Dennis v Dennis
[2016] TASSC 62
•25 November 2016
[2016] TASSC 62
COURT: SUPREME COURT OF TASMANIA
CITATION: Dennis v Dennis [2016] TASSC 62
PARTIES: DENNIS, Nicholas Cashmore
DH DENNIS PTY LTD
v
DENNIS, Graham Archibald
ALEXANDER, Anthony William
DENNIS, Telfer Anne
FILE NO: 175/2015
DELIVERED ON: 25 November 2016
DELIVERED AT: Hobart
HEARING DATE: 18, 21, 22 November 2016
JUDGMENT OF: Estcourt J
CATCHWORDS:
Estoppel – Equitable estoppel – Proprietary estoppel – Where promisor made representations to promisee as to the forgiveness of debt – Whether promisee acted to his detriment in reliance on promisor's representations.
Sidhu v Van Dyke [2014] HCA 19, 251 CLR 505; Crown Melbourne Limited v Cosmopolitan Hotel (Vic) Pty Ltd [2016] HCA 26, 333 ALR 384; Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, referred to.
Aust Dig Estoppel [1048]
Succession – Contracts to leave property by will – Generally – What amounts to contract – Evidence of agreement.
Aust Dig Succession [1034]
Succession – Particular documents – Succession deed – Breach of clause to provide parents with accommodation.
Aust Dig Succession [1014]
REPRESENTATION:
Counsel:
First and Second Plaintiffs: T Williams
First, Second and Third Defendants: P L Jackson SC and N L Terracall
Solicitors:
First and Second Plaintiffs: T Williams
First, Second and Third Defendants: Rae & Partners
Judgment Number: [2016] TASSC 62
Number of paragraphs: 74
Serial No 62/2016
File No 175/2015
NICHOLAS CASHMORE DENNIS and DH DENNIS PTY LTD
v GRAHAM ARCHIBALD DENNIS, ANTHONY WILLIAM ALEXANDER
and TELFER ANNE DENNIS
REASONS FOR JUDGMENT ESTCOURT J
25 November 2016
The plaintiffs' claims
The first named plaintiff, Nicholas Cashmore Dennis (Nicholas Dennis or Nicholas), is the son of the late Donald Henry Dennis (the deceased) who died on 28 August 2012. The third named defendant Telfer Anne Dennis (Mrs Dennis) is Nicholas' mother.
The second named plaintiff, DH Dennis Pty Ltd (the Company), was appointed as the trustee of the Donald Dennis Family Trust (the Trust) on 30 June 1989 and remains so. Prior to 28 September 2007 when Nicholas Dennis, the deceased and Mrs Dennis entered into a succession deed in order to provide for the transfer of the family farming business conducted on a property known as "Fairfield" to Nicholas (the Succession Deed), the Company owned that property as tenants in common in equal shares with the deceased.
The first and second defendants are the executors and trustees of the last will and testament of the deceased dated 2 November 2007 (the executors).
Nicholas Dennis, who was born on 3 August 1957, claims that from an early age he worked in the farming business providing his labour and his business acumen without any adequate wage or remuneration, in the expectation, discussed and agreed between him and the deceased, that he would succeed to the ownership and/or effective control of the farming business and its assets and goodwill upon his father's retirement.
To that end the Succession Deed was entered into and, on 9 November 2007, the deceased and Mrs Dennis transferred to Nicholas the entirety of their shareholding in the Company. On 18 April 2008 Nicholas was appointed jointly with the deceased as appointer and guardian of the trust and, on 14 May 2008, the deceased transferred his one half interest in Fairfield to Nicholas.
As at 30 June 2007 the Company, although not in its capacity as trustee of the trust, was indebted to the deceased in an amount of $93,558 (the debt). The company was also indebted in its capacity as trustee of the trust to the deceased in the sum of $225,427.09 (the loan).
Nicholas Dennis claims that in about August 2007, before the Succession Deed was signed, the deceased agreed with him and with the Company that he would forgive the debt in his will and that he would forgive the loan during his lifetime, both in consideration of Nicholas succeeding to ownership and control of the farming business and its assets. Nicholas claims that the loan was forgiven by agreement between the deceased and the company as from 30 June 2009 but, and there is no doubt about this, the deceased did not forgive the debt in his will. On the contrary, the deceased's will had the effect that any loan account held by him in the company as at the date of his death passed to Mrs Dennis.
Nicholas claims that on a proper construction of the agreement between himself, the deceased and the Company, the agreement to forgive the debt was an agreement entered into between them whereby the deceased would include a provision in his will to forgive the debt. He claims therefore that the deceased was in breach of contract in failing to provide for the release of the debt in his will, and he claims damages equivalent to the amount of the debt.
In addition to the claim for breach of contract, Nicholas Dennis claims that in discussions with the deceased and his agent, Mr Simon Hegarty, in the context of discussions in about September 2007 concerning proposed succession arrangements, the deceased represented that Nicholas would succeed to ownership and control of the farming business, and that the deceased would forgive the debt in his will. Nicholas claims that he relied on that representation and acted to his detriment in entering into the Succession Deed instead of pursuing a claim based on his contribution over many years to the farming business. As a result Nicholas contends that the executors are estopped from denying the representations and must release the Company from the debt or otherwise pay compensation in the amount of the debt to the Company.
Nicholas makes a further claim in estoppel in relation to distributions made from the Trust to the deceased and Mrs Dennis in the years 2010, 2011 and 2012. The amounts distributed to the deceased were $39,000, $49,000 and $3,647 respectively, and to Mrs Dennis were $24,805, $25,000 and $16,090 respectively. Nicholas contends that had he been aware that the financial position of the parties would be changed significantly by reason of the deceased not forgiving the debt in his will, the distributions in favour of the deceased would not have been made, as Nicholas, in exercising his discretion to make them, was acting in reliance on the deceased's representation that he would so release the debt.
Accordingly the plaintiffs claim that the executors are estopped from denying the deceased's representation and must make compensation in the amount of the debt, or otherwise release and forgive it.
The third named defendant's defence
Mrs Dennis admits that there was a joint expectation that Nicholas would take over the farming business but says that the joint expectation was that at the appropriate time there would be an assessment of the business, of Nicholas' contribution, of the position she was in and of the position of the other children of the deceased, and that there would be an accommodation of all of the competing interests in order to satisfy the joint expectation. Nonetheless she admits that the Succession Deed was entered into. She does not admit that Nicholas worked in the business for many years without any adequate wage by way of remuneration for the work which he undertook.
Mrs Dennis denies that there was any agreement by the deceased to forgive the debt in his will and points out that the Succession Deed is silent as to any such agreement.
The third named defendant's counterclaim
Mrs Dennis claims that when the Succession Deed was executed she and the deceased occupied a house on Fairfield (the Fairfield house), and that after the death of the deceased she continued to occupy that house.
Clause 1(e) of the Succession Deed provides as follows:
"(1)In consideration of the Parents transferring Fairfield and the control of DH Dennis Pty Ltd to ND or such entity as ND nominates, as a gift, ND agrees from the date of such transfer ('the commencement date') he will:
…
(e) If the Parents cease to reside in the house they currently occupy on Fairfield and wish to reside in:
(i) either another property; or
(ii) nursing home accommodation,
to
(i)make available the property the Parents wish to live in (holding title to that Property in ND's name or such other entity as ND nominates or entering into a lease of the same) and permit the Parents to live in that alternative property rent free for so long as they wish to do so; or
(ii)pay the costs of entry into the nursing home accommodation."
Mrs Dennis claims that by a letter from her solicitor dated 23 December 2014 she expressed her intention to cease to reside in the house and her wish to live in another property which she identified as 14 Swan Avenue Longford in Tasmania (the Longford house), and requested that Nicholas Dennis take steps to make the Longford house available. She claims that Nicholas, by way of a letter from his solicitor dated 12 March 2015, refused to make the Longford house available and refused to purchase any other property for her to live in. Accordingly Mrs Dennis claims specific performance on the part of Nicholas Dennis of his obligations under cl 1(e) of the Succession Deed.
Mrs Dennis also claims that in consequence of Nicholas' breach of cl 1(e), she has already suffered loss in that she has been required to pay rent for the premises in which she has lived since 31 December 2015 at the rate of $743.30 per fortnight, a total of $15,602.20 to the date of trial.
Finally, Mrs Dennis claims that payments made to her in years 2009/2010, 2010/2011 and 2011/2012 were not the payments that Nicholas was required to make pursuant to cls 1(a), 1(b), 1(c) and 2 of the Succession Deed, but were in whole or in part purported or actual distributions for those years in the Donald Dennis Family Trust, and that accordingly the amounts due to her for those years under the Succession Deed remain unpaid and due to her. She claims damages to be assessed for the loss suffered by her as a result of Nicholas' failure to make the required payments.
The plaintiffs' defence to the third defendant's counterclaim
Nicholas Dennis does not admit that he has refused to make the Longford house available, although he claims that he is ready, willing and able to rent an equivalent property for Mrs Dennis, but is not in a financial position to purchase the Longford house. He denies that he is obliged to purchase an equivalent property. Nicholas argues that cl 1(e) of the Succession Deed only obliges him to provide Mrs Dennis with accommodation once she has ceased to "reside in the house" she currently occupies and that that had not occurred as at 23 December 2014, the date Mrs Dennis purported to exercise her entitlement pursuant to cl 1(e).
Moreover, Nicholas claims that notice was required to be given under cl 1(e) of the Succession Deed, and that the letter of 23 December 2014 could not and did not constitute the required notice as it was made expressly conditional upon Nicholas agreeing to undertake specified renovations to the house, and Nicholas did not agree to such a condition. Nicholas says that the right to have a substitute property made available under cl 1(e) has not arisen.
Nicholas also asserts that Mrs Dennis is estopped by the pleading in her counterclaim that she resided in the Fairfield house from now asserting to the contrary until the amendment of that pleading. He further says that if Mrs Dennis has lawfully exercised her right to require a property to be made available to her, then her right to retain possession of the Fairfield house ceased and she has wrongly maintained possession of it. In that case he says that he is entitled to mesne profits to be assessed. He also says that if Mrs Dennis is entitled to damages she has failed to mitigate her loss by not moving back into the house.
Nicholas says that he has paid the expenses required of him under the Succession Deed and, in addition, that the allocations of trust income to Mrs Dennis and the deceased have been separately and properly discharged by the company in its capacity as trustee, and that there has been an accord and satisfaction between the parties.
The first and second named defendants' defence
The executors maintain a similar defence to the plaintiffs' claims as that of Mrs Dennis. They do not admit the existence of any agreement to forgive the debt as alleged by Nicholas. They do not admit that Nicholas continuously worked in the conduct of the farming business from an early age, or that he did not receive any adequate wage by way of remuneration for his work. They deny that the plaintiffs are entitled to any of the relief claimed by them or either of them.
The first and second named defendants' counterclaim
The executors claim that following the death of the deceased the debt became payable to his estate and that the balance of the debt of $93,558 currently outstanding is repayable on demand. The executors claim that neither the debt nor the loan is or ever has been the subject of an agreement to forgive or relinquish as far as they are aware. They say that the outstanding amount of the loan was discharged in full through his solicitor by letter of 3 July 2014.
The executors claim that a formal demand for payment of the debt was made on 11 February 2015 on the "first plaintiff" (Nicholas Dennis) and that he has not repaid the debt. They then claim that as a consequence of the failure of "the second plaintiff" (the Company) to repay the debt upon the demand of 11 February 2015, the executors have lost the use of the amount of $93,558 for business or investment purposes.
The executors counterclaim $93,558 for debt and interest by way of damages pursuant to the principal in Hungerfords v Walker (1989) 171 CLR 125.
The plaintiffs' defence to the first and second defendant's counterclaim
The plaintiffs do not admit that the outstanding amount of the loan was discharged on 3 July 2014. As to the debt they rely on the whole of the provisions of the Succession Deed which they say do not preclude the amount of the debt claimed in the executors counterclaim from not being owed at all.
In answer to the executors counterclaim insofar as it concerns Nicholas Dennis only Nicholas says that the amount of $93,558 claimed in the counterclaim was a debt of the company and not a debt of his. He says that he cannot be liable himself for repayment of the debt on the facts as pleaded by the executors.
The issues arising
As can be seen from the foregoing the principal issue for resolution on the plaintiffs' claim is whether the deceased agreed during his lifetime to forgive the debt in his will. The resolution of that issue will resolve the plaintiffs' claim for breach of contract. However, of itself, it would not fully resolve the first claim in estoppel because, in order to succeed, Nicholas Dennis would need to show that he acted to his detriment in entering into the Succession Deed in reliance upon the deceased's representation that he would forgive the debt. In order to show detriment by not pursuing the claim relating to his contributions over many years to the farming business, he would need to show that such a claim had a value greater than the value of the farming business without forgiveness of the debt. It would therefore, were it not for concessions made by Nicholas (the concessions), be necessary to resolve the issue of whether and to what extent Nicholas worked continuously from an early age in the conduct of the farming business without any adequate wage by way of remuneration for the work which he undertook, in the expectation discussed and agreed with the deceased that he would succeed to the ownership and/or effective control of the farming business and its assets and goodwill upon the deceased's retirement, and whether any entitlement arising as a result would have a greater value than the farming business and its assets and goodwill encumbered by the debt.
The first concession made on behalf of Nicholas by his counsel, Mr Williams, is that he does not seek to prove that he would have been better off pursuing a "Sidhu v Van Dyke" [[2014] HCA 19, 251 CLR 505] claim in 2007 "by litigating about a constructive trust as pleaded rather than accepting the settlement", that is the settlement constituted by the Succession Deed.
The second concession was made on behalf of Nicholas by Mr Williams in the following terms:
"… while we say that it was a very important matter about the forgiveness of the loans and a matter of some significance at the time if it is put whether in retrospect my client thinks he would have gone ahead with the agreement had his father said at the time, 'I am not going to forgive them', he would say to the Court, 'In retrospect it wasn't something I continued at the time but if pressed I think I've gone ahead with it'."
As to Nicholas' further claim for estoppel, the issue again arises as to whether the deceased made the representation that he would forgive the debt in his will, but it is also necessary to determine whether the relevant discretions exercised by the trustee of the Trust, in order to make any trust distributions or trust allocations to the deceased and Mrs Dennis "would not have been exercised at all or in a significantly different manner but in any event for the benefit of the first named plaintiff, his wife and or children", as pleaded by Nicholas Dennis in his amended statement of claim.
Put simply, if it be the fact that the deceased did not unequivocally agree or represent in an unqualified way that he would forgive the debt in his will, all issues arising on Nicholas' claims would be resolved against him. Equally the executors could in that situation succeed in a properly pleaded claim to recover the debt from the Company. If the contrary were the fact, then the further issues I have identified may require resolution in order to determine Nicholas' claims and Mrs Dennis' claim for unpaid amounts due under the Succession Deed.
As to Mrs Dennis' counterclaim concerning her request of Nicholas to purchase the Longford property, this turns principally on the question of the proper construction of cl 1(e) of the Succession Deed. The counterclaim as to damages for rent and Nicholas' claim for mesne profits would follow upon the proper construction of that clause.
The evidence of Nicholas Dennis as to the promise
Mr Dennis provided evidence-in-chief by agreement between the parties in the form of two witness statements which he adopted on affirmation in the witness box. Because of the importance of his evidence as to the alleged representation or promise made by his father, I will not attempt to paraphrase his evidence, but will set out the relevant text from his witness statements and the relevant passages from the transcript of his supplemental evidence-in-chief, in cross-examination and re-examination.
In his first witness statement Mr Dennis said, relevantly, as follows:
"•I can't remember the exact date but probably sometime in early 2007, my father agreed to consider putting together a succession plan concerning the property after we were both approached by our accountant at WHK, Simon Carins. The plan was put together with the help of our lawyer, Jacinta French and another accountant at WHK, Simon Hegarty.
•There was then an initial meeting at Jacinta French's office attended by Jacinta French, Simon Hegarty, my father and myself. My father said at this meeting that he intended to leave me the property in the future and that he intended to do this via his will. I recall Jacinta French saying to my father that if he left the property to me in his will, there was a risk that the will could be contested upon his death. My father said that he did not want that to happen and specifically that he did not want his son-in-law Peter Blackwood to benefit in any way. So it was suggested that the farm be transferred to me at the time and not left until after his death. He agreed to this suggestion.
•The matter of my brother, Christopher Dennis, was discussed and my father asked me if I was prepared to give up my share of my mother's estate which he thought was probably more than the amount that he had previously intended to give my brother. I said I was prepared to do that and he said he would discuss it with my mother. He asked me if I would enter into an agreement to provide for him and my mother for the rest of their lives. He said if I agreed to do these things then there would be no more debt placed on me from having to provide for anyone after his death. My father had often told me how he hated debt and did not want me to have to borrow more money. He had told me he was not happy that the debt incurred for purchasing 'Emu Plains' for my sister over 15 years ago still existed at that time it continues to exist today.
•During this meeting the loan accounts were also discussed and my father agreed that he would gift them to me in his will.
•After the meeting at Jacinta French's office, my father said he would go home and discuss the plan with my mother and then sometime during July 2007, a meeting was held at my parents' home attended by Simon Hegarty, my parents and myself to discuss the succession in further detail. In particular, the meeting was to provide my mother with an understanding of the succession of the family farming operation and to seek her agreement to the plan.
•During the meeting, I remember a discussion about the transfer of the land, the loan accounts and the deed. I cannot recall the exact words used but as a result of that discussion I believed the gifting of the loan accounts was all part of the succession plan which included my agreeing to enter into the Deed of Family Arrangement to provide for my parents during their lifetime and I later signed the Deed in good faith with that understanding.
•A copy of the Succession Plan Notes compiled by Simon Hegarty that were provided to my late father are provided. There are notes written on them in his handwriting, including my brother's phone numbers on the back of the document. Clearly listed is the proposition that the loan accounts would be forgiven via the wills.
•I recall at the end of the meeting, my father saying he would discuss the situation with my brother and therefore I had the understanding later that my brother was fully aware of my father's plans.
•I signed the deed relying on the promises to forgive the debts that had been made. I was happy with the overall arrangements and did not pursue any claims as I regarded a satisfactory settlement had been reached. Subsequently I acted in the belief that all arrangements including the debt forgiveness would be given effect to…
•After my father died and the will was forwarded to me, I was shocked to see that my father's loan accounts had not been gifted to me as was previously agreed. I approached my mother about this and she said that my father had said on several previous occasions that he must go to town to change his will. As there was very little in his will apart from the loan accounts, I believe he meant to ensure the loan accounts were gifted …
•Following my father's death, I became aware from Jacinta French that while he had every intention of gifting the loan accounts in his will he wanted to ensure that I was abiding by the terms of the Deed of Family Arrangement (see letter of 24 (sic) May 2013 from Jacinta French to Rae and Partners). At no time after the Deed was signed until his death was the Deed ever raised by my father or myself and it was never discussed again. My father did not ever suggest I was not abiding by the terms of the Deed. Nor did he ever suggest that he was evaluating whether I was abiding by the terms."
I pause to set out the relevant part of the letter referred to above from Jacinta French to Rae & Partners dated 24 May 2013 which, as I understand it, is in fact a letter dated 27 May 2013. Ms French wrote as follows:
"We can confirm that in August 2007 Mr Nick Dennis and Mr Don Dennis attended our office and the loan accounts were raised at that discussion. At that time Mr Don Dennis indicated that he would document the terms of the loans for the loan accounts, those terms to record that they were interest-free and to be forgiven on death.
From our file notes when preparing Mr Don Dennis' Will in October 2007 Mr Don Dennis specifically advised us that although he had every intention of gifting the loan accounts to Nick he wished to first ensure that Nick was abiding by the terms of the Deed of Family Arrangement before he did so.
Mr Don Dennis did not consult us again after he signed his Will on the 2nd November 2007."
In his supplemental witness statement Nicholas Dennis said, relevantly, as follows:
"19Following my father's death I went with my mother to Simon Hegarty's office for him to explain the loan account position. During the meeting, my mother was reminded of my father's agreement to gift the loan accounts to me in his will. My mother then agreed to transfer the loan accounts to me and it was decided that the appropriate legal documents would be drawn up by Jacinta French. We then met with Jacinta French to discuss the issue and Simon advised my mother to obtain independent legal advice in the meantime."
In his cross-examination by Mr Jackson SC, counsel for the defendants, the following relevant exchanges appear:
"Did you know – do you recall whether you were then aware of what amount was owed to Donald in the family trust accounts loan account?……I had some idea but can't remember the detail.
What was your some idea or can you just not remember an amount or anything like it?……I can remember it was a few hundred thousand, probably two or three hundred thousand or something.
You, of course, would have read the deed very carefully before you signed it?……Yes.
And indeed, before you executed it some alterations were made to it at your request?……That's right.
You would have been very much aware that the deed was silent as to any loans or debts?……That's right.
You never asked that the deed include any reference to any loans or debts?……No.
You never asked Donald at any time subsequent to the execution of the succession deed whether he had made a will in the terms you now say he'd promised to. That is, gifting to you any debts owed to him?……No, I took at his – on his word that he was going to gift them to me.
You never asked him whether he had?……No…
Did you know – did you know then what the value of the entire farm property was?.....Approximately.
Approximately what?.....Five million, maybe.
Five million. Your parents gave up control of the company and everything that went with that?.....That's right.
Your parents gave up control of the trust and everything that went with that, especially control over distributions of income, didn't they?.....That's right.
They, by this agreement, committed themselves to almost total dependency on you for the balance of their lives, didn't they, that is for a roof over their head, do you agree?.....Yes.
For a substantial part of their ordinary living expenses?.....Yes.
In fact by the time the succession deed was executed and the things they'd agreed to do had been done all they were left with, including – sorry, all the things they'd agreed to do, including forgiveness of the company debt of about two hundred and twenty odd thousand, all that they had left out of all of that was the debt we're dealing with here, the ninety three odd thousand?.....That's right.
You knew, Mr Dennis, that Donald had in fact reserved the right not to release the trust from the debt, didn't you? Let me put it to you this way. In discussions Donald had with you and others where you were present Donald made it clear that whilst there was an intention at some point to forgive that debt or to gift it to you that depended upon him being satisfied eventually that all of this was going to work, didn't he?.....That's right.
In other words he wasn't saying to you, 'This is going to happen', he was saying to you, 'If it all works out this is what I'll do', didn't he?.....Yes.
And you were well aware that he kept the debt in place, reserved the right not to gift it to you or forgive it as security, as it were, against him being satisfied that you were doing all you were obliged to do under the deed?.....Yes.
And being satisfied that you were properly managing the farm and looking after it and preserving that heritage?.....That's right.
HIS HONOUR: In his opinion.
MR JACKSON SC: Yes. (Resuming): He had to be satisfied of that, didn't he, that's what he was making clear to you?.....Yes."
In re-examination Nicholas gave the following relevant evidence.
"<REXN - MR WILLIAMS: Thank you, your Honour. While your father was alive did he ever complain to you that you weren't complying with the terms of the succession deed?……Never.
As far as you were aware were you complying with those terms?……Yes…
Thank you. Now, Mr Jackson earlier asked you about being present with a – being present when there was a conversation with your father where he said that he was reserving forgiveness of the ninety three thousand five hundred and fifty eight dollars until he was satisfied that you had complied with the deed?……That's right.
When was the first conversation you were privy to where that was communicated by your father to you? Was it after the succession deed?……Could you repeat that again, I –
As I understand it correctly, did you say to Mr Jackson that you were part of a conversation in which your father said that he was waiting to forgive the loan – sorry, waiting to give the loan of ninety three thousand five hundred and fifty eight dollars until he saw whether you were going to carry out your obligations under the succession deed?……Yes.
HIS HONOUR: That wasn't quite what was put by Mr Jackson but I understand it's an intended paraphrase. Mr Jackson used the term 'reserved'.
MR WILLIAMS: Reserved, I –
HIS HONOUR: And also didn't use the proposition 'complying with the terms of the succession deed' but that everything was working out okay.
MR WILLIAMS: Yes.
HIS HONOUR: Yes.
MR WILLIAMS: (Resuming): Can we – if you adopt the words his Honour just said in terms of the phraseology of working out the succession deed, that's the conversation I'm referring to?……Yes.
And I was asking you whether that occurred – the first conversation occurred after the succession deed was entered into?……Yes.
Do you recall how long after?……No."
Observations on Nicholas Dennis' evidence as to the promise
A close examination of Nicholas' evidence does not disclose an unqualified promise or representation made by the deceased to forgive the debt in his will. I do not doubt that there was an understanding on Nicholas' part that the deceased would forgive the debt but that understanding in my view is more in the nature of an expectation that that would occur and is not based on any concrete statement attributed by him to the deceased.
I note that Nicholas' evidence is that the deceased's statement that he was waiting to gift the debt until he saw "that everything is working out okay" was made after the Succession Deed was entered into and that evidence is broadly consistent with Ms French's letter of 27 May 2013 set out above. The difficulty remains however that there is no clear evidence that the deceased, before the Succession Deed was entered into, ever couched his intention to forgive the debt in any other context. In particular there is no evidence that the deceased ever did, as noted by Ms French in her letter, "document the terms of the loans for the loan accounts those terms to record that they were interest-free and to be forgiven on death". Indeed Ms French next recorded in her letter that the deceased told her when she was taking instructions for his will that he wished to wait before deciding whether to forgive the loans or not
Nicholas' bald assertion in his evidence that there was a promise, about which, Mr Williams asserted in his closing submissions that Nicholas was not cross-examined, must be assessed in the light of all the evidence. I note that Nicholas did not give evidence that the qualified expression of his father's intention to forgive the debt made after the Succession Deed was entered into came as a surprise to him, or that he challenged his father at that time about resiling from an earlier promise or representation. The evidence does not support the submission made by Mr Williams in closing submissions that Nicholas was shocked.
In my view Nicholas' evidence is not capable of establishing a testamentary contract and falls well short of amounting to an unequivocal, unqualified promise that could found an estoppel. In so saying I am simply concluding that, taken on its own, Nicholas' evidence does not satisfy me on the balance of probabilities that his father unequivocally and/or unconditionally agreed or represented to him that he would forgive the debt in his will.
There is no incongruity in so concluding, notwithstanding that the deceased in the same discussions leading up to the entering into of the Succession Deed apparently agreed to forgive the loan and did so as from June 2009. After gifting everything to Nicholas in the Succession Deed, the deceased had, as was pointed out in cross-examination, committed himself and Mrs Dennis to almost total dependency on Nicholas for the balance of their lives. That is to say, for a roof over their heads and for a substantial part of their ordinary living expenses. In fact, by the time the Succession Deed was executed and the things they had agreed to do had been done, including forgiveness of the company debt of about $210,000, all that they had left was the debt owed by the Company of $93,558. That was their only asset. Accordingly, in my view, it is more likely than not that the deceased at no time expressed in an unqualified or unconditional verbal statement that he would forgive the debt in his will. In my view it is more likely than not that the deceased always had the state of mind that he apparently expressed to Ms French, as related in her letter of 27 May 2013. That is understandable. If the arrangements under the Succession Deed did not work out, the deceased and Mrs Dennis would be left with nothing. The deceased would have known that after his death, if Mrs Dennis survived him, she would have been left in that same situation.
Had there been a clear articulation by Nicholas in his evidence of the words that his father used in making the unconditional representation Nicholas asserts, or had Nicholas been reported as expressing surprise at learning, even after the Succession Deed was entered into, that his father was reserving the right not to forgive the debt in his will, my conclusion might have been otherwise. The fact of the matter, is in my view, as established by Mr Jackson in cross-examination, namely, that in discussions the deceased had had with Nicholas and others where Nicholas was present, the deceased made it clear that whilst there was an intention at some point to forgive the debt or to gift it to Nicholas, that depended upon the deceased being satisfied eventually that the succession arrangement was going to work, or was working in his opinion. That fact leaves no room for the existence of an unequivocal or unconditional, unqualified representation or promise made before the Succession Deed was entered into. However even if there were room for such doubt, that could no longer have been the case after those discussions at which Nicholas was present had been held.
In re-examination Nicholas was unable to say how long after the Succession Deed was entered into that the first of those discussions occurred. However, in my view, it is safe to infer that they occurred at or about the time Ms French's file notes were made when preparing the deceased's will in October 2007. I observe that even allowing for a generous lapse of time after the deceased made his will, the relevant discussions are more likely than not to have occurred prior to the making of the first of the disputed distributions or allocations from the Trust made in 2010, and which Nicholas claims were made to his detriment in reliance upon the deceased's promise.
Mr Simon Hegarty's evidence as to the promise
The only other relevant evidence of significance on the question of the alleged promise or representation claimed to have been made by the deceased was that of Mr Simon Hegarty who at the time of these events, was a director/principal of the firm WHK Launceston and was involved in his capacity as an accountant and adviser in meetings with the deceased, Mrs Dennis, Nicholas Dennis and Ms French.
In his evidence-in-chief which was presented by way of three witness statements Mr Hegarty said as follows:
"7There were two meetings that I can recall that were held between July and October 2007 as follows:-
a Meeting on a Sunday morning in July at Mr D H & Mrs T Dennis's home in the presence of Nicholas Dennis where the need for succession planning and in particular passing of control of the trust and the balance of the lands owned by Mr D H Dennis jointly with the company D H Dennis Pty Ltd be completed, and that was agreed at that meeting.
At this meeting it was agreed that the land would be transferred by Mr Donald H Dennis and that he would resign as an appointor of the trust and both he and Mrs Telfer Dennis would transfer the balance of their shares in the company to Mr Nicholas Dennis. It is my recollection also that their loan accounts in the company and trust, were discussed and it was intended that they be forgiven by Will.
b A further meeting was held with Mr Donald H Dennis only in my office at 62 Paterson Street, Launceston some two weeks later where finer points in relation to the general plan were discussed and basic instructions were, the writer recalls, relayed by Mr Donald H Dennis and Mr Nicholas Dennis in a subsequent meeting with the joint solicitor Mrs Jacinta French of Shields Heritage, Launceston
…
9I do recall loan accounts being discussed because at that time Mr Dennis's loan accounts were well in excess of $300,000 and it was agreed that they be left for a short term as a form of security to ensure the arrangements were working but would certainly be forgiven in his Will so as not to saddle Nicholas with any further debt whether to family, or to a third party banker or financier."
Mr Hegarty said that based on the documents attached to his first witness statement and his memory of the meetings, it was his clear understanding that the deceased "intended to gift all loans to Nicholas either inter vivos or under the terms of his will".
In a supplemental witness statement however Mr Hegarty said:
"4… My recollection is that the only further meeting after 29 July with either Don or Telfer was a meeting by myself with Don only in August during which he had some further questions about the process and what was going to happen. He said either he had just been or was going to review the draft deed with Jacinta French. I recall a conversation with him in that meeting where I raised with him the question of loan accounts as detailed on agenda items on my succession plan document. Don said he intended to forgive the loan accounts in his will but 'not just yet' as he wanted to ensure that the arrangement operated satisfactorily and in his words 'nothing changes' but once he was satisfied they would be gifted in due course." (Emphasis added.)
Some time after the meeting of 29 July 2007, and at about the time of the meeting between Mr Hegarty and the deceased at Mr Hegarty's office in August 2007, Mr Hegarty prepared a document entitled "SUCCESSION PLAN NOTES FOR A MEETING WITH JM FRENCH". In the document Mr Hegarty wrote:
"vi)The loan accounts due to Mr Mrs Dennis after the forgiven in their will, is not already done so. Could be paid out over say 10 years pension application is unsuccessful …".
In his third witness statement Mr Hegarty wrote the following:
"17My recollection is that for the years ending, 2011 and 2012 the primary consideration Nick discussed with me was reducing the impact of taxation by splitting the income. I recall explaining to Nick alternatives such as reducing the amount of profit by expenditure on certain items such as fertiliser. I had in mind my conversation with Don in 2007 at the meeting with Jacinta French when he said he would forgive the loan accounts 'but not just yet' and he wanted to ensure the arrangement operated satisfactorily and nothing changed, but once satisfied they would be forgiven … Don had made no complaint to me of any problems relating to the arrangement and I was not aware of any complaint from any other source. While I was not aware of any reason why Don would not carry out his promise I recall warning Nick of the problems that would arise if Don did not keep his promise or had not got round to it saying his alternative was to spend money on items that were tax deductible. My recollection is of Nick saying to me that his preference was to split the income by also making allocations to Don and Telfer. Nick had told me his father would forgive the loans. Our conversations proceeded on the mutual understanding of this promise."
Observations on Mr Hegarty's evidence as to the promise
There is nothing in Mr Hegarty's evidence or in that of Ms French that could possibly justify the bold statement made by Mr Hegarty in a letter he wrote to Ms French on 5 March 2013 that it was his clear understanding and recollection that after a "year or two" the deceased was going to either gift any loan accounts to Nicholas, and if not during his lifetime they were going to be gifted by his will. Indeed more than a "year or two" had passed between the deceased statement to Ms French when she was preparing his will containing terms to the contrary in October 2007 and the deceased's death in August 2012. Almost five years in fact.
When all of Mr Hegarty's evidence is considered together, and in conjunction with Ms French's letter of 27 May 2013, in which she stated that when preparing the deceased's will in October 2007 he specifically advised her that although he had every intention of gifting the loan accounts to Nicholas he wished first to ensure that he was abiding by the terms of the Succession Deed before he did so, I apprehend that the deceased had not, as at the time he signed the Succession Deed on 28 September 2007, made an unconditional or unqualified, unequivocal representation to Nicholas that he would forgive the debt in his will. Indeed the deceased made his will only 35 days after he signed the Succession Deed and did not do so. And of course, on the other hand, the Succession Deed is silent as to any such commitment. I do not find Nicholas' evidence that he agreed to forgo any claim to his mother's estate is influential in fact finding in this case. Nicholas succeeded after all to a farming business worth, on his estimate, about $5 million.
Indeed in cross-examination Mr Hegarty accepted that at the time he prepared the notes for the meeting with Ms French which contained the paragraph numbered "vi)", as set out above, the question of the forgiveness of the debt, and indeed the loan, was the only issue in his mind that was "outstanding at that date and had not been dealt with". He said that it was one of the few items that had not been totally addressed, compared to others, such as transfer of land or appointment or transfer of shares. He said "it was left". Nothing in the evidence suggests that thereafter the position changed. Ms French in her letter stated that the deceased wanted to ensure the arrangement was operating satisfactorily before committing to forgive the debt. In my view the matter was never finally concluded. I apprehend that Mr Hegarty understood that and that his understanding in that regard provided the basis for his warnings to Nicholas concerning proposed distributions or allocations from the Trust. Nicholas on the other hand preferred to think that his father would ultimately decide to forgive the debt and proceeded optimistically in that expectation.
Mr Hegarty said in his third witness statement that the deceased had made no complaint to him of any problems relating to the arrangement, and he was not aware of any complaint from any other source. That of course that does not provide total insight into the deceased's state of mind. Indeed the deceased's daughter, Claire Blackwood, and son, Chris Dennis, gave evidence, which was not challenged in cross-examination, that in the last years of his life their father was unhappy and upset about the way Nicholas was running the farm.
Conclusion as to the promise
Having regard to the totality of the evidence it is not, in my view, capable of establishing a promise sufficient to establish a testamentary contract, and falls well short of amounting to a representation or promise that could found an estoppel. I am not satisfied on the balance of probabilities that the deceased unequivocally and/or unconditionally agreed, represented or promised that without qualification he would forgive the debt in his will. Accordingly Nicholas' claim in contract, his claim in equity concerning the debt which has been referred to as "the Sidhu v Van Dyke claim" and his further claim in estoppel concerning the 2010, 2011, and 2012 distributions or allocations from the Trust must fail.
Reliance and detriment
Having regard to the concessions made by Nicholas in respect of the issues of reliance and detriment in the Sidhu v Van Dyke claim, that claim could not succeed in my view even were I wrong in my conclusion as to the absence of a relevant promise or representation. As was pointed out by Mr Jackson in his opening submissions, the principles on which equitable or promissory estoppel is grounded were most recently discussed by the High Court in Crown Melbourne Limited v Cosmopolitan Hotel (Vic) Pty Ltd [2016] HCA 26, 333 ALR 384, but the current law in Australia is still to be found in the judgment of Brennan J in Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 428-429.
If, as he concedes he would, Nicholas would have proceeded to enter into the Succession Deed absent any assurance as to the debt and does not seek to prove that any entitlement arising in equity would have a greater value than the farming business and its assets and goodwill encumbered by the debt, he could not, in my view, establish an estoppel against the first and second named defendants or an injunction restraining them from recovering the debt, and he could not establish an entitlement to damages in equity. The evidence does not support the assertion made on behalf of Nicholas by Mr Williams in his closing submissions that if the deceased had stated his "true position" Nicholas would have had further negotiations with him with the "prospect" that "forgiveness was properly documented thereby leaving Nicholas Dennis in a better position".
The position as to reliance would not be the same however in relation to Nicholas' further estoppel claim, as were I to be wrong in my conclusion as to the absence of the necessary representation or promise, I accept the evidence of Mr Hegarty set out above in these reasons to the effect that he warned Nicholas of the problems that would arise if the deceased did not keep his promise or had not got around to it, and that Nicholas had said that his preference was to split the income by also making allocations to his mother and father, saying that his father would forgive the debt. That would be sufficient to my mind to establish reliance in that scenario.
In relation to the further estoppel claim, the evidence would also be sufficient, in my view, to establish detriment, given that, even taking into account income tax implications, Nicholas would have been better off by an amount equal to or greater than the value of the debt by distributing or allocating the relevant amounts to himself and his wife, rather than to his father.
The defendants' counterclaims
I turn now to Mrs Dennis' counterclaim in respect of Nicholas' breach of cl 1(e) of the Succession Deed in failing to make the Longford house available to her.
The relevant clause is set out above in these reasons. In order to activate the clause, it is necessary, in my view, as a minimum, that Mrs Dennis give notice to Nicholas of her wish to reside in another property. Thereupon Nicholas is obliged to "make available the property", that is to say, make available the property nominated by Mrs Dennis as the property in which she wishes to live.
On 23 December 2014 Mrs Dennis' solicitors wrote to Nicholas' then solicitors conceding that Mrs Dennis did not have an unfettered discretion to choose and elect to reside in any other property and put forward the view that a proper interpretation of cl 1(e) was that Mrs Dennis' choice must be of another property reasonably comparable in its essential characteristics to the Fairfield house.
In that letter Mrs Dennis' solicitors nominated the Longford house, which, on the evidence before me, is comparable to the house on Fairfield in which she formerly resided. However the letter went on to say that the nomination of the Longford house was "conditional upon essential but minor renovations to the house to make it a more suitable residence and more similar in essential characteristics to the present residence and to make the house suitable for occupation by Mrs Dennis". The nominated renovations to the house comprised the installation of a bath, the installation of handrails down the steps into the garage and a small ramp installed at the front door.
The letter by its penultimate paragraph stated:
"Would you please make the necessary enquiries with regard to the property and advise whether your client is agreeable to purchasing a property for our client and undertaking the necessary modifications."
The pleaded position adopted by Nicholas in his defence to his mother's counterclaim is that the letter of 23 December 2014 did not constitute the required notice as it was expressly made conditional upon Nicholas agreeing to undertake specified renovations to the house and that he did not agree to such a condition. Regrettably as I apprehend it that position is correct in law. I say regrettably because, while it is unnecessary here to decide, Mrs Dennis is, in my view, entitled to nominate a comparable house to the Fairfield house, and Nicholas is obliged to make it available to her by purchasing it in his own name. It is not available for rental.
Properly characterised, the letter of 23 December 2014 was not a notice which activated the relevant clause in the Succession Deed, but rather it constituted a purported conditional exercise by Mrs Dennis of an entitlement, the conditional stipulation of which was not acceptable to Nicholas. Neither Nicholas nor Mrs Dennis sought to amend the pleadings in such a way as to permit me to construe cl 1(e), and it is not necessary for me on the pleadings to determine the contention that the notice was ineffectual because Mrs Dennis had not ceased living in the Fairfield house at the time the notice was given. Neither is it necessary or appropriate for me to consider the question of whether cl 1(e) confers an option on Nicholas to either rent or purchase an appropriate house for his mother as he chooses.
On the pleaded case, which I point out includes a pleading that Mrs Dennis is estopped by the pleading in her counterclaim from asserting that she no longer resides in the Fairfield house, it is my view the contention that the right to have made available a substitute property under cl 1(e) has not yet arisen is correct. As a consequence there has been no breach of the Succession Deed which would sound in the damages sought by Mrs Dennis as a result of having to pay rent in the accommodation in which she now resides at 23 Hart Street, Newstead. The corollary is that Nicholas has no claim for mesne profits.
As to Mrs Dennis' claim for damages to be assessed for the loss suffered by her as a result of Nicholas's failure to make the required payments pursuant to cls 1(a), 1(b), 1(c) and 2 of the Succession Deed, I find myself unable to calculate on the material before me whether any amounts remain due to her after the reconciliation carried out by Ruddicks accountants in April 2013 which resulted in the payment to Mrs Dennis of a cheque in the name of H M Dennis and Son for $44,260 tendered on 3 July 2014. If a claim is pursued in these proceedings for such damages, subject to hearing the submissions of the parties, it would be my intention to refer the issue to the Associate Judge for an account to be taken.
As to the counterclaim by the first and second named defendants against the first named plaintiff for the repayment of the debt in the sum of $93,558 together with damages in the nature of interest, the first and second named defendants plead that a formal demand for payment of the debt was made on 11 February 2015 by a letter from solicitors for the first and second named defendants to the solicitor for the first named plaintiff, and that in breach of the loan agreement to which the debt is owed the first named plaintiff has not repaid the debt. As is pointed out however in the defence of the first named plaintiff to the first and second named defendants' counterclaim, the debt of $93,558 was a debt of the second named plaintiff, the Company, and the first named plaintiff cannot be liable for repayment of that debt on the facts pleaded in these proceedings. I note but do not accept the submission made by Mr Jackson in his closing submissions that in the circumstances as I have found them to be, the claim by the first and second named defendants for payment of the debt "must succeed". On the pleaded case that is not so. No doubt however the plaintiffs or either of them are free to repay the debt to the executors.
Disposition
For the reasons I have given the plaintiffs' claims fail, the third named defendant's counterclaim in respect of cl 1(e) of the Succession Deed fails, and the first and second named defendants' claim against the first named plaintiff fails. The validity of the third named defendant's claim for damages to be assessed for any loss suffered by her by reason of the first named plaintiff's failure to make payments required by cls 1(a), 1(b), 1(c) and 2 of the Succession Deed cannot be determined without the taking of an account.
I will hear counsel as to the appropriate orders to be made in the light of my findings and conclusions.
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