Humphreys v Humphreys

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL COURT

CIVIL LIST

S CI 2013 06180

PETER HUMPHREYS	Plaintiff
v
LINDA HUMPHREYS	Defendant

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JUDGE:	GINNANE J
WHERE HELD:	Melbourne
DATE OF HEARING:	8-11, 15 March 2016
DATE OF JUDGMENT:	25 October 2016
CASE MAY BE CITED AS:	Humphreys v Humphreys
MEDIUM NEUTRAL CITATION:	[2016] VSC 637

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CONTRACT – Mediated agreements and subsequent agreements to settle family disputes about father’s will – Claim by younger brother against sister that he was misled about the effects of the agreements on his entitlements under the will – Claims in negligence, promissory estoppel, unilateral mistake and breach of fiduciary duty – Claims dismissed

CONTRACT – Mediated agreement and subsequent agreement to settle family disputes about father’s will – Meaning of obligation of the plaintiff to pay ‘all proper estate liabilities’ – Ambiguity – Evidence of objective background facts

EVIDENCE – Whether statement made at mediation was admissible – Evidence Act 2008 s131 (1),(2)(f)(g)(i)

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J Ribbands and Mr T Bevan	T F Grundy
For the Defendant	Mr J Searle	Harry H Hearn

HIS HONOUR:

Mr Peter Humphreys, the plaintiff, and Ms Linda Humphreys, the defendant, are brother and sister.

Their father, Mr David Humphreys, who died on 27 September 2005, was survived by three children, the third being Ms Jennifer Humphreys. Ms Merle Humphreys, his second wife, also survived him.

Linda was the oldest child, followed by Jennifer and Peter. In March 2008, Linda was aged 57, Jennifer 54 and Peter 49.

I will refer to each of the members of the Humphreys family by their first names as that was how they referred to each other in evidence and as counsel referred to them at trial.

Peter had limited schooling and was close to his older sister Linda. However, the evidence suggests that he was not without some business skills. Linda has conducted or been involved in businesses.

Their father, David, earned much of his livelihood from the 1950s from a saw milling and timber business in East Gippsland.

The Plaintiff’s Claims

Peter’s claims against Linda arise out of mediation agreements to resolve proceedings brought by Jennifer under Part IV of the Administration and Probate Act1958 and related subsequent proceedings against the estate. Those claims were mediated and agreements in writing reached. Peter brings claims against Linda in negligent misrepresentation, promissory estoppel, unilateral mistake and breach of fiduciary duties arising from his entry into two agreements at a mediation. He seeks rectification of the second agreement, and partial rescission of that agreement, as between him and Linda.

Linda denies Peter’s claims and commenced a counterclaim against him arising out of the provisions of the ‘Bayswater agreement’ made in November 2008 concerning a property owned by the deceased in Bayswater. Peter disputes Linda’s claims.

Background
David Humphreys’ will

Mr David Humphreys made a will dated 5 March 2003 and a codicil dated 7 April 2005. He appointed Merle, Peter and Linda to be joint executors of his will. Probate of his will and codicil was granted on 3 March 2006.

By order of 10 February 2012, made by consent, Merle was discharged as an executor.

The inventory of his assets and liabilities, prepared for probate in January 2006, recorded estate assets of $1,458,181.29 and no liabilities. The estate mainly consisted of real estate in Victoria and Queensland, cash in several bank accounts, a boat and a Mercedes Benz motor vehicle. The real estate assets of the estate included ownership of, or an interest in, the following properties:

(a) a shop and land at 94 Wilsons Road, Mornington (‘the Mornington property’);

(b) a yard at 373 Bayswater Road, Bayswater North (‘the Bayswater property’);

(c) a factory and land 8 Wise Avenue, Seaford (‘the Seaford property’);

(d) land at 49 The Esplanade, Tin Can Bay, Queensland (‘the Tin Can Bay property’); and

(e) a house and land at Tamboon South, in Gippsland (‘the Tamboon property’).

The Bayswater property and all its rental proceeds were left to Merle for life subject to certain conditions and upon her death to Peter absolutely. The half share in the Seaford property was left to Linda. The Mornington property was left to Peter. The Tamboon property was left to Peter and licence agreements which concerned the Tamboon property were assigned to him. A boat was left to Peter. The residue of the estate was to be divided between Peter, Linda and Jennifer, or if they had died in testator’s lifetime, leaving a child or children, ‘such child or children shall take and equally among them and if more than one the share in my estate which their parent would have taken’.

David Humphreys executed a codicil to his will, in which he severed a joint tenancy with Merle in respect of the Tin Can Bay property. He gave Merle a life interest in his interest in the property and thereafter bequeathed his interest in the property to Peter and Linda in equal shares as tenants in common.

The financial effect of David’s will was that Peter was left 72% of the estate, Linda 17%, Merle 8%, although she also received life interests, and Jennifer 3%.

Jennifer Humphreys’ first Supreme Court proceeding - No 7751 of 2006

On 26 July 2006, Jennifer issued a Supreme Court proceeding in which she sought a greater share of her father’s estate under Part IV of the Administration and Probate Act 1958 (‘the Part IV proceeding’). The Court ordered that the Part IV proceeding be referred to mediation. The parties held a mediation on 18 May 2007, but it did not settle the proceeding.

On 1 June 2007, Mr Charles White, solicitor of Lardners Solicitors, the estate’s solicitors wrote to Jennifer’s lawyers, Harding and Co Lawyers, making an ‘without prejudice save as to costs’ offer to settle the Part IV proceeding. On 14 June 2007, Harding and Co responded to Mr White’s letter saying: ‘We are instructed to advise you on behalf of Jennifer, that the offer is accepted.’[1] Despite this exchange, the settlement ‘fell over’, because of issues with the allocation of the Mornington property.[2] The evidence suggested that Peter wished to maintain the bequest to him of that property.
[1]Court Book (‘CB’) 207-209.
[2]Transcript of Proceedings, Humphreys v Humphreys (Supreme Court of Victoria, S CI 2013 06180, Ginnane J, 8-11 and 15 March 2016) (‘T’) 16, 94-96.

Jennifer Humphreys’ second Supreme Court proceeding – No 9778 of 2007

On 4 December 2007, Jennifer commenced a second Supreme Court proceeding (‘the second proceeding’) seeking a declaration to enforce the agreement arising from her acceptance of the letter of 1 June 2007 and seeking the removal of the executors.

The Mediation of 27 March 2008

Pursuant to Court order, a second mediation occurred on 27 March 2008 in both Jennifer’s first and the second proceedings.

The mediation took place at the Carrum Downs offices of Taylor Splatt, solicitors for Merle and lasted all day until 7.30 in the evening. There were many lawyers present representing the parties. The mediator was Mr H Jolson QC. Peter was represented in his personal capacity by Mr R Cook of counsel and Mr James Lardner, solicitor. Merle was represented in her personal capacity by Mr R Miller, barrister and Mr N Roberts, solicitor. Jennifer was represented by Mr P Nash QC and Mr P Harding, solicitor, together with another solicitor. The executors were represented by Mr R Wells, barrister and Mr Charles White, solicitor. Linda was not legally represented.

The estate was land rich, but cash poor. At the time of the mediation, the Seaford property had been sold for net proceeds of $160,157.25. The Mornington property had been sold and awaited settlement when the amount of $250,537.98 was realized. The Bayswater property had not yet been placed on the market for sale. The estate bank account balance was $206,000, being primarily the proceeds of the sale of the Seaford property.

The three executors received a schedule prepared by Mr White, solicitor, listing the assets of the estate.

Jennifer had already received $50,000 to pay legal fees and Peter had received $50,000 to pay bills.[3]
[3]T 101.

The main issue, at least initially, at the mediation was what amount Jennifer would accept to settle her Part IV claim and the second proceeding. Two and a half years had passed since David’s death. Jennifer required the Tamboon property and a financial settlement,[4] but Peter did not want to part with Tamboon. Merle wanted to finalise her involvement in the estate. She had a life interest in the Bayswater property and was prepared to surrender that in exchange for the remaining interests in the Tin Can Bay property.
[4]T 301.

Mr White gave evidence that during the mediation there was much discussion to and fro, but there was no dispute about the value of the properties. Several offers were made and written on a blackboard.

Two written agreements were prepared, both of which were signed by the three executors. The first agreement was headed ‘Terms of Settlement’, with a heading that included the proceeding number of both of Jennifer’s Supreme Court proceedings. By its terms, Jennifer was to receive:

(a)Any advances made to her by way of interim provision from the Estate to date of the terms of settlement. [She had received $65,000].

(b)       The Tamboon property.
(c)       The sum of $200,000.
(d)      The sum of $50,000 in respect of her costs.

The payments were to be made within 60 days of 27 March 2008.

Many of the issues in this case arose from the terms of the second agreement. In a substantial sense, its terms were inter-connected with those of the first agreement as both concerned the redistribution of the estate. Peter described how the estate’s properties were divided during the mediation as follows. The name of each property was written on a blackboard and, as they were assigned to the beneficiaries, the name of the beneficiary to receive the particular property was written next to each property, which was then struck off the list.[5]
[5]Linda (T 299) and Mr White (T 175 and 181) also recalled the blackboard(s).

The second agreement contained the following terms:

THE REAL ESTATE IN SPECIE
1.THE DECEASED’S ½ SHARE IN TIN CAN BAY BE TRANSFERRED TO MERLE PLUS $57 000 PLUS 92 000 PLUS COSTS OF $50 000 OF WHICH $19 000 HAS BEEN PAID. TOTAL $180 000 INCLUSIVE OF THE COSTS WITHIN 90 DAYS.
2.THE DECEASED’S ½ SHARE OF SEAFORD AND THE LUMP SUM OF $75,000 BE PAID TO LINDA WITHIN 90 DAYS.
3.THE DECEASED’S INTEREST IN TAMBOON — SUBJECT TO LICENCES — AND THE SUM OF $235 000 INCLUSIVE OF ALL HER COSTS, SUCH SUM TO BE IN ADDITION TO PREVIOUS DISTRIBUTIONS MADE TO HER BE PAID TO JENNIFER WITHIN 90 DAYS.
4.THE DECEASED’S INTEREST IN MORNINGTON AND THE LUMP SUM OF $24 300 BE PAID TO PETER WITHIN 90 DAYS.

THE REST AND RESIDUE OF THE DECEASED’S ESTATE SHOULD BE DISTRIBUTED AS FOLLOWS:-
5.(A) IN PAYMENT OF ALL PROPER ESTATE LIABILITIES INCLUDING BUT NOT LIMITED TO ACCOUNTING AND TAXATION COSTS AND THE LEGAL COSTS AND DISBURSEMENTS OF THE ESTATE AND OF EACH OF LINDA AND PETER PERSONALLY (THE QUANTUM OF ALL SUCH COSTS TO BE SUBSEQUENTLY AGREED BETWEEN PETER AND LINDA’S SOLICITORS).
(B) THE BALANCE OF THE ESTATE INCLUDING BAYSWATER BE EQUALLY DIVIDED BETWEEN PETER AND LINDA.
6.PETER SHALL RELEASE CHARLES WHITE AND LARDNERS FOR ANY LIABILITY CONNECTED WITH THE SUBJECT MATTER OF EITHER LEGAL PROCEEDINGS. [6]

[6]CB 237. The solicitors were paid $30,000 in accordance with clause 5(A).

A page was attached to the second agreement on which was written:

EACH OF THE PARTIES, MERLE, LINDA AND PETER PAY $5,000 TOWARDS JENNIFER’S COSTS.

The amount of $24,300 referred to in clause 4 of the second agreement was the same amount as Linda and Jennifer had received as executors’ commission.[7]
[7]T 107.

During cross-examination, Mr White said that the Terms of Settlement and the second agreement were drafted through a process of negotiation. He said that the figures recorded in the second agreement were ‘bandied about between the respective counsel that were circulating around the rooms’ and agreed that the exercise could be characterised as ‘shuttle diplomacy’.[8]
[8]T 171.

Peter’s case is founded, in part, on a statement alleged to have been made by Linda late in the day near the end of the mediation when the Bayswater property was being discussed. In his Third Amended Statement of Claim this statement is pleaded as:

[The plaintiff], you and I are joined at the hip. Let’s put the remaining properties into our joint names and we will work it out later.[9]

During cross-examination, Peter agreed that the statement only related to the Bayswater property.[10] He gave evidence that Linda said:

[The plaintiff], you and I are joined at the hip. Let’s just put Bayswater into our names and we will work it out later.[11]

[9]Third Amended Statement of Claim, [10] particulars.

[10]T 227 and T 276.

[11]T 227.

Peter gave the following evidence about this part of the mediation:

Counsel: What else happened? What else was on this list of properties, can you remember?
Plaintiff: Then they mentioned the Bayswater property. I was sitting with Linda. When they mentioned the Bayswater property, Linda looked at me and said, "We are joined at the hip. Let's just put it in our names, that property, and we can work it out later." …
Counsel: This here says, "The balance of the estate, including Bayswater, be equally divided between Peter and Linda", right?
Plaintiff:That's right. That was for us to work out at a later date.

Counsel: What time of the day are we at now?
Plaintiff: We got out of there at 7.30 at night.
Counsel: Any idea what time of the day we're having this discussion about, "We'll work it out later"?
Plaintiff: We were winding up the remaining properties. Jenny got the Tamboon property. The other properties, this is what was done just to finalise the day.
Counsel: So in terms of the time of the day, do you have any recollection as to when it was Linda had this discussion with you about, "We'll work it out later"? …
Plaintiff: It was very late in the day because I remember Rick Wells had to get going and this was written down and there was quite a bit of paperwork going on. Yeah, we were to work it out later. That was the way it was.
Counsel: Let me ask you this: you told us your signature appears on this particular page?
Plaintiff: Yes.
Counsel: After you signed this page, was there anything else done at this mediation meeting?
Plaintiff: That was it. We all took off.[12]

[12]T 109 - 110.

Peter alleged that this statement induced him to enter the second agreement.

Linda said that she did not recall making the comment ‘You and I are joined at the hip. We’ll put the remaining property in our joint names and sort it out later.’[13] She understood that clause 5(B) of the second agreement meant what it said.
[13]T 303.

I accept that Linda made a statement in the terms mentioned in the previous paragraph, although Linda may have specifically mentioned the Bayswater property. Peter clearly recollected the making of the statement or words to its effect and it was important to him. Linda’s memory about the occurrence of this conversation appeared uncertain.

I conclude in a later section of this judgment, although this statement was made during a court ordered mediation, it was admissible. However, the fact remains that, whether or not the statement was admissible some months later in November 2008, Peter and Linda did discuss the Bayswater property and reached an agreement about its distribution. They did, as a matter of fact, ‘sort it out later’, although, of course, Peter contends that Linda’s conduct conferred on him causes of action and an entitlement to damages.

Assessment of Peter and Linda’s evidence

I will state my conclusions at this point about my general impressions of Peter’s and Linda’s evidence. The only other witness was Mr Charles White, solicitor and it was not suggested that his evidence should not be accepted.

Peter’s counsel portrayed him as an unsophisticated individual who had a naïve simplicity that was evident. He was an honest witness. He clearly felt wronged by his sister’s conduct, but was not bitter. His memory of the making of the agreement and the order of events was good, particularly of what was said. Linda was a meticulous witness and had managed her own affairs as an investor and landlady. She took over the de facto management of the estate and was well aware of the estate finances. When it suited her she showed recall, but when it did not she was unable to do the most basic arithmetic.

Linda submitted that the reliability of Peter’s evidence was affected by his desire to regain all his entitlements under his father’s will.

It is important to keep in mind that Peter and Linda were attempting to give evidence of events and conversations of more than seven years ago. As has been wisely said:

human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious considerations of what should have been said or could have been said. All too often what is actually remembered is little more than impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.[14]

[14]Watson v Foxman (1995) 49 NSWLR 315, 319 (McLelland CJ in Eq).

I have therefore exercised caution in accepting any evidence of the precise terms of oral conversations.

However, on the key conversations, I have on a number of factual issues, but not all, preferred Peter’s evidence to Linda’s. He impressed me as having had a clearer recollections of the particular conversations on which I have accepted his evidence, perhaps because they were particularly important in his decision to relinquish some of his entitlements under the will.

The other matter to note in respect of witnesses’ evidence is that, other than Mr White, none of the barristers or solicitors who took part in the mediation gave evidence.

Admissibility of evidence

It is next necessary to rule on the admissibility of the ‘joined at the hip’ statement that I have found that Linda made to Peter. This issue requires some detail of the relevant law, although as I have stated, the fact remains that Peter and Linda did later ‘sort out’ the distribution of the Bayswater property.

Linda contended that any communications made at the mediation were ‘without prejudice’ and inadmissible.

In final submissions[15] Linda’s counsel relied only on s 131(1) of the Evidence Act 2008 (‘Evidence Act’).
[15]Previously the defendant had relied on Rule 50.07(6) of the Supreme Court (General Civil Procedure) Rules 2015 and s 24A of the Supreme Court Act 1986. Neither Rule 50.07(6) or s 24A could operate to exclude the statement: Rule 50.07(6) was revoked by rule 5(1) of the Supreme Court (Chapter I Amendment No. 25) Rules 2011 and no longer applies. Similarly, as Kyrou J accepted in Simply Irresistible Pty Ltd v Couper [2010] VSCA 505 [12]-[13], the prohibition on the admission of evidence in s 24A is confined to the admission of evidence at the hearing of the proceeding referred to mediation by the Court, and need not apply to any later proceeding. See also, Shot One Pty Ltd v Richard Day [2015] VSC 139 [21]; Feiglin v Ainsworth (No. 2) [2013] VSC 83 [47].

Ruling that evidence could be led, subject to objection

On the first day of the trial, I ruled that the answer to the question of whether the statement was admissible would, at least in part, turn of the context that existed when the statement was alleged to have been made and on the evidence of the parties. In those circumstances, I considered that the appropriate course was to allow the evidence to be led, subject to objection and deal with issues of admissibility in this judgment.

Section 131

Section 131 of the Evidence Act relevantly provides:

131 Exclusion of evidence of settlement negotiations
(1)   Evidence is not to be adduced of—
(a)   a communication that is made between persons in dispute, or between one or more persons in dispute and a third party, in connection with an attempt to negotiate a settlement of the dispute; or
(b)   a document (whether delivered or not) that has been prepared in connection with an attempt to negotiate a settlement of a dispute.

(2)   Subsection (1) does not apply if—
…
(f)     the proceeding in which it is sought to adduce the evidence is a proceeding to enforce an agreement between the persons in dispute to settle the dispute, or a proceeding in which the making of such an agreement is in issue; or
(g)   evidence that has been adduced in the proceeding, or an inference from evidence that has been adduced in the proceeding, is likely to mislead the court unless evidence of the communication or document is adduced to contradict or to qualify that evidence; or
…
(i)     making the communication, or preparing the document, affects a right of a person; or
…

(5) In this section—
(a) a reference to a dispute is a reference to a dispute of a kind in respect of which relief may be given in an Australian or overseas proceeding;

…

The Parties’ Submissions

Linda submitted that the statement was clearly a communication between ‘persons in dispute’, being Peter and her, or ‘between one or more persons in dispute and a third party’, being either Merle or Jennifer The ‘dispute’ was said to be either of the Supreme Court proceedings or a ‘dispute’ between Peter, Linda and Merle as to the division of the Estate. Linda also contended that the statement was made ‘in connection with an attempt to negotiate a settlement’ of the Part IV claim, because the resolution of Jennifer’s claim could not logically occur without the other three beneficiaries deciding how much to give up to satisfy it. Linda also submitted that her evidence, and that of Peter and of Mr White showed that the Terms of Settlement and the second agreement were signed at the same time and were co-dependant.

Peter submitted that the statement may be led, because there was no ‘dispute’ within the meaning of s 131(1)(a) of the Evidence Act. He said that the only justiciable disputes being addressed at the mediation were the Supreme Court proceedings and that Peter, Linda and Merle, in deciding how to divide the rest of the estate, took a commercial common sense step, in advance of any dispute between them. Peter also suggested that, so far as he and Linda were concerned, there was no entitlement on anyone’s part to sue or seek relief in a proceeding at the time of the mediation. The limitation period for any Part IV claim which could have been made by Linda or Merle had long expired.[16] In short, Peter submitted that any discussions which occurred between him, Linda and Merle as to the division of the Estate between them were not involved with the resolution of the disputes with Jennifer. In the event that s 131(1)(a) applied, Peter relied on the exceptions in s 131(2)(f), (g) and/or (i).
[16]T 509.

Section 131(1) is to be interpreted and applied having regard to the object it is designed to achieve; that is, to enable free, genuine and realistic attempts to compromise litigation.[17]
[17]Field v Commissioner of Railways (1957) 99 CLR 285,291-2.

Does s 131(1)(a) apply?

To be excluded by operation of s 131(1)(a), the statement must have been ‘made between persons in dispute, or between one or more persons in dispute and a third party, in connection with an attempt to negotiate a settlement of the dispute.’

Were the parties ‘in dispute’?

In s 131(1)(a), ‘a reference to a dispute is a reference to a dispute of a kind in respect of which relief may be given in an Australian or overseas proceeding’.[18] That is, leaving aside the overseas element, ‘a proceeding (however described) in an Australian court.’[19] There must be a dispute present.[20]
[18]s 35(5)(a) Evidence Act.
[19]Dictionary, Evidence Act.
[20]Biovision v CGU Insurance Ltd [2010] VSC 589.

In considering the question of whether there is a qualifying dispute, it is not necessary that relief be available at the time a communication is made, only that it may be given by a court in due course.[21] Additionally, several authorities make clear that the protection offered by s 131(1) extends beyond the existing proceedings to all disputes, as defined.[22]
[21]Brown v Commissioner of Taxation (2001) 187 ALR 714, 751.
[22]See, Korean AirlinesCo Ltd v Australian Competition And Consumer Commission (No 3) (2008) 247 ALR 781, 788 [67]-[69] (‘Korean Airlines’).

Much evidence was given without objection about the time at which of the Terms of Settlement and the second agreement were drafted and signed during the mediation[23] and the connection between the two agreements.[24] Counsel for Linda attempted to show that she and Peter were ‘persons in dispute’ because they needed to agree the terms of the second agreement before they could resolve Jennifer’s claims by signing the Terms of Settlement. Their ‘dispute’ was said to be over the division of the estate under the second agreement to facilitate the settlement of Jennifer’s claims. Counsel for Peter endeavoured to show that he and Linda were on the same side of the dispute with Jennifer, and, therefore, not in dispute with each other.
[23] T 102 -104, 104 -105, 225, 226, 182-183, 302-23, 351.
[24]T 241, 172, 182-183.

In my view, the expression ‘a communication that is made between persons in dispute’ in s 131(1)(a) is capable of referring to a communication between participants in a dispute who are on the same side of a qualifying dispute. The words of s 131(1) suggest that it is intended to have a wide application. Communications are prohibited if they are made between ‘persons in dispute’. Further, the subclause in paragraph (a) extends the prohibition to communications made ‘between one or more persons in dispute and a third party’. Similarly, s 131(1)(b) applies to any document (whether delivered or not) that has been prepared in connection with an attempt to negotiate a settlement of a dispute; not only a document written or sent to, for example, party A who sues party B. Excluding evidence of communications made between party A and party B, each of whom is ‘in dispute’ with party C at a mediation is, in my view, consistent with the rationale of s 131 – that is, to enable free, genuine and realistic attempts to compromise litigation.

Therefore, I consider that the Peter and Linda, were ‘persons in dispute’ at the mediation.

‘In connection with an attempt to negotiate a settlement of the dispute’

The second question to be answered in determining whether s 131(1)(a) applies to the statement is whether it was made ‘in connection with an attempt to negotiate a settlement of the dispute’ between the beneficiaries. In order to attract s 131(a), the statement must have a direct connection with bringing about a settlement of the dispute.[25]
[25]Korean Airlines (2008) 247 ALR 781.

The phrase has two aspects. First, what constitutes an ‘attempt to negotiate a settlement’ and, secondly, what is required by the words ‘in connection with’? [26] As has been noted, the word ‘negotiate’ means to arrange for or bring about a settlement.[27] In order to attract s 131(1)(a), the statement must have a direct connection with bringing about a settlement of the dispute. As I have previously mentioned, the statement in present contention was, on Peter’s evidence, made at the end of a long day of mediation between the beneficiaries. Very little, if any, further negotiation occurred after the statement was said to have been made. The evidence suggests that the second agreement was signed immediately afterwards. What was being said and done at that stage of the mediation was, in Peter’s words, ‘done just to finalise the day’.
[26]Stephen Odgers, Uniform Evidence Law in Victoria (Lawbook Co, 2^nd Ed, 2013) 763; Galafassi v Kelly (2014) 87 NSWLR 119, 114 [115].
[27]Barrett Property Group Pty Ltd v Dennis Family Homes Pty Ltd (No 2) (2011) 193 FCR 478.

This evidence demonstrates that the statement had a direct connection with bringing about a settlement of the dispute. Indeed, it is said to have been made a critical point in the negotiations. The statement was not a mere assertion of fact, or of one party’s position, but rather a statement with the apparent intention of finalising the negotiations. As such, I consider that the statement was made ‘in connection with an attempt to negotiate a settlement of the dispute’ between the beneficiaries.[28]
[28]Indeed, the plaintiff submitted that: ‘clause 5(B) of the Agreement was intended to be an efficient means of concluding a long mediation, leaving it to the plaintiff and defendant to wind up the Estate subject to further adjustments, bearing in mind they were not warring parties.’ (Plaintiff’s written submissions p. 2).

Conclusion

The statement was made during a formal mediation, designed to avoid further litigation, at which all of the parties other than the Linda were legally represented. The purpose of the mediation was to resolve the disputes with Jennifer, and the resolution of these disputes necessarily involved the adjustment of the remaining beneficiaries’ respective shares of the estate. All of the beneficiaries were in dispute. The evidence as to the timing and nature of the statement also establishes that it was directly connected to bringing about a resolution of the disputes at the mediation; it was said to have been made at the end of a long day of difficult negotiations. The second agreement, which was said to have been ‘co-dependant’ with the Terms of Settlement with Jennifer, was signed around the time the statement was made. This was the last action taken at the mediation.

I consider that the statement in issue is the type of evidence that directly engages s 131(1). In my opinion, communications made in circumstances such as in the present case – that is, in connection with an attempt to resolve disputes at a formal mediation, where multiple lawyers are present and the terms of settlement are formally recorded in writing – fall squarely within the provision. This finding is consistent with the rationale for s 131(1), and without prejudice privilege at common law, in that these are precisely the circumstances in which parties to a dispute intend to ‘communicate with each other freely and without embarrassment … so that their negotiations to avoid litigation or to settle it may go on unhampered.’[29]
[29]Field v Commissioner for Railways (1957) 99 CLR 285, 291-2.

I therefore consider that s 131(1) of the Evidence Act applies to the statement and, prima facie, prohibits it from being adduced as evidence.

Exceptions to s 131(1)

The prohibition on adducing evidence of settlement negotiations is not absolute. Section 131(2) of the Evidence Act contains a number of exceptions. Peter relied on each of the exceptions in s 131(2)(f), (g) and (i).

Section 131(2)(f)

Peter submitted that the exemption in s 131(2)(f) applied because the proceeding was one in which the making of the second agreement was in issue.[30] Peter alleged that the second agreement was not the entire agreement between the beneficiaries to the estate and suggested that the statement also formed part of the agreement.[31] He also claimed rectification of clause 5(B) in light of the statement. In contrast, Linda submitted that the making of the second agreement was not in issue and pointed out that Peter brought no cause of action based in contract.
[30]The plaintiff relied on Asciak v Australian Secured and Managed Mortgages Pty Ltd [2008] FCA 573.
[31]T 513.

In my opinion, Peter is not seeking to enforce the second agreement in accordance with its terms. Instead, he seeks rectification and estoppel. Neither party denies that they reached an agreement during the mediation; consequently, the fact of the making of the second agreement is not in issue. I consider that s 131(2)(f) does not apply to permit the statement to be adduced as evidence.

Section 131(2)(g)

Peter submitted that the exception in s 131(2)(g) applied for similar reasons to s 131(2)(f). He stated that if evidence of the statement was inadmissible, the Court would be misled into thinking that the document recording the second agreement represented the entirety of the agreement between the beneficiaries.[32]
[32]T 513 -514.

Several cases have suggested that the source or origin of s 131(2)(g) is the common law principle articulated in Pitts v Adney.[33] The authorities make clear that section 131(2)(g) applies where application of the prohibition in s 131(1) would allow a party to use the cloak of privilege to hide the truth and mislead the court.[34] For the exception in s 131(2)(g) to apply, the opposing party must be attempting to make some inappropriate use of the prohibition in s 131(1).
[33](1961) 78 WN (NSW) 886, Brown v Commissioner of Taxation (2001) 187 ALR 714, 751 and Simply Irresistible Pty Ltd v Couper [2010] VSCA 505..
[34]Barrett Property Group Pty Ltd v Dennis Family Homes Pty Ltd (No 2)(2011)193 FCR 479, [47].

Peter submitted that the second agreement is the evidence which would be likely to mislead the Court, if s 131(2)(g) does not apply to permit the statement to be adduced. However, Linda is not asserting a case that is inconsistent with the statement having been made. In her oral evidence, she said she could not recall making it.[35] Her case is that, even if the phrase ‘you and I are joined at the hip. Let’s put Bayswater into our joint names and we will work it out later’ was said, it cannot support Peter’s claims.
[35]T 303.

Linda is not attempting to make some inappropriate use of the prohibition in 131(1). Therefore, s 131(2)(g) does not apply.

Section 131(2)(i)

Peter also relied on the exception in s 131(2)(i), stating that the making of the statement affected his rights.[36] Linda, on the other hand, submitted that no right of Peter was affected.
[36]He submitted that the rights affected were those under the secondary agreement: T 517.

It is clear is that in order for s 131 (2)(i) to apply, the making of the communication must have legal consequences for the rights of a person.[37] It is not sufficient that the communication is relevant to a right; rather, for s 131(2)(i) to apply, actual rights must be affected in some fairly direct way.[38]
[37]Liu v Fairfax Media Publications Pty Ltd [2012] NSWSC 1352, 567 [123], citing in Ryder v Frohlich
[38]Asciak v Australian Secured and Managed Mortgages Pty Ltd [2008] FCA 753, [34].

In Unilever plc v Procter & Gamble Co,[39] Walker LJ, dealing with the position at common law stated:
[39][2001] 1 All ER 783.

there are numerous occasions on which, despite the existence of without prejudice negotiations, the without prejudice rule does not prevent the admission into evidence of what one or both of the parties said or wrote. [40]
[40]Ibid, 791.

Walker LJ then listed eight common law exceptions to the without prejudice rule. The exceptions most relevant to the interpretation of s 131(2)(i) were described as follows:

(2)Evidence of the negotiations is also admissible to show that an agreement apparently concluded between the parties during the negotiations should be set aside on the ground of misrepresentation, fraud or undue influence…
(3) Even if there is no concluded compromise, a clear statement which is made by one party to negotiations, and on which the other party is intended to act and does in fact act, may be admissible as giving rise to an estoppel…[41]

[41]Ibid, 792.

I consider that for present purposes, Linda’s statement upon which Peter relies did directly affect his rights in the sense contemplated by s 131(2)(i). Peter’s claims against Linda include negligent misrepresentation and promissory estoppel. The statement formed part of the basis for his claim in misrepresentation and promissory estoppel, whether or not those claims are ultimately successful. Unless the exception applied, Peter would be unable to make the two claims that I have mentioned.

Conclusion on admissibility

I consider that the statement is excepted from the prohibition on admissibility by reason of s 131 (2)(i).

The effect of the second agreement

Under the second agreement, Peter had to give up the Mornington property, the Tamboon property and part of the Bayswater property. Merle received the other half interest in the Tin Can Bay property. Linda received half the value of the Seaford property, one quarter of the Tin Can Bay property and a third of the residue. The effect of the two agreements was that the estate property was to be distributed as follows:

a. Clause 1: Jennifer to receive the Tamboon property and $250,000;
b.Clause 2: Linda to receive a half share of the Seaford property and $75,000;
c.Clause 3: Merle to receive the Tin Can Bay property and $199,000;

d. Clause 4: Peter to receive the Mornington property and $24,300; and
e.Clause 5: Peter and Linda to receive the Bayswater property and the residuary estate equally.

The funding of the payments due under the mediation agreements

The financial obligations imposed by the two mediation agreements were the distribution of $514,300 within 90 days, together with $165,000 being the Seaford proceeds and $265,000 being the Mornington proceeds within 90 days.

Peter gave evidence that there was no discussion of the source of the money required to pay Merle’s or Jennifer’s entitlements under the second agreement.[42] Linda, who lived in Hobart, had managed the estate bank accounts and Peter said that he did not have a clear idea of how much money was available. But, he believed that the money required to settle claims would come from moneys in the estate bank accounts or held on behalf of the estate in Mr White’s trust account. The estate assets and the terms of the settlement were written on the blackboard.[43] Peter agreed that he knew the value of the properties that formed the estate and as an executor had received valuations of them.[44]
[42]T 106, 232.
[43]T 217.
[44]T 216-7.

He accepted that Jennifer was in need and that provision needed to be made for her, that her claims had to be resolved and once that had occurred, they would reach agreement amongst themselves about the distribution of the remainder of the estate.[45]
[45]T 204-5, 225.

In evidence in chief, when asked if he had any idea as to the amount of money that the estate might have had that could have been given or offered to Jennifer, he said that:

I knew there was a bit in there. There was a few quid. I’m not too sure how much was there exactly, but there was a fair bit of cash as far as I was concerned.[46]

[46]T 100.

In cross-examination, Peter confirmed that he knew that was some money in the bank and that Linda did say at the mediation that ‘we had a lot of money in the bank.’[47] She said that ‘we’ve got enough…there…to solve Jenny’s claim.’[48] ‘We can do this, don’t worry about Tamboon, you’ll get it back.’[49]
[47]T 209.
[48]T 219.
[49]T 220.

Linda gave evidence that she asked Mr White whether the mediation agreement was ‘okay’ to sign and he had answered ‘yes’. Mr White said that ‘Linda never asked me anything’,[50] but he did not deny that Linda may have sought confirmation from him that the estate had enough money to meet the commitments.[51] However, I do not accept that he gave any assent to the appropriateness of the terms of the agreements.
[50]T 184.
[51]Ibid.

It was put to Linda in cross-examination that she did not tell Peter that he would not receive Mornington because of the financial commitments under the mediation agreements.[52] She said that she did not believe that she misled Peter. The three executors were in the room and they all signed the documents.[53] She did not tell him that the agreement would ‘fall over’ if Mornington was not available to fund the settlement. [54]
[52]T 388–9.
[53]T 409.
[54]T 391.

Linda gave evidence that there was no alternative but to use the proceeds of the sale of Mornington and Seaford to pay out Jennifer’s entitlements under the settlement agreement. Peter did not dispute that proposition. Linda said that there was no discussion about how cash payments would be funded other than that they were going to come from the funds in the estate bank account.

On any view, once Merle, Peter and Linda agreed that Jennifer would receive more money from the estate than had been left to her under the will, a new distribution of the remaining estate assets was required.

After the mediation

The Mornington property settlement occurred on 8 April 2008, and the proceeds were used to pay Merle and Jennifer their entitlements under the settlement agreements. Peter did not receive the Mornington property and Linda did not receive the Seaford property or her $75,000.

In the second half of June 2008, Peter rang Linda and asked where the money from the Mornington property was and when he would receive it. Linda’s evidence was that she told him that the money had been used to pay out Jennifer. She told him words to the effect:

Peter, our money has gone because Merle and Jenny had to be paid and those payments have been made. We get our money when Bayswater settles.[55]

[55]T 305.

I accept Linda’s evidence of this conversation with Peter.

Peter’s position was that he was entitled to the proceeds of the sale of the Mornington property and that he was not going to lose ‘my Tamboon property and then lose the Wilsons Road property as well, no way known.’[56] However, the evidence suggests that Peter understood and accepted that Jennifer and Merle had to be paid the amounts due to them under the second agreement[57] and that, by about June 2008, he knew that the proceeds of sale of the Mornington property had been used to fund the payments due to them.[58]
[56]T 111.
[57]T233.
[58]T 233-4.

The Bayswater agreement of November 2008

The Bayswater property was sold by the estate for $1.65 million.

In November 2008, Peter and Linda spoke on the telephone about the Bayswater property. There was some confusion in the evidence about the date of this conversation, but nothing turns on that. Peter’s evidence was that he told Linda that he required $1.1 million from the proceeds of sale and that she could have $500,000. He said ‘Will you take $500,000, I need the extra to buy Tamboon back from Jenny.’ Peter was interested in regaining Tamboon. Linda said she replied, ‘Make it $600,000 and you take over the liabilities’ and said, referring to the second agreement, that she owned half of the Bayswater property. Peter replied, ‘No you don’t, not in the will.’ He asked her, ‘What about dad’s will? What about what dad wanted?’ Linda replied to him, ‘That went out the window when Jenny contested the will.’[59] He replied, ‘That’s just not right. We were supposed to sort this out.’ He thought that, as he had given up his Tamboon property and was still waiting to be paid for the Mornington property, it was not right for Linda to take half of the Bayswater property. Peter described the discussions as heated.[60]
[59]T 115.
[60]T 116.

Linda told Peter that he could have $1 million from Bayswater and she would receive $600,000 provided he took on all the liabilities of the estate, including ‘taxes and whatever’.[61] He said that he asked Linda how much the estate owed and she said that Mr White’s bill, which was around $2,500 to $3,000, had to be paid. She did not tell him about ‘other big sums for taxes or other debts’ owed by the estate.[62] Peter said that he paid Mr White.[63]
[61]T 116.
[62]T 117.
[63]T 262.

Peter agreed in cross-examination that Linda said to him that she was entitled to half of the proceeds, in accordance with the terms of clause 5(B) of the second agreement. He said: ‘That’s – that’s when – when I thought that was very unfair.’[64] Peter said he was angry about Linda’s assertion,[65] but explained that he ‘owed [Linda] money from [the Bayswater] property.’[66] Peter also considered that he owed Linda some money because, under the settlement agreements, she had lost her interest in the Tin Can Bay property.
[64]T 246-7.
[65]T 282.
[66]T 112.

In contrast, Linda’s evidence was that on or about 12 November 2008, she and Peter discussed the distribution of the sale proceeds from the Bayswater property. She said that Peter asked her to take $500,00 because he wanted to buy back the Tamboon property. In response, she said ‘Peter, make it 600 [thousand]’.[67] She asked him to take on the estate liabilities and she asked for the agreement to be ‘written up’.[68] She said that she mentioned estate liabilities of $65,500 comprising Mr White’s fees of $25,000, taxation debts of $40,000 and the insurance premium on the Tamboon property of $500.[69] There was a part of a note page of Linda’s in evidence that contained the figures ’65,000’[70] including many other figures and she relied on it to support her contention as to the amount of the estate liabilities that she had conveyed to Peter. Linda agreed that she mentioned an estate taxation liability of $3000 relating to rental earned from the Bayswater property.[71]
[67]T 417, 425.
[68]T 309.
[69]T 307.
[70]T 586.
[71]T 420.

Linda agreed that Peter rang her about that time and said on solicitor’s advice she should take all the money out of the estate bank accounts in case Jennifer brought another claim. There was $18,000 in the accounts and it appears that they divided it equally.[72]
[72]T 420-1.

Linda’s basis for requiring $600,000 was that it represented the value of the Seaford property of $300,000, her share in the Tin Can Bay property of $250,000 and $50,000, being the equivalent of the payments that Jennifer and Peter had each received from the estate.

I accept Peter’s evidence that Linda told him that the liabilities of the estate for which he would become responsible were between $2500 and $3000. If Linda had told Peter that she wanted him to accept liability for the sum of $65,500, it is improbable that he would have agreed, as he did, to the division of the balance of the estate bank account of $18,000, equally with Linda whereby they each received $9,000. I do not consider that he agreed in discussions with Linda to accept responsibility for all future ‘proper estate liabilities’.

After these discussions, an agreement about Bayswater was put in writing. Peter signed a document addressed to Linda (‘the Bayswater agreement’), that was on the letterhead of his solicitors, Jimmy Lardner & Associates. Omitting some formal details, it was in the following terms:

12 November 2008
Ms Linda Humphreys
c/o Lardners Solicitors
55 Mount Eliza Way
MOUNT ELIZA VIC 3930
Dear Madam,
RE: The Estate of David G Humphreys – Deceased
The Supreme Court
Jennifer Humphreys –v- Peter Humphreys, You and Merle Humphreys

We act for Peter Humphreys in his personal capacity. We note that on the 27 March 2008, the executors of your father’s estate and Jennifer Humphreys and the legal advisor’s attended mediation at Taylor Splatt & Partners. The parties signed Terms of Settlement dated 27 March 2008 and Minutes of Consent Orders.
We are advised by Peter that he has agreed to vary the Minutes of Consent Orders as follows:
‘It is agreed that the balance of the proceeds of sale of the Bayswater property be distributed as follows:
• The sum of $600,000 to Linda Humphreys
• The sum of $1,000,000 to Peter Humphreys

Peter Humphreys agrees that he is personally responsible, upon payment of the money from Bayswater for all proper estate liabilities including but not limited to accounting and taxation costs and the legal costs and disbursements of the estate.’
____________________________________
Mr Peter Humphreys

Yours faithfully,
Jimmy Lardner & Associates, Lawyers

It is clear that Peter had the opportunity to obtain legal advice from his solicitor about the document, although there is no evidence whether he did so.

The Bayswater agreement did not on its terms vary or set aside Peter’s entitlements to the Mornington property given by clause 4 of the second mediation agreement. Peter’s evidence was that he was still expecting his money from the sale of the Mornington property and that he signed the letter on that basis. There was no evidence of anything said at the time of the Bayswater agreement suggesting that Peter would receive any further payments from the estate or that there were any funds available that might be used to make such payments.

The parties presented various calculations of how the beneficiaries’ entitlements under the will were altered by the subsequent events. On Linda’s calculations, the actual distributions of the estate received by the beneficiaries were: Peter 37%, rather than 72% that would have been the effect of the will or 41% that he should have received under the terms of settlement. For Linda the percentages were: 22%, 17% and 40%. For Merle, the figures, taking into account the value of life interests, were 21% (real increase), 8% and 20%. For Jennifer the figures were 20%, 3% and 19%.[73]
[73]T 476. The percentages relating to the terms of settlement add up to 120% but counsel for Linda said that this was due to the timing of the receipt of payments.

Peter relied on the fact that under the agreements reached at the mediation, Linda had more than doubled the amounts that she would have received under the will.

Jennifer’s third proceeding - No 7506 of 2009

In 2009, Jennifer commenced a third proceeding against the executors alleging that they failed to maintain the Tamboon property and challenging the terms of settlement. That proceeding has been stayed because of Jennifer’s failure to pay a costs order.

Peter raises issues about the settlement agreements

About July 2010, which was 21 months after the Bayswater agreement, Peter commenced inquiring from Linda when he would be paid the sums due under clause four of the second agreement in respect of the proceeds of sale of the Mornington property.

Peter engaged Mr Jim Davies, solicitor of Logie-Smith Lanyon Lawyers, to act on his behalf. On 5 July 2010, Mr Davies wrote to Taylor Splatt as follows:

Estate of D.G. Humphreys
We have been requested by Peter Humphreys, known to you to be one of the Executors of this Estate, to inform you that we have been retained to investigate several issues relating to this Estate. This means we will need access to all records, files and dealings in relation to the Estate.
In the meantime, Mr Humphreys would like you to know –
(1)he wants no further action taken in relation to the administration of the Estate until such time that we have concluded our investigation;
(2)he will want us to investigate the Terms of Settlement reached after the Mediation which took place as a consequence of an action instigated by his sister Jenny;
(3)he will not accept liability for any more expenses associated with the Estate and current litigation.

Please let us know when we may have access to the files, records and dealings with this estate that may be under your control.

On 16 July 2010, Mr White replied:

Following the agreement reached between the parties on 27 March 2008… the administration of the Estate was subsequently completed with the settlement by the Executors on the vacant lot of land in Bayswater. The sale price for the land was $1,600,000.
At that time, the final estate tax return had not yet been completed but notwithstanding this, [the plaintiff] and his sister, [the defendant] reached an agreement regarding the disposal of the proceeds of that sale and the completion of the estate administration, in accordance with the terms of a letter dated 12 November 2008 … The proceeds of the sale were duly distributed to them in accordance of the terms thereof and steps were taken to finalise the estate tax returns.
The tax accountants previously appointed by the executors to finalise these return[s] were Financial Services Tasmania of Hobart, but following the agreement between Peter and his sister on 12 November 2008, Peter has appointed his own accountant, Stephen Jolley & Co, to complete the returns. We believe that the estate returns have not been finalized and enquiries on our part to Stephen Jolley & Co have elicited the enclosed response dated 18 June 2010 from that firm.
Apart from the present litigation brought by Peter and Linda’s sister against the Executors (details of which you no doubt are aware of), and the completion of the final estate tax returns, the estate administration is completed.
We do however note Peter’s instructions that no further estate administration costs are to be incurred.[74]

[74]CB 289.

On 10 August 2011, Mr Davies wrote to Mr White contending that the estate had not yet been finalised and raising issues arising from Jennifer’s refusal to assume ownership of the Tamboon property. The letter concluded by stating:

You were made aware that Peter Humphreys is dissatisfied with the way he has been treated given his prior entitlement to the Estate. But for the Mediation which took place in 2008 his share of the Estate would be substantially greater than transpired. Additionally, he is not only concerned by the unfair share of expenses he has to meet but the fact that he believes he has not yet received his ‘negotiated’ share of the Estate having regard to the failure of the parties to comply with the terms of Settlement dated 27 March 2008. We believe our client should be reimbursed by the Estate for most, if not all of the legal fees and expenses he has paid for independent legal advice seemingly an unnecessary requirement.

Further correspondence occurred between the solicitors.

Commencing in November 2012,[75] correspondence occurred between Peter and Linda, including in respect of the rates owing on the Tamboon property and an action that Peter was proposing to commence and his obligation to attend to estate matters. Not all of the correspondence that appears to have occurred was in evidence.
[75]There may have been earlier correspondence, see T 311.

Peter wrote to Linda on 11 December 2012, asking questions about how entitlements contained in the will had been altered concluding:

I think our arrangement on 12.11.2008 about the Bayswater property was premature and not in the interest of the Estate.[76]
[76]CB 316.

Issues about the administration of the estate

Linda gave evidence about the administration of the estate. She lives in Hobart had completed the 2007-2008 tax return for the estate. After the Bayswater agreement, Linda sent Peter a lot of paperwork and cheque books.

She gave evidence that the estate had two bank accounts, one a cheque account and one a deposit account. All three executors were signatories to the accounts and all three executors were required to and did sign every cheque that was drawn upon the cheque account.

However, the evidence established that Peter had not had a number of taxation returns relating to the estate filed.[77]
[77]T 265.

The parties’ general submissions about Peter’s claims

Peter contended that Linda used the Seaford and Mornington properties to fund the payments to Jennifer and Merle without consulting him. He claimed that he was manipulated into resolving Jennifer’s claim in accommodating Linda and Merle’s entitlements to a greater extent than he would have otherwise agreed to.

Linda contended that Peter had reneged on three agreements and kept reverting in his own mind to his entitlements under the will. Peter was taking a significantly increased share from Bayswater rather than the 50 per cent to which he was entitled under the second agreement. Peter received the proceeds of the Mornington sale when the Bayswater division was adjusted. Save and except for the fact that both Peter and Linda received their payments later, that is, at the time when the Bayswater property settled, all the obligations under the mediation agreements were met.

I consider that it is relevant to keep in mind that Peter made generous concessions to enable Jennifer’s claims to be settled and that he appears now to feel that he has been unfairly treated. But, those considerations do not, by themselves, entitle him to undo agreements that he entered into.

Peter Humphreys’ causes of action
Negligent misrepresentation

Peter submitted that Linda owed him a duty of care at the mediation; namely, to ensure that he had the necessary information to understand the true financial position of the estate, so as to have a proper basis on which to decide on the division of estate assets. The duty was said to exist because Linda was an executor, and in a position of trust as his older sister. He submitted that she misrepresented, and failed to disclose, the true capacity of the estate to fund the settlement with Jennifer and the other distributions made under the second agreement.

Peter alleged that the duty of care was breached by Linda’s false and untrue representations:

(a) that the size of the estate was such that if Peter gave the Tamboon property to Jenny, there would be sufficient capacity for it to meet its other obligations incurred by the entry into the settlement agreement;
(b) that the size of the estate and the distributions to be made in favour of Linda were such that she was still to receive significant payments from the estate, notwithstanding the amounts which were to be paid by the estate to Peter;
(c) that if Peter agreed to transfer a one half interest in the Bayswater property to her, she would subsequently reconcile payments made to her and to Peter so as to ensure that he received an amount that was proportional to his original share of the estate as bequeathed to him by the Will;
(d) Peter would receive all of the proceeds of the sale of the Mornington property;
(e) once the payments to Jenny and Merle were resolved Peter and Linda would be in a position to distribute amongst themselves the remaining property both real and personal in a manner proportionate with their original entitlements under the Will.

In final submissions, Peter contended that Linda breached her duty of care in three ways:

(a) she told him ‘there was a lot of money in the accounts’;

(b) she told him ‘we’ve got enough – we’ve got enough there to – to solve [Jennifer’s] claim’; and

(c) she failed to disclose that the estate could not fund the agreement without denying him what had been promised to him, the Mornington property, and expecting him to reimburse her for the Seaford property from the proceeds of the Bayswater property.

According to Peter, these statements, and the failure to disclose relevant information about the estate, were misleading because Linda knew that the estate lacked the money to pay the amounts due under the terms of settlement and the second agreement. The fact that he had legal representation at the mediation did not affect Linda’s duty to inform him accurately of the estate’s finances.

Peter contended that by relying on an inflated idea of the estate’s capacity to pay, his bargaining position was undermined and eroded which led him to agree to an unfunded agreement with Jennifer and the other executors. He claimed damages being the amounts that the estate received from the Mornington and Bayswater property settlements less $204,000, being Linda’s interest in the Tin Can Bay property. If he had been properly informed about the value of the estate, he would have not agreed to Linda receiving more than the value of her interest under the will being $364,880.64.

Linda submitted that there was no special relationship or nexus between her and Peter which established a duty of care. She disputed that she made any negligent misrepresentation and submitted that there was no evidence that she had. She also argued that, if it was found that she did not tell Peter that the settlement agreements could not be funded without the use of the Mornington property proceeds, that would not be a misrepresentation by silence, because she was not aware whether there were sufficient funds to make the payments due under the settlement agreements and there was no evidence that Peter did not know that the entitlements that they created could not be funded. Linda also contended that because Peter, as an executor, had full knowledge of the financial position of the estate and had the assistance of his lawyers at the mediation, he could not have been misled.

Conclusion

I consider that Linda did not bear a duty of care to ensure that Peter had the necessary information about the funds available in the estate to make the payments due under the mediation agreements. No special relationship of the category that would give rise to such a duty of care existed.[78] Peter had his own lawyers and he, Linda and Merle were each executors. I have reached that conclusion for the following reasons.
[78]Hedley Byrne & Co v Heller & Partners Ltd [1964] AC 465; Mutual Life and Citizens’ Assurance Co Ltd v Evatt [1971] AC 791 and Esanda Corporation v Peat Marwick (1997) 188 CLR 241.

Peter had protected his right to the Mornington property in the June 2007 discussions and he had not relied on Linda. He had legal representation at the March 2008 mediation and the significance of that factor is not lessened by any decision he may have made not to seek their assistance at particular times during the mediation.

Next, if Linda did bear a duty of care, she did not breach it because Peter must have known that because of the mediation and Bayswater agreements, the effect of his father’s will would be altered. The settlement terms were the price of settling Jennifer’s claims, and had been negotiated over a long day. He and Linda agreed to work out later how the substantial Bayswater asset would be distributed. Linda was accurate in saying that there was a lot of money in the estate. Peter knew the value of the properties that comprised the estate.

I do not consider that Linda gave Peter any incorrect information about the estate or misled him by silence.

Next, even if there was a breach of duty, Peter did not establish that he suffered any loss or damage as a result. If Jennifer’s claim had not been settled, it is entirely uncertain what the ultimate division of the estate would have been or what sum he would have eventually received. Further legal costs would certainly have been incurred.

In considering whether Peter would have reached any different conclusion had he known the proceeds of the Mornington property would be required to fund the entitlements under the terms of settlement, it is relevant that Peter did not press a claim to the proceeds of the Mornington settlement when the Bayswater agreement was reached. Peter has not sued in this proceeding or otherwise to enforce clause 4 of the second mediation agreement.

Promissory estoppel

Peter contended that Linda told him, during the mediation, that they could ‘work it out later’ with respect to the balance of the estate’, which was the subject of clause 5(B) of the second agreement. As previously found, she said words to the effect of:

Peter, you and I are joined at the hip. Let’s put the remaining properties into our joint names and we will work it out later.[79]

[79]Third Amended Statement of Claim, [10] particulars.

As previously mentioned, Peter asserted that that he signed the second agreement on the basis of that statement and, consequently, suffered a detriment by giving up a significant amount of the bequests made to him under his father’s will. He submitted that Linda should be estopped from relying on a strict reading of clause 5(B) of the second agreement, because it would be unconscionable to allow her to resile from the statement.

Peter sought rectification of clause 5(B) so that it would read:

The balance of the estate, including Bayswater, be equally divided between Peter and Linda so that they may subsequently apportion the proceeds of the estate between them, meaning Linda and Peter, any acceptance with their respective entitlements under the Will and as per this agreement.

Linda submitted that there was no evidence that she made the statement and, as previously mentioned, that any such statement was made in without prejudice negotiations and was inadmissible. As previously stated, I consider that it is admissible. Linda also submitted that the alleged statement could not give rise to an estoppel because:

(a) Peter did not suffer any detriment, as he received an amount representing the Mornington settlement proceeds under the Bayswater agreement;

(b) Peter had not established that Linda had the requisite knowledge or intention that he would act in reliance on any assumption or expectation created by the statement;

(c) Peter, as an executor, knew the financial position of the estate and had legal representation at the mediation; and

(d) the statement was, in any event, meaningless.

Conclusion

I consider that Peter’s claims of promissory estoppel and rectification are not established. [80]
[80]Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, 428-9 (Brennan J).

A misrepresentation must be factual. A promise or assurance as to future conduct cannot, of itself, amount to a misrepresentation because it cannot be either true or false.[81] The statement ‘you and I are joined at the hip. Let’s put Bayswater into our joint names and we will work it out later’ is such promise. It is not a representation of an existing fact and, therefore, cannot amount to a misrepresentation for promissory estoppel. It was only an agreement to agree and not enforceable.
[81]Civil Service Co-Operative Society of Vic Ltd v Blyth (1914) 17 CLR 601.

At its highest, the statement made by Linda might mean that, in respect of the Bayswater property, she and Peter would come to some later arrangement, different from the equal division required by the express words of clause 5(B). That is what they did.

I do not consider that any of the pleaded representations upon which Peter relied was established on the evidence. On the evidence, Linda told Peter that there enough money in the estate to pay the sums agreed to be paid under the terms of settlement. That representation was true. I accept that they also agreed to discuss the division of the Bayswater property proceeds, but there was no agreement as to how those discussions would end. Peter has not established that he had any assumption or expectation that any particular legal relationship existed between them other than as set out in the written agreements. Nor do I consider that Linda induced Peter to adopt any such assumption or expectation or that he acted in reliance on any such assumption or expectation.

Even if the statement was made, it cannot give rise to an estoppel because Peter and Linda did, in fact, ‘work it out later’. I do not consider that the words of the statement are capable of sustaining a meaning such that the parties would ‘work it out later’ in accordance with their respective entitlements under the will. Any assumption or expectation induced in Peter by Linda was, on the evidence, fulfilled.

Nor has Peter established that he would suffer any detriment if any such assumption or expectation was not fulfilled. If settlement had not been reached with Jennifer, it is entirely unclear what redistribution of the estate property would eventually have occurred.

Peter has not established that Linda engaged in any unconscionable conduct.[82]
[82]Crown Melbourne Limited v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 333 ALR 447[217] Nettle J.

The rectification claim cannot be accepted as both parties knew that the terms of the will were being significantly altered to settle Jennifer’s Part IV claim and there is no basis for restoring Peter or any other beneficiary to their entitlements under the will. There was no mistake to justify the making of any rectification order.

Unilateral mistake and rescission

Peter’s next cause of action was that Linda knowingly exploited his mistake and understanding about the estate’s capacity to fund the obligations due under the Terms of Settlement and the second agreement, and thereby procured a deal she perceived as advantageous to herself. Peter submitted that this was ‘sharp practice’, inviting the intervention of equity. He sought partial rescission of the secondary agreement as an appropriate remedy. Merle, who was party to the second agreement was not a party to this proceeding.

Linda did not make any separate submissions in respect of Peter’s claim of unilateral mistake, but the substance of her other submissions were equally applicable. They were that she did not make any false statement to Peter and did not take any unfair advantage of him.

Conclusion

I do not consider that Peter has established any unilateral mistake that contributed to any loss that he suffered. He knew that the entitlements under the will were being altered, including his entitlement to the Bayswater property. He agreed to what was necessary to settle Jennifer’s claims and Merle’s entitlements. In my opinion, Peter, after reaching agreements at the mediation and later concerning Bayswater, has regretted his actions because of their contrast with his entitlements under the will. However, those circumstances do not provide a basis for relief founded on an unilateral mistake.[83]
[83]Taylor v Johnson (1983) 151 CLR 422.

Breach of fiduciary duty

Peter also alleged that Linda breached a fiduciary duty that she was not to use her position as an executor to make a gain for herself at his expense as he was another beneficiary.[84] He alleged that Linda engineered an outcome whereby, after settling the claims with Jennifer and buying out Merle’s interest, she more than doubled the legacy that she would have received under the terms of the will and did so at direct cost to Peter.
[84]The plaintiff relied on the rule in Keech v Sandford (1726) 25 ER 223 and Keith Henry & Co Pty Ltd v Stuart Walker & Co Pty Ltd (1958) 100 CLR 342, 350.

Linda disputed that she breached any fiduciary duty that she owed to Peter. She submitted that such a breach of a fiduciary duty only occurred when the person sued was able to exercise powers and discretions that affected the interests of the beneficiary. Her actions were taken as an executor jointly with Peter and Merle. She submitted that she took no positive action which affected Peter’s interests. While she did receive a greater amount under the second agreement than she would have received under the will, all beneficiaries under the will recognized that that the bequests under it would require adjustment, following Jennifer’s Part IV proceeding.

Conclusion

Peter was aware of the terms of the mediation agreements. When he later asked for his entitlements to the Mornington property, Linda told him that they had been used to settle Jennifer’s claims and to ‘pay out’ Merle. Some months later, Peter agreed to the Bayswater settlement and the payment of $600,000 to Linda. I do not accept that he anticipated or could reasonably anticipate that Linda would pay him back the Mornington money.

I will assume for present purposes that Linda, as an executor, owed a fiduciary duty to Peter as a beneficiary, even though he was an executor as well. But on that assumption, I do not consider that Linda did use her position as an executor to benefit herself in disregard of Peter’s interests. She was one of three executors. Peter and Merle were the other executors. They all signed the cheques to give effect to the agreements that they had reached. The settlement agreements were made following a mediation during which Peter was represented by both a barrister and a solicitor. Neither Peter nor Linda received the specific bequests that they were entitled to under the will. Peter and Linda agreed to discuss the distribution of the Bayswater proceeds with Linda at a later point. They did later negotiate about the distribution of the Bayswater proceeds and again reached a written agreement, which was prepared in its written form on the letterhead of Peter’s solicitor. By those negotiations and their outcome, Peter consented to the additional benefits that Linda sought. Linda was duly authorised to act in the manner that she did and in those circumstances, equity will not grant any remedy on the basis of any breach of fiduciary duty.[85]
[85]Chan v Zacharia (1984) 154 CLR 178, 204 (Deane J).

Linda Humphreys’ Counterclaim

By her counterclaim, Linda claimed a number of sums, which she said were payable by Peter under the Bayswater agreement.

Linda’s counterclaim alleged that, pursuant to the Bayswater agreement, Peter assumed responsibility to administer the estate from that time on and assumed personal liability for its liabilities. Since December 2008, Peter had been in sole possession of all the relevant estate books of account and records, and bank records and documents. He has refused to pay any estate liabilities and has allowed them to increase due to penalties and interest.[86]
[86]The counterclaim also contained a claim against Peter for breach of fiduciary duty, but that claim was not pressed.

Linda alleged that:

(a) she has been required to pay estate expenses that Peter was obliged to pay amounting to $27,952.81;

(b) Merle has been required to pay estate expenses that Peter was obliged to pay amounting to $23,279.58.

Linda alleges that Peter breached the terms of the Bayswater agreement in that he has:

(a) failed to properly administer the estate;

(b) failed to properly lodge all appropriate BAS statements;
(c) failed to properly lodge all tax returns;
(d) failed to properly pay to the Australian Taxation Office all amounts pursuant to BAS statements such that penalties and interest amounts have been incurred;
(e) failed to properly pay to the Australian Taxation Office all amounts due by way of taxation payments;
(f) failed to pay all proper estate liabilities including accounting and taxation costs and legal costs and disbursements.

Peter denied that he has breached any obligation imposed by the Bayswater agreement.

The Bayswater agreement stated in relevant respects that:

Peter Humphreys agrees that he is personally responsible upon payment of the money from Bayswater for all proper estate liabilities including but not limited to accounting and taxation costs and the legal costs and disbursements of the estate.

The principal issue in the determination of the counterclaim was whether the Bayswater agreement referred to ‘all proper estate liabilities’ as they were at the date of the agreement or applied to all future liabilities of the estate. Peter’s evidence was that Linda told him that the estate expenses outstanding, that he understood that he was accepting liability for, were in the order of $3,000. Linda’s evidence was that she told him that the liabilities were $65,500.

As previously stated, I accept Peter evidence that Linda told him that the liability that he was undertaking was about $2500- $3000.

Linda argued that it must have been intended that the agreement would extend to future expenses because there was a reference to tax liabilities, which must include those that were to fall due. She contended that Peter had been in sole possession of the relevant estate books of accounts, banking records, banking records and all other relevant books and records and of the estate since December 2008.

I consider that the term ‘liabilities’ in the Bayswater agreement is ambiguous and can be read as referring to existing liabilities or to all estate liabilities that existed or that arose in the future. In those circumstances, the prior negotiations or discussions between Peter and Linda are admissible to establish objective background facts known to both of them.[87] Those facts were the information that Linda gave to Peter of the extent of the estate liabilities. As previously stated, I prefer Peter’s evidence in that regard and consider that Linda mentioned an amount of legal fees of $2500- $3000. On his evidence, which I accept, Linda did not mention any particular liability for future estate expenses. Nor did she mention any anticipated taxation liabilities. The actual amounts that Linda claims do not include any taxation debt. Peter gave evidence that he had paid Mr White’s bill.
[87]Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337, 352 (Mason J).

I do not consider that the term ‘all proper estate liabilities’ that was contained in the Bayswater agreement referred to liabilities that arose after the date of the agreement.

Consideration of sums claimed by Linda under the counterclaim

The first sum claimed in the counterclaim was accounting fees payable to Financial Services Tasmania. Linda Humphreys paid $496.42 being parts of bills[88] in connection with the estate’s 2007-2008 tax return. Merle paid the other half of the bill. One of the invoices, dated 4 December 2008, discloses work performed before the date of the Bayswater agreement totalling $510.[89] The remainder were for work performed after that date. Merle has paid part of that bill, but she is not a party to the counterclaim, nor was she a party to the Bayswater agreement. I consider that, under the terms of the agreement, as I have interpreted it, Peter was liable to Linda for only half of the estate liability of $510, being $255 plus any interest that has been charged on that sum.
[88]T 319.
[89]CB 349. The first three items being $310, $40 and $160.

The second part of the counterclaim was legal fees payable to Murdoch Clarke, solicitors of Hobart. These were two amounts, one on 10 May 2013 for the amount of $2,291.36 and a second on 3 June 2013 of $1,124.20.[90] Linda gave evidence that she incurred these fees after being summoned by Taylor Splatt to pay estate costs of $62,000 incurred in defending Jennifer’s third Supreme Court proceeding. I do not consider that these amounts were an existing estate liability as at 12 November 2008 and therefore, were not liabilities that Peter undertook to pay.
[90]T 319, 321.

The third item claimed is related to the second and was the amount of $62,000 claimed by Taylor Splatt for its representation of the executors in Jennifer’s third proceeding.[91] Part of that sum being $18,739.47 was paid on 3 May 2013. Merle paid a third of the total bill. It appears that Taylor Splatt had commenced proceedings against the executors, or at least Linda and Merle, seeking payment of those fees.
[91]T 320, 577.

I do not consider that Peter was liable for this amount under the Bayswater agreement, as it was not an estate liability then owing. No argument was put as to Peter’s liability as an executor to pay part of Taylor Splatt’s fees, nor were details of who engaged Taylor Splatt in evidence. I express no view on those issues. The evidence about this debt was vague and lacking in detail.

Fourthly, Linda claimed two small photocopying bills of $11.00 each totalling $22.00 paid to an accounting firm Kajang, trading as T/A Hamilton Accounting in Hobart in May 2013.[92] She was unclear what was photocopied, but said that it had something to do with the estate finances. I do not consider that this was an estate liability for which Peter accepted responsibility under the Bayswater agreement.
[92]T323.

The fifth claim that was part of the counterclaim was for fees to Butler McIntyre & Butler of $1,496.00 in March 2012. Linda engaged that firm to act in respect of Merle’s resignation as an executor of the estate.[93] For similar reasons to those given in respect of other claims. I do not consider that they were estate liabilities to which the Bayswater agreement applied.
[93]T324.

Conclusion on counterclaim

I conclude that Linda has only established an entitlement under the counterclaim to payment of the sum of $255, plus any applicable interest.

Other remedies sought by Linda in her counterclaim

Linda also sought the taking of accounts in relation to the estate and an order that Peter promptly prepare and have lodged all appropriate taxation documents. She also sought orders that he pay all proper estate liabilities and reimburse all estate expenses paid by Linda and/or Merle since 12 November 2008 pursuant to the Bayswater agreement. However, as previously stated, the actual claim that Linda made in the final presentation of her case was for the payment of sums totalling $27,952.81, which claims I have determined above.

The evidence suggests that Peter has failed to administer the estate properly, at least in respect of lodging the necessary taxation documents. A taxation debt has been owing for some years and has incurred interest. When Linda sent the estate documents and banking records to Peter, he engaged an accountant to deal with the taxation returns, but they have not been lodged.

Conclusion

No submissions were made that would justify orders that Linda sought in her counterclaim for the taking of accounts and that Peter file taxation documents. I raised with Linda’s counsel during final submissions the basis on which any such orders could be made.[94] No authority was referred to support those orders. I therefore am not prepared to make them. There are remedies available against executors who fail to perform their duties, but the remedies that Linda sought appeared to be not based on those duties, but on Peter’s obligations under the terms of the Bayswater agreement. Executors can be required to file an account, but I do not consider that the basis for such an order against Peter was established. The evidence led about estate activities since November 2008 was too vague to justify such an order being made. Linda did not contend that Peter had in fact been acting as the sole executor and it seems that Jennifer’s third proceeding was defended on behalf of the estate by Linda and Merle.
[94]T 495-500.

Orders

Peter’s proceeding will be dismissed. There will be judgment for Linda on her counterclaim for $255, plus any applicable interest.

I will hear the parties as to the appropriate form of any other orders.

[2006] NSWSC 1324, [7] (Brereton J).

[2016] VSC 637

25 October 2016