Craig v Silverbrook - [2013] NSWSC 1687

Supreme Court

New South Wales

Medium Neutral Citation: Lorretta Kistmah Craig and Ors v Kia Silverbrook and Ors [2013] NSWSC 1687
Hearing dates: 22, 26, 27, 28, 29, 30 August 2013, 2, 3, 4, 5, 18 September 2013, further written submissions on 26, 30 September 2013
Decision date: 15 November 2013
Jurisdiction: Equity Division
Before: Sackar J
Decision:
See paragraph [524]

Catchwords:
EQUITY - Baumgartner constructive trust - whether parties pooled resources - whether parties were engaged in a joint endeavour - whether parties acted in the course of, and for the purposes of, a joint relationship or endeavour - relevance of parties' intention to create a joint endeavour.

ESTOPPEL - estoppel by convention - whether parties had adopted a common assumption as to the existence of a trust arrangement.
EVIDENCE - burden of proof - whether defendants bear an onus to displace plaintiffs' allegations - difficulty of proof with sufficient precision of words allegedly spoken several years ago absent contemporaneous record - rejection of a witness' evidence does not necessarily prove or require acceptance of the opposite of what was asserted - relevance of failure to raise a matter in correspondence where the relationship between the parties is such that a particular reply might be expected.
Legislation Cited: Conveyancing Act 1919
Fair Trading Act 1987
Bounty (Computers) Act 1984 (Cth)
Trade Practices Act 1974 (Cth)
Cases Cited: Allen v Roughley [1955] HCA 62; (1955) 94 CLR 98
Amalgamated Investment and Property Co Ltd v Texas Commerce International Bank Ltd (in liq) [1982] QB 84
Apollo Shower Screens Pty Ltd v Building and Constructions Industry Long Service Payments Corp (1985) 1 NSWLR 561
Australian Building & Technical Solutions Pty Ltd v Boumelhem [2009] NSWSC 460; (2009) 2 ASTLR 336
Baumgartner v Baumgartner [1987] HCA 59; (1987) 164 CLR 137
Blatch v Archer (1774) 1 Cowp 63
Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336
Browne v Dunn (1893) 6 R 67 (HL)
Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253
Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) [1986] HCA 14; (1986) 160 CLR 226
Cubillo v Commonwealth of Australia [2000] FCA 1084; (2000) 174 ALR 97
Dabbs v Seaman [1925] HCA 26; (1925) 36 CLR 538
Dovuro Pty Ltd v Wilkins [2003] HCA 51, (2003) 215 CLR 317
Fox v Percy [2003] HCA 22; (2003) 214 CLR 118
Friend v Brooker & Anor [2008] HCATrans 344
Gissing v Gissing [1971] AC 886
Grey v Australian Motorists & General Insurance Co [1976] 1 NSWLR 669
Grundt v Great Boulder Pty Gold Mines Ltd [1937] HCA 58; (1937) 59 CLR 641
Helton v Allen [1940] HCA 20; (1940) 63 CLR 691
Heydon v NRMA Ltd [2000] NSWCA 374; (2000) 51 NSWLR 1
Hopcroft & Edwards v Edmunds [2013] SASCFC 38; (2013) 116 SASR 191
Jeffrey-Potts v Garel [2012] VSC 237
John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; (2010) 241 CLR 1
Jones v Sutherland Shire Council [1979] 2 NSWLR 206
Le Meilleur Pty Ltd and Others v Jin Heung Mutual Savings Bank Co Ltd [2011] NSWSC 1115, (2011) 256 FLR 240
Legione v Hateley [1983] HCA 11; (1983) 152 CLR 406
Lloyd v Tedesco [2002] WASCA 63; (2002) 25 WAR 360
Lustre Hosiery Ltd v York [1935] HCA 71; (1935) 54 CLR 134
McGraddie v McGraddie and another [2013] UKSC 58; [2013] 1 WLR 2477
Moratic Pty Ltd v Gordon [2007] NSWSC 5; (2007) 13 BPR 24,713
Murtagh v Murtagh [2013] NSWSC 926
Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583
NRMA Limited & Ors v Heydon S26/2001 [2001] HCATrans 439
Pennimpede v Pennimpede [2009] NSWSC 85
Pitcher v Langford (1991) 23 NSWLR 142
R v Birks (1990) 19 NSWLR 677
R v Manunta (1989) 54 SASR 17
Rosenberg v Percival [2001] HCA 18; (2001) 205 CLR 434
Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; (2007) 69 NSWLR 603
Shaddock & Associates Pty Ltd v Parramatta City Council (No 1) [1981] HCA 59; (1981) 150 CLR 225
Steinberg v Federal Commissioner of Taxation [1975] HCA 63; (1975) 134 CLR 640
Strong v Woolworths Ltd [2012] HCA 5; (2012) 246 CLR 182
Thomas v Hollier [1984] HCA 35; (1984) 156 CLR 152
Thompson v Palmer [1933] HCA 61; (1933) 49 CLR 507
Vetter v Lake Macquarie City Council [2001] HCA 12; (2001) 202 CLR 439
Waterman v Gerling Australia Insurance Company Pty Ltd [2005] NSWSC 1066; (2005) 65 NSWLR 300
Watson v Foxman (1995) 49 NSWLR 315
West v Mead [2003] NSWSC 161; (2003) 13 BPR 24,431
Young v Tibbits [1912] HCA 23; (1912) 14 CLR 114
Texts Cited: J D Heydon, Cross on Evidence, 9th ed (2013) LexisNexis Butterworths
J D Heydon and M J Leeming, Jacob's Law of Trusts in Australia, 7th ed (2006) LexisNexis Butterworths
J J Spigelman, "Truth and the Law" (2011) 85(11) Australian Law Journal 746
P W Young, C Croft and M L Smith, On Equity (2009) Lawbook Co
Ritchie's Uniform Civil Procedure NSW
Category: Principal judgment
Parties: Lorretta Kistmah Craig (First Plaintiff)
Vincent Desmond Craig (Second Plaintiff)
D & L Craig and Associates Pty Ltd (Third Plaintiff)
DLC Properties Pty Ltd (Fourth Plaintiff)
DLCF Pty Ltd (Fifth Plaintiff)
Kia Silverbook (First Defendant)
Janette Lee (Second Defendant)
Silverbrook Research Pty Ltd (Third Defendant)
Serif Pty Ltd (Fourth Defendant)
Le'Brook Pty Ltd (Fifth Defendant)
Precision Mechatronics Pty Ltd (formerly Lee Edison and Associates Pty Ltd) (Sixth Defendant)
Priority Matters Pty Ltd (formerly Broadwater Rest Pty Ltd) (Seventh Defendant)
Memjet Pty Ltd (Eighth Defendant)
Allplaces Pty Ltd (formerly Cosmic Osmo Pty Ltd) (Ninth Defendant)
Chesreal Pty Ltd (Tenth Defendant)
Memjet Ltd (formerly Pamry Ltd) (Eleventh Defendant)
Clamate Pty Ltd (Twelfth Defendant)
Donatable Pty Ltd (Thirteenth Defendant)
Representation: Counsel:
R Newlinds SC and D Sulan (Plaintiffs)
M Walton SC, Dr K Stern SC and V Bosnjak (Defendants)
Solicitors:
Johnson Winter & Slattery (Plaintiffs)
In Legal (Defendants)

File Number(s): 2010/333159

Judgment

Index

Proceedings

[1]

Background facts

[7]

Legal principles

[77]

Baumgartner principles

[78]

Conventional estoppel

[111]

Watson v Foxman and burden of proof

[122]

Admissions on questions of mixed fact and law

[127]

The witnesses

[134]

Ms Craig

[144]

The early years

[152]

Overview of the alleged meeting on 20 January 2000

[221]

Detailed analysis of the alleged meeting on 20 January 2000

[233]

Events following the alleged 20 January 2000 meeting

[309]

The year 2001

[321]

The year 2002

[339]

The year 2003 and following

[349]

Mr Craig

[372]

Mr Silverbrook

[373]

Ms Lee

[384]

Ms Yan-Colebourn and Mr Govender

[409]

Ms Yan-Colebourn's evidence

[413]

Mr Govender's evidence

[422]

Conclusions as to the evidence of Ms Yan-Colebourn and Mr Govender

[427]

Mr Tilbrook

[431]

Payments and emails between the parties

[436]

Property and financing transactions

[468]

Inferences from property and financing transactions

[495]

Frederick Street events

[500]

Conclusion

[511]

Proceedings

The first plaintiff, Lorretta Kistmah Craig (Ms Craig) and (to a lesser degree) her husband, being the second plaintiff, Vincent Desmond Craig (Mr Craig), were, at the relevant times, family friends of the first defendant, Kia Silverbrook (Mr Silverbrook or the first defendant) and the second defendant, Janette Lee (Ms Lee or the second defendant). The third to fifth plaintiffs are corporate entities owned and controlled by Mr or Ms Craig or both of them.

Mr Silverbrook is an inventor, a product designer, and the holder of thousands of patents, particularly in the field of print technologies.

Ms Lee is Mr Silverbrook's partner, and is involved in, among other things, the financial aspects of Mr Silverbrook's work and in commercial negotiations with existing and prospective investors in, and licensees of, various technologies invented by Mr Silverbrook. The third to thirteenth defendants are corporate entities owned or controlled by, or otherwise associated with, Mr Silverbrook or Ms Lee or both Mr Silverbrook and Ms Lee.

In a third further amended commercial list statement (filed on 15 October 2012), the plaintiffs alleged that, on the basis of various representations made by Mr Silverbrook and Ms Lee over a period from 1992 to 2002, one or more of the plaintiffs has or have contributed approximately $2.14 million to assist Mr Silverbrook to develop and commercialise his inventions. The key individuals in these proceedings are Ms Craig, Mr Silverbrook and Ms Lee. A number of corporate entities have become involved as parties in these proceedings as a result of the complex corporate structures used by Mr Silverbrook, Ms Lee and Ms Craig in conducting their businesses and in their dealings with one another and others.

One of Mr Silverbrook's inventions, the profits of which are at the centre of the dispute between the parties, is known (or has come to be known) as the Memjet technology (Memjet technology). Broadly, the plaintiffs asserted they were entitled to a share in the profits ultimately generated from Mr Silverbrook's inventions, including profits generated from the Memjet technology. Formally, the relief the plaintiffs sought was articulated in their further amended summons (filed on 15 October 2012). It included causes of action in partnership, contract, misleading and deceptive conduct, and constructive trust, it is framed by reference to a number of complex defined terms, and it may be summarised as follows:

(1) (1992 partnership) The plaintiffs sought a declaration that they carried on a partnership or joint venture with the defendants since mid 1992 or such other time as the court determines, and:

(a) an order that such alleged 1992 partnership be wound up; and

(b) a declaration that the plaintiffs were entitled to a 50% share or interest in the assets of the partnership, or (alternatively) such share or interest as may be considered just and reasonable, or (alternatively) a particular share or interest in the Memjet technology, as varied by agreement in 2000, as defined in the relevant part of the pleadings; and

(c) a declaration that the defendants held their interests in the assets of the 1992 partnership on constructive trust for the benefit of the 1992 partnership (and/or for the benefit of the plaintiffs); and

(d) a declaration identifying that the assets of the 1992 partnership included the Memjet technology and other technologies known as Netpage, Artcam and Value Added Technology together with any rights to income or revenue deriving from that technology (together, "the Assets" for the purpose of this summary of relief sought); and

(e) various consequential orders, including the appointment of receivers, the taking of accounts of the 1992 partnership, and the transfer to the plaintiffs of their share in the 1992 partnership.

(2) (2000 partnership) As an alternative to the 1992 partnership, the plaintiffs sought similar orders and declarations in relation to a partnership or joint venture with the defendants since about January 2000. There were some differences in detail between the precise scope and extent of the interests asserted by the plaintiffs in the 2000 partnership as opposed to the 1992 partnership, but it is not necessary to presently set out that level of detail.

(3) (other relief) In the further alternative to a 1992 partnership or a 2000 partnership (i.e. in the alternative to all of the above), the plaintiffs sought:

(a) a declaration that the defendants had breached a contract as formed in 1992, or alternatively as formed in 1992 but subsequently varied, or alternatively as formed in 2000; and

(b) an order that the defendants transfer to the plaintiffs a 50% share or interest in "the Assets" (as defined above), or alternatively some other percentage share or interest as defined in the pleadings or as the court considers just and reasonable; and

(c) a declaration that "the Assets" (as defined above) are held by the defendants on constructive trust for the benefit of the plaintiffs in such amount or proportion as the court considers just and reasonable; and

(d) various consequential orders including the appointment of receivers, an inquiry into the value of "the Assets", and transfer or payment by the defendants to the plaintiffs of such share or value of their interest in "the Assets" as may be just and reasonable; and

(e) damages, compensation (under s 82 of the Trade Practices Act 1974 (Cth) or s 68 of the Fair Trading Act 1987), equitable compensation, and an accounting of profits (among other things).

(4) (Frederick Street property) As a stand-alone claim, the plaintiffs sought an order that the seventh defendant transfer a particular item of real property, namely Unit 1, Frederick Street, Gosford, to the relevant plaintiff(s).

(5) The plaintiffs also sought costs, interest and such other orders as the court sees fit.

However, during the course of the hearing, counsel for the plaintiffs indicated, and in final submissions confirmed, that the plaintiffs would only be pressing for relief by way of a constructive trust in accordance with the principles expressed in Baumgartner v Baumgartner [1987] HCA 59; (1987) 164 CLR 137, and for relief in respect of the property known as Unit 1, Frederick Street, Gosford. The defendants deny the existence of any such arrangements.

Background facts

There is a myriad of factual controversies between the parties. Ms Craig on the one hand purports to reconstruct the relevant chronology over a period of more than twenty-five years. The first and second defendants, on the other hand, almost at every turn, deny the various events alleged by her.

As will later appear, on any view of the evidence, Ms Craig, Mr Silverbrook and Ms Lee were very good friends over a long period of time and large amounts of money moved from the plaintiffs to the defendants and vice versa during the period of that friendship. This included, from time to time, the provision of blank (but signed) cheques by one or other of Ms Craig or Ms Lee, to be completed and used by the other as and when needed. Many of the alleged payments are admitted, but many are put in issue.

Although Ms Craig gives very specific detail about many of the payments, she does not purport to deal with all of them. The defendants, on the other hand, provide little by way of specific information. They also deny most if not all of the conversations asserted by Ms Craig and deny any arrangements amounting to a "deal" for a profit interest. What follows is therefore not intended to be exhaustive, but only deals with the payments to which the plaintiffs attached prominence. In addition, it is not intended to exhaustively outline every fact which is controverted between the parties. I will later deal with the specific facts in issue.

Ms Craig first met Mr Silverbrook some time between the late 1970s and the early 1980s, while they were both working at a company, Fairlight Instruments Pty Ltd (Fairlight).

In February of 1987, Mr Silverbrook asked Ms Craig to work with him at a new company he had formed, Integrated Arts Ltd (Integrated Arts), which had been given a research and development grant of $2.4 million. Ms Craig commenced working at Integrated Arts in March of 1987, and she met Ms Lee there in April of 1987.

In approximately October of 1988, Ms Craig purchased a company, D & L Craig and Associates Pty Ltd (formerly named Idameneo (271) Pty Ltd, DLCA), as a corporate vehicle through which she would provide consultancy services. DLCA is the third plaintiff in these proceedings.

In January of 1990, administrators were appointed to Integrated Arts. At or about the same time, Ms Craig commenced working as a "bounty consultant", obtaining Federal government research and development grants under the Bounty (Computers) Act 1984 (Cth) for companies operating in the electronics industry.

In May of 1990, Mr Silverbrook commenced working as an executive director of Canon Information Systems Research Australia Pty Ltd (Canon). He developed a personal relationship with Ms Lee in about May of 1991.

From about May of 1990 to some time in 1992, Ms Craig had regular dealings with Mr Silverbrook whilst he was working at Canon. She worked as a purchasing consultant for Canon, and later as a bounty consultant, also for Canon. Also in May of 1990, Ms Lee incorporated a company, Lee Edison Pty Ltd (Lee Edison) to carry out consulting work and research and development work with Ms Craig for joint clients (Lee Edison is now named Precision Mechatronics Pty Ltd, and is the sixth defendant in these proceedings).

Ms Craig asserts that in early 1992, she became aware that Mr Silverbrook had developed a large range of new computer products for Canon and was very impressed with his work.

Ms Craig asserts that in mid-1992, Ms Lee spoke to her about Mr Silverbrook's inventive capability, lack of remuneration at Canon, and Mr Silverbrook's desire to leave Canon to commence working independently on inventions which would generate an enormous amount of profit. Ms Craig asserts that Ms Lee and herself, agreed to jointly provide funds to Mr Silverbrook to enable him to acquire the equipment he needed so that when he left Canon he could work on developing inventions independently, on the basis that they would all share in the proceeds of his inventions. Ms Craig asserts Ms Lee requested Ms Craig to advance funds, for this purpose, to Lee Edison.

In June 1992, DLCA allegedly made its first advance of $15,075 to Lee Edison. Ms Craig asserts that later that month, Ms Lee informed her that a company, Owen Scientific Imaging Pty Ltd (OSI), had been incorporated, that this marked the commencement of a shared enterprise, that Mr Silverbrook had already filed patents for inventions he had developed, and that he was continuing to investigate camera lenses he had purchased for his research. Ms Craig also asserts that Ms Lee advised her to continue to make payments to Lee Edison, not OSI, as the necessary equipment would be purchased through Lee Edison.

In November 1992 to June 1993, DLCA allegedly made advances to Lee Edison (or directly purchased computers for Lee Edison) totalling $144,592. Ms Craig alleges this money was advanced to enable Mr Silverbrook to purchase the equipment he needed, and that Ms Lee mentioned that when Mr Silverbrook sold something, they would all share in the benefits of his inventions. Ms Craig also alleges Mr Silverbrook said he will pay Ms Craig back "tenfold".

In late 1993, Mr Silverbrook resigned from Canon (though he appears to have officially departed from there in March of 1994). Ms Craig alleges that at this point, she started to have more regular dealings with Ms Lee and Mr Silverbrook, and that Ms Lee made regular requests for money.

Also in late 1993, DLCA allegedly made further advances to Lee Edison totalling $13,500, at Ms Lee's request to enable Mr Silverbrook to purchase equipment needed to develop inventions.

Ms Craig asserts that in June 1994, Ms Lee and Mr Silverbrook advised her that Mr Silverbrook was working on a new printing technology that could be used in a wide range of consumer products, that it would revolutionise the printing industry, and that everyone would need to pay to use his patent. Ms Craig alleges Ms Lee also requested further money to enable Mr Silverbrook to continue his research work. In the same month, DLCA allegedly made further advances to Ms Lee, Lee Edison and Mr Silverbrook, totalling $77,066, to enable the development of the printing technology.

On 26 September 1994, Ms Lee and Mr Silverbrook incorporated Silverbrook Research Pty Ltd (SRPL). SRPL is the third defendant in these proceedings. Ms Craig alleges Ms Lee advised her to make all future advances to SRPL instead of Lee Edison.

Ms Craig alleges that in October 1994, Ms Lee and Mr Silverbrook described to her a printing technology being developed, later known as "LIFT", and advised that patents protecting the technology would be lodged in all market sectors, that it was a "billion dollar market", that "anyone wanting to use [Mr Silverbrook's] inventions would need to pay", that "[they] would be rich", that "the potential is huge", but that Mr Silverbrook needed to be properly funded in order to do this.

Between November 1994 and March 1995, DLCA allegedly advanced to SRPL and Lee Edison a total of $140,015.

Ms Craig alleges that some time between April and September 1995, Mr Silverbrook said he was about to file provisional patents, that he was starting to promote the sale of the LIFT patents, and that "[they] would all make a lot of money". At or shortly after this time, fifty-nine provisional patents were filed in Australia. Ms Craig alleges that, also around this time, Ms Lee asked for further advances.

Between October and November 1995, DLCA allegedly made further advances to SRPL totalling $28,000. On 13 October 1995, Mr and Ms Craig incorporated DLC Properties Pty Ltd (DLCP) to carry on, among other things, property development. DLCP is the fourth plaintiff in these proceedings.

In February and March of 1996, SRPL sold the patents in relation to the LIFT technology to Kodak for approximately $6 million. Ms Craig alleges Mr Silverbrook advised her he was thinking about how to return some money back to the plaintiffs, and that he had started working on a project to further develop the print technologies he had been working on.

Ms Craig alleges that in March 1996, a meeting took place, attended by Ms Lee, Mr Silverbrook and herself, at which the plaintiffs' advances were reconciled to a total sum of $418,248, and Ms Lee advised Ms Craig that Mr Silverbrook needed funds to further develop print technologies. Ms Craig also alleges it was agreed at the meeting that the defendants would pay $200,000 to the plaintiffs (from the defendants' sale proceeds of the LIFT technology to Kodak), and that any further share of the plaintiffs in the sale proceeds received from Kodak would remain as capital to allow Mr Silverbrook to continue working on his inventions.

On 24 April 1996, SRPL made a payment of $200,000 to the plaintiffs (by two separate cheques for $100,000 each). Also in April of 1996, Ms Craig alleges she attended a meeting with Mr Silverbrook and Ms Lee to discuss a new project, known as Artcam, and to prepare a research and development tax concession application.

In the period 1997 to mid-1998, Ms Craig alleges she had dealings with Mr Silverbrook and Ms Lee to assist SRPL with its research and development tax concession application, but that no requests for further advances were made during this period.

Ms Craig alleges that in June of 1998, Ms Lee asked her for further advances, to enable various properties owned by various corporate entities owned and/or controlled by Ms Lee and/or Mr Silverbrook to be refinanced, in order to release funds into SRPL in order to pay for patent filings in the United States. The corporate entities owned and/or controlled by Mr Silverbrook and/or Ms Lee which are alleged to own the properties the subject of the refinancing are Le'Brook Pty Ltd (the fifth defendant in these proceedings, Le'Brook), Allplaces Pty Ltd (the ninth defendant in these proceedings, formerly named Cosmic Osmo Pty Ltd, Allplaces), and Chesreal Pty Ltd (the tenth defendant in these proceedings, Chesreal). The plaintiffs allege they understood Le'Brook, Allplaces and Chesreal to be part of the alleged partnership in the development of technologies.

From 24 June 1998 to 6 July 1998, the plaintiffs allegedly made further advances totalling $120,753. The plaintiffs allege that some of those advances were drawn from the bank account of Mr and Ms Craig's superfund, namely D & L Craig Superannuation Fund, of which DLCF Pty Ltd (DLCF) is the corporate trustee, and is the fifth plaintiff in these proceedings. The plaintiffs allege that, of the advance of $120,753, a sum of $112,673 was used to pay for patent filings, and that $50,753.11 of that sum was paid directly to the US Commissioner of Patents and Trademarks for the filing of patents.

Ms Craig alleges that on 7 July 1998, Ms Lee advised her that once the patents were lodged, Mr Silverbrook would start promoting their sale and that a "deal" would be made between the plaintiffs and the defendants once the patents were sold or licensed. Ms Craig alleges she understood, from these conversations, that the patents were in respect of the same inventions in respect of which patents were filed in Australia. Ms Craig also alleges that later that month, Ms Lee informed her that Mr Silverbrook was talking to many potential buyers, but that the process was taking longer than expected.

In the period from 7 August 1998 to 8 February 1999, the plaintiffs allegedly made further advances to the defendants totalling $430,760.20. Ms Craig alleges that, also during this period, she had regular conversations with Ms Lee in the course of which Ms Lee said Mr Silverbrook was "working so hard", that he was having discussions with a number of computer chip manufacturers including Motorola and IBM, that "[they] would all be rich from his invention", that he was talking to investors, and that the defendants needed further funding to "keep things going". It appears that, some time during this period, a print technology was conceived, named "Memprint", which later became known as, or is somehow related to, the Memjet technology.

Ms Craig alleges that in February 1999, Ms Lee advised her that Philips made an offer of $50 million, but that even greater returns could be achieved if the technology was further developed, by the defendants, into a working prototype, and that this would require assistance from a wealthy investor.

Ms Craig alleges that in mid-February 1999, during a visit by Mr Silverbrook and Ms Lee to Mr and Ms Craig, Mr Silverbrook said he had been working to find an investor, that he would strike a deal and repay Mr and Ms Craig "tenfold", that Mr and Ms Craig would "never have to worry about money again", that he was grateful for Mr and Ms Craig's assistance, that he would not let them down, that they could trust him, and that he needed a further advance of $400,000. Ms Craig alleges she agreed to advance the sum of $400,000.

In March of 1999, DLCP mortgaged property it owned at Frederick Street and White Street in East Gosford. Ms Craig alleges that, from the proceeds of the mortgage, a sum of $400,000 was advanced to the defendants.

Ms Craig alleges that in May of 1999, Ms Lee advised her that Mr Silverbrook was in the United States having discussions with a wealthy potential investor of millions of dollars, and informed her that the defendants needed more money to "keep things going".

Between 5 May 1999 and 27 July 1999 the plaintiffs allegedly made further advances to the defendants totalling $94,793. Ms Craig alleges this sum was to meet SRPL's operating expenses, patent expenses and for payment of instalment obligations under an arrangement reached with the New South Wales Office of State Revenue (due to the alleged failure of Le'Brook to pay certain taxes). Ms Craig alleges the monies comprising these advances were sourced partly from the proceeds of the mortgage over DLCP's property at Frederick Street and partly from Mr and Ms Craig's personal "Mortgage Equity Account" (which was a line of credit secured against their then family home in Narara, Gosford, Mortgage Equity Account).

On 12 July 1999, Mr Silverbrook and Ms Lee incorporated Memjet Ltd in Ireland (the eleventh defendant in these proceedings, formerly named Pamry Ltd, Memjet Ireland), to facilitate a proposed investment by a third party in the Memjet technology. Ms Craig alleges that, on the same day, Ms Lee advised her that Mr Silverbrook found a very wealthy investor for the Memjet technology, who would enable them to develop a working prototype and take the technology to a licensing stage. Ms Craig alleges that in response to Ms Craig expressing concerns to Ms Lee about the timeframe for that expected investment, Ms Lee assured her "[they] would make lots of money" and requested further funds.

From 27 July 1999 to 23 August 1999 the plaintiffs allegedly advanced a further sum of $82,500 drawn from their Mortgage Equity Account.

Ms Craig alleges that in the period from September to October of 1999, the plaintiffs were struggling to meet mortgage repayments, and that Ms Lee said she would transfer to the plaintiffs whatever sum she could, to enable the plaintiffs to meet interest payments on their mortgages. During this same period, the defendants allegedly made payments to the plaintiffs totalling $18,000.

In November 1999, DLCP exchanged contracts for the sale of its property at Unit 1, Frederick Street, East Gosford, to a corporate entity owned and controlled by Mr Silverbrook and Ms Lee, namely Broadwater Rest Pty Ltd (the seventh defendant in these proceedings, now named Priority Matters Pty Ltd, Broadwater Rest). The plaintiffs allege the purpose of this transaction was to alleviate the mortgage stress the plaintiffs were experiencing as a result of the mortgage they had earlier provided over the Frederick Street property in order to avail themselves of a source of funding for the defendants. Ms Craig alleges that this transaction gave effect to a trust arrangement, whereby Broadwater Rest held Unit 1 on trust for the plaintiffs, to be reconveyed at a later stage for nil consideration. Ms Craig alleges that in the same month, Mr Silverbrook advised her that a deal with an investor was almost complete, and that he wanted Ms Craig to visit him at some stage so she could view the progression of the development of the technology and hear from Mr Silverbrook about the "deal" he had in mind for Mr and Ms Craig. Ms Craig also alleges that Ms Lee said they had found the right investor, that they just had to work out the details, and that in the meantime they needed more funds.

Between November and December 1999, the plaintiffs allegedly made further advances to the defendants, totalling $65,000.

Ms Craig alleges that on 20 January 2000, a day-long meeting took place, attended by herself, Ms Lee and Mr Silverbrook, at which, among other things, Ms Lee and Mr Silverbrook explained the plan for commercialisation of the Memjet technology, including the development of a working prototype, licensing the technology to a "Memjet Group" of companies (not as yet formed) which would in turn licence the technology for use in consumer products, and identified projected income streams, target markets and potential licensees. Importantly, Ms Craig alleges that, at this meeting (among other things), it was agreed that the plaintiffs would receive shares of 4.34%, in both the company (or companies) owning the Memjet technology, and the company (or companies) owning the licensing rights and income streams from the Memjet technology. Converted into dollars, this allegedly amounted to expected cash payments from SRPL in the sum of US$9,548,000 to the plaintiffs, in specified tranches. This alleged agreement referred to as the January agreement.

Ms Craig alleges that on 3 February 2000, she was advised by Ms Lee that the expected funds from the US investor, a Mr Ray Stata (Mr Stata), had not yet been received, and that she was asked to provide further funding in the meantime. The plaintiffs allegedly advanced a further $40,000.

On 4 February 2000, Mr Silverbrook, Ms Lee, SRPL and Mr Stata entered into an agreement entitled "Share Allocation and Capital Subscription Agreement" under which Mr Stata invested US$4 million in a newly formed Australian company, Memjet Pty Ltd (the eighth defendant in these proceedings, Memjet Australia).

On 11 February 2000, Mr Stata's investment of US$4 million was remitted to Memjet Australia's USD account. The funds were then allegedly transferred to SRPL's account to fund the further development of the Memjet technology.

Between 14 June and 27 December 2000, SRPL allegedly made cash payments to the plaintiffs totalling $623,040. The plaintiffs allege these payments were made in pursuance of the January agreement.

On 11 August 2000, Memjet Australia and Mr Stata entered into agreements referred to as "Option Deeds", by which, among other things, Mr Stata granted Memjet Australia a put option, which, broadly, entitled Memjet Australia to require Mr Stata to purchase 6% of Memjet Australia's shares for a further US$6 million.

In May of 2001, Ms Craig (through DLCA) commenced working as SRPL's general manager. Ms Craig alleges that she created a "Creditors List" and other financial documents, that she had weekly meetings with Mr Silverbrook and Ms Lee to discuss SRPL's financial position, and that Mr Silverbrook advised Ms Craig that he had emailed Mr Stata advising that Ms Craig would be assisting SRPL.

Between 7 June 2001 and 8 August 2001, SRPL allegedly made further payments, totalling $108,000, to the plaintiffs. The plaintiffs allege the payments to them by SRPL were made in pursuance of the January agreement.

Ms Craig alleges that between 12 July 2001 and 17 August 2001, SRPL began struggling financially. She alleges that Mr Silverbrook and Ms Lee were reluctant to require further investment by Mr Stata by exercising their rights under the agreement of 4 February 2000 with Mr Stata, as it would have involved a material loss of equity, and that Ms Craig agreed with Ms Lee that payments due to the plaintiffs under the January agreement would be deferred. She also alleges the plaintiffs made further advances totalling $21,703 in order to pay SRPL's creditors.

The plaintiffs allege that by September 2001, the funds invested by Mr Stata had been exhausted and SRPL was experiencing very serious cash flow difficulties. It appears, from various contemporaneous materials, that statements of claim were being served on, creditors were demanding payment from, and there were overdrawn bank accounts for, SRPL. It also appears that Mr Silverbrook was having discussions with an ink manufacturer which could have resulted in cash inflows, but no deal had been finalised. Ms Craig alleges that Ms Lee asked her to refinance a property, owned by DLCA, located at Pearl Beach, in order to make further advances of money to the defendants. Ms Craig alleges she agreed with Ms Lee that any further advances by the plaintiffs would be dealt with separately to the January agreement. In particular, it was allegedly agreed that the defendants would repay what they could of these further advances when the re-financing of a property owned by Le'Brook, known as the "Manor House" (the Manor House), had settled.

Between 21 September and 9 November 2001, the plaintiffs allegedly refinanced the Pearl Beach property owned by DLCA, and allegedly used the funds to make further advances to the defendants totalling $164,166.64, to pay SRPL's creditors, contractors and staff wages. However, SRPL appears to have continued to experience significant cash flow difficulties, as it received statutory demands and calls for payment from creditors.

On 18 November 2001, refinancing of the Manor House had settled, and at about this time, SRPL received $1 million from Le'Brook. As a result of the settlement of the Manor House, Ms Craig alleges that, two days later, she had discussions with Ms Lee and Mr Silverbrook about being repaid some of the post-January 2000 advances, and that SRPL paid to DLCA $149,671.61 in respect of such advances.

In December 2001, SRPL appears to have continued experiencing financial difficulties, as it was served with statutory demands, and had its direct debit arrangements and credit cards with Westpac cancelled. It would appear that the funds raised by the defendants from the refinancing of the Manor House were depleted. Mr Silverbrook and Ms Lee continued to engage in discussions with an ink manufacturer, E I DuPont Ne Nemours and Company (DuPont), and were regularly travelling to attempt to finalise a deal. Also in the same month, the plaintiffs allege they made further advances, totalling $161,975, to pay SRPL's creditors and staff wages. The plaintiffs allege they obtained this money by having DLCP remortgage properties it owned at 17 and 19 White Street, East Gosford.

Also in December 2001, Ms Craig's brother, Bernard Govender (Mr Govender), was engaged as SRPL's finance and administration manager. Mr Govender provided his services through a corporate vehicle, namely DLCA.

On 21 December 2001, SRPL and DuPont executed a document entitled "Letter of Intent" (Letter of Intent), securing exclusive discussions to negotiate a long form agreement under which, among other things, DuPont would develop suitable jetable fluids for use with the Memjet technology.

On 2 January 2002, SRPL received a payment from DuPont of US$2 million, apparently under the Letter of Intent.

Between 4 January 2002 and 3 March 2002, the defendants allegedly made further payments to the plaintiffs, totalling $48,258. The plaintiffs allege these payments were in pursuance of the January agreement.

By February 2002, a final agreement with DuPont had not yet been reached, and the due diligence process remained to be conducted or finalised. Ms Craig alleges she was informed by Ms Lee that, until the deal with DuPont was finalised, they needed to "keep things going" for the next few weeks. The plaintiffs allege that SRPL was again experiencing financial difficulties, and that the plaintiffs therefore obtained short term loans, secured by mortgages over their properties located at Pearl Beach and White Street, in order to advance funds to SRPL.

On 25 February 2002, Mr Silverbrook and Ms Lee arranged for the incorporation of various companies based in Ireland (Irish Companies), apparently as a step to progress commercialisation plans for the Memjet technology.

On 28 February 2002, SRPL and a number of the Irish Companies entered into various licence agreements for the manufacture and supply of Memjet components in designated markets. Ms Craig alleges that the licensing arrangements mirrored the commercialisation plans explained to her in the meeting on 20 January 2000.

The following day, on 1 March 2002, SRPL and three Irish Companies entered into three agreements (separately) with DuPont, called "Certified Supplier Agreements", under which DuPont was required, among other things, to make significant payments to the relevant Irish Company upon completion of certain "Memjet Milestones". Those payments would then be transferred to SRPL. The first payment under any of the Certified Supplier Agreements was not due until seven days following execution (being 8 March 2002).

The plaintiffs allege that between 7 and 8 March 2002, no monies had been received by the defendants from DuPont pursuant to the Certified Supplier Agreements, and that the plaintiffs made further advances totalling $83,171 in order to enable payment of SRPL staff wages. The plaintiffs say those monies were sourced from the Pearl Beach and White Street mortgages created in February 2002.

Between 13 March 2002 and 3 April 2003, the plaintiffs allege that substantial monies had been paid by DuPont (or third party investors) to the Irish Companies, and, in turn, transferred from the Irish Companies to SRPL. The plaintiffs allegedly received several payments totalling $283,972 from SRPL, which they allege were paid pursuant to the January agreement. Also in April of 2003, Ms Craig ceased to be the general manager of SRPL.

The plaintiffs allege that, from May 2003 to March 2007, substantial sums of money continued to be paid to SRPL by DuPont (or third party investors), that the George Kaiser Family Foundation and related charitable trusts (the GKFF Entities) invested in the Irish Companies, and that SRPL made further payments to the plaintiffs totalling $1,260,500 in accordance with the January agreement. Mr Silverbrook and Ms Lee incorporated further Irish Companies, which entered into various licence agreements for the manufacture and supply of Memjet components in designated markets. Ms Craig alleges that, as a result of becoming aware, through conversations with Mr Govender, that the defendants were still struggling to develop a prototype and commercialise the Memjet technology, she refrained from calling for further payments from the defendants under the January agreement.

Ms Craig alleges that, in April 2006, at Ms Lee's request, Ms Craig provided a personal guarantee for $2 million, to meet SRPL's staff wage requirements and other urgent debt.

Ms Craig alleges that, from conversations with her friends still working at SRPL, she learnt that Mr Silverbrook had unveiled the Memjet technology at a Global Ink Jet Printing Conference in Prague on 21 March 2007, and that he had demonstrated a working prototype through an internet website at the conference.

Between 28 March 2007 and 8 August 2007, SRPL allegedly made further payments to the plaintiffs totalling $64,000. The plaintiffs allege the payments were made pursuant to the January agreement, and that the defendants made no further regular payments to the plaintiffs since 8 August 2007.

Ms Craig alleges that, in April of 2008, she was considering taking legal action against the defendants, and that she arranged for a meeting with Mr Silverbrook, at which she made a demand for payments from the defendants pursuant to the January agreement. A final payment was made on 12 April 2008, which the plaintiffs allege was pursuant to the January agreement. This was the last payment made by the defendants to the plaintiffs.

Between 2010 and 2011, the Irish Companies commenced selling commercial licences for mass production of consumer products incorporating the Memjet technology.

In October 2010, the plaintiffs commenced these proceedings (2010/333159) against the defendants.

Other legal proceedings were also commenced, against SRPL, Mr Silverbrook and Ms Lee, by the GKFF Entities, in the High Court of Justice in England on 23 September 2011 and in the United States District Court for the Northern District of Oklahoma on 5 March 2012, alleging, among several other things, breaches of various agreements, fraud, misrepresentation and deception. These foreign proceedings were all settled on 3 May 2012 by an agreement called the "Memjet Restructure Agreement", entered into by the GKFF Entities, the Irish Companies, SRPL, Mr Silverbrook and Ms Lee (among others), providing for payment of US$20 million to SRPL, Mr Silverbrook and Ms Lee, the assignment of the Memjet technology to one of the Irish Companies in which the GKFF Entities were the majority shareholders, and a sale of the Memjet technology on terms entitling SRPL, Mr Silverbrook and Ms Lee to substantial distributions of the sale proceeds.

Legal principles

Given the bases on which the plaintiffs ultimately put their case, the areas of law relevant to these proceedings are those relating to the Baumgartner constructive trust, conventional estoppel, and general rules as to burden of proof.

Baumgartner principles

The plaintiffs' principal case is that they have been in a joint relationship with the defendants since 1992, involving the contribution of more than $2 million of the plaintiffs' money, as requested by the defendants from time to time, together with the personal exertions of Ms Craig, in order to enable the defendants to invest, research and develop technologies for the financial benefit of the plaintiffs and defendants. The plaintiffs submit that, as the inventions were met with success, and there was a pooling of the parties' resources to that end, and the relationship between the parties has now broken down, it is unconscionable for the defendants to deny the plaintiffs their share in the assets and profits of the joint relationship.

Therefore the plaintiffs' principal case was founded on the principles set out in Baumgartner v Baumgartner [1987] HCA 59; (1987) 164 CLR 137. It is appropriate to commence the discussion of legal principles with an analysis of Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583, where the High Court considered in some detail the principles governing the availability of a remedial constructive trust in circumstances bearing some similarity to those of this case. Although those principles were embraced in the subsequent decision of Baumgartner v Baumgartner, the theoretical foundation, and a fuller exposition, of those principles is found in the judgment of Deane J in the earlier case.

The facts of Muschinski v Dodds are concisely summarised in the headnote to the report. An unmarried couple purchased land by a contract under which they were jointly and severally liable. They intended to renovate a cottage on the land which would be used by Mrs Muschinski as an arts and craft centre and to buy a prefabricated house which was to be erected on the land. Mrs Muschinski paid the price of the land from her own funds and agreed to include Mr Dodds' name on the title if he undertook to renovate the cottage and pay for the prefabricated house. The land was transferred to them as tenants in common in equal shares. The parties separated without the cottage having been renovated or the house acquired. The woman claimed sole beneficial ownership of the land, pursuant to a resulting trust, or alternatively a constructive trust. The New South Wales Supreme Court (Waddell J) and Court of Appeal (Hope, Samuels and Mahoney JJA) held there was no relevant resulting or constructive trust, and therefore found for Mr Dodds. A finding made by each of the courts below and accepted by the High Court was that at the time of the purchase of the property, Mrs Muschinski intended to give to Mr Dodds an immediate and unconditional beneficial interest in the property and did not intend to limit it, suspend it or make it conditional on the extent of Mr Dodds' contributions.

All members of the court (Gibbs CJ, Mason, Brennan, Deane and Dawson JJ) rejected Mrs Muschinksi's argument that Mr Dodds held his one half interest pursuant to a resulting trust, in favour of Mrs Muschinski. All members of the court also agreed that there is no place in Australian law for the notion of a constructive trust which is imposed by law whenever justice and good conscience require it, but rather, proprietary rights fall to be determined by principles of law and not by some mixture of judicial discretion, subjective views about which party ought to win, or the "formless void of individual moral opinion". Beyond this point, there was significant divergence in opinion. Gibbs CJ, Mason and Deane JJ ultimately found in favour of Mrs Muschinski. Gibbs CJ did so on a basis different to that of Deane J. Mason J generally agreed with Deane J. In separate dissenting judgments, Brennan and Dawson JJ considered that Mrs Muschinski's appeal should be dismissed, for the reasons given in Brennan J's judgment.

Since the plaintiffs in the proceedings before me rest their case on constructive trust principles, it is unnecessary to consider the principles relating to resulting trusts. It is sufficient to say that, in the course of their reasoning, all of the members of the court in Muschinski v Dodds rejected a case based on a resulting trust.

When considering whether a constructive trust should relevantly be imposed, Gibbs CJ commenced by noting, as the Court of Appeal found, that the evidence did not reveal any equitable fraud on the part of Mrs Muschinski, and that Mr Dodds had been fulfilling his assurances up to the time the "joint venture" came to an end through no fault on either side. Gibbs CJ considered whether there was a broader principle, allegedly based on comments in the judgment of Lord Diplock in Gissing v Gissing [1971] AC 886, permitting the imposition of a constructive trust whenever the conduct of the legal owner makes it equitable to do so. His Honour understood Lord Diplock's opinion as somewhat narrower than this, requiring some conduct on the part of the trustee inducing the beneficiary to act to his own detriment in the reasonable belief that by so acting he was acquiring a beneficial interest in the land. Gibbs CJ was unable to find any such conduct by Mr Dodds. His Honour then considered, but distinguished, a number of subsequent English decisions influenced by, or based on, Lord Diplock's judgment. Ultimately, Gibbs CJ found for Mrs Muschinski on the basis that, as the parties were made by the contract jointly and severally liable to pay the price of the land, they were under a common obligation to pay the debt, and they were obliged to bear the burden equally, and therefore if one discharged more than his or her proper share, he or she could call upon the other for contribution.

Brennan J considered that the beneficial interest, which Mrs Muschinski intended to, and did, confer on Mr Dodds, was conditional on the performance by Mr Dodds of the renovation of the cottage and the erection of the prefabricated house. His Honour noted that non-fulfilment of a condition annexed to a gift generally produced one of two results, namely the forfeiture of the gift or alternatively the creation of an enforceable personal obligation. His Honour held that, in the circumstances of the particular case, Mr Dodds' non-performance of the condition produced the latter result, and that as Mrs Muschinski claimed only a proprietary right, but not (for example) a right to compensation, her claim failed.

Although this disposed of the matter as far as Brennan J was concerned, he nonetheless went on to consider Mrs Muschinski's constructive trust submission. His Honour first commented that the alleged constructive trust could not arise from anything done or promised after Mr Dodds first acquired his interest in the property, but must have its origins in the arrangements existing at the time he acquired his interest, namely the purpose for which he was given his interest. His Honour said Mrs Muschinski must show that it is not merely unfair, but unconscionable, for Mr Dodds to retain his interest. His Honour could not identify any principle of equity which might restrict a donee's proprietary interest in a gift beyond any restriction imposed expressly or impliedly by the donor (and his Honour had previously rejected the view that any such restriction existed here). Since Mr Dodds' non-fulfilment of the assurances was not intended to effect a forfeiture of his interest, it was not unconscionable for him to retain his interest. His separation from Mrs Muschinski was not in breach of any equitable obligation. His Honour considered the argument for a constructive trust to be, in substance, based merely on fairness, and therefore insufficient.

Deane J commenced his reasons with an acknowledgement that there was no express or implied agreement, arrangement, understanding, or contract between the parties that they should hold their legal interests on trust for themselves in shares corresponding to their respective contributions. To the contrary, the evidence established that their shared intention was that, from the time of purchase, each would immediately and unconditionally have a one half beneficial and legal interest in the property. There was therefore no room for a resulting trust. His Honour also considered there was no room for the doctrine of contribution (as it was actually the common intention of the parties that the burden or price of the property would be borne by Mrs Muschinski alone), and that there was no true partnership or contractual joint venture between the parties.

Deane J commenced his analysis of Mrs Muschinski's constructive trust case with some relevant academic discussion about the state of Australian law relating to constructive trusts. His Honour's observations included that although the constructive trust remains predominantly remedial, it is available only when warranted by established equitable principles or by the legitimate process of legal reasoning, by analogy, induction and deduction, from the starting point of a proper understanding of the conceptual foundation of such principles. It is not available simply on the basis of notions of fairness and justice. Although the principal operation of the constructive trust in Australia has been in the area of breach of fiduciary duty, it is not confined to such cases. His Honour said that once its predominantly remedial character is accepted, there is no reason to deny the availability of the constructive trust in any case where some principle of the law or equity calls for the imposition upon the legal owner of property, regardless of actual or presumed agreement or intention, of the obligation to hold or apply the property for the benefit of another.

Applying this to the case, Deane J said it was therefore necessary to consider whether there was any basis on which, independently of the actual intention of the parties, Mrs Muschinski could be entitled to relief by way of constructive trust in the particular circumstances of the case. His Honour observed that, where some consensual joint relationship or endeavour fails without attributable blame, the set of rules applicable to determine the distribution of assets and liabilities depends on the nature of the relationship that has broken down. For example, sometimes the law draws a line leaving assets and liabilities to be borne according to where they lie, as a matter of law, at the time of the failure. Where there are contractual provisions regulating the parties' rights and duties in the event of premature failure, those rules will be given effect. Where there are no such provisions, and a merely contractual relationship has been frustrated without fault on either side, contributions are generally refunded if there has been a complete failure of consideration in performance. Where the failed relationship is a partnership, the relevant rules of equity provide that the partners will ordinarily be entitled to a repayment (or proportionate repayment in the case of a fixed term partner) of their capital contributions after the discharge of the partnership debts. If the relevant relationship is a contractual joint venture, a similar rule of equity applies.

His Honour then reasoned that the rules applying to a premature dissolution of partnerships and the collapse of joint ventures (which provide for a proportionate refund of capital contributions), are only instances of a more general principle of equity, and that the circumstances of the case before his Honour provided the necessary context for the operation of that general principle. His Honour "more precisely defined" the circumstances in which the general principle operates as follows (at 620):

The principle operates in a case where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specially provided that that other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do.

His Honour noted that if the relationship between Mrs Muschinski and Mr Dodds was merely a commercial one, then there would be no doubt that Mr Dodds' conduct (in seeking to retain the unfair advantage of unforseen circumstances by asserting his legal entitlement to a one half interest without compensating Mrs Muschinski for the unintended gross disproportion between their contributions) is of the type which the general principle exists to preclude. Deane J noted, however, that the relationship between the parties was a mixture of the commercial and the personal. The presence of a personal element in the relationship does not displace the application of the general principle, but it introduces a multitude of additional "special considerations" which need to be taken into account in determining whether the conduct of the relevant party bears an unconscionable character. Deane J described it as "a practical equation between direct contributions in money or labour and indirect contributions in other forms such as support, home-making and family care". Deane J held that, in the circumstances of the case, the considerations arising from the personal relationship between Mr Dodds and Mrs Muschinski did nothing to override or negate the unconscionable character of Mr Dodds' conduct.

Deane J therefore concluded that equity required an adjustment of the parties' rights and obligations to compensate for the disproportion of their contributions. That adjustment involved a discharge of the debts involved in the joint undertaking and a proportionate repayment of the parties' capital contributions to the extent allowed by any sale proceeds. As to the distribution of any surplus (following the discharge of any debts incurred in their joint undertaking and the repayment of capital contributions), the extent to which the relevant principle of equity operates to qualify legal entitlement is only that to which it positively appears that it would be unconscionable for one party to assert or retain the benefit of property contributed by the other party. It may vary depending on the circumstances of each case. In that case, Deane J held that it would not be unconscionable for Mr Dodds to retain his one half share in any residue of the proceeds of the sale of the property.

Deane J therefore proposed to make an order declaring a constructive trust of the property to the effect that the parties held their respective legal interests as tenants in common upon trust (following payment of any joint debts) to repay to each their respective contribution and as to the residue for them both in equal shares.

Mason J agreed with Deane J. He commented that although it was not inequitable for Mr Dodds to retain his interest, it would be inequitable for him to do so without crediting to Mrs Muschinski her contributions to the acquisition and improvement of the property. That was because the parties shared an expectation that Mr Dodds would be making substantial contributions to the projected development. Mason J also expressed particular agreement with Deane J's application to the present case of the general principle underlying the proportionate repayment of capital contributions to joint venturers on the failure of a joint venture.

Stepping back from the detail for a moment, it is clear that although a majority of the court ultimately found for Mrs Muschinski, the constructive trust basis for that outcome was only accepted by a minority (that is Mason and Deane JJ, but rejected by Gibbs CJ, Brennan and Dawson JJ). It is therefore unclear whether that case stands as authority for the imposition of a constructive trust in those circumstances. The position was clarified two years later in Baumgartner v Baumgartner. As noted in J D Heydon and M J Leeming, Jacob's Law of Trusts in Australia, 7th ed (2006) LexisNexis Butterworths (at [1352]), the prevailing principle in Australia is a result of the adoption and adaptation in Baumgartner v Baumgartner by Mason CJ, Wilson and Deane JJ of what had been said by Deane J in Muschinski v Dodds.

Again, the facts of Baumgartner v Baumgartner are adequately narrated in the headnote to the report. The parties to a de facto relationship pooled their incomes for living expenses and fixed commitments. They lived at first in a unit owned by Mr Baumgartner, which they sold when they acquired a house in his name. The house was purchased with the aid of a mortgage in the name of Mr Baumgartner, who also contributed the net proceeds of sale of the unit. The parties' aggregate earnings were pooled in the proportions of roughly fifty-five percent by Mr Baumgartner and forty-five percent by Ms Baumgartner. They later separated and Mr Baumgartner asserted that the land was his sole property. Accepting the views expressed by Deane J in Muschinski v Dodds, all members of the court (Mason CJ, Wilson, Deane, Toohey and Gaudron JJ) held that Mr Baumgartner's assertion after the relationship had failed that the property that had been financed in part through the pooled funds was his to the exclusion of any interest in Ms Baumgartner was unconscionable conduct which attracted the intervention of equity and the imposition of a constructive trust.

Mason CJ, Wilson and Deane JJ delivered a joint judgment. Their Honours first held that the finding by the majority of the Court of Appeal that the parties held a common subjective intention to create a trust, was made on the basis of an impermissible alteration to the factual landscape as found by the primary Judge, and was therefore unsustainable. Their Honours then turned to the remaining question of whether, in the circumstances, Ms Baumgartner was entitled to relief by way of constructive trust. Their Honours quoted the passage from Deane J's judgment in Muschinski v Dodds which I have quoted above (at [89]), and said it was a:

... general equitable principle which restores to a party contributions which he or she has made to a joint endeavour which fails when the contributions have been made in circumstances in which it was not intended that the other party should enjoy them ...

...

... the constructive trust serves as a remedy which equity imposes regardless of actual or presumed agreement or intention "to preclude the retention or assertion of beneficial ownership of property to the extent that such retention or assertion would be contrary to equitable principle" ...

Their Honours described the parties' relationship as involving a pooling of earnings to meet all expenses and outgoings arising from their living together as a family (at 148), designed to ensure that their earnings would be expended for the purposes of their joint relationship, their mutual security and benefit, and to secure accommodation for themselves and their child (at 149). Accordingly, their Honours noted that the parties' contributions, financial and otherwise, were on the basis of, and for the purposes of, that joint relationship (at 149). In this situation, their Honours considered that, Mr Baumgartner's assertion, after the relationship had failed, that the property, which was financed in part through the pooled funds, is his sole property, beneficially, to the exclusion of any interest at all on the part of Ms Baumgartner, amounted to unconscionable conduct which attracted the intervention of equity and the imposition of a constructive trust.

When turning then to consider the terms of the constructive trust to be imposed, their Honours commented that, consistent with the maxim that equity favours equality, in circumstances where the parties have lived together for years and have pooled their resources and their efforts to create and (at least largely) finance a joint home, they should, as a starting point, share the beneficial ownership equally as tenants in common. However, that is subject to adjustment to avoid any injustice which would result if account were not taken of the disparity between the worth of their contributions (either financially or in kind). Their Honours found (and it was apparently the subject of agreement), that Mr Baumgartner's contributions were approximately fifty-five percent and Ms Baumgartner's were approximately forty-five percent. Further adjustments needed to be made, entitling Mr Baumgartner to repayment of the contributions effectively made by him before and after the period of the parties' pooling of resources, and entitling him to an amount equal to the value of furniture, taken by Ms Baumgartner after termination of the relationship, which was purchased by the parties during the period of pooling of resources.

Their Honours therefore asked the parties to agree on short minutes of order to the effect that the sale proceeds of the property would be first applied to discharge any debt outstanding under the mortgage; secondly, to effect the adjustments described above (and that Mr Baumgartner receive a lien over the property securing his entitlement to those adjustments); and thirdly, that the property would be held on trust for the parties in the respective percentages as described above.

In a separate judgment, Toohey J agreed with the joint judgment and added the observation that, in his view, the imposition of a constructive trust based on unconscionable conduct produced the same result as the imposition of a constructive trust for the prevention of unjust enrichment. Gaudron J also delivered a separate judgment, in which her Honour largely expressed agreement with the joint judgment.

A fundamental difference between constructive trusts and other forms of trusts, such as express and implied (including resulting) trusts, is that the constructive trust arises regardless of intention. As Deane J observed in Muschinski v Dodds, although the rationale of express and implied trusts is usually identified by reference to intention, the rationale of the constructive trust "must still be found essentially in its remedial function" (at 613). A constructive trust nonetheless requires identification of the traditional ingredients of subject-matter, trustee, beneficiary, and personal obligation attaching to property (at 614 per Deane J). Another similarity is that, once established or imposed, a constructive trust is a relationship governed by a coherent body of "traditional and statute law" (at 614 per Deane J).

Although widely followed in a number of subsequent cases, the reasoning in Baumgartner v Baumgartner has been widely criticised. In Jacob's Law of Trusts, J D Heydon and M J Leeming commented (at [1352] and [1353], footnotes omitted):

[1352] ... [Deane J] identified a general equitable principle which restores to any party contributions which that party has made in a joint endeavour which fails, the contributions having been made in circumstances that it was not intended the other party should enjoy them. Examples were given of premature partnership dissolution and collapse of joint ventures. In the latter regard, reference was made to United States decisions. However, an examination of those cases shows that they are examples of the fiduciary characterisation given in the United States to joint ventures generally, and contrary to the position established in Australia by United Dominions Corp Ltd v Brian Pty Ltd. Deane J saw the examples he gave as instances of the basic concern of equity to interpose and prevent the assertion or exercise of a legal right in circumstances where this would constitute unconscientious conduct ...

...

[1353] It may be said the reasoning in Baumgartner v Baumgartner, while purporting to be rooted in basic equity, gives no more predictability or consistency in result than that which follows from the English decisions espousing the 'new model' constructive trust. It remains unclear as to when and why the interposition of equity to prevent unconscientious reliance on legal rights in the Australian cases will give rise in equity to a proprietary rather than a personal right, and a proprietary right which is a constructive trust 'fashioned' by the court.

In John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; (2010) 241 CLR 1 (at 8), in the course of argument, Gummow J said, with reference to Muschinski v Dodds and Baumgartner v Baumgartner, "[i]t may be necessary to look at those cases some day", and in its judgment, the court described Baumgartner v Baumgartner in possibly narrow terms, describing it as a case "dealing with the property rights of de facto spouses after their relationship ended" (at [58] per French CJ, Gummow, Hayne, Heydon and Kiefel JJ). I am acutely cognisant of the proper place of special leave transcripts (Heydon v NRMA Ltd [2000] NSWCA 374; (2000) 51 NSWLR 1; NRMA Limited & Ors v Heydon S26/2001 [2001] HCATrans 439), but I simply note that in Australian Building & Technical Solutions Pty Ltd v Boumelhem [2009] NSWSC 460; (2009) 2 ASTLR 336, Ward J referred (at [49]) to the following exchange which took place in the special leave application of Friend v Brooker & Anor [2008] HCATrans 344:

GUMMOW J: There were a lot of cases cited in the Court of Appeal, including Muschinski and Baumgartner, but I can think of at least two occasions in the last 10 years in which we have referred to those cases, and it escaped the attention of counsel in the Court of Appeal. One was in Giumelli 196 CLR 101 at 113. The other is Bathurst City Council 159 CLR 566 [sic] at 585, which at least would suggest some caution in jumping into the pool with the words "Baumgartner" in front of it.

MR WALKER: Yes, your Honours, it is an important doctrine. We have to accept that. What I am trying to persuade your Honours is, however - - -

GUMMOW J: We say these things and hope that they will be read. It is a hope the flags from time to time. It is certainly flagged here.

In any event, the decisions which have applied Baumgartner v Baumgartner assist in distilling precisely what is required for the imposition of a constructive trust of the nature contended for by the plaintiffs in this case. In West v Mead [2003] NSWSC 161; (2003) 13 BPR 24,431, Campbell J said (at [58], [59] and [62]):

[58] Before any particular asset can become subject to a constructive trust in accordance with the Baumgartner principle, one needs to have a joint relationship or endeavour, and an asset acquired in the course of, and for the purposes of, that joint relationship or endeavour ...

[59] In accordance with this approach, a plaintiff needs to establish that there is indeed a joint endeavour between the parties, in which expenditure is shared for the common benefit. It is also necessary to identify what the scope of that joint endeavour is. It is a question of fact, for any couple, what the scope of the joint endeavour they are engaging in is ...

...

[62] The Baumgartner type of constructive trust is imposed to prevent an unconscionable assertion of legal title, in circumstances where the parties had no explicit intention about how the legal title would be held in the circumstances which have arisen. By contrast, the presumption of a resulting trust is one which seeks to give effect to the intention of the parties, by making a presumption about what that intention was [citations omitted]. Even so, that is not to say that the intention of the parties has no role to play in whether a Baumgartner constructive trust should be held to exist. Part of the justification for imposing the Baumgartner constructive trust is that the parties have jointly been building up assets, on the basis that those assets will be available for the joint endeavour in future. Part of the reason why it can be unconscionable to let the legal title lie where it falls, if the relationship fails, is that each knew that the other was contributing to a common pool on the basis that the pool, and assets acquired from it, would be used for their ongoing common benefit.

The defendants submit that although the parties need not have a common subjective intention to create a trust for the imposition of a Baumgartner trust, it is a requirement that the parties had a common intention to enter into a joint enterprise. The defendants submit that the relevant distinction is between an intention to create a trust (which is not required) and an actual intention to enter into a joint enterprise (which is required). In support of their submission, the defendants cite Pullin J (with whom Hasluck J and in effect Murray J at [46] agreed) in Lloyd v Tedesco [2002] WASCA 63; (2002) 25 WAR 360 (at [86], emphasis added):

[86] What has to be established over and above the de facto relationship is that the parties embarked upon a joint enterprise in the nature of a "commercial venture". In my view, the learned trial Judge correctly observed that the proof of the joint endeavour required proof of an actual intention to pool resources. Proving the existence of an intention of a joint enterprise in the nature of a "commercial venture" will usually lead to evidentiary issues, such as whether the parties expressly agreed to embark upon such a joint enterprise or whether that intention can be inferred from all the circumstances.

These comments would appear to be consistent with the High Court's formulation of the principle (Baumgartner v Baumgartner at 149; see also P W Young, C Croft and M L Smith, On Equity (2009) Lawbook Co at [6.780], page 448). In Australian Building & Technical Solutions Pty Ltd v Boumelhem, Ward J adopted Campbell J's analysis in West v Mead, and articulated the principles as follows (at [51]-[53]):

[51] First, it is necessary that there be both a joint relationship or endeavour, in which expenditure is shared for the common benefit in the course of and for the purposes of which an asset is acquired. The scope of the joint venture in which the parties were engaging may be of relevance and as Deane J in Muschinski considered, may change from time to time.

[52] Secondly, the substratum of that joint relationship or endeavour, must have been removed or the joint endeavour prematurely terminated "without attributable blame".

[53] Thirdly, there must be the requisite element of unconscionability - it would be unconscionable for the benefit of those monetary and non-monetary contributions to be retained by the other party to the joint endeavour.

The plaintiffs submitted that, as a matter of principle, proof of the precise words spoken by the parties at the time they embarked upon the transactions leading to the acquisition of the relevant property is not essential for a finding on the balance of probabilities that there was a joint endeavour, nor is the lack of objective record to corroborate the alleged arrangements necessarily fatal in such cases. No doubt those propositions are true as a matter of principle (see Australian Building & Technical Solutions Pty Ltd v Boumelhem at [83]-[84]), but equally, the absence of such matters will affect proof.

The plaintiffs submitted that, as the evidence they adduced was allegedly sufficiently weighty, the defendants bore an onus to displace the plaintiffs' allegations, which they failed to do. In support of that submission, the plaintiffs relied on certain comments made by Foster J in Jeffrey-Potts v Garel [2012] VSC 237 (at [103]-[105]). In my view, Foster J was not stating a new principle relating to onus of proof specifically applicable to cases of this nature. His Honour was simply applying the second of three general propositions articulated by Heydon J in Strong v Woolworths Ltd [2012] HCA 5; (2012) 246 CLR 182 (at [52]-[54], footnotes omitted):

[52] In the first sense, "evidential burden" refers to the duty of one party (usually the party bearing the legal (i.e. persuasive) burden, who in most instances will be the plaintiff) to call sufficient evidence to raise an issue as to the existence or non-existence of a fact in controversy ...

[53] In the second sense, "evidential burden" refers to circumstances in which a plaintiff calls evidence sufficiently weighty to entitle, but not compel, a reasonable trier of fact to find in the plaintiff's favour. There is then said to be an "evidential burden" in the sense of a "provisional" or "tactical" burden on the defendant: if the defendant fails to call any or any weighty evidence, it will run a risk of losing on the issue - that is, a risk that at the end of the trial the trier of fact will draw inferences sufficiently strong to enable the plaintiff to satisfy the legal (i.e. persuasive) standard of proof. The "provisional" or "tactical" burden raises the question whether a defendant should as a matter of tactics "call evidence or take the consequences, which may not necessarily be adverse".

[54] The third sense in which the expression "evidential burden" is employed arises where a plaintiff, in discharging the evidential burden in the first sense, calls evidence so strong that a reasonable trier of fact would be bound to decide the issue in the plaintiff's favour if the defendant calls no evidence.

Returning then to the principles governing the imposition of a Baumgartner constructive trust, I would adopt Ward J's analysis in Australian Building & Technical Solutions Pty Ltd v Boumelhem, but emphasise that whilst there is no need for the parties to possess an intention to create a trust, the parties' intention remains relevant in that it must be shown that "the benefit of money or other property contributed by one party [was] on the basis and for the purposes of the [joint] relationship or endeavour" (Muschinski v Dodds at 620). Therefore the plaintiffs must demonstrate both the existence of a joint relationship or endeavour, and that the parties made contributions on the basis and for the purpose of that joint relationship or endeavour.

Whether the plaintiffs have established the existence of a joint endeavour, and that they made contributions on the basis and for the purpose of it, calls for a detailed analysis of the evidence which I undertake below.

Conventional estoppel

As a stand-alone claim, the plaintiffs allege that Unit 1 in the Frederick Street property was held by Broadwater Rest on trust for the benefit of DLCP, on terms that it would be re-conveyed from Broadwater Rest to DLCP for nil consideration following the commercialisation of the Memjet technology. The plaintiffs seek such a re-conveyance. The defendants deny the existence of a trust arrangement, and submit that the alleged trust arrangement must fail for want of compliance with writing requirements under ss 23C and 54A(1) of the Conveyancing Act 1919. The plaintiffs do not contest that the relevant provisions in the Conveyancing Act apply to an agreement to create a trust over land, but submit that the requirement for writing does not defeat the alleged trust arrangement on the basis that a conventional estoppel arises from the conduct of the parties in the period 1999 to 2012. The particular conduct in that period allegedly founding the estoppel is said to include:

that Ms Lee never obtained a key to the unit;
that Ms Lee visited the unit on only two occasions, one of which involved her breaking through a roller door;
that Ms Lee never rented or sought to collect rent in respect of the unit;
that Ms Lee allowed Ms Craig's daughter and her fiancé to live in the unit and never enquired as to whether they had moved out;
that Ms Lee only ever paid council rates and a limited number of strata rates, but no other bills;
that Ms Lee did not seek to challenge the caveat which Ms Craig lodged in 2009, claiming an interest in the unit.

It may be said that there are three general classes of estoppel, namely estoppel of record, estoppel of writing, and estoppel in pais, and that estoppel in pais includes both estoppel by convention (a common law doctrine) and estoppel by representation (a doctrine of equity) (Legione v Hateley [1983] HCA 11; (1983) 152 CLR 406 at 430 per Mason and Deane JJ). The principles determining whether a conventional estoppel arises have been stated on numerous occassions.

Isaacs J said that the "governing principle" is that "when parties have agreed to act upon an assumed state of facts, their rights between themselves are justly made to depend on the conventional state of facts, and not on the truth" (Dabbs v Seaman [1925] HCA 26; (1925) 36 CLR 538 at 549). Mason and Deane JJ said it is "the common law estoppel which precludes a person from denying an assumption which formed the conventional basis of a relationship between himself and another or which he has adopted against another by the assertion of a right based on it" (Legione v Hateley at 430). Gibbs CJ, Mason, Wilson, Brennan and Dawson JJ said it "is a form of estoppel founded not on a representation of fact made by a representor and acted on by a representee to his detriment, but on the conduct of relations between the parties on the basis of an agreed or assumed state of facts, which both will be estopped from denying" (Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) [1986] HCA 14; (1986) 160 CLR 226 at 244).

The "classic statement of [the underlying] principle" (Legione v Hateley at 430) is said to be that of Dixon J in Thompson v Palmer [1933] HCA 61; (1933) 49 CLR 507 (at 547, citations omitted):

In early March 2003, DLCP refinanced the late 1999 loan from Westpac, which was secured against the Lushington Street property. The only contemporaneous document indicating that such a refinancing took place is a settlement sheet prepared by the solicitors acting for DLCP on the loan transaction (CB 1322). According to the settlement sheet, the lender/mortgagee appears to be a "SA Teen", and the amount borrowed was $240,000, of which $165,445.77 was paid to discharge Westpac's existing mortgage, and $59,896.73 was paid to DLCP (as surplus). The balance of the loan monies were used to meet various expenses associated with the transaction.

Inferences from property and financing transactions

Relevantly, what emerges from the analysis of the plaintiffs' property and financing transactions is that almost each occasion on which the plaintiffs encumbered one or more of their properties coincided with an acquisition of further property or another business purpose for their own benefit. Contrary to what was submitted on behalf of the plaintiffs, I do not think that Mr and Ms Craig (or any of their corporate entities) were "mortgaging themselves up to the hilt" (T762.37) to give money to the defendants. The inference which is therefore open, and plausible, is that the plaintiffs obtained financing predominantly for their own purposes, but provided excess funds, only as was available to them from time to time, to meet requests from the defendants.

For example, the 1995/1996 mortgage granted by the plaintiffs to Westpac over the Frederick Street properties coincided with the plaintiffs' acquisition of the Frederick Street property. The 1999 mortgage which appears to have been granted over the Pearl Beach property coincided with the plaintiffs' acquisition of the Pearl Beach property. The mortgage granted by the plaintiffs to Westpac on 4 March 1999 coincided with the conclusion of the construction of the Frederick Street properties, and was probably for the purpose of transferring an accrued encumbrance over the family home to the investment properties at Frederick Street. Indeed, that is consistent with the purpose of the loan, as represented by the plaintiffs to Westpac at the time of application for the loan.

Pausing here for a moment, I was invited by counsel for the plaintiffs, to find that his own client had misled the bank, and that the real purpose of the loan was to make advances to the defendants rather than for the sated purpose of recouping construction costs. I reject that submission, as it is contrary to contemporaneous material and there is nothing in the evidence to support it.

Moving on, the inflow of settlement monies in early 2000 were undoubtedly used to discharge a mortgage which Westpac had against the Frederick Street mortgages. The mortgage granted to Westpac in early 2000 coincided with the acquisition of the Lushington Street property. The mortgage granted by the plaintiffs in favour of Westpac in September 2001 was for the stated purpose of meeting expected construction costs for developing Pearl Beach. For reasons already stated, I reject the submission to find that this represented purpose was inaccurate. The mortgage granted to AAA Finance in late December 2001 was predominantly for the purpose of discharging a Westpac mortgage over the White Street properties. It is true, that it appears that a loan from AAA Finance secured against the White Street and Pearl Beach properties was for the primary or perhaps even the sole purpose of advancing money to the defendants, but such monies were seemingly soon repaid by the defendants (e.g. in March 2002 it is alleged DLCP paid approximately $84,000 on account of SRPL staff wages, and by September 2002 SRPL had paid more than $100,000 directly to AAA Finance). The mortgage in favour of "SA Teen" in early March 2003 was for the purpose of discharging an existing Westpac mortgage over the Lushington Street property.

In the light of this analysis, I find it difficult to accept the submission that the plaintiffs heavily burdened themselves and encumbered their properties in order to advance monies to the defendants. To the contrary, I think it is clear that the plaintiffs were helping themselves, but assisted the defendants when they were able to conveniently do so.

Frederick Street events

Since the plaintiffs' claim in relation to the Frederick Street property is separable from the balance of their case, I propose to deal with the facts relevant to that claim separately. The Frederick Street claim effectively stands or falls depending on whether the evidence makes good their conventional estoppel submission. I have identified above the relevant principles governing conventional estoppel, but I should repeat what the High Court emphasised in Con-Stan Industries of Australia v Norwich Winterthur Insurance (Australia) Ltd, namely that "there is no estoppel unless it can be shown that the alleged assumption has in fact been adopted by the parties as the conventional basis of their relationship" (at 244).

Ms Craig alleges that on or about 23 September 1999, Ms Lee called Ms Craig to advise that Ms Lee and Mr Silverbrook wanted to purchase two units at Frederick Street from Mr and Ms Craig, and that "when the money came in they would give the two units back to [Mr and Ms Craig] unencumbered" and that the units would be held on trust for Mr and Ms Craig. Ms Craig alleges she then spoke to Mr Craig, before calling Ms Lee to advise that they agreed to the transfer of the units, to be held on trust and returned unencumbered following commercialisation of the Memjet technology.

Ultimately, there was a transfer of only one unit to Broadwater Rest, namely Unit 1/49 Frederick Street (with contracts for the sale of that unit being exchanged shortly after 12 October 1999, and the transaction settling on 7 January 2000). It is unclear why only Unit 1 was transferred to Broadwater Rest rather than Units 1 and 2. Ms Craig alleges that Ms Lee advised her in a conversation that she was unable to proceed with the purchase of Unit 2. Ms Lee denies that such a conversation took place. In the end, Unit 2 was sold to a third party for a price higher than that for which Unit 1 was sold to Ms Lee.

In any event, the defendants deny there was any trust arrangement in place in relation to the unit they acquired, and assert that the transaction was simply a conventional conveyance.

In cross-examination, counsel for the plaintiffs investigated the reasons for which Ms Lee acquired the unit. Ms Lee gave evidence that she acquired the unit for a variety of family reasons, including so that her father could visit sick relatives living in or around the Gosford area. However, she later conceded that her father ultimately never visited the unit, and accepted that "the family reasons fell through" (T496.24-T496.25).

During cross-examination, a number of concessions were made which firmly established that the conveyancing transaction was in fact not what may describe as in accordance with conventional practice. For example, whilst Ms Lee accepted that "part of a normal conveyance" is for the purchaser to receive the key on settlement, she conceded that she never in fact received the key for the Frederick Street property (T496.27-T493.17). Ms Lee explained that she did not receive a key because the property was occupied by tenants (T497.25-T497.36). Ms Lee conceded she did not know the tenants' tenure, and when she was asked how her father could visit the unit given the presence of the tenants, she said "it would have been easy with notice to have a tenant not in the property" (T497.31-497.36).

While Ms Lee also accepted that the "usual conveyancing practice" for a property occupied by a tenant at the time of settlement, involved a notice being sent to the tenant directing future rental payments to go to the purchaser, she conceded that no such notice was given in this transaction, because the rent could have been collected by "another person ... like the Craigs" (T497.38-T500.8). Despite these concessions, Ms Lee refused to qualify her evidence that the transaction was a "standard" or "normal conveyance" (T500.10-T500.20), and said that Mr and Ms Craig were to collect rent on her behalf (T500.26-T500.28), even though Mr and Ms Craig never accounted to Ms Lee for any rental income (T.500.48-T.500.50), and there is no written record of any arrangement with Mr and Ms Craig (T501.20-T500.21).

There were other unusual features about the transaction, including that the sale contract indicated that the property would be sold with vacant possession, while Ms Lee in fact knew that there were tenants occupying the property (T502.8-T502.16); that Ms Lee only visited the property on two or three occasions and had to break in on one of those occasions (T503.9-T503.22), even though at the time she decided to drive to the property she knew she did not have a key (T504.43-T504.48); that Ms Lee only paid some of the outgoings in relation to the property, including council fees, and limited strata rates, but no other bills; that Ms Lee did not seek to challenge a caveat which Ms Craig lodged in 2009 claiming an interest in the property (Exhibit P11); that Ms Lee instructed her solicitors retained at the time to write letters (dated 121 December 2012 and 5 January 2013 respectively) alleging that Mr and Ms Craig had been "fraudulently" using the property (CB 4211 and CB 4215), and that the collection of rent from the property by Ms Craig was a recent discovery when Ms Lee had probably known for two years that the premises were being let out by Mr and Ms Craig (T394.45-T394.50).

Ultimately, the plaintiffs bear the burden of demonstrating the existence of a conventional estoppel. The "common assumption" which the plaintiffs contend was adopted by the parties was that the property, though conveyed to a defendant corporate entity, would be held on trust for Mr and Ms Craig or one of their entities. The evidence in support of that assertion comes from Ms Craig's oral testimony about the negotiations, and the unusual events which took place after the transaction.

In relation to Ms Craig's affidavit (and oral) evidence about the conversations which allegedly occurred prior to the transaction, the defendants submit that legal principle does not permit me to take into account the evidence of Ms Craig about what was said between the parties prior to the transaction, on the basis that such evidence was superseded by entry into the contract. There are, as I have said above, conflicting lines of authority on this point. I do not need to express any view, because even if I was to admit Ms Craig's evidence of the alleged pre-contractual negotiations, there remains a serious question as to Ms Craig's credibility. Given the observations I have already made about Ms Craig's credit, I am simply not prepared, in the absence of relevant contemporaneous material or corroboration from an independent witness, to accept her affidavit or oral testimony that there was an agreement that the property would be held on trust.

In relation to the evidence of the unusual events which took place after the sale transaction, the plaintiffs attribute such unusual features to the existence of a trust arrangement in the terms Ms Craig alleges. Under ordinary circumstances, I think that such a submission would be persuasive. But I think the circumstances of this case are far from ordinary. In particular, it is clear that the relationship between the parties was highly unusual. Although the features of this sale transaction could be consistent with the existence of a trust arrangement, I think it is also explicable by the nature of the relationship between the parties. Once one appreciates the nature of the relationship between the parties (for example, the provision of blank cheques from one to the other and the failure to properly account for large sums of money given by one to the other), it would hardly be surprising to learn that Ms Lee in fact did purchase the property for personal reasons, but permitted Mr and Ms Craig or their daughters to use it for their family purposes as and when they needed.

Conclusion

As close friends, I am prepared to accept that on many occasions over the years, Ms Craig and the first and second defendants discussed where the defendants' inventions were at from time to time. I am also prepared to accept that, at least up until perhaps 2003, significant detail may have been imparted by the defendants from time to time to Ms Craig about their hopes or expectations about the commercialisation of the various technologies, and the details of the persons investing. I have little doubt that the second defendant in particular kept Ms Craig informed and indeed enthralled at the prospect of SRPL's commercial success, and that Ms Craig was there when it counted, as it were, making funds available for wages and other pressing needs, and when the first defendant and/or second defendant had either little interest or little ability to do so. Likewise the defendants made funds available to the plaintiffs from time to time. But the provision of assistance cannot simply be equated with the existence of a joint endeavour or relationship, or with a pooling of resources, in the relevant sense. That is particularly so on the unusual facts of this case where the parties, seemingly haphazardly provided friendly, ad hoc assistance to one another over a number of years. It was not suggested, and it would be untenable to suggest, that the assistance the defendants provided to the plaintiffs should result in the defendants having an interest in the plaintiffs' property development activities.

Having carefully considered the various contemporaneous materials, I am simply not satisfied that there was a pooling of the respective parties' resources with any hope or expectation on the part of Ms Craig or any promise made to her about participation in profits from the technologies as and when commercialised or indeed any equity at all in any of the technologies invented by the defendants. I am not persuaded that the defendants at any point, notwithstanding the rather unsatisfactory nature of their evidence, made any of the representations as alleged by Ms Craig insofar as they relate to profits and/or equity participation in the technologies, or insofar as they relate to an alleged trust arrangement over Unit 1, Frederick Street.

Although the affidavit evidence of Ms Craig was both lengthy and detailed, there was little or no contemporaneous material, in my view, relevant to the critical issues. I have found it necessary to analyse her evidence extensively. I have found it helpful to do so by reference both to the chronological order of the events alleged, and a number of specific topics. That has unfortunately produced some repetition.

To summarise, the plaintiffs alleged that, on commercialisation of certain technology developed by one or more of the defendants, one or more of the plaintiffs would be entitled to a share of the profits. In substance, that allegation rested on two alternative (but related) grounds. First, the plaintiffs alleged that an agreement, arrangement or understanding to that effect was reached at a meeting in January 2000. Secondly, the plaintiffs alleged that even if no such understanding was formed at the alleged meeting in January 2000 in isolation, the parties' conduct, not only at the meeting, but also over a period of time extending from several years prior to that alleged meeting, to several years after it, is such as to warrant the imposition of a constructive trust to the same effect. The defendants dispute this. In my view, the evidence is overwhelmingly against the plaintiffs.

I have come to the firm conclusion that no meeting took place in January 2000 (or at all) at which the parties formed an agreement or understanding of the nature alleged by the plaintiffs. The success of the plaintiffs' case regarding the alleged January 2000 meeting necessarily depended on my acceptance of the meaning ascribed by Ms Craig to various unintelligible notations on one of two pages allegedly made at that meeting. In my view, not only did Ms Craig not produce contemporaneous material or other corroborative evidence supporting her detailed assertions as to the meaning of the various notations, but Ms Lee gave evidence, supported by contemporaneous material, positively proving that many of the notations critical to the plaintiffs' case in fact bore a meaning entirely unrelated to that ascribed by Ms Craig. Counsel for the plaintiffs did not cross-examine Ms Lee on the notations and on the quite specific and detailed account by Ms Craig which I regard as critical to the plaintiffs' case. In giving evidence as to the meaning of these notations, Ms Craig went to such lengths, and descended into such a level of detail, and did so, in my view, in such an overly elaborate manner, that it is impossible to resist the conclusion that her evidence was largely contrived. In hindsight, I find it unsurprising that it took Ms Craig two years to prepare her affidavit, as it would have required an enormous degree of diligence, careful consideration and imagination to cover, and to appear to cover, every contingency. Her attempts, unrealistically, to breath life into every squiggle on Document B, for example, leaves me in no doubt that Ms Craig would take any course she thought expedient to advance her case.

It is true that in closing submissions the plaintiffs largely abandoned their pleaded case of a formal agreement arising from the January 2000 meeting. However, the analysis of that alleged meeting remains important not only because it is relevant to determining whether there existed a joint endeavour or relationship (to provide the necessary context for the imposition of a Baumgartner constructive trust), but also because of matters of credibility.

There is competing evidence as to whether certain amounts passing between the parties should be characterised as payments for services, interest-free loans, advances between friends, repayments of such advances, or gratuitous payments from the defendants to the plaintiffs. There is, however, in my view, no sound evidentiary basis for characterising any of these payments as being made in the course of and for the purpose of a joint relationship or endeavour, or on any understanding of an equity participation by any of the plaintiffs.

The parties never indicated in writing that any agreement, arrangement, understanding, expectation or joint endeavour of the sort alleged by the plaintiffs, existed. Again, the absence of any contemporaneous record, in the years that followed January 2000, of a transaction supposedly valued at more than $9 million, is significant. In the little available correspondence and other contemporaneous material in the months and years following January 2000, there is no reference, either specifically or generally, to any agreement, arrangement, understanding or even expectation of profits or revenues from the commercialisation of technology. There is nothing suggesting the plaintiffs were interested to learn of the progress of commercialisation from time to time, even though this was the event which would supposedly trigger their entitlement to significant sums of money and alleviate their financial distress. There is no mention by the plaintiffs of an expected revenue stream to creditors and mortgagees who were hounding them for repayment of loans. Even on Ms Craig's evidence, there was apparently no mention, during her meeting of 2008 with Mr Silverbrook and in her follow-up email, of any expectation of profits or the existence of any relevant understanding or joint endeavour, in either a general or specific sense.

Characterising the plaintiffs' payments to the defendants in the months and years prior to January 2000 as necessarily either advances (to assist the defendants), or alternatively, as fees due to the defendants on account of services rendered, is difficult. The difficulty arises because there is contemporaneous material unequivocally stating that for the seven years prior to January 2000, the plaintiffs had paid fees to the defendants on account of technical support services, and that on many occasions such fees were "in the tens of thousands". The odd, unrounded, and sporadic nature of the monies between the parties (at least prior to mid 2003) is consistent with the payments being for services, bills, or friendly loans to assist as and when each party was able to do so.

To the undefined extent that monies were advanced by the plaintiffs for the purpose of assisting the defendants (rather than a payment for services provided by the defendants), the little contemporaneous material available indicates that such monies were advanced with the expectation of repayment of those same amounts without interest, rather than a repayment of any multiple of those amounts or a percentage of profits generated by the defendants' inventions. The evidence shows that Ms Craig persistently felt a need to prepare financial reconciliations to gauge her position in relation to the defendants, that she was often begging the defendants for advances of money during times of financial distress in order to meet mortgage repayments, that she was prepared to be employed by the defendants to work to earn those advances, and that at the time the defendants stopped making regular monthly payments to the plaintiffs she believed that there were still monies unrepaid by the defendants to the plaintiffs. The financial reconciliations she prepared compared the sums she had advanced against the amounts she had been repaid, rather than against an alleged promised equity-based payment of some $9 million.

An analysis of the plaintiffs' property and financing transactions indicates, contrary to the plaintiffs' submissions, that the times at which the plaintiffs encumbered their properties usually coincided with a time when they were in need of funds for their own property development business. Although the plaintiffs clearly did provide monies to the defendants, from time to time, from their secured borrowings, they did so as and when they could, and the defendants made payments back fairly quickly either to the plaintiffs or to the plaintiffs' creditors directly (in the case of AAA Finance).

The better view of the evidence is that the payments by the defendants to the plaintiffs were not in connection with the alleged January 2000 agreement or some joint endeavour, but were either repayments of advances previously made by the plaintiffs to the defendants, or simply payments made, sometimes gratuitously, without documentation and without interest charges, in recognition by the defendants of the plaintiffs' financial difficulties, and on the basis that the plaintiffs would repay such advances only if and when they could. It was only Ms Craig who ever sought to conduct financial reconciliations. In particular, the regular payments of $16,000 by the defendants to the plaintiffs were expressly stated in the available contemporaneous material to be linked to the plaintiffs' monthly mortgage repayment obligations, rather than to the alleged January agreement or some other equity arrangement or joint endeavour.

I have also rejected the plaintiffs' claim for a reconveyance of Unit 1 Frederick Street. There is no contemporaneous material supporting the existence of a trust arrangement, and there is no mention of such an arrangement in communications where one would have excepted such a reference to appear, nor is there any request by the plaintiffs, during the times when the plaintiffs were under immense financial pressure, for the reconveyance to which they were supposedly entitled. The admittedly unusual features of the sale of the unit from DLCA to Broadwater Rest are explicable by the nature of the unusual relationship that existed between the parties at the time. Finally, insofar as this claim depends on Ms Craig's uncorroborated oral assertions, and therefore her credibility, I am not satisfied that such an arrangement existed. On the unusual facts of this case, as I have found them, I do not think the parties adopted an assumption that there was a trust.

It follows that I would dismiss the plaintiffs' proceedings in their entirety. I invite the parties to send to my Associate short minutes of order giving effect to my reasons and to arrange with my Associate a suitable time to re-list the matter to address the question of costs, unless it is the subject of agreement.

**********

Decision last updated: 15 November 2013

Medium Neutral Citation:	Lorretta Kistmah Craig and Ors v Kia Silverbrook and Ors [2013] NSWSC 1687
Hearing dates:	22, 26, 27, 28, 29, 30 August 2013, 2, 3, 4, 5, 18 September 2013, further written submissions on 26, 30 September 2013
Decision date:	15 November 2013
Jurisdiction:	Equity Division
Before:	Sackar J
Decision:	See paragraph [524]
Catchwords:	EQUITY - Baumgartner constructive trust - whether parties pooled resources - whether parties were engaged in a joint endeavour - whether parties acted in the course of, and for the purposes of, a joint relationship or endeavour - relevance of parties' intention to create a joint endeavour. ESTOPPEL - estoppel by convention - whether parties had adopted a common assumption as to the existence of a trust arrangement. EVIDENCE - burden of proof - whether defendants bear an onus to displace plaintiffs' allegations - difficulty of proof with sufficient precision of words allegedly spoken several years ago absent contemporaneous record - rejection of a witness' evidence does not necessarily prove or require acceptance of the opposite of what was asserted - relevance of failure to raise a matter in correspondence where the relationship between the parties is such that a particular reply might be expected.
Legislation Cited:	Conveyancing Act 1919 Fair Trading Act 1987 Bounty (Computers) Act 1984 (Cth) Trade Practices Act 1974 (Cth)
Cases Cited:	Allen v Roughley [1955] HCA 62; (1955) 94 CLR 98 Amalgamated Investment and Property Co Ltd v Texas Commerce International Bank Ltd (in liq) [1982] QB 84 Apollo Shower Screens Pty Ltd v Building and Constructions Industry Long Service Payments Corp (1985) 1 NSWLR 561 Australian Building & Technical Solutions Pty Ltd v Boumelhem [2009] NSWSC 460; (2009) 2 ASTLR 336 Baumgartner v Baumgartner [1987] HCA 59; (1987) 164 CLR 137 Blatch v Archer (1774) 1 Cowp 63 Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 Browne v Dunn (1893) 6 R 67 (HL) Byrnes v Kendle [2011] HCA 26; (2011) 243 CLR 253 Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) [1986] HCA 14; (1986) 160 CLR 226 Cubillo v Commonwealth of Australia [2000] FCA 1084; (2000) 174 ALR 97 Dabbs v Seaman [1925] HCA 26; (1925) 36 CLR 538 Dovuro Pty Ltd v Wilkins [2003] HCA 51, (2003) 215 CLR 317 Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 Friend v Brooker & Anor [2008] HCATrans 344 Gissing v Gissing [1971] AC 886 Grey v Australian Motorists & General Insurance Co [1976] 1 NSWLR 669 Grundt v Great Boulder Pty Gold Mines Ltd [1937] HCA 58; (1937) 59 CLR 641 Helton v Allen [1940] HCA 20; (1940) 63 CLR 691 Heydon v NRMA Ltd [2000] NSWCA 374; (2000) 51 NSWLR 1 Hopcroft & Edwards v Edmunds [2013] SASCFC 38; (2013) 116 SASR 191 Jeffrey-Potts v Garel [2012] VSC 237 John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; (2010) 241 CLR 1 Jones v Sutherland Shire Council [1979] 2 NSWLR 206 Le Meilleur Pty Ltd and Others v Jin Heung Mutual Savings Bank Co Ltd [2011] NSWSC 1115, (2011) 256 FLR 240 Legione v Hateley [1983] HCA 11; (1983) 152 CLR 406 Lloyd v Tedesco [2002] WASCA 63; (2002) 25 WAR 360 Lustre Hosiery Ltd v York [1935] HCA 71; (1935) 54 CLR 134 McGraddie v McGraddie and another [2013] UKSC 58; [2013] 1 WLR 2477 Moratic Pty Ltd v Gordon [2007] NSWSC 5; (2007) 13 BPR 24,713 Murtagh v Murtagh [2013] NSWSC 926 Muschinski v Dodds [1985] HCA 78; (1985) 160 CLR 583 NRMA Limited & Ors v Heydon S26/2001 [2001] HCATrans 439 Pennimpede v Pennimpede [2009] NSWSC 85 Pitcher v Langford (1991) 23 NSWLR 142 R v Birks (1990) 19 NSWLR 677 R v Manunta (1989) 54 SASR 17 Rosenberg v Percival [2001] HCA 18; (2001) 205 CLR 434 Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; (2007) 69 NSWLR 603 Shaddock & Associates Pty Ltd v Parramatta City Council (No 1) [1981] HCA 59; (1981) 150 CLR 225 Steinberg v Federal Commissioner of Taxation [1975] HCA 63; (1975) 134 CLR 640 Strong v Woolworths Ltd [2012] HCA 5; (2012) 246 CLR 182 Thomas v Hollier [1984] HCA 35; (1984) 156 CLR 152 Thompson v Palmer [1933] HCA 61; (1933) 49 CLR 507 Vetter v Lake Macquarie City Council [2001] HCA 12; (2001) 202 CLR 439 Waterman v Gerling Australia Insurance Company Pty Ltd [2005] NSWSC 1066; (2005) 65 NSWLR 300 Watson v Foxman (1995) 49 NSWLR 315 West v Mead [2003] NSWSC 161; (2003) 13 BPR 24,431 Young v Tibbits [1912] HCA 23; (1912) 14 CLR 114
Texts Cited:	J D Heydon, Cross on Evidence, 9th ed (2013) LexisNexis Butterworths J D Heydon and M J Leeming, Jacob's Law of Trusts in Australia, 7th ed (2006) LexisNexis Butterworths J J Spigelman, "Truth and the Law" (2011) 85(11) Australian Law Journal 746 P W Young, C Croft and M L Smith, On Equity (2009) Lawbook Co Ritchie's Uniform Civil Procedure NSW
Category:	Principal judgment
Parties:	Lorretta Kistmah Craig (First Plaintiff) Vincent Desmond Craig (Second Plaintiff) D & L Craig and Associates Pty Ltd (Third Plaintiff) DLC Properties Pty Ltd (Fourth Plaintiff) DLCF Pty Ltd (Fifth Plaintiff) Kia Silverbook (First Defendant) Janette Lee (Second Defendant) Silverbrook Research Pty Ltd (Third Defendant) Serif Pty Ltd (Fourth Defendant) Le'Brook Pty Ltd (Fifth Defendant) Precision Mechatronics Pty Ltd (formerly Lee Edison and Associates Pty Ltd) (Sixth Defendant) Priority Matters Pty Ltd (formerly Broadwater Rest Pty Ltd) (Seventh Defendant) Memjet Pty Ltd (Eighth Defendant) Allplaces Pty Ltd (formerly Cosmic Osmo Pty Ltd) (Ninth Defendant) Chesreal Pty Ltd (Tenth Defendant) Memjet Ltd (formerly Pamry Ltd) (Eleventh Defendant) Clamate Pty Ltd (Twelfth Defendant) Donatable Pty Ltd (Thirteenth Defendant)
Representation:	Counsel: R Newlinds SC and D Sulan (Plaintiffs) M Walton SC, Dr K Stern SC and V Bosnjak (Defendants) Solicitors: Johnson Winter & Slattery (Plaintiffs) In Legal (Defendants)
File Number(s):	2010/333159

Proceedings	[1]
Background facts	[7]
Legal principles	[77]
Baumgartner principles	[78]
Conventional estoppel	[111]
Watson v Foxman and burden of proof	[122]
Admissions on questions of mixed fact and law	[127]
The witnesses	[134]
Ms Craig	[144]
The early years	[152]
Overview of the alleged meeting on 20 January 2000	[221]
Detailed analysis of the alleged meeting on 20 January 2000	[233]
Events following the alleged 20 January 2000 meeting	[309]
The year 2001	[321]
The year 2002	[339]
The year 2003 and following	[349]
Mr Craig	[372]
Mr Silverbrook	[373]
Ms Lee	[384]
Ms Yan-Colebourn and Mr Govender	[409]
Ms Yan-Colebourn's evidence	[413]
Mr Govender's evidence	[422]
Conclusions as to the evidence of Ms Yan-Colebourn and Mr Govender	[427]
Mr Tilbrook	[431]
Payments and emails between the parties	[436]
Property and financing transactions	[468]
Inferences from property and financing transactions	[495]
Frederick Street events	[500]
Conclusion	[511]