However, in some cases, undue influence may be reasonably inferred from the circumstances surrounding the making of a will, as suspicion alone is insufficient; the equitable doctrine of undue influence is engaged in cases where

‘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 [or her] part’

Johnson v Buttress (1936) 56 CLR 113, 134-135 per Dixon J

In Quek v Beggs (1990) 5 BPR McClelland J stated the circumstances that must be proved if a presumption of undue influence is to arise:

(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 grounds of friendship, relationship, charity or other ordinary motives on which ordinary persons act…

In order to rebut the presumption, it must be proved that

“the gift was the independent and well-understood act of a man [or woman] in a position to exercise free judgment based on information as full as that of the donee”

Johnson v Buttress (1936) 56 CLR 113 at 134 per Dixon J

In most cases producing evidence that the person subject to the influence received independent advice before entering into the transaction is the most common way to rebut the presumption.

Background

The plaintiffs in Tong v Tong [2023] ACTSC 163 are the deceased’s surviving wife Suqin Zhu Tong, (the fifth plaintiff) and their four children (the first to fourth plaintiff) The Deceased was also survived by his mother, Khanh Thi Ha and his five siblings. Two of those siblings, Mr Duc Khai Tong (the executor and second defendant) and Ms Le Ngoc Tong, ( the third defendant) are defendants in the proceeding.

The deceased died in 2019. The administration of his estate involved disputes about:

• the existence of equitable undue influence (to determine the size of the estate),
• family provision (to determine the beneficiaries),

• the removal of the executor and

• control of a testamentary trust set up for the children of the deceased.

In the months before his death, with the knowledge that his illness was in its advanced stages, the deceased settled his affairs by:

• settling the mortgages over properties held by himself and the defendants which significantly diminished the value of the Estate,

• establishing a trust fund for his children, and

• writing a will.

The executor submitted that he was unaware of the gift when it was initially transferred to his bank account and that he transferred the money back before it was ultimately given to him a second time by the deceased paying him by bank cheque.

Discharging Mortgages

On 15 April 2019, the deceased received an advance death benefit of $1,027,804.33 ( death benefit); following receipt of that money, the deceased paid out a housing loan of $285,000 for a property he owned in Kambah ( the Kambah property) in which his mother lived. Once the mortgage was discharged the title to the kambah property was transferred to the third defendant and registered on 13 May 2019.

On 16 April 2019, the deceased transferred $360,000 to the executor. Over April and May 2019, the deceased transferred amounts totalling $312,000 to the third defendant; roughly the amount owing on the defendant’s home loans; including a mortgage on the family property the deceased had purchased in Richardson in 2005 (the Richardson property), that he and the plaintiffs had lived in, and in which the plaintiffs still live.

The third defendant had taken over the title of the Richardson property from the deceased in January 2008, borrowing $285,000 and using savings to pay the balance of the purchase price and stamp duty ($350,000).

The deceased and his wife had then paid weekly payments to the third defendant. There is a dispute over whether those payments made were rental payments or were more like payments of the loan and mortgage for what both the deceased and his wife viewed as their family home.

The family trust

On 10 May 2019, the deceased executed a deed which created the Tong Family Trust (Trust) naming the corporate defendant in this proceeding, Fortitude Investment Group (Fortitude), as Trustee of the Tong Family Trust. The executor and the third defendant are the directors and shareholders of Fortitude.

Following receipt of the death benefit the deceased drew bank cheques (on 20 and 22 May 2019) in favour of Fortitude totalling $225,000 that were cashed after he died and now form part of the assets of the Trust.

The Will

Less than a week before he died, the deceased made a will dated 12 June 2019 (the Will). The terms of the Will made further gifts of $70,000 each to the second and and third defendants and $30,000 to his mother, Khanh. The deceased’s superannuation benefit was left to the fifth plaintiff.

The residue of the deceased estate was then to be transferred to the Trust, to be invested for the benefit of the deceased children’s education, health and well-being until the youngest surviving child reached 24 years of age.

There was a further provision in the Will that when each surviving child reached 24 years of age, they were able to choose to take the whole of their equal share as a lump sum payment, and cease being a beneficiary of the Trust.

Probate was granted to the executor on 15 November 2019; the net value of the Estate, excluding the Kambah and Richardson properties, was approximately $340,000.

Undue Influence

The Court held that the deceased may have fully intended and desired the transaction without receiving any encouragement or request from the executor, yet still, the doctrine of undue influence will intervene if the circumstances are insufficient to establish the requisite degree of independence and informed decision-making by the deceased.

‘His entire estate was only worth $340,000 after liabilities were discharged. That is, at the time of the gift to [the executor], [the deceased] had created circumstances where he was only leaving his young children around $170,000. The context to the gift thus includes a 49-year-old dying man leaving his four school-aged children collectively with half the amount of the gift given to his brother’

Tong v Tong [2023] ACTSC 163 at [190]

The Court held that it was critical in this case that the deceased had not received any independent financial or legal advice at any time before making the gift.

The deceased may have trusted the executor more and not wanted to spend money on such advisers, but the reason why he did not get advice is immaterial. He did not have any independent advice, let alone any appreciation that he understood what he was doing.

A presumption of undue influence thereby arose:

‘[ the deceased] may have fully intended and desired the transaction without receiving any encouragement or request from [ the executor], yet still the doctrine of undue influence will intervene if the circumstances are insufficient to establish the requisite degree of independence and informed decision-making by the donor. [The deceased’s] gift was clearly made out of love and deep gratitude and in that regard it was voluntary. However, it has not been shown to be free, in the sense that it was not an independent and well-understood choice’

Tong v Tong [2023] ACTSC 163 at [193]

The evidence before the Court was insufficient to rebut the presumption.

The decision

Having regard to circumstances at the time the gift was made, the value of the gift was so substantial and the transaction so improvident as to be inexplicable on the grounds of the ordinary motives on which ordinary persons act.

The Court found that in his attempt to be generous to his brother, it was an improvident thing for the deceased to pay off his brother’s mortgage, giving the executor significantly more in a single payment than he was leaving to his four young children combined; money upon which they needed following their father’s death.

The Court ordered

• the gift be set aside and repaid to the estate.
• family provision for the wife and children
• The third defendant was ordered to transfer the title to the Richardson property free of any encumbrance as to 50% for the fifth plaintiff and the remaining 50% to the ACT Public Trustee and Guardian to be held on trust for the first to fourth plaintiffs.