Fifteenth Eestin Nominees Pty Ltd v Rosenberg

SUPREME COURT OF VICTORIA

COURT OF APPEAL

No 7433 of 2004

FIFTEENTH EESTIN NOMINEES PTY LTD (ACN 005 291 832) & ORS	Appellants
FIFTEENTH EESTIN NOMINEES PTY LTD (ACN 005 291 832) & ORS	v
BARRY ROSENBERG (as Executor to the Estate of Emanuel Rosenberg, deceased) & ANOR	Respondents

---

JUDGES:	Maxwell P, Neave and Redlich JJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	22-23 January 2008
DATE OF JUDGMENT:	27 May 2009
MEDIUM NEUTRAL CITATION:	[2009] VSCA 112

---

EQUITABLE OR PROMISSORY ESTOPPEL – Whether father estopped from removing trustee of discretionary trust and changing will because of alleged representations and promises to daughter and son-in-law – Whether judge erred in rejecting claims regarding representations – Whether judge erred in finding that no detriment was suffered in reliance on alleged representations or promises – Whether constructive trust of assets established – Whether judge erred in finding that appropriate order, if either claim was made out, would be for equitable compensation.

PRACTICE AND PROCEDURE – Father died shortly before appeal was heard – Son nominated as executor of will, but probate not yet granted – Application for order that son be made respondent to the appeal in substitution for father – Supreme Court (General Civil Procedure) Rules 2005 rr 9.09(2) and 16.03(1)(b).

---

APPEARANCES:	Counsel	Solicitors
For the appellants	Mr G R Ritter QC with Mr R Greenberger and Ms L M Powderly	Kalus Kenny
For the respondents	Mr P B Murdoch QC with Mr S H Parmenter	B2B Lawyers

I Introduction

II Background to the proceedings

III Management of the Investment Trust

IV Summary of grounds of appeal

V Is Emanuel’s personal representative a party to the appeal?

VI Were the pleaded representations made?

A The pleadings

B Summary of alleged representations

C The evidence

D His Honour’s findings

E The significance of the credibility findings

F The attack on the credibility findings…………………………………………………….48

G Should his Honour have found that any of the pleaded representations were made out?

VII The issue of detriment

A Execution of the Dissolution Agreement

B Management of the Investment Trust and its assets.

C The taking over of the Delf Brass business

D Ian Berger’s loan to Project Hardware, the guarantee of its debts and the loan by Project Hardware to the Investment Trust

E Provision of a home for Emanuel

VIII Could any detriment be rectified by an award of equitable compensation?

IXRemoval of a trustee for breaches of trust

MAXWELL P
NEAVE JA
REDLICH JA:

I INTRODUCTION

This is an appeal from the decision of a trial division judge, holding that the second and third appellants, Sabrina and Ian Berger, are not entitled to various interests in property.[1] Those interests were claimed on the basis of what was said to have been their detrimental reliance on representations made to them by Emanuel Rosenberg, Sabrina Berger’s father. The appellants also appeal from his Honour’s decision that Emanuel Rosenberg was entitled to exercise his power of appointment to remove the first appellant, Fifteenth Eestin Nominees Pty Ltd (‘Fifteenth Eestin’), as the trustee of the E Rosenberg Investment Trust (the ‘Investment Trust’) and to appoint Glen Oak Nominees Pty Ltd (‘Glen Oak’) in its stead.
[1]Rosenberg v Fifteenth Eestin Nominees Pty Ltd [2007] VSC 101 (‘Reasons’).

Throughout these reasons, we generally use first names to refer to Emanuel Rosenberg, his late wife (Bloom), Ian and Sabrina Berger and Sabrina Berger’s brother, Barry Rosenberg. The trial judge did likewise. Like him, we intend no disrespect by so doing.

We are mindful of the fact that judgment in this appeal has been reserved for over a year. A delay of that length is much to be regretted. There were, however, 76 grounds of appeal, almost all of which raised questions of fact and evidence, rather than law. In the circumstances, as will be apparent from the reasons for judgment, consideration of the evidence and resolution of the grounds of appeal has been an unavoidably lengthy process.

II BACKGROUND TO THE PROCEEDINGS

These proceedings are the product of an unfortunate family dispute about the disposition of Emanuel Rosenberg’s fortune. Emanuel started work when he was 13 and became a successful businessman. He set up various companies and trusts to manage his businesses and investments for the benefit of himself and his family. The trial judge described in his reasons the complex network of trusts and companies established by Emanuel, and later by his children and their spouses, and the various changes which occurred to the company and trust structures over time.[2] We describe them only to the extent necessary for the disposition of this appeal.
[2]Reasons [11]-[115].

Barry Rosenberg ran a family business known as Delf Brass Co (‘Delf Brass’) until 1990. Delf Brass was owned by Rosekay Holdings Pty Ltd (‘Rosekay’), one of the family companies.[3] Because Rosekay’s name was changed in April 1996 to Project Hardware Pty Ltd, we refer to it as ‘Project Hardware’ throughout these reasons.
[3]In 1990, following the Dissolution Agreement described below, Sabrina owned half of the shares in Rosekay, Bloom owned one quarter of the shares and the other quarter was owned by Rangeway Nominees Pty Ltd, the trustee of the E Rosenberg Family Trust (note that this is a different Trust from the Investment Trust): Reasons [49].

From early 1991, Sabrina and Ian Berger took over management of the Delf Brass business, with some input from Emanuel. As directors of Fifteenth Eestin, the Bergers also managed the Investment Trust, along with Emanuel, whose active involvement in both the Investment Trust and the Delf Brass business diminished over time. The last time Emanuel signed a document as a director of Fifteenth Eestin was on 14 June 2000.[4] The Bergers had an amicable relationship with Emanuel for many years. Sadly, they later came into conflict.
[4]The document was a tax return also signed by the Bergers.

According to Emanuel’s evidence, he was initially upset because he was not properly consulted by the Bergers about sales and purchases of apartments by the family in Surfers Paradise.[5] According to Ian, he had unintentionally upset his father-in-law by telling him he was ‘crazy’ not to attempt a reconciliation with his son, Barry. According to Emanuel, Ian had said to him, ‘all you Rosenbergs are mad’, and this was the culmination of matters which had led to his estrangement from the Bergers.[6] His Honour commented:

[I]t seems to me that Mr Rosenberg had become disgruntled by the failure of [Sabrina and Ian] to wait for his death before attempting to obtain the full benefit of the assets which he had built up.[7]

[5]The various sales and purchases are described in the Reasons at [99]-[100].

[6]Reasons [109].

[7]Reasons [152].

Although that conclusion is challenged in the grounds of appeal, it is unnecessary in order to determine this appeal to decide why the conflict arose. The appeal concerns whether various representations were made by Emanuel, and if so, whether they were acted upon by the Bergers to their detriment. It is sufficient to say that the difficulties between the Bergers and Emanuel came to a head in early 2004,[8] when Emanuel, then aged 86, made changes to his personal affairs and to the trust arrangements.
[8]The matters which gave rise to conflict between them are discussed in more detail below.

On 29 March 2004, Emanuel revoked ‘any and all Powers of Attorney… given by [him] to [his] daughter Sabrina Berger and/or [his] son-in-law Ian Berger’.[9] He later executed successive wills, depriving Sabrina of the benefits previously conferred on her by a will he had made in 1988 and subsequent codicils. Under his 1988 will, Emanuel had appointed his brother, Lionel, as executor and Sabrina as executrix if Lionel predeceased him. He left his residuary estate to his wife, Bloom, or if she should predecease him, to Sabrina.[10]
[9]Reasons [110]. Emanuel had executed an enduring power of attorney in favour of Sabrina on 16 October 1990: Reasons [37]. It is unclear whether he had at any time executed a power of attorney in favour of Ian.
[10]And if Sabrina predeceased him, to Sabrina’s children.

In the 1988 will, Emanuel said that he had made no provision for Barry because he had ‘adequately provided for him during his life-time’. The will also provided that if Barry predeceased him, the power which Emanuel held to change the trustee of the Investment Trust[11] would vest in Sabrina from his death and that, if his wife should predecease him, his power to alter the trustee of various other trusts would also vest in Sabrina. Bloom Rosenberg made a will in similar terms.
[11]Clause 8, referring to the BD Rosenberg Investment Trust, which became the E Rosenberg Investment Trust (‘the Investment Trust’). The same provision was made in relation to the power conferred on Bloom by the BD Rosenberg Trading Trust. In addition, clause 7 provided that if his wife predeceased him, the power to appoint a new Trustee conferred by the E Rosenberg Family Trust dated 25 November 1972, and the BD Rosenberg Family Trust dated 1 February 1976, should vest in Sabrina.

Under a 1995 codicil, executed after the death of Bloom, Sabrina was appointed sole executrix and trustee; specific bequests of $70,000 were made to each of Emanuel’s grandchildren; and his residuary estate was left to Sabrina or to her two children, if she should predecease him. A 1997 codicil altered the timing of one of the grandchildren’s bequests, but in all other respects confirmed the 1988 will and the earlier codicil.

On 21 April 2004, Emanuel executed a new will, appointing Barry as his executor and trustee, and dividing his residuary estate into two portions. His grandchildren and great grandchildren were to receive half of the residuary estate, and the other half was left to Jewish Care (Victoria) Inc. On 27 October 2004, Emanuel made yet another will, under which Barry’s children were made the sole beneficiaries of a testamentary trust. Neither Sabrina, Ian nor their children benefited under the October 2004 will (the ‘2004 will’).

As we have said, Fifteenth Eestin was the trustee of the Investment Trust, which was established in 1977.[12] The main assets of the Investment Trust were, and are, three valuable commercial properties – one is situated in Alexandra Parade, Clifton Hill, and the other two are in Hoddle Street, Clifton Hill. The three properties are collectively referred to in the evidence and in his Honour’s judgment as ‘the corner properties’. The properties are all leased and generate a rent of approximately $500,000 per annum, which is income of the Investment Trust. Because the control of the assets and income of the Investment Trust lies at the heart of this dispute, we now briefly describe the history of the management of the Trust.
[12]The trust was initially known as the BD Rosenberg Investment Trust, but on 28 June 1991 it changed its name to the E Rosenberg Investment Trust.

IIIMANAGEMENT OF THE INVESTMENT TRUST

Originally, both Emanuel and Barry were directors of Fifteenth Eestin as well as appointors under the deed establishing the Investment Trust. In November 1990, a Dissolution Agreement to split various family businesses between family members and various corporate entities was entered into. Barry resigned as appointor of the Investment Trust and was replaced by Bloom. After Bloom died in October 1993, Emanuel became the sole appointor under the Investment Trust. Under the Dissolution Agreement, Barry also agreed to resign as a director of Fifteenth Eestin in favour of Sabrina. In 1991, Ian became a director of Fifteenth Eestin. From then on, Emanuel and the Bergers were directors of Fifteenth Eestin.

Over the years, the Investment Trust made distributions of income to family entities, including: Project Hardware (which, as previously mentioned, owned Delf Brass); S & I Investments (Australia) Pty Ltd (‘S & I Investments’) (a company of which Mr and Mrs Berger were directors); Emanuel and his wife Bloom; and Sabrina and Ian. In the financial year ending 30 June 1999, Mr Norman Same, the Investment Trust’s accountant, advised that potential taxation liability could be reduced if the Trust made a capital distribution.[13] His Honour found that a capital distribution of $2,085,777 was applied as a credit to Ian and Sabrina’s joint loan account with the Investment Trust, and that $153,021 was credited to Emanuel’s loan account. His Honour said that it was common ground that Ian was not then a beneficiary of that trust, and that his half share of that capital distribution and an income payment of $3,000 made to him in 1998 were distributions made in error. Ian repaid the $3,000 to the trust.[14] We discuss the additional issues relating to these distributions in further detail below.[15]
[13]Reasons [83].
[14]It was submitted on behalf of the appellants that Ian was eligible to be added as a beneficiary of the Investment Trust because he was the brother-in-law of Barry, who was originally a specified beneficiary. This is relevant to the respondents’ notice of contention. Given our view that it is unnecessary to decide the issue raised by the notice of contention (see paragraph [278] below), we do not examine this matter further.
[15]See paragraphs [225]-[226] and [277]-[279].

On 15 July 2004, following the conflict to which we have referred, Emanuel exercised his powers as sole remaining appointor under the trust deed to remove Fifteenth Eestin as the trustee of the Investment Trust and to appoint Glen Oak in its stead. Glen Oak consented to act as trustee, and on 16 July 2004 signed an authority directing Fifteenth Eestin to deliver relevant documents, property and income to it. Mr John Adams, a partner in the accounting firm Horwath, is the sole director and shareholder of Glen Oak.

After Fifteenth Eestin failed to comply with that request, Emanuel and Glen Oak commenced proceedings in the Supreme Court.[16] They relied primarily on clause 10A of the Trust Deed, which gave Emanuel the power to remove the trustee and to re-appoint a new trustee. In the alternative, they relied on a number of alleged breaches of trust as the basis for Fifteenth Eestin’s removal.
[16]For details of the proceeding below, see Reasons [2].

In their amended defence and counterclaim, Fifteenth Eestin and the Bergers alleged that Emanuel had made various representations to the Bergers; that the Bergers had acted to their detriment in reliance on those representations; and that, as a consequence, Emanuel was estopped from removing Fifteenth Eestin as trustee. (The particular representations pleaded are discussed in more detail below.) Further, or in the alternative, it was alleged that Emanuel held his assets and wealth on a constructive trust for Sabrina.[17]
[17]The pleadings relied on a number of different factual scenarios in the alternative, as the basis for the imposition of a constructive trust.

The judge held that Sabrina and Ian had not satisfied the onus of proving that Emanuel had made the pleaded representations.[18] His Honour further held that, even if the representations had been made, the Bergers had not shown that they had suffered any detriment in reliance upon them.[19]
[18]Reasons [132]-[156].
[19]Ibid [157]-[169].

His Honour further held that, even if the Bergers had suffered a detriment as claimed, he would have made an order compensating them, rather than giving effect to any of the alleged representations. His Honour held that the defence and counterclaim were not made out, and that Emanuel had been entitled to exercise his power to change the trustee of the Investment Trust. [20]
[20]See Reasons [163], [166].

Although it was not strictly necessary to do so, his Honour also held that Fifteenth Eestin had not exercised its discretion in the interests of all the beneficiaries of the Trust. He said that for that reason, he would have been prepared to order its removal as trustee in any event.

IV SUMMARY OF GROUNDS OF APPEAL

The appellants relied on 76 grounds of appeal. In essence they contend that his Honour erred in:

·rejecting the claim that Emanuel made the various representations;[21]
·finding that the Bergers did not suffer any detriment in reliance on the representations;[22]
·holding that, even if the elements of an estoppel or constructive trust were made out, the appropriate remedy would be to order payment of equitable compensation to the Bergers and not to restrain Emanuel from exercising his power to appoint a new trustee of the Investment Trust;[23] and
·finding that Fifteenth Eestin had not exercised its discretion in the interests of all the beneficiaries of the trust.[24]

[21]Grounds of appeal 1-47, 50-51. Because the grounds of appeal overlap considerably, references to particular grounds in this judgment are necessarily imprecise.

[22]Grounds of appeal 48-49, 52-66.

[23]Grounds of appeal 67-69.

[24]Grounds of appeal 70-76.

Counsel for the appellants made very lengthy written submissions before the hearing. After the hearing, the appellants filed amended submissions covering 89 pages. Many of the submissions simply repeated the substance of the grounds of appeal. Because of the repetition in both the grounds of appeal and the submissions, we address the essential elements of the complaints rather than dealing separately with each of the grounds of appeal.

The respondents filed a notice of contention to the effect that, his Honour should have held that removal of Fifteenth Eestin was warranted because it breached the terms of the trust by paying income and distributing capital to persons or companies which were not beneficiaries. The notice of contention alleged that purported amendments to the deed of settlement of the Investment Trust, under which Project Hardware and S & I Investments became beneficiaries, were invalid.

Before turning to the matters under appeal, we deal briefly with a preliminary question as to the orders to be made for substitution of parties. This arises because of the death of Emanuel, which occurred after his Honour delivered judgment and before the hearing of the appeal.

We turn then to the grounds of appeal relating to the estoppel and constructive trust claims. We deal first with his Honour’s finding that Emanuel did not make the pleaded representations. We go on to consider the grounds which challenge his Honour’s findings that:

·the Bergers did not act to their detriment in reliance on these representations; and
·any such detriment could, in any case, be rectified by awarding them equitable compensation.

Finally, we briefly consider the question of Fifteenth Eestin’s conduct as trustee.
VIS EMANUEL’S PERSONAL REPRESENTATIVE A PARTY TO THE APPEAL?

At the time of the hearing of the appeal, Emanuel had left a will which had not been proved. Prior to the hearing, Barry Rosenberg and Glen Oak applied for orders that:

1. Barry David Rosenberg, as executor of the will of Emanuel Rosenberg, is made the first respondent to this appeal in substitution for Emanuel Rosenberg and that the title to this appeal is amended accordingly.
2. Such further orders as the Court thinks fit.

The application was accompanied by an affidavit sworn by Barry, stating that he was the executor under the 2004 will. The application was heard immediately before the hearing of the substantive appeal.

At the hearing of the application, counsel were informed of the Court’s preliminary view that, because Barry was Emanuel’s personal representative, Barry could be substituted as a party to the proceeding under r 9.09(2) of the Supreme Court (General Civil Procedure) Rules 2005 (Vic). It was therefore unnecessary to consider whether the Court should exercise the power conferred by r 16.03(1)(b) (to ‘appoint a person to represent the estate for the purpose of the proceeding with the consent of the person appointed’). Where the Court exercises that power, the judgment binds the estate of the deceased as if the personal representative were an original party to the proceedings.[25]
[25]Rule 16.03(2).

Counsel for the appellants indicated that they would consent to Barry being appointed to represent Emanuel’s estate for the purpose of the appeal, but that they objected to his being described as ‘executor of the will of Emanuel Rosenberg’. It was submitted that the Court should not make an order substituting Barry as a party in place of the original party under r 9.09(2), but should instead exercise power under r 16.03. Counsel also submitted that, because Emanuel had ceased to be an object of the discretionary trust of which Fifteen Eestin was trustee, and since Barry was not a beneficiary of the trust, he had no standing to seek the alternative relief (which the plaintiffs had initially sought against Fifteenth Eestin for breach of trust).[26] Further, it was submitted, Glen Oak had no standing to seek such alternative relief.
[26]In the proceedings below, the plaintiffs claimed orders that Fifteenth Eestin had ceased to be trustee and that Glen Oak was trustee. In the alternative, it sought a declaration that Fifteenth Eestin had acted in breach of trust, and an order removing Fifteenth Eestin and substituting Glen Oak.

Counsel submitted that the person named as executor in the will was not the personal representative of the deceased until probate had been granted. Further, if the pleaded estoppel or constructive trust were made out, the provisions of the will might be so inconsistent with the representation made by Emanuel that the will could not operate. The Court should not ‘pre-empt the outcome of that issue’ by making an order for substitution – ie, designating Barry as executor - but should instead make an order under r 16.03.

Counsel for the respondents said that r 16.03 was irrelevant because there was a personal representative of Emanuel’s estate. The 2004 will had appointed Barry as executor and, once probate was granted, the estate of the deceased would vest in the executor as from the date of death.

In our view, the submission of counsel for the respondents should be accepted. At common law, the title to the personal estate of the deceased vests in his or her executor from the date of death.[27] That principle continues to apply in Victoria. When probate is granted, s 13 of the Administration and Probate Act 1958 (Vic)[28] provides that any real estate belonging to the deceased vests in the executor retrospectively to the date of death. Thus, once a grant of probate has been made, the executor will be bound by any decision affecting Emanuel’s real or personal property, even if the Court does not proceed under r 16.03.
[27]Ryan v Davies Brothers Limited (1921) 29 CLR 527.
[28]Under s 13(2), this includes property over which the testator had a general power of appointment.

The only basis on which it was submitted that a grant of probate could be refused was that Emanuel had represented to Sabrina that she would be entitled to the proceeds of his estate under the 1988 will. Even if Sabrina succeeded in establishing that his Honour should have found that the property left by Emanuel’s 2004 will was affected by an estoppel or constructive trust, neither the validity of that will, nor the title of the executor and trustee appointed by it to administer his estate, would be affected. Instead, the executor would be required to administer the property and hold it on any trust imposed as a result of court orders made on the appeal, rather than in accordance with the terms of the will.

The situation is similar to that in Stone v Hoskins,[29] where it was argued that probate of a will should not be granted because the property was held on a constructive trust arising from an agreement between the testatrix and her husband. Sir Gorell Barnes said that where an agreement to make mutual wills is established, the Court does not set aside the will, but orders the executor of the will to act as the trustee to perform the contract.[30] The High Court followed this approach in Birmingham v Renfrew[31] and Barns v Barns.[32] Although there is no direct authority for the principle in the context of estoppel, the same reasoning applies by analogy. In our opinion, it is therefore unnecessary for the Court to proceed under r 16.03.
[29][1905] P 194, 197.
[30]Ibid 197.
[31](1937) 57 CLR 666, 677 (Latham CJ).
[32](2003) 214 CLR 169, 199 (Gummow and Hayne JJ). See also Ogilvie v Ryan [1976] 2 NSWLR 504, where the constructive trust arose from a promise made by the deceased on which the defendant had acted to her detriment.

We would also reject the appellants’ claim that Glen Oak does not have standing in the appeal in relation to the alternative claim for breach of trust sought by it and Emanuel. Glen Oak’s standing to claim alternative relief was not challenged below. It is now too late for the appellants to claim that it should not have been a party to the breach of trust claims.

If we had concluded that his Honour erred in holding that Emanuel was entitled to exercise his power to remove the trustee of the Investment Trust, Barry would not have had standing to pursue the alternative claim for breach of trust because he was not a beneficiary of the Investment Trust and does not have any interest in it in his capacity as executor. But since we have concluded that his Honour was correct to dismiss the estoppel claim (so that Emanuel was entitled to remove Fifteenth Eestin and appoint Glen Oak as trustee), Barry’s lack of standing has no practical significance.

VI WERE THE PLEADED REPRESENTATIONS MADE?
A The pleadings

In their defence and counterclaim, the appellants relied on representations and promises made on four separate occasions. The first representations were said to have been made after Emanuel had by-pass surgery in mid-July 1990. Around that time there were disagreements between him and Barry about the management of Delf Brass (which was then being run on a day-to-day basis by Barry’s brother–in–law) and a timber business. Barry and Emanuel were directors of Project Hardware, which, as mentioned above, owned the Delf Brass business. Sabrina, Bloom and Barry’s wife, Sara, were the shareholders. Barry was also responsible for running the timber business, owned by the Provans Timber group of companies.[33] Emanuel was then contemplating a division of the various family businesses and entities between Barry’s interests (covering Barry and his wife, Sara) on the one hand, and Emanuel’s interests (covering Emanuel, Bloom and Sabrina) on the other.
[33]Provans Timber Pty Ltd, Provans Timber (Joinery) Pty Ltd and Provans Timber Joinery (Vic) Pty Ltd were all parties to the Dissolution Agreement.

The defence and counterclaim alleged that in July 1990 Emanuel made the following promises to Sabrina (‘the July 1990 promises’):

(a) to avoid any dispute between Barry and Sabrina over the division of family controlled assets after his death, [Emanuel] would, during his life, split up his wealth between Barry and Sabrina; and
(b) he would take steps to ensure that the assets of the [Investment Trust[ would -
(i) be, and remain, managed and controlled by Sabrina;
(ii) be used for the benefit of [himself[ and [his wife Bloom] (‘the parents’) and Sabrina while the parents were alive;
(iii) be for the sole benefit of Sabrina after the parents' deaths.

The second representations were said to have been made in or around October 1990, prior to the execution of the Dissolution Agreement. They were said to have been made to Sabrina, who informed Ian of them. We call these ‘the October 1990 promises to Sabrina’.

As pleaded, the representations were that:

(a)[Emanuel] would, during his life, split up his wealth between Barry and Sabrina;
(b) he was arranging for a Dissolution Agreement to be drawn so as to divide the assets of the family between Barry, his wife, and their associated corporate entities, of the one part, and [Emanuel], Bloom Rosenberg and Sabrina, and their corporate entities, of the other part;
(c) the purpose and effect of the Dissolution Agreement was to ensure that Sabrina would be looked after financially in the future after the parents' deaths, so that she would not be reliant on Barry;
(d) Barry and his family were getting properties under the Dissolution Agreement, and Sabrina would get the properties held by the [Investment Trust];
(e) [Emanuel] would ensure that Sabrina would be looked after financially, in the future after her parents' deaths;
(f) [Emanuel] would ensure that the assets of the [Investment Trust], would -
(i) be, and remain, managed and controlled by Sabrina and Ian;
(ii) be used for the benefit of the parents and Sabrina while the parents were alive;
(iii) be for the sole benefit of Sabrina after the parents' deaths;

(g)[by implication] [Emanuel] would do everything necessary to ensure that Sabrina had the benefit of the represented state of affairs and his promises as set out [above]; and
(h)[by implication] [Emanuel] would not do anything inimical to the represented state of affairs and his promises as set out [above], nor would he do anything to prevent or frustrate the fulfilment of the said represented state of affairs and his promises.

The third representations were also said to have been made in or around October 1990, but in this case, to Ian. It was alleged that these promises were made to Ian when Emanuel asked him to take over the management of Project Hardware and the Investment Trust, and that Ian had informed Sabrina of them. We call these ‘the October 1990 promises to Ian’. They were that:

(a)[Emanuel] was going to split his assets between Barry and Sabrina;
(b)the assets of the [Investment Trust], and all other assets under his management and control, would be for the benefit of the parents and Sabrina during the lifetimes of the parents, and thereafter for the benefit of Sabrina;
(c)[Emanuel] would ensure that the assets of the [Investment Trust], and all other assets under his management and control, would -
(i) be, and remain, managed and controlled by Ian and Sabrina;
(ii) be used for the benefit of the parents and Sabrina while the parents were alive;
(iii) be for the sole benefit of Sabrina after the parents' deaths;

(d)under the [1988 will] all proceeds of his estate went to [Bloom], then to Sabrina;
(e)the asset arrangements in sub-paras (a), (b), (c) and (d) were for the benefit of Sabrina and Ian.

As earlier mentioned, the Dissolution Agreement was entered into in November 1990 between Emanuel, Bloom, Barry, Sara, Sabrina and other corporate entities which owned various family businesses or held property on trust for family members. Fifteenth Eestin was a party to the agreement in its own right and as trustee of the Investment Trust. Clause C of the Preamble to the Agreement said that disagreements had arisen about the future operation and management of Delf Brass and the timber business. Clause D of the Preamble said that, in order to resolve these disagreements, the principals (Barry, Sara, Emanuel, Bloom and Sabrina) had agreed to a division of defined real estate and business assets between Barry’s interests (covering Barry and Sara) and Emanuel’s interests (covering Emanuel, Bloom and Sabrina). To bring about that division, the agreement provided for the appointment and retirement of family members from specified company positions and trusteeships and for transfers of shares in specified companies.

Under a deed of variation and a deed of nomination executed on the same day, Barry resigned as appointor of the Investment Trust in favour of his mother.[34] He also resigned as director of Fifteenth Eestin and Sabrina took his place as director. ASIC records showed that Ian became a director of Fifteenth Eestin on 17 May 1991, though the judge said that ‘no minutes were produced of any meeting of directors at which such appointments were said to have been made’.[35]
[34]Note that at that time, the Investment Trust was known as the ‘BD Rosenberg Investment Trust’: Reasons [14].
[35]Reasons [51].

The overall effect of the Dissolution Agreement was as follows. Bloom and Sabrina transferred their shares in the Provans Timber group entities to Barry and Sara, who thereby obtained full control of the timber business. Sabrina retained her 50 per cent shareholding in Project Hardware. The other 50 per cent was owned (in equal parts) by Bloom and by Rangeway Nominees Pty Ltd (‘Rangeway’), which was the trustee of another family trust.[36] Ian took over the day to day management of the Delf Brass business, with some assistance from Sabrina.
[36]This was the E Rosenberg Family Trust, established by deed of settlement dated 25 November 1972: see Reasons [13], [49]. Initially Emanuel and Bloom were directors of Rangeway, however Sabrina also became a director of the company in 1984: see Reasons [13] and [15].

The fourth representations were said to have been made to Sabrina and Ian after Bloom’s death, when Emanuel sold the apartment in which he was living and divided the proceeds between his five grandchildren. We call these ‘the 1994 promises’. According to the pleading, Emanuel:

(a)informed Sabrina and Ian that he would sell his apartment in South Yarra and divide the proceeds of sale amongst his five grandchildren, but [that he expected Sabrina and Ian] to see that he had a place in which to live;
(b)represented to Sabrina and Ian, and promised them, that Sabrina would get everything on his death pursuant to the [1988 will]; and
(c)repeated his earlier representation and promise that the assets of the [Investment Trust] would -
(i) be, and remain, managed and controlled by Sabrina and Ian;
(ii) be used for his benefit and for the benefit of Sabrina while he was alive;
(iii) be for the sole benefit of Sabrina after his death.

The pleadings alleged that, in reliance on the July and October 1990 promises to Sabrina, the October promises to Ian and Emanuel’s request to Ian to take over the Delf Brass business (through the request to manage Project Hardware), Sabrina was induced to accept appointment - and thereafter remain - as a director of Fifteenth Eestin, and to participate in the management and control of the Investment Trust thereafter. Further, in reliance on Emanuel’s request and the July and October 1990 promises to Sabrina and the October 1990 promises to Ian, Ian accepted an appointment as director of Fifteenth Eestin and took over the management of Project Hardware. It was said that, by making these promises, Emanuel had fostered various assumptions or expectations on the part of Sabrina and Ian, which they relied on to their detriment. It was also said that Sabrina and Ian had provided Emanuel with a place to live in reliance on the 1994 promises.

B Summary of alleged representations

The various representations alleged to have been made by Emanuel to Sabrina and/or Ian can be summarised as follows:[37]
[37]See reasons [132]-[157]. His Honour grouped the alleged promises according to when they were said to have been made. As a number of the promises were said to have been repeated, we have classified them as separate promises, rather than dealing with them by reference to the dates they were said to have made. Although the defence and counterclaim describes them slightly differently, the differences do not appear to be significant.

(a) Sabrina would be looked after financially in the future after her parents' deaths, so that she would not be reliant on Barry.[38]
[38]October 1990 promise to Sabrina.

(b) Emanuel would split his wealth between Sabrina and Barry, or would, during his life, give his entire wealth to Sabrina.[39]
[39]July and October 1990 promises to Sabrina and October 1990 promise to Ian. In the defence and counterclaim, this is described as a promise that Mr Rosenberg would give his entire wealth to Sabrina.

(c) Emanuel would ensure that the assets of the Investment Trust and all his other assets would be (and would remain) managed and controlled by Sabrina,[40] or by Sabrina and Ian, for the benefit of Emanuel and his wife and Sabrina while the parents remained alive - and after their deaths, for the benefit of Sabrina.[41]
[40]July promise to Sabrina. Reasons [153].
[41]July and October 1990 promise to Sabrina, October 1990 promise to Ian, the 1994 promises to Ian and Sabrina.

(d) Sabrina would be entitled to the properties held by the Investment Trust after Emanuel’s death.[42]

(e) After Bloom’s death, Sabrina would get ‘everything on [Emanuel’s] death’ under the 1988 will. [43]

C The evidence

[42]October 1990 promise to Sabrina.

[43]The 1994 promise.

It is necessary to summarise the relevant evidence (respectively) of Sabrina, Ian, Mr Fisher (the Rosenbergs’ friend and solicitor) and Emanuel.

1 Sabrina Berger

In her first affidavit, Sabrina deposed that in July 1990, shortly after Emanuel left hospital, he had told her that he was unhappy with the way Barry was running the Delf Brass business; that he did not want a conflict between her and Barry ‘over the division of the family controlled assets; he would rather see them enjoying themselves whilst he was still alive and ensure that they did not fight after his death’; and that he had decided to split his wealth between his two children.

She said she had had a discussion with her father in October 1990 in which he said his intention, and the purpose of the proposed Dissolution Agreement, was that she ‘would be looked after into the future and after his death so that [she] would not be reliant on [her] brother’; that he would give her a power of attorney to use if required; and that the assets of the Investment Trust ‘would be utilised for the benefit of himself, [Bloom] and [Sabrina] whilst [her] parents were alive, and after their deaths for [her]’. He also said to her that he would give Gard Nominees Pty Ltd and the Provans Timber companies to Barry.[44]
[44]Gard Nominees was trustee of the BD Rosenberg Family Trust, which owned property in Toorak (the home of Barry and Sara) and a property on Alexandra Parade, Clifton Hill. The Provans Timber group owned two other properties in Alexandra Parade: Reasons [31].

Sabrina also deposed that there was a later meeting between herself, Barry and Emanuel, at which Emanuel said that he had decided to split ‘all of the assets’, except for the Delf Brass business. At this meeting, Emanuel asked Barry if he wanted to buy Delf Brass or get out of the business. Barry said that he wanted to get out of the business. Shortly after that meeting, Emanuel asked Ian if he wanted to run Delf Brass, but he declined. In November 1990, however, Ian told Sabrina that he had changed his mind after pressure from Emanuel, and would agree to run Delf Brass.

Sabrina also said in her first affidavit that in 1994, Emanuel had told her and Ian that he wanted to sell his apartment in South Yarra and split the proceeds of sale between his five grandchildren:

He emphasised to us that, because he had rearranged the family asset affairs in 1990 so that the assets of the Trust would be mine after his death, once he sold his apartment in South Yarra it would be up to my husband and me to provide him with a place to live and look after him in his old age. I agreed to do so.

Sabrina described the improvements made to the three properties owned by the Investment Trust (ie, the corner properties). The funds expended on demolition and construction works on the Alexandra Parade property in 1996 were financed by an advance of $400,000 from the Investment Trust, a Macquarie Bank loan of $550,000 to the Investment Trust, a $300,000 loan from Project Hardware Ltd[45] and smaller loans from other family companies and trusts.[46] That property is leased by Delf Brass at a rent of $220,000 per annum.
[45]In 1990, following the Dissolution Agreement half of Rosekay Pty Ltd (later Project Hardware Pty Ltd) was owned by Sabrina, Bloom owned a quarter and the remainder was owned by Rangeway as trustee for the BD Rosenberg Family Trust: Reasons [49].
[46]Mistirose Pty Ltd lent $115,861.09. Mistirose was a family company of which Mr Rosenberg and Sabrina were originally the two directors and shareholders. By 2005, Mistirose was 88.9 per cent owned by SFSG Pty Ltd as trustee of the Berger’s superannuation fund and 11.1 per cent owned by Project Hardware. SFSG lent the Trust $100,000. The Macquarie Bank loan was repaid by Project Hardware. See Reasons [16], [77].

Between 1991 and 1996, Project Hardware had made improvements to the property at 457 Hoddle St at its own expense; and between 2000 and 2003, the Investment Trust had expended approximately $74,000 on improving the property. In 2000, a new building was constructed at 477 Hoddle Street, Clifton Hill, financed by a loan of $772,077 from Macquarie Bank. Kaylock (Australia) Pty Ltd, in which Sabrina and Ian then had a 50 per cent interest, pays rent of $155,000 per annum to the Investment Trust.

In her third affidavit, sworn on 21 December 2005, Sabrina deposed that Emanuel had said at the hospital that he ‘wanted to split everything equally between Barry and me, so that there would be no problems if he died’. She said that, by what her father had said and the way that he had spoken, she understood him to be referring to various properties (including the properties of the Investment Trust) and the two businesses, Provans Timber and Delf Brass.

Emanuel told her that she would become a director of Fifteenth Eestin in order to participate in the management and control of the Investment Trust. He said that the assets of the Investment Trust and his other assets would be used for him, Bloom and Sabrina whilst he and Bloom were alive, and thereafter for Sabrina’s benefit alone. She said that she had told Ian about these discussions with Emanuel.

Sabrina said that, apart from attending the meeting previously referred to, she had not been involved in the negotiations for the Dissolution Agreement because she had a young baby at the time. She now recalled, however, that Ian was present at that meeting and that Emanuel had offered Delf Brass to Barry, but Barry had said that he did not want it. She said that Delf Brass had accumulated large debts under the management of Barry’s brother-in-law, Ady Broder.

She also said that in November 1990, Ian said that he had told Emanuel that, despite his reluctance, he was willing to take over the management of Delf Brass. She said that she had signed the Dissolution Agreement in reliance on the fact that Ian would be joining with her in the control and management of the Investment Trust. She had also relied on Emanuel’s statements that in the long term, Delf Brass and the assets of the Trust would be hers.

Sabrina also deposed that, in discussions about the Dissolution Agreement, Emanuel had told her that she was getting the corner properties. She said that Emanuel had told her that what he was doing would ensure she would never be reliant on Barry to ‘do the right thing’ once he (Emanuel) was no longer around. She said that Emanuel had also told her that his will stated that Barry had been taken care of during his lifetime, and that it provided for his estate to go to Bloom and then to Sabrina. Since 1990, she said, Emanuel had repeatedly said he had done the ‘right thing’ in dividing the family business assets. Sabrina said that she had relied on what Emanuel had said when providing support and assistance to Ian in the management and control of Project Hardware and the Investment Trust.

Although Sabrina repeated many of these statements in her evidence-in-chief, much of her evidence in cross-examination was not helpful to the appellants’ case. So far as the effect of the Dissolution Agreement was concerned, she agreed that she had thought that Emanuel ‘would look benevolently on [her] in the future’. She said that she had ignored the detail of the Dissolution Agreement because she had thought that Emanuel would look after her interests. Sabrina also agreed that she had understood that the Dissolution Agreement did not split Emanuel’s wealth between her and Barry. She had been aware that the Agreement had left Emanuel and Bloom with their residential property and with shares in various companies, and had left herself and Emanuel in control of the assets of the Investment Trust for the benefit of the beneficiaries of the Trust. But she reiterated that Emanuel had said that he would split his wealth between her and Barry.

She said that she had expected that, after her parents’ death, Emanuel’s wealth would ‘eventually … be [hers] anyway, so to [her] that related [to] the same conclusion’. She agreed that her expectation reflected the fact that Barry was her only sibling and that there was ‘tension’ between Emanuel and Barry, who were ‘disentangling their business connections’.

The following exchange then occurred between Sabrina and cross-examining counsel:

COUNSEL:Was it your understanding that in the arrangements that your father was proposing to be made, that he was expressing the view that he had provided in Barry taking a share that he had provided sufficiently for Barry?
WITNESS:Yes.
COUNSEL:You were rather younger than Barry, nine years?
WITNESS:Yes.
COUNSEL:But a time might come, mightn’t it, when your father was satisfied that he had provided sufficiently for you, mightn’t it?
WITNESS:Possibly.

This was a significant admission because it undermined Sabrina’s claim that she believed her father had promised she would receive all his remaining property.

Sabrina’s answers in cross-examination show her appreciation of the fact that the Dissolution Agreement did not divide all the family wealth between her and Barry. At most her evidence supports the claim that Emanuel led her to believe that he would divide his wealth between her and Barry, either during his lifetime or by his will.

Sabrina also gave evidence about her state of mind in relation to Fifteenth Eestin. She said that when Emanuel made her a director of that company in 1990, he said that he ‘was making arrangements that would benefit [her] if he was not around’ - that is, if he died shortly after making the arrangement. At that time, Emanuel had had heart surgery and it was expected that Bloom would outlive him. The transcript notes an inaudible response to a question in cross-examination about whether Sabrina knew what would happen if Emanuel was ‘still around’ - that is, if he survived Bloom for a significant period.

In cross-examination, Sabrina agreed that she had realised that she did not become entitled to the assets of the trust simply by becoming a director of Fifteenth Eestin; that Emanuel and Bloom were both beneficiaries of that trust; and that her participation was for the purposes of making decisions that would benefit all the beneficiaries.

In her affidavit of 21 December 2005, Sabrina said that at about the same time that Emanuel was talking to Ian about taking over the Delf Brass business, Emanuel had told her that she ‘was getting the corner properties, being those owned by the Trust’. As his Honour noted, however, Sabrina also agreed in cross-examination that Emanuel had never given her any assurance that particular buildings would always remain the property of the Investment Trust, nor had he made any promises about the nature of the assets of the Investment Trust.[47] She also agreed that Emanuel regarded the Investment Trust properties as his, and that he had never ruled out the sale of those properties. She also said that she had been aware in 1990 that Emanuel intended to leave all his assets to Bloom, if she survived him.
[47]Reasons [143].

It was put to Sabrina that Emanuel’s concern about her financial security in 1990 arose from his concern that he might not live much longer. Sabrina said that she had believed that everything in Emanuel’s will would come to her, even if she was financially secure by the time he died. His Honour then asked her whether that meant that Emanuel could not change his 1988 will and the codicils to it (for example, to leave something to a charity). Sabrina said that, in the period after the will was made, she and Emanuel ‘had discussions to change his will and he mentioned that he would want to do, give some to charity. Well that was fine’.

2 Ian Berger

Ian swore six affidavits in these proceedings. In his first affidavit, he said that he had been invited by Emanuel to come into the Delf Brass business. He had at first refused but, on being pressed by Emanuel, he eventually agreed, mainly because of Sabrina. In his second affidavit, he said that he had been appointed as a director of Fifteenth Eestin following the division of the Rosenberg family assets in November 1990, and that his becoming a director was ‘sought and encouraged’ by Emanuel, who said he was seeking to ‘hand over the reins’ so as to relieve himself of the burdens of managing the assets under his control’.

It was not until his third affidavit that Ian referred to the promises said to have been made by Emanuel. According to that affidavit:

· From July 1990 onwards, Emanuel had told Ian on a number of occasions that his will did not provide for Barry, and that everything was left to Bloom, and then to Sabrina.

· At the time he took over Delf Brass, Ian had considered it to be ‘a basket case’. When he agreed to take over control and management of that business, he was influenced by the fact that Emanuel had told Sabrina and him that Project Hardware and the Investment Trust would belong to Sabrina in the long term.

· In late 1990, Emanuel had told Sabrina and Ian of the impending agreement to divide the family business assets. Ian said that Emanuel had:

emphasised to us that what he was doing was for the benefit of Sabrina into the future [so] she would never be reliant upon Barry Rosenberg to do the right thing by her, once Mr Rosenberg was no longer around to take care of her. Mr Rosenberg told us that his will stated that Barry Rosenberg had been taken care of during his lifetime, and that his estate would be left to his wife, then to Sabrina. In many conversations with Mr Rosenberg over the years following 1990, he repeatedly said that what he had done in 1990 to divide the family business assets was the right thing, and that he felt he could rest easy knowing that he had provided for both of his children fairly.

· In mid-1990, Sabrina had told Ian of discussions between herself and Emanuel, in which Emanuel had said he would during his life split his wealth between his two children; that Sabrina would become a director of Fifteenth Eestin, in order to participate in the management and control of the Trust; and that the assets of the Trust and his other assets would be used for the benefit of Sabrina and her parents whilst her parents were alive and then they would be for the sole benefit of Sabrina.

· Sabrina had told Ian of discussions between herself and Emanuel in about October 1990, in which Emanuel had told her that he would, during his life, split his wealth between her and Barry; and that he was arranging for a Dissolution Agreement, to divide the assets of the family between Barry, Sara and their associated corporate entities on the one hand, and Emanuel, Bloom and Sabrina and their associated corporate entities on the other. The Dissolution Agreement was intended to ensure that Sabrina would not be dependent on Barry after Emanuel’s death. Sabrina would get the properties held by the Investment Trust and Delf Brass. Emanuel would ensure that Project Hardware and the assets of the Investment Trust would be managed and controlled by Sabrina and Ian, and would be used for the benefit of Sabrina and her parents while her parents were alive, and then would be for the sole benefit of Sabrina after the parents’ death.

· Sabrina had also told Ian that Emanuel had asked her to become a director of Fifteenth Eestin, for the purpose of taking part in the management and control of the Investment Trust.

· In reliance on these discussions, Ian had accepted an appointment as a director of Fifteenth Eestin and had carried the primary responsibility for the management and control of the Investment Trust. Emanuel had given Sabrina and Ian a copy of his will and codicil dated September 1995, pursuant to which the balance of Emanuel’s estate (after bequests of $70,000 to each of the five grandchildren) was left to Sabrina if she survived him.[48] In his evidence at trial, Emanuel said that he had spoken to Sabrina in 1990 about what the will then provided, but did not speak to her about the benefits that would come to her when he and Bloom passed away. Emanuel contradicted himself about whether Sabrina had a copy of the 1988 will.[49]

[48]Statements to similar effect were contained in Ian’s third affidavit.

[49]Sabrina gave evidence that her father gave her a copy of his 1988 will in around mid-1995.

Some of Ian’s evidence in cross-examination related to the circumstances in which he had backdated a deed executed by Mr Lionel Rosenberg, Emanuel’s brother. The deed assigned to Project Hardware (which, at the time, was still called Rosekay) Lionel’s interest as an object of the Investment Trust (which was a discretionary trust).[50] The backdating was intended to ensure that distributions made by Fifteenth Eestin to Project Hardware (both before and after the execution of the Dissolution Agreement in November 1990, when it was not yet a beneficiary of the Investment Trust) did not result in a re-assessment of tax liability.
[50]Reasons [64].

We refer below to his Honour’s strongly adverse findings about Ian Berger’s credit, which were in part based on his evidence relating to these matters. His Honour regarded it as ‘quite unbelievable’ that Ian would not have recalled the backdating episode. His Honour noted Ian’s

prolonged reluctance to state that one of the reasons for the backdating of the documents in 1993 was that, if the distributions had to be reversed because they were in breach of trust, there would be taxation issues.[51]

[51]Ibid [125]-[127].

In cross-examination, counsel put to Ian an apparent inconsistency between his affidavits about what Emanuel had told him about the management and benefit of the assets of the Investment Trust. In his first affidavit, Ian had said that Emanuel had told him that the assets of the trust would be for the benefit of himself and Sabrina during their lives and then for Sabrina. In his third affidavit, however, Ian had said that Emanuel had told Sabrina that the assets of the trust and his other assets would be used for the benefit of Sabrina and her parents whilst her parents were alive and then for the sole benefit of Sabrina. Ian said that this was a ‘drafting error’ by his legal team, which was changed in a later affidavit, and that he had not read the previous affidavit ‘100 per cent thoroughly’.

It was also put to Ian in cross-examination that it was inaccurate to describe Delf Brass as having been a ‘basket case’ in 1990. Ian responded that the statement was correct because Delf Brass had large borrowings and unsaleable stock, and because Mr Broder, the manager of the business, had put customers off by his attitude. Ian was then taken to the accounts, showing that in 1990 Delf Brass had sales of $3,439,000 (an increase over the previous year), a gross profit of $1.24 million and an overall profit of $50,000, despite paying large amounts for interest, management fees and building up of inventory. The accounts also recorded a substantial inventory, which did not include any substantial amount for writing off unsaleable assets. Ian maintained that Delf Brass was a basket case because the overdraft had risen to just under $2 million, stock had only increased by $900,000 and interest would be continuing to rise.

In cross-examination, Ian agreed that he had not believed that Sabrina had become the owner of Project Hardware as a result of the Dissolution Agreement. He said that he had believed that there was a division of assets into the interests of Barry and his family on the one hand, and Emanuel, Bloom and Sabrina on the other. He said that he had understood that ‘Project Hardware was for [Sabrina] in the future but she would get [sic] in the future. He repeated his assertion that there had been a discussion between himself and Emanuel in mid-1990, in which Emanuel had expressed concern that Barry might not provide for Sabrina if he (Emanuel) was to die, and that he would make arrangements so that Sabrina would not have to depend upon Barry. When asked whether Emanuel had promised him that Sabrina would be looked after to ‘any particular level of comfort’, Ian said:

He told me that the assets of the Trust and Delf Brass or Project Hardware or Rosekay Holdings were for Sabbie, so obviously you can draw any inference you want from that you like [sic].

Ian agreed that Emanuel had said nothing about any particular asset of the Trust being preserved. It was also put to him that the conversations he had had with Emanuel in 1990, and subsequently, had nothing to do with him taking a position with Project Hardware. Ian said he did not understand the question. He also agreed that he had said nothing in his first affidavit to indicate that it was because of promises by Emanuel that he had agreed to work for Delf Brass, and that this was only said in later affidavits. He also conceded that his recollection had failed him on a number of occasions - for example, when questioned about the capital re-distribution made by the Investment Trust. But he maintained that what Emanuel had said - and what Sabrina had told him Emanuel had said - was that the Investment Trust would be used for the benefit of Emanuel, Bloom and Sabrina in the lifetimes of the Rosenbergs, and that he had relied on those statements in taking on Delf Brass and the management of the Investment Trust.

It was also put to Ian that Sabrina had never said in her affidavits that Emanuel had made a promise to her in relation to assets which fell outside the Dissolution Agreement. Ian responded that he could not recall what Sabrina had said in her affidavits. When it was put to him that Emanuel had never told him that his other assets would be for Sabrina’s benefit, Ian said that he could not recall at what point Emanuel ‘did tell me about his will, that he had provided for Sabbie in his will’. But he reiterated that Emanuel had said that Sabrina would not have to rely on Barry and that ‘he would look after her into the future’. According to Ian, Emanuel had said that

he was making sure that [Sabrina would] be financially secure and the assets of the trust and the – would be for her benefit after – would be for her benefit as well as her parents while they are alive and then for her afterwards.

3 Mr Fisher

Mr Fisher is a solicitor retained as a consultant by the legal firm of Wisewoulds. At the time of the trial he had been a friend of the Bergers for approximately 15 years. He deposed that:

[F]rom about the mid 1990s onwards Mr Rosenberg told me on many occasions, that he had been clever, by distributing his wealth to his children before he died. He told me that he had provided for his son, Barry Rosenberg, and his daughter, Sabrina. He said that Barry took over the business of Provans Timber and the properties associated with that business, and that the rest was for Sabrina. He told me that Sabrina had agreed to look after him. He jokingly referred to himself as being a pauper, because he had given everything away. He appeared to be self-satisfied with that situation.

As we discuss below, in cross-examination, Emanuel denied telling Mr Fisher that ‘the rest was for Sabrina’ and could not recall saying that ‘he was a pauper’ because he had given away his property to his children. He conceded that Sabrina had agreed to look after him, but denied informing Mr Fisher of this.

In April and May 2003, Mr Fisher met with the Bergers on three occasions to discuss matters relating to corporate and trust structures and wills and estate planning. Mr Fisher said that he had been asked by the Bergers to explain these proposals to Emanuel. He attended a meeting on 26 May 2003 with Ian, Sabrina and Emanuel. Emanuel was present for only part of the meeting. Mr Fisher deposed as follows:

8.While Mr Rosenberg was present, we discussed the proposed restructure, among other matters, and the fact that Mr Rosenberg would be required to transfer his shares in Project Hardware Pty Ltd.[52] Mr Rosenberg told me that he was agreeable to that, subject to there being no problem in relation to any capital gains tax issues.
[52]Emanuel inherited his deceased wife’s shares in Project Hardware: Reasons [69].
9.I also said to Mr Rosenberg that in addition to the restructure, we would need to deal with the Trust. I said: ‘You have no ongoing involvement, it’s being managed by Ian for Sabbie and the children, and it is appropriate that in tidying up the paperwork, if you are still the appointor or guardian, you should resign in favour of Sabbie’ (or words to that effect). He readily agreed to that. He said: ‘Yes, do that’.
10.In the same discussion I also raised with Mr Rosenberg issues relating to Rangeway Nominees Pty Ltd, in its capacity as trustee of the E. Rosenberg Family Trust.[53] I discussed with him, the need for his resignation as a director, the transfer of his shares, and his resignation as appointor or guardian if necessary. I told him it was appropriate to fix up the paperwork. I said: ‘These arrangements which you entered into in 1990 whereby Sabbie and Ian have been in control, have to be formalised’, or words to that effect. Again, he readily agreed.
[53]As mentioned earlier, this was another family trust.
11.We also discussed the need for new wills for Ian and Sabrina Berger and for Mr Rosenberg. Mr Rosenberg raised the issue because he wanted to ensure that provision would be made in the wills of Ian and Sabrina Berger for his maintenance, in case they happened to predecease him. Ian and Sabrina Berger readily agreed to this.
12.During the meeting, and in the presence of Ian and Sabrina Berger, I told Mr Rosenberg that we had reviewed his own will and codicils. I told him that I had concerns with the inter-relationship of his existing will and codicils. He instructed me to prepare a new will to ensure that the residue of his estate passed to Sabrina if she survived him, and to her children if she predeceased him.
…
15.I refer to my notes [which] reflected the fact that Sabrina Berger was, in effect, entitled to the benefit and control of the Trust properties which, through her will, were to pass to her two children.

On 9 October 2003, Mr Fisher met again with Ian, Sabrina and Emanuel at the Bergers’ home. After the meeting commenced, he met with Ian and Emanuel in Ian’s study, where he explained to Emanuel the things he had been retained to do:

21.… I told Mr Rosenberg that part of the restructure involved the establishment of a new company called Project Hardware Australia Pty Ltd and that Ian Berger was to put the 50 per cent shareholding of S & I Investments (Australia) Pty Ltd in Kaylock (Australia) Pty Ltd [both Berger family companies],[54] into Project Hardware (Australia) Pty Ltd. I suggested to Mr Rosenberg that it was therefore appropriate that through Mr Rosenberg’s will, his shareholding in Project Hardware (Australia) Pty Ltd stay within the Berger family after Mr Rosenberg’s death. Mr Rosenberg said he agreed to do this.
22.He told me to prepare a will for him in which his shares in Project Hardware (Australia) Pty Ltd would be left to Sabrina Berger, or if she predeceased him, then in a testamentary trust for Sabrina’s two children and Ian Berger’s daughter by his first marriage.

[54]In October 2003, Ian and Sabrina Berger were the directors of S& I Investments (Australia) Pty Ltd.

In his notes of the meetings on 2 April 2003, 30 April and 13 May, Mr Fisher recorded Ian and Sabrina as saying that Emanuel would not be happy to be ‘removed’ from Project Hardware. The notes also say that:

Ian advises that the assets of the investment trust have been dealt with in E Rosenberg’s will. The dissolution agreement dealt with interests in the investment trust. E Rosenberg’s will was made post dissolution. Wisewoulds to review the trust deeds of the family trust and investment trust, in particular the offices of appointor and guardian to ensure control retained by Ian and Sabbie.

In cross-examination, Mr Fisher said that he had formed the view that the removal of Emanuel as appointor of the Investment Trust was consistent with the Dissolution Agreement. At the trial he was cross-examined on this issue:

COUNSEL:Why did Mr Rosenberg need to be removed as appointor?
WITNESS:It was appropriate in that he had agreed to pass control of assets, or assets as the case might be to his daughter that therefore that be appropriately documented.
COUNSEL:Why did he need to be removed?
WITNESS:Well first off it wasn’t an issue of removing him, as I mentioned before, but it’s an issue of ensuring that the legal documentation in existence properly reflected the intentions of the parties.
...
COUNSEL:Does the same reasoning apply to any need that might exist for him to be removed as a director of a shareholder of Rangeway Nominees?
WITNESS:Well again I have not used the word ‘removed’ and it is the same logic.

Mr Fisher was asked about the statement in his notes that ‘Ian and Sabbie advises [sic] that E Rosenberg will not be happy with the removal’. He said that this related to the transfer of all shares in Project Hardware to a holding company, Project Hardware (Australia) Pty Ltd (‘PHA’), and the consequent allotment of shares in that company. Mr Fisher explained that the removal of Emanuel as appointor of the Investment Trust reflected his own view that Emanuel had effectively relinquished the role, but the documentation had not been done. Asked why he had not advised Emanuel to seek independent legal advice, Mr Fisher said that he had understood that the changes were consistent with Emanuel’s earlier intentions. He said that the restructuring was intended to formalise what had been in place for many years.

Mr Fisher said that, when he had spoken to Emanuel to persuade him to transfer his shares in Project Hardware and to relinquish his power of appointment, he had in substance pointed out to Emanuel that the Trust was being managed by Ian for Sabrina and the children and that Emanuel should ‘tidy up the paperwork’ and resign in favour of Sabrina. He said that Emanuel did not clearly differentiate between his own property and property owned by the Investment Trust. He was then asked how Emanuel had responded to being told that he had ‘no on-going involvement in the trust’:

COUNSEL:But in response to your proposition to him, ‘You have no ongoing involvement in the trust’, he was quiet as a lamb, was he?
WITNESS:No he – he accepted that, he wasn’t – Mr Rosenberg is – was rarely quiet as a lamb, he agreed.
COUNSEL:So if there were an understanding between Mr Rosenberg and Mr Berger and Sabrina Berger that the assets of the trust would be used during Mr Rosenberg’s lifetime for him as well as for others that would be entirely inconsistent with him saying, ‘Yes, I’ve got no involvement’?
WITNESS:But that wasn’t the position. The position was always, as I had understood it, based on discussions that I participate – or was a party to, or would hear, and conduct, that the assets of the trust were managed by and for the benefit of the Berger family, effectively Sabbie, with the clear understanding that they would provide for Mr Berger – sorry, I apologise, Mr Rosenberg, during his life.

Mr Fisher was asked about the statement in his affidavit that Emanuel had told him that he had been clever by distributing his wealth to his children before he died. The trial judge put to Mr Fisher that he must have known when he was speaking to Emanuel ‘that he was still possessed of shares and interests of that nature that he hadn’t actually disposed of to Sabrina in his lifetime’. Mr Fisher said ‘I only became aware of that as a function of the instructions that I received in early [2003]’.

Mr Fisher conceded that the way in which he had proposed to Emanuel that he dispose of his assets was to the benefit of the Bergers, but said that he had regarded it as addressing the issue of division of assets. In re-examination he reiterated that the restructuring he had discussed with Emanuel was intended to effect Emanuel’s intention to give his assets to Sabrina. He said it had not occurred to him to tell Emanuel that he should get independent legal advice.

4 Emanuel Rosenberg

Emanuel denied statements in Sabrina’s first affidavit to the effect that:

·he had said in October 1990 that the purpose of the Dissolution Agreement was to look after Sabrina in the future and after his death, so she would not be reliant on Barry;
·Sabrina had attended a meeting with Barry and himself at which he said that he had decided to split all the assets, save for the Delf Brass business; and
·Delf Brass was making little or no profit at the time that Ian became involved in its management; that it had an overdraft of $1.6 million; and that the interest charges on the overdraft were $30,000 per month.

Emanuel did not deny Sabrina’s assertion that he had given her a copy of his 1988 will in 1994, around the time he sold his apartment, but simply said that he had made a new will on 21 April 2004. He denied that he had given assurances that control and management of the Investment Trust would reside with Ian and Sabrina. He deposed that he had agreed to allow Sabrina to manage the Investment Trust, along with himself, for the benefit of himself and Bloom. He said that he had told Sabrina she ‘would benefit from the trust assets’ after his death.

Emanuel said that he had not opposed Ian becoming a director of Fifteenth Eestin but he had neither instigated nor encouraged it. He had ‘always reserved to [himself] the power to ultimately decide who should manage the trust and how it should be managed, and who should benefit from it’. His intention was that the Investment Trust should ‘be run collaboratively by [himself] and [Sabrina], for [his] benefit, and for [Sabrina] to then derive a benefit from the trust assets after [his] death’.

Emanuel said he had never told Mr Fisher that ‘the rest [of his assets] was for Sabrina’. He said that he had never agreed ‘with any statement that Sabrina and Ian had been in control of the [Investment Trust] since … 1990’, or ‘that anything needed to be formalised’ by his resignation as appointor of the Investment Trust. Although Ian was involved in administering the Investment Trust, Emanuel said that he had never agreed that the assets of the Investment Trust belonged to Ian or to Ian and Sabrina.

Emanuel said:

In speaking with Sabrina and Ian, I never departed from what I had always said, namely that the assets of the trust were to be used for Bloom, my and Sabrina’s benefit while we were all alive, and (after Bloom had died) that the assets of the trust were to be used for my and Sabrina’s benefit while I was alive.

He said that he had said that he ‘would ensure that Sabrina would benefit from the trust assets after Bloom and [he] were dead’.

He denied having ever agreed that any shareholding of his in PHA should remain within the Berger family after his death. He denied having said to Sabrina in July 1990 that he wanted to ‘split everything equally between Barry and Sabrina’. Such a statement would, he said, have been inconsistent with the Dissolution Agreement, which provided for the assets of the Investment Trust to be held on trust for specified beneficiaries, including himself, his wife and Sabrina. He said:

If I had simply wanted to split everything equally between Barry and Sabrina, I would have ensured that the dissolution agreement achieved this result.

In cross-examination, Emanuel agreed that he no longer had good recall of what had happened in 1990, around the time when he had his heart operation and prior to the execution of the Dissolution Agreement. He said that he had had no discussions with Sabrina about the family assets when she had visited him in hospital. Nor did he recall any meeting with Barry, Sabrina and Ian before the Dissolution Agreement was made, though he could not deny that there might have been such a meeting.

He was asked about the circumstances in which Ian became involved in the running of the Delf Brass business. When asked whether Ian was reluctant at first, Emanuel responded: ‘Well, he said he was’. He agreed that from 1990 onwards, his own work at Delf Brass had decreased and that Ian and Sabrina had taken on a bigger workload.

Emanuel was extensively cross-examined as to the circumstances in which Sabrina became involved in the management of the Investment Trust. He was asked about his statements that he had never given assurances that control and management of the trust would reside with Ian and Sabrina and that he had agreed to allow Sabrina to manage the trust along with himself:

COUNSEL:So the words were, ‘I agreed to allow Sabrina to manage the trust along with me’?
WITNESS:Yes.
COUNSEL:Now when did you make that agreement? Mr Rosenberg - - - ?
WITNESS:When did I make the agreement?
COUNSEL:I’ve asked you when you made that agreement, no need to look at any document?
WITNESS:I can’t remember when I made that agreement.
COUNSEL:You actually said to Sabrina that she could manage the trust with you?
WITNESS:No.
COUNSEL:When did you say that – well how did you agree to allow Sabrina to manage the trust along with you?
WITNESS:Along with me?
COUNSEL:How did you agree to that and when, what date. I’m asking you that?
WITNESS:Well I can’t remember the date.
COUNSEL:Well was it before the dissolution agreement, after the dissolution agreement?
WITNESS:No, I can’t recall that. I’m sorry, I can’t recall.
COUNSEL:Do you recall at any stage agreeing to allow Sabrina to manage the trust along with you?
WITNESS:No.
COUNSEL:Did you ever indicate to Sabrina that she and you could manage the trust for the benefit of you and Bloom?
WITNESS:No.
COUNSEL:I’ll take that slowly for you. Did you ever agree in anyway with Sabrina that you, she and you could manage the trust for the benefit of you, Mr Rosenberg, and Bloom?
WITNESS:No.
COUNSEL:You told Sabrina, did you, that you would make sure that she would benefit from the trust assets after your death?
WITNESS:No.
COUNSEL:I’ll take that slowly. Would you look at p.380 at the top?
WITNESS:Yes.
COUNSEL:Now you see the words, ‘I told Sabrina’?
WITNESS:Yes.
COUNSEL:Just read that sentence to yourself. Have you read that sentence?
WITNESS:Yes.
COUNSEL:Is that true or not?
WITNESS:The bottom part’s true.
COUNSEL:No, no, just the one sentence, ‘I told Sabrina that I would ensure’, just that sentence, the first - - - ?
WITNESS:No, no.
COUNSEL:That’s not true?
WITNESS:I made a will and it was in the will, was in the will.
COUNSEL:But this is talking about what you told Sabrina?
WITNESS:No, I didn’t tell Sabrina, to my knowledge now I don’t – I can’t remember - - -
COUNSEL:All right.
HIS HONOUR: Well that’s slightly different Mr Rosenberg. Are you saying that sitting now in the witness box, you can’t remember whether or not you told Sabrina - - - ?
WITNESS:No.
HIS HONOUR: That you’d be sure that she’d benefit from the trust assets after her death or are you saying - - - ?
WITNESS:I’m not saying I didn’t, but I can’t remember I did.

Emanuel was also cross-examined about what he meant by saying in his affidavit that he had always reserved to himself the power to ultimately decide who should manage the Investment Trust:

COUNSELNow, first of all, how did you reserve the power to decide who should manage the trust?
WITNESS How did I decide?
COUNSEL How did you reserve that power?
WITNESSBecause I’ve never asked anybody else for an opinion when I go to do something. Right? I act as my own judge. I don’t ask anybody.
COUNSELRight?
WITNESS I act as my own judge. I don’t ask anybody.
…
COUNSEL How were you going to do that, Fifteenth Eestin is a company with three directors?
WITNESS:Well, what date is this?
COUNSEL:It doesn’t have a date, you made a statement there with no dates, you’ve always done this you say. Is that accurate - or not an accurate statement?
WITNESS:Well I say it on the top one but how it should be managed and who should benefit from it, is that what you’re asking me?
COUNSEL:Yes.
WITNESS:Well, I would say it’s the shareholders, whoever they are.
COUNSEL:Do you mean the beneficiaries?
WITNESS:Yes.
COUNSEL:If we take the beneficiaries, if Barry was not a beneficiary and if Sara wasn’t, and if you, Bloom and Sabbie were, how were you going to decide ultimately who would benefit?
WITNESS:But I’m still here.
…
HIS HONOUR This is talking about the trust.
WITNESSI understand that.
HIS HONOUR Not under a will.
WITNESSHe’s talking about who’s going to get the money in the trust.

Emanuel could not recall if he had told Sabrina who would benefit from the Investment Trust when he died. He said that, in 1990, he had spoken to Sabrina about what his will provided for, but ‘I can’t recall it though’. Nor could he recall whether he had told her that she would benefit from the corner properties, although he could not state definitely that he had not made the statement.

Emanuel agreed that he had told Sabrina that he did not want to see her and Barry in dispute after he had died. He was then cross-examined about what he had told Sabrina after he had been in hospital:

COUNSEL:And you told her that you would rather see Barry and Sabbie enjoying themselves whilst you were still alive?
WITNESS:Yes.
COUNSEL:You told her that you wanted to ensure that they didn’t fight after your death?
WITNESS:Correct.
COUNSEL:You told her that you had decided to split your wealth up between Barry and Sabbie?
WITNESS:Yes.

There was further cross-examination of Emanuel about what he had told Sabrina about the corner properties:

COUNSEL:Did you indicate to Sabbie that she would get some benefit from the corner properties when you died?
WITNESS:Yes, I would say – if she read my will, she would.
COUNSEL:Did you tell her that Barry gets certain properties, and she gets the balance of your estate, including the corner properties when you died?
WITNESS:No.
COUNSEL:You didn’t say that?
WITNESS:No.
COUNSEL:Did you talk to her and say that she would have the – that she would get the corner properties?

We have already referred to the income distributions by the Investment Trust which benefited the Bergers’ companies. With Emanuel’s acquiescence, the Bergers’ involvement in the management of the Trust also gave them access to substantial funds which were used for their benefit. In the financial year ended 30 June 2001, the Investment Trust lent Sabrina $975,240 to finance the purchase of a luxury home in Toorak. To do so, the Investment Trust borrowed moneys from other family companies, including Rangeway, Project Hardware and Mistirose. In the following year, the Investment Trust lent Sabrina a further $1,133,620 to renovate the house. In April 2002, she repaid to the Investment Trust $1,500,000 of the proceeds from the house bought for her by Emanuel.[210] In her evidence, Sabrina estimated their house to be now worth between $7 million and $10 million. In May 2004, $794,000 was lent to Jassi Investments Pty Ltd, the Bergers’ own family company, by Fifteenth Eestin, to finance the purchase of an apartment in Surfers Paradise.
[210]Ibid [91].

As we have said, Sabrina had a majority shareholding in Project Hardware which owned Delf Brass. Project Hardware was valued by Ernst & Young in July 2003 as worth $12.5 million. When PHA acquired the shares in Project Hardware as part of the restructuring arrangements, Project Hardware was valued at around $10 million. Sabrina’s D class shares in Project Hardware were bought back for approximately $3,000,000.[211]
[211]Ibid [104].

In these circumstances, his Honour was right to conclude that the Bergers had not relied to their detriment on Emanuel’s alleged promises. It was not unconscionable for Emanuel to fail to give his remaining wealth to Sabrina during his lifetime or to leave it to her by will. Nor was it unconscionable for him to remove Fifteenth Eestin as trustee of the Investment Trust.

We consider below[212] the appellants’ contention that his Honour erred in taking the view that any detriment suffered by the Bergers in reliance on Emanuel’s promises could have been rectified through the making of orders for equitable compensation.

E Provision of a home for Emanuel

[212]See paragraphs [263]-[272] below.

The final act of detrimental reliance was said to be the provision of a home for Emanuel to live in, in reliance on his promise that he would leave his property to Sabrina. The appellants allege that his Honour erred in holding that, because Emanuel paid rent, the provision of an home to him from 1995 did not amount to a detriment.[213] Counsel submitted that Emanuel would never have been required to use his own funds to pay rent, and that he was not charged rent between June 2002 and February 2004, when he lived in the Bergers’ family home.
[213]Ground of appeal 64(a).

It was also submitted that his Honour wrongly disregarded the detriment suffered by the Bergers on the ground that Mistirose (and not the Bergers) owned various properties in which Emanuel lived.[214] It was said that the Bergers had suffered a detriment because Mistirose had bought apartments that Emanuel had selected to live in, rather than investing in property purchased by reference to commercial considerations alone.
[214]Ground of appeal 64(b).

Unlike his Honour, we do not consider that the fact that the apartments were owned by Mistirose, rather than personally by the Bergers, would necessarily prevent them from claiming that in providing a residence to Emanuel, they had detrimentally relied on the promise that Sabrina would be entitled to his property under the 1988 will. Sabrina and Emanuel were the original directors and shareholders of Mistirose. From 1994, the Bergers were the directors of that company, which, by 2005, was 88.9 per cent owned by SFSG Pty Ltd, as trustees of the Berger Family Superannuation Fund. The remaining 11.1 per cent of Mistirose was owned by Project Hardware.[215] Thus, any detriment incurred by Mistirose could legitimately be regarded as a detriment which was at least partially suffered by the Bergers.
[215]Reasons [16].

Rent for the apartments in which Emanuel lived was debited to his loan account with Fifteenth Eestin. According to Mr Same’s evidence, this amounted to a total of $165,104. Two of the properties purchased as a home for Emanuel were sold at a substantial profit, with Mistirose receiving the benefit of this capital gain. In these circumstances, we consider that his Honour correctly held that the Bergers did not suffer any detriment by providing Emanuel with a home.

In essence, the Bergers’ claim is that they did not get what Emanuel is said to have promised them.[216] As we have said, this misconstrues the nature of proprietary and promissory estoppel, both of which reflect the jurisdiction to prevent a person from resiling from representations where it would be unconscionable to do so. It is not unconscionable for a person to refuse to carry out promises unsupported by consideration unless the claimant has suffered a detriment as a result of relying on those promises. For the reasons discussed above, we do not consider that his Honour erred in concluding that the Bergers did not satisfy this requirement.
[216]This is in effect stated in ground of appeal 69.

Further, even if detrimental reliance was established, the Court would not necessarily enforce the relevant representations. This brings us to the third group of grounds of appeal, relating to the remedy which should be ordered for the alleged estoppel.

VIIICOULD ANY DETRIMENT BE RECTIFIED BY AN AWARD OF EQUITABLE COMPENSATION?

The learned judge below held that, even if the Bergers suffered a detriment by looking after the affairs of the Investment Trust in reliance on a representation made by Emanuel, the appropriate remedy would be an award of equitable compensation rather than an order preventing Emanuel from exercising his power of appointment under the Investment Trust, or from changing his 1988 will.[217] He also said that if, contrary to his view, Ian had been detrimentally affected by making an interest-free loan to Project Hardware, equitable compensation would be the appropriate remedy.[218]
[217]Reasons [169].
[218]Ibid [166].

Counsel for the appellants submitted that his Honour had wrongly considered that the value of any detriment suffered by the Bergers must be equivalent to the value of the property ordered to be transferred, as the result of detrimental reliance on the representation.[219] Counsel said that, where an estoppel arises, the ‘primary remedy’ is to give effect to the expectations encouraged by the representations, and that equitable compensation is awarded only in exceptional cases, for example to avoid injustice to third parties.[220] It was further claimed that his Honour gave insufficient reasons for denying that primary remedy to the Bergers.[221] In support of these submissions, the appellants relied on the High Court’s decision in Giumelli v Giumelli (‘Giumelli’)[222] and the decision of this Court in Donis.[223]
[219]Grounds of appeal 57 and 69.
[220]Grounds of appeal 61 and 67.
[221]Ground of appeal 68.
[222](1999) 196 CLR 101.
[223][2007] VSCA 89. See also Flinn [1999] 3 VR 712.

Counsel for the respondents contended that, even if Emanuel was estopped from denying any of the pleaded representations, the appropriate orders would be those which ‘effect the minimum equity to do justice’.[224] On the facts of this case, his Honour did not err in holding that equitable compensation was the appropriate remedy.
[224]Reliance was placed inter alia on Crabb v Arun District Council [1976] Ch 179, 198 (Scarman LJ) and Gillett v Holt [2001] Ch 210, 235 (Robert Walker LJ).

Competing views have been expressed on the nature of the remedy which should be ordered if an estoppel is made out. In Commonwealth of Australia v Verwayen,[225] those members of the Court who held in favour of Mr Verwayen did not take a consistent approach on this issue. Among the majority, Deane J considered that the prima facie remedy for estoppel by conduct was to preclude departure from the assumed state of affairs, although he recognised that where relief granted on that basis would be inequitably harsh, some lesser form of relief should be awarded.[226] Dawson J said that the facts of the case required the Court to give effect to the assumption created by the representation, though he did not say that this was the prima facie remedy for estoppel.[227]
[225](1990) 170 CLR 394 (‘Verwayen’).
[226]Ibid 443.
[227]Ibid 462.

By contrast, Toohey and Gaudron JJ[228] said that the primary purpose of equitable estoppel was to rectify the detriment suffered as the result of representations made by another person, rather than to make those representations good. Like Mason CJ, however, they accepted that in some cases the only means of rectifying detrimental reliance on a representation was to give effect to it.[229] Mason CJ, who dissented in the result, commented:

[A]s a matter of principle and authority, equitable estoppel will permit a court to do what is required in order to avoid detriment to the party who has relied on the assumption induced by the party estopped, but no more. In appropriate cases, that will require that the party estopped be held to the assumption created, even if that means the effective enforcement of a voluntary promise. [230]

Brennan J,[231] who also dissented, considered that the primary remedy for equitable estoppel was not the enforcement of the promise, but the minimum equity necessary to avoid detriment. However His Honour also acknowledged that in some situations, enforcing the promise will be the only means of rectifying the detriment.[232]

[228]Toohey J, who decided the case on the basis of waiver (but in the context of promissory estoppel), said that ‘the [C]ourt should enforce the promise only as a means of avoiding detriment and to the extent necessary to achieve that end’: Ibid, 475-6. Gaudron J’s comments on the remedy for estoppel were qualified by her recognition that ‘it may be that an assumption should be made good unless it is clear that no detriment will be suffered other than that which can be compensated by some other remedy’: Ibid 487.

[229]Ibid 475-476 (Toohey J) and 487 (Gaudron J).

[230]Ibid 412.

[231]Ibid 429.

[232]See also 501 (McHugh J).

In Giumelli,[233] the High Court held that nothing which had been said in Verwayen precluded the making of an order to give effect to the respondent’s expectation that he would receive a block of land promised to him by his parents, in circumstances in which he had acted on that representation to his detriment.[234] Giumelli concerned the kind of estoppel which arises when a person expends money on property, or otherwise acts to his or her detriment, in reliance on an assumption or expectation encouraged by a property owner that the claimant already owns, or will receive an interest in, that property. One of the early cases of this kind was Dillwyn v Llewelyn,[235] where the Court gave effect to a father’s promise that he would give his son a piece of land if the son built a house on it. In proprietary estoppel cases, courts often give effect to the assumption created by the representation. This is not necessarily the case for other forms of estoppel. Courts still tend to deal with proprietary estoppel as a distinct category. An ‘overarching’ doctrine of estoppel of the kind to which Mason CJ referred in Verwayen has not yet emerged.[236]
[233](1998) 196 CLR 101.
[234]Ibid 125 (Gleeson CJ, McHugh, Gummow and Callinan JJ) and 127 (Kirby J).
[235](1862) 4 De GF & J 517. See also Ramsden v Dyson (1866) LR 1 HL 129, 170 (Kingsdown LJ).
[236](1990) 170 CLR 394, 410-411; see also 440 (Deane J).

In Donis, Nettle JA made the following remarks on the proprietary estoppel line of cases:[237]

In such cases the remedy relates to the understanding of the parties and the expectation that has been encouraged. Prima facie the estopped party can only fulfil his or her equitable obligation by making good the expectation which he or she has encouraged. The estopped party, having promised to confer a proprietary interest on the party entitled to the benefit of the estoppel, and the latter having acted upon the promise to his or her detriment, is bound in conscience to make good the expectation.[238] It follows that the detrimental reliance that supports the estoppel need not constitute in any sense a consideration moving to the party bound. It is a unilateral element of the estoppel and not the price paid for it.[239]
The prima facie position will yield to individual circumstances. Principle and authority compel the view that where a plaintiff’s expectation or assumption is uncertain or extravagant or out of all proportion to the detriment which the plaintiff has suffered, the court should recognise that the claimant’s equity may be better satisfied in another and possibly more limited way.[240] Thus, as was also said in Giumelli,[241] before granting relief the court is required to consider all of the circumstances of the case, including the possible effects on third parties, and to avoid going beyond what is required for conscientious conduct or would do injustice to others. But that does not mean that the court is required to be ‘constitutionally parsimonious’[242] or that it is necessary for there to be substantial correspondence between expectation and the monetary value of the detriment suffered, or which but for the relief to be accorded would be suffered.[243] The object of the exercise is to do equity and for that purpose ‘detriment’ is no narrow or technical concept. It need not consist of expenditure of money or other quantifiable financial disadvantage so long as it is something substantial. The requirement must be approached as part of a broad inquiry as to whether departure from a promise would be unconscionable in all the circumstances.

[237][2007] VSCA 89, [20]. See also Flinn [1999] 3 VR 712, 744 [96] and Gillett v Holt [2001] Ch 210, 232.

[238]Olsson v Dyson (1969) 120 CLR 365, 378-9; Meagher, Heydon, Leeming, Meagher Gummow & Lehanes Equity, Doctrines & Remedies, [17-085]; see also Pascoe v Turner [1979] 1 WLR 431, 436.

[239]Sullivan v Sullivan [2006] NSWCA 312, [20] (Handley JA, who dissented in the result but whose judgment contains a thorough and, with respect, persuasive analysis of the relevant authorities). See also, Handley, The three High Court Decisions on estoppel 1988-1990, (2006) 80 (11) ALJ 724.

[240]Jennings v Rice [2003] EWCA Civ 159, [48] (Robert Walker LJ).

[241](1999) 196 CLR 101, 125[49].

[242]Jennings v Rice 2003] EWCA Civ 159; Sullivan v Sullivan [2006] NSWCA 312, [23].

[243]Plimmer v The Mayor, Councillors and Citizens of the City of Wellington (1884) 9 App Cas 699 at 714; Pascoe v Turner [1979] 1 WLR 431 at 436.

Ashley J took a more cautious view about the appropriate remedy in Pearson v Williams,[244] another proprietary estoppel case. He said that

in determining what relief should be granted (if relief is appropriate) the court must look closely at the circumstances of the particular case to see in what way the equity can be satisfied. It should approach the matter cautiously, in order to achieve the ‘minimum equity to do justice to the plaintiff’. Clear it is that the court is not precluded from requiring the party stopped to make good the assumption. On the particular facts, such an order was made in Flinn and (in substance) in Gillett. But, on the particular facts, it was otherwise in Giumelli and in Rogers.

[244][2001] VSC 509, [74].

Unlike the situation in Donis, Emanuel’s alleged promise that Ian and Sabrina would continue to manage and control the Investment Trust was not a promise to confer an interest in property. We doubt whether the prima facie position which Nettle JA said applied in Donis is relevant in such circumstances. However, even if that were the case, we consider that a remedy preventing Emanuel from exercising his power of appointment under the Investment Trust would be disproportionate to the detriment incurred by the Bergers in managing the Investment Trust without remuneration, or by Ian in making interest-free loans to Project Hardware which have since been repaid. If the other benefits gained by the Bergers as a result of their management of the Investment Trust are taken into account, the extent of disproportion would be even greater.

The respondents submit that the principles in House v R[245] govern an appellate challenge to the exercise of his Honour’s discretion to determine the remedy.[246] We will assume in favour of the appellants that they do not. Nevertheless, we do not consider his Honour erred in concluding that, if the alleged representations were made and the Bergers acted upon them to their detriment, they would be adequately compensated by an award of equitable compensation.

IX REMOVAL OF A TRUSTEE FOR BREACHES OF TRUST

[245](1936) 55 CLR 499.

[246]The issue was left open in Flinn [1999] 3 VR 712, 749-750 (Brooking JA) and Donis [2007] VSCA 89, [17] (Nettle JA).

His Honour held that Emanuel was entitled to exercise the power conferred upon him by clause 10A of the Trust Deed to remove Fifteenth Eestin as trustee and replace it with Glen Oak. That clause provided that:

(a)no beneficiary shall be a trustee;
(b)the said appointor shall not appoint himself or herself or any legal entity in which he or she has a financial or controlling interest in [sic] or a company which he or she is a director of or in which he or she owns or holds any part of the issued capital of, as a trustee.
(c)…
(d)No removal or appointment under this clause shall be effective in the event that the appointor or the successor imposes or attaches any conditions whatsoever upon the Trustee purportedly appointed or to be appointed that relate to the manner in which the Trustee is to exercise any of the discretions conferred upon him hereunder.
(e)…

The power conferred on Emanuel by clause 10A of the Trust Deed was discretionary in nature. Courts will not interfere with the exercise of a discretionary power under a trust, except when the power is exercised in bad faith.[247] That is why it was necessary for the Bergers to rely on estoppel in order to restrain Emanuel from exercising his powers under the Trust Deed.
[247]See generally JD Heydon and MJ Leeming, Jacobs’ Law of Trusts in Australia (7^th ed) [1606] and Butterworths, Trusts Law Australia: Principles and Practice, Vol 1 (at 17,071) [9030]. The discussion in those texts relates to trustees or donees of powers to appoint property to objects of a discretionary trust, but a comparable approach probably applies to the exercise of a discretionary power to appoint or remove a trustee.

Clause 10A of the Trust Deed imposed some limits on Emanuel’s power of appointment, including a prohibition on him appointing as trustee ‘any legal entity in which he … has a financial or controlling interest’. His Honour held that the appointment of Glen Oak could not be challenged on the basis that Emanuel had ‘a financial or controlling interest in Glen Oak’.[248] He also rejected the appellants’ submission that Glen Oak would not exercise its discretion independently of Emanuel. The sole director and shareholder of Glen Oak is a Mr John Adams, a member of the accounting firm Horwaths, who is a registered company liquidator and bankruptcy trustee and an accountant with experience in administering trusts. His Honour was satisfied, by the answers which Mr Adams gave to his questions, that Mr Adams was

an independent professional person who … would approach the exercise of discretion by the trustee in an appropriate manner.[249]

The grounds of appeal do not challenge that conclusion, which is, in our view, unassailable.

[248]Reasons [190].

[249]Ibid.

His Honour also considered that the Court could have exercised its jurisdiction to remove Fifteenth Eestin to ensure satisfactory administration of the Investment Trust and a faithful and sound exercise of the trustee’s discretion.[250]
[250]Miller v Cameron (1936) 54 CLR 572, 580 (Dixon J).

The appellants challenge his Honour’s findings, that since approximately 1992, distributions from the Investment Trust were governed by tax minimisation considerations; that no thought was given by Fifteenth Eestin to the individual needs of a beneficiary such as Emanuel; and that Fifteenth Eestin did not exercise its discretion as a trustee in the interests of all the beneficiaries.[251] For the reasons set out above, it is unnecessary to consider these submissions. If required to determine whether the relevant grounds of appeal were made out, and/or whether his Honour should have found that Fifteenth Eestin could have been removed for breach of trust, we would consider that his Honour’s findings on these issues should not be set aside.
[251]Grounds of appeal 70-76.

The respondents’ notice of contention alleges that his Honour should have found that the income distributions made by Fifteenth Eestin to Project Hardware and S & I Investments, and the capital distribution made to Ian and Sabrina in 1998, or a combination of those distributions, were breaches of trust which warranted the removal of Fifteenth Eestin as trustee. In light of our previous findings, it is also unnecessary to consider the notice of contention.

For the above reasons we would dismiss the appeal.

[2009] VSCA 112

27 May 2009