Horn v GA & RG Horn Pty Ltd

[2022] NSWSC 1519

Supreme Court

New South Wales

Medium Neutral Citation:

Horn v GA & RG Horn Pty Ltd [2022] NSWSC 1519

Hearing dates:

12 – 16, 19 – 23 September 2022; 4 – 6 October 2022; submissions 18 and 26 October 2022

Decision date:

10 November 2022

Jurisdiction:

Equity

Before:

Meek J

Decision:

Estoppel claim made out. Parties to bring in short minutes.

Catchwords:

ESTOPPEL — Estoppel by encouragement — estoppel by acquiescence — Farming properties held through a company — Company incorporated and initial management shares held by plaintiff’s father and paternal grandfather – Plaintiff claims his father gave encouragement for plaintiff and his wife to move onto one of the properties and subsequently also farm the other property and made promises to leave the shares in the company (or the properties) to the plaintiff upon his father’s death — Father makes various Wills leaving shares to plaintiff but 5 days prior to his death makes a Will leaving his estate to his wife (plaintiff’s mother) — Plaintiff claims father estopped from doing so and shares held on trust for plaintiff — Mother claims plaintiff did not abide by terms of promises by failing to make payments to father and failing to continue farms as “working farms” — Estoppel case made out

ESTOPPEL — Consideration of alleged conditionality of promises — Whether promises of testamentary inheritance of shares conditional upon plaintiff(s) making payments for benefit of the deceased albeit payments made to corporate entity — Whether promises conditional upon plaintiff(s) continuing to work farms for the remainder of deceased’s life — Effect of deceased’s post promise intervention suggesting alternative use of property for members of plaintiffs’ family

ESTOPPEL — Estoppel by encouragement — estoppel by acquiescence — Requirements — deceased aware of intended reliance — Life-changing decisions with practically irreversible consequences of a profoundly personal nature beyond the measure of money — Application of principle in Donis v Donis (2017) 19 VR 577; [2007] VSCA 89 — Substantial detrimental reliance established

TRUSTS — Time from which a constructive trust arises — Time of the conduct which gives rise to the trust occurred is generally when a plaintiff acts in reliance on the promise or expectation such that it later becomes unconscionable for the promisor to resile

EQUITY — Equitable remedies — Defences to specific performance — Unclean hands — consideration of onus of proof — Consideration of operation of maxim used as a defence against a party seeking equitable relief based on estoppel

PAYMENT — Consideration of payment obligation being waived or not pressed

LOANS — Onus of proof — Absence of evidence bearing directly on gifting of monies — Whether loan can be inferred from book entries without movement of money — Requirement for underlying agreement — Consideration of Manzi v Smith (1975) 132 CLR 671; [1975] HCA 35 — Whether inference of agreement open — Whether within the scope of authority of accountant to characterise payment as a loan and prepare company financial statements and tax returns accordingly

GIFTS — Absence of evidence bearing directly on gifting of monies — Assessment of evidence — Gift established — In any event arguably a presumption of advancement arises

PRACTICE — Pleadings — Pleading of estoppel claims — Test of pleading is not greatest fidelity to facts but materiality of facts — Pleading events or contingencies need not be stated if they are not alleged to affect a plaintiff’s right or title or claim to relief

CIVIL PROCEDURE — Subpoenas — Privacy and access issues — If parties have concerns regarding privacy but do not have technical capacity to address that they should actively seek the assistance of their legal representatives or other appropriate professionals who can assist them to resolve production issues in a way that fairly enables production of relevant material but otherwise preserves the integrity of matters that are properly the subject of privacy concerns

EVIDENCE — Photographic evidence — Admissibility — No requirement to prove who took the photograph — Photograph admissible where a witness is able to state the photograph accurately depicts what is shown of the relevant scene, item or facts — Nonetheless distortion of appearance may be ground to make a photograph inadmissible or use unfair

EVIDENCE — Self-incrimination — Informing witnesses of rights — Obligation under s 132 Evidence Act 1995 (NSW) regarding objections pursuant to s 132 Evidence Act to answering questions

DECLARATORY RELIEF — Conditioning relief on plaintiffs not being permitted to enforce claim against the estate in respect of a “director’s loan” recorded in company accounts — Further nunc pro tunc declaration sought — Declined on the facts

TAXES AND DUTIES — NSW company shares — whether dutiable property — Marketable securities not dutiable property — Court otherwise will not pre-empt what duty or tax liability may flow from findings regarding loan and gift transactions 

ANCILLARY RELIEF — Order sought empowering Registrar to execute transfer documents — Court may condition orders with an “alternative execution” provision if circumstances demonstrate probable futility of signing request — Probable futility not demonstrated

ORDERS — Application for referral of matters to Regulator — Basis on which referral is made discussed — Whether appropriate in the circumstances — Papers not referred

Legislation Cited:

Civil Procedure Act 2005 (NSW)

Crimes Act 1900 (NSW)

Corporations Act 2001 (Cth)

Duties Act1997 (NSW)

Evidence Act 1995 (NSW)

Income Tax Assessment Act 1936 (Cth)

Income Tax Assessment Act 1997 (Cth)

Succession Act 2006 (NSW)

Supreme Court Act 1970 (NSW)

Taxation Administration Act 1953 (Cth)

Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

Adnunat Pty Ltd v ITW Construction Systems Australia Pty Ltd [2009] FCA 499

AG Australia Holdings Ltd v Burton (2002) 58 NSWLR 464; [2002] NSWSC 170

Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570; [2008] HCA 57

Ancient Order of Foresters in Victoria Friendly Society Ltd v Life Plan Australia Friendly Society Ltd (2018) 265 CLR 1; [2018] HCA 43

Associated Food v Baxter [1999] NSWSC 236

Aviani v Loh (No 2) [2022] NSWSC 1148

Ballenden v Bryant(No 2) [2013] NSWSC 454

Ballenden v Bryant [2012] NSWSC 1471

Bassett v Cameron [2021] NSWSC 207

Black Uhlans Inc v New South Wales Crime Commission [2002] NSWSC 1060

Boone v Mitchell (1822) 1 B&C 18

Brown v Barber [2020] WASC 84

BSA Advanced Property Solutions (Fire) Pty Ltd v Ventia Australia Pty Ltd [2022] NSWCA 82

Calverley v Green (1984) 155 CLR 242; [1984] HCA 81

Charles Moore & Co (WA) Pty Ltd v Federal Commissioner of Taxation (1956) 95 CLR 344; [1956] HCA 77

Commonwealth Bank of Australia v Gaszewski [2006] NSWSC 772

Commonwealth of Australia v Verwayen (1990) 170 CLR 394; [1990] HCA 39

Coshott v Sakic (1998) 44 NSWLR 667

Currie v Dempsey [1967] 2 NSWR 532

D Capital 2 Pty Ltd v Western (No 2) [2022] NSWSC 1283

Dare v Pulham (1982) 148 CLR 658; [1982] HCA 70

De Vries v Timbercorp Finance Pty Ltd (in liq) [2021] VSCA 265

Delaforce v Simpson–Cook (2010) 78 NSWLR 483; [2010] NSWCA 84

Di Lorenzo Ceramics Pty Ltd v Federal Commissioner of Taxation (2007) 161 FCR 198; [2007] FCA 1006

Donis v Donis (2007) 19 VR 577; [2007] VSCA 89

E Co [a pseudonym] v Q [a pseudonym] (No 4) [2019] NSWSC 429

Effem Foods Pty Ltd v Lake Cumbeline Pty Ltd [1999] HCA 15; (1999) 161 ALR 599

Ermogenous v Greek Orthodox Community (2002) 209 CLR 95; [2002] HCA 8

Eyles v Ellis (1827) 4 Bing 112; 130 ER 710

Federal Commissioner of Taxation v Dixon (1952) 86 CLR 540; [1952] HCA 65

Federal Commissioner of Taxation v Snowden & Wilson Pty Ltd (1958) 99 CLR 431; [1958] HCA 23

Flinn v Flinn [1999] 3 VR 712; [1999] VSCA 109

Fox v Percy (2003) 214 CLR 118; [2003] HCA 22

Gillett v Holt [2001] Ch 210

Giumelli v Giumelli (1999) 196 CLR 101; [1999] HCA 10

Grant v Roberts [2019] NSWSC 843

Griffiths atf the Griffiths HWL Practice Trust v Martinez atf the Martinez HWL Practice Trust as representative of the partners trading as HWL Ebsworth Lawyers [2019] NSWSC 664

Guest v Guest [2022] UKSC 27

Hallstroms Pty Ltd v Federal Commissioner of Taxation (1946) 72 CLR 634; [1946] HCA 34

Hendersons Automotive Technologies Pty Ltd (in liq) v Flaton Management Pty Ltd (2011) 32 VR 539; [2011] VSCA 167

Heydon v Perpetual Executors Trustees & Agency Co (WA) Ltd (1930) 45 CLR 111; [1930] HCA 26

Hill v Dunn [2019] NSWSC 419

Hypec v Mead [2004] NSWCA 221

In the Marriage of Malpass & Mayson [2000] FamCA 1253; (2000) 27 Fam LR 288

In the matter of GA and RG Horn Pty Ltd [2021] NSWSC 210

In the matter of Hillsea Pty Ltd [2019] NSWSC 1152

In the matter of Hoju Jobs Pty Ltd [2021] NSWSC 302

In the matter of Opal Producers Australia Limited (ACN 112 322 442) [2011] NSWSC 689

In the matter of York Street Mezzanine Pty Ltd (in liq) (2007) 162 FCR 358; [2007] FCA 922

ING Bank Australia Ltd v Bucknell [2016] NSWSC 1049

Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8

Kemi v Wood [2013] NSWSC 180

Keskin v Keskin [2019] FamCA 384

Leotta v Public Transport Commission (NSW) (1976) 50 ALJR 666

Manzi v Smith (1975) 132 CLR 671; [1975] HCA 35

McNab v Graham (2017) 53 VR 311; [2017] VSCA 352

Notesco Pty Ltd v Australian Financial Complaints Authority Ltd [2022] NSWSC 285

Nu Line Construction Group Pty Ltd v Fowler (aka Grippaudo) [2012] NSWSC 587; (2012) 16 BPR 31,011

Official Trustee in Bankruptcy v Tooheys Ltd (1993) 29 NSWLR 641

Ogilvie v Littleboy (1897) 13 TLR 399

P’Auer AG v Polybuild Technologies International Pty Ltd [2015] VSCA 42

Page v Vanker [1990] NSWCA 42

Papas v Co [2018] NSWSC 1404

Parsons v Bain (2001) 109 FCR 120; [2001] FCA 376

Paycorp Payment Solutions Pty Ltd v Chai (No 3) [2011] NSWSC 1632

Paycorp Payment Solutions Pty Ltd v Chai [2011] NSWSC 1290

Potter v Potter [2003] 3 NZLR 145

Priestley v Priestley [2017] NSWCA 155

R v Ahmed [2001] NSWCCA 450

Rafidi v Commonwealth Bank of Australia Ltd [2017] NSWCA 96

Rafidi v Commonwealth Bank of Australia Ltd [2017] NSWCA 96

Re Harmony and Montague Tin and Copper Mining Company (Spargo's Case) (1873) 8 Ch App 407

RHG Mortgage Ltd v Rosario Ianni [2015] NSWCA 56

Ronpibon Tin NL v Federal Commissioner of Taxation (1949) 78 CLR 47; [1949] HCA 15

Savage v Norton [1908] 1 Ch 290

Schmierer v Taouk [2004] NSWSC 345; (2004) 207 ALR 301

Shymko v Lach [2022] NSWSC 1096

Sidhu v Van Dyke (2014) 251 CLR 505; [2014] HCA 19

Silovi Pty Ltd v Barbaro (1988) 13 NSWLR 466

Steiner v Strang [2016] NSWSC 395

Stone v Stone [2019] NSWSC 233

Taylor v Chief Constable of Cheshire [1986] 1 WLR 1479

Trentelman v The Owners – Strata Plan No 76700 (2021) 106 NSWLR 227; [2021] NSWCA 242

Voce v Deloraine [2012] NSWSC 1187

Vukic v Grbin [2006] NSWSC 41

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; [1988] HCA 7

Wantagong Farms Pty Ltd as Trustee for the Bulle Family Trust v Bulle [2015] NSWSC 1603

Watson v Foxman (1995) 49 NSWLR 315

Wheatley v Salmon [2022] NSWSC 395

Ying v Song [2010] NSWSC 1500

Texts Cited:

D B Casson and I H Dennis, Odgers’ Principles of Pleading and Practice in Civil Actions in the High Court of Justice (22nd ed, 1981, Stevens & Sons)

Halsbury’s Laws of Australia (online)

J D Heydon, M J Leeming and P G Turner Meagher, Gummow & Lehane's Equity: Doctrine & Remedies (5th ed, 2014, LexisNexis)

Category:

Principal judgment

Parties:

Michael George Horn (First Plaintiff)
Adele Ruth Horn (Second Plaintiff)
GA & RG Horn Pty Ltd (First Defendant)
Barbara Constance Horn (Second Defendant)

Representation:

Counsel:
C Mantziaris / I S Young (6 October 2022) / A K Flecknoe-Brown (12 September 2022) (Plaintiffs)
N Simpson / D Yazdani / M Bennett (26 October 2022) (Defendants)
Solicitors:
Arnold Lawyers (Plaintiffs)
Tranter Lawyers (Defendants)

File Number(s):

2021/75707

Judgment

TABLE OF CONTENTS

Introduction

The claims - paragraph 1

Some nomenclature - paragraph 8

Summary of outcome - paragraph 10

Family details

The deceased - paragraph 14

The family - paragraph 27

Others including various professionals - paragraph 40

Rossdale and Gostwyck Flats - paragraph 41

Rossdale - paragraph 44

Gostwyck Flats - paragraph 61

The company - paragraph 69

Memorandum of association and articles - paragraph 73

Shareholding - paragraph 74

Directorship - paragraph 85

Banking arrangements - paragraph 87

Assets – the properties and the water access licences - paragraph 94

Other properties

Residential properties - paragraph 95

Failford property - paragraph 98

Activities on the properties - paragraph 118

Pleadings and claims for relief

Procedural background - paragraph 126

Claims for relief - paragraph 131

The statement of claim - paragraph 142

Introductory matters - paragraph 143

Rossdale Arrangement and the 2000 Gostwyck Arrangement - paragraph 144

Proposed 2009 intergenerational transfer - paragraph 150

22 October 2019 Agreement - paragraph 151

Estoppel by encouragement - five representations - paragraph 155

Reliance - paragraph 163

Estoppel by acquiescence or convention - paragraph 166

Family provision claim - paragraph 168

The defences - paragraph 169

Disentitling Conduct and Unclean Hands - paragraph 172

The plaintiffs’ final case - paragraph 174

Pleading comment - paragraph 175

Issues - paragraph 199

Evidence

Affidavit evidence - paragraph 200

Documentary evidence - paragraph 202

Subpoenas and notices to produce - paragraph 219

Notice to produce to Michael - paragraph 225

Obligation of parties and practitioners regarding production of documents - paragraph 231

Subpoena to Tranter Lawyers - paragraph 237

Calls for documents - paragraph 243

The deceased’s writings - paragraph 248

Witnesses - paragraph 256

Admissibility of photographic evidence - paragraph 259

Photographic material regarding Rossdale and Gostwyck Flats - paragraph 266

Estate

Assets and liabilities - paragraph 268

Costs - paragraph 278

Legal representatives - paragraph 290

Wills - paragraph 298

2006 Will - paragraph 299

April 2019 Will - paragraph 302

August 2019 Will - paragraph 306

Last Will - paragraph 308

Barbara

Financial details - paragraph 313

Health - paragraph 318

Needs - paragraph 324

Michael & Adele

Financial details - paragraph 327

Health - paragraph 343

Needs - paragraph 346

Damah Pty Ltd - paragraph 347

Events - paragraph 348

1950s-1970s - paragraph 349

1990s the Rossdale Arrangement - paragraph 354

2000s the Gostwyck Flats Arrangement - paragraph 393

2002 plans to build on Rossdale - paragraph 412

2004 residing on Rossdale - paragraph 426

2008 construction of a workshop and other works on Rossdale - paragraph 435

2009-2010 pension discussions and intergenerational transfer - paragraph 438

2012-2013 further works on Rossdale - paragraph 454

2015 & 2017 flooding and drought - paragraph 456

2017-2018 proposed subdivision of Gostwyck Flats - paragraph 459

2018 a move to Closebourne Village - paragraph 486

Early 2019 the proposed sale of Rossdale - paragraph 487

July- October 2019 listing of Rossdale for sale and various meetings - paragraph 511

22 October 2019 meeting and October 2019 Agreement - paragraph 535

Events after the meeting - paragraph 539

28 October 2019 a letter from Michael and medical certificates - paragraph 542

30 October 2019 the deceased’s letter - paragraph 545

November-December 2019 attempts to stop the sale of Rossdale - paragraph 554

January 2020 company EGMs - paragraph 571

14 February 2020 meeting and the deceased’s handwritten note - paragraph 599

March 2020 deceased’s heart attack and death - paragraph 608

April 2020 correspondence between parties and their legal representatives - paragraph 617

December 2020 letters of administration CTA - paragraph 629

February 2021 litigation and other steps regarding control of the company - paragraph 631

August 2021 financial advice given to Barbara - paragraph 649

Opening submissions

Plaintiffs’ submissions - paragraph 651

Defendants’ submissions - paragraph 652

Plaintiffs’ reply submissions - paragraph 658

Closing submissions - paragraph 662

Credibility and reliability of witnesses

Submissions - paragraph 663

Some general observations - paragraph 667

Evidence of meetings from mid-late 2019 - paragraph 674

Michael - paragraph 680

Adele - paragraph 708

Barbara - paragraph 720

Mr Smart - paragraph 735

Hamish and Philippa - paragraph 739

Legal principles

Plaintiffs’ submissions - paragraph 766

Defendants’ submissions - paragraph 769

Estoppel - paragraph 774

Reliance - paragraph 775

Unclean hands - paragraph 776

Issue 1 - What promises were made by the deceased? - paragraph 793

Issue 2 - Were the promises clear and unequivocal promises regarding the shares and or properties? - paragraph 838

Issue 3 - Were the promises conditional upon aspects of the Arrangements? - paragraph 845

Issue 4 - Were the promises conditional upon the plaintiffs paying the deceased a remuneration for the remainder of his life?

Was payment essential? - paragraph 855

Were such payments made? - paragraph 876

Were payment requirements insisted upon or waived and what was the effect of incomplete payment? - paragraph 941

Issue 5 - Were the promises conditional upon the plaintiffs continuing to work the farms for the remainder of the deceased's life? - paragraph 973

Issue 6 – Was there an assumption that a particular legal relationship existed between the plaintiffs and the deceased? - paragraph 992

Issue 7 - Did Michael and Adele act reasonably in reliance on the promises? - paragraph 1002

Issue 8 - Did the deceased know or intend that Michael and or Adele would act in reliance on the promises (issue 8)? - paragraph 1031

Issue 9 - Was Michael’s and Adele’s reliance on the promise to their detriment (issue 9)? - paragraph 1038

Issue 10 - Did the deceased, and/or Barbara (in her capacity as executor and sole beneficiary of his estate) act unconscionably in not honouring the promises? - paragraph 1050

Issue 11 - What if any effect did the post 2017 events have on the estoppel case? - paragraph 1057

The Gostwyck Flats subdivision - paragraph 1064

The proposed sale of Rossdale - paragraph 1079

Issue 12 - Are the plaintiffs guilty of unclean hands so as to preclude equitable relief? - paragraph 1145

Payment obligation - paragraph 1150

Alleged concealment of the proposed sale of Rossdale - paragraph 1153

Alleged non-disclosure of the DFT and use of Gostwyck Sold proceeds - paragraph 1155

Alleged nondisclosure of purchase of Failure through company assets - paragraph 1157

Mortgage in relation to the Gostwyck Flats. - paragraph 1161

Alleged undertaking of legal and financial decision-making without disclosure to, consultation with or the authority of the deceased - paragraph 1165

Issue 13 - Was a loan of $817,417 made to the deceased and then gifted to Michael or the plaintiffs (issue 13)? - paragraph 1167

Submissions - paragraph 1171

Principles regarding loans, book entries and gifts

Loans and book entries - paragraph 1176

Gifts - paragraph 1190

The deceased’s awareness of the sale of Lot 6 - paragraph 1195

Records and evidence regarding the $817,417 amount - paragraph 1197

Cross-examination - paragraph 1215

Determination - paragraph 1232

Issue 14 - If the estoppel case succeeds what remedy is appropriate and in particular what order ought be made regarding the $817,417 amount (issue 14)?

The estoppel claim - paragraph 1258

Date on which trust arises - paragraph 1267

Specific orders sought - paragraph 1271

Relief as between Michael and Adele - paragraph 1279

The WALs - paragraph 1280

The $817,417 loan - paragraph 1283

Signing of transfer - paragraph 1284

Ancillary relief - paragraph 1292

Nunc pro tunc declaration - paragraph 1295

Duty liability - paragraph 1303

Notation regarding the value of the shares - paragraph 1334

Issue 15 - If the estoppel case fails, what if any family provision relief should be given? - paragraph 1339

Referral of papers - paragraph 1347

Informing witnesses of rights - paragraph 1348

Submissions - paragraph 1354

Conclusion - paragraph 1372

Orders - paragraph 1373

Costs - paragraph 1374

HIS HONOUR:

Introduction

The claims

1. These proceedings are brought by the first plaintiff Michael Horn (Michael) and the second plaintiff, Adele Horn (Adele) and involve disputed claims over farming properties in the Vacy district (north of Maitland) and in the Dungog Shire: CB 2.1/232, CB 3/80.5.

1. In the alternative there is a family provision claim by Michael in relation to the estate of his late father Ross George Horn (deceased) pursuant to the provisions of s 59 Succession Act 2006 (NSW) (Succession Act).

2. The first defendant is a company G.A. & R.G. Horn Pty Ltd (company). The second defendant is the deceased’s widow Barbara Constance Horn (nee Pryde) (Barbara).

3. The parties provided written submissions both prior to the hearing and on the final day of hearing as well as their counsel addressing orally on the final day of the hearing. Pursuant to an order on a discrete issue supplementary submissions were also provided.

4. I will make reference to the oral submissions by transcript page reference. For convenience, I will refer to the various written submission documents as follows:

1. the plaintiffs’ opening written submissions (POS), the plaintiffs’ opening reply (POR), the plaintiffs’ concluding written submissions (PCS) and the plaintiffs’ supplementary submissions on remedy (PSSR); and

2. the defendants’ opening written submissions (DOS), the defendants’ concluding written submissions (DCS), and the defendants’ supplementary submissions on remedy (DSSR).

6. The essential claim of the plaintiffs is that the deceased made representations to Michael (or them) regarding shares in the company holding two properties and as a result of the representations they farmed and improved the properties to their detriment. The deceased made various Wills leaving the shares (and thus indirectly the properties to Michael). But 5 days prior to his death the deceased changed his then Will and left the shares to Barbara. The plaintiffs claim the shares under estoppel principles.

7. The defendants submit that the proceedings should be dismissed and say the papers should be referred to the Australian Taxation Office (ATO) for reasons explained below. The defendants also submit in the event the proceedings are not dismissed, only a ‘modest’ family provision order should be made in favour of Michael, having regard to lifelong contributions to the deceased's estate by Barbara: DCS [3].

Some nomenclature

8. There are various properties referred to in the proceedings. However, for introductory purposes it suffices to note that the properties include “Rossdale”, “Gostwyck Flats”, “Lennoxton” and “Failford”.

9. In these reasons I will refer to:

1. a part of Gostwyck Flats that has been sold as “Gostwyck Sold” or “Lot 6” and a part that has been retained as “Gostwyck Remnant” or “Lot 5” (as explained below);

2. the net proceeds of sale of Gostwyck Sold as “Gostwyck Fund”;

3. Rossdale and Gostwyck Flats as the “properties”;

4. pleaded arrangements between the plaintiffs and the deceased regarding Rossdale (Rossdale Arrangement) and (Gostwyck Flats Arrangement) as the Arrangements;

5. Water Access Licences (WAL14722 and WAL14723) held by the company in respect of Rossdale as the “WALs”;

6. Rossdale, Gostwyck Remnant and the WALs as the “claimed property”;

7. the deceased’s shares in the company as the “claimed shares”;

8. the partnership known as ‘M & A Horn’ through which Michael and Adele conducted farming activities on the properties and I will refer to this simply as the “partnership”; and

9. pleaded representations by the numbers assigned in the pleadings “representations 1-6” including variants of representation 1 as “variant 1A-1C”;

10. a sum of $817,417 sourced from Gostwyck Fund alleged to have been lent to the deceased and allegedly gifted to by the deceased to Michael or the plaintiffs which sum was used to facilitate the purchase of Failford as the “$817,417 amount”; and

11. the Danmah Family Trust (see below) as the “DFT”.

Summary of outcome

10. I have identified 15 issues below for particular determination in the proceedings For the reasons that I have outlined below, I determine regarding those 15 issues as follows.

1. Representations were made by the deceased to Michael and or the plaintiffs (issue 1):

1. in 1991, 1993 and 2000 that should Michael come onto Rossdale and later onto Gostwyck Flats (variant 1A) and farm at his own expense (variant 1B) the deceased would by his last Will leave the claimed shares to Michael when the deceased died (giving by that means Michael indirect access and use to the properties) (representation 1);

2. that if Michael did come onto the properties he could do what he wished with the properties including relevantly in the sense of not being confined as to their use in the way raised in issue 5 (representation 5); and

3. in 2002 that the deceased approved Michael building a house on Rossdale (representation 3).

2. The deceased’s promises being representations 1 (including variants), 3 and 5 (promises) were sufficiently clear and unequivocal to permit Equity’s intervention and also declaratory relief (issue 2).

3. Contrary to the defendants’ contention, the promises forming the estoppel case were not generally conditional upon aspects of the Arrangements between the plaintiffs and the deceased (issue 3).

4. The promises were not conditional upon payment of remuneration by the plaintiffs to the deceased under the Arrangements, and relevantly:

1. at least from 1993 there was a condition of payment regarding the Rossdale Arrangement and from 2000 a request for payment regarding the Gostwyck Arrangement;

2. such payment, though a term of the Arrangements was not an essential term of the promises;

3. Michael and Adele did not completely and meticulously pay to the company or to the deceased sums of $500 for each of the properties from 1993 and 2000 respectively under the Arrangements; and

4. the deceased from at least 2000 did not insist on strict payment under the Arrangements and by 2010 did not require payment of the $500 amounts for each property.

5. As to any requirement for continued operation of the farms (issue 5) the deceased did not impose as an essential part of the promises that in order for Michael to receive the shareholding in a company the properties had to be worked as "ongoing farms".

6. A relationship was assumed between Michael and the deceased (issue 6) of sufficient seriousness that it was susceptible to being enforced in Equity. The promises on the deceased part, were initially oral and found a more formal legal expression in his 2006 Will in gifting his shares in the company to Michael.

7. Michael and Adele acted reasonably in reliance on the promises (issue 7).

8. The deceased both knew and intended that Michael and or Adele would act in reliance on the promises (issue 8).

9. Michael’s and Adele’s reliance on the promise was to their detriment (issue 9).

10. By 2017 it would have been unconscionable for the deceased to renege on his promises with Michael and Adele and, subject to the remaining issues, it is unconscionable for Barbara in her capacity as executor and sole beneficiary of his estate to hold the deceased shares other than on trust for Michael (issue 10).

11. The events post 2017 regarding the subdivision of Gostwyck Flats and the proposed sale of Rossdale did not disable the plaintiffs from the relief that they seek in relation to the claimed shares, and indirectly the claimed property (issue 11).

12. Michael and Adele are not guilty of unclean hands so as to preclude Equitable relief to Michael or them (issue 12).

13. The $817,417 amount was a loan from the company to the deceased, a gift from the deceased to Michael and a loan from Michael to the DFT (issue 13).

14. The estoppel case succeeds and regarding precise relief the parties should bring in short minutes of order to give effect to the findings I have made, to the general intent that:

1. a declaration ought to be made that Barbara in her capacity as administrator of the deceased’s estate holds the claimed shares on trust for Michael;

2. the declaration should be subject to noting Michael’s and Adele’s undertaking that they by themselves or by the company will not be permitted to also enforce a claim by the company (or them) against the estate in respect of the $817,417 amount.

15. Strictly speaking it is unnecessary to deal with the alternative claim for family provision relief and having regard to that and also the fact that no submissions were made by the plaintiffs in respect of the family provision claim, I expressly do not venture any view regarding possible relief regarding the family provision claim (issue 15).

11. I note for clarity’s sake I do not accept there was an additional representation (representation 6) that should Michael predecease the deceased Adele would receive what Michael was to receive under the first representation. However, Michael did not predecease the deceased and so the alleged representation bears no practical significance to the outcome.

12. Prior to dealing with the 15 particular issues in the proceedings it is appropriate to outline some details regarding the family, Rossdale and Gostwyck Flats, the company and certain other properties. Much of that material is not seriously disputed. The facts that I set out in relation to those matters should be regarded as findings of the Court unless qualified or otherwise indicated.

13. I will later make particular findings regarding the facts on the 15 particular issues.

Family details

The deceased

14. The deceased was born in July 1930 and died on 20 March 2020 aged 89. He was the only child of George Amos Horn (Amos) and Gladys Horn (Gladys): CB 3/240, 331.

15. Within the family the deceased was referred to as "Ross", "Dad" and sometimes as "Papa": CB 2.1/154.

16. The deceased grew up at Vacy attending the local public school and then attending Boys’ Grammar School at Morpeth: CB 3/241, 332.

17. After he left school he worked in his parent’s store at Vacy.

18. The deceased worked in the Vacy store until about 1952. The deceased and his parents left Vacy and moved to Maitland where the deceased purchased the hardware store and ran it with Amos’s help: CB 2.1/232.

19. Barbara was born in June 1936 and is currently 86 years old. Barbara was educated at Maitland Girls High. She spent a short time studying accounting at Sydney Technical College in 1950 whilst working at the National Bank and undertook other studies in accountancy at Maitland Technical College from 1953 until 1955: CB 2.1/398.

20. At least during part of her studies Barbara worked for her father in his wholesale business, manufacturing confectionery: CB 2.1/398 – 399.

21. The deceased and Barbara met in 1955, were engaged in 1957 and married in 1958: CB 2.1/399.

22. In 1958 following his marriage to Barbara the deceased and Barbara built their first home at Tocal Road Bolwarra Heights: CB 3/242, 333.

23. On 20 May 1959, the company was incorporated.

24. In about June 1959 (CB 2.1/232, 3/241, 334) or 1960 (CB 3/242) the deceased sold the hardware store and commenced working on the family properties.

25. The deceased had a prominent stutter, from which he suffered for most of his life. In his later years he became deaf. In the last few years of his life he suffered from certain medical issues and had some eyesight issues: CB 2.1/227 [17].

26. Barbara asserts that the deceased was a private person, would not disclose his private affairs with friends and that indeed he rarely disclosed private matters to his family except the discussions they had when he would change his Will from time to time: CB 2.1/402.

The family

27. The deceased and Barbara have two children namely Michael and Philippa Furner (Philippa). Michael was born in July 1966 and is currently aged 56. Philippa was born in January 1961 and is currently aged 61.

28. Clearly within the family Barbara seemed, at least in later years if not earlier, to align herself with Philippa, rather than with Michael.

29. Barbara claims that Michael and the deceased had a difficult relationship citing occasions when the deceased was apparently disgusted that he had called in at Rossdale at mid- morning times and Michael failed to even offer him a cup of tea: CB 2.1/404.

30. I did not gain the impression and do not find that the deceased’s relationship with Michael was particularly vexed or difficult. However, clearly the events of later years especially from September 2017 until the deceased’s death were troubling for the deceased and Michael and caused strain within the family relationships.

31. Michael is married to Adele (nee White: CB 2.1/175) who was born in August 1966 and is currently aged 56.

32. Adele had lived in another de facto relationship/marriage from 1987 to 1991: CB 2.1/162.

33. Michael and Adele started living together in about May 1992. They married in September 1993. They have two children Nicholas born in August 1994 (now 28) and Danika born in August 1997 (now 25).

34. Nicholas has a de facto partner Kate Kelly (Kate) with whom he has two biological children. Kate has one child from a previous relationship: CB 2.1/226.

35. Danika is in a de facto relationship with Anthony Lawrence: CB 2.1/226.

36. Philippa is married to Stephen (Steve) Furner and they have three children being Tristian born in October 1982 (now aged 40), Hamish born in July 1984 (now aged 38), and Prudence born in May 1986 (now aged 36): T 1030; CB 2.1/226; 5/54.

37. In September 1978 Gladys passed away and within a few years Amos also passed away in 1980, aged 81: CB 3/243.

38. In March 1988 the deceased and Barbara moved to live in King Street Lorn: CB 2.1/352; 3/244.

39. Hamish works as an accountant with RHK Equities as an accountant (T 876) (having at a prior stage worked for Branxton Engineering Pty Ltd) and Philippa works as a School Support Officer with the NSW Department of Education.

Others including various professionals

40. Apart from the family members, the evidence referred to a number of other parties including the following persons:

1. Barry White and Elaine White - sharefarmers who lived in the Greenhouse on Rossdale (Greenhouse) from at least 1992 to 2000 (when Barry died): CB 2.1/163;

2. Andrew Saide – a friend of the deceased and from 2021 a director of the company: CB 2.1/337;

3. Alasdair Smart (Pearson Smart at Maitland) - accountant for the deceased and Barbara and the company from 1994 to May 2021: CB 2.1/130, 146;

4. James Carr (Anova Chartered Accountants) – accountant for the company from May 2021: CB 2.1/146;

5. Daryl Peter Lawrence (Waller Fry & Faulkner) – solicitors for the deceased and Barbara and the company at least from 2006 to 2016: CB 3/18.1, 18.5, 19; T 687, 743

6. Jim Meredith – (Meredith & Co at Maitland) – solicitor for the deceased (from October 2016) and for Barbara and the company from October 2016 until about early January 2020: CB 3/23.1; CB 2.1/324;

7. Randeep Singh – (Tranter Lawyers at Maitland) – solicitor for Barbara from about early January 2020: CB 2.1/324;

8. Janelle Banks (Thompson Madden at Orange) – solicitor for Philippa and Hamish from approximately 2019: CB 3/144.

9. Bruce Killingly (Get Planning) – financial adviser to the deceased and Barbara from about March 2018: CB 3/26.4;

10. Greg Lidbury (Bowe & Lidbury at Rutherford) – a stock and station/real estate agent: T 732;

11. Dr Donna Booth (Sempill Street Surgery at Maitland) – a medical practitioner for the deceased and Barbara; and

12. Beryl Mudd – a long-time friend of the deceased and Barbara and witness to the last Will of the deceased (15 March 2020).

Rossdale and Gostwyck Flats

41. Descendants of the Horn family immigrated to Australia from Baden Germany the mid 1800s: CB 2.1/232; 3/324. In 1873 Johannes Horn was naturalised and in May 1877 purchased a 525 acre property “Cory Vale” at Vacy located across the Paterson River opposite the Farmers Hotel in the Vacy Village: CB 3/325; T 651.

42. It is not necessary to recite in a detailed way of all the various landholdings referred to in the evidence. However, it is appropriate at this point to provide a degree of detail regarding two properties which feature prominently in the evidence, being part of the claimed property, namely Rossdale and Gostwyck Remnant.

43. The two properties, which I will describe below, lie north of Maitland and Morpeth. Gostwyck Remnant is by direct line about 4 km north-east from Rossdale but about 7 km away by road (depending on the route taken): CB 2.1/242. There is about a seven to ten minute drive between the two properties: MFI 2; T 53.

Rossdale

44. Rossdale is a property at 598 Gresford Road, Vacy NSW (folio identifier 123/1063557) (Rossdale), on which Michael and Adele reside: CB 2.1/154.

45. Rossdale comprises land along both sides of Gresford Road, Vacy and at various times has included parcels individually known as Tillimby or Lennoxton: CB 2.1/155. In some parts of the evidence it is referred to as the “Vacy property”: e.g. T 812.

46. The two sides of Gresford Road are a ‘river side’ and a ‘hill side’: CB 2.1/162.

47. The ‘river side’ has a frontage to the Paterson River (CB 2.1/182). It is where the improvements to Rossdale including sheds and the house of Michael and Adele are located. The residential address (598 Gresford Road) is on this ‘river side’: CB 2.1/240.

48. The ‘hill side’ of Rossdale is basically grazing paddocks and timber: CB 2.1/240.

49. The plaintiffs contend that Amos purchased a farm “Rossdale” at Vacy comprising 226 acres on or about 22 December 1936: CB 1/61; CB 2.1/236, 238. There is some dispute on the pleadings regarding the correct title history of Rossdale. However, the current title of Rossdale and Gostwyck Remnant is clear and it is not necessary to make findings regarding the correct original title to the properties.

50. In about 1949 the deceased either purchased or received from his father Amos and two uncles a transfer of the property known as Tillimby (volume 5996 folio 84) which adjoined Rossdale: CB 2.1/236.

51. On or about 16 October 1959 Amos transferred Rossdale to the company: CB 1/61. The defendants dispute that the current title reference only came into existence in 2004: CB 1/138. It is not necessary to resolve that dispute.

52. In 1987 or 1988 Rossdale was subdivided to create three new title lots 11-13 in DP 773693 being (CB 2.1/161, 236, 238; T 656, 659):

1. lot 11 an area of about 7.5 acres (Lennoxton) on the south-western ‘hill side’ of Gresford Road and given to Michael by his parents as a 21st birthday present;

2. lot 12 an area of about 94 acres adjacent to Lennoxton also on the south-western ‘hill side’ of Gresford Road; and

3. lot 13 an area of about 130 acres situated on the ‘river side’ of Gresford Road.

53. The company retained lots 12 and 13: CB 2.1/238.

54. On or about 6 August 1992 a subdivision of Tillimby (folio 84) was registered: CB 1/61, 139. Folio 84 was subdivided into two parcels being one parcel of approximately 150 acres (lot 122) another parcel of approximately 76 acres (lot 2A): CB 2.1/239.

55. Lot 122 was sold by the deceased to a third party. Lot 2A was sold by the deceased to the company: CB 2.1/236.

56. Lot 2A was consolidated with lot 12 to create lot 121/918869 a parcel of about 170 acres (lot 121): CB 2.1/239.

57. On or about 2 February 2004, to get development approval to build a house on Rossdale (see below), the plaintiffs and the deceased caused the company to apply to consolidate the titles to "Rossdale" (lot 13 being 130 acres and lot 121 being 170 acres) to bring it up to one title of about 300 acres to satisfy planning requirements for having two houses on Rossdale being the Greenhouse and the house the plaintiffs proposed to build: CB 2.1/175, 237, 239. The consolidated title is the area currently known as Rossdale being folio identifier 123/1063557: CB 1/61, 139 – 140; 2.1/239.

58. Michael and Adele paid for the expenses associated with title consolidation even though the titles belonged to the company: CB 2.1/176.

59. Rossdale is currently described as comprised of river flats to soft undulating country. It is pasture improved, has numerous sheds, an office, cattle yards, 180 mega litre irrigation system with 25 acres under irrigation. It is zoned RU1 and R5 and has scope for subdivision: CB 2.2/78.

60. It has an appraised value of $5.5M-$6M: CB 2.2/79.

Gostwyck Flats

61. Gostwyck Flats is a property at 471 Dungog Road, Vacy NSW (folio identifier A/162949) (Gostwyck Flats). In some of the evidence the property is referred to as being located at Hilldale: e.g. CB 2.1/155; 3/163.

61. The history of Gostwyck Flats was explained by Michael in the evidence. It is not necessary for the purposes of the proceedings to recite the history other than to note as follows.

62. Gostwyck Flats was subdivided on or about 26 November 2018: CB 2.1/155, 188, 243. The evidence in the proceedings describes the subdivided property as follows:

1. Gostwyck Remnant/Lot 5 (folio identifier 5/1248814) - an area of 89.2 ha “proposed” for the plaintiffs’ son Nicholas; and

2. Gostwyck Sold/Lot 6 (folio identifier 6/1248814) - an area of 64 ha that in family discussions had been designated for the plaintiffs’ daughter Danika, which was sold on or about 10 December 2018 for $840,000 with the net proceeds ultimately being paid to the company. The use of the net proceeds and in particular the $817,417 amount to fund the purchase of Failford via the DFT is the subject of dispute (see issue 13 and below): CB 2.1/154, 243; 3/323.

64. A historical title search for Lot 5 showed it was created on 26 November 2018: CB 5/124. As at 6 September 2022 the property was subject to a mortgage to the National Australia Bank Ltd (NAB) and a caveat lodged by Michael: exhibit D7 (being a title search dated 6 September 2022): T 311. The caveat was lodged on 21 August 2020: CB 5/124.

65. Gostwyck Remnant is gently undulating grazing country. It is divided into numerous paddocks and has dams and a permanent creek. It has stockyards and shedding. It has an appraised value of $1.3M to $1.4M: CB 2.2/33 – 34.

66. Michael indicates that up until about the 1970s Gostwyck Flats was run by the company as a dairy farm under share farming arrangement with a neighbouring property to Gostwyck Flats called “Mirari”, which he said was owned by Amos and sold in 1970: CB 2.1/242.

67. Barbara indicated Gostwyck Flats had been part of a larger lot of land known as Mirari (T 656) which was 1,000 acres and left to Amos’ brothers John and Wesley: CB 2.1/416. Barbara later clarified that Amos bought out John’s share and then later bought out Wesley’s share in about 1970: T 644.

68. Seemingly Amos sold Mirari (T 656) and retained Gostwyck Flats.

The company

69. The company was incorporated on 20 May 1959.

70. There are various materials in the proceedings bearing upon the details of the company. These include pleadings, a company search (CB 5/52-68), the formal company register (exhibit D11) and some affidavit evidence.

71. The earliest documents in the company register date back to approximately 1984. The earliest records on the company search appear to be reference to an annual return received by ASIC on 1 January 1991: CB 5/60. The search also makes reference to two pre-ASIC documents received in 1990.

72. Most of the details regarding the shareholding of the company were admitted on the pleadings.

Memorandum of association and articles

73. The Memorandum of Association and Articles of Association are in evidence: CB 5/1-51.

Shareholding

74. On the incorporation of the company the Memorandum of Association reveals Amos and the deceased as having subscribed for one management share each: subscription table: CB 5/9; 1/58, 2.1/232.

75. The Memorandum of Association provided for the share capital of 50,000 shares of £1 each: clause 5 (CB 5/8).

76. The Articles of Association subdivided the company share capital into the following categories:

1. 200 management shares, which conferred upon the holder a right to vote at a meeting of members until such time as that share was transferred from its original allottee to another person;

2. 29,800 ordinary shares which conferred no right to vote at a meeting of members until the death of all original allottees of management shares; and

3. 20,000 ordinary "A" class shares which conferred no right to vote at a meeting of members: Articles clauses 4 and 76 (CB 5/13).

77. On the death of the original allottee of management shares, those shares converted to ordinary shares: clause 4(b) (CB 5/13).

78. At some point between 1 July 1965 and 17 December 1980 the company reorganised its share capital so that the issued share capital of the company consisted of:

1. 1 management share issued to Amos;

2. 6 management shares issued to Barbara;

3. 124 management shares issued to the deceased; and

4. 1,700 ordinary shares with no right to vote issued to the deceased: CB 1/58 – 59.

79. On or about 11 June 2004 Michael was allotted one ‘A’ class ordinary share: Exhibit D11; CB 1/59. The minutes of meeting of directors establish that it was resolved that the one ‘A’ class share was issued on the basis that the share would only have rights to dividends and no other rights: Exhibit P11.

80. Up until 21 March 2019 the shareholding of the company was as follows:

1. the deceased - 124 management shares (presumably from December 1980 to 21 March 2019) and 17,000 ordinary shares (presumably from December 1980 to 21 March 2019): CB 5/57;

2. Michael – 1 ‘A’ class ordinary share issued on or about 11 June 2004: Exhibit P11; CB 2.1/233, 5/57; and

3. Barbara – 6 management shares held presumably from December 1980 to 21 March 2019: CB 5/57-58.

81. On 21 March 2019 (about a year before the deceased’s death) Barbara transferred her 6 management shares to the deceased: Exhibit D11 (also CB 1/59, 2.1/233[45], 5/57-58).

82. Immediately prior to the deceased's death the company had a share capital consisting of 130 management shares and 17,000 ordinary shares held by the deceased and one A class share held by Michael: CB 1/59.

83. On the death of the deceased the 130 management shares held by him were converted to ordinary shares: CB 1/59, clause 4(b) CB 5/13.

84. On 1 March 2021 all of the shares in the company held by the deceased were transferred to Barbara in her capacity as administrator of the deceased's estate and from that time the company has held share capital consisting of 17,130 ordinary shares with a right to vote held by Barbara and one A class share with no right to vote held by Michael: CB 1/59.

Directorship

85. The directors of the company have been and now are as follows:

1. initially presumably Amos and the deceased (although the evidence is not clear as to this);

2. the deceased and Barbara for 36 years (1 July 1965 - 19 February 2002);

3. the deceased and Michael for the next 18 years (19 February 2002 – 20 March 2020);

4. Michael (20 March 2020 – 18 April 2020);

5. Michael and Adele (18 April 2020 – 19 April 2021); and

6. Barbara, Hamish and Andrew Saide (from 19 April 2021).

86. Barbara was the company secretary from 1 July 1965 to 19 February 2002. Adele was the company secretary from 19 February 2002 to 19 April 2021. Hamish has been the company secretary from 19 April 2021.

Banking arrangements

87. Barbara had experience as a bookkeeper by working in her father’s business: T 666. When the company was initially set up Barbara did the wages and the deceased paid the accounts: T 667. As best she could recall Barbara thought that the company had one (bank) account and the deceased and Amos had separate accounts: T 667.

88. Evidence regarding the company’s bank accounts included the following:

1. the deceased initially controlled the company accounts: T 530 (Mr Smart);

2. there was four or possibly five company bank accounts in the early 2000s: T 554 (Mr Smart);

3. at some point of time there ceased to be company bank accounts perhaps in 2012 (T 554) or possibly in 2010: PCS page 38/59.

89. The evidence does not disclose why there might have been four or five company accounts in the early 2000’s.

90. A table which is set out in an appendix to these reasons discloses that in 2012 and following there were at least some monies paid to the company recorded as rent being $2,994 in 2012; $1,362 in 2013; $1,459 in 2014; $2,272 in 2015 and $963 in 2016.

91. Mr Smart indicated that the company was not registered for GST and essentially the entries for rent or agistment on the one hand from the partnership as an expense and as income for the company were simply book entries: T 556.

92. Subsequently, on or about 8 May 2018 the company opened an account with the NAB, which was controlled by Michael and Adele: exhibit P2. The catalyst for opening the account appears principally to have been for the purpose of facilitating the sale of Lot 6 and receiving and then paying out the net proceeds of sale of Gostwyck Sold: T 556 (Mr Smart).

93. From this point (8 May 2018) onwards until about 19 April 2021 when Michael and Adele ceased to be directors and Barbara, Hamish and Mr Saide became directors (21 April 2021) the company bank accounts were controlled by Michael and Adele: PCS page 37/59.

Assets – the properties and the water access licences

94. The WALs (1472 and 1473) are registered in the name of the company and the relevant access licence details are set out in title searches at CB 5/126-129.

Other properties

Residential properties

95. I have noted that the deceased and Barbara having initially lived at Bolwarra Heights from about 1958 moved in March 1988 to live in King Street Lorn: CB 3/242, 244.

96. From at least 1991 Michael and Adele lived at Lennoxton Road Vacy (i.e. Lennoxton): CB 3/0.1.

97. From at least 1991 Philippa lived at Vine Street Branxton: CB 3/0.1.

Failford property

98. One of the issues in the proceedings relates to discussions within the family in respect of the deceased’s desire expressed in 2017 to benefit Nicholas through providing to him some part of Gostwyck Flats.

99. Discussions between the deceased and Michael led to Michael and Adele seeking some advice and an eventual subdivision of Gostwyck Flats with part (Lot 6) being sold with the intent to benefit Danika and part (Lot 5) retained with the intent of being for the benefit of Nicholas.

100. Because of what is described as the issue regarding the $817,417 amount, there is necessity in the proceedings to clarify precisely what happened with the sale proceeds of Lot 6.

101. Danika did not wish to live on or receive Lot 6 in specie. Michael and Adele received some advice regarding this and there were discussions regarding ways to assist Danika, but also protect her against the prospect of the funds being accessed by her partner in the event of a relationship breakdown.

102. It was decided (by the deceased, Barbara, Michael and Adele) that Lot 6 would be sold to an external buyer, who happened to be a neighbour: T 752.

103. Michael indicates he set up the DFT to hold the funds that came out of the sale of Lot 6 so that he and Adele could provide for Danika's future: CB 2.1/26.

104. Michael states he decided to put the sale funds into the DFT and have the trustee purchase an investment property rather than give the funds (or land) directly to Danika, so that Danika would have some protection in the event of a family law dispute with her current or any future partner: CB 2.1/27.

105. Barbara deposes to the deceased's sceptical approach to trusts being dismissive of them and referring to them as "untrustworthy": CB 2.1/406.

106. On 10 April 2018 (CB 3/60) Mr Smart settled the DFT: CB 3/27-62. Damah Pty Ltd (Damah) is the trustee for the DFT which is a discretionary trust. "Damah" stands for Danika, Michael and Adele Horn: CB 2.1/26.

107. The terms of the DFT named Michael and Adele as the beneficiaries and Michael is the "principal" of the DFT: CB 3/60.

108. Barbara states that Philippa had taken the deceased to a meeting with Mr Smart in which he had told the deceased that Danika was not named as a beneficiary: CB 2.1/406. Technically it is correct that Danika is not a named beneficiary. However, at least by definition a class including the children of Michael and Adele are beneficiaries, so Danika is in fact one of the beneficiary objects of the DFT: see clause 1.1, definition of "Beneficiaries", para (b): CB 3/34.

109. Mr Smart in response to an email from Mr Meredith noted that Danika’s name was intentionally left out as a beneficiary so that there would be “no clear named attachment” of Danika to the DFT “for family law purpose(s)”: email 21 March 2019 CB 3/86.19, 86.20.2.

110. On 26 April 2018 Damah as trustee for the DFT opened an account with the NAB: exhibit P1 pages 18.

111. On or about 1 May 2018 Michael and Adele provided funds of $44,000 being 5% deposit for the purchase of Failford, to Manning Valley Property & Livestock which amount was receipted on 7 May 2018: exhibit P1 pages 6,13 (NAB bank statement).

112. On about 3 May 2018 Damah as trustee for the DFT entered a contract for sale to purchase a rural properly with residence of approximately 100 acres at 168 Greys Road Failford being folio 12/806418 (Failford) for $880,000 with a mortgage of $175,000. Failford is also known as ‘Ruben Park’: exhibit P1 pages 6,13 (NAB bank statement); CB 3/71.

113. On 16 May 2018 Mr Meredith met with Michael and the deceased and carried out a verification of identity for both of them: CB 3/66.1-66.8.

114. On 17 May 2018 the company entered into a contract for sale (prepared by Mr Meredith) of the then proposed Lot 6 in an unregistered plan (Gostwyck Sold) which contract for sale was signed by both the deceased and Michael on behalf the company as vendor. The sale was to David and Summah Lagettie (of Hilldale): CB 3/66.10, 66.12.

115. On or about 5 July 2018 Michael and Adele provided further funds of $35,110 as payment for or in contribution towards duty for the purchase of Failford by Damah: exhibit P1 pages 7, 14 (NAB bank statement).

116. On 11 December 2018 the company received into its NAB account the sum of $796,767.23 being part of the proceeds of sale of Gostwyck Sold and paid out of its account $796,417.23 to Damah: exhibit P2.

117. On 12 December 2018 Damah completed the purchase of Failford: CB 2.1/244. I will say more about this below in issue 13 addressing the alleged loan/gift of the $817,417 amount.

Activities on the properties

118. In pursuit of their farming activities Michael and Adele operate through the partnership, which initially (or at least from 1997) traded as “Hunter Earthworms”: CB 4/12, 15.

119. In 1997 the main business activity of the partnership was described as being “Earthworms Farmers”: CB 4/14.

120. In 1998, the description of the main business activity of the company was “beef cattle breeding & grazing”: CB 4/20.

121. In 1999 the main business activity of the partnership was described as being “beef cattle breeding & grazing”: CB 4/39.

122. The company holds the WALs which are used to irrigate Rossdale. The WALs allocate about 180 megalitres per year from the Paterson River which are used to irrigate Rossdale and grow pastures and Lucerne: CB 2.1/177, 241.

123. Since about 2008 Michael has also run a mechanical repair business from Rossdale trading as "Valley Machinery Service". He is a qualified trades mechanic. His work with Valley Machinery Service is mainly on the repair and maintenance of agricultural plant and machinery.

124. Currently Michael and Adele run cattle and grow lucerne hay on Rossdale: CB 2.1/213. They cut and bail hay into round bales silage, part of which is fed to the steers. They run about 80 steers through winter and about 123 through summer.

125. Michael and Adele sell the cattle and surplus silage: CB 2.1/213. The cattle and silage sales numbers vary depending on weather conditions: CB 2.1/241. They sell about 100 bales of silage a year: CB 2.1/241.

Pleadings and claims for relief

Procedural background

126. The proceedings were commenced by the summons filed on 17 March 2021. The only claim for relief was for a family provision order.

127. On 5 May 2021 the plaintiff filed a statement of claim. There is some suggestion that the document may have been rejected on that day after the filing attempt had been imprinted on the document, and that the document was re-lodged for filing and was in fact filed on 6 May 2021: T 11-12. Nothing turns on the actual filing date.

128. Barbara filed a defence to statement of claim on 25 May 2021 and the company filed defence on 27 May 2021.

129. Each of Barbara and the company filed amended defences on 10 December 2021.

130. The plaintiffs filed a reply on 29 June 2021.

Claims for relief

131. The primary relief sought in the statement of claim is:

1. declaratory relief that the company holds the claimed property on trust for Michael and or Adele (order 1: CB 1/52) and that Barbara holds the claimed shares on trust for Michael and or Adele: order 4 (CB 1/52); and

2. orders that the company and Barbara convey the claimed property to Michael and Adele (order 2: CB 1/52) and alternatively a charging order: order 3 CB 1/52.

132. The POS cast the plaintiffs’ case as an “estoppel claim” in varying ways including that the plaintiffs seek to enforce the obligation of the deceased:

1. to “transfer the two farms upon his death”: POS[1];

2. that Michael would succeed to “the company’s land (and the company)” on the death of the deceased: POS[6]; and

3. that Michael would succeed to the properties “either through a transfer of the land or a transfer of the shares in the company”: POS[7].

133. The estoppel was framed as one of “proprietary estoppel” by “representation and encouragement” (POS[7],[14],[21],[25], [44(a),(b)]) and by “acquiescence (convention)”: POS[8],[14], [21(d)], [44(c)].

134. I refer to the particular representations below.

135. Dr Mantziaris submitted that:

1. all the conduct relied upon by the plaintiffs is captured under the estoppel by encouragement rubric, but should that case “fall short” in some respect, then estoppel by acquiescence is relied upon: POS[45]; and

2. Equity should not only recognise the promise of the farms, but also the fact that Michael and Adele relied on that promise in the “Inheritance Assumption” (see as the structure for their lives since about 1995 (sic). Their labour on the land, the improvements, the construction of Rossdale House, has improved the value of the land: POS [47].

136. Estoppel by acquiescence is conceptually different from estoppel by convention. As the references to estoppel by convention were not really explored in the case as presented I propose to say nothing further about them.

137. The PCS did not elaborate nor deviate from the casting of the case in the above way.

138. Dr Mantziaris submitted that if successful the plaintiffs would elect the remedies where election is required: POS[50], PCS[116]

139. There is a family provision claim which has been relegated below the principal relief in the statement of claim: CB 1/53. Dr Mantziaris in the POS expressly stated that the family provision claim was cast in the alternative and need only be determined if the plaintiffs failed on the estoppel claim: POS[15].

140. The POS indicate that the estoppel claim is anterior to the determination of any potential action to revoke the letters of administration in relation to the last Will: POS[16]. However, there is no claim in these proceedings to revoke the letters of administration.

141. I say nothing more about that other than to observe that these proceedings have been completed, progressed and heard on the basis that the last Will is a valid testamentary instrument.

The statement of claim

142. The statement of claim is a lengthy document.

Introductory matters

143. The introductory matters pleaded include matters relating to:

1. the parties and relevant family members;

2. the deceased's testaments;

3. the capital structure of the company;

4. the governance of the company;

5. the real property of the company;

6. the enterprises conducted on Rossdale and Gostwyck Flats.

Rossdale Arrangement and the 2000 Gostwyck Arrangement

144. Part G of the pleading describes two forms of arrangement between Michael and Adele and the deceased, namely the 1995 Rossdale Arrangement and the 2000 Gostwyck Arrangement. The pleading of those arrangements (CB 1/67-68[71],[75]) is as follows:

“The 1995 Rossdale Arrangement

71.    In about 1995, the deceased proposed to Michael and Adele orally, and Michael and Adele accepted the proposal, that they should -

(a)    take over farming the land on Rossdale;

(b)    farm it, making improvements to it, as they wish;

(c)    do so at their expense;

(d)    retain whatever profits made;

(e)    pay the Company's outgoings and legal and accounting expenses for Rossdale;

1361. Mr Young submitted that in relation to this case:

1. the deductibility of the amounts paid by the partnership is not determined by the attached labels of "agistment fees" or "rent" pursuant to a contract but rather whether the expenditure is incurred from the business owner's perspective himself, as necessary in the course of earning primary production income, in either an earlier or later income year, from a practical and business point of view, rather than any exact jurisprudential classification of legal rights: PCS page 47/59;

2. it mattered not from a taxation perspective whether the Rossdale Arrangement and Gostwyck Arrangement involved a payment in the context of subjective motive expressed in a family context, that post derivation by the company, amounts might be paid by the company, to the deceased as bonuses, gratuities, directors fee, wages and the like, if in fact Michael and Adele made the payment in the context of grazing cattle and reasonably considered that necessary for carrying on of the partnership business: PCS pages 47-48/59; and

3. a collateral benefit to a family member does not detract from the conclusion the expenditure is "necessarily incurred", save and except if it were "grossly excessive": Ronpibon Tin at 60; Taxation Ruling TR 2006/2 PCS pages 47-49/59.

1362. Mr Young then submitted that:

1. the basis upon which a court may exercise its power to refer a matter to a regulatory authority requires the establishment of "strong prima facie evidence of fraudulent tax evasion" per Handley JA in Page v Vanker [1990] NSWCA 42 or the existence of "a scheme designed to defraud the revenue" (Rafidi v Commonwealth Bank of Australia Ltd [2017] NSWCA 96 per Basten JA at [16]);

2. the Court would not refer a matter unless it thought that the evidence sufficiently disclosed the crime concerned or that further investigation based on that evidence was very likely to do so. The Court is also entitled to take into account other matters, including the utility of a prosecution overall, and the nature of the offence disclosed and its consequences: Paycorp (No 3) per Brereton J at [4];

3. some guidance regarding consideration of referral of papers to ATO is provided by consideration of authorities in the family law jurisdiction. In particular he submitted that the approach of courts is only to refer in the case of “more blatant and substantial irregularities” citing In the Marriage of Malpass & Mayson [2000] FamCA 1253; (2000) 27 Fam LR 288 at [31]; Keskin v Keskin [2019] FamCA 384 at [176] - [178]; and

4. the Court draws a distinction between potential criminal offences as opposed to referral to regulatory authorities in her decision: In the matter of Opal Producers Australia Limited (ACN 112 322 442) [2011] NSWSC 689 (Opal Producers) per Bergin CJ in Eq at [8].

1363. Mr Young qualified the authorities by indicating that on one view Commonwealth courts are more inclined to refer matters to the ATO (citing Paycorp Payment Solutions at [3]) and noting that in family law the proper identification and quantification of liabilities to the ATO goes directly to issues (at least in property cases) relating to the ascertainment of the value and extent of assets available for division between the parties: Keskin v Keskin at [31].

1364. I accept the submissions of Mr Young as to the law.

1365. Further I note that in some instances, where the matters arising or evidence suggests possible criminal conduct there is little choice but to refer the papers to prosecuting or regulatory authorities: e. g. s 316 of the Crimes Act 1900 (NSW). However, in other cases in which the circumstances do not involve the prospect of criminal conduct matters may nonetheless be referred to regulators to ensure that the regulator is aware of conduct about which the Court has deep concern: Opal Producers at [8].

1366. Sometimes the Court will exercise its discretion not to refer papers in circumstances in which the Court is satisfied that the relevant parties have in the context of the hearing acknowledged the gravity of their conduct or there has been some other mitigating circumstances such that the Court is satisfied that “salutary lessons” have been taken on board which the parties will take into account in their future lives, both in business and otherwise: Opal Producers at [9] (discretion exercised not refer papers to ASIC).

1367. On the facts I have set out in the Appendix details of the payments made recorded as “Rent”.

1368. From a tax perspective it is clear that the characterisation of an arrangement is not predicated on the description parties put on it.

1369. It seems to me, without deciding the issue, there is at least an argument that from a “practical and business” point of view the plaintiffs made the payments in the belief that the payments were “necessarily” incurred in carrying on of the farming business on the properties.

1370. Further, it seems to me that once payments were received by the company the fact that the deceased at some point or points drew monies from the company as director’s fees or the like does not detract from an arguable conclusion the payments as expenditure were "necessarily incurred". There was no real suggestion by the defendants that any payments made were "grossly excessive" (see Ronpibon Tin at 60). If anything the defendants disputed that significant payments were made.

1371. In the above circumstances I do not propose to make any order referring the papers in the proceedings to the ATO.

Conclusion

1372. I find that the plaintiffs’ estoppel case is made out.

Orders

1373. I direct the parties to bring in short minutes of order to give effect to these reasons for judgment.

Costs

1374. Mr Simpson on behalf of the defendants indicated that they wish to be heard on the question of costs: DCS[4]. Dr Mantziaris submits the costs should be determined in a separate hearing following judgment: PSSR[4].

1375. In light of those submissions I will agree to that course. Nonetheless, it is appropriate to briefly mention at this stage the fact that at the commencement of proceedings an open offer was made by Mr Simpson on behalf of the defendants.

1376. The offer essentially provided for:

1. Rossdale to be sold with an agreed listing or failing agreement appointment of an independent agent;

2. Gostwyck Remnant to be transferred to Nicholas with the transfer cost and stamp duty paid from the net proceeds of the sale of Rossdale;

3. the plaintiffs to be responsible for the payment of any debt secured by the mortgage to the NAB over Gostwyck Remnant;

4. Barbara to receive from the net proceeds of sale of Rossdale a sum of $1.5M;

5. after the sale of Rossdale and transfer of Gostwyck Remnant all shares in the company to be transferred to the plaintiffs or either of them and for Barbara, Hamish and Mr Saide to resign as officers of the company and the plaintiffs be appointed as officers in their place; and

6. each party to bear their own costs.

1377. The open offer had been formalised in a letter dated 11 September 2022 from Tranter Lawyers to Arnold Lawyers and was tendered becoming exhibit D8: T 332.

1378. Mr Simpson submitted that Barbara was attempting to honour the deceased's wishes as conveyed in the 14 February 2020 meeting and indicated the opening offer on 11 September 2022 reflected that: DCS[34].

1379. In light of the request for the parties to address on the question of costs after delivery of these reasons I say nothing further regarding the offer.

1380. In bringing in short minutes of order the parties should include orders regarding proposed cost orders and provide any evidence regarding costs and brief submissions (no more than five pages) addressing costs.

1381. The orders of the Court are:

1. Direct the parties to submit agreed short minutes of order to give effect to the reasons for judgment, including as to costs, or if there is no agreement between them, their respective draft orders, submissions (not exceeding five pages) and any affidavits by 4:00 PM on 24 November 2022.

2. Adjourn the proceedings to 9:30 AM on 25 November 2022 or such other time as may be arranged with my Associate.

**********

APPENDIX

Year	M & A Partnership Payment	Company income
1998	Nil [1]	$3,780 [2]
1999	Nil [3]	$2,498 [4]
2000	Nil [5]	Nil [6]
2001	$2,500 [7]	$2,500 (recorded as “Rent”) [8]
2002	$6,000 [9]	$6,000 (recorded as “Rent”) [10]
2003	$7,667 [11]	$7,667 (recorded as “Rent”) [12]
2004	Nil [13]	$11,395 (recorded as “Rent”) [14]
2005	$13,762 (recorded as “Rent”) [15]	$13,762 (recorded as “Rent”) [16]
2006	$9,000 (recorded as “Rent”) [17]	$9,311 (recorded as “Rent”) [18]
2007	$5,000 [19]	$5,000 (recorded as “Rent”) [20]
2008	$3,500 [21]	$3,500 [22]
2009	$1,500 [23]	$1,500 [24]
2010	Nil [25]	Nil [26]
2011	$1,642 (recorded as “Rent”) [27]	$1,642 [28]
2012	$2,994 (recorded as “Rent”) [29]	$2,994 [30]
2013	$1,362 (recorded as “Rent”) [31]	$1,362 [32]
2014	$1,459 (recorded as “Rent”) [33]	$1,459 [34]
2015	$2,272 (recorded as “Rent”) [35]	$2,272 [36]
2016	$963 (recorded as “Rent”) [37]	$963 [38]
2017	$993 (recorded as “Rent”) [39]	$993 [40]
2018	$700 (recorded as “Rent”) [41]	$700 [42]
2019	$1,502 (recorded as “Rent”) [43]	$1,502 [44]
2020	$1,267 (record as “Rent”) [45]	$1,267 [46]
Total	$64,083	$82,067

1. CB Vol 4 pp 30, 36

2. CB Vol 4 p 22

3. CB Vol 4 pp 39, 43

4. CB Vol 4 p 45.5

5. CB Vol 4 p 167

6. CB Vol 4 p 151 (see entry for “Rent”)

7. CB Vol 4 p 167

8. CB Vol 4 pp 151, 182

9. CB Vol 4 p 222

10. CB Vol 4 pp 182, 204

11. CB Vol 4 p 222

12. CB Vol 4 p 204

13. CB Vol 4 p 235

14. CB Vol 4 p 248

15. CB Vol 4 p 241

16. CB Vol 4 p 248

17. CB Vol 4 p 261

18. CB Vol 4 pp 281, 293

19. CB Vol 4 p 310

20. CB Vol 4 p 293

21. CB Vol 4 p 310

22. CB Vol 4 p 344

23. CB Vol 4 p 339

24. CB Vol 4 pp 344, 378

25. CB Vol 4 pp 371 (no entry), 419 (see entry for “Rent”)

26. CB Vol 4 pp 378, 406

27. CB Vol 4 pp 419, 468

28. CB Vol 4 pp 406, 455

29. CB Vol 4 pp 468, 517

30. CB Vol 4 pp 455, 504

31. CB Vol 4 p 517

32. CB Vol 4 pp 504, 545

33. CB Vol 4 p 540

34. CB Vol 4 pp 545, 582

35. CB Vol 4 p 577

36. CB Vol 4 pp 582, 626

37. CB Vol 4 pp 639, 667

38. CB Vol 4 pp 626, 682

39. CB Vol 4 pp 667, 714

40. CB Vol 4 pp 682, 704

41. CB Vol 4 pp 714, 769

42. CB Vol 4 pp 704, 757

43. CB Vol 4 p 769

44. CB Vol 4 pp 757, 786

45. CB Vol 4 p 752

46. CB Vol 4 p 786

Endnotes

Decision last updated: 10 November 2022