donee took no active steps to procure the gift: Quek at 11,765.
74․ Determining whether the presumption has been rebutted is a factual question, requiring close examination of the particular circumstances of the case. The size of the gift, especially in this case, is important. In Watkins, Isaacs J stated at 193 (citations omitted, emphasis added):
The first thing to ascertain in such a case is the true character of the transaction impeached. Is it a gift to the “confidant” of importance? If so, the burden at once is cast on the confidant to satisfy the Court that the transaction was free from “undue influence” but was the free outcome of the donor’s uninfluenced will…
75․ See also Meagher, Gummow and Lehane’s Equity: Doctrines & Remedies [15-130 & 15-135], where the learned authors drew key factors relevant to rebutting the presumption from the authorities, such as whether the gift was improvident and whether a person received independent advice. The case of Watkins is an example of those considerations being determinative. Knox CJ, Gavan Duffy and Starke JJ, stated at 187-188:
…In the view which we take of the case it is sufficient to say that taking the evidence as a whole the conclusion is that during the year 1919 Mrs Reynolds was failing both physically and mentally. Probably her condition in both respects was variable, … assuming that she was competent to transact business, we have to consider whether, in view of the relation which existed between her and the defendants, this transfer or the gift of £100 should be allowed to stand. We have come to the conclusion that during her residence with the defendants … Mrs Reynolds’s mind was entirely under the dominion of the defendants, and that she was therefore, as they well knew, incapable of dealing with them on a footing of equality. A disposition of property by her to either of them, whether voluntary or for valuable consideration, made while this relation continued and without the benefit of independent advice, cannot stand.
76․ However, although independent advice is important, it is not necessarily essential to rebut the presumption: Haskew v Equity Trustees, Executors and Agency Co. Ltd (1919) 27 CLR 231 (Haskew) at 234-235. The evidence must be taken as a whole. In answering the ultimate question described in Haskew at 235 as: “was it really the act of the party comprehending what he did and the result of his or her own free will?” Isaacs J went on to say at 235:
… that the question of independent advice is a subsidiary question the answer to which frequently comes in to help to determine the ultimate issue in the case…
The relationship of ascendancy in the present case
77․ The relationship of ascendancy that was pleaded was Mr Wu’s dependence on Mrs Wu for all decisions about his assets and financial matters. Angela was alleged to have been the third-party recipient of the O’Malley property.
78․ On appeal, the parties were not entirely clear as to the case that was put at first instance and supplementary submissions were directed to that issue. Accordingly, it is necessary to deal with the way the case was pleaded and conducted at first instance. Two things appear to have contributed to the confusion. First, the trial at first instance was primarily focused on unconscionable conduct and the parties thus concentrated on the conduct of Angela, and whether she was the recipient of a gift, as well as what she knew or what control she exercised. Second, the pleaded allegation rolled up undue influence and unconscionable conduct, which meant that the distinctions between the two doctrines, and the different analysis of the same facts required, were not as readily apparent, at least to the trial judge and perhaps also to the parties themselves.
79․ However, as will be seen from what follows, the appellant’s case on undue influence was not only pleaded but conducted on the basis that the relationship of influence was that of the appellant and his wife, with the gift procured by the daughter a result of that undue influence.
The pleadings
80․ The Amended Statement of Claim pleaded the following (emphasis in original, underlining added):
Unconscionable conduct and undue influence
35. The Father signed the Transfer in or about July 2009 in the following circumstances:
(a) the Father was 85 years of age;
(b) the Father did not understand English;
(c) the Daughter knew that the Father did not understand English and the Daughter made no attempt to explain to the Father the meaning and effect of the Transfer;
(d) the Solicitor knew that the Father did not understand English and did not arrange for the Transfer to be translated to the Father;
(e) The Solicitor did not explain to the Father the meaning and effect of the Transfer;
(f) the Mother did not explain to the Father the meaning and effect of the transfer;
(g) the Father did not receive independent legal advice in relation to signing the Transfer;
(h) the Father did not understand the legal meaning and effect of the Transfer;
(i)the Father was dependent on the Mother for managing his assets and finances on his behalf;
(j) the Father had no significant assets other than his interest in the Property;
(k) the Father had another daughter (Karen) who, in addition to the Daughter was the natural object of the Father’s testamentary intention and bounty in the event of his death;
(l) the Father did not receive legal or financial advice as to how his future care and health needs were to be funded in the event that his interest in the Property was transferred to the Daughter and the Daughter failed to pay the Father adequate consideration for the Transfer;
(m) the Father did not receive legal advice in relation to how his right to continue to reside at the Property could be protected in the event that the Daughter no longer wished for him to reside at the Property;
(n) the Father did not receive legal advice in relation to how his right to continue to reside at the Property could be protected in the event that the Daughter granted a mortgage over the Property and a mortgagee sought to enforce its rights to possess and sell the Property pursuant to any such mortgage;
(o) the Solicitor had taken instructions from the Daughter in relation to the preparation of the Transfer;
(p)the interests of the Father and the Daughter under the Transfer were the interests of opposite parties to the transaction;
(q) there was a conflict between the Solicitor’s duty to the Daughter pursuant to the Daughter’s retainer and the Solicitor’s duty to the Father pursuant to the Implied Term and/or the Duty of Care;
(r) the Solicitor failed to advise the Father that there was a conflict between the Solicitor’s duty to protect the Father’s legal interests and his duty to protect the Daughter’s legal interests; and
(s) the Solicitor failed to advise the Father that he should seek separate legal advice in relation to the Transfer.
36.The Daughter knew, or should have known, that her Father signed the Transfer in the circumstances set out in paragraph 35 above.
…
40. Further or alternatively, the signing of the Transfer by the Father and its subsequent registration was procured by undue influence by the daughter.
81․ The particulars in (q) and (r) fell away on appeal following the findings of the primary judge that the solicitor was not acting for, and did not otherwise advise, the appellant: primary judgment at [218] and [222].
82․ The significance of the particulars underlined is that each aspect of the claim on undue influence was pleaded, namely a relationship of dependency, being the language used by Dixon J in Johnson at 134, and a transaction that was against the appellant’s interest and improvident in fact.
83․ It can be seen from the words emphasised in the pleading above that the relationship of dependency, or trust and confidence, expressly pleaded was that as between Mr and Mrs Wu. This was understood by the respondent, who expressly drew attention to the pleaded case in written submissions at first instance.
84․ In their supplementary submissions, the respondent drew attention to [40] of the pleading, set out above, and the words “procured by undue influence by the daughter”. However, that paragraph must be read with the particulars at [35], which particularised the undue influence claim. Those particulars pleaded a dependency on Mrs Wu, and did not plead the basis of a relationship of dependency on, or ascendancy of, the respondent. When the pleadings are read as a whole, it is clear that the appellant was alleging that the transfer and registration were procured by the respondent by undue influence (that is, obtained by the respondent in the circumstances of undue influence). Properly understood in its context, [40] of the pleading alleged that the signing of the Transfer by the appellant was procured by the respondent by, or as a result of, the undue influence of his wife.
The conduct of the case on undue influence
85․ That is how the case of influence was conducted, as seen from the issues, submissions and evidence. The basis was the relationship of ascendancy of Mrs Wu over Mr Wu’s decision-making with respect to the management of his assets and financial affairs.
86․ The parties prepared a joint list of issues document, which contained the following (emphasis added):
Unconscionable conduct and/or undue influence (First Defendant only)
4. If there was no Enforceable Agreement, whether the Plaintiff is entitled to have the 2009 transfer set aside, or alternatively to equitable damages against the First Defendant, on the basis of unconscionable conduct and/or undue influence engaged in by the First Defendant including:
a. whether or the extent to which the Plaintiff signed the transfer in the circumstances alleged in paragraph 35 of the Claim;
b. whether or the extent to which the First Defendant knew or ought to have known that the Plaintiff signed the transfer in the circumstances alleged in paragraph 35 of the Claim; and
c.subject to the answers to (a) and (b), whether the proven circumstances and the proven state of the First Defendant’s actual or imputed knowledge are sufficient to constitute unconscionable conduct and/or undue influence by the First Defendant.
87․ The respondent submitted (in supplementary submissions) that the words “engaged in by the First Defendant”, emphasised in item 4 above, meant that the case presented was on the basis of a relationship of the appellant’s dependence on the daughter. However, again, the issues document expressly incorporated “the circumstances” as being those “alleged in paragraph 35 of the Claim”, and it is very clear that the relationship of dependence relied upon was that between the appellant and his wife. The issues document then refers in (b) to whether the respondent knew of those circumstances to a sufficient level to constitute undue influence by her. The engagement by the respondent that was contemplated in the issues document was her actual or imputed knowledge of the circumstances in paragraph [35] of the Claim. Accordingly, contrary to the respondent’s submissions on appeal, the use of the words “engaged in by” the respondent did not place the respondent as being in a relationship of ascendancy over the appellant.
Written submissions at first instance
88․ The written submissions of the appellant at first instance confirm the dependent relationship that was in question was that of Mr Wu depending upon Mrs Wu. They contained the following (emphasis in original):
2.40 …Mr Wu was, however, resolute in his evidence that: “I always agreed with my wife because I don’t understand English”: T270.35-36. The evidence clearly demonstrates that this was a recurring aspect of Mr Wu’s decision making in relation to the family’s property and financial affairs especially when documentation in the English language was involved.
…
2.46Mr Wu could not recall the specific nature of any discussion which he had with his wife in relation to signing the Contract Schedule. He was however clear as to why he signed the Contract Schedule. He gave the following evidence at T231.17-21:
Mr Wu, it is your signature in the bottom left hand of the document, is it not? --- Right.
Do you remember signing the document? ---Probably so.
And your discussion about the document would have been with Mrs Wu. Is that right? --- My wife asked me to sign it. That’s why I sign it.
Do you remember any discussion about why you were signing? ---My wife asked me to sign it.
Do you remember any – can you tell us of any discussion that you had about why you were signing it? --- Can’t remember.
Are you able to remember whether there was any discussion about what it was that you were signing? ---I don’t know. [emphasis added].
2.47 There was no challenge to Mr Wu’s evidence that he signed the Contract Schedule because his wife asked him to do so. The Court should find that this is why he signed the document.
…
2.55 Mr Wu’s evidence, which should be accepted by the Court, is that in 2009 he relied on his wife for advice in relation to the O’Malley Property. In relation to documents in English concerning the family’s financial and property affairs, he did not ask his wife for an explanation. The Court should accept Mr Wu’s reason for this, namely: “there was no need because I trusted my wife”: T240.15-16.
89․ Later in the submissions, the appellant dealt with the unconscionable conduct and undue influence claims, which were again addressed together (emphasis in original):
Part B: Unconscionable conduct and/or undue influence
6.Fourth Issue – whether the plaintiff is entitled to relief based on unconscionable conduct and/or undue influence
90․ The appellant’s submissions at first instance referred to a number of applicable legal principles, including cases which have already discussed above, such as Thorne, Stubbings v Jams 2 Pty Ltd [2022] HCA 6; 96 ALJR 271 (Stubbings), and Jenyns. Among the submissions made were the following:
6.12 The doctrine of undue influence can be engaged where the influence is exerted by a third party to the impugned transaction or by a party which does not directly benefit from the impugned transaction. …
6.13…Where, however, undue influence is alleged by a third party to the impugned transaction, it is necessary to show that the party against whom relief is sought “knew or ought to have known” of the undue influence: Barbaro v Millington [2007] ACTCA 1 at [70].
91․ Barbaro v Millington [2007] ACTCA 1 was a case that concerned enforcement of a guarantee, not a gift. In such cases (where the transaction involves consideration provided by the third party), the necessity to prove knowledge is an additional consideration. The reference to that principle before the primary judge was understandable, when it is recalled that the appellant’s primary case at first instance was the O’Malley property was not a gift, and that a debt was owed in respect of the transfer. However, knowing receipt was not a matter that was necessary to establish if the primary judge found that the O’Malley property was a gift, putting Angela in the position of a volunteer. On appeal, and with knowledge of the primary judge’s finding in that regard, the appellant adopted in supplementary submissions the same position with regard to volunteers as that discussed earlier in these reasons as part of the discussion of the applicable principles. The respondent initially submitted that the respondent took as volunteer, but then withdrew the submission and indicated that she would like the opportunity to put on further evidence that she believes is relevant to that issue. The finding that the transfer was a gift was Angela’s case at first instance and was not challenged on appeal.The parties have not yet had an opportunity to engage on the question of how such evidence may now be led, but in light of the findings on this appeal, that matter may be addressed at the appropriate time.
92․ The reference in the appellant’s written submissions, set out above, to the position regarding third parties is also significant as it again makes clear that this was a case involving third parties, namely the case being pursued by the appellant involved Mrs Wu’s influence over her husband to benefit the respondent. The words used are “where the influence is exerted by a third party to the impugned transaction or by a party which does not directly benefit from the impugned transaction”. This legal principle can only be understood as a reference to Mrs Wu, as Angela directly benefited from the impugned transaction, which squarely contradicts the respondent’s supplementary submission that it was “inconceivable” the appellant was running such a case.
93․ Returning to the appellant’s submissions at first instance, the argument then dealt with unconscionable conduct, special disadvantage and Angela’s knowledge of the special disadvantage. As part of that discussion, the appellant submitted (emphasis in original):
6.16 When Mr Wu signed the 2009 O’Malley Transfer:
(a) He was unable to read the document …
(b) He did not have a sufficient commend of spoken English to converse with Mr Perkins (or any other solicitor) in relation to the 2009 O’Malley Transfer. He was dependent on his wife when there was a need for English to be spoken in a professional or business context. His wife spoke with the customers and buying agents in English when they were operating the business in Taiwan… . It was she who dealt with the real estate agents for the purpose of locating property … . Mrs Wu dealt with CBRE for the purpose of obtaining a valuation report. … Mrs Wu spoke for Mr Wu when he attended medical appointments … . Mrs Wu dealt with Land Titles Office for the purpose of registering documents … . Mr Wu was in no position to seek an explanation of the 2009 O’Malley Transfer from a solicitor of financial adviser without assistance.
(c) The true effect of the document was not explained to him. …
(d) He did not have the benefit of independent legal advice. …
(e) …
(f) …
(g) [Mr Wu’s] reliance on, and tendency to fall in with the wishes of, Mrs Wu prevented Mr Wu from making a judgment as to his own best interests. By 2009, at the age of 85 years, Mr Wu was well and truly entrenched in a decades’ habit of falling in with the wishes of his wife in relation to any aspect of the family’s property and financial affairs which required speaking or reading English. It was Mrs Wu who had dealt with the customers and buying agents in Taiwan … . It was Mrs Wu who made the decision for the family to migrate to Australia … . It was Mrs Wu who decided that the family should live in Farrer … . …Mr Wu fell in with Mrs Wu’s decisions in relation to the acquisition of investment properties in Sutton … . It was Mrs Wu who found the house in O’Malley for the family to live in … . Mr Wu left it to Mrs Wu to lodge documents for registration of property interests affecting him … . There may have been some discussion between Mr and Mrs Wu about these things. But the critical point is that there was never any disagreement from Mr Wu in relation to Mrs Wu’s wishes. The reason why there was never any disagreement from Mr Wu was stated plainly and simply by Mr Wu in his own words in cross-examination: “I always agreed with my wife because I don’t understand English”: T270.35-36.
94․ To the extent that undue influence was addressed separately, it was dealt with in two paragraphs (emphasis added):
Undue influence
6.30Many of the considerations relevant to whether the 2009 O’Malley Transfer was procured by unconscionable conduct are also relevant to whether the transaction was procured by undue influence. The critical question in relation to undue influence is whether Mr Wu’s assent to the transaction reflected his “independent and voluntary” will … . Mr Wu signed the 2009 O’Malley Transfer not knowing that it stated a false position, ie, that it stated consideration was to be paid when there was no intention for the payment of consideration. Angela was complicit in this situation coming about. She authorised Mr Perkins to sign the 2009 O’Malley Transfer in the knowledge that it stated a false position. In these circumstances, it cannot be said that Mr Wu gave any real or meaningful assent to the 2009 O’Malley Transfer.
6.31 For the above reasons, the Court should conclude that the 2009 O’Malley Transfer was procured by unconscionable conduct and/or undue influence.
95․ In supplementary submissions on the appeal, the respondent argued that she proceeded on the basis that the case on undue influence, as presented, related to Angela’s influence, notwithstanding that there was some appreciation that the circumstances pleaded referred to Mr Wu’s “dependence” on Mrs Wu and that the evidence led in support of the case was of Mr Wu acting at the direction of Mrs Wu. The respondent below argued (emphasis added, references omitted):
90. Unconscionability. For the reasons set out [earlier in the respondent’s submissions], it is questionable whether Mr Wu’s limited English and “dependence” on Mrs Wu, in the circumstances, are capable of amounting to a special disability within the terms of Amadio. Regardless, the plaintiff has adduced no evidence whatsoever of any attempt by Angela to “unconscientiously exploit” those characteristics in relation to the Transfer.
91. Undue influence. Likewise, the plaintiff has adduced no evidence to suggest that Angela had any influence at all on Mr Wu in relation to his participation in the Transfer. Mr Wu’s case is that he participated in the Transfer at the direction of Mrs Wu.
92. The plaintiff’s equitable actions in the alternative are no more than conjecture. It is not enough for the plaintiffs to prove that the facts might be “consistent with” a hypothesis of unconscionable conduct and/or undue influence. What must be shown is that the facts are inconsistent with any other hypothesis. The evidence adduced by the plaintiff falls well short of that threshold and does not call for any response from the first defendant.
96․ As stated at the outset of these reasons and seen from the above submissions, there does appear to have been a degree of confusion which may have affected the way in which the primary judge dealt with undue influence. However, that does not mean that the case on undue influence based on a relationship of dependency on Mrs Wu was not run.
Oral argument
97․ Finally, in closing oral argument, relevant to the way the undue influence case was conducted, the appellant’s counsel submitted (emphasis added):
Your Honour, this is set out at length in my submissions. I am going to state this reasonably quickly in terms of the key circumstances that go to Mr Wu’s special disadvantage. It is clear, your Honour, from the authorities that this is a multifactorial, nuanced assessment. There is one thing that the authorities are clear about: your Honour has to have regard to all of the circumstances. …Mr Wu could not read English …
Mr Wu did not have independent legal advice …Mr Wu was in his eighties … Mr Wu had no other significant assets in 2009 …
Mr Wu was dependent on Mrs Wu in relation to decisions concerning the family’s property and financial matters. …
It was Mrs Wu who told Angela that the O’Malley property would be transferred to her. Mr Wu never told Angela, Angela never made enquiries to ascertain whether Mr Wu intended that. She knew she had no need to, your Honour, because she knew that her mother was the moving party in relation to the family’s properties and finances. So your Honour, in relation to all of those circumstances which I say place Mr Wu at a special disadvantage in that he was not in a position to make a judgment as to his own best interests, …
98․ The appellant’s counsel later took the Court to Aboody v Ryan [2012] NSWCA 395 (Aboody) at [75], drawing the court’s attention to the shifting onus on a defendant where a relationship of special disadvantage (or ascendancy in the case of undue influence) was established. Again, undue influence was briefly addressed at the conclusion of the argument, but there was no doubt about the relationship of ascendancy that was relied upon (emphasis added):
…Your Honour, in relation to undue influence, as I say in my primary submissions, a lot of the factors which inform whether the transaction was unconscionable also go to the question of undue influence. So here I can be relatively brief. It clearly calls for an evaluative judgment, your Honour. The real question here is: was the transfer the product of Mr Wu’s independent and voluntary will?
Unlike duress I don’t need to establish there was illegitimate or improper pressure. Your Honour heard Mr Wu’s evidence. Your Honour, he was clearly dependent on Mrs Wu when it came to decisions effecting the family’s property and finances. It was a dependence and a trust that had built up over decades. And, your Honour, in my respectful submission, you cannot reconcile his evidence with this being an independent and voluntary will.
Much is made in certainly the second defendant’s submissions – in fact, both [defendants’] submissions – that somehow there had to be some deception or trickery on the part of Mrs Wu. That’s not Mr Wu’s case at all, your Honour. They had been together for decades. It comes to a point, your Honour where life intersects with the law. … The Court knows that human relationships are complex things.
Mrs Wu had her reasons for what she did. Your Honour doesn’t have to go there. She’s taken those reasons with her to the grave, but if she had formed an assessment that it was in the family’s interest for the property to be transferred, and if she knew that Mr Wu would fall in line with what she intended to happen, there are other characterisations of that that are far more plausible than deception or trickery. It’s just how their relationship operated. But ultimately the question in terms of equitable relief: was Mr Wu in a position to make a decision in his best interest? When your Honour has regard to all of the factors which I have identified the answer has to be that he was not.
99․ The significance of the emphasised passages is that:
(a)the relationship of trust and confidence or dependence relied upon was that of the appellant’s wife over the appellant;
(b)the relationship affected the quality of the appellant’s decisions (or his consent) concerning the family’s property and finances to the extent that they were not the product of his free and voluntary will; and
(c)the appellant was not submitting that there was active concealment or moral turpitude on the part of the wife.
100․ The primary judge then confirmed with counsel for the appellant whether the equitable claims would still succeed if it was found that Mr Wu intended to gift the property to Angela. Counsel for the appellant confirmed that the fact that a person may intend to gift the property did not exclude equitable relief. Counsel referred to Thorne and Aboody and then submitted “…your Honour has to look at the circumstances that procured his intention, if your Honour does find that, to gift the property.”
101․ Given the pleading and the issues document, the reference to circumstances can only have been to those at [35] of the Amended Statement of Claim, including the deferential relationship pleaded, the gift not being in the appellant’s interests, the lack of any other significant assets and the lack of independent legal advice.
102․ Tracing that history through has been necessary because the respondent submitted that references to dependency on the wife were “isolated instances and single sentences” taken out of context, from which this Court on appeal could not draw any conclusions. The respondent also argued that the trial judge was “in the singularly best position” to understand the references to Mr Wu’s dependency on Mrs Wu within the overall case that was run, relying on the oft-cited passage from Fox v Percy (2003) 214 CLR 118 at [23] concerning the advantages the trial judge has in the evaluation of witness credibility and the “feeling” of a case, and what conclusions to draw from the evidence. However, the trial judge enjoys no such advantage in terms of the legal argument and analysis of the case that was conducted. That is readily ascertainable on rehearing from reviewing the pleadings, the oral and written arguments and the transcript in its entirety, all of which were before the Court on appeal.
Conclusion on Issue 1
103․ As the above demonstrates, the appellant’s case on undue influence was consistently put in terms of a relationship of dependence by the appellant on his wife, even if the respondent, for whatever reason, viewed the case differently and now submits she made forensic decisions according to that view.
104․ When properly analysed, the undue influence claim that was both pleaded and pursued was that the appellant was entirely dependent on his wife for managing his assets and finances on his behalf, that the decision-making process in respect of the O’Malley property was part of that deference, that the gift was made without the benefit of legal advice, was immoderate and improvident in the circumstances at the time, and that Angela was the beneficiary (knowing or otherwise) of the gift.
105․ As seen from the primary judge’s reasons set out above, there was an error in the analysis of the undue influence claim. Further, because the reasoning at first instance does not disclose the principles applied to the analysis, the Court is unable to otherwise find that any factual finding relevant to the appellant’s dependence on his wife (such as that at [164] of the primary judgment) was a product of the correct application of principle insofar as it related to undue influence.
106․ Error is thus established on Issue 1.
Issue 2: Is relief available on the basis of Unconscionable Conduct?
107․ The appellant argued that the primary judge erred in failing to find that the appellant was under a special disadvantage.
108․ The applicable principles were set out by the High Court in Amadio at 459-460, 461, 474 and Stubbings at [39]. A finding of unconscionable conduct requires three elements to be established:
1․ A relationship that places one party at a “special disadvantage” vis-à-vis the other;
2․ Knowledge of that special disadvantage by the stronger party; and
3․ Unconscientious exploitation by the stronger party of the weaker party’s disadvantage.
109․ The High Court in Stubbings went on to say at [39] that the above considerations should not be understood “as if they were to be addressed separately as if they were separate elements of a cause of action in tort”, citing the passage from Jenyns set out above at [52] of these reasons, as to a precise examination of the facts and scrutiny of the exact relationship being required, before stating at [40] (references omitted):
Special disadvantage
40.In this field of discourse, “special disadvantage” means something that “seriously affects the ability of the innocent party to make a judgment as to his [or her] own best interests”. While the factors relevant to an assessment of special disadvantage have not been exhaustively listed, Fullagar J in Blomley v Ryan considered that special disadvantage may be inferred from “poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary”. No particular factor is decisive, and it is usually a combination of circumstances that establishes an entitlement to equitable relief.
110․ The primary judge referred to that principle at [158] of the primary judgment, before going on to state (emphasis added, italics in original):
161.Counsel for the plaintiff submitted that a number of matters in combination would lead to the Court concluding that the plaintiff was suffering from a special disadvantage. In particular, the plaintiff’s reliance on his wife, lack of English knowledge and lack of access to independent advice at the time of the transfer combined to lead to a special disadvantage.
162. These submissions run counter, however, to my earlier findings.
163.In particular, I am satisfied that, as outlined in the plaintiff’s own evidence, Mr and Mrs Wu made joint decisions regarding their property. I am certainly not satisfied that Mrs Wu dictated the family’s property and financial choices as submitted by counsel for the plaintiff. That suggestion, is, in my view, inconsistent with the clear evidence of the plaintiff that he and his wife worked together, including when running what was, when viewed objectively, a successful business.
164.While I accept that the plaintiff’s evidence was that his wife’s English language skills were superior to his and that, accordingly, Mr Wu may have relied upon his wife to translate documents and explain some matters to him, this does not in my view extend to the level of reliance advanced by counsel for the plaintiff. Further, reliance on Mrs Wu to explain some aspects of certain documents where those documents are in English would not, in my view, be sufficient to find special disadvantage in circumstances where Mr and Mrs Wu made joint decisions concerning their property.
165.Having made that finding also disposes of the other arguments. To the extent that the plaintiff could not understand the relevant document he was signing (and on that matter I refer to my earlier finding that he could, on the balance of probabilities, understand the key aspects of the document), Mrs Wu was present with him at the time of transfer. As explained above, I have already indicated why I am not satisfied to the requisite standard that Mrs Wu would have concealed significant matters from Mr Wu. It follows, that Mrs Wu was present to explain the effect of the relevant document that Mr Wu was signing to him.
166.Further, and in the alternative, I am also satisfied, for the reasons explained above, that the transfer document was a relatively simple document. I accept counsel for the first defendant’s submission that this was not an example of a complicated financial instrument where the need for all terms to be explained was clear. This is also not an example, as in Amadio, where there is evidence that the contents of the document signed by Mr Wu were misrepresented to him by a person whom he trusted.
…
169.This then leaves me in the position where Mr Wu was around 85 years old at the time of the transfer. In my view, that alone is not sufficient to establish that Mr Wu was unable to determine what was in his own interest at the relevant time. In my view, to the contrary, it is clear that Mr Wu was capable at least in 2009 of making decisions in his own interest. While, perhaps with hindsight Mr Wu would now not have made the same decision (as noted from his evidence in cross-examination) that is not the relevant test.
170.I am further not satisfied that Ms Angela Wu who was living overseas at the relevant time would have been aware of the special disadvantage. In particular, I am not satisfied that Ms Angela Wu would have thought that Mr Wu was under any special disadvantage in circumstances where Mrs Wu was present to explain any matters to him that he did not understand.
171.In the result, in my view, the transfer cannot be set aside on the basis of unconscionable conduct.
111․ The appellant’s complaint was that the primary judge misdirected herself in characterising the issue as whether Mrs Wu dictated the family’s property and financial choices, and that her Honour further erred in finding that there was no special disadvantage because Mr and Mrs Wu made joint decisions.
112․ The appellant argued that the critical question was whether the appellant always made joint decisions which accorded with the wishes of Mrs Wu because of a strong emotional dependence or attachment, relying on the following passage from Bridgewater at [115] (references omitted):
The position of disadvantage which renders one party subject to exploitation by another such that the benefit of an improvident disposition by the disadvantaged party may not in good conscience be retained may stem from a strong emotional dependence or attachment. Louth v Diprose was such a case. In his judgment in the South Australian Full Court, a decision which was upheld in this court, Jacobs ACJ said:
It is an oversimplification to say that because the respondent acted as he did with his eyes open, and with a full understanding of what he was doing, he was not in a position of disadvantage, and therefore not the victim of unconscionable conduct.
113․ In the preceding paragraph at [114], the majority (Gaudron, Gummow and Kirby JJ) suggested that one manifestation of vulnerability in the above sense is where there is a tendency of a person to “fall in with the wishes” of another person because of the closeness of the relationship between them.
114․ Critically, the appellant contended that the failure was one in the analysis, in that having found that the appellant and Mrs Wu made joint decisions, the primary judge saw that as the end point, and did not proceed to look at every connected circumstances to determine why the appellant fell in with Mrs Wu’s wishes in respect of the transaction in question, and whether that was indicative of vulnerability or special disadvantage.
115․ There is force in the appellant’s complaint. The primary judge’s reasoning treated the joint decision-making between Mr and Mrs Wu as something that countered vulnerability, rather than as a matter that itself called for scrutiny as being potentially an indicative factor of special disadvantage. The primary judge did not address the appellant’s clear and unchallenged evidence as to why the appellant jointly made the decision in respect of the gift in this aspect of the reasoning at all, namely that his wife told him to do it, so he agreed. The further analysis of what led the appellant to that position being adopted as a matter of course (whether there was strong emotional attachment, lack of language and inexperience with formal documents in English, age and so forth) is also absent.
116․ The respondent argued that the words “special disadvantage” do not appear in the pleading. However, a party is not required to use the words of the legal test in a pleading that expressly alleges unconscionable conduct and the facts giving rise to special disadvantage were clearly set out at [35] of the Amended Statement of Claim (see [80] above of these reasons).
117․ The respondent further contended that the submission concerning the appellant’s dependence on his wife in respect of financial decisions was not pleaded. That submission cannot be accepted in light of the detailed discussion of the case pleaded and conducted above.
118․ The respondent relied on the primary judge’s finding at [164] as being correct. The difficulty with that finding has already been addressed.
119․ The respondent argued that there was no need for the appellant to obtain professional advice because the transaction was one that he understood with the assistance of his wife (primary judgment at [165], [166] and [170]). She contended that there was nothing of any particular legal complexity which needed explaining.
120․ That submission misunderstands the circumstances that give rise to the need to obtain professional independent advice. The advice that was required was whether it was in the appellant’s own interests – in this case separate from the interest of his wife – to gift unconditionally his only significant asset to his daughter and the risks or consequences for him if he did so, explained to him by someone who was not the person to whom Mr Wu had any attachment. The respondent’s argument entirely overlooks the importance of the person explaining the effect and consequences of the transaction being both a qualified professional and independent, as do the reasons of the primary judge.
121․ Accordingly, error with regard to the finding that there was no special disadvantage has been established.
122․ The remaining two aspects of the doctrine are concerned with knowledge and exploitation of that disadvantage. What constitutes knowledge and whether it imports constructive knowledge was discussed in Stubbings at [44]-[45] (references omitted):
44.The primary judge found that Mr Jeruzalski “should have known” that the appellant was bound to lose his equity in the Narre Warren properties. It may be accepted that his Honour's findings as to Mr Jeruzalski's state of mind did not rise to an unequivocal finding of actual knowledge on the part of Mr Jeruzalski that the appellant would inevitably lose his equity in his properties by taking these loans; but a finding in such terms was not essential to the appellant's case for relief. For a court of equity, the question is whether Mr Jeruzalski's appreciation of the appellant's special disadvantage was such as to amount to an exploitation of that disadvantage.
45.In Kakavas, this Court approved of the emphasis laid by Mason J in Amadio on the point that:
"the disabling condition or circumstance is one which seriously affects the ability of the innocent party to make a judgment as to his [or her] own best interests, when the other party knows or ought to know of the existence of that condition or circumstance and of its effect on the innocent party."
123․ The primary judge made no findings on these aspects. However, in circumstances where there are further factual findings required to be made on other issues on appeal and the potential for further evidence to be led, we will refrain from expressing any view at this stage about whether the alternative claim in equity should have separately succeeded.
Issue 3: Did the primary judge err in finding the defence of laches applied?
124․ For the defence of laches to apply, what must be established is that through the plaintiff’s inaction, the defendant or a third party has been placed in a situation in which it would be inequitable and unreasonable to place him if the remedy were afterwards to be asserted: Lindsay Petroleum Company v Hurd (1873-74) LR 5 PC 221 (Lindsay) at 239-241. In Lindsay, Lord Selborne LC, delivering the judgment of the Privy Council, explaining the doctrine at 239-241 as follows:
Now the doctrine of laches in Courts of Equity is not an arbitrary or technical doctrine. Where it would be practically unjust to give a remedy, either because the party has, by his conduct, done that which might fairly be regarded as equivalent to a waiver of it, or whereby his conduct and neglect he has, though perhaps not waiving that remedy, yet put the other party in a situation in which it would not be reasonable to place him if the remedy were afterwards to be asserted, in either of these cases, lapse of time and delay are most material. ... Two circumstances, always important in such cases, are, the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy.
... In order that the remedy should be lost by laches or delay, it is, if not universally at all events ordinarily ... necessary that there should be sufficient knowledge of the facts constituting the title to relief.
125․ The laches asserted in the present case was delay with prejudice to others. Following Lindsay, in making its determination, the court considers the length of the delay and the nature of the acts done during the interval, with a view to determining whether it would be unjust in all the circumstances to grant the relief sought.
126․ The primary judge’s reasoning with regard to this defence is set out at [187]-[202] of the primary judgment. Her Honour’s findings were based on a delay in commencing proceedings, taking August 2009 as the relevant date by which to assess the delay: primary judgment at [196]. That date was selected by her Honour because it was the date from which her Honour found the appellant was aware that the O’Malley property had been transferred to Angela and that he had not received any consideration for that transfer: primary judgment at [195].
127․ There are two difficulties with the reasoning at first instance. First, as explained above at [46] as part of the discussion concerning the applicable principles in cases of undue influence, the fact that a person may intend to voluntarily make a gift does not detract from the operation of the principle of undue influence. The reasoning given by the primary judge reflects a misapprehension of the undue influence case as solely involving concealment or a lack of knowledge, which in turn affected the analysis of the laches defence pleaded in answer to it as being referable to the point at which her Honour had found the respondent had knowledge that the transaction was a gift.
128․ Secondly, as submitted by the appellant, the primary judge did not appreciate that the doctrine of laches operates differently from a statutory limitation period, where the focus is upon time commencing to run from the date when the cause of action arises. In considering a defence of laches, there is a difference between the reasonable time for doing that which is in question (pursuing the right in equity), and the point beyond that, which is delay in the true sense. This was helpfully explained by Mahoney JA (with whom Meagher and Handley JJA agreed) in Nowell v Palmer (1993) 32 NSWLR 574 at 580 (references omitted):
In assessing delay, for this and other purposes in the law, it is important to understand what is the true meaning of delay. Delay is the period of time beyond that within which, in ordinary expectation, the act in question should have been done. In quantifying delay it is necessary to determine what time is ordinarily to be allowed for the doing of that which is in question. It is only the time beyond this which, in the strict sense, represents delay.
129․ In the present case, while any consideration of laches proceeds on the basis of the finding that the appellant knew he had gifted the O’Malley property to Angela in 2009, in the case of undue influence, the relevant date from which to assess the reasonableness of the time elapsed is the time after the removal of any influence under which the gift or benefit was made: Allcard at 187.
130․ In light of the fact that the equitable claims will need to be reconsidered and any consequent operation of the defence will depend on the facts found, it is unnecessary to go further than to find that the primary judge also erred as a matter of legal principle in respect of the respondent’s equitable defence insofar as it was a defence to the undue influence claim.
Relief consequent upon the findings on appeal
131․ In the event the appellant succeeded on appeal, as stated, he did not seek remittal. He sought that this Court determine the appeal in his favour by way of declaratory relief and in setting aside the transfer of the O’Malley property. The respondent submitted that she had made forensic decisions based on her understanding of the case presented on undue influence, a position which this Court has found to have been mistaken. By application filed in the appeal on 5 July 2024, she seeks leave to adduce evidence, through an affidavit prepared by her solicitor, to say that she would have given evidence at the hearing. The appellant has objected to the application to read the solicitor’s affidavit.
132․ The question of any remittal at this stage of the proceeding may be unattractive to the parties for a number of reasons, including most obviously the age of the appellant.
133․ The parties will therefore be given an opportunity to consider these reasons and to confer, to determine whether remittal is now sought (including whether it is appropriate for any remittal to be to the primary judge or a different judicial officer) or whether they instead seek for this Court to draw any factual conclusions as part of the task on rehearing. The arguments on the application in proceeding may be shaped by whether the proceeding is remitted or alternatively, determined by this Court, or some other resolution reached between the parties. The application should therefore await further orders.
Costs
134․The appellant has succeeded on each of the three substantive grounds of complaint. However, the costs of the appeal and the hearing at first instance are properly left for determination once the ultimate outcome is known.
Orders
135․For the above reasons, the orders of the Court are as follows:
1.Within 7 days of these orders being made, the parties are to provide agreed or competing short minutes of order giving effect to these reasons, including proposed orders for the further conduct of the proceedings, dealing with the question of remittal or final disposition.
| I certify that the preceding one hundred and thirty-five [135] numbered paragraphs are a true copy of the Reasons for Judgment of the Court. Associate: Date: |
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