Fitzgerald v The Valley Centre for Environmental Education and Research Inc

[2021] NSWSC 217

Supreme Court

New South Wales

Medium Neutral Citation:

Fitzgerald v The Valley Centre for Environmental Education & Research Inc [2021] NSWSC 217

Hearing dates:

1, 2, 3, 4 and 5 March 2021

Date of orders:

8 March 2021

Decision date:

08 March 2021

Jurisdiction:

Equity

Before:

Parker J

Decision:

See [104]-[105]

Catchwords:

CONTRACTS – formation – agreement – loan to incorporated association by founder and office-bearer – loan initially unsecured but shown in later financial statement as secured – whether evidence sufficient to infer agreement by association to grant security

ESTOPPEL – promissory estoppel – whether financial statement a representation by association – reliance – detriment – statute of frauds

LIMITATION OF ACTIONS – debt – extension of limitation period by confirmation – acknowledgement in financial statement – extension operates from date specified in statement not date of adoption

Legislation Cited:

Associations Incorporation Act 1984 (NSW)

Associations Incorporation Act 2009 (NSW)

Conveyancing Act 1919 (NSW), s 54A

Cases Cited:

Ace Insurance SA-NV v Seechurn [2002] 2 Lloyd’s Rep 390; EWCA Civ 67

Elzamtar v Bangladesh Islamic Centre of NSW Inc [2020] NSWSC 1161

Fischer v Nemeske Pty Ltd [2015] NSWCA 6

Jones v Dunkel (1959) 101 CLR 298

Powercell Pty Ltd v Cuzeno Pty Ltd [2004] NSWCA 51

Re Candy-Vend Pty Ltd [2020] NSWSC 1735

Stage Club Ltd v Millers Hotels Pty Ltd (1981) 150 CLR 535

Category:

Principal judgment

Parties:

Amba Margeurite Fitzgerald (Plaintiff)
The Valley Centre for Environmental Education & Research Incorporated Y1767941 (Defendant)

Representation:

Counsel:
A Justice/R Boyd (Plaintiff)
J Anderson (Defendant)

Solicitors:
Roberts Legal (Plaintiff)
Sparke Helmore Lawyers (Defendant)

File Number(s):

2018/80831

Publication restriction:

Nil

Judgment – EX TEMPORE

Revised from transcript; issued 12 March 2021

1. This case arises out of a dispute about a parcel of land at Lower Portland on the Hawkesbury River north‑west of Sydney. The land is owned by the defendant, The Valley Centre for Environmental Education and Research Incorporated. The plaintiff, Amba Margeurite Fitzgerald, claims a security interest in it for a debt of approximately $600,000.

2. The defendant is a corporation incorporated under the Associations Incorporation Act2009 (NSW). Strictly speaking, it was incorporated under the predecessor legislation, the Associations Incorporation Act 1984 (NSW), and its incorporation continues under the 2009 Act. I will refer to it as the “Valley Association”.

3. The Valley Association operates on a not-for-profit basis. As its name suggests, its activities are directed towards environmental conservation.

4. Ms Fitzgerald brings the proceedings as administrator of the estate of her late mother, Lesley Provan. Ms Provan was one of the founders of the Valley Association when it was established in 1993. From then until her death in 2013 she played a leading role in its affairs. She was continuously an office bearer and a member of its executive committee.

5. Ms Fitzgerald’s case is that during her lifetime Ms Provan lent money to the Valley Association to fund its activities, including the purchase of the land at Lower Portland, and that the Association later granted security over that land to secure its liabilities to her. Critical to the plaintiff’s case are financial statements of the Association for the 2009-10 and 2010-11 financial years. Those statements were prepared in 2012 and show Ms Provan as a secured creditor of the Association.

Claims for determination

6. There are two bases to Ms Fitzgerald’s claim against the Valley Association on behalf of Ms Provan’s estate. First, it is contended that there was an agreement between Ms Provan and the Association, reflected in the financial statements, to give Ms Provan security for part of her pre‑existing debt. Alternatively, the statements themselves are alleged to give rise to an equitable estoppel.

7. The Association disputes both contentions. If the security claim fails the Association contends that the debt claim is statute barred. But if the claim for security over the land prevails, the Association contends that the figures in the financial statements are not correct. In that event the Association would seek to have the amount due determined by means of an account. The parties agreed that this issue, if it arises, should be dealt with at a later hearing.

8. The case was initially fixed for nine days’ hearing. After I had raised questions about the plaintiff’s claim during the opening, counsel for Ms Fitzgerald obtained an adjournment and presented a cut-down version of her claim. This version omitted much of the contextual material and focused on the key period of time, which was from 2009 to 2012.

9. Counsel for the Valley Association actively cooperated with this process and it greatly reduced the amount of evidence and submissions required. Ultimately, the hearing and submissions were completed inside five days. I record my thanks to counsel for the helpful and cooperative way in which they conducted the proceedings.

Chronology of key events

10. The Valley Association was incorporated on 3 July 1993. As I have mentioned, Ms Provan was one of its founders. Another founder was Peter Ross Fitzsimmons, who was a witness before me. At that time Mr Fitzsimmons was in a relationship with Ms Provan, although that ceased 10 or 15 years before her death.

11. Following the incorporation of the Valley Association a house was bought at Narrabeen and registered in its name. The house appears to have operated as a type of commune. As well as Ms Provan and Mr Fitzsimmons (and Ms Provan’s daughter, Ms Fitzgerald) several other like-minded conservationists lived at the house.

12. The Lower Portland property was acquired in 1998. It was described in the evidence before me as consisting of pristine rainforest or bushland which is a refuge for various endangered species in the Hawkesbury area. There is a shed on the property which was there when it was acquired. At one stage an extension in the form of a tent appears to have been erected next to the shed. The property has otherwise remained undeveloped.

13. The Narrabeen property was later sold and the land at Lower Portland is now the sole significant asset of the Association. Although Ms Provan does not appear to have ever lived there, other members of the Association have. In particular, Mr Fitzsimmons is still living there, as is David Rose, another member of the Association who gave evidence before me.

14. In about 2004 or 2005 Ms Provan moved to a house at Glossodia, in the Hawkesbury area not far from Lower Portland. She continued to live there until her death in 2013. This was where the records of the Valley Association were kept.

15. The Glossodia property was owned and occupied by Ms Provan and Tracey Anne Cooper as co‑owners. Ms Cooper was a friend of Ms Provan who Ms Provan originally met in the 1990s and who appears to have lived for a time at the Narrabeen house. She was also a member of the Valley Association committee and an office bearer.

16. In 2008 Ms Provan and Ms Cooper bought a unit in an apartment building at Silverwater, apparently as an investment. The ownership arrangements were unusual. The Glossodia property was held as to one one‑hundredth by Ms Provan and as to ninety nine one‑hundredths by Ms Cooper. The proportions were reversed for the Silverwater unit. According to statements made by Ms Provan recorded in the evidence, the arrangement was really a 50:50 ownership of both properties.

17. At some point Ms Provan and Ms Cooper appear to have assisted Ms Fitzgerald to buy another unit in the Silverwater apartment building. There are other proceedings between Ms Fitzgerald and Ms Cooper concerning these, and perhaps other, property dealings which are awaiting hearing. It is not necessary to go into the ownership and financing arrangements in any detail for the purpose of this judgment.

18. Following the acquisition of the Silverwater apartment by Ms Provan and Ms Cooper in 2008, there were further property transactions in 2009 to which I refer in more detail below.

19. The 2009-10 and 2010-11 financial statements of the Valley Association to which I have referred were signed in mid‑March 2012. They were lodged with the Department of Fair Trading in late April. The statements (or at least one set of statements) were signed by Barry Crockford. He was the principal of a firm called "Bardi Management Group". Ms Provan had worked for that firm and may still have been working for it in March and April 2012.

20. At around the same time as the accounts were prepared, Ms Provan was diagnosed with cancer which proved terminal. According to Ms Cooper the diagnosis took place in March 2012. There is no medical evidence before me which would establish the precise date. In about May 2013 Ms Provan's health declined. She became bedridden and died in June 2013.

21. The letter of demand which led to these proceedings was sent in 2016.

Summary and analysis of evidence

Witnesses

22. Three witnesses were called by the plaintiff. These were Ms Fitzgerald; Joelle Shelhot, an acquaintance of Ms Provan who gave evidence about some conversations she had with Ms Provan in 2010 or 2011; and Emma Ruthie Thompson. Ms Thompson was the receptionist for the Bardi Management Group from October 2010 until May 2016, when Mr Crockford sold the practice.

23. Neither Ms Fitzgerald nor Ms Shelhot was required for cross‑examination. Ms Thompson was called to give some supplementary evidence and was briefly cross‑examined. Her credibility was not in issue. Mr Crockford was not called as a witness; according to Ms Thompson he died in August 2016.

24. For the defendant three witnesses were called. These were Ms Cooper; Mr Fitzsimmons; and Mr Rose. As I have mentioned, each of them was a longstanding member of the committee of the Association and an office bearer. I will describe their evidence in more detail below.

Documentary evidence

25. The critical evidence in the case begins with an audit letter dated 30 June 2009 from Ms Provan to Berger Piepers, a firm of accountants at Penrith who had acted as the Valley Association's accountants in previous years. The letter was in conventional form for audit purposes and stated:

I the undersigned wish to confirm that the amount owing to me as a member loan in the accounts of The Valley Centre for Environmental Education & Research Incorporated is $807,433 as at year-end 30^th June 2009.

I also wish to confirm that I will continue my financial support of the organisation and review the situation as at year-end 30^th June 2010.

26. In July 2009 Ms Provan and Ms Cooper signed a contract to purchase yet another townhouse in the Silverwater building. At this time they had also entered into agreements to buy two townhouses at Port Macquarie. They needed money to complete the purchases. In August they approached the Community First Credit Union (“CFCU”) to obtain loan finance.

27. Meanwhile, Ms Provan appears to have decided to draw on investments that were held by the Valley Association in an account operated by a funds manager known as Asgard. The Association's account with Asgard was opened in 1999 with a deposit of $100,000, which had been invested in various managed funds. In July 2009 some of the holdings were liquidated and $50,000 was withdrawn by Ms Provan.

28. In evidence is an email dated 13 September 2009 addressed from Ms Provan to the members of the committee of the Valley Association, although the evidence does not directly establish that the email was sent to all of the members of the committee. Attached to the email was a letter which stated:

I request that part of my member loan to The Valley Centre for Environmental Education & Research Inc. be repaid immediately.

Recently, due to financial pressure I had to withdraw some funds from The Valley Centre’s Managed Funds account with Asgard. I need to withdraw the balance of those funds, currently just under $62,000, to further ease my financial strain.

Please note that I will not at this stage request the repayment of any further loan monies, as this would require the property owned by the organisation at [Lower Portland] to be sold.

29. There is no evidence of any written response to this proposal. A few weeks later, at the end of September, Ms Provan proceeded to liquidate the remaining holdings in the Association's Asgard account. She transferred the closing balance (approximately $64,000) to herself.

30. In the meantime Ms Provan continued to pursue the possibility of a loan from CFCU. The CFCU lending manager visited Ms Provan and Ms Cooper on 10 or 11 September, and this was followed by a letter to CFCU and a loan application on 14 September. The letter described the various property holdings of Ms Cooper and Ms Provan, as well as referring to the Lower Portland property. It stated:

Here is some background information about the property acquisition strategy that Lesley Provan (member no. 773998) and Tracey Cooper (member no. 744076) have been working toward:

In 1992 Lesley's husband died and she decided to turn a tragedy into a new purpose. So she started the Valley Centre and Project Nardu. She owned a $1 million apartment at Freshwater Beach on Sydney's Northern beaches.

In 1995 Lesley procured a large $1.1 million 6 bedroom residence with Tracey and another Valley committee member on Narrabeen Lakes (Sydney's Northern beaches) with a view to building a property portfolio for the Valley Centre.

In 1997 the Freshwater Beach apartment and Narrabeen Lakes residence were sold.

In 1998 Lesley purchased the Nardu Stud (170 acre nature sanctuary recently valued at $700,000) on the Hawkesbury River at Lower Portland for the Valley Centre to run programs and events and to begin building the Valley Centre Vision.

In 2002 Lesley inherited a 3--bedroom home in Terry Hills on the Northern Beaches and sold it in 2003 for $640,000.

In 2003 Lesley purchased a 3-bedroom residence in Wilberforce for $330,000. Now worth $400,000 negotiations have begun to sell the property to the present tenants.

In 2004 Lesley and I purchased a 5-bedroom residence at Glossodia completing a $100,000 internal and external renovation in July this year. (Loan with Community First) Property now valued at $720,000.

In 2008 Lesley and I purchased a 3-bedroom townhouse 'off the plan' in Silverwater and refinanced both properties at a competitive rate with NAB. (See email from Pru Jones NAB assuring us that she would correct the loan facility that was incorrectly set up P & I for investment properties instead of interest only)

In July this year we signed an "off the plan" contract for a large 4 bedroom townhouse in Silverwater due for completion in February - March 2010 contract price $550,000 market value on completion $580,000. Holding deposit $20,000.

We also have a 3 bedroom townhouse 'off the plan' agreement at Port Macquarie. Construction is due to start in December 2010. Agreed price $480,000 projected market value on completion $550,000. Holding deposit $20,000.

We also have an agreement 'off the plan' for a 5 bedroom luxury duplex. Agreed price $600,000 and projected value of 900,000 on completion. Construction is due to start In December 2010. Holding deposit $15,000.

The following outlines information as requested (see excel spread sheet A). Excel spreadsheet B shows the projections through to December 2011.

Throughout this long history of property acquisitions we have worked with the same property developer. In order to secure the lucrative investment properties Port Macquarie 1 and 2 we need funds to provide deposits. The funds required will also secure top of the range appliances and carpet for Silverwater 2 increasing the equity projected to date substantially.

Yours faithfully,

Lesley Provan, Bach Land Management (Eco. Agriculture) University of Sydney

President/Co-founder

31. According to the lending manager’s notes, he was told that the Association paid rent to Ms Provan and Ms Cooper for use of the Glossodia house. But there was no other evidence to confirm that there was any such arrangement as between the Association, on the one hand, and Ms Provan and Ms Cooper, on the other. There was also no reference to any rental payments in the accounts.

32. Ms Provan’s email to the committee members of 13 September had suggested that Berger Piepers were too expensive and someone else should be retained to act as the accountant for the Association. At this point Berger Piepers dropped out of the picture. When Ms Provan submitted the Association’s annual summary of financial affairs to the Department of Fair Trading for the 2008‑09 financial year in January 2010, she stated that the financial statements were in preparation. But no formal financial statements prepared by a firm of accountants for the 2009 year was in evidence before me, nor was there any audit letter for 2010 or 2011 as there had been in 2009.

33. The Valley Association’s Annual General Meeting (“AGM”) minutes are in evidence. They record that the meeting took place on 28 December 2010. The minutes relevantly record:

Year End Business:

Income and expenditure of the organisation for financial year end presented

Bank balances for Membership account $959.90

Public fund account $164.69

General account $257.08

Mortgages, charges and other securities of any description affecting any of the property of the association as at 30/06/10, there are none.

Election of office bearers and committee as follows:

President – Lesley Provan

Vice President – Peter Fitzsimmons

Treasurer – David Rose

Secretary – Ivor Williams

Public Officer – Lesley Provan

Committee Member – Tracey Cooper, Julie Piggott, Val Klagsbrun

34. Although the minutes stated that “income and expenditure” was presented, there is no evidence that any formal profit and loss account had been drawn up at this point. The profit and loss account which formed part of the 2010 financial statements to which I have referred was not of course prepared until 2012.

35. In the second half of 2011, Ms Provan took steps to incorporate an alternative vehicle for her environmental interests. This was a company limited by guarantee called The Valley Centre for Environmental Education and Research Limited (the “Valley Company”).

36. The Company’s constitution was dated 7 August 2011 and was subscribed to by Ms Provan, Mr Fitzsimmons and Ms Cooper. Article 16 provided:

Lesley Provan, as the founding benefactor of the Company will remain a Director for such time as funds loaned to the Company and secured by some form of mortgage over the property at Lower Portland are repaid. This position shall revert to her heir or benefactor if unpaid at her death.

37. No steps appear to have been taken to transfer any of the assets from the Valley Association to the Valley Company following its incorporation. There is in fact no evidence of any further activity involving the Company.

38. The minutes of the AGM for the 2011 financial year record that it was held on 28 December 2011. The minutes are worded in a virtually identical way to the minutes of the 2010 AGM which I have quoted, right down to the appointment of office bearers. Again, although the minutes refer to the presentation of “income and expenditure”, the profit and loss account in the financial statements had not been prepared at that point.

39. There are a number of versions of the 2009-10 and 2010-11 financial statements in evidence. These include the statements attached to the lodgements with the Department of Fair Trading which were produced by the Department on subpoena.

40. The 2010 balance sheet has an entry recording “loans ‑ secured - L Provan” in the sum of $513,207. Underneath it is a “loan ‑ unsecured” of $149,178 which counsel for Ms Fitzgerald contended was also a loan from Ms Provan. The balance sheet showed an excess of liabilities over assets of $269,651.

41. In the 2011 balance sheet, the figures for the secured and unsecured loans were the same. The excess of liabilities over assets showed a slightly different 2010 figure as a comparative for the excess of assets over liabilities. This was $256,143, increasing slightly to $265,566 at the end of the 2011 financial year. There was no evidence, and no submission was made to me, about this discrepancy.

37. The financial statements for both years were prepared so as to include four formal reports or certifications. The first was a report of the committee concerning the affairs of the Association. In each year it recorded the committee members as being just Ms Provan and Ms Cooper, although that does not reflect the committee membership as recorded as having been elected at the preceding annual general meeting. The report provided for signature in accordance with a resolution of the committee, but in each year it was unsigned.

38. The next page of each set of statements contained what was described as a “Certificate by Members of the Committee”. Although stated as a certificate by members, in each case it was signed by Ms Provan alone. For 2010 the certificate stated:

I, of Lesley Provan, certify that:

a)   I attended the annual general meeting of the association held on 18.12.2010

b)   The annual financial statements for the year ended 30 June 2010 were submitted to the members of the association at the annual general meeting.

The 2011 certificate was in the same form.

44. The next page contained a statement by members of the committee. For 2010 this stated:

The committee has determined that the association is not a reporting entity and that this special purpose financial report should be prepared in accordance with the accounting policies outlined in Note 1 to the financial statements.

In the opinion of the committee as set out in the accompanying financial report:

1.   Presents a true and fair value of the financial position of The Valley Centre for Environmental Education & Research as at 30 June 2010 and its performance for the year ended on that date.

2.   At the date of this statement, there are reasonable grounds to believe that The Valley Centre for Environmental Education & Research will be able to pay its debts as and when they fall due.

This statement is made in accordance with a resolution of the committee and is signed for and on behalf of the committee by:

[Signature]

President

[Signature]

Treasurer

45. The 2010 statement was signed by Ms Provan as President and Ms Cooper as Treasurer (although Mr Rose was, according to the AGM minutes, the Treasurer). This statement was missing from the 2011 accounts lodged with the Department of Fair Trading.

46. The final page was a compilation report prepared for signature by Mr Crockford. It stated:

Compilation Report To The Valley Centre for Environmental Education & Research

We have compiled the accompanying special purpose financial statements of The Valley Centre for Environmental Education & Research which comprise the attached income and expenditure statement for the year ended 30 June 2010. The specific purpose for which the special purpose financial statements have been prepared is to provide financial inforn1ation to the Committee of Management.

The Responsibility of the Committee of Management

The Committee of Management is solely responsible for the information contained in the special purpose financial statements and has determined that the basis of accounting adopted is appropriate to meet the needs of the Committee of Management for the purpose of complying with the Association's Constitution.

Our Responsibility

On the basis of information provided by the Committee of Management, we have compiled the accompanying special purpose financial statements in accordance with the basis of accounting and APES 315: Compilation of Financial Information.

Our procedures use accounting expertise to collect, classify and summarise the financial information, which the directors provided, in compiling the financial statements. Our procedures do not include verification or validation procedures. No audit or review has been performed and accordingly no assurance is expressed.

The special purpose financial statements were compiled exclusively for the benefit of the Committee of Management. We do not accept responsibility to any other person for the contents of the special purpose financial statements.

47. The financial statements lodged with the Department of Fair Trading for 2011 include Mr Crockford’s signature which is dated 16 March 2012. The page is missing from the 2010 accounts lodged with the Department of Fair Trading.

48. Also in evidence are further copies of the financial statements and other financial documents obtained by Ms Thompson in February 2018. These include full copies of all of the four reports or certificates, but all are unsigned.

49. There were also some ledger printouts and draft accounts in evidence, which were apparently generated by Mr Crockford’s firm, but these are fragmentary. The ledger accounts do not cover all of the balance sheet items. The 2010 ledger accounts also include a year-end figure of approximately $13,000 for the Asgard account when the account had actually been closed by then. Again, there was no evidence before me to explain these discrepancies.

50. According to minutes in evidence there was a meeting of the committee on 30 March 2012, two weeks after Mr Crockford signed at least the 2011 financial statements. The minutes, however, did not refer to the financial statements at all. They stated:

Present: Julie Piggot, Lesley Provan, Tracey Cooper, Peter Fitzsimmons, David Rose, Vale Klagsbrun

Apologies:

Resolved: minutes from previous meeting read and moved by Tracey and seconded by [illegible] passed

Inward Correspondence: n/a

Outward Correspondence: n/a

General Business:

Right of way to Hawkesbury River review and maintenance

Creek clearing to continue under greens road to allow water flow into property

grant applications continue

Bush regeneration Programs on the valley property continue with landcare

There being no further business the meeting closed at 5pm

51. On 29 March the Department of Fair Trading wrote to the Association chasing financial statements for 2009-10 and 2010-11. Annual summary of financial affairs forms were completed and lodged by Ms Provan at the end of April.

52. As well as containing financial information extracted from the accounts, the form contained space for particulars of mortgages or charges and the like. This was left blank.

53. A later part of the form dealt with financial statements. The form was ticked so as to show that the financial statements for the relevant year were attached and had been audited. The form also contained a question about whether any resolution had been passed at the AGM concerning the statements. That box was not ticked.

54. The form ended with the following declaration signed by Ms Provan:

I am authorised by the committee to make the following statements:

the association’s financial statements for the last financial year were presented to the members of the association at the annual general meeting

the particulars set out in this document are correct and give a true and fair view of the financial matters to which they relate and are not misleading, and

there are reasonable grounds to believe, at the date of this statement that the association will be able to pay its debts as and when they fall due.

55. The first statement in the declaration was not correct. The financial statements had not been presented to the relevant AGM. The second statement was inconsistent with the grant of any security. The third statement was also incorrect if Ms Provan’s loan was at call.

56. The next meeting of the committee, which took place after the lodgement of the statements, is recorded in minutes dated 30 June 2012. Again these minutes did not refer to the financial statements. They stated:

Present: Julie Piggott, Lesley Provan, Tracey Cooper, Peter Fitzsimmons, David Rose, Val Klagsbrun, Ivan Williams

Inward Correspondence: n/a

Outward Correspondence: n/a

General Business:

Shed renovation and refit to start next month

grant applications continue

Seeding propagation programs complete and planting day to commence next month on the valley

There being no further business the meeting closed at 5pm

Witness evidence

57. According to Ms Shelhot’s affidavit she first became aware of the Valley Association when working on a television program. The program had an item referring to the Association’s activities and included an interview with Ms Provan. In early 2010 Ms Shelhot was asked to join the “board” of the Association and was sent an email containing an agenda, but nothing appears to have come of that.

58. Ms Shelhot deposed to conversations with Ms Provan about turning the Valley Association into a company. Those conversations were recorded in the affidavit as follows:

In or about late 2010, Lesley visited me at North Narrabeen. Lesley and I had a conversation during which she said to me words to the effect of:

I'm still trying to turn the Valley Centre into a Company so Ambi [Ms Fitzgerald] can be the sole shareholder.

On another occasion in or about late 2010, Lesley visited me at North Narrabeen. Lesley and I had a conversation during which she said to me words to the effect of:

We have been working on grants for the Valley Centre and some of the grant money was used to improve some area of Glossodia, as there was no infrastructure on the land.

59. Ms Fitzgerald also referred to this in her affidavit. Her version of the conversation with her mother was as follows:

Mum said:   I want to transfer The Valley from a charity to a company limited by guarantee with a board of directors instead of a Committee.

I said:   What does that mean?

Mum said: What this means is that the charitable status will still remain but the Valley will operate as a company instead of an association and there will be a new Constitution with Directors. People can be voted in and out of a Committee quite easily whereas having Directors instead provides more security over the land and the loan.

I said:   So, you are going to be one of the Directors then?

Mum said:   Yes and Tracey and Barry [Crockford].

I said:   Why Tracey? Aren’t you trying to protect The Valley? Why would you make her a Director?

Mum said:   With Barry and I as Directors we will always have the majority vote so Tracey won't have any control anyway. In order to do the transfer, I of course need the support of the current Valley Committee which includes her [Tracey]. So, if I want this to happen, I know she won't let me unless I let her be a Director.

I said:   Well, what about me? Can I be a Director? Then you would have a majority of three instead of just two meaning you and Barry.

Mum said:   There is a new constitution being written up with a specific clause for me as the founding Director. What this means is that in the event of my death, as my heir, you will take my place alongside Barry and Tracey. This means that you retain control of the land and the loan and you don't have to worry about a Committee voting you out as President.

60. Ms Fitzgerald also gave evidence of discussions with her mother in around May 2013 when she was in the final stage of her illness. According to Ms Fitzgerald these were as follows:

I said:   I am really worried about what will happen when you pass away eventually. I am worried that if you do pass before Tracey [Cooper] there will be a huge mess, seeing as when I have come to visit before, Tracey [Cooper] has locked me out of the house or left the phone off the hook so I could not get through to you.

Mum said:   I know that Tracey is difficult and you two have always had a difficult time getting along, but she [Tracey Cooper] knows that everything is 50:50 with Glossodia and I am sure that she will do the right thing. The deal has always been 99:1 on paper for this house [The Glossodia House] in Tracey's favour and 99:1 in my favour for the Silverwater [Beaconsfield Street, Silverwater] property that we have already sold. You will not have to worry about anything financially speaking, my half of Glossodia has been paid off in full from the proceeds of the sale of [Ascot Place, Wilberforce] and from the sale of your grandmother's house [Booralie Road, Terrey Hills] and all the calculations are in an Excel spreadsheet on my laptop.

I said:   What about The Valley Centre Company and changing The Valley Centre from a charity to a company? Has that been finalised with the new constitution?

Mum said:   Yes. You are listed as a founding Director to ensure our family will retain control, and not Tracey [Cooper], I worry that Tracey tends to drift away from the main purpose of The Valley Centre, and that this is the reason why we have had no sponsors or investors except for my huge loan. When I pass, you will have the choice to either continue on [with The Valley Centre], or have the property sold and do as you please with the repaid loan funds. If there is any money left over you have been paid out you can give it to another charity. My Will has left everything to you. Tracey won't be able to argue with that, even though she has it in her head that I am leaving my half of the house [the Glossodia House] to her out of convenience because she lives here at the moment. All I ask is that you give Tracey a decent amount of time to get finance together to be able to buy out your inherited, unmortgaged half of the property so that Tracey can continue to live here if she chooses to.

I said:   Yes Mum, I am fine with that.

61. Ms Cooper was cross‑examined about the dealings with CFCU in 2009. She was eager to say that Ms Provan had pushed her into the various property transactions and the associated borrowings. She denied any involvement in providing information to CFCU. But in fact, as I have already noted, the lending manager’s notes record that Ms Cooper was present as well as Ms Provan when he visited them at the Glossodia house to discuss the loan.

62. Ms Cooper was also cross‑examined about the 2011 constitution for the Valley Company. She denied at first ever having agreed to any proposal to establish the Company, but was unable to explain how she had come to subscribe to the constitution.

63. The Valley Association’s defence admitted that Ms Cooper had signed various documents, including the missing committee member’s statement from the 2010-11 accounts. The defence was verified by Ms Cooper. As a result of the plaintiff cutting down the case and amending the pleadings, the formal admission dropped out of the record, but Ms Cooper was cross‑examined on the admission made in her affidavit verifying the earlier version of the defence.

64. Under cross-examination Ms Cooper denied knowledge of signing the relevant documents. Indeed, she said that Ms Provan had an electronic copy of her signature which she (Ms Provan) would apply to Valley Association documents when approval was required. Accordingly, Ms Provan was not prepared even to accept that she had actually signed the documents bearing her signature which are in evidence.

65. This cross‑examination did raise doubts about Ms Cooper’s reliability generally. Because of the pendency of the other proceedings, I do not propose to go further in this judgment than is needed to resolve the issues in this case.

66. Despite Ms Cooper’s difficulties in cross‑examination I am inclined to accept that she had no recollection of signing the financial statements. I accept that if she did sign them she would have done so at Ms Provan’s request. I am not satisfied that she was aware of the reference to the security at the time that she signed the 2009-10 and 2010-11 financial statements.

67. One thing which did appear clearly from the evidence was Ms Cooper's affinity with the Lower Portland land. It was plain that she thinks that the land is a special place and should be protected for future generations.

68. Mr Rose gave evidence of the way in which the meetings of the committee and the AGMs of the Association were conducted. Although various other longstanding members of the committee were described as having been the office-bearers, the process was always controlled by Ms Cooper. She appears to have convened the meetings and sent out such agendas as may have been used.

69. According to Mr Rose the meetings were conducted without formal voting or resolutions. Documents were rarely, if ever, tabled during the meetings, although Mr Rose did remember that sometimes at the end of meetings cheques would be signed.

70. Mr Rose recalled a request being made by Ms Provan in about 2008 for security to be granted over the Lower Portland land to support the borrowings concerning the Silverwater unit. She explained that rent from the unit would be used to fund the Association’s activities. Mr Rose said that he and Mr Fitzsimmons were both against this idea and turned it down, after which it was not revived.

71. Mr Rose did not recall receiving the email and letter from Ms Provan of 13 September 2009 and it may be that he is telescoping events together. But there was no challenge to the substance of his account and I accept his evidence that a request was made to use the land for borrowings and the request was rejected.

72. Although Mr Rose was the Treasurer of the Association during the period when the financial statements were prepared, he said that he had no knowledge of the Association's financial affairs and this was all handled by Ms Provan. There was no real challenge to this and it was not suggested to Mr Rose that he was aware of, much less that he agreed to, the purported grant of security to Ms Provan.

73. On essential matters Mr Fitzsimmons’ evidence was to similar effect. He confirmed the informal nature of the committee meetings and the AGMs. He said that Ms Provan had told him that she kept his signature on file to be applied to documents when required, although on his account she said she would tell him beforehand when she needed to do so.

74. Mr Fitzsimmons also confirmed the rejection of the proposal that the land be used as security. He did sign the constitution of the Valley Company, but no doubt this was at Ms Provan's request. Again, it was not suggested that he himself had approved the grant of security to Ms Provan in 2012.

Conclusions

75. Even if the financial statements had been properly adopted on behalf of the Association, the inclusion in the balance sheet of a reference to security does not itself create any security interest. Ms Fitzgerald must prove the underlying transaction if she is to establish that security was actually granted: compare Re Candy-Vend Pty Ltd [2020] NSWSC 1735 at [61].

76. The allegation of agreement appears in Ms Fitzgerald's statement of claim in the following terms:

Between 16 March 2012 and 27 April 2012, Provan and the Defendant entered into an agreement (“Agreement”).

PARTICULARS

The Agreement is to be implied.

It is to be implied from:

(1)    the 2010 financial statements and 2011 financial statements of the defendant;

(2)    the signing by Tracey Cooper and Provan of a constitution of an entity called The Valley Centre for Environmental Research and Education Limited ACN 152 924 671;

(3)    conversations between the Plaintiff and Provan on 12 May 2013; and

(4)    the change in position between the parties vis-à-vis 30 June 2009 and 30 June 2010.

77. Although the particulars describe the agreement as implied, the case they propound is actually one of an inferred agreement. When I pressed counsel for particulars of when and how the agreement was made, his response, as I understood it, was that I should infer that the security proposal had been presented to and agreed by the members of the committee of the Association at one of their meetings. Counsel identified this as having happened at either of the meetings on 30 March or 30 June 2012.

78. Both counsel sought to draw support from previous events in their respective intentions as to whether an agreement had been made. For this purpose I do not consider it necessary to go into the submissions made by counsel for the Association about the unreliability of the accounts and the financial statements. I will assume that the June 2009 audit letter is correct in reflecting that there was a loan of approximately $800,000 resulting from monies which had previously been provided by Ms Provan for the purpose of funding the Association's activities, and in particular, the purchase of the Lower Portland property. I will also assume, as the audit letter suggests, that the loan was not immediately repayable.

77. The CFCU applications from September 2009 show that Ms Provan did wish to use the Lower Portland land to support hers and Ms Cooper's proposed property dealings, and she saw herself as a creditor of the Association. But it is significant that she sought to justify the use of the Lower Portland property to support the borrowings on the ground that this would be for the benefit of the Association, not for her personal benefit.

78. Furthermore, as the evidence of Mr Rose and Mr Fitzsimmons makes clear, there was never any agreement from the committee to the proposal. I do not know what arrangements were ultimately put in place for borrowing from CFCU, but it is clear that security over the Lower Portland property was never provided.

79. The incorporation of the Valley Company in 2011 again shows that Ms Provan was contemplating the conferral of a security interest over the Lower Portland property on herself, and on her daughter after her death. But as framed, the relevant article in the constitution pre-supposed the transfer of the property from the Association to the Company and the grant of a formal mortgage. None of this ever happened and the idea appears to have been abandoned by Ms Provan.

80. This brings me to the preparation of the 2009-10 and 2010-11 financial statements in March 2012, with their notation of a security interest in Ms Provan’s favour (although not specifically over the land). Counsel for Ms Fitzgerald submitted that it was probably not a coincidence that these documents were drawn up at around the time when Ms Provan was diagnosed with cancer. It may be accepted that this is correct and Ms Provan was seeking to put her affairs in order and to ensure that her daughter would benefit from the Association’s remaining asset. But I think there are four significant factors in the evidence which need to be considered.

81. First, it is unclear what Ms Provan specifically intended. As I have just pointed out, the security notation did not identify the nature of the security, nor was the existence of a security reflected in the declarations to the Department of Fair Trading completed by Ms Provan. It is not clear what Ms Provan thought the effect of the notation. In particular, it is not clear whether she considered the making of the notation would be sufficient of itself to confer a security interest on her estate, or if she did not, what other steps she had in mind to affect that purpose.

82. The second key factor is that there is no mention of the alleged agreement in the committee minutes. The argument by counsel for Ms Fitzgerald requires that some sort of agreement was reached at the committee meetings to confer security. There is simply no reason to think that if this occurred, Ms Provan would not have recorded it when drawing up the minutes. The absence of mention is eloquent testimony that no such mention was made.

83. The third consideration is that there is no evidence that the accounts themselves were ever properly approved by resolution of the committee members. The evidence given by Mr Rose and Mr Fitzsimmons (and to a lesser extent Ms Cooper) about the informal working of the committee was not contradicted. The documents in evidence show all the hallmarks of having been created by Ms Provan without reference to actual events.

84. The fourth factor to my mind is the most important. It is that there was no evidence that anyone else on the committee was in favour of the idea of converting the loan into a secured loan for the benefit of Ms Provan’s estate so that it could be enjoyed by her daughter.

85. I am satisfied that each of Mr Rose, Mr Fitzsimmons and Ms Cooper, in his or her own way, was committed to the conservation of the property for the benefit of future generations. The Association had no means of repaying to Ms Provan the debt recorded in the financial statements. Acceptance of that debt, and that it was secured over the land, would inevitably have had the effect of transferring the land to Ms Provan’s estate where it would be sold. I do not believe that any of those witnesses would have contemplated that for a moment.

86. Counsel suggested that in 2012 the circumstances had changed from the circumstances in 2008 and 2009 as a result of Ms Provan contracting cancer. But I have no reason to think that that would have altered the views of Mr Rose, Mr Fitzsimmons or Ms Cooper. However sympathetic they may have been to Ms Provan’s plight, I cannot see any reason to think that they would have wished to hand over the property to the ownership of her daughter. Counsel at no stage made any such suggestion to them.

87. In final submissions counsel suggested that I should draw a Jones v Dunkel (1959) 101 CLR 298 inference against the Association on this point. With respect, I think this submission is quite unreal. In fact there is a strong, if not overwhelming, inference the other way as a result of counsel’s failure to put the transaction which he contended for directly to the witnesses. I see no reason whatever to draw the inference which counsel suggested.

88. For these reasons I am not satisfied that there was any agreement of the type pleaded. Nor am I satisfied that the accounts were ever approved by the committee members.

Alleged agreement

91. On my findings Ms Fitzgerald has failed to prove the agreement that she alleges. Her case on this point fails for that reason alone.

92. I should note that even if I was satisfied that an agreement had been made, it was not one which was signed on behalf of the Association. It is, therefore, unenforceable at law under the statute of frauds (Conveyancing Act 1919 (NSW), s 54A). Counsel for Ms Fitzgerald did not seek to sustain the agreement using the doctrine of part performance.

Estoppel

93. On my findings Ms Fitzgerald has failed to prove that, in fact, the accounts were adopted by the Association either through its committee or at its AGM. Thus, the statements in the accounts do not amount to a representation on behalf of the Association which is capable of founding an estoppel against it.

94. Counsel for Ms Fitzgerald faintly relied on the indoor management rule. It was suggested that Ms Provan and Ms Cooper were permitted by the other members of the committee a wide latitude in the conduct of the affairs of the Association. In particular, there were frequent references to them conducting fundraising activities on the Association’s behalf. But this is entirely different from the grant of security in Ms Provan’s favour over an asset of the Association. It is also quite different from passing formal resolutions for the committee.

95. If, as I have found, the committee did not approve the accounts, then no question of ostensible authority being conferred on Ms Cooper to do so can arise. Furthermore, even if some sort of representation had arisen from the accounts, Ms Provan could not reasonably have relied on any such representation. On my findings she would have been well aware that, in fact, there had been no agreement with the members of the committee to grant security.

96. The likelihood is that the financial statements were prepared by Ms Provan and the statement about security was her own statement. It is therefore hard to see how Ms Provan could have acted to her detriment. On my findings it appears that she simply put the reference to security into the accounts hoping that it would be sufficient to protect hers and her daughter’s interests. In fact it was not, but there is no evidence that Ms Provan was led by anyone else not to take some further action to formalise the position.

97. That is not the only difficulty with the lack of formality in the transaction. The estoppel in the present case could not properly be classified as a proprietary one. Any estoppel must be a promissory one. There is a problem with trying to use the doctrine of promissory estoppel to outflank the writing requirement of the statute of frauds.

98. I discussed this issue in Elzamtar v Bangladesh Islamic Centre of NSW Inc [2020] NSWSC 1161. As I pointed out in that case at [157]-[160], authority at appellate level in this State is against the use of a promissory estoppel in this way unless a specific representation is made that the defendant will not rely on the statute: see Powercell Pty Ltd v Cuzeno Pty Ltd [2004] NSWCA 51 at [76]-[80]. Therefore, even if the ingredients for promissory estoppel were otherwise established, the doctrine would not avail Ms Fitzgerald in the present case.

Limitation

99. The proceedings were commenced on 13 March 2018. This was just less than six years after the date of Mr Crockford’s signature on the accounts (16 March 2012). But it was more than six years after the end of the financial year with which the accounts dealt (30 June 2011).

100. The acknowledgement of a debt in the corporation’s financial statements can operate to extend the limitation period. But where the creditor is an insider involved in producing those financial statements, there may be a question about whether the acknowledgment operates for the creditor’s benefit: see Fischer v Nemeske Pty Ltd [2015] NSWCA 6 at [105]-[113].

101. I do not need to go into this issue for present purposes. Even if available, any extension of the limitation period would only postpone it until six years after the date on which the accounts speak, namely 30 June 2017: see Stage Club Ltd v Millers Hotels Pty Ltd (1981) 150 CLR 535 at 565.

102. Counsel suggested that the fact that the accounts were signed within the six year period might make some difference to this. I confess that I did not fully follow counsel’s argument. In any event, in Ace Insurance SA-NV v Seechurn [2002] 2 Lloyd’s Rep 390; EWCA Civ 67 the Court of Appeal for England and Wales decided that estoppel against relying on the statutory of limitations is only available where there is a specific promise not to plead the statute coupled with reliance on that specific promise. I followed and applied that authority in Elzamtar: see at [151] and [166].

103. In opening counsel foreshadowed an argument that Seechurn and Elzamtar were wrongly decided in this respect. But no such argument was presented in final submissions. There was no specific representation in this case. Accordingly, the limitation defence to the debt action succeeds.

Conclusions and orders

104. I have concluded that:

1. (1)   the plaintiff’s claim to a security interest in the Lower Portland property based on alleged agreement or, alternatively, on equitable estoppel fails;

2. (2)   the plaintiff’s debt claim is statute barred.

(Counsel addressed on costs)

105. The orders of the Court are:

1. Dismiss the plaintiff’s claim.

2. Order that the plaintiff pay the defendant’s costs of the proceedings.

**********

Decision last updated: 12 March 2021