Ip v Chiang [2021] NSWSC 822, Lindsay J

By Karen Gaston
Posted March 20, 2022


The Testator died on 23 August 2017, aged 84 years.

His wife of over 20 years passed away in June 2012.  At the time of her death, they were both the registered proprietors of a valuable property at Redfern (the Redfern Property).  Following her death, the deceased was entitled to become the sole registered proprietor of the Redfern Property.

He had one son, Wing Tong Ip. Wing Tong Ip’s paternity was disputed by the deceased’s third wife but this was the subject of other proceedings.

The deceased was poorly educated and spoke only in a particular Cantonese dialect.

On 3 September 2013, he went through a ceremony of marriage with a much younger woman, Ms Chiang.  Ms Chiang spoke Mandarin and the wedding ceremony was conducted in Mandarin.  She was 67 at the date of the deceased’s death and 64 when they married.

Also on 3 September 2013, the Notice of Death relating to the death of the deceased’s wife was prepared by Ms Chiang and lodged for registration by her.  The attendance at the Titles Office occurred immediately after the wedding.

On 9 September 2013, the deceased signed a transfer for one half of the Redfern Property to Ms Chiang.  A conveyancer had previously explained that there would be no stamp duty on a transfer between spouses.

The conveyancer purported to act for both the deceased and Ms Chiang, in relation to the transfer of the Redfern Property.

Shortly after the marriage, Ms Chiang travelled back to Taiwan and was absent for much of the marriage.

Ms Chiang’s evidence was that these absences caused the deceased to turn to Ms Guo, for companionship.  Ms Guo was Ms Chiang’s ex-mother-in-law.

By mid-2015 the deceased’s health and cognition were such that he required nursing home care.

Ms Chiang separated from the deceased, and they divorced on 23 October 2015.  The deceased and Ms Chiang saw Ms Ying Zhang who appeared to act for both parties.

A Binding Financial Agreement was entered into on 6 July 2015.  The effect of the BFA was to give Ms Chiang the second half of the Redfern Property.

On 26 April 2016, Ms Guo and the deceased purported to marry.

On 26 May 2016, NCAT made orders for the protective management of the deceased’s estate on a temporary basis, and they were made final on 26 August 2016.

As to the Redfern Property, shortly after it was transferred to her, Ms Chiang leased the property to her ex-husband (whose mother was to become the deceased’s third wife), took out a mortgage ($150,000) over the property and used it to gamble at Star Casino and sold the property for $1.05m a few months later.  She subsequently purchased another unit and two parking spaces close to the casino. 

Two years later, Ms Chiang used these properties to secure finance to purchase another property.  One of these properties was subsequently sold to her ex-husband., but a caveat meant the title after the sale was not perfected.

So, by the time the protective orders had been made by NCAT the Redfern property no longer formed part of the deceased’s estate. 

The proceedings the subject of this judgement were commenced after the deceased passed away, by the administrator of his estate.

Matters still in dispute, and the subject of separate proceedings, are the paternity of Wing Tong Ip, and also the validity of the deceased’s last will and various family provision proceedings.


Findings – Capacity to enter into inter vivos gifts & the doctrine of non est factum

Lindsay J carefully reviewed the available medical and lay evidence about the deceased’s capacity.  As a result, he formed the view that the deceased did not have capacity in and following 2013.[1]

Something more than a lack of understanding, or carelessness is required for a finding of non est factum, however.  What is required is:

  1. One party must be incapacitated; and
  2. The other party must know of that incapacity.[2]

Ultimately it was not necessary to make a finding of non est factum, but based on the judgement, it is highly likely it would have been.

Findings – Capacity to Marry– Ms Chiang

Under s51 of the Family Law Act 1975 (Cth) and Section23B(1)(d)(iii) of the Marriage Act 1961 (Cth) a marriage is void and may be declared a nullity on the ground that the consent of one party to the marriage was not “real consent” because the party was “mentally incapable of understanding the nature and effect of the marriage ceremony”.[3]

Lindsay J found that the deceased did not understand the nature and effect of the ceremony on 3 September 2013.

“At the time of the alleged marriage, the deceased was an elderly, unsophisticated man suffering cognitive impairment, probably the result of vascular dementia. Evidence of his general practitioner, Dr Pak, and lay observers (including a long-time family friend, Dorothy Quan, and a long-time neighbour, Ling Zhen Liang, as well as the plaintiff, her husband and their children) provides a foundation for a finding of mental incapacity, as does the expert evidence of the geriatrician, Dr Tuly Rosenfeld.”[4] 

Further, he found that Ms Chiang knew, or ought to have known of the deceased’s incapacity.  As Lindsay J put it:

Within a very short time of meeting him, the first defendant led the deceased through a marriage ceremony the rationale of which was to enable her to take an interest in the deceased’s home without liability for stamp duty on the transfer executed by him in her favour. The transfer was effected within a very short time of the marriage ceremony and immediately thereafter the first defendant went overseas, leaving the deceased to his own devices. She was able to do so only because he lacked the mental capacity to appreciate what was happening.[5]

The findings about the deceased’s capacity to marriage were relevant to other aspects of the proceedings, as it underpinned the transfers of the Redfern property and the execution of the BFA.

Findings – Capacity to Marry – Ms Guo

Interestingly, the validity of the marriage between the deceased and Ms Guo (Ms Chiang’s ex-mother-in-law) was not a matter that was in issue before the Court in these proceedings.[6]  Doubtless it will be in issue in the separate probate and paternity proceedings.

And it is also likely that the findings about the marriage to Ms Chiang which pre-dated the marriage to Ms Guo by several years, are an indication of the findings a Court may make in relation to the later marriage.

Findings – Divorce and Binding Financial Agreement

In relation to the divorce, which was separate to the property settlement which was to be effected by the BFA, it appeared that both parties were represented by the same lawyer.  Lindsay J had this to say about this arrangement:[7]

The deceased’s lack of sophistication, poor education and weak mind were patent. Ms Zhang could not have failed to notice them. In taking steps to obtain a divorce order and a property settlement, she appears to have taken no steps of any consequence to satisfy herself that the deceased had both capacity and understanding to effect the business at hand. She appears to have acted principally in the interests of the first defendant and on her instructions, treating a need for the deceased to obtain independent legal advice as a bare formality.

Lindsay J was very critical of Ms Zhang as a witness and her conduct in relation to the deceased:

“[she saw]…nothing incongruous about her acceptance on 3 December 2015 that the deceased lacked capacity to execute an enduring guardianship appointment on 1 December 2015 and her procuring of a statutory declaration from the deceased on 25 November 2015; she refused to accept that, if the deceased lacked capacity to sign an enduring guardianship appointment on 1 December 2015, there was a reasonable possibility that he may also have lacked capacity to make a statutory declaration on 25 November 2015.[8]

She also saw no incongruity in her lodgement with the Land Titles Office on 13 April 2016 of a statutory declaration purportedly made by the deceased on 2 April 2016 after the time when (no later than 3 December 2015) she was explicitly on notice that the deceased was suffering from dementia.[9]

In relation to the lawyer who was supposed to be representing the deceased and giving him independent advice, Mr Chen, Lindsay J had this to say:

In my assessment, Mr Chen was an honest witness. In retrospect, he would have acted more prudently had he, in light of his reservations about the Binding Financial Agreement, simply refused to witness the deceased’s signature or to provide a certificate of independent advice. This is what he should have done. The quality of any advice he was able to give the deceased was less than required if the deceased had been competent to comprehend it, which I find was not the case. Mr Chen’s intervention in the deceased’s affairs was inadequate to establish that the deceased was able to give, and did give, a fully informed consent to the Binding Financial Agreement.[10]

Although Mr Chen endeavoured to give independent advice, he was not, as Lindsay J observed, well placed to do so.  He did not speak Cantonese, and relied on a law student to assist him in this regard.  He observed that the deceased was “a bit fragile” but had no idea of the extent of his physical and mental infirmities.

He did not know that the transfer referred to in the BFA had already been signed (and witnessed by Ms Zhang) and did not verify that the payment in cash the deceased was supposed to receive had in fact been received. Lindsay J was not satisfied that the cash had been paid.

Further, the BFA made not attempt to secure the right for the deceased to live in the Redfern property for the rest of his life.  Lindsay J described this as a “manifest deficiency”.[11]

Ultimately, Lindsay J found:

On 6 July 2015 the deceased was suffering from a chronic, progressive form of vascular dementia. Even if the documents signed by him on that date (the Binding Financial Agreement, the Authority addressed to Juris Cor Legal and an Application for Divorce) were fully explained to him, he would not have understood their nature, effect or consequences. His lack of capacity was patent. He was at that time suffering from advanced vascular dementia, an illness that would have extinguished his ability to understand and consider his future needs, care and estate. He would have been unable to understand, consider and resolve issues encountered in the making of decisions about the nature, implications and consequences of a divorce and family law settlement. He would not have been able properly to recall the background, understand, consider and resolve the complexities of the implications and consequences of the financial arrangements involved in signing the documents placed before him for execution or a divestiture of his interest in the Redfern Property. [12]

Findings – Equitable Relief

In addition to the findings in relation to capacity, Lindsay J found that each of the impugned transactions was an unconscionable dealing by Ms Chiang and liable to be set aside.  This finding was based on the following:

  1. the deceased was, at the time of each transaction, suffering from a special disadvantage vis-à-vis the first defendant;
  2. that special disadvantage seriously affected the deceased’s capacity to judge or protect his own interests;
  3. the first defendant knew of the deceased’s special disadvantage, or at least of facts which would raise that possibility in the mind of any reasonable person;
  4. the first defendant took advantage of the opportunity presented by the deceased’s special disadvantage by calculated steps to divest him of the Redfern Property, his principal asset;
  5. that taking of advantage was unconscientious, the transactions by which the first defendant acquired the Redfern Property being demonstrably improvident viewed from the perspective of the deceased.[13]

He also found that that the doctrines of undue influence, breach of fiduciary obligations and non-est factum would also provide relief, but they were unnecessary to make, given the findings in relation to unconscionability and incapacity.

The findings justified the imposition of a constructive trust over Ms Chiang’s property, which were obtained from the sale of the Redfern property or obtained using that property as security for finance.

Read the full decision here.

[1] At [123].

[2] At [125] – [126], also Petelin v Cullen (1975) 132 CLR 355 at 359-360.

[3] At [93].

[4] At [99].

[5] At [100].

[6] At [14].

[7] At [ 209].

[8] At [141].

[9] At [142].

[10] At [145].

[11] At [218].

[12] At [219].

[13] At [323].

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