Grant v Grant
[2013] VSC 329
•28 June 2013
| Do Not Send for Reporting | ||
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
S CI 2009 09850
| ROBERT GRANT | Plaintiff |
| v | |
| DAVID GRANT | First Defendant |
| - and - | |
| IRENE GRANT | Second Defendant |
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JUDGE: | DALY AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 22, 23, 24, 25 October 2012, 7 November 2012, further affidavits and submissions received on 14 February 2013, 26 February 2013, 7 March 2013, 18 March 2013, 20 March 2013 and 25 March 2013. | |
DATE OF JUDGMENT: | 28 June 2013 | |
CASE MAY BE CITED AS: | Grant v Grant | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 329 | |
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JUDGMENT
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CONSTRUCTIVE TRUST — Claim by son over assets of parents — Whether agreement was entered — Whether common intention constructive trust — Whether constructive trust should be imposed by reason of son’s contributions to the family business — Whether share transfer valid — Ownership of furniture and other chattels.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr G McCormick | O’Neill Behan & Associates |
| For the Defendant | Mr R Young | Waters Lawyers |
HER HONOUR:
Background and Overview
Robert Grant, the plaintiff, is the son of the defendants, David and Irene Grant. David and Irene Grant are now in their senior years: indeed, David is now extremely unwell and suffers from dementia. They have another son, Paul Grant, Robert’s brother. By reason of, among other things, the matters which are the subject of dispute in this proceeding, Robert[1] is estranged from his mother and his brother.
[1]For ease of reference, I will refer to the parties and other family members by their first names. No disrespect is intended.
Prior to his semi-retirement in the 1990s, David had run a series of businesses, with mixed success, including a chain of music stores in suburban Melbourne, the last of which closed in 1996. Irene was largely occupied by home duties, and did not take an active part in these businesses or any other businesses operated by David and/other family members. Robert and Paul were both musically inclined and, while the extent of their contribution is disputed, they both worked in the music stores from time to time.
From 1981 the Grants lived on a 40 acre property at 415 Manks Road, Clyde (“property”), just outside the Melbourne metropolitan area. Both David and Irene were the registered proprietors of the property until it was sold in 2012. The net proceeds of sale of the property (after the discharge of all loans secured by the property), being approximately $500,000, are held by a firm of solicitors on trust for the parties pending the outcome of this proceeding.
All of the businesses in which the family had an involvement were operated through a company, Seventh Advocate Management Pty Ltd (“company”). Until 2006, both David and Irene were directors of the company, and each held a 50 per cent shareholding in the company. Since 2006, Robert has been listed as a director and shareholder of the company in the records of the Australian Securities and Investment Commission (“ASIC”). Irene disputes the validity of these records.
The following businesses were operated by the company over the relevant period:
(a)from 1985 to 1996, the music stores in Dandenong, Cranbourne and Ormond (“music shop business”);
(b)from 1994 to 1997, the breeding and rearing of ostriches at the property (“ostrich farming business”); and
(c)from 1995 to 2010, a cartage business, based at the property, specialising in carting water and potatoes by tanker (“trucking business”).
Robert’s evidence is that he worked in the music shop business and the ostrich farming businesses, without remuneration, as a teenager and young man, and provided cash to David and Irene from the proceeds of his earnings as a professional musician. This is disputed by Irene, but in the end, this dispute is peripheral to the main issues in this proceeding. What is not in dispute was that, despite some involvement by David in the trucking business prior to the time that his health started to decline in or around 2006, the driving force and main operator of the trucking business was Robert. What is also not in dispute is that from about 1997 at the latest, from the income derived from the trucking business, the company paid the repayments due on loans secured by mortgages over the property, the outgoings and expenses associated with the property (such as rates and utility bills) and the loan repayments and other expenses associated with a fleet of prestige vehicles used by David and Irene. From 1997, both David and Irene received social security payments, which financed their day to day living and personal expenses.
However, while the company subsidised the lifestyle and housing related expenses of David and Irene, at least until 2010, the property also conferred benefits upon the company, with David and Irene allowing the equity in the property to be used as security for loans advanced for the benefit of the company, such as for the purchase of new tankers and trucks for the trucking business.
By the time of trial in late 2012, the company was not actively trading. Its only income was generated by the lease of trucks and tankers to RJG Transport Pty Ltd, a company controlled by Robert, which also operates a cartage business. An expert report prepared for the purpose of this proceeding ascribes a nil value to the company, and the parties have agreed to proceed upon this basis.
The final matter which is not in dispute between the parties is that, while there may be some quibbling about the extent of Robert’s contributions to the family businesses and economic wellbeing of his parents prior to about 1995, at least since that time, Robert’s contributions to his parents’ economic welfare, through his work in the trucking business and the use of the income generated by the trucking business for the benefit of his parents, was substantial, and far outweighed the contribution made by his younger brother, Paul. However, by reason of wills made by David and Irene in 1996 and 1999 respectively, all of their assets, including their net equity in the property and their shares in the company (if Irene is correct in establishing there was no valid share transfer from David to Robert in 2006) will be left, upon the death of both of them, equally to Robert and Paul. David, by reason of his lack of capacity, is unable to change his will. Irene, by reason of her estrangement from Robert and her involvement in this proceeding, is presumably not prepared to do so.
Robert gave evidence that he discovered the arrangements made by his parents under their respective wills in 2008 or 2009 after reviewing some of his parents’ papers he obtained from their solicitors after the house at the property was destroyed by fire. In his view, the equal bequests to himself and Paul were inconsistent with his understanding of what was to occur. In particular, he asserted that this position was inconsistent with an agreement reached between him and his parents in or about December 1994 (“1994 agreement”), whereby David and Irene promised him that if he worked for the company, took over their debts, and supported David and Irene financially, the property and the company would be left to Robert on their death.
Robert issued this proceeding on 28 October 2009 and, based upon the 1994 agreement, or, alternatively, a constructive trust arising out of the promises made by David and Irene in or about December 1994, sought declarations that David and Irene held the property on trust for Robert, and that Irene held her fifty per cent share in the company on trust for Robert.
In his further amended statement of claim filed 21 September 2011, Robert alleged, in summary, as follows:
(a)Robert was born in 1972 and left school shortly after he turned 15, and worked as a professional musician and in the music shop business;
(b)in or about 1993, Robert commenced working casually with Mayne Nickless as a truck driver while still working as a professional musician and in the music shop business;
(c)between 1990 and 1994, Robert made cash payments to his parents, at their request, totalling $26,920, as evidenced by ledger cards;
(d)in or about 1994, Robert suffered a back injury while in the employ of Mayne Nickless;
(e)in or about December 1994, David told Robert that:
(i)the music shop business was unsuccessful and the company could not afford to pay the rent for the stores;
(ii)David, Irene and the company owed substantial sums of money, which were secured against the property; and
(iii)David and Irene had the opportunity to invest in the ostrich farming business but that it could not succeed without Robert’s labour.
(f)further, in or about December 2004, in a series of conversations between Robert and David and Irene, David and Irene represented that they would make mutual wills to the effect that they would leave to Robert exclusively the whole of the property and the company, in recognition of Robert’s past contributions to the company and in consideration for:
(i)Robert continuing to work for the company;
(ii)Robert and/or the company assuming responsibility for all payments of all loans secured by mortgage over the property;
(iii)Robert and/or the company paying all personal expenses for David and Irene for the remainder of their lives;
(iv)David and Irene continuing to reside at the property for the remainder of their lives;
(v)Robert assisting in the establishment of the ostrich farming business including attending to fencing, constructing a shed, and setting up for the ostrich farming business; and
(vi)Robert agreeing to pay to Paul the sum of $40,000 upon the death of David and Irene.
(g)in or about 1995, Robert decided to use a $40,000 compensation payment he had received to commence a trucking business. He discussed this plan with David and Irene, who suggested that the company be used to operate the business, as it had accumulated substantial tax losses;
(h)the company commenced the trucking business in 1995 with one truck and one water tanker. Later, the company purchased further trucks and trailers from:
(i)income from the trucking business;
(ii)a further $75,000, being part of a further compensation payment received by Robert in 2001;
(iii)proceeds of sale of existing trucks and trailers; and
(iv)finance obtained from Westpac and Esanda;
(i)neither David nor Irene held truck licences, and while David did some work in the trucking business, Irene did no work in the trucking business;
(j)Robert incurred personal liabilities in respect of borrowings for the trucking business;
(k)in 1997, the ostrich farming business was wound up because of its unprofitability and David and Irene commenced receiving social security benefits;
(l)in or about September 2006 Robert, David and Irene discussed the 1994 agreement, and David and Irene’s continuing involvement in the company, and agreed that:
(i)David would resign as a director of the company, transfer his share in the company to Robert and provide Robert with a financial power of attorney to operate the company’s bank accounts;
(ii)Irene would remain as a director reluctantly because of the statutory requirements of a two director company; and
(iii)David would no longer do any work for the company (“2006 agreement”).
(m)on 28 September 2006, David resigned as a director of the company. On 13 October 2006 he transferred his share in the company to Robert, and on 27 November 2006 executed a financial power of attorney in favour of Robert;
(n)in or about July 2008, Robert and Irene agreed that Irene would cease to be a director and would transfer her share to Robert’s nominee, but despite repeated requests since September 2008, Irene has refused to do so;
(o)between 1995 and 2009, in reliance upon the 1994 agreement, Robert caused the company to confer the following benefits upon David and Irene:
(i)mortgage repayments totalling $435,997;
(ii)payments of council rates, utility bills and medical expenses in the sum of $159,928;
(iii)unquantified payments in respect of insurance for the property, and the extinguishment of David and Irene’s credit card and tax liabilities;
(iv)the sum of $38,472, being the difference between the cost of rebuilding the house on the property following a fire in April 2008, and the insurance payout received by David and Irene following the fire; and
(v)unspecified amounts for the construction of two sheds, a seven-car garage, and concreting and gravelling works at the property;
(p)the company and Robert personally purchased or contributed to the purchase of various household goods and furniture to the value of approximately $100,000, which remain in the possession of David and Irene; and
(q)in breach of the 1994 agreement, David and Irene did not make wills so as to leave the property and the shares in the company exclusively to Robert, but rather in 1996 and 1999 they respectively made wills leaving their estates to be shared equally between Robert and Paul upon the death of both of them.
The defences and counterclaim filed by David and Irene on or about 18 November 2011 deny that Robert is a director and shareholder of the company. They admit that Robert worked in the music business between 1986 and 1994, but denied that he did so without remuneration. They deny that Robert gave them any money between 1986 and 1994.
In relation to the 1994 agreement, they admit that the music shop business was unsuccessful and that they had an opportunity to invest in the ostrich farming business, but they deny that they and the company were in substantial debt, or that David told Robert that the investment in the ostrich farming business could not succeed without Robert’s labour. They deny that there were conversations and/or representations made by them to the effect referred to in paragraph (12)(a) above.
In relation to the establishment of the trucking business, they deny they had a conversation with Robert regarding using his compensation payout to establish a trucking business, and deny that they suggested that he should operate the business through the company to take advantage of its accumulated tax losses. They deny that Robert used his $40,000 compensation payout to purchase a truck and tanker for the trucking business, and, save that Robert contributed to the cost of an Atkinson truck purchased in 2001, deny that the further purchase of vehicles was purchased from the sources identified by Robert. They deny that Robert incurred personal liabilities in respect of the assets of the trucking business, and respond to the allegation that they made no contribution by way of money or assets to the trucking business by stating that the property was used as security for funds used by the trucking business.
David and Irene assert that David not only did the work referred to by Robert in his claim, but also general bookkeeping work as well, and that Irene did some telephone work in the trucking business. While the pleading is a little confusing, it appears to be asserted that David had a truck driver’s licence.
David and Irene admit that the ostrich farming business folded for want of profitability, and that they have been in receipt of social security benefits since that time. They deny that the only profitable business operated by the company since 1995 was the trucking business.
In relation to Robert’s allegations regarding the 2006 agreement, David and Irene agree that there were discussions about the future operation of the trucking business. While they allege that David did not have the mental capacity to enter into any agreement at that time, they assert that the effect and outcome of these discussions was as follows:
(a)they deny that it was agreed that David would resign as a director of the company and transfer his share in the company to Robert, that David would no longer do any work for the company, and that Irene would reluctantly continue as a director and shareholder “in name only”;
(b)they deny that in or about July 2008 Robert and Irene agreed that Irene would cease to be a director and shareholder and transfer her share in the company to Robert’s nominee;
(c)they allege that in September 2006 David decided that he did not have the ability to run the company any more and it was agreed between David, Irene and Robert that Robert would run the company for David and Irene, and receive “reasonable remuneration” for doing so, but it was not agreed what “reasonable remuneration” was;
(d)in relation to the claim that David and Irene had converted certain chattels, David and Irene assert that certain chattels had been owned by them in the period prior to 2001 and that others were purchased from the proceeds of the insurance policy received by them after the April 2008 fire; and
(e)they agree that they made wills leaving their estate to be divided equally between their sons, but that Robert had always known the contents of their wills.
In their counterclaim, David and Irene allege that Robert has in his possession eight guitars which properly belong to David. This is denied by Robert.
Accordingly, the issues for determination in this proceeding are as follows:
(a)whether, as Robert asserts, an agreement was reached in 1994 in the terms alleged or that certain representations were made by David and Irene to Robert, which were relied upon by Robert;
(b)whether the appointment of Robert as a director of the company and the transfer of David’s share to Robert took place in accordance with and as a consequence of the 2006 Agreement and whether David had the requisite mental capacity to enter an agreement at that time;
(c)was there an agreement between Robert and Irene in July 2008 that Irene would resign as a director and transfer her share in the company to Robert or his nominee; and
(d)who is the proper owner of various chattels?
The conduct of the trial, credibility of witnesses, and other procedural issues
The evidence at trial was primarily by way of affidavit, supplemented by oral evidence at trial, both in terms of examination‑in‑chief and cross‑examination. The defendants filed and served a number of affidavits which were not relied upon. The expert reports of Ms Hayley Coates, Mr Ronald Hall, and Mr Michael Smith were tendered in relation to the valuation of the company, without any party calling upon any expert to be cross-examined. The parties agreed to proceed on the evidence of Mr Smith, the independent expert appointed jointly by the parties, that the company had no value.
In relation to the question of David’s capacity as at September 2006, David and Irene tendered two expert reports: a report of Dr Kim P. Teo, and a report of Dr Ramy Ghaly, both dated 25 August 2011. These were tendered over the (faint) objection of counsel for Robert, who did not require the attendance of either of the medical witnesses, but submitted that their reports should be given little, if any weight.
One significant issue hampering the determination of the issues in the proceeding was the inability of David to give evidence by reason of his lack of mental capacity caused by his advancing dementia. In circumstances where he was the driving force behind the company for many years, was party to the critical conversations which were said to have taken place (or not to have taken place), and was the party to have, according to ASIC records, relinquished his directorship and shareholding in the company to Robert, his evidence would have been of great assistance.
This is particularly the case given the entrenched positions adopted by both Robert and Irene in this dispute. The nature of the allegations in the proceeding are such that, while some evidence could perhaps be said to have been coloured by the heat of the dispute, and the different perceptions and expectations of the parties, in respect of some issues, it is impossible to conclude anything other than that one party is not telling the truth. These observations relate to both Robert and Irene.
This was an example of a proceeding where it was impossible to assess the credibility of the parties by reason of their demeanour when giving oral evidence. Both Robert and Irene gave evidence in a forthright, and, with some exceptions on both sides, non‑evasive manner. But it may well be that they are so entrenched in their respective positions in the family dispute, and are so persuaded by their view of the justice of their position, that they are able to make their assertions with such apparent confidence.
Ultimately, however, I have had to form a view about what did and did not happen, in the absence of potentially the most reliable witness, David. While I accept the evidence of both Robert and Irene on many matters, I have only accepted it unreservedly in circumstances where it is corroborated by another witness, supported by contemporaneous documents, and/or consistent with common sense and the undisputed facts and circumstances at the relevant time. I have far less reservations about accepting the evidence of other witnesses, such as Kerry Schroeder and Hayley Coates. While Kerry is clearly in Robert’s “camp”, I generally accept her evidence, including her evidence regarding what was said in conversations involving the parties, where she was present, and I would generally prefer her evidence over that of Irene in relation to those conversations.
There are two other matters of significance that arose during the course of the trial, and in its aftermath. First, on the first day of trial, counsel for Robert indicated that it had only come to his attention on the weekend prior to the commencement of the trial that Ms Coates, the company’s accountant, had tried to locate company records relevant to the validity of the share transfer and change of directorship at the request of Robert’s solicitors, but that the records had been destroyed by white ants. I allowed Ms Coates, who had previously prepared an expert report on behalf of Robert, to give evidence as a witness of fact, over the protests of counsel for David and Irene. Subsequently, as a result of the evidence given by Ms Coates, counsel for Robert applied to withdraw an admission deemed to have been made by reason of the failure of the solicitors for Robert to file a Notice of Dispute in response to a Notice to Admit filed on behalf of David and Irene dated 12 April 2012 in relation to the following alleged fact:
No transfer of share form in respect of Seventh Advocate Management Pty Ltd was signed by David Grant or his authorised agent transferring David Grant’s shares in Seventh Advocate Management Pty Ltd to Robert Grant, the plaintiff herein.
I will not rehearse the evidence and submissions in relation to this matter here, which are canvassed in my ruling on 7 November 2012, when the application to withdraw the admission was allowed, on the basis that the evidence of Ms Coates on this point was likely to be of significant probative value, such that Robert would be unfairly prejudiced should I not grant leave for the deemed admission to have been withdrawn. I allowed Robert to be recalled for further cross‑examination in relation to this matter. Robert’s further evidence did not prove to be particularly illuminating one way or the other.
Another issue arose, some time after the trial, in the course of my reviewing the Court Book for the purposes of preparing this judgment. A letter from Kerry to a mortgage broker (see CB 1179) made a reference to funds from the 2 February 2007 refinancing being used, in part, to pay out the mortgage on Robert’s home in Berwick. My associate’s letter of 6 February 2013 stated as follows:
Associate Justice Daly is currently preparing her judgment in this matter. Following her review of the court book, she would like to draw the parties’ attention to exhibit “KS-19” to the affidavit of Ms Schroeder sworn 27 February 2012 (CB 1179). This document indicates that at least part of the funds raised by the borrowings from Bank West in 2007 against the security of the property of 415 Marks Road (“2007 refinancing”) were used, or intended to be used, to pay out the existing mortgage on the property at 14 Magdalena Street, Berwick, which is presumably a property owned by Mr Robert Grant.
The question of whether part or all of the surplus funds raised by the 2007 refinancing were used to retire Mr Robert Grant’s personal liabilities may well be of relevance to the determination of the issues in dispute between the parties. Associate Justice Daly also draws the parties’ attention to the document at CB 1314 (part of exhibit “RG-7” to the affidavit of Mr Robert Grant sworn on 27 February 2012), which shows that, after payments to the Commonwealth Bank and transaction fees, the surplus funds from the 2007 refinancing amounted to $225,030.81 (of which $25,000 appears to have been used to purchase a tanker, presumably for the purpose of the business of Seventh Advocate Pty Ltd).
The question of how the surplus funds from the 2007 refinancing were deployed was not the subject of any scrutiny at trial (although an indirect reference was made to the funds from the 2007 refinancing being used for Mr Robert Grant’s house at paragraphs 45(c) and (g) of the witness statement of Mrs Irene Grant of 20 March 2012), but may well be a matter of some relevance to the ultimate determination of the issues in the proceeding. Associate Justice Daly invites the parties to consider and make brief written submissions as to how best to deal with this issue in the most cost effective way. One option is for either Mr Robert Grant or Ms Schroeder to make an affidavit deposing as to how the surplus funds from the 2007 refinancing were disbursed and for the parties to subsequently provide brief written submissions on the relevance and/or significance of this evidence.
Subsequently, affidavits were sworn by Robert and Kerry on 14 February 2013, by Irene and Robert Hall (an expert witness retained on behalf of David and Irene) on 26 February 2013, and affidavits in reply by Robert and Kerry were filed and served on 7 March 2013. Written submissions in relation to this further evidence were filed on behalf of Robert on 20 March 2013, and on behalf of David and Irene on 18 March 2013 and 25 March 2013. The additional written material concluded with a letter from Robert’s solicitors to David and Irene’s solicitors, stating that Robert would oppose any application by David and Irene to reopen their case. No such application has been made, and the evidence has been taken into account only to the extent it is relevant to the issues as pleaded.
The 1994 Agreement
In support of his contention that David and Irene made, and were bound by, the 1994 agreement, and that Robert acted in accordance with, and in reliance upon the 1994 agreement, Robert relied upon the evidence of himself, his partner Kerry Schroeder, and two friends, Brett Glover and Mark Potter.
In his affidavit sworn on 27 February 2012 (“primary affidavit”), Robert deposed, in summary, as follows:
(a)he lives with Kerry and her three children. He and Kerry have been in a relationship since November 2006;
(b)since 28 September 2006 he has been a director and shareholder of the company, “when Mum transferred Dad’s share to me”;
(c)until December 2011 he operated the trucking business from the property. He usually works eighty to ninety hours per week in the trucking business. He has had between one and four drivers working for him since the late 1990s;
(d)he left school at the end of year 8 in 1987. The company had purchased a music shop in Cranbourne, and he commenced working full time in that store, doing general shop duties and teaching students. When the Cranbourne store was sold he then commenced working at the Dandenong store, mainly teaching students;
(e)he was receiving cash payments as a professional musician, which he passed on to his father. He was not receiving a regular wage from the music store, but after a while his father agreed to pay him a regular wage when the stores could afford it;
(f)he exhibited ledger cards which showed that between 1990 and 1994 he paid his parents the sum of $26,290 from his earnings as a musician and truck driver;
(g)he gave evidence about the opening and closing of music stores by the company;
(h)in 1993 David approached various people seeking funds to invest in an ostrich farming business at the property. Apparently David was successful in obtaining funds to establish the ostrich farming business. Robert recalls having discussions with David about how Robert was to build and fence yards for the ostriches and learn how to look after the ostriches and incubate eggs. David left Paul in charge of one of the music shops and shut down another; and
(i)at some stage Robert commenced working for two to three days per week as a driver for Mayne Nickless, while also working on the property in the ostrich farming business, building and maintaining the yards, cleaning the sheds, feeding the birds, incubating eggs, and transporting birds, both for the company and for other people, without any remuneration from the company.
Given the significance of the discussions said to have taken place in 1994 and 1995 to the claims made by Robert in this proceeding, paragraphs 35—43 of the primary affidavit are reproduced below:
“35.I needed an income and as I didn’t want to be an employee I decided in 1995 to go into water cartage following a work accident payment. I had already found a truck to do the job which was a 1975 Tieman Bogy Axle Tanker Trailer with registration number 65316-S. This vehicle is currently valued at $9,000.00.
36.To the best of my recollection on the verandah of the property and then in the kitchen, I discussed my plans with Dad and Mum. I told them I couldn’t keep working for nothing so I was going to start up a water business using the money from my work accident.
37.In respect of the work accident I was injured when working for Mayne Nickless as a driver in or about June 1995. I slipped on the back of a van and initially was off work for about one week. I was then placed on light duties working in the factory whilst I underwent CT scans. I received an initial payment of $40,000.00. Following solicitor costs I gave Mum and Dad the sum of $36,000.00. I recall doing this because I signed the back of the cheque and banked it into Mum and Dad’s bank account.
38.About this time Ron Kran (Ron) had a tanker and he was the supplier who Mum and Dad purchased water for the property. I had earlier approached Ron and said that I would hopefully be receiving some money but I wouldn’t have it for a while. Ron agreed to let me have the tanker on an agreement of payment the money when it came in. The $36,000.00 was subsequently used to pay out Ron and the balance was left to use in the new water business as had been agreed with Mum and Dad.
39.My Court case in respect of the work accident was finalized in or about late 1999 and after legal costs and repayments to Centrelink I received the sum of $190,000.00. I used some of this money to purchase a house in Berwick and borrowed $60,000.00 by way of a Mortgage. I paid approximately $175,000.00 for the Berwick house and the balance of about $75,000.00 was used when we, including Mum and Dad, required money to pay bills and living expenses.
40.I asked Dad how I could start up a company and that’s when Dad said that a better idea was to use Seventh Advocate because it had a net minus income that I could use to my advantage and that if something happened between Christine and me then the business would be protected from her. In particular, the Seventh Advocate had an accrued tax loss of (which I later found to be $104,892) that could be used to offset any profit I earnt.
41.Dad then said if I was doing it that way I would have to take over the business debts and the debt on the property and that if I could make it work and keep the debts paid then the business and the property would all be mine. I relied on what Dad said and agreed to use Seventh Advocate as the corporate vehicle for my water business.
42.On this occasion when we got back into the kitchen Mum said “Well you have done all the work but Paul has to get something”. Her reasoning was that if I was taking it all on, namely the business and the farm, Paul had to get a small amount of money in the order of $40,000 from me when they died because they wouldn’t have anything to leave him.
43.Because I had done all the work on the property and in the shops it had been intimated by both Mum and Dad even before the work accident payment, that because of all my work it would be all mine, meaning the property and Seventh Advocate. Paul had done nothing, other than work in one of the shops for a short period of time, so he was only to get a small cash payout when they died. In or about December 1994 Dad, who was nearly 60 years of age, and Mum told me that they would make mutual Wills leaving the whole of the property and the business of Seventh Advocate to me. Mum and Dad both said they were doing this as they recognized all the work I had previously put into Seventh Advocate and for looking after them.”
The primary affidavit also deposed in some detail as to the following matters:
(a)the purchase and sale of trucks by the company from 1995 onwards;
(b)the expansion of the company from water carting to potato cartage; and
(c)the role of David in the trucking business between 1995 and 2006.
The primary affidavit also deposed to some conversations which were said to have taken place after a fire destroyed the home at the property in April 2008 which were said to be consistent with the existence of the 1994 agreement. Robert deposed[2] that, when discussing the arrangements for rebuilding after the fire, Irene said to him “You handle it, I want nothing to do with it, its yours, you rebuild it the way you want it as you and Kerry will be moving into it anyway.”
[2]At paragraph 76 of the primary affidavit.
Further, he deposed[3] that in or about May 2008 Irene said to him that he “should furnish the house as you see fit because [he] and Kerry are the ones that will be there and Dad and I don’t need much.”
[3]At paragraph 87 of the primary affidavit.
Robert deposed that after the fire he started “trying to sort out” the amount to be paid to Paul, and that Irene stated “You organise it with the solicitor and I’ll come down and sign it up”.[4]
[4]At paragraph 95 of the primary affidavit.
At paragraphs 96 to 99 of the primary affidavit, Robert deposed as follows:
“96.As far as I remember the agreement was that I was going to give Paul $125,000 at the time of their death. Mum didn’t want Paul to get it before then as she was concerned about problems with Vanessa and Paul, in particular the fraud case involving Vanessa following her termination from Harvey Norman. Mum reiterated that she didn’t want Paul to have the money now and that when they passed away that was Mum and Dad’s last gift to Paul. This conversation, to the best of my recollection, took place at Dartmoor Drive, it was my birthday, and I had bought lunch for everyone. Mum, Dad, Kerry and I were there.
97.Shortly after moving Mum and Dad into the rebuilt house, I approached them both in the dining area and said that “in light of the fire and all that sort of thing, we needed to put the agreement we had in place properly”. This was when Mum agreed about the money that I had suggested for Paul, to have the property signed over to my name and to have Kerry put on as the second director of Seventh Advocate.
98.Kerry and I went to see our accountants, Tax on Time to discuss the best way to start putting away money to build up to this $125,000 for when Mum and Dad passed away. Seventh Advocate wasn’t financially able to just take this amount of money out in one lump sum so we were going to have to put money away each year.
99.Mum had previously asked me to organize a day with the solicitor to have everything drawn up and for her to go down and sign it. Following the times that I approached Mum to say that I had a day to go down, she would say she wasn’t feeling well or that she didn’t want to go because she was feeling too upset.”
He deposed[5] that he continued to speak to his mother about having an agreement drawn up, but that Irene continued to make excuses about not being able to attend the solicitor’s office. He discussed the fact that Irene kept making excuses with Kerry, and that they agreed that Kerry would talk to Irene about why she kept “stalling”. He worked in the office at the property while Kerry talked to Irene. He deposed:[6]
When Kerry came back to the office after talking with Mum she said she had come to the conclusion that Mum was just telling me what I wanted to hear and that she had no intentions of ever honouring the agreement that I had with Mum and Dad from the start. She said Mum was just telling this just to keep me off her back. I then went back over to the house and Mum was extremely upset that she had been put on the spot. I told her it had come to the point where she had to stop “stringing me along”. We said our goodbyes and went home.
[5]At paragraph 105 of the primary affidavit.
[6]At paragraph 106 of the primary affidavit.
In Robert’s version of events, all came to a head in September 2009 when Robert received a telephone call from Irene stating that she was taking $40,000 out of the company account to give to Paul, because of the difficulties that Paul’s partner, Vanessa Grant, was having with her former employer.
Robert deposed that he replied “You can’t do that to the business, Paul has nothing to do with the business, there isn’t $40,000 to take anyway”.[7]
[7]Paragraph 107 of the primary affidavit.
After that conversation, the dispute between Robert, on the one hand, and Paul and Irene on the other hand, escalated unpleasantly. The remainder of the primary affidavit goes into some detail about the dispute, which has resulted in allegations of violence and tampering with property, and various parties obtaining intervention orders against other parties. From about 24 March 2010, the company, which remains in Robert and Kerry’s effective control, stopped paying for expenses related to the property, and, from 1 September 2011, the company stopped paying the mortgage payments in respect of the property.
At paragraph 108 of the primary affidavit, Robert deposed as follows:
From 1995 I was making all the money from the transport business. This money was being used to pay the mortgage repayments and living expenses on the property for Mum and Dad. Until September 2006, Dad was making these payments from my earnings and from January 2007 I gave Kerry permission to pay all personal expenses, rates and mortgage repayments on the property for Mum and Dad. In addition to paying for all these expenses I also authorized Kerry to pay all additional costs for the rebuild following the fire at the property and we also used money from the water and potato cartage, my business, to pay for the furniture and household items at the current property.
The evidence in this paragraph of the primary affidavit does not appear to be seriously in dispute.
In his oral evidence at trial, Robert gave further evidence about the types of driving licences he held, the injury he suffered while working at Mayne Nickless, and his receipt of compensation payments totalling $290,000. He confirmed that he worked for the company in the music shop business, and the ostrich farming business.
Robert gave evidence that when he received the first insurance payout in late 1994 or early 1995, he had discussions with his father about getting into the trucking business to guarantee his future income. He stated:[8]
I originally asked Dad how I would set up my own company with the money I had to start up the transport business and then it was discussed that I take over [the company] and that I use that as a vehicle of starting up my own business.
[8]T36, 25-29.
Robert gave evidence that the reason given by David for using the company as the vehicle for the trucking business was because of the losses that the company had accrued. He tendered a tax return of the company for the 1994-1995 financial year which showed that the company made a loss of $104,892, and that there was negative equity of $254,435.[9]
[9]Exhibit A.
Robert gave evidence about how he sourced a water tanker for the trucking business, and paid for it from his insurance payout. He advertised the trucking business in local papers, and made “cold calls” to try and obtain business. The trucking business was not particularly successful in the first year, but grew slowly from the second year. Initially he did all of the driving, while David would take phone calls and do all of the bookwork, banking, and tax returns.
In 1997 or 1998, the trucking business expanded into the potato cartage business. A new prime mover was purchased, with the finance for the purchase having been organised by David. Further trucks were purchased from the proceeds of the trucking business. Works were undertaken at the property to accommodate the trucking business, including the conversion of a shed into an office, and making the yard area bigger to create larger turning circles for the trucks. These modifications were funded by the company from the proceeds of the trucking business.
Returning to the events of late 1994 and early 1995, Robert gave evidence that he had a discussion with David and Irene about “whose business it would be”. He stated:
the nature of the discussion was because I had already put in such a large amount of work previously and that with my payout of using the [company] it was discussed that, back then, obviously, because of the losses that they had accrued over the years, the property at that stage was up for sale. It was discussed that if I could make the cartage business work and take over the repayments of the property and look after the expenses for Mum and Dad, that obviously the business and the property would be mine.[10]
[10]T40-41.
Robert gave evidence that these discussions took place over several days, in the kitchen at the property. In relation to the alleged discussions about David’s and Irene’s wills, Robert stated that:
it was said that the wills would be written up as per that I would receive the property and the business and that my brother would receive a sum of money, namely about $40,000.[11]
[11]T42, 25-28.
These discussions were also said to have taken place at the property, with both David and Irene, over the course of several days.
Robert also gave evidence that he was heavily involved in the ostrich farming business. While David did the bookwork and fed the birds, Robert did most of the physical work. He gave evidence that the ostrich farm closed down in 1996 or 1997, after the flock was wiped out by an imported disease.
Robert gave evidence that he had not seen his mother’s or father’s wills in 1995 or 1996. He stated that there were further discussions between himself, David and Irene regarding the company in 2006, and that David told him that he wanted to “put on” Robert as the director because the company was his and he saw the time to have that put in his name.[12]
[12]T45, 5-7.
Robert gave evidence that there were further discussions between him and his parents in 2008, after the fire, and before David and Irene moved back into the property in or around Easter 2009 regarding having Irene transfer her directorship in the property to Kerry, and “getting the money that was talked about for my brother sorted” and to “sort out the property sign over”.[13] His mother’s response was that they should see Mr Waters, David and Irene’s solicitor, to “have it drawn up”, however, a couple of appointments were made, which were cancelled by his mother. He gave evidence that there were discussions about the amount of money which was to go to Paul, which had changed from the amount of $40,000 suggested by David and Irene, to an amount of $125,000, at Robert’s suggestion. These discussions took place after he discovered that “the wills weren’t written up as what was told to me,” but at that time, his relationship with his mother was still “pretty good”.
[13]T71, 6-9.
Finally, Robert gave evidence regarding the payments made by the company in relation to the mortgage repayments, the property related expenses, holidays for David and Irene, motor vehicles for David and Irene, and to meet David and Irene’s unpaid tax liabilities. He gave evidence that he did not really know what drawings he took from the company, as Kerry was the best person to ask about such matters. He gave evidence that the company ceased operating the trucking business from the property in December 2011, and that since then, it has been operating from leased premises through a company controlled by him, which costs $3,300 per month.
Robert’s evidence relevant to this issue upon cross‑examination is summarised below:
(a)before Robert became involved with the company, David was the financial power behind the company;
(b)he was getting a small amount of money from the company, and there was never any dispute with his parents about how much money he was taking from the company;
(c)he disputed the assertion that he was aware that his mother wanted to divide the estate between Robert and Paul on a 75%/25% basis;
(d)he stated there was no possibility of his parents’ wills being changed, as David had dementia from about 2008;
(e)he confirmed that his position was that the 1994 agreement provided that the property and the business were to be left to him and his parents could live there until they died. In response to a question “and they could have sold that house in between?” he said, “No”;[14]
(f)he agreed that the property had to be sold because the company ceased making mortgage repayments, which could be perceived to be a breach of the 1994 agreement,[15] and that he wanted a “portion” of the sale proceeds to go to him; and
(g)there was never any agreement about what portion should go to him, it was never discussed, because he never thought “it would come to this.”
[14]T103, 30.
[15]T110, 19-31; T111, 1-29.
Robert also relied upon the evidence of Brett Glover, Mark Potter, and Kerry to support his contentions with respect to the 1994 agreement and what Robert had done to comply with it. The evidence of Brett Glover and Mark Potter was brief. Brett Glover deposed that he had known David, Robert and Irene since 2001, and that he recalled that some time in 2006 or 2007 he attended at the property, and Irene told him in the kitchen that “this property will be Robert’s one day.” He also deposed that on many occasions he assisted Robert with work at the property, including delivering gravel, building the truck turning circle and repairing the driveway and yard area, he had frequently found Robert at the property making, repairing fences, spraying, grading, and carrying out general maintenance. He had never observed either David, Irene or Paul assisting in any way.
Mr Glover also deposed that, at a meeting at his home in about 2006 to discuss the proposed construction of a mosque in the neighbourhood, David had said, in a discussion after the meeting, that he was worried for Robert about future land values as the property would be his one day. In his oral evidence, Mr Glover confirmed that these were the exact words David used.[16] He also agreed that he vividly recalled the conversation he had with Irene, which he believed more likely took place in 2007 rather than 2006.
[16]This part of his evidence was relied upon by counsel for Robert for the purposes of credit, not for the truth of its contents, although whose credit it was said to affect is not entirely clear.
Mark Potter gave evidence that he first met David Grant in 1995, and since then has been the mechanic for the Grant family. He deposed that Robert “took over” from David in about 1999. He deposed that David would normally pay him by cheque at the property, and that on one occasion in 2002 David said to him “You will need to get used to Robert as he will be taking over this place. You will have to deal with Robert in future as he will be running the property and the business.”
He deposed that Robert not only looked after and worked full time in the trucking business but also worked around the property carrying out maintenance, driving the tractors, mowing the grass, repairing the driveway and yard area and building fences. He never saw either David, Irene or Paul carrying out such work.
In her affidavit sworn on 27 February 2012, Kerry gave detailed evidence regarding the following matters:
(a)her educational qualifications and professional experience;
(b)the commencement of her relationship with Robert in November 2006, and her first meeting with the other members of the Grant family in December 2006;
(c)at this first meeting, Robert told Irene that Kerry would be helping Robert with the administrative duties associated with the company, and she commenced helping out for two or three hours, two or three times per week;
(d)the refinancing of the property in or about 2007 to consolidate all outstanding debts (including the debt on the Rolls Royce and David’s credit card debt) and to purchase new equipment for the trucking business (“2007 refinancing”);
(e)that on several occasions when Irene was approached to discuss refinancing, the purchase of the business, and other matters such as opening new bank accounts, Irene would say words to the effect that she didn’t want to know anything about the company, she was a director in name only, and that Robert could do anything he wanted with the company and the property as they were his anyway;
(f)after the fire, she discovered that the insurance policy in respect of the property didn’t include insurance for the contents of the house on the property;
(g)her dealings with the insurance company to arrange for the rebuilding of the property, and her organising temporary accommodation for David and Irene to live in while the rebuild took place;
(h)how, when in about May 2008, she and Robert visited David and Irene to show them the plans for the new house, Irene said the plans “were very nice, but that it didn’t really matter as it was Robert’s house and property anyway” and that “Robert could build and furnish the house with anything he liked”;
(i)between April 2008 and March 2009 she visited, with Robert, various furniture and antique dealers to purchase furniture for the new home, once built, and that all furniture was paid for by either Robert or the company;
(j)the insurance payout following the fire did not cover the cost of rebuilding, and that the shortfall was funded by the company;
(k)in late 2008 or early 2009 Robert requested copies of David and Irene’s wills from their solicitors, and she and Robert discovered that they did not include a clause leaving the property and the company to Robert;
(l)the wills were inconsistent with what was stated by both David and Irene to Robert and Kerry at various lunches they attended at the property between January 2007 and April 2008. She deposed that:
During these discussions, both Irene and David reiterated to Robert in my presence that the property and [the company] were his “and that some money had to be given to Paul when they passed away”.[17]
[17]at paragraph 65.
(m)in about May 2008 she and Robert attended at the offices of the company’s accountant to discuss setting aside some funds from the income of the company for Paul;
(n)in respect of David, she noticed that while David and Irene were living at the temporary premises while the house on the property was being rebuilt, David’s memory deteriorated further, and he was less active than he had been when he was living at the property;
(o)since January 2007, she organised payments from the company’s account for the personal expenses of Irene and David, including utilities, vehicle expenses, health care costs, resort membership, and other expenses;
(p)on Mother’s Day 2009, after Robert spoke to her about his concerns about whether Irene was going to honour the 1994 agreement, she went to the property to discuss matters with Irene. She deposed as follows:
Irene said that she and David “weren’t ready yet” and that the agreement was that Robert would have it all when they died. She also said that Paul needed more money now because of the problems he and Vanessa were involved in with Harvey Norman.
I explained that unless a legal agreement was put in place, when they died it wouldn’t pass to Robert meaning the property and [the company]. I told Irene even if she changed her will to say that, David’s couldn’t be changed and if he outlived her his current will would be the one that stood. I further told Irene that the agreement could cover everything, including how much and when Paul was to get the money that she and David wanted for him.
Irene said she was concerned about me being a director and that after talking to the accountant we weren’t going to do that anymore. I said the plan was for Robert to start a new company with only him as a director and that we would amalgamate [the company] into this new company. Irene then said she would not give the directorship to Robert because she needed to get money for Paul and it was her company meaning Seventh Advocate.[18]
(q)after this discussion (“Mother’s Day conversation”), she became very disillusioned with Irene, and rarely attended the property after that date.
[18]at paragraph 78.
At trial, Kerry gave evidence that she is a consultant, specialising in assisting small businesses to become more energy and resource efficient and in overseeing their systems and processes. She gave evidence as to how she prepared the table at CB 1226 which summarised the Centrelink payments received by David and Irene between April 1997 and June 2010, being $252,126.07. She gave evidence of how, after the fire and Irene’s mother’s death in the fire, she organised for Irene to switch from receiving a carer’s pension in respect of her mother to being a carer for David.
Kerry confirmed that, after the fire, she was responsible for all dealings with the insurance company regarding the rebuilding of the property, which cost some $38,472 in excess of the amount actually paid to David and Irene by the insurance company, and how David and Irene’s temporary rental expenses were reimbursed by the insurance company. She confirmed the thrust and location of where various statements were made by Irene, referred to in her affidavit, although she could not recall the exact words. She confirmed that she had operated the accounts of the company since around December 2006.
Under cross‑examination by counsel for David and Irene, Kerry rejected the assertion that Irene had not told her that the property and the company were Robert’s. She has a different recollection from Irene regarding the nature of the discussion and the language used during the Mother’s Day conversation. When asked whether Irene was angry, she agreed, and when asked why Irene was angry, she stated as follows:
She was angry about the fact that I had asked her what was the issue with doing the legal documentation we needed to do to put into effect the promise that she had made.And she was denying there was any promise, wasn’t she?—No, she wasn’t denying any promise.
Why was she angry then?—Because she didn’t like that we were asking her to do that, that she wanted money for Paul and she now no longer wanted to hand over her directorship to Robert.
It was obvious that there was, on any version of the matter, a dispute as far as she was concerned as to what was to happen?—I’m sorry, I don’t understand that.
It was obvious at that discussion—when was that discussion when you had the glass of wine?—That discussion was Mother’s Day 2009.
And it was obvious that she wasn’t in agreement with what you and Robert were saying should happen in relation to the will and the company?—Can I please clarify a point, Your Honour. I never, ever spoke to Irene about making any alterations to any will at any time.
What were you talking about when you were having, if we can call it, the glass of wine conversation?—We were discussing drawing up legal documents to transfer the directorship to Robert and to put into place legal documents so that when her and David died the property would go to Robert as they wished. If I may clarify, the reason we were discussing it that way is after the fire when we obtained copies of the wills and I read them, I said to Robert that the problem we had with the fact that they were wills was that David’s could no longer be changed and therefore any alteration to a will would not serve any purpose.
I put it to you that she was refusing to change the will and refusing to sign any directorship documents?—She was refusing to sign directorship and I never asked her about the will.[19]
[19]T151, 12-31, T152, 1-17.
Finally, she gave evidence that the trucking business was now conducted through RJG Transport and Farming, which leased the trucks from the company.
David and Irene called two witnesses on their behalf, Irene herself, and her son and Robert’s brother, Paul Grant. In her witness statement dated 20 March 2012, Irene stated as follows:
(a)from 1981 she and David operated several businesses at the property, including raising horses, raising cattle, and ostrich farming;
(b)between 1985 and 1996 they ran the music shop business, in which David, Robert and Paul were involved;
(c)Paul Grant ran the Dandenong music shop from 1994 to 1996;
(d)in 1996 the family concentrated on the ostrich farming business;
(e)the trucking business commenced in 1997 and all family members were involved;
(f)in 1998 and 1999, Robert, his then partner, and her children lived at the property rent free;
(g)David signed a will in July 1996 leaving his estate to Irene, then to his children equally. She signed a similar will in April 1999;
(h)in September 2006 David was admitted to hospital and diagnosed with dementia;
(i)in December 2006 all paperwork and equipment in relation to the business of the company was moved into an office in a shed which housed the trucks;
(j)both she and Paul worked in the business on the administration side;
(k)She stated that:
In or around September 2006 when David became sick it was discussed between me and Robert and in the presence of David that he would take over the running of the business and that he would take a reasonable remuneration. However, there was no agreement reached regarding his remuneration. Robert was well remunerated from the business”;
(l)in around December 2006 Robert began “hassling her” regarding the family will. She stated as follows:
Robert questioned me in regards to the Will. He wanted to have more share than Paul because he has been helping with the business more. He felt that the 50/50 arrangement was unfair. I agreed to think about it, he proposed that it should be changed to 75% and 25% in favour of Robert. My opinion of changing the will changed after Robert became aggressive towards me. We had heated discussions as Robert wanted to give Paul $25,000 upon our deaths, and for myself to sign a new will stating Robert was entitled to the business and the property immediately.
(m)around April 2009 Robert (and Kerry and Robert) started “hassling” Irene about the will again. She stated that on 10 May 2009, at approximately 10:30pm:
Kerry Schroeder visited me and said “let’s have a wine, we need to a have a woman to woman talk.” To be friendly, I poured a glass of wine each. Kerry said I was like the matriarch of the family. She pressured me into changing the will to suit Robert 100%. I refused this. Kerry also told me that I needed to sign the directorship over as it was all too complicated for Centrelink purposes;
(n)at approximately 1.00am she asked Kerry to leave as she was feeling uncomfortable and threatened. She told Kerry to “fuck off”. She was in a traumatic state and called Paul to tell him what happened; and
(o)on 14 August 2009, Robert approached her to say that he wanted David and Irene out of the house by September because that was when the lease on his Berwick investment property ran out, and they could move in there. There had been no previous discussion about David and Irene living anywhere else but at the property.
In her witness statement, Irene also responded to certain matters referred to in the affidavits relied upon by Robert. In response to the affidavits of Mark Potter and Brett Glover sworn on 23 February 2012, Irene stated as follows:
I deny the statements alleged therein in paragraph 4 of Glover’s affidavit that it would all belong to Robert one day. I have always made it clear to Robert that if he wanted the property after the death of myself and David that if the property was still owned that he would have to purchase Paul’s share at market value.
I worked in the business taking phone calls doing wages taking all orders and doing general administration work. Paul assisted with the bookwork and assisted with the BAS statements. Paul and Vanessa maintained the gardens on the property, mowing and whipper snippering, washed the trucks and ran errands for truck parts and did banking.
In response to Robert’s primary affidavit, Irene stated as follows:
(a)David, not Robert, ran the trucking business up until 2006, including hiring the staff and overseeing Robert;
(b)both Robert and Paul worked in the music shop business as they were living in the family home rent free. Robert was in receipt of Centrelink benefits during the time that he worked in the music shop business and his expenses were paid by David and herself. Robert and Paul lived at the farm on the same basis. Robert never provided David and Irene with cash. All family members assisted with the maintenance of the property;
(c)she denied that David had told Robert that he could use the company as a vehicle for the trucking business to protect his assets from Robert’s then partner and to take advantage of the company’s tax losses, and denied that David told Robert that Robert would have to take over the business debts and the debt on the property and that if he could make it work and keep the debts paid then the business and the property would all be his;
(d)she denied that she had told Robert that “well you have done all the work but Paul has to get something”, or that in December 1994 she and David told Robert that they would make mutual wills leaving the whole of the property and the company to Robert in recognition of all of the work he had previously put into the company and into looking after them. It was always her intention that her estate would be distributed in accordance with the terms of her will, noting that both she and David signed their wills after December 1994;
(e)David was the person who made the decisions to purchase all of the trucks for the trucking business, not Robert;
(f)the trucking business was paying for Robert’s personal expenses as well as David and Irene’s personal expenses;
(g)she denied that, after the fire, she had said that the house was Robert’s and he could rebuild it in any way he liked, or that she had said that Robert should furnish the house as he saw fit because he and Kerry would be the ones who would be there;
(h)she never agreed to any suggestion by Robert that she change her will in Robert’s favour. There was never any reference to any amounts which would be set aside for Paul. She refused to sign over the directorship to Kerry, and did not ask Robert to go to the solicitors to “have something drawn up”;
(i)she denied that Paul took no interest in the welfare of David and herself, and detailed various things that Paul and Vanessa did for them and for the company both before and after the fire; and
(j)she denied calling Robert in September 2009 seeking $40,000 for Paul, but said she did ask for a loan from the company funds for Paul in October 2008.
In response to Kerry’s affidavit sworn on 27 February 2012, Irene stated as follows:
(a)she denied that she told Kerry at their first meeting in December 2006 that the company and the property were Robert’s, although she did tell her that Robert would be taking over the family business after the death of David and Irene;
(b)she thought that the purpose of the 2007 refinancing was to consolidate existing loans and to obtain a better interest rate, not to obtain further financing for the trucking business;
(c)she disagreed that she told Kerry that she would sign anything that Robert required: she always wanted to know what she was signing;
(d)she denied the statements attributed to her about the rebuilding of the house after the fire;
(e)in response to Kerry’s statement that there were a number of conversations between Kerry and Robert and Irene and David over 2007 and 2008, Irene deposed that “there was never a sum of money discussed”;
(f)she denied that in late 2008 or 2009 Robert had told her that due to David’s illness with dementia his will could not be altered;
(g)she had no wish and made no promise to leave the property and the company to Robert alone;
(h)she denied making a statement in April 2009 that Robert “had already done so much for us and that the business and the property were all his”;
(i)since January 2007 Kerry organised the payments for David and Irene’s and Robert and Kerry’s expenses out of the accounts for the company;
(j)she disagreed with Kerry’s version of the Mother’s Day conversation, and, in particular, stated that there was no discussion about Robert starting his own business or appointing himself as a director; and
(k)the reason why Kerry did not attend the property after May 2009 was because Irene asked her not to because she “was sick of being hassled by her in regards to the Will”.
In the course of her oral evidence at trial, Irene denied that there had been a discussion between Robert, herself and David about Robert taking over the company, or the property. She said:
He would have only been about 22 at this stage.[20]
[20]T169, 25.
In response to a question as to whether Robert started to look after the business of the company, she stated:
Yes, he did all the manual work and the driving and all that, yes.[21]
[21]T169, 27-28.
She gave evidence that Robert had worked in the family businesses operated by the company since he was 15, but that there were no real managers, it being a family business, everybody did what had to be done. She stated that Robert started actively managing the business after David was diagnosed with dementia in 2006, but that Robert had been doing most of the work since 2000. She agreed that Robert had done far more work in the family business than had Paul.
Irene gave evidence that the only time that there were discussions between her, Robert and David about the manner in which David and Irene’s estate was to be divided up. She stated:
The only time was after the fire. It was told to me by Robert that he thought it was unfair that the will was made out 50/50 because he did most of the work. That was really the only time I had a discussion with Robert over it.[22]
after which she said:
All right, Robert, I’ll change the will for you to have 75% and Paul to have 25%.[23]
[22]T170, 19-23.
[23]T170, 27-29.
She gave evidence that Robert’s response was “that was okay”. She said, however, Robert started harassing her about changing the will.
Irene was asked by her counsel that she had heard Robert say at various times Paul was going to get $40,000 and another time $125,000, and what was her response to that? She said:
No. What I heard was that Robert was going to open a trust account for Paul for $25,000 and that’s when I started getting a little bit, you know, worried. I said to Robert, “No, no $25,000. It’s got to be 25% of whatever.” But Robert wanted to do it all before we are dead, before his father and I are dead. So that’s why I didn’t go ahead with changing the will to 75% to Robert.[24]
[24]T171, 10-17.
Ultimately, she said, not long after they returned to live in the property after the fire, she and Robert discussed the will and became abusive.
Finally, she was asked whether, when Robert was managing the company, there were any arguments about him taking money out of the company. Her response was:
No. You know, he could do whatever he wanted. That’s why we gave him power of attorney, to run the business and do whatever, as long as the mortgage was paid, you know, and that’s all I was worried about that we keep the property.[25]
[25]T173. 1-5.
Under cross‑examination by counsel for Robert, Irene gave evidence as follows:
(a)most of the discussions about the business took place between David and Robert in the kitchen in the house on the property. She would often be there, but not always listening, or listening carefully, as she might be occupied with preparing meals and so on;
(b)she never heard a discussion about the use of the company for Robert to start a water cartage business, although it may have been discussed between David and Robert; and
(c)it may be that there may have been discussions between David and Robert that she never heard.
Finally, David and Irene relied upon a witness statement made by Paul Grant on 20 March 2012. Paul stated, in summary, as follows:
(a)he assisted his parents from time to time in their businesses such as the music shop business, the ostrich farm business, and the trucking business;
(b)there was no discussion between himself, his parents and his brother regarding his parents transferring the property and the company to Robert;
(c)in about December 2006 Irene voiced her concerns to him regarding Robert “hassling her” regarding the family will;
(d)in February 2007 he had a conversation with Robert where Robert told him he would get nothing from the farm;
(e)in February 2007 he had a discussion with Robert at the property, where Robert told him that he would make sure that Paul would get nothing from the farm;
(f)on the evening of 10 May 2009 he called Robert. Robert made some derogatory remarks about Irene, and then stated, amongst other things:
The business is going down and not making enough to keep them. The farm is costing $20,000 a month to keep them on the farm, they will need to move out.
and
the house and the business has nothing to do with Mum and Dad and it won’t be getting sold.
(g)he then contacted Irene and told her of this conversation, and Irene said that she felt uncomfortable and threatened. Irene then contacted him at 1.30am the next morning, in a traumatic state, after she had told Kerry to leave; and
(h)he stated that:
the will was always openly discussed between myself, Robert and our parents that if Robert wanted to buy the farm he would have to pay me 50% of the value of the property at that time.
As discussed in paragraph 29 and 30 above, after the trial I requested further evidence and submissions from the parties as to whether any portion of the funds raised by the 2007 refinancing was used to meet Robert’s personal liabilities, and in particular, to pay off or reduce the mortgage over Robert’s home in Berwick. This issue was not particularly relevant to the question of the existence of the 1994 agreement, but to the question of whether, in the alternative, a constructive trust should be imposed upon David and Irene’s assets to reflect Robert’s contributions to the property and the company.
In his affidavit sworn on 14 February 2013, Robert deposed, in summary:
(a)he confirmed the evidence given in the primary affidavit that he had a discussion with Irene in December 2006 regarding the need to refinance the mortgage over the property, as there were too many loans, and to finance the purchase of another trailer needed for the trucking business;
(b)after paying out the loan secured over the property of $304,683.69, there were surplus funds held by the company of $225,030.81;
(c)he deposed:
“these surplus funds of $225,030.81 were not used to retire my personal liabilities, in particular they were not used to pay out the existing mortgage on the property at 14 Magdalena Street, Berwick (the Berwick property). I did not use these funds to pay this existing loan or to pay out any personal liability of mine.”
(d)his initial mortgage secured over the Berwick property of $60,000 in August 2001 increased to $80,000 in March 2002, with further increases in March 2004, August 2004, July 2007, and April 2010, with the loan balance outstanding in January 2013 being $264,006.73;
(e)the reference in Kenny’s letter to the mortgage broker to funds from the 2007 refinancing being used to pay out the mortgage on the Berwick property was merely an initial enquiry; but the proposal was not pursued, because it was not feasible to do so given the need to pay out other debts of David, Irene and the company, and Robert’s desire for the company to purchase some more equipment for use in the trucking business and leave funds in the company for operating expenses;
(f)he exhibited documents which showed that funds from the 2007 refinancing, totalling $61,506.81 were used to pay out the company’s debt and to finance the purchase of vehicles for the trucking business. The remaining funds were used to pay the operating costs of the trucking business, and repairs and maintenance at the property.
In her affidavit sworn 14 February 2013, Kerry deposed that the conversation referred to in the document at CB 1179 took place at the initial stages of her discussions with Robert and the mortgage broker regarding loan consolidation options, and that the option of refinancing the loan over the Berwick property was considered, but not pursued, for the reasons advanced by Robert.
David and Irene relied upon further affidavits sworn by Irene and Robert Hall on 22 February 2013. Mr Hall was the expert accountant retained by David and Irene for the purpose of preparing a report on the value of the company.[26] In his affidavit, Mr Hall deposes to having received the company’s bank statements and cheque registers for the period February 2007 to June 2009 which disclose a number of payments recorded as being payable to accounts in the name of Robert at the Adelaide Bank, some of which the cheque register designates as “Loan repayments – for 560 by RG”, and some bank statement references for “BPAY ADL LOC/REVOLVING NETBANK”. Mr Hall deposes that Robert’s affidavit of 14 February 2013 makes reference to a lender “Home Loans”, which he believes is a mortgage manager for Adelaide Bank, now Bendigo and Adelaide Bank. These payments total $142,177.03, including a payment of $13,283.75 to Kerry.
[26]The report contained a number of allegations about the lack of cooperation by Robert, Kerry, and Robert’s solicitors regarding the provision of company records, which are repeated in Mr Hall’s affidavit.
Irene deposed as follows:
That I have read the Affidavits of Robert Grant and Kerry Schroeder both sworn 14 February 2013 and the Affidavit of Robert William Hall sworn 22 February 2013 and state that:
(a)Robert Grant was not authorised to make the payments referred to in paragraph 5(d) of the Affidavit of Robert William Hall; and
(b)As far as I can recall there were no Directors’ meeting held authorising such payments.
In response, Robert deposed, among other things, that the payments referred to in Mr Hall’s affidavit which have the reference “ADL/LOC REVOLVING NETBANK” is a line of credit secured against the Berwick property. The references to “Loan repayments – for 560 by RG” are references to repayments made by him for the repayments on David’s Mercedes 560 and reimbursed to him by the company. The references to other payments show that they were clearly operating expenses of the company reimbursed to him.
Kerry deposed that in respect of the payment to her of $13,283.75 on 23 February 2007, that she on occasion covered the expenses of the trucking business and was reimbursed later, and has been paid by the company for the bookkeeping and other administrative work she did for the company. The payment of $13,283.75 was in respect of expenses for the trucking business.
Both Robert and Kerry deposed that the mortgage on the Berwick property was not fully paid out from the funds of the company.
The 2006 Agreement
In support of his claim regarding the 2006 agreement, Robert relied upon his own evidence, the evidence of Kerry Schroeder, and the evidence of the company’s accountant, Ms Hayley Coates.
In his primary affidavit, Robert deposed, in summary, as follows:
(a)that since 28 September 2006 he has been a director of the company, and the holder of one of two ordinary $1.00 shares “when Mum transferred Dad’s share to me”;
(b)in or about September 2006 he wanted to expand the trucking business and needed to control the finances of the company as David was now on a disability pension. David told him that Robert was to be a director in his place and that he would resign as a director. Irene remained as a director and signed the necessary documents. He exhibited copies of the ASIC “change to company details” form,[27] which shows that on or about 10 October 2006, Irene signed a form showing the change of directorship from David to Robert. Also, the documents show that on or about 13 October 2006, Robert signed, in his capacity as director of the company, a document which showed that, on 28 September 2006, David transferred his share in the company to Robert;
(c)not long after the change in the company directorship and share register, David and Irene told him that because they were getting to the age they were, and because he was running everything and paying for them financially, they wanted him to be their financial power of attorney to handle all of their affairs; and
(d)on or about 27 November 2006, he, David and Irene visited David and Irene’s solicitor, Mr Noel Waters, and he drew up and witnessed Enduring Powers of Attorney for both David and Irene.
[27]Exhibit “RG-5”, CB 1291 - 1298.
In his oral evidence regarding this issue, Robert gave evidence that, in 2006, David wanted to put him on as a director as the business was his (meaning Robert’s). He stated that:
Mum, Dad and myself were in the kitchen at the time. That’s where most discussions were held. The kitchen was near the office, so any discussions were held in the kitchen of the house. Mum and Dad and myself talked about the directorship of the business. Dad said that he wanted me to be put in his place as director. Mum agreed to those conversations that we had.[28]
[50]at paragraph 44(cc).
Of course, my finding that conversations of this nature took place in 2007 and 2008 is consistent with there being no agreement between Robert on the one hand and David and Irene on the other hand in 1994 or 1995. After all, if an agreement had been reached at that time that Robert would inherit everything save for a sum of $40,000 for Paul, why would there need to be further discussions more than ten years later about an appropriate sum for Paul?
No agreement in the terms outlined above appears to have been concluded, and, indeed, no such agreement is pleaded. However, if I accept Robert and Kerry’s evidence on this point, it is difficult to accept Irene’s evidence that the proposal was that David and Irene’s estate be left to Robert and Paul with 75% being left to Paul. However, it may be that both options were under consideration (noting that 25% of the net proceeds of the sale of the property, as it turned out, would be $125,000). In the absence of any documentary evidence, or evidence from David, it is difficult to tell. In any event, whatever the true position was, it seems that Irene’s position hardened towards Robert after she perceived him and Kerry to be “hassling” her, and the rest, as they say, is history, and an unfortunate one at that.
Counsel for Robert submitted that, by reason of the 1994 agreement, or alternatively the representations made by David and Irene to Robert in 1994 and 1995, upon which Robert relied, the proper form of relief would be to impose a constructive trust upon the assets of David and Irene, to the extent necessary to do equity between the parties.
Before turning to whether a constructive trust should be imposed upon the assets of David and Irene, and in particular, the proceeds of sale of the property, it is necessary to briefly summarise the legal position in relation to constructive trusts.
A constructive trust may be imposed upon the legal owner or owners of property (in this case, David and Irene) to prevent them from asserting or exercising their legal rights in respect of that property in circumstances where it would be unconscionable to do so.
The imposition of a constructive trust reflects the general equitable principle which restores, to a party, contributions which he or she has made to a joint venture which fails, when such contributions were made in circumstances in which it was not intended that the other party should enjoy them, and where it would be unconscionable for the benefiting party to retain the benefit of those contributions.
A constructive trust may be imposed even if it is contrary to the express or implied intentions of the parties, and the contributions made go beyond financial contributions to the purchase price of property, to the acquisition or improvement of the property in issue. But the contributions must be linked, albeit possibly indirectly, to the purchase, maintenance and improvement of the property in question.
However, a constructive trust will not be imposed on the ground of mere fairness. In Muschinski v Dodds,[51] Brennan J stated:
There is no jurisdiction in an Australian court of equity to declare an owner of property for another merely on the ground that, having regard to all of the circumstances, it would be fair to so declare … The flexible remedy of the constructive trust is not so formless as to place propriety rights in the discretionary disposition of a court acting according to vague notions of what is fair.
[51](1985) 160 CLR 583 at 608.
An alternative means by which a court may impose a constructive trust is on the basis of an actual or inferred intention of the parties. The relevant common intention may be ascertained by evidence of the express agreement or inferred from the conduct of the parties, including statements and admissions. A common intention constructive trust may arise from an agreement or common intention arising after the acquisition of the relevant property.
However, even with the proof of the requisite intention, no constructive trust will be imposed unless a failure to do so would cause detriment or material disadvantage to the party claiming that relief. Mere disappointed expectations are not enough.
Just as there is insufficient evidence to establish the existence of the 1994 agreement, there is also insufficient evidence to justify the imposition of a constructive trust, based either on representations made by David and Irene in 1994 or 1995, on the basis of the parties’ intentions, or on the basis of Robert’s contributions.
For similar reasons to those set out above in relation to the 1994 agreement, I cannot find that there are grounds for imposing a constructive trust based upon the “common intentions” of Robert, David, and Irene, or representations made to Robert by David and Irene. The evidence discloses some possible grounds for concluding that there was a common intention, or at least steps towards reaching a common intention, in the 2007-2008 period as a result of the discussions between David, Irene, Robert and Kerry. However, in the absence of evidence from David, the lack of certainty about what provision was to be made for Paul, and, given that the question of David’s capacity becomes murkier over time, the evidence is insufficient to ground a finding that common intention constructive trust should be imposed upon the proceeds of sale of the property.
There is also a question of whether a constructive trust should be imposed upon the assets of David and Irene on the grounds that Robert, through his work for the company, and his work on the property generally, made such a contribution to the value of those assets that it would be unconscionable for David and Irene to deny Robert’s entitlement to those assets, or a portion of those assets sufficient to remedy any injustice arising by reason of the assertion of their legal right to the proceeds of the sale of the property.
In my view, the question of the respective contributions of the parties is somewhat more complicated than that asserted by Robert. When analysing the respective parties’ contributions, there are three relevant entities to consider: David and Irene, (as a single entity), Robert, and the company. The respective contributions can be summarised as follows:
(a)from 1995, Robert contributed to the company by reason of his financial contributions from his compensation payments, his labour and later, through his management expertise, and, after 2006, as a surety for loans provided to the company;
(b)David and Irene contributed to the company through, at least until 2006, David’s administrative tasks and management expertise, by allowing the property to be used as security for borrowings for the benefit of the company, by allowing the trucking business of the company to operate from the company rent free, and finally, by extinguishing the liabilities of the company, to the extent they were secured by the property, upon the sale of the property (and, it should be noted, thus releasing Robert from any liability under the guarantees provided by him in respect of those liabilities);
(c)the company contributed to the maintenance and upkeep of the property by meeting the mortgage repayments and other expenses of the property, financing improvements to the property (some of which were, however, directly for the benefit of the trucking business, and as such, may not have contributed to its value), and by funding the shortfall between the insurance payout and the cost of rebuilding after the fire;
(d)the company provided benefits to Robert. While Robert has underplayed the extent to which he has derived income from the company, there is direct evidence, through the affidavit of Mr Hall sworn 22 February 2013, and Robert’s failure to deny that payments were made to reduce the loans secured over the Berwick property, that company funds were used for the direct benefit of Robert. While the details regarding “suspicious” payments contained in paragraph 5(d) of Mr Hall’s affidavit are a little difficult to reconcile, it seems to be tolerably clear that, after the 2007 refinancing, at least $92,520.16 of company funds were used to service or reduce the loans made to Robert and secured by the Berwick property. Further, to the extent that the losses carried forward by the company reduced the tax payable by the trucking business, this may have also indirectly benefitted Robert given that Robert has conceded that he derived an income from the company. Further, while there is insufficient evidence upon the matter for me to draw firm conclusions regarding the extent to which the company currently operating the trucking business has appropriated the business of the company (from which Robert presumably draws an income) without paying the company a proper commercial value for the good will of the business, it is quite possible that may have occurred; and
(e)David and Irene have provided Robert with benefits, at least in the early part of the period relevant to this dispute, by providing Robert with rent free accommodation, even as an adult.
Taking all of the above into account, it is difficult, if not impossible, to untangle the web of contributions and to arrive at a conclusion anything other than that Robert has been unable to show that equity requires that there be a constructive trust over the sale proceeds of the property.
I should add that, in my view, the flow of funds and resources between David and Irene, the company, and Robert, are entirely consistent with the relationships and understandings of the parties over time, if not their obligations and entitlements under taxation, social security, employment or corporations law. I consider that Irene’s statement in her affidavit of 22 February 2013 that any payments to Robert personally were not authorised to be somewhat disingenuous, inconsistent with her evidence at trial, and reflective of the bad blood that exists between Robert on the one hand, and Irene and Paul on the other. After all, at trial, she gave the following evidence in response to a question as to whether there were any arguments about Robert taking money out of the company.[52]
No. You know, he could do whatever he wanted. That’s why we gave him power of attorney, to run the business and do whatever, as long as the mortgage was paid, you know, and that’s all I worried about, that we keep the property.
[52]T173, 1-5.
In my view, this statement was an accurate summary of the parties’ position with respect to the use of company funds.
Counsel for Robert submitted that, in cases similar to the current proceeding, the fact that Robert derived benefits from the use of the property over which the constructive trust is sought has been found by the courts to be irrelevant to the determination of whether a constructive trust ought to be imposed. However, in my view, the current case is distinguishable from the situation of those relied upon by counsel for Robert. Not only have I found that no representations were made by David and Irene in the 1994-1995 period, but also, as noted above, the flow of contributions and benefits were primarily through the company, not directly from Robert to his parents, or vice versa. Counsel for Robert relied upon Donis v Donis[53] where the fact that the plaintiff (the ex‑wife of a son of the defendants) received rent free accommodation on a house on the relevant property during her marriage ought not deny or diminish her relief. However, in the current case, it was not Robert who received the benefit of rent free accommodation: it was the company, and, it was a real and substantial commercial benefit.
[53](2008) 19 VR 577.
However, I do believe that there is sufficient evidence to justify the imposition of a constructive trust over Irene’s share of the company in favour of Robert on the basis of the common intentions of the parties, and I will grant appropriate relief in that respect.
Robert’s evidence that David had requested him to work in the ostrich farming business, that the water cartage business was the initiative of Robert, and that David suggested that the company be used as the vehicle for the water cartage business was not seriously contradicted by Irene, and is consistent with the circumstances at the time. The evidence shows that both David and Irene expressed their intention that Robert would take over the family business (meaning the company) upon their deaths, if not before. The transactions and conversations which took place in the latter part of 2006 were consistent with the intentions of the parties being that Robert would not only take over the management of the company, but the control of the company was to be accelerated by reason of David’s ill health. In my view, the only reason why only David, rather than David and Irene, transferred their directorship and shares to Robert was owing to their entirely understandable but mistaken belief that the statutory requirement that there be two directors of a company remained in force.
Indeed, at trial Irene gave evidence that she agreed to sign over her share in the company to Robert, but then decided not to after the Mother’s Day conversation. That is, Irene did not consider that Robert was not entitled to her share in the company, but she changed her mind after becoming upset by what she perceived to be Robert and Kerry’s ill treatment of her.
My view that it was intended, at leats by the end of 2006, that the company was to be Robert’s, presumably on the assumption that the company would continue to pay the mortgage. This is consistent with the frequent references by Irene to the company and the business being Robert’s, that he could do what he wished, and that she wanted no part of it. Despite some references in the pleadings and in Irene’s witness statement to her doing some work for the company, I doubt she did any work for the company, except perhaps occasionally answer the phone. This is not a criticism, but just a statement of fact.
The authorities make it clear that not only do I have to find a common intention that beneficial ownership in the property concerned had passed or should pass to the claimant, but that the claimant must show that he or she would suffer a material detriment if such relief were not granted. In the current case, I consider that there is a real risk that Robert would suffer a material disadvantage should full ownership of the company not pass to him. The company is in effect deadlocked. It is clear from the submissions filed after the trial, in response to the evidence filed after the letter of 6 February 2013 that David and Irene, while not seeking to amend their pleadings in this proceeding, consider that Robert has misappropriated money from the company, and the tenor of those submissions is that further disputation is quite possible if not likely. Further, while the parties have proceeded on the basis that the company has a nil value, it does have assets, such as the trucks and the furniture, and it is accepted by David and Irene that Robert has done the bulk of the work in the trucking business since 2000, if not well before that, and as such, was the primary contributor to the acquisition of those assets.
The 2006 Agreement
Again, consistently with the evidence, the contemporaneous documents and the circumstances of the time, as established by uncontested evidence, demonstrates that it is more probable than not that the transfer of David’s directorship and shareholding in the company was valid, and took place in accordance with an agreement, if not between David, Irene and Robert, then in accordance with an agreement between David and Robert.
While, strictly speaking, the onus of proof is upon Robert to prove that the transfer took place, practically speaking, given that the ASIC records show that Robert is a director and shareholder of the company, it is for David and Irene to show that the prima facie presumption that the ASIC records are correct ought be displaced. Again, the best person to give evidence upon this matter is David, who is, regrettably, not available.
The uncontested, or only faintly contested, evidence regarding the circumstances as at September 2006 is as follows:
(a)Robert was the driving force in the trucking business, and had been for a number of years;
(b)while it is not entirely certain when David’s first hospitalisation took place, it was apparent by late 2006 this his capacities were diminishing, and it is not contested that he wanted to withdraw from active involvement in the trucking business;
(c)David and Robert were close, and talked frequently about the family business, including, no doubt, about the future of the family business; and
(d)David and Irene provided Robert with an enduring power of attorney over their financial affairs.
In my view, the transfer by David to Robert of his directorship and shareholding in the company is entirely consistent with the uncontested evidence, and this conclusion is bolstered by the contemporaneous documentary evidence and the evidence of Ms Coates. It appears that David may well have been aware of the difficulties facing him, and would have well been aware that Irene was not in a position to take over the running of the trucking business and the other financial affairs of the family. There would be all types of practical difficulties for the trucking business if Robert was not a director of the company should David’s health deteriorate further, as it indeed did. The assertion in the pleadings that Irene remained as a director of the company because of the statutory requirement that there be two directors, although no such requirement existed, does not detract from this finding: such a requirement did exist in the past, and it may well be that David, Irene and Robert mistakenly believed that this remained a requirement.
Irene’s denials that she did not know that Robert was a director of the company lack credibility. She signed the document giving effect to the change of directorship. She signed documents for the 2007 refinancing, and other loans obtained by the company in 2006, 2008 and 2009, which showed Robert signing in his capacity as a director. She may not have had a great deal of regard for these documents, but her evidence as to whether she read documents that she signed is inconsistent. In her witness statement, she deposed that she always read documents that she signed: in her oral evidence, she said she did not. The documents themselves are not confusing or unclear. In any event, by reason of the statement of principle in Toll (FGCT) v AlphapharmPty Ltd,[54] that a person is bound by their signature regardless of whether they have read the document, Irene should be taken to have consented to the transfer of David’s directorship to Robert.
[54](2004) 219 CLR 165.
I am also sceptical about Irene’s evidence that when she attended Noel Waters’ office in May 2009 (some days after the Mother’s Day conversation) with David, Paul, and Vanessa, that she was shocked to hear that Robert was a director of the company (she made no reference to learning about Robert being a shareholder at that meeting, which would presumably also have been apparent from Mr Waters’ ASIC searches). There is no evidence that, after that meeting, she or David or Paul took any steps to challenge Robert about his appointment as a director. If there were concerns at the time as to whether the appointment was valid, then surely the issue would have been raised at the time, particularly given that Irene and the other family members had consulted a solicitor. However, no point of this nature was taken until David and Irene’s defences were filed in December 2009.
Other evidence that supports the contention that Irene knew that Robert was a director of the company is Kerry’s evidence regarding the Mother’s Day conversation, which was not directly contradicted by Irene. Kerry deposed that Irene was concerned about Kerry becoming a director of the company, and her response that that was no longer the plan. As noted, I have generally accepted Kerry’s evidence, including what was said in conversations. Again, it defies logic that there were discussions about Kerry becoming a director of the company if Robert was not already a director of the company, and that fact was known to all relevant parties. Indeed, it would make sense that, in the absence of a falling out within the family, that the intergenerational transfer of the company would be completed by Irene transferring her interests in the company to Robert, or Kerry, and I would be surprised that such discussions had not taken place over the course of 2007 and 2008. Irene’s resistance to that occurring is also explicable, given her evidence that she did not like Kerry, and her increasing unhappiness at being “hassled” about the wills.
The question of whether there was also a valid transfer of David’s share in the company to Robert is a little more vexed, given the absence of a signed share transfer form, Robert’s inconclusive evidence on the point, and the original response or, more accurately, non response to David and Irene’s Notice to Admit. However, as I stated above, the transfer of David’s share to Robert is consistent with him handing control of the company to Robert. In the end, however, it was the evidence of Ms Coates which was compelling. Ms Coates presented as a capable, experienced professional. She freely admitted that she did not directly recall that she saw the share transfer form signed by both David and Robert. However, she was emphatic that she would not have lodged the second Form 484 without having personally sighted the share transfer form. I can understand why she would adopt such a strict policy regarding such transactions, and I have no real doubt that she did sight a share transfer form, given that she gave evidence that she always adhered to that policy. For completeness, while she may be perceived to be in Robert’s camp, being the accountant engaged by the company, there is absolutely no reason to suggest that her evidence would be, or might have been, coloured by her business association with Robert.
For completeness, David and Irene’s assertion that David lacked capacity to enter into the 2006 agreement, or the transactions that gave effect to the 2006 agreement, were only faintly pressed at trial, and I could not make a finding, based upon the evidence available, that David lacked capacity as at the end of 2006.
Furniture
In relation to the furniture and other chattels purchased by Robert after the fire, I accept that the items listed in the Schedule to the Further Amended Statement of Claim were purchased by Robert, either from his own funds, or from company funds, in accordance with the evidence of Robert and Kerry in relation to these matters, and in particular the table which is exhibit M. Irene freely admits they were not purchased by her or David: indeed, she has no real idea as to how they were paid for. I do not accept that the company records were in such disarray as was contended for on behalf of David and Irene, and I accept the evidence of Kerry, in regard to who paid for which items. Kerry, who is clearly efficient and capable in such matters, compiled the summary table which is exhibit M, and I accept that the company records support this summary.
Guitars
In relation to the ownership of the guitars, I accept the evidence of Irene that these guitars belonged to David, not Robert (whether they were “intended” for Paul is not particularly relevant). Robert’s evidence regarding the circumstances in which he was given the guitars is less than convincing. Also, the circumstances in which the guitars were removed from the property does not assist greatly in determining the ownership of them: Kerry deposes that she and Mr Glover removed “Robert’s guitars” from the shed at the property at the time they removed the books and records of the company, once the dispute between Robert on the one hand, and Irene and Paul on the other hand, had become quite inflamed. Kerry did not give evidence as to whether she actually knew, or how she knew, that the guitars belonged to Robert. Irene gave evidence that, before the fire, the guitars were stored in her and David’s bedroom. Presumably, the guitars were stored in the shed during the course of rebuilding, and for whatever reason, were never returned to the new house.
I accept Irene’s evidence that the guitars were stored in the house before the fire. Robert did not say anything to contradict this. Given that Robert had been living away from the property since 2001 at the latest, it would be odd that if they were his guitars, they were not in his possession from that time. What I suspect occurred was that when Kerry and Brett Glover removed the company records from the shed at the property, in a rush, and in the context of an escalating family dispute, removed the guitars, assuming, quite understandably, that they belonged to Robert, and then Robert, again in the context of an escalating family dispute, decided to keep them.
One piece of evidence which informs my conclusion that the guitars are more likely than not to belong to Robert is, what on its face appears to be unreliable hearsay evidence of the worst kind: that is, the evidence of Irene that David told her he wanted to come to court about the guitars. All parties agree that David is extremely unwell, and his mental capacity is severely affected by dementia. No doubt he has little recollection or understanding as to what are the issues being dealt with in this proceeding. However, one thing he does apparently remember is that there is a dispute about the guitars. In my view, it is inherently unlikely that he would recall such a thing if he did not assert a claim to ownership of the guitars.
Conclusion
Accordingly, I will find that Robert has been validly appointed as a director of the company, and is the holder of a $1.00 share of the company, and is entitled to orders that he is the beneficial owner of Irene’s share in the company.
I will find that Robert and the company are the owners of the furniture and other chattels listed in the Schedule to the Further Amended Statement of Claim in accordance with the evidence of Robert and Kerry, that David is the proper owner of the guitars, and that by retaining the guitars, Robert has converted them to his own use.
I will seek submissions from counsel on the form of orders necessary to give effect to these findings, and the question of costs.
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